**FORM
        10-KSB**
  **SECURITIES
        AND EXCHANGE COMMISSION**
 WASHINGTON,
        D.C. 20549
  **FORM
        10-KSB FOR THE YEAR**
  **ENDED
        JULY 31, 2007**
  **x
        ANNUAL REPORT PURSUANT
        TO SECTION 13 OR 15(D) OF THE SECURITIES ACT OF** 1934
  **o
        TRANSITION REPORT UNDER
        SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**
  For
        the
        transition period from ________ to ________.
  **TISSERA,
        INC.**
 (Exact
        name of registrant as specified in its charter)
  BERT
        Logic, Inc.
 (Former
        Name of Registrant)
  **Washington**
              **91-2034750**(State
                  or other jurisdiction of
                incorporation
                  of organization)
              (I.R.S.
                  Employer
                Identification
                  No.)**Maskit
                  8, 4th floor, Herzlia**
              **46733
                  Israel**(Address
                  of principal executive offices)
              (Zip
                  Code)
  Amos
        Eiran, Chairman of the Board and CEO
 Herzlia
        Business Park
 8
        Maskit
        St., 4th Floor
 Herzlia,
        46733 Israel
  +972-9-9561151
        (Address, including zip code, and telephone number, including area code,
        of
        registrant's principal executive offices)
  Copies
        to:
 Gregory
        Sichenzia, Esq.
 Stephen
        M. Fleming, Esq.
 Sichenzia
        Ross Friedman Ference LLP
 61
        Broadway, 32 Floor
 New
        York,
        New York 10006
 Phone:
        (212) 930-9700
 Fax:
        (212) 930-9725
  Securities
        registered under Section 12(b) of the Exchange Act:
 
 Title
                    of Each Class
                
                Name
                    of each Exchange on Which RegisteredCommon
                    Stock ($0.0001 Par Value)
                
                NonePreferred
                    Stock ($0.0001 Par Value)
                
                None
  Securities
        registered under Section 12(g) of the Exchange Act: None
  Check
        whether the issuer: (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act of 1934 during the preceding 12 months (or for
        such
        shorter period that the registrant was required to file such reports),
        and
  (2)
        has
        been subject to such filing requirements for the past 90 days. Yes x No o
  
  Check
        if
        there is no disclosure of delinquent filers in response to Item 405 of
        Regulation S-B not contained in this form, and no disclosure will be contained,
        to the best of registrant's knowledge, in definitive proxy or information
        statements incorporated by reference in Part III of this Form 10-KSB or any
        amendment to this Form 10-KSB x.
  The
        issuer's had no revenues for the year ended July 31, 2007.
  As
        of
        October 18, 2007, the number of shares outstanding of the registrant's Common
        Stock, $0.0001 par value (the only class of voting stock), was
        45,314,332.
  2
  TABLE
        OF
        CONTENTS
 
 ITEM
                  NUMBER AND CAPTION
              PAGEPART
                  I1.
              Description
                  of Business
              12.
              Description
                  of Property
              53.
              Legal
                  Proceedings
              54.
              Submission
                  of Matters to a Vote of Security Holders
              5PART
                  II5.
              Market
                  for Common Equity and Related Stockholder Matters
              66.
              Management's
                  Discussion and Analysis or Plan of Operation
              67.
              Financial
                  Statements
              108.
              Changes
                  in and Disagreements with Accountants on Accounting and Financial
                  Disclosure
              108A.
              Controls
                  and Procedures
              108B.
              Other
                  Information
              10PART
                  III9.
              Directors,
                  Executive Officers, Promoters, Control Persons and Corporate Governance;
                  Compliance with Section 16(a) of the Exchange Act
              1010.
              Executive
                  Compensation
              1111.
              Security
                  Ownership of Certain Beneficial Owners and Management and Related
                  Stockholders
              1212.
              Certain
                  Relationships and Related Transactions, and Director
                  Independence
              1313.
              Exhibits
              1414.
              Principal
                  Accountant Fees and Services
              15SIGNATURES
              16
  3
  **PART
        I**
  **ITEM
        1. DESCRIPTION OF BUSINESS**
  **History**
  Tissera,
        Inc. (the "Company") was incorporated under the laws of the State of Washington
        on May 31, 2000 as Bert Logic, Inc. Our Internet address is
        www.tissera.com.
  On
        September 4, 2003, the former president of Bert Logic Inc. completed a share
        purchase agreement with the Company's existing shareholders, who purchased
        15,000,000 shares of the then issued and outstanding 18,036,000 of the Company's
        Common shares. In connection with the consummation of the transaction, the
        president of the Company resigned as president and sole director of the Company.
        Pursuant to the agreement, the Company entered into an amended license agreement
        to sell Bit Error Rate Testers on a worldwide non-exclusive basis. In exchange,
        the Company obtained forgiveness of the remaining promissory note of $10,299,
        and accrued interest of $2,436. Also, in connection with the transaction,
        the
        former president of the Company agreed to forgive his shareholders' loan,
        in the
        amount of $2,442.
  Following
        the share purchase agreement dated September 4, 2003, the management of the
        Company has decided to discontinue all activities related to the sales of
        Bit
        Error Rate Testers, used for the integrity and reliability of communication
        channels. The discontinuation of their activity was accounted for under the
        provision of SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived
        Assets".
  On
        October 8, 2003, the Company entered into a research and license agreement
        (the
        "Research Agreement") with Yeda Research and Development Company Limited
        ("Yeda"), described in greater detail below.
  On
        October 9, 2003, the Company's Board of Directors resolved to change the
        name of
        the Company from Bert Logic, Inc. to "Tissera, Inc.".
  On
        October 27, 2003, the Company incorporated a wholly-owned subsidiary in Israel,
        Tissera Ltd.
  **Recent
        Developments**
  **Issuance
        of Common Stock Purchase Warrants**
  On
        December 28, 2006, the Company has completed a private placement for the
        sale of 16,500,000 shares of Common stock ("the Shares") at a price of $0.10
        per
        share. For each two Shares of Common stock purchased, each investor will
        receive
        a Series E Common Stock Purchase Warrant to purchase one share of Common
        stock
        of the Company (the "Series E Warrants") and a Series F Common Stock Purchase
        Warrant to purchase one share of Common stock of the Company (the "Series
        F
        Warrants"). The Series E Warrants shall be exercisable for a period commencing
        six months from the issue date through five years from the issue date at
        an
        exercise price of $0.165 per share. The Series F Warrants shall be exercisable
        for a period commencing six months from the issue date through five years
        from
        the issue date at an exercise price of $0.1815 per Share. The Series E Warrants
        and the Series F Warrants are exercisable on a cashless basis.
 
 The
        common stock, the Series E Warrants and the Series F Warrants were offered
        and
        sold to the Investors in a private placement transaction made in reliance
        upon
        exemptions from registration pursuant to Section 4(2) under the Securities
        Act
        of 1933 and Rule 506 promulgated thereunder. Each of the Investors are
        accredited investors as defined in Rule 501 of Regulation D promulgated under
        the Securities Act of 1933.
 
 In
        connection with the above closing, we paid $165,000 to Burstein & Lindsay
        Security Corp. for its services as a finder in connection with this transaction
        and agreed to pay them 10% of all cash proceeds, if any, generated as a result
        of the exercise of the Series E Warrants and the Series F Warrants. In addition,
        they also received a common stock purchase warrant to purchase 3,300,000
        shares
        of common stock at an exercise price of $0.10 per share exercisable for a
        period
        commencing six months from the issue date through five years from the issue
        date.
  **Consulting
        Agreement with Advisor Associates, Inc.**
 
 On
        June
        26, 2007, the Company entered into a Consulting Agreement with Advisor
        Associates, Inc. (“Advisor”) pursuant to which Advisor shall provide the Company
        with consulting and advisory services in connection with strategic business
        planning, corporate finance, investor support, broker relations and related
        matters. The term of the agreement is for one year. In consideration for
        providing such services, the Company issued on October 9, 2007 Advisor 1,000,000
        shares of common stock.  The shares are non-cancelable and non dependent on
        future performance of the consultant.
  1
  **General**
  We
          develop, test and intend to commercialize solid organ transplantation therapies
          based on an approach employing organ-specific precursor tissues. Our future
          approach involves harvesting embryonic mammalian tissue at the most appropriate
          stages after stem cells have committed to becoming organ-specific precursor
          tissues and transplanting them in target human organ systems. The optimal
          windows for embryonic tissue transplantation have been defined by Prof.
          Reisner's lab at the Weizmann Institute. We entered into a Research and
          License
          Agreement with Yeda, whereby Yeda procures the performance of research
          at the
          Weizmann Institute of Science, under the supervision of Professor Yair
          Reisner
          of the Department of Immunology. Pursuant to the Company's agreement with
          Yeda,
          Yeda provided the Company with a worldwide, exclusive license to develop,
          manufacture and sell products for solid organ transplantation from embryonic
          tissue based on research conducted under the supervision of Professor Reisner
          of
          the Department of Immunology of the Weizmann Institute of Science. The
          license
          shall expire in each country with respect to each product at the later
          of (i)
          the expiration of the patents covering such product in the country of sale,
          or (ii)
          15
          years from the date of receipt of FDA New Drug Approval in the United States
          for
          such product, or the equivalent in any other country in which the products
          are
          sold.
 For
          the
          year ended July 31, 2007 we did not generate revenues and generated net
          losses
          of $1,865,000 as compared to no revenue and net losses in the amount of
          $1,715,000 for the year ended July 31, 2006.
  We
        are at
        development stage and devoting substantially all of our efforts toward
        conducting R&D activities, raising capital, pursuing regulatory approval,
        recruiting personnel and building infrastructure.
  **Organ
        Transplantation**
  **General**
  Yeda
        is
        the commercial arm of the Weizmann Institute of Science. The Yeda Research
        Agreement provides the Company with the license to market and sell products
        for
        solid organ transplantation from embryonic tissue based on research conducted
        at
        the Weizmann Institute of Science under the supervision of Prof. Reisner
        in
        accordance with the Research Agreement. The Company intends to market and
        sell
        products for solid organ transplantation from embryonic tissue based on research
        conducted by Prof. Reisner's lab at the Weizmann Institute of Science. The
        Company believes this technology will provide effective alternatives to current
        kidney, liver and pancreas transplants and provide therapies for a number
        of
        unmet medical needs in large markets. However, due to budgetary constraints,
        the
        Company has taken the decision to concentrate all its efforts on the development
        of its pancreatic transplantation technology for the treatment of
        insulin-dependent diabetes and not to pursue other organ applications for
        the
        time being. Yeda has filed several patent applications with the United States
        Patent and Trademark Office in accordance with the Research Agreement.
  **About
        the Product**
  Technologies
        involving the utilization of stem cells from early human embryos or adults
        are
        being researched and developed as a source of early stage cells that could
        be
        isolated, grown in culture and used to replace tissues impaired by many
        devastating diseases. In 1998, scientists first developed a procedure whereby
        they were able to isolate embryonic stem cells from early human embryos and
        grow
        them in culture. Embryonic stem cells were viewed as a new source of tissue
        that
        could be used to replace cells or tissues that are damaged or destroyed by
        various diseases. However, scientists have not been able to overcome the
        difficulties involved in replicating nature and controlling the growth and
        differentiation of stem cells in the laboratory.
  Embryonic
        stem cell research was delayed due to the inability to determine which organ
        a
        cell would develop into. At a certain point in embryonic development, stem
        cells
        differentiate and commit to a particular development pathway leading to the
        formation of a specific organ. Unfortunately, it could not be determined
        which
        cells were going to develop into a specific organ. As a result of embryonic
        stem
        cells tendency to develop in a disorganized fashion that could not be
        controlled, the scientific community was not able to develop any real world
        uses
        for embryonic stem cells.
  Prof.
        Reisner, through his research at the Weizmann Institute of Science, has learned
        to identify kidney, liver, pancreatic and other precursor tissues found in
        the
        developing embryo. Prof Reisner intends to continue to identify additional
        organ
        precursor tissues as well. In their initial experiments, Prof. Reisner's
        team
        harvested kidney precursor tissue from human and porcine embryos which was
        then
        implanted in mice. The approach developed in Prof. Reisner's lab preserves
        the
        natural state of harvested tissue. Tissue is harvested from aborted embryos
        and
        then implanted in the recipient. Tissues are tested for control purposes;
        however, cells are not isolated, cultured, expanded or genetically engineered.
        This approach takes embryonic tissue and transplants it in a recipient where
        it
        matures into appropriate functional tissue. By using committed organ-specific
        precursor cells, uncontrolled differentiation is avoided. By taking tissue
        at
        the earliest time after cells commit to a pathway, immune response is minimized.
        Further, cells are not altered through culturing and manipulation in ways
        that
        may reduce their integration in the host.
  Implanting
        healthy embryonic tissue into humans, tissue which will mature and produce
        missing proteins, is believed to be a therapy for many diseases where a specific
        protein is not being produced in sufficient quantities (i.e. type I diabetes,
        hemophilia, etc.). Ideally, human embryonic tissue would be used for treating
        diseased human patients. However, in some countries, most notably the United
        States, there are objections on ethical grounds to using tissue from aborted
        embryos. Furthermore, pigs may be a preferred source of tissue for certain
        clinical applications. Pigs can be raised in controlled environments and
        typically gestate five to ten embryos in each pregnancy. Embryonic porcine
        tissue can be made available as needed. Human tissue produces human proteins
        that may have a better therapeutic potential than porcine tissue that produces
        somewhat different proteins. In treating some diseases, these differences
        may be
        significant.
  2
 The
          Company intends to market and sell products for solid organ transplantation
          from
          embryonic tissue based on research conducted by Prof Reisner's lab in accordance
          with the Research Agreement. The Company believes that the use of early
          organ-committed tissues may be appropriate for treating many serious diseases.
          The Company's current target is insulin dependent diabetes. The Company,
          through
          its commercialization of research conducted pursuant to the Research Agreement,
          intends to provide readily available on demand solutions for patients waiting
          for transplant organs that will reduce the need for long term use of
          immunosuppressive drugs and will involve minimally invasive surgical procedures
          that are normally associated with transplants. The Company understands
          there are
          numerous regulatory approvals which will be needed before the above can
          be put
          into place.
  **Plan
        of Operation**
  The
        Company has licensed the right to develop products for solid organ
        transplantation from embryonic tissue from Yeda and entered an agreement
        to
        sponsor research in Prof. Reisner's laboratory at the Weizmann Institute
        of
        Science for three years.  On April 10, 2006, the research agreement was
        prolonged for an additional year until April 9, 2007.  On April 10, 2007
        the research agreement was prolonged until April 9, 2008.  Prof.
        Reisner's team is continuing the development of the application employing
        pancreatic precursor tissues. The team is actively engaged in experiments
        of
        implanting pancreatic precursor tissues harvested from pig embryos into diabetic
        monkeys. This will allow scientists to monitor the growth, function and
        therapeutic value of precursor tissues in a large animal, to develop appropriate
        surgical techniques, to optimize the amount of tissue transplanted and to
        determine the most suitable use of immunosuppressive drugs.
  **The
        License**
  We
        develop, test and intend to commercialize solid organ transplantation therapies
        based on an approach employing organ-specific precursor tissues. Our future
        approach involves harvesting embryonic mammalian tissue at the most appropriate
        stages after stem cells have committed to becoming organ-specific precursor
        tissues and transplanting them in target human organ systems. The optimal
        windows for embryonic tissue transplantation have been defined by Prof.
        Reisner's lab at the Weizman Institute.
  On
        October 8, 2003, we entered into a Research and License Agreement (the "Research
        Agreement") with Yeda. The agreement relates to the rights of our company
        to
        have the license from Yeda related to research conducted and to be conducted
        at
        the Weizmann Institute of Science, under the supervision of Professor Reisner
        of
        the Department of Immunology, and relates to an invention comprising methods
        of
        organ transplantation utilizing developing pancreatic and other tissues.
        The
        License granted to us shall expire in each country with respect to each product
        at the later of the following:
  ·
              the
                  expiration of the patents covering such product in the country
                  of sale;
                  or
  ·
              15
                  years from the date of receipt of FDA New Drug Approval (in the
                  United
                  States), or the equivalent in any other country in which the products
                  are
                  sold.
  In
        addition, Yeda may terminate the Research and License Agreement if we are
        in
        breach thereof and Yeda may, at its option, terminate the Research and License
        Agreement, in whole or in part, or make it non-exclusive if we fail to reach
        certain commercialization and development goals as set out in the Research
        and
        License Agreement. Yeda is entitled to unilaterally amend the license so
        that it
        is non-exclusive or terminate the license in the event that we fail to achieve
        commercialization of at least one product within certain time limits, fail
        to
        commence various phases of clinical trials within certain time limits or
        fail to
        sell a product after certain milestones. Further, if we contest the validity
        of
        the patents, Yeda may terminate the license. In the event that Yeda would
        like
        to pursue sponsored research with respect to, or the commercialization of,
        a
        given product that would otherwise be subject to the Research and License
        Agreement that we have not already commenced developing, then Yeda may provide
        us with notice of its intention. Upon receipt of such notice, we will then
        have
        three months to submit a product development program. If we do not submit
        such
        program, the license will be terminated with respect to said given
        product.
  As
        part
        of the Research and License Agreement, on February 24, 2005, the Company
        agreed
        to issue to Yeda the following:
  ·
              a
                  warrant, exercisable at an aggregate exercise price of US $900
                  to purchase
                  up to 2.23% of the issued and outstanding shares of common stock
                  of our
                  company immediately following the exercise of such warrant;
                  and
  ·
              a
                  warrant, exercisable at an aggregate exercise price of US $1,100
                  to
                  purchase up to 2.67% of the issued and outstanding shares of our
                  company
                  immediately following the exercise of such
                  warrant.
  However,
        the Research and License Agreement provides that the maximum number of shares
        of
        common stock that Yeda may exercise into for each warrant is 3,010,699 and
        3,612,839, respectively (in each case as such number of shares of common
        stock
        shall be appropriately adjusted in the event of stock splits, stock dividends,
        capital reorganizations, reclassifications, recapitalizations and the like
        as
        well as issuances or sales by us of shares for par value only, for consideration
        less than par value and for no consideration, all in accordance with the
        terms
        and conditions of said warrant, which shall be satisfactory to Yeda and us).
        The
        share amounts described above are adjusted to reflect the three for one split,
        but not the other adjustment events described above that have occurred through
        the date hereof. Each such warrant shall be exercisable for a period beginning
        on the date of its issuance and ending at the later of the
        following:
  3
  ·
              one
                  year following the termination of the Research and License Agreement;
                  and
  ·
              October
                  7, 2013.
  We
        also
        agreed to pay or have paid to Yeda the following:
  ·
              With
                  regard to the first year of the research period (commencing on
                  April 9,
                  2003), we paid the amount of US $450,000 of which a non-refundable
                  installment of US $450,000 was paid on December 23, 2003. This
                  amount is
                  in addition to the $450,000 paid to Yeda in connection with researched
                  performed by Yeda during the first
                  year.
  ·
              With
                  regard to the second year of research we paid an amount of US $900,000
                  of
                  which $225,000 was paid on April 23, 2004; $225,000 was paid on
                  July 8,
                  2004; $225,000 was paid on October 8, 2004; and $225,000 was paid
                  on
                  January 10, 2005.
  ·
              With
                  regard to the third year of research we paid an amount of US $900,000
                  of
                  which $225,000 was paid on April 18, 2005; $225,000 was paid on
                  July 11,
                  2005; $225,000 was paid on October 12, 2005 and $225,000 was paid
                  on
                  January 9, 2006.  ·
              Pursuant
                  to the third addendum of the Research Agreement dated April 11,
                  2006, with
                  regard to the fourth year of research we paid an amount of US $600,000
                  of
                  which $150,000 was paid on May 2, 2006, $150,000 was paid on July
                  19,
                  2006, $150,000 was paid on October 13, 2006 and $150,000 was paid
                  on
                  January 17, 2007. Further, the termination of the research period
                  was
                  extended from April 10, 2006 to April 9,
                  2007.  ·
              Pursuant
                  to the fourth addendum of the Research Agreement dated April 1,
                  2007, with
                  regard to the fifth year of research we committed to pay an amount
                  of
                  $400,000 of which $100,000 was paid on April 10, 2007, $100,000
                  was paid
                  on July 10, 2007 and $100,000 was paid on October 11, 2007. The
                  termination of the research period was extended from April 9, 2007
                  to
                  April 9, 2008.
  We
          have
          also agreed that within one year from the date of the Research and License
          Agreement, we will submit a development program to Yeda for its approval,
          and
          eventually a progress report every 6 months, in every December and June.
          In
          agreement with Yeda, the product development plan was submitted to Yeda
          in
          September 2005, and eventual progress reports were submitted at the appropriate
          dates. The last progress report was timely submitted in June 2007. We further
          undertook to use our best efforts to commercialize the licensed products.
          We
          also agreed to pay Yeda a license fee as follows:
  $50,000
        per year commencing from the end of the license period, which has been extended
        until April 9, 2008;
  ·
              4%
                  of net sales of all products covered by the Research and License
                  Agreement;
  ·
              33%
                  of all sublicense fees for all agreements entered into within one
                  year of
                  the Agreement; and
  ·
              16%
                  of all sublicense fees for all agreements entered into after such
                  one year
                  period.
  **Industry**
  There
        are
        numerous companies developing drugs or devices to slow down or halt the
        progression of kidney and liver disease, to treat diabetes and to care for
        genetic diseases. These companies are developing traditional chemical compounds,
        new biological drugs, cloned human proteins and other treatments, which are
        likely to impact the markets which the Company is targeting.
  There
        are
        a number of companies developing cell therapies. Among them, there are those
        that are using genetically-engineered, non genetically-engineered cells,
        fetal
        cells, adult cells, progenitor cells, mature cells, human cells and non-human
        cells. The Company is aware of two companies that have been involved in fetal
        porcine cell transplant. Alexion Pharmaceuticals was developing fetal porcine
        cell treatments. Alexion's annual report states that it is looking for a
        corporate partner and is no longer investing in their cell therapy program.
        Diacrin, Inc. was active in developing fetal porcine cell therapies for liver
        and cardiac applications. Diacrin had begun phase I studies for a number
        of
        applications. It showed positive phase I results for a Parkinson's disease
        therapy but failed to show convincing phase II results. In August 2003, Diacrin
        merged with GenVec, Inc. and it is not clear which, if any, of the porcine
        cell
        therapies will be continued.
  There
        are
        a number of companies using adult stem cells or adult precursor cells. These
        companies must first isolate the adult stem cells from surrounding tissue
        and
        then grow them in culture in order to arrive at the number of cells required
        for
        therapeutic use. Growing adult stem cells generally requires the extensive
        use
        of growth factors or genetic engineering techniques. Some of these companies
        have had moderate success developing cell therapies (e.g. Genzyme's Carticel
        for
        knee cartilage repair) although they have not yet been able to engineer a
        functional organ structure.
  4
  Dr.
        Marc
        Hammerman at the Washington University in St. Louis has been active in
        developing kidney disease therapies based on transplanted embryonic
        kidney-precursor cells and has been granted a patent, titled "Chimeric Kidney",
        by the US Patent and Trademark Office in connection with this research. A
        British company, Intercytex Ltd., has licensed this technology and is sponsoring
        research in Dr. Hammerman's laboratory. This same company has also filed
        a
        related PCT application titled "Kidney Formation". In addition, Dr. Hammerman
        has been active in developing diabetes mellitus therapies based on transplanted
        embryonic endocrine pancreas-precursor tissues and has filed a US patent
        application, titled "Chimeric Pancreas", in connection with this research.
        As it
        was felt by us that the above-mentioned patent and patent applications might
        have a negative impact on our potential to develop our products, we have
        commissioned an expert legal opinion on the matter from a leading office
        of
        patent attorneys. This opinion has been delivered to us, and on its basis,
        we
        now do not believe that either Dr. Hammerman's patent and patent application
        or
        Intercytex' patent application should restrict Tissera's freedom to implement
        its pancreatic and/or kidney product development.
  We
        believe, based on information currently available to us, that Dr. Hammerman's
        research will not impact our potential liver, spleen and other organ
        applications which, as previously stated, are currently inactive.
  **Employees**
  We
        currently only have three officers and no day to day employees. Mr. Amos
        Eiran
        serves as Chairman of the Board and CEO, Mr. Alex Werber serves as our Chief
        Financial officer and Dr. Uri Elmaleh serves as our V.P. of Medical and
        Regulatory Affairs. We currently use consultants, attorneys and accountants
        as
        necessary. If we hire employees a portion of any employee compensation likely
        would include the right to acquire our stock, which would dilute the ownership
        interest of holders of existing shares of our common stock.
  **ITEM
        2. DESCRIPTION OF PROPERTY**
  We
        are
        headquartered at 8 Maskit St. 4th floor, Herzlia Israel where we occupy 1,000
        square feet of office space. We believe that this facility is generally suitable
        and adequate to accommodate our current operations and that such facility
        is
        adequately insured.
  **ITEM
        3. LEGAL PROCEEDINGS**
  From
        time
        to time, the Company may become involved in various lawsuits and legal
        proceedings which arise in the ordinary course of business. However, litigation
        is subject to inherent uncertainties, and an adverse result in these or other
        matters may arise from time to time that may harm the Company's business.
        Except
        for the following, the Company is currently not aware of nor has any knowledge
        of any such legal proceedings or claims that we believe will have, individually
        or in the aggregate, a material adverse affect on our business, financial
        condition or operating results:
 On
          December 21, 2004, Dr. Rabenou, our former CEO and a director, filed claim
          in
          the District Labor Court located in Tel Aviv Israel ("Labor Court") against
          the
          Company alleging that the Company owed Dr. Rabenou a sum of NIS 564,140
          (approximately $131,000 as for July 31, 2007) pursuant to the terms of
          her
          employment agreement. This claim remains pending, and the Company intends
          to
          continue its current defense efforts with respect to such claim.  The
          Company’s management and its legal advisors are of the opinion that the Company
          has a reasonably good defense against the claim.  In addition, the Company
          filed a counterclaim against Dr. Rabenou in the Labor Court based on damages
          incurred to the Company pursuant to certain of Dr. Rabenou's actions or
          omissions, during her tenure as the Company's CEO. The counterclaim seeks
          damages against Dr. Rabenou in the amount of NIS 9,405,491 (approximately
          $2,185,000). These damages are based primarily on certain actions taken
          by Dr.
          Rabenou as follows: (i) the issuance of an unauthorized bonus to Dr. Rabenou
          while she was CEO in the amount of $110,000 upon completion of the private
          offering in the amount of $5,500,000 in March 2004;; (ii) the issuance
          of
          280,000 shares of common stock to Pini Rabenou, the brother of Dr. Rabenou,
          for
          which the Company did not receive any discernible consideration; (iii)
          the
          failure to withhold Israeli income taxes with respect to the exercise of
          options
          by Dr. Rabenou; and (iv) the issuance of shares to BioGreen Ltd. as more
          fully
          described below. On January 15, 2004, when Dr. Rabenou recommended the
          issuance
          of Company shares to number of specified entities and individuals, including
          a
          company known as BioGreen Ltd. ("BioGreen"), to which the Company issued
          397,000
          shares (the "BioGreen Shares"). The issuance of the BioGreen Shares gave
          rise to
          a Company expense of $833,700. After Dr. Rabenou resigned as CEO, the Company
          commenced an internal investigation into all corporate actions taken during
          Dr.
          Rabenou's tenure, including the BioGreen matter. The Company's management
          attempted, unsuccessfully, to identify the specific services that served
          as the
          basis for BioGreen's compensation, and Dr. Rabenou refused to cooperate
          with the
          Company's investigation. Notwithstanding, in response to the Company's
          counterclaim, Dr. Rabenou filed a reply brief within which she denied our
          claims
          and asserted that she assigned her right to the BioGreen Shares to an unnamed
          offshore company incorporated in the Bahamas (that the Company believes
          is
          BioGreen), and asserting a number of new defenses and mitigating factors,
          which
          were not disclosed either during or immediately subsequent to the January
          15,
          2004 Board of Directors Meeting. The Company initially described the above
          litigation proceedings, within its Form 10-QSB filed for the quarter ended
          April
          30, 2005. Subsequent to the filing of such Form 10-QSB, Dr. Rabenou's legal
          counsel: (a) communicated to the Company that it believed that the statements
          in
          such 10-QSB constituted libel; (b) threatened legal action against the
          Company
          if such statements were not withdrawn; and (c) claimed damages of approximately
          $23,000 related to such alleged libel. The Company, based on the opinion
          of its
          legal advisors, does not intend to retract any of its public statements
          regarding the above matters.
  **ITEM
        4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**
  During
        the forth quarter ended 2007, the Company did not submit any matters to a
        vote
        of security holders through the solicitation of proxies or otherwise.
  5
  **PART
        II**
  **ITEM
        5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS**
  **a)
        Market Information**
  The
        Company's common stock is currently traded on the OTC Bulletin Board under
        the
        symbol "TSSR". The Company's common stock was traded on the OTC Bulletin
        Board
        under the symbol "BRTL". The Company's common stock began trading on August
        27,
        2002.
  The
        table
        below sets forth the high and low sales prices for the Company's common stock
        for the relevant calendar quarters of 2005, 2006 and 2007. The quotations
        below
        reflect inter-dealer prices, without retail mark-up, mark-down or commission
        and
        may not represent actual transactions:
 
 Fiscal
                  2007
              
              Fiscal
                  2006
              
              Fiscal
                  2005Quarter
                  Ended
              
              High
              
              Low
              
              High
              
              Low
              
              High
              
              LowFirst
              
              $
              0.11
              
              $
              0.06
              
              $
              0.26
              
              $
              0.14
              
              $
              0.48
              
              $
              0.26Second
              
              $
              0.24
              
              $
              0.08
              
              $
              0.15
              
              $
              0.08
              
              $
              0.47
              
              $
              0.28Third
              
              $
              
              
              $
              
              
              $
              0.18
              
              $
              0.08
              
              $
              0.38
              
              $
              0.18Fourth
              
              $
              
              
              $
              
              
              $
              0.13
              
              $
              0.06
              
              $
              0.28
              
              $
              0.15
  **b)
        Holders**
  As
        of
        October 18, 2007, there were approximately 190 shareholders of record holding
        a
        total of 45,314,332 shares of common stock. The holders of our common stock
        are
        entitled to one vote for each share held of record on all matters submitted
        to a
        vote of shareholders. Holders of the common stock have no preemptive rights
        and
        no right to convert their common stock into any other securities. There are
        no
        redemption or sinking fund provisions applicable to the common
        stock.
  **c)
        Dividends**
  There
        have been no dividends declared since the inception of the Company and there
        are
        no restrictions on the ability to pay dividends on common equity or that
        are
        likely to do so in the future. The payment of dividends is within the discretion
        of the Board of Directors and will depend on the Company's earnings, capital
        requirements, financial condition, and other relevant factors. There are no
        restrictions that currently limit the Company's ability to pay dividends
        on its
        Common Stock other than those generally imposed by applicable state
        law.
  **d)
        Recent Sales of Unregistered Securities**
  On
        December 28, 2006, the Company has completed a private placement for the
        sale of 16,500,000 shares of Common stock ("the Shares") at a price of $0.10
        per
        share. For each two Shares of Common stock purchased, each investor will
        receive
        a Series E Common Stock Purchase Warrant to purchase one share of Common
        stock
        of the Company (the "Series E Warrants") and a Series F Common Stock Purchase
        Warrant to purchase one share of Common stock of the Company (the "Series
        F
        Warrants"). The Series E Warrants shall be exercisable for a period commencing
        six months from the issue date through five years from the issue date at
        an
        exercise price of $0.165 per share. The Series F Warrants shall be exercisable
        for a period commencing six months from the issue date through five years
        from
        the issue date at an exercise price of $0.1815 per Share. The Series E Warrants
        and the Series F Warrants are exercisable on a cashless basis.
 
 In
        connection with the above closing, we paid $165,000 to Burstein & Lindsay
        Security Corp. for its services as a finder in connection with this transaction
        and agreed to pay them 10% of all cash proceeds, if any, generated as a result
        of the exercise of the Series E Warrants and the Series F Warrants. In addition,
        they also received a common stock purchase warrant to purchase 3,300,000
        shares
        of common stock at an exercise price of $0.10 per share exercisable for a
        period
        commencing six months from the issue date through five years from the issue
        date.
  In
        January 2007, the Board of Directors granted to the Chief Executive Officer
        a
        bonus in the amount of $30,000 in consideration of his efforts related to
        the
        latest fund raising for the Company.
  On
        June
        26, 2007, the Company entered into a Consulting Agreement with Advisor
        Associates, Inc. (“Advisor”) pursuant to which Advisor shall provide the Company
        with consulting and advisory services in connection with strategic business
        planning, corporate finance, investor support, broker relations and related
        matters. The term of the agreement is for one year. In consideration for
        providing such services, the Company issued on October 9, 2007 Advisor 1,000,000
        shares of common stock.  The shares are non-cancelable and non
        dependent on future performance of the consultant.
  6
  **ITEM
        6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION, CHANGES IN
        FINANCIAL CONDITION AND RESULTS OF OPERATIONS**
  This
        annual report on Form 10-KSB contains forward-looking statements, which are
        made
        pursuant to the safe harbor provisions of the Private Securities Litigation
        Reform Act of 1995. These forward-looking statements involve risks and
        uncertainties that could cause actual results to differ materially from the
        forward-looking statements. You should not place undue reliance on
        forward-looking statements. In some cases, you can identify forward-looking
        statements by terminology such as "may", "will", "should", "intends", "expects",
        "plans", "anticipates", "believes", "estimated", "predicts", "potential",
        or
        "continue" or the negative of such terms or other comparable terminology.
        These
        statements are only predictions and involve known and unknown risks,
        uncertainties, and other factors that may cause the Company's actual results,
        levels of activity, performance, or achievements to be materially different
        from
        any future results, levels of activity, performance, or achievements expressed
        or implied by such forward-looking statements. These factors include, among
        other things, those discussed in this annual report on Form 10-KSB and in
        the
        Company's other filings with the SEC. Although the Company believes that
        the
        expectations reflected in the forward-looking statements are reasonable,
        forward-looking statements are inherently uncertain, and the Company cannot
        guarantee future results, levels of activity, performance, or achievements.
        The
        Company is under no duty to update any of the forward-looking statements
        in this
        annual report on Form 10-KSB to conform forward-looking statements to actual
        results. All forward-looking statements should be considered in light of
        these
        risks and uncertainties.
 
 **Overview**
 
 We
        were
        incorporated under the laws of the State of Washington on May 31, 2000. We
        develop, test and intend to commercialize solid organ transplantation therapies
        based on an approach employing organ-specific precursor tissues. Our approach
        involves harvesting embryonic mammalian tissue at the most appropriate stage
        after which stem cells commit to becoming organ-specific precursor tissues
        and
        transplanting them in target human organ systems. The optimal windows for
        embryonic tissue transplantation were defined by Prof. Reisner's lab at the
        Weizman Institute. We entered into a Research and License Agreement with
        Yeda,
        whereby Yeda procures the performance of research at the Weizman Institute
        of
        Science, under the supervision of Professor Reisner of the Department of
        Immunology. We have a world wide license that shall expire in each country
        with
        respect to each product at the later of (i) the expiration of the patents
        covering such product in the country of sale, or (ii) 15 years from the date
        of
        receipt of FDA New Drug Approval in the United States for such product, or
        the
        equivalent in any other country in which the products are sold.
  We
        are at
        development stage and devoting substantially all of our efforts toward
        conducting R&D activities, raising capital, pursuing regulatory approval,
        recruiting personnel and building infrastructure. Our former line of business
        was selling bit error testers. Our license in connection with bit error testers
        expired in May 2004.
  **Research
        and License Agreement**
  On
        October 8, 2003, we entered into a Research and License Agreement (the "Research
        Agreement") with Yeda. The agreement relates to the rights of our company
        to
        have the license from Yeda related to research conducted and to be conducted
        at
        the Weizmann Institute of Science, under the supervision of Professor Reisner
        of
        the Department of Immunology, and relates to an invention comprising methods
        of
        organ transplantation utilizing developing pancreatic and other tissues.
        The
        License granted to us shall expire in each country with respect to each product
        at the later of the following:
  ·
              the
                  expiration of the patents covering such product in the country
                  of sale;
                  or
  ·
              15
                  years from the date of receipt of FDA New Drug Approval (in the
                  United
                  States), or the equivalent in any other country in which the products
                  are
                  sold.
  In
        addition, Yeda may terminate the Research and License Agreement if we are
        in
        breach thereof and Yeda may, at its option, terminate the Research and License
        Agreement, in whole or in part, or make it non-exclusive if we fail to reach
        certain commercialization and development goals as set out in the Research
        and
        License Agreement. Yeda is entitled to unilaterally amend the license so
        that it
        is non-exclusive or terminate the license in the event that we fail to achieve
        commercialization of at least one product within certain time limits, fail
        to
        commence various phases of clinical trials within certain time limits or
        fail to
        sell a product after certain milestones. Further, if we contest the validity
        of
        the patents, Yeda may terminate the license. In the event that Yeda would
        like
        to pursue sponsored research with respect to, or the commercialization of,
        a
        given product that would otherwise be subject to the Research and License
        Agreement that we have not already commenced developing, then Yeda may provide
        us with notice of its intention. Upon receipt of such notice, we will then
        have
        three months to submit a product development program. If we do not submit
        such
        program, the license will be terminated with respect to said given
        product.
  As
        part
        of the Research and License Agreement, on February 24, 2005, the Company
        agreed
        to issue to Yeda the following:
  ·
              a
                  warrant, exercisable at an aggregate exercise price of US $900
                  to purchase
                  up to 2.23% of the issued and outstanding shares of common stock
                  of our
                  company immediately following the exercise of such warrant;
                  and
  ·
              a
                  warrant, exercisable at an aggregate exercise price of US $1,100
                  to
                  purchase up to 2.67% of the issued and outstanding shares of our
                  company
                  immediately following the exercise of such
                  warrant.
  7
  However,
        the Research and License Agreement provides that the maximum number of shares
        of
        common stock that Yeda may exercise into for each warrant is 3,010,699 and
        3,612,839, respectively (in each case as such number of shares of common
        stock
        shall be appropriately adjusted in the event of stock splits, stock dividends,
        capital reorganizations, reclassifications, recapitalizations and the like
        as
        well as issuances or sales by us of shares for par value only, for consideration
        less than par value and for no consideration, all in accordance with the
        terms
        and conditions of said warrant, which shall be satisfactory to Yeda and us).
        The
        share amounts described above are adjusted to reflect the three for one split,
        but not the other adjustment events described above that have occurred through
        the date hereof. Each such warrant shall be exercisable for a period beginning
        on the date of its issuance and ending at the later of the
        following:
  ·
              one
                  year following the termination of the Research and License Agreement;
                  and
  ·
              October
                  7, 2013.
  We
        also
        agreed to pay or have paid to Yeda the following:
  ·
              With
                  regard to the first year of the research period (commencing on
                  April 9,
                  2003), we paid the amount of US $450,000 of which a non-refundable
                  installment of US $450,000 was paid on December 23, 2003. This
                  amount is
                  in addition to the $450,000 paid to Yeda in connection with researched
                  performed by Yeda during the first
                  year.
  ·
              With
                  regard to the second year of research we paid an amount of US $900,000
                  of
                  which $225,000 was paid on April 23, 2004; $225,000 was paid on
                  July 8,
                  2004; $225,000 was paid on October 8, 2004; and $225,000 was paid
                  on
                  January 10, 2005.
  ·
              With
                  regard to the third year of research we paid an amount of US $900,000
                  of
                  which $225,000 was paid on April 18, 2005; $225,000 was paid on
                  July 11,
                  2005; $225,000 was paid on October 12, 2005 and $225,000 was paid
                  on
                  January 9, 2006.
  ·
              Pursuant
                    to the third addendum of the Research Agreement dated April 11,
                    2006, with
                    regard to the fourth year of research we paid an amount of US
                    $600,000 of
                    which $150,000 was paid on May 2, 2006 and $150,000 was paid
                    on July 19,
                    2006, $150,000 was paid on October 13, 2006 and $150,000 was
                    paid on
                    January 17, 2007. Further, the termination for the research period
                    was
                    extended from April 10, 2006 to April 9,
                    2007.
  ·
              Pursuant
                    to the fourth addendum of the Research Agreement dated April
                    1, 2007, with
                    regard to the fifth year of research we committed to pay an amount
                    of
                    $400,000 of which $100,000 was paid on April 11, 2007, $100,000
                    was paid
                    on July 10, 2007 and $100,000 was paid on October 11, 2007. The
                    termination of the research period was extended from April 9,
                    2007 to
                    April 9, 2008.
 We
          have
          also agreed that within one year from the date of the Research and License
          Agreement, we will submit a development program to Yeda for its approval,
          and
          eventually a progress report every 6 months, in every December and June.
          In
          agreement with Yeda, the product development plan was submitted to Yeda
          in
          September 2005, and eventual progress reports were submitted at the appropriate
          dates. The last progress report was timely submitted in June 2007. We further
          undertook to use our best efforts to commercialize the licensed products.
          We
          also agreed to pay Yeda a license fee as follows:
 ·
              $50,000
                  per year commencing from the end of the license period, which has
                  been
                  extended until April 9, 2008;
  ·
              4%
                  of net sales of all products covered by the Research and License
                  Agreement;
  ·
              33%
                  of all sublicense fees for all agreements entered into within one
                  year of
                  the Agreement; and
  ·
              16%
                  of all sublicense fees for all agreements entered into after such
                  one year
                  period.
  **RESULTS
        OF OPERATIONS - FISCAL YEAR ENDED JULY 31, 2007 COMPARED TO THE FISCAL YEAR
        ENDED JULY 31, 2006**
 **REVENUES
          AND COSTS OF GOODS SOLD** We are
          in a development stage and, therefore, have no revenues and cost of goods
          sold.
  **OPERATING
          EXPENSES**
  Operating
          expenses for the year ended July 31, 2007 amounted to $1,885,000 compared
          to
          $1,760,000 for the year ended July 31, 2006. The increase in operation
          expenses
          is attributed to expenses related to warrants granted to employees, service
          providers and consultants and to the implementation of SFAS No. 123 in
          which the
          Company accounted for its employee stock option under the fair value method,
          creating an expense of $430,000 for the year ended July 31, 2007 as compared
          to
          expense of $7,000 for the year ended July 31, 2006. Without the expenses
          related
          to the implementation of SFAS No. 123(R) amounting to $430,000 the company
          would have reported a decrease in its operations expenses by $305,000 for
          the year ended July 31, 2007 compared with July 31, 2006. The decrease
          is
          attributed mainly to a decrease in the R&D expenses as explained in the next
          paragraph.
 8
 The
          R&D expenses amounted to $1,073,000 for the year ended July 31, 2007
          compared to $1,031,000 for the year ended July 31, 2006. The increase is
          attributed to expenses related to warrants granted to employees, service
          providers and consultants and to the implementation of SFAS No. 123(R)
          in which
          the Company accounted for its employee stock option under the fair value
          method,
          totaling to $280,000 during the year ended July 31, 2007 compared to an
          income
          of $20,000 in the year ended July 31, 2006. Excluding the above expenses
          the
          Company would have decreased R&D expenses in the amount of approximately
          $258,000. The decrease is attributed to a decrease in expenses related
          to Yeda
          (see Item 1 - DESCRIPTION OF BUSINESS) which were decreased from approximately
          $808,000 in year ended July 31, 2006 to $538,000 in the year ended July
          31, 2007
          a decrease of $270,000.
  The
          Company had general and administrative expenses of $812,000 during the
          year
          ended July 31, 2007 compared to $729,000 for the year ended July 31, 2006.
          Excluding the expenses related to warrants granted to employees, service
          providers and consultants with respect to the implementation of SFAS No.
          123(R)
          in 2007 which the Company accounted for its employee stock option under
          the fair
          value method, and excluding the expenses related to APB 25 in
          2006, totaling to an expenses of $150,000 and $27,000 in the year ended
          July 31, 2007 and 2006 respectively, the Company has decreased its general
          and
          administrative expenses in approximately $ 40,000 in the year ended July
          31,
          2007 compared to the year ended July 31, 2006. The decrease is mainly attributed
          to a decrease in professional fees paid by the company.
  **FINANCIAL
          INCOME**
  We
          had a
          net financial income in the amount of $37,000 for year ended July 31, 2007
          compared to a net financial income
          of $55,000 in the year ended July 31, 2006. The decrease in financial income
          is
          attributed to a decrease in fund available for investment due to it use
          of cash
          to finance its Research and development activities. The Company has invested
          its
          funds in bank deposits that bear interest rates of approximately 5.0% per
          annum.
  **TAXES
          ON INCOME**
  We
          had a
          tax expense
          amounting to $17,000 in the year ended July 31, 2007 compared to $10,000
          year
          ended July 31, 2006. The tax expense resulted from tax liability of our
          wholly
          owned subsidiary Tissera Ltd. The Company has an agreement with its subsidiary
          in which it provides services related to the Research and Development activities
          of the Company. The Company reimburses Tissera Ltd. for these expenses
          on a cost
          plus 10% basis which creates a taxable income in our subsidiary.
  **NET
          LOSS**
  As
          a
          result of the above, we incurred a net loss of $1,865,000 for the year
          ended
          July 31, 2007, compared to a net loss of $1,715,000 for the year ended
          July 31,
          2006.
 
 **LIQUIDITY
          AND CAPITAL RESOURCES**
 
 Our
          cash
          equivalents and short term deposits were $999,000 as of July 31, 2007,
          compared
          to $955,000 as of July 31, 2006. This increase in Cash equivalents and
          short
          term deposits is attributed to a private placement for the issuance of
          16,500,000 shares of common stock at a price of $0.10, per share which
          took
          place on December 28, 2006. The net amount has raised to the amount of
          $1,424,000. The Company needs to finance its development activities from
          its
          cash equivalents and short term deposits. We had a working capital of $597,000
          as of July 31, 2007, compared to $499,000 as of July 31, 2006. We plan
          to
          continue to consume cash in our research and development activities through
          payments of salaries, payments for services received from Yeda and other
          costs.
          We also plan to continue financing our operations through a combination
          of
          private placement, stock issuances, debt issuances, mutual development
          with
          possible milestone license payments and research and development programs.
          There
          are no assurances, however, that we will be successful in obtaining an
          adequate
          level of financing required for the long-term development and commercialization
          of our planned products.
 
 Due
          to
          our being a development stage company and not having generated revenues,
          in the
          consolidated financial statements for the year ended July 31, 2007 and
          2006 we included an explanatory paragraph regarding concerns about our
          ability to continue as a going concern. Our consolidated financial statements
          contain additional note disclosures describing the circumstances that lead
          to
          this disclosure.
 
 The
          continuation of our business is dependent upon us raising additional financial
          support. The issuance of additional equity securities by us could result
          in a
          significant dilution in the equity interests of our current stockholders.
          Obtaining commercial loans, assuming those loans would be available, will
          increase our liabilities and future cash commitments.
 
 **APPLICATION
          OF CRITICAL ACCOUNTING POLICIES**
 
 **Going
          Concern**
 
 Our
          period financial statements have been prepared on the going concern basis,
          which
          assumes the realization of assets and liquidation of liabilities in the
          normal
          course of operations. The financial statements have been prepared assuming
          we
          will continue as a going concern. However, certain
          conditions which exist are raising doubt about our ability to continue
          as a
          going concern. We have suffered recurring losses from operations and have
          accumulated deficit during the development stage of approximately $30,197,000
          since inception through the period ended July 31, 2007.
  9
  **ITEM
        7. FINANCIAL STATEMENTS**
  The
        financial statements are attached hereto following the signature page beginning
        on page F-1.
  **ITEM
        8. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
        DISCLOSURE**
  None.
  **ITEM
        8A. CONTROLS AND PROCEDURES**
  As
        of the
        end of the period covered by this report, we conducted an evaluation, under
        the
        supervision and with the participation of our chief executive officer and
        chief
        financial officer of our disclosure controls and procedures (as defined in
        Rule
        13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation,
        our chief executive officer and chief financial officer concluded that our
        disclosure controls and procedures are effective to ensure that information
        required to be disclosed by us in the reports that we file or submit under
        the
        Exchange Act is recorded, processed, summarized and reported, within the
        time
        periods specified in the Commission's rules and forms. There was no change
        in
        our internal controls or in other factors that could affect these controls
        during our last fiscal quarter that has materially affected, or is reasonably
        likely to materially affect, our internal control over financial
        reporting.
  **ITEM
        8B. OTHER INFORMATION**
  None.
  **PART
        III**
  **ITEM
        9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(A) OF THE EXCHANGE ACT**
  The
        Company's directors hold office until the annual meeting of shareholders
        next
        held after their election. The officers and directors of the Company as of
        October 17, 2007 are as follows:
 
 **Name**
              
              **Age**
              
              **Position**Amos
                  Eiran
              
              71
              
              Chief
                  Executive Officer and Chairman of the Board of
                  DirectorsAlex
                  Weber
              
              52
              
              Chief
                  Financial Officer and Chief Accounting OfficerRobert
                  G. Pico
              
              62
              
              DirectorUri
                  Elmaleh
              
              60
              
              VP
                  ResearchMeir
                  Segev
              
              54
              
              DirectorPeretz
                  Shmuel
              
              66
              
              Director
 
 **Amos
        Eiran**
  Amos
        Eiran was appointed on September 7, 2004 as the Chairman of the Board and
        as the
        Acting Chief Executive Officer of the Company. On March 13, 2006 Amos Eiran
        was
        appointed as Chief Executive Officer. Mr. Eiran serves as Chairman of Atudot,
        a
        major Israeli pension fund, and Chairman of the Investments Committee of
        Clal
        Insurance Group, an Israeli insurance company. He also serves as a director
        of
        Deleck Oil Exploration. Mr. Eiran has been a director for Medis Technologies
        Ltd. (Nadaq: MDTL) since 1992 and is also a director of two of its subsidiaries,
        Medis Inc. and Medis El. Through the summer of 2002, Mr. Eiran served as
        the
        Chairman of the Industrial Cooperation Authority, the agency in charge of
        the
        buy-back and offset programs of the State of Israel, for seven years. Mr.
        Eiran
        was Director General of the Prime Minister's office during Yitzhak Rabin's
        first
        term as Prime Minister. Prior to and after his term with the Prime Minister's
        office, he was Director General and Chairman of Mivtahim, the largest pension
        fund in Israel. From 1993 to 1995, Mr. Eiran served as a director for XTL
        Biopharmaceuticals Ltd., a company presently traded on the London Stock
        Exchange. Mr. Eiran received a bachelor's degree in Liberal Arts from American
        University in Washington D.C. in 1968, a master's degree in History from
        Tel
        Aviv University in 1974, a diploma in business administration from Harvard
        University in 1963 and a diploma in investments from the Wharton Business
        School
        in 2002.
  10
  **Alex
        Werber**
  Alex
        Werber serves as our Chief Financial Officer. From August 2002 to the present,
        Mr. Werber is Chief Financial Officer of Global Energy Inc. and Oramed
        Pharmaceutical, Inc.  Mr. Werber has worked as a financial services
        consultant where he has provided a wide range of outsourced financial services.
        In addition, since September 2000 till March 2007, Mr. Werber has served
        as the
        Audit Committee Chairman of the Board of Directors of Crow Technologies Ltd.,
        a
        manufacturer of security products. From October 2001 to August 2002, Mr.
        Werber
        was the Chief Financial Officer of CTMotion Ltd. a developer and deplorer
        of
        mobile internet and location-based services. In addition, Mr. Werber served
        as a
        business developer for Nokrom Technologies, which specializes in retain
        financial services, insurance and telecommunications sectors. From November
        1996
        to March 2000, Mr. Werber served as the Vice President of Finance for Vcon
        Telecommunications, a developer and manufacturer of video conferencing systems.
        Mr. Werber is a Certified Public Accountant and received his Bachelor of
        Arts in
        Economics and Accountancy from Tel Aviv University and did his post graduate
        study in Accounting at Tel Aviv University.
  **Uri
        Elmaleh**
  Uri
        Elmaleh holds an M.D. degree from the Hebrew University and Hadassah medical
        school in Jerusalem. He is a certified board specialist, who underwent training
        in both Internal Medicine and Obstetrics & Gynecology at Hadassah University
        Hospital. Prior to joining the company, he served as VP for Business Development
        in Rad Biomed Ltd, where he was actively involved in the establishment and
        scientific and business mentoring of several Life Sciences start-up
        companies.
  **Robert
        Pico**
  Robert
        Pico, since joining TranSwitch Corporation in 1989, has held several top
        management positions at TranSwitch, a publicly traded Nasdaq corporation,
        including director of business operations, vice president of sales and vice
        president of business development. Mr. Pico is currently the vice president
        of
        business development at TranSwitch Corporation. Mr. Pico sits on the board
        of
        IC4IC, TeraOP, SOSI and is an advisor for Accordion Networks and Optix Networks.
        In 1966, Mr. Pico received a BSEE from the University of Hartford, in 1972
        he
        received an MS in Physics from Trinity College and in 1981 he completed the
        coursework for an MBA from the University of Hartford.
  **Meir
        Segev**
  Meir
        Segev is a director of our company. Meir Segev was appointed as a director
        of
        Pluristem Inc. on March 18, 2003 and also serves as the Chief Executive Officer
        of ISC Holdings Ltd. Mr. Segev graduated from University of Haifa and received
        his Bachelor of Arts degree in political science in 1997. From 1997 to 2002,
        Mr.
        Segev served as the Headquarters Division Head of Shabak, the Israel Security
        Agency. He was primarily responsible for the management and strategic planning
        of resources and budget for the entire Headquarters Division of
        Shabak.
  **Shmuel
        Peretz**
  Shmuel
        Peretz was appointed on November 29, 2004 as a director and as a Chairman
        of the
        Audit Committee of the Board. Mr. Peretz has held several top management
        positions Israel Aircraft Industry (IAI) among them the CEO of IAI and President
        of IAI Europe. Mr. Peretz served as director on several companies including
        Elta, Magal, Elcint and others. Mr. Peretz in 1982, received a MBA degree
        from
        the New York Institution of Technology, in 1963 he received a BA in Economics
        from the Hebrew University, Jerusalem.
   **Code
        of Ethics**
  The
        Company adopted a Code of Ethics for its officers, directors and employees.
        A
        copy of the Code of Ethics is attached hereto as an exhibit.
  Section
        16(a) Beneficial Ownership Compliance
  Section
        16(a) of the Securities Exchange Act of 1934 requires the Company's directors
        and executive officers, and persons who own more then 10 percent of the
        Company's Common Stock, to file with the SEC the initial reports of ownership
        and reports of changes in ownership of common stock. Officers, directors
        and
        greater than 10 percent stockholders are required by SEC regulation to furnish
        the Company with copies of all Section 16(a) forms they file.
  Specific
        due dates for such reports have been established by the Commission and the
        Company is required to disclose any failure to file reports by such dates
        during
        fiscal year 2007. Based solely on its review of the copies of such reports
        received by it, or written representations from certain reporting persons
        that
        no Forms 5 were required for such persons, the Company believes that during
        the
        fiscal year ended July 31, 2007, there was no failure to comply with Section
        16(a) filing requirements applicable to its officers, directors and ten percent
        stockholders.
  **ITEM
        10. EXECUTIVE COMPENSATION**
  The
        following table provides summary information for the years 2005, 2006 and
        2007
        concerning cash and noncash compensation paid or accrued by the Company to
        or on
        behalf of the president and the only other employee(s) to receive compensation
        in excess of $100,000.  11
  **SUMMARY
        COMPENSATION TABLE**
  Name
                    & Principal Position
                
                Year
                
                Salary
                  ($)
                
                Bonus
                  ($)
                
                Stock
                  Awards
                    ($)
                
                Option
                    Awards
                  ($)
                
                Non-Equity
                    Incentive Plan Compensation ($)
                
                Change
                    in Pension Value and Non-Qualified Deferred Compensation Earnings
                    ($
                    )
                
                All
                    Other Compensation ($)
                
                Total
                    ($)Vicki
                    Rabenou
                
                
                2005
                
                $
                125,000
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                158,415
                
                $
                283,415Amos
                    Eiran
                
                
                2007
                
                $
                180,000
                
                $
                30,000
                
                
                24,750
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                234,7502006
                
                $
                180,000
                
                
                
                
                
                5,625
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                185,6252005
                
                $
                162,000
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                162,000Uri
                    Elmaleh
                
                
                2007
                
                $
                123,300
                
                
                
                
                
                131,097
                
                
                
                
                
                
                
                
                
                
                $
                12,000
                
                $
                266,397Alex
                    Werber
                
                
                2007
                
                $
                107,600
                
                
                
                
                
                54,585
                
                
                
                
                
                
                
                
                
                
                $
                12,000
                
                $
                174,185
  **Compensation
        of Directors**
 Mr.
          Pico
          and Mr. Segev received warrants to purchase 270,540 shares of common stock
          each
          at an exercise price of $ 0.30.
  Mr.
          Shmuel Peretz received warrants to purchase 270,540 shares of common stock
          at an
          exercise price of $ 0.31.
  Directors
          who are not employees of the Company are paid $600 for participation in
          Board
          meeting and $300 for telephonic attendance as well as annual fee of
          $8,400.
  **ITEM
          11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT**
 The
          following table sets forth certain information regarding the beneficial
          ownership of the stock of the Company as of October 23, 2007, by each
          shareholder who is known by the Company to beneficially own more than 5%
          of the
          outstanding common stock, by each director, and by all executive officers
          and
          directors as a group.
 Title
                of Class
              
              Name
                  and Address ofBeneficial Owner
              
              Amount of Shares
                  and Options (2)
              
              Percent of Class
                  (2)Common
                  Stock
              
              Alpha
                    Capital Anstalt
                  Pradafant
                    7
                  9490
                    Furstentums
                  Vaduz
                    Liechtenstein
              
              
              3,000,000
              
              
              6.620
              %Options
              
              Amos
                  Eiran**
              
              
              1,500,000
              (1)
              
              4.86
              %Options
              
              Uri
                  Elmaleh **
              
              
              280,000
              
              
              *
              %Options
              
              Robert
                  G. Pico**
                3
                  Field Drive
                Woodbridge,
                  CT 06525
              
              
              225,450
              (3)
              
              *
              %Options
              
              Yaron
                  Sagi
              
              
              33,333
              
              
              *
              %Options
              
              Meir
                  Segev**
              
              
              247,995
              (3)
              
              *
              %Options
              
              Peretz
                  Shmuel**
              
              
              270,540
              
              
              *
              %Common
                  Stock and Options
              
              Alex
                  Werber**
              
              
              94,444
              (4)
              
              *
              %Common
                    Stock
              
              Whalehaven
                    Capital Fund Ltd.
                  14
                    Par-Laville Road, 3rdFl.
                  Hamilton,
                    Bermuda HM08
              
              
              2,353,000
              
              
              5.193
              %Options
              
              All
                  officers and directors as a Group
              
              
              2,651,762
              
              
              5.38
              %
  *
        Less
        than 1% of the outstanding common stock.
  **
        Executive officer and/or director. Addresses are c/o Tissera, Inc., Herzlia
        Business Park, 8 Maskit Street, 4th Floor 46733 Israel.  12
 (1)
          The
          Company granted Mr. Eiran warrants to purchase 1,500,000 shares of common
          stock
          at an exercise price of $0.30. Executive's rights to exercise the warrants
          shall
          vest in 24 equal monthly installments during a period of two years commencing
          September 7, 2004, of which 1,500,000 are currently vested.
  (2)
          Unless otherwise indicated, each person has sole investment and voting
          power
          with respect to the shares indicated. For purposes of this table, a person
          or
          group of persons is deemed to have "beneficial ownership" of any shares
          which
          such person has the right to acquire within 60 days as of October 23, 2007.
          For
          purposes of computing the percentage of outstanding shares held by each
          person
          or group of persons named above on October 23, 2007 any security which
          such
          person or group of persons has the right to acquire within 60 days after
          such
          date is deemed to be outstanding for the purpose of computing the percentage
          ownership for such person or persons, but is not deemed to be outstanding
          for
          the purpose of computing the percentage ownership of any other person.
          As of
          October 23, 2007, we had 45,314,332shares of common stock
          outstanding.
  (3)
          Received a warrant to purchase 270,540 shares of common stock, of which
          225,450
          are vested for Mr. Pico and 47,995 are vested for Meir Segev.
  (4)
          We
          granted a warrant to purchase 100,000 shares of common stock to Mr. Werber.
          Currently, 88,888 shares of common stock have vested in connection with
          the
          warrant.
  **ITEM
        12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**
  No
        director, executive officer or nominee for election as a director of our
        company, and no owner of five percent or more of our outstanding shares or
        any
        member of their immediate family has entered into or proposed any transaction
        in
        which the amount involved exceeds $60,000 except as set forth
        below.
  Mr.
        Meir
        Segev and Mr. Robert G. Pico, our directors, each received 270,540 warrants
        which vest at the rate of 22,545 shares of common stock every three months
        during the terms of the warrants. The warrants are exercisable at $0.30 per
        share.
  Mr.
        Alex
        Werber, our CFO, was granted 100,000 stock options that are exercisable at
        $0.30
        per share on a cashless basis. The Stock Options vest and become exercisable
        in
        36 equal monthly installments of 2,778. The Stock Options expire (5) years
        after
        the date they granted and become exercisable, but in any case not later than
        six
        (6) months after termination of the reporting person's employment. We have
        an
        agreement with Mr. Werber which provides that we must pay Mr. Werber a monthly
        salary equivalent to 30,000 NIS ($6,666) pursuant to Mr. Werber's full time
        employment with the Company.
  We
        have
        entered into an employment agreement with Dr. Uri Elmaleh, our Vice President
        of
        Medical and Regulatory Affairs. The agreement provides that we must pay him
        35,000 shekels per months as well as provide him with a car and phone allowance.
        We also granted Dr. Elmaleh a warrant to purchase 280,000 shares of common
        stock
        at $.30 per share. On May 25, 2004 the Company granted Dr. Elmaleh 10,090
        shares
        in consideration for services rendered.
 In
          March
          2004, the Board of Directors authorized the issuance of 280,000 shares
          of common
          stock to Mr. Pinny Rabenou. Mr. Rabenou is the brother of Dr. Rabenou.
          In
          addition, the Board also authorized the issuance of common stock purchase
          warrants to purchase 280,000, which the granting of such warrants were
          contingent upon the entering into a definitive employment agreement with
          Mr.
          Rabenou. The issuance was approved by the Board of Directors. However,
          following
          the Company's later investigation, the Company discovered that no consulting
          agreement was ever signed between the Company and Mr. Rabenou, and the
          Company
          received what it believes to be only token services from Mr. Rabenou, which,
          the
          Company believes, did not justify the largess of such grant. As no definitive
          employment agreement was entered into, the Board of Directors cancelled
          the
          warrants issued to Mr. Rabenou. As such, the financial statements for the
          related period include no expenses on account of such warrants.
  We
          entered into an employment arrangement with Mr. Yaron Sagi. Mr. Sagi, a
          shareholder of our company, in exchange for serving in an administrative
          capacity, received a warrant to purchase 33,333 shares of common stock
          at an
          exercise price of $.30 per share. Further, Mr. Sagi received a salary of
          25,000
          new Israeli shekels per month plus use of a company car and cellular phone.
          This
          employment agreement has been terminated.
 In
        consideration for Dr. Rabenou's efforts in obtaining financing for the Company
        in the amount of $5,500,000 in March 2004, the Board of Directors granted
        a
        bonus in the amount of $110,000 to Dr. Rabenou. On November 4, 2004, the
        Board
        of Directors decided to cancel a former bonus granted to Dr. Rabenou in March
        2004, in the amount of $110,000 and demand the bonus to be repaid, based
        on the
        Board of Directors' analysis that the grant of such bonus was not approved
        by a
        majority of the Company's shareholders. The Company has submitted a letter
        to
        the former CEO demanding that the bonus be repaid and filed a counterclaim
        against Dr. Rabenou seeking full restitution. Dr. Rabenou filed a reply brief
        within which she denied our claims.  Please refer to legal proceeding in
        the financial statements (Note 9).
  13
  At
        a
        special meeting of the Board of Directors of the Company, a majority of the
        directors of the Company elected to terminate Dr. Rabenou as the Chief Executive
        Officer of the Company. In addition, Dr. Rabenou has resigned as a director
        of
        the Company pursuant to a resignation letter from Dr. Rabenou to the Board
        of
        Directors of the Company dated September 20, 2004 (the "Resignation Letter").
        In
        addition, Dr. Rabenou has resigned as a director and Chief Executive Officer
        of
        Tissera, Ltd., a wholly-owned subsidiary of the Company, pursuant to the
        Resignation Letter. Dr. Rabenou's resignation in said capacities was effective
        on September 20, 2004.
  On
        November 4, 2004, the Company ratified the issuance of warrants to purchase
        200,000 shares of common stock at an exercise price of $1.00 to each Prof
        Abraham Shaked, M.D., Ph.D., Sir Roy York Calne, M.D., F.R.C.P., F.R.C.S
        and
        Prof. Shutherland.
  The
        Company granted Mr. Eiran warrants to purchase 1,500,000 shares of common
        stock
        at an exercise price of $0.3. Executive's rights to exercise the warrants
        shall
        vest in 24 equal monthly installments during a period of two years commencing
        September 7, 2004.
  Any
        vested portion of the warrants, if not previously exercised shall terminate
        upon
        the earlier of three months after termination of the agreement or 10 years
        from
        the date of vesting.
 Mr.
          Shmuel Peretz received warrants to purchase 270,540 shares of common stock
          at an
          exercise price of $0.31.
  For
          more information as to the vesting periods and
          expiration dates please refer to note 11 of the financial statements.
 
 In
          January 2007, the Board of Directors granted to the Chief Executive Officer
          a
          bonus in the amount of $30,000, in consideration of his efforts related
          to the
          latest fund raising for the Company.
  On
          June
          26, 2007, the Company entered into a Consulting Agreement with Advisor
          Associates, Inc. (“Advisor”) pursuant to which Advisor shall provide the Company
          with consulting and advisory services in connection with strategic business
          planning, corporate finance, investor support, broker relations and related
          matters. The term of the agreement is for one year. In consideration for
          providing such services, the Company issued Advisor 1,000,000 shares of
          common
          stock.
 
 We
          issued
          the shares to Advisor pursuant to a private placement transaction made
          in
          reliance upon exemptions from registration pursuant to Section 4(2) under
          the
          Securities Act of 1933 and Rule 506 promulgated thereunder. Advisor is
          an
          accredited investor as defined in Rule 501 of Regulation D promulgated
          under the
          Securities Act of 1933.
  **ITEM
        13. EXHIBITS**
  Exhibit
                  No.
                
                Page
                  No.
                
                Description3(a)(i)
                
                *
                
                Articles
                    Of Incorporation of Tissera, Inc. (Incorporated by reference
                    filed with
                    the Company's Form SB-2 on November 14, 2000).3(a)(ii)
                
                *By-laws
                    of Tissera, Inc.4.1
                
                *
                
                Specimen
                    Share of Common Stock4.2
                
                
                
                Subscription
                    Agreement dated December 28, 20064.3
                
                
                
                Form
                    of Series E Common Stock Purchase Warrant4.4
                
                
                
                Form
                    of Series F Common Stock Purchase Warrant10.1
                
                *
                
                Agreement
                    Between BERT Logic Inc. and Reach Technologies Inc Dated May
                    31, 2000 for
                    the right to distribute the Reach Technologies Inc. licensed
                    product
                    line.10.2
                
                **
                
                Agreement
                    Between BERT Logic Inc. And Reach Technologies Inc Dated May
                    11, 2001
                    amending the Licensing Agreement with Reach Technologies, Inc.
                    dated May
                    31, 2000 as it pertains to new territory10.3
                
                ****
                
                Agreement
                    Between BERT Logic Inc. And Reach Technologies Inc Dated May
                    31, 2003
                    amending the Licensing Agreement with Reach Technologies, Inc.
                    dated May
                    31, 200010.4
                
                *****
                
                Agreement
                    Between BERT Logic Inc. And Reach Technologies Inc Dated September
                    4, 2003
                    amending the Licensing Agreement with Reach Technologies, Inc.
                    dated May
                    31, 200010.5
                
                ******
                
                Research
                    and License Agreement between Yeda Research and Development Company
                    Limited and Bert Logic Inc.10.6
                
                
                
                Consulting
                    Agreement by and between Tissera, Inc. and Advisor Associates,
                    dated June
                    26, 200714.1
                
                ******
                
                Code
                    of Ethics16.1
                
                ***
                
                Letter
                    on change in certifying accountant.31.1
                
                
                
                Certification
                    of the Acting Chief Executive Officer of Tissera, Inc. pursuant
                    to Section
                    302 of the Sarbanes-Oxley Act of 200231.2
                
                
                
                Certification
                    of the Chief Financial Officer of Tissera, Inc. pursuant to Section
                    302 of
                    the Sarbanes-Oxley Act of 200232.1
                
                
                
                Certification
                    of the Acting Chief Executive Officer of Tissera, Inc. pursuant
                    to Section
                    906 of the Sarbanes-Oxley Act of 200232.1
                
                
                
                Certification
                    of the Chief Financial Officer of Tissera, Inc. pursuant to Section
                    906 of
                    the Sarbanes-Oxley Act of 2002
 14
  *Incorporated
        by reference filed with the Form SB-2 filed with the Securities and Exchange
        Commission on November 14, 2000.
  **Incorporated
        by filed with the Company's Form 10-KSB filed with the Securities and Exchange
        Commission on March 15, 2001.
  ***Incorporated
        by reference filed with Company's Form 8-K filed with the Securities and
        Exchange Commission on January 13, 2004.
  ****
        Incorporated by reference to the Company's Form 8-K filed with the Securities
        and Exchange Commission on June 16, 2003.
  *****
        Incorporated by reference to the Company's Form 8-K filed with the Securities
        and Exchange Commission on September 8, 2003.
  ******
        Incorporated by reference to the Company's Form 8-K filed with the Securities
        and Exchange Commission on October 14, 2003.
  ******Incorporated
        by reference to the Company's Form 10-KSB filed with the Securities and Exchange
        Commission on November 3, 2003.
  **ITEM
        14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.**
  **Audit
          Fees** .
          The
          aggregate fees billed by our auditors, for professional services rendered
          for
          the audit of the Company's annual financial statements for the two years
          ended
          July 31, 2007 and 2006 and for the reviews of the financial statements
          included
          in the Company's Quarterly Reports on Form 10-QSB during that fiscal years
          were
          $70,000 in each year.
  **Audit
          Related Fees** .
          The
          Company did not engage auditors to provide any other professional services
          to
          the Company during the two fiscal years ended July 31, 2007 and
          2006.
  **All
          Other Fees** .
          There
          were no fees billed by auditors for services rendered to the Company, other
          than
          the services covered in "Audit Fees" for the fiscal years ended July 31,
          2007
          and 2006.
  For
          the
          fiscal years ended July 31, 2005. $5,000 was billed by auditors for services
          rendered to the Company, other than the services covered in "Audit
          Fees".
  The
          Audit
          Committee has considered whether the provision of non-audit services is
          compatible with maintaining the principal accountant's independence and
          has
          confirmed that no conflict exists.
 15
  **SIGNATURES**
  In
        accordance with Section 12 of the Securities Exchange Act of 1934, the
        registrant caused this Amendment to Form 10-KSB to be signed on its behalf
        by
        the undersigned, thereunto duly authorized, this 29th day of October
        2007.
 
 **TISSERA,
                  INC.**/s/
                  Amos EiranName:
              Amos
                  EiranTitle:
              Chairman
                  of the Board ofDirectors
                  and Chief Executive Officer
  In
        accordance with the Exchange Act, this report has been signed below by the
        following persons on behalf of the registrant and in the capacities and on
        the
        dates indicated.
  Signature
                
                Title
                
                Date/s/
                    Amos Eiran
                
                Chief
                    Executive
                
                October
                    29, 2007Officer
                    and Chairman of the Board of Directors/s/
                    Alex Werber
                
                Chief
                    Financial
                
                October
                      29, 2007Officer
                  & Chief Accounting Officer/s/
                    Robert G. Pico
                
                Director
                
                October
                      29, 2007/s/
                    Meir Segev
                
                Director
                
                October
                      29, 2007/s/
                    Peretz Shmuel
                
                Director
                
                October
                      29, 2007




16


**TISSERA
          INC. AND ITS SUBSIDIARY**
 **(A
          development stage company)**
 
 
 **CONSOLIDATED
          FINANCIAL STATEMENTS**
 
 
 **AS
          OF JULY 31, 2007**
 
 
 **IN
          U.S. DOLLARS**
  
 
 **INDEX**
 
 
 **Page****Report
                    of Independent Registered Public Accounting Firm**
                **2****Consolidated
                    Balance Sheets**
                **3****Consolidated
                    Statements of Operations**
                **4****Statements
                    of Changes in Stockholders' Equity (Deficiency)**
                **5****Consolidated
                    Statements of Cash Flows**
                **6****Notes
                    to Consolidated Financial Statements**
                **7
                    - 30**




Tissera Inc.


**REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 **To
        the shareholders of**
 
 **TISSERA
        INC.**
 ( **A
        development stage company** )
 
 We
        have
        audited the accompanying consolidated balance sheets of Tissera Inc. ("the
        Company") (a development stage company) and its subsidiary as of July 31, 2007 and 2006
        and
        the related consolidated statements of operations, changes in stockholders'
        equity (deficiency) and cash flows for each of the years then ended and for
        the
        period from May 31, 2000 (inception) through July 31, 2007. These
        financial statements are the responsibility of the Company's management.
        Our
        responsibility is to express an opinion on these financial statements based
        on
        our audits. The financial statements as of July 31, 2003 and for the period
        from May 31, 2000 (inception) through July 31, 2003, were audited by other
        auditors whose report dated September 13, 2003 expressed an unqualified
        opinion on those statements. The consolidated financial statements for the
        period from May 31, 2000 (inception) through July 31, 2003 included a
        net loss of $ 105 thousand. Our opinion on the consolidated statements of
        operations, changes in stockholders' equity (deficiency) and cash flows for
        the
        period from May 31, 2000 (inception) through July 31, 2007 insofar as
        it relates to amounts for prior periods through July 31, 2003, is based
        solely on the report of other auditors.
 
 We
        conducted our audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. We were not engaged to perform
        an
        audit of the Company's internal control over financial reporting. Our audit
        included consideration of internal control over financial reporting as a
        basis
        for designing audit procedures that are appropriate in the circumstances,
        but
        not for the purpose of expressing an opinion on the effectiveness of the
        Company's internal control over financial reporting. Accordingly, we express
        no
        such opinion. An audit also includes examining, on a test basis, evidence
        supporting the amounts and disclosures in the financial statements, assessing
        the accounting principles used and significant estimates made by management,
        and
        evaluating the overall financial statement presentation. We believe that
        our
        audits and the report of the other auditors provide a reasonable basis for
        our
        opinion.
 
 In
        our
        opinion, based on our audits and the report of the other auditors, the
        consolidated financial statements referred to above, present fairly, in all
        material respects, the consolidated financial position of the Company and
        its
        subsidiary as of July 31, 2007 and 2006, and the consolidated results of
        their operations and cash flows for each of the years then ended and for
        the
        period from May 31, 2000 (inception) through July 31, 2007 in
        conformity with accounting principles generally accepted in the Unites States.
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. As more fully described in Note 1c, the
        Company is in the development stage and, as such, has incurred recurring
        operating losses, has generated an accumulated deficit and has a negative
        cash
        flow from operating activities. These conditions raise substantial doubt
        about
        the Company's ability to continue as a going concern. The financial statements
        do not include any adjustments to reflect the possible future effects on
        the
        recoverability and classification of assets or the amounts and classification
        of
        liabilities that may result from the outcome of this uncertainly.
 
 
 Tel-Aviv,
                  Israel
              KOST
                  FORER GABBAY & KASIEREROctober
                  29, 2007
              A
                  Member of Ernst & Young
                  Global


-
          2
          -


**TISSERA
          INC. AND ITS SUBSIDIARY**
 **(A
          development stage company)**
  **CONSOLIDATED
        BALANCE SHEETS**


**U.S.
      dollars in thousands, except share and per share data**


**July
                  31,****2007**
              
              **2006**ASSETSCURRENT
                  ASSETS:Cash
                  and cash equivalents
              
              $
              999
              
              $
              111Short-term
                  deposit (Note 4)
              
              
              -
              
              
              844Accounts
                  receivable and prepaid expenses (Note 5)
              
              
              221
              
              
              174Totalcurrent assets
              
              
              1,220
              
              
              1,129RESTRICTED
                  CASH
              
              
              5
              
              
              5SEVERANCE
                  PAY FUND
              
              
              47
              
              
              33PROPERTY
                  AND EQUIPMENT, NET (Note 6)
              
              
              7
              
              
              13LONG-TERM
                  PREPAID EXPENSES (Note 7)
              
              
              4
              
              
              -Totalassets
              
              $
              1,283
              
              $
              1,180LIABILITIES
                  AND STOCKHOLDERS' EQUITYCURRENT
                  LIABILITIES:Trade
                  payables
              
              $
              12
              
              $
              4Other
                  accounts payable and accrued expenses (Note 8)
              
              
              611
              
              
              626Totalcurrent liabilities
              
              
              623
              
              
              630ACCRUED
                  SEVERANCE PAY
              
              
              64
              
              
              44COMMITMENTS
                  AND CONTINGENCIES (Note 9)Totalliabilities
              
              
              687
              
              
              674STOCKHOLDERS'
                  EQUITY:Stock
                  capital (Note 11) -Common
                  stock of $ 0.0001 par value each - Authorized: 100,000,000 shares at
                  July 31, 2007 and 2006; Issued and outstanding: 44,314,332 and
                  27,814,332
                  shares at July 31, 2007 and 2006, respectively
              
              
              5
              
              
              3Preferred
                  stock of $ 0.0001 par value each - Authorized: 20,000,000 shares at
                  July 31, 2007 and 2006; Issued and outstanding: 0 shares at July 31,
                  2007 and 2006
              
              
              -
              
              
              -Additional
                  paid-in capital
              
              
              30,788
              
              
              28,839Deferred
                  stock based compensation
              
              
              -
              
              
              (4
              )Deficit
                  accumulated during the development stage
              
              
              (30,197
              )
              
              (28,332
              )Totalstockholders' equity
              
              
              596
              
              
              506Totalliabilities and stockholders' equity
              
              $
              1,283
              
              $
              1,180





The
      accompanying notes are an integral part of the consolidated financial
      statements.


-
          3
          -




**TISSERA
        INC. AND ITS SUBSIDIARY**
 **(Formerly:
        Bert Logic Inc.)**
 **(A
        development stage company)**
  **CONSOLIDATED**  **STATEMENTS
        OF OPERATIONS**


**U.S.
      dollars in thousands, except share and per share data**





**Year ended**
              **July
                31,**
            
            **From**
              **May 31, 2000
                (inception date) through**
              **July
                31,****2007**
            
            **2006**
            
            **2007**Operating
              expenses:Research
                and development expenses *)
            
            $
            1,073
            
            $
            1,031
            
            $
            16,137General
                and administrative expenses **)
            
            
            812
            
            
            729
            
            
            14,0651,885
            
            
            1,760
            
            
            30,202Financial
                income, net (Note 13)
            
            
            37
            
            
            55
            
            
            162Loss
                from continuing operations before income taxes
            
            
            1,848
            
            
            1,705
            
            
            30,040Income
                taxes (Note 10)
            
            
            17
            
            
            10
            
            
            65Loss
                from continuing operations
            
            
            1,865
            
            
            1,715
            
            
            30,105Loss
                from discontinued operations (Note 1a)
            
            
            -
            
            
            -
            
            
            92Net
                loss
            
            $
            1,865
            
            $
            1,715
            
            $
            30,197Basic
                and diluted net loss per share
            
            $
            0.05
            
            $
            0.06Weighted
                average number of shares used in computing basic and diluted net
                loss per
                share
            
            
            37,533,510
            
            
            27,662,795








*)
            Including
                expenses (income) related to options granted to employees and warrants
                granted to Yeda and to service providers in the amount of $ 280 and
                $ (20) for the years ended July 31, 2007 and 2006,
                respectively.





**)
            Including
                expenses related to warrants, options and shares granted to service
                providers, employees and directors and compensation to investors
                in the
                amount of $ 150 and $ 27 for the years ended July 31, 2007 and 2006,
                respectively.





The
      accompanying notes are an integral part of the consolidated financial
      statements.


-
          4
          -


**TISSERA
        INC. AND ITS SUBSIDIARY**
 **(A
        development stage company)**
 **STATEMENTS
          OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)**


**U.S.
      dollars in thousands, except share data**


**Deficit****accumulated**
              
              **Total****Additional**
              
              **Deferred**
              
              **during
                  the**
              
              **stockholders'****Stock
                  capital**
              
              **paid-in**
              
              **stock
                  based**
              
              **development**
              
              **equity****Number**
              
              **Amount**
              
              **capital**
              
              **compensation**
              
              **stage**
              
              **(deficiency)**Balance
                  as of May 31, 2000
              
              
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -Stock
                  issued for cash on May 31, 2000
              
              
              15,036,000
              
              
              2
              
              
              8
              
              
              -
              
              
              -
              
              
              10Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (5
              )
              
              (5
              )Balance
                  as of July 31, 2000
              
              
              15,036,000
              
              
              2
              
              
              8
              
              
              -
              
              
              (5
              )
              
              5Stock
                  issued for cash on July 17, 2001
              
              
              3,000,000
              
              
              *)
                  -
              
              
              40
              
              
              -
              
              
              -
              
              
              40Contribution
                  of capital
              
              
              -
              
              
              -
              
              
              15
              
              
              -
              
              
              -
              
              
              15Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (30
              )
              
              (30
              )Balance
                  as of July 31, 2001
              
              
              18,036,000
              
              
              2
              
              
              63
              
              
              -
              
              
              (35
              )
              
              30Contribution
                  of capital
              
              
              -
              
              
              -
              
              
              15
              
              
              -
              
              
              -
              
              
              15Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (39
              )
              
              (39
              )Balance
                  as of July 31, 2002
              
              
              18,036,000
              
              
              2
              
              
              78
              
              
              -
              
              
              (74
              )
              
              6Contribution
                  of capital
              
              
              -
              
              
              -
              
              
              15
              
              
              -
              
              
              -
              
              
              15Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (31
              )
              
              (31
              )Balance
                  as of July 31, 2003
              
              
              18,036,000
              
              
              2
              
              
              93
              
              
              -
              
              
              (105
              )
              
              (10
              )Stock
                  issued for cash related to PPM1, net of $ 176 of cash issuance
                  expenses
              
              
              1,767,200
              
              
              *)
                  -
              
              
              2,033
              
              
              -
              
              
              -
              
              
              2,033Stock
                  issued for cash related to PPM2, net of $ 517 of cash issuance
                  expenses
              
              
              3,142,858
              
              
              1
              
              
              4,983
              
              
              -
              
              
              -
              
              
              4,984Stock
                  based compensation related to warrants granted to service
                  providers
              
              
              -
              
              
              -
              
              
              11,429
              
              
              -
              
              
              -
              
              
              11,429Stock
                  based compensation related to options granted to employees and
                  directors
              
              
              -
              
              
              -
              
              
              1,130
              
              
              -
              
              
              -
              
              
              1,130Compensation
                  related to stock granted to service providers and
                  employees
              
              
              3,067,090
              
              
              *)
                  -
              
              
              7,366
              
              
              -
              
              
              -
              
              
              7,366Deferred
                  stock based compensation
              
              
              -
              
              
              -
              
              
              163
              
              
              (163
              )
              
              -
              
              
              -Exercise
                  of options
              
              
              1,543,766
              
              
              *)
                  -
              
              
              -
              
              
              -
              
              
              -
              
              
              *)
                  -Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (22,529
              )
              
              (22,529
              )Balance
                  as of July 31, 2004
              
              
              27,556,914
              
              
              3
              
              
              27,197
              
              
              (163
              )
              
              (22,634
              )
              
              4,403Stock
                  based compensation related to warrants granted to
                  investors
              
              
              -
              
              
              -
              
              
              1,980
              
              
              -
              
              
              -
              
              
              1,980Warrants
                  granted to Yeda and to service providers
              
              
              -
              
              
              -
              
              
              (362
              )
              
              -
              
              
              -
              
              
              (362
              )Amortization
                  of stock based compensation related to options granted to employees
                  and
                  directors
              
              
              -
              
              
              -
              
              
              -
              
              
              176
              
              
              -
              
              
              176Deferred
                  stock based compensation
              
              
              -
              
              
              -
              
              
              44
              
              
              (44
              )
              
              -
              
              
              -Exercise
                  of options
              
              
              25,200
              
              
              *)
                  -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (3,983
              )
              
              (3,983
              )Balance
                  as of July 31, 2005
              
              
              27,582,114
              
              
              3
              
              
              28,859
              
              
              (31
              )
              
              (26,617
              )
              
              2,214Exercise
                  of options
              
              
              232,218
              
              
              *)
                  -
              
              
              *)
                  -
              
              
              -
              
              
              -
              
              
              *)
                  -Warrants
                  granted to service providers
              
              
              -
              
              
              -
              
              
              (20
              )
              
              -
              
              
              -
              
              
              (20
              )Amortization
                  of stock based compensation related to options granted to employees
                  and
                  directors
              
              
              -
              
              
              -
              
              
              -
              
              
              27
              
              
              -
              
              
              27Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,715
              )
              
              (1,715
              )Balance
                  as of July 31, 2006
              
              
              27,814,332
              
              
              3
              
              
              28,839
              
              
              (4
              )
              
              (28,332
              )
              
              506Reclassification
                  of deferred stock-based compensation into additional paid-in capital
                  upon
                  adoption of SFAS 123R
              
              
              -
              
              
              -
              
              
              (4
              )
              
              4
              
              
              -
              
              
              -Issuance
                  of shares and warrants, net
              
              
              16,500,000
              
              
              2
              
              
              1,422
              
              
              -
              
              
              -
              
              
              1,424Shares
                  granted to service providers
              
              
              -
              
              
              -
              
              
              110
              
              
              -
              
              
              -
              
              
              110Stock
                  based compensation related to options granted to employees and
                  directors
              
              
              -
              
              
              -
              
              
              271
              
              
              -
              
              
              -
              
              
              271Warrants
                  granted to Yeda
              
              
              -
              
              
              -
              
              
              150
              
              
              -
              
              
              -
              
              
              150Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,865
              )
              
              (1,865
              )Balance
                  as of July 31, 2007
              
              
              44,314,332
              
              $
              5
              
              $
              30,788
              
              $
              -
              
              $
              (30,197
              )
              $
              596





*)
            Represents
                an amount lower than $ 1.





The
      accompanying notes are an integral part of the consolidated financial
      statements.


-
          5
          -


**TISSERA
      INC. AND ITS SUBSIDIARY**


**(A
      development stage company)**


**CONSOLIDATED**  **STATEMENTS
        OF CASH FLOWS**





**U.S.
      dollars in thousands**


**Year
                  ended**
                **July
                  31,**
              
              **From**
                **May
                  31, 2000 (inception date) through**
                **July
                  31,****2007**
              
              **2006**
              
              **2007**Cash
                  flows from operating activities:Net
                  loss
              
              $
              (1,865
              )
              $
              (1,715
              )
              $
              (30,197
              )Adjustments
                  required to reconcile net loss to net cash used in operating
                  activities:Depreciation
              
              
              6
              
              
              8
              
              
              31Expenses
                  (income) related to warrants granted to Yeda and to service providers
              
              
              150
              
              
              (20
              )
              
              11,206Expenses
                  related to options granted to employees and directors
              
              
              271
              
              
              27
              
              
              1,604Expenses
                  related to shares granted to service providers and compensation
                  to
                  investors
              
              
              9
              
              
              -
              
              
              9,346Interest
                  accrued on short-term deposit
              
              
              -
              
              
              (17
              )
              
              (17
              )Decrease
                  (increase) in accounts receivable and prepaid expenses
              
              
              54
              
              
              91
              
              
              (120
              )Increase
                  (decrease) in trade payables
              
              
              8
              
              
              (1
              )
              
              12Increase
                  (decrease) in other accounts payable and accrued expenses
              
              
              (15
              )
              
              (34
              )
              
              611Increase
                  in accrued severance pay, net
              
              
              6
              
              
              1
              
              
              17Net
                  cash used in continuing operating activities
              
              
              (1,376
              )
              
              (1,660
              )
              
              (7,507
              )Net
                  cash provided by discontinued operating activities
              
              
              -
              
              
              -
              
              
              75Total
                  net cash used in operating activities
              
              
              (1,406
              )
              
              (1,660
              )
              
              (7,432
              )Cash
                  flows from investing activities:Short-term
                  deposit, net
              
              
              844
              
              
              (827
              )
              
              17Sales
                  of property and equipment
              
              
              -
              
              
              -
              
              
              9Purchase
                  of property and equipment
              
              
              -
              
              
              -
              
              
              (47
              )Restricted
                  cash
              
              
              -
              
              
              (5
              )
              
              (5
              )Lease
                  deposits
              
              
              (4
              )
              
              -
              
              
              (4
              )Net
                  cash used in continuing investing activities
              
              
              840
              
              
              (832
              )
              
              (30
              )Net
                  cash used in discontinued investing activities
              
              
              -
              
              
              -
              
              
              (15
              )Total
                  net cash provided by (used in) investing activities
              
              
              840
              
              
              (832
              )
              
              (45
              )Cash
                  flows from financing activities:Issuance
                  of shares and warrants, net
              
              
              1,424
              
              
              *)
                  -
              
              
              8,441Net
                  cash provided by continuing financing activities
              
              
              1,424
              
              
              -
              
              
              8,441Net
                  cash provided by discontinued financing activities
              
              
              -
              
              
              -
              
              
              35Total
                  net cash provided by financing activities
              
              
              1,424
              
              
              *)
                  -
              
              
              8,476Increase
                  (decrease) in cash and cash equivalents
              
              
              888
              
              
              (2,492
              )
              
              999Cash
                  and cash equivalents at beginning of period
              
              
              111
              
              
              2,603
              
              
              -Cash
                  and cash equivalents at end of period
              
              $
              999
              
              $
              111
              
              $
              999Non-cash
                  activity:Prepared
                  expenses (see Note 11.2c)
              
              $
              101
              
              $
              -
              
              $
              101


*)
            Represents
                an amount lower than $ 1.





The
      accompanying notes are an integral part of the consolidated financial
      statements.


-
          6
          -


**TISSERA
      INC. AND ITS SUBSIDIARY**


**(A
      development stage company)** **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**


**U.S.
      dollars in thousands, except share and per share data**




**NOTE
                1:-**
            **GENERAL**





a.
            Tissera
                Inc. ("the Company") was incorporated under the laws of the State
                of
                Washington on May 31, 2000. The Company is in the development stage.
                The Company is engaged in developing and testing organ transplantation
                therapies based on an approach employing organ-specific precursor
                tissues.





On
      September 4, 2003, the former president of the Company (and a former major
      shareholder) entered into a share purchase agreement ("the Agreement") with
      the
      Company's existing shareholders, who purchased 15,000,000 shares of the then
      issued and outstanding 18,036,000 shares of the Company's Common stock. In
      connection with the agreement, the president of the Company resigned as
      president and sole director of the Company. Also, in connection with the
      Agreement, the Company obtained forgiveness of the remaining promissory note
      of
      $ 10 and accrued interest of $ 2 that was due on May 31, 2004 in
      respect of the Company's license to sell Bit Error Rate Testers ("the License")
      and agreed to convert the License to a worldwide non-exclusive license. Also,
      in
      connection with the Agreement, the former president of the Company agreed to
      forgive his loan, in the amount of $ 1.





Subsequent
      to the Agreement, the management of the Company has decided to discontinue
      all
      activities related to the sales of Bit Error Rate Testers and to engage in
      the
      development of tissue transplant technologies. The discontinuation of this
      activity was accounted for under the provision of Statement of Financial
      Accounting Standard No. 144 ("SFAS 144"), "Accounting for the Impairment or
      Disposal of Long-Lived Assets".





The
      statements of operations for the year ended July 31, 2004, include a gain
      in the amount of $ 13, reported in discontinued operations, related to the
      forgiveness of the note and the loan described above.





On
      October 8, 2003, the Company entered into a research and license agreement
      with Yeda Research and Development Company Limited ("Yeda"), according to which
      Yeda provided the Company with a worldwide exclusive license to develop,
      manufacture and sell Yeda's tissue transplant technologies. Yeda is entitled
      to
      cancel the agreement under certain conditions determined in the agreement (see
      Note 2). The Company currently bases its entire operations on the license
      provided from Yeda. Should Yeda terminate the agreement with the Company, the
      Company will not be able to continue its current research operations. Regarding
      the extension of the research and development agreement, see Note
      2.





On
      October 9, 2003, the Company's Board of Directors resolved to change the name
      of
      the Company from Bert Logic, Inc. to "Tissera, Inc".





b.
            On
                October 27, 2003, the Company incorporated a wholly-owned subsidiary
                in Israel, Tissera Ltd. ("the subsidiary"), which is engaged in research
                and development.





-
          7
          -




**TISSERA
      INC. AND ITS SUBSIDIARY**


**(A
      development stage company)** **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**


**U.S.
      dollars in thousands, except share and per share data**






**NOTE
                1:-**
            **GENERAL
                (Cont.)**


c.
              Going
                  concern considerations:
 
 The
        Company's accumulated deficit and net loss as of July 31, 2007 and for the
        year
        then ended, amounted to $ 30,197 and $ 1,865, respectively. In April
        2008, the Company will finalize its current research and development agreement
        with Yeda (see Note 2) so as to reduce its current R&D expenses. The
        Company's ability to continue to operate as a going concern is dependent
        on its
        ability to generate sufficient cash flows to meet its obligations on a timely
        basis, to obtain additional financing and to ultimately attain profitability.
        The Company is in the development stage and, as such, has no revenues (and
        is
        not intended to generate revenues in the near future), has incurred recurring
        operating losses, and an accumulated deficit and has a negative cash flow
        from
        operating activities (amounting to $ 1,376 and $ 1,660 for the years ended
        July 31, 2007 and 2006, respectively). The process of developing commercial
        products will require significant additional expenditures for research and
        development, maintaining the key technology license, pre-clinical testing
        and
        clinical trials, as well as obtaining regulatory approval. These activities,
        together with general and administrative expenses, are expected to result
        in
        substantial operating losses in the foreseeable future.
 
 In
        the
        event the Company is unable to successfully raise capital and generate revenues,
        it is unlikely that the Company will have sufficient cash flows and liquidity
        to
        finance its business operations as currently contemplated. Accordingly, the
        Company will likely reduce general and administrative expenses and cease
        or
        delay development projects until it is able to obtain sufficient financing.
        There can be no assurance that additional funds will be available on terms
        acceptable to the Company, or at all.
 
 These
        conditions raise substantial doubt about the Company's ability to continue
        to
        operate as a going concern. The accompanying financial statements do not
        include
        any adjustments to reflect the possible future effect on the recoverability
        and
        classification of assets or the amounts and classification of liabilities
        that
        may result from the outcome of this uncertainly.
 
 d.
              Risk
                  factors:
 
 The
        Company depends on Yeda to conduct its research and development activities.
        As
        discussed in Note 2, the research services are to be provided until April
        2008.
        Thereafter, the Company will have to negotiate for new research services
        to be
        received, whether, by Yeda or by other service providers. If Yeda fails to
        provide the research services or is unwilling to continue to provide research
        services after April 2008, at terms that are acceptable to the Company, the
        Company may be required to seek alternative sources of research services.
        A
        change in service provider could result in delays in the research activities,
        an
        increase in expense and could adversely affect the Company's results of
        operations and cash flows. In addition, as discussed in Note 2, Yeda may
        terminate the research and license agreement ("the Agreement") under certain
        conditions.
  -
            8
            -
  **TISSERA
        INC. AND ITS SUBSIDIARY**
 **(A
        development stage company)** **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **U.S.
        dollars in thousands, except share and per share data**
   **NOTE
                  2:-**
              **RESEARCH
                  AND LICENSE AGREEMENT**
 
 On
        October 8, 2003, the Company entered into a research and license agreement
        ("the
        agreement") with Yeda. The Company conducted the research for a period of
        three
        years, at the Weizmann Institute of Science (the commercialization company
        of
        Yeda). On April 11, 2006, the Company signed an agreement with Yeda, extending
        the research period by one additional year, until April 2007. In April 2007
        the
        agreement was further extended until April 2008. The research relates to
        an
        invention comprising methods of organ transplantation employing nephric tissues.
        The license that was granted to the Company shall expire at the later of
        (i) the
        expiration of the patents in the country of sale, or (ii) 15 years from the
        date
        of receipt of FDA new drug approval (in the United States), or the equivalent
        in
        any other country in which the products are sold. In addition, Yeda may
        terminate the agreement if the Company will fail to achieve certain
        commercialization and development achievements, as defined in the agreement.
        Currently, the Company complies with all of the terms of the
        agreement.
 
 The
        Company committed to grant Yeda, within 120 days of the date on which the
        agreement is signed, (i) a warrant, exercisable at an aggregate exercise
        price
        of $ 0.9 to purchase up to 2.23% of the issued and outstanding Common stock
        of the Company immediately following the exercise of such warrant, and (ii)
        a
        warrant, exercisable at an aggregate exercise price of $ 1.1 to purchase up
        to 2.67% of the issued and outstanding shares of the Company immediately
        following the exercise of such warrant, provided that the maximum number
        of
        shares of Common stock that Yeda may exercise under the warrants shall be
        3,010,699 and 3,612,839, respectively (the number of shares of Common stock
        shall be appropriately adjusted in the event of stock splits, stock dividends,
        capital reorganizations, reclassifications, recapitalizations and the like
        as
        well as issuances or sales by the Company of shares for par value only, for
        a
        consideration of less than par value and for no consideration, all in accordance
        with the terms and conditions of said warrant). Each such warrant shall be
        exercisable for a period beginning one year after the date on which the
        agreement is signed, and ending at the later of (a) one year following the
        termination of the agreement and (b) October 7, 2013. As of the balance sheet
        date, 2,334,283 of the Company's shares of Common stock are underlying the
        warrants. The warrants shall be exercisable on a cashless basis.
 
 The
        fair
        value of the warrants was determined based on the number of shares underlying
        the warrants as of the balance sheet date. The number of shares underlying
        the
        warrants as of the balance sheet date was determined based on the actual
        issued
        and outstanding shares of the Company and any options to acquire Company's
        shares for a nominal consideration, totaling 2,580,879 shares of Common stock.
        Each such warrant shall be immediately exercisable till the later of (a)
        one
        year following the termination of the agreement and (b) October 7,
        2013.
 
 Prior
        to
        the actual issuance of the warrants, the value of the warrants for recording
        the
        research and development expenses was remeasured at each reporting period
        based
        on the number of shares underlying the warrants as of each reporting period
        with
        the entire change in the fair value of the underlying shares reported in
        research and development expenses.
  -
            9
            -
  **TISSERA
        INC. AND ITS SUBSIDIARY**
 **(A
        development stage company)** **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **U.S.
        dollars in thousands, except share and per share data**
 
 
 **NOTE
                  2:-**
              **RESEARCH
                  AND LICENSE AGREEMENT****(Cont.)**
 
 After
        the
        issuance of the warrants, since the warrants entitle the investors to a final
        percentage of the Company's shares (up to a certain maximum number of shares),
        with each change in the number of the Company's issued and outstanding shares
        or
        the number of options with a nominal exercise price, the fair value of the
        additional shares underlying the warrants will be recorded as research and
        development expenses. Once the number of shares underlying the warrants will
        reach the maximum number of shares that can be issued under the warrants,
        the
        warrants will cease to be further re-measured.
 
 According
        to the agreement and addendums, the Company paid Yeda with regard to the
        first,
        second and third years of the research period commencing April 9, 2003, an
        annual amount of $ 900.
 
 In
        April
        2006, the Company signed a third addendum to the agreement with Yeda extending
        the research period by one more year to April 9, 2007. In respect of this
        fourth
        year of research the Company paid Yeda an amount of $600.
 
 In
                  April 2007, the Company signed a fourth addendum to the agreement
                  with
                  Yeda and committed to pay Yeda an amount of $ 400 to be paid in
                  four equal
                  installments payable in advance in respect of the fifth year of
                  the
                  research period ending April 9,
                  2008.
 
 The
                  above annual payments to Yeda were recorded as research and development
                  expenses in the amount of $ 538 and $ 808 for the year ended July 31,
                  2007 and 2006, respectively.
 
 The
        Company undertook to make its best efforts to commercialize the licensed
        products. The Company also agreed to pay Yeda a license fee of (i) $ 50 per
        year, to be paid commencing the first year after the completion of the research
        and development period; (ii) 4% of net sales of all products using the licensed
        technology; (iii) 33% of all sublicense fees for all agreements entered into
        within one year following the agreement date, and (iv) 16% of all sublicense
        fees for all agreements entered into after such one-year
        period.
 
 **NOTE
                  3:-**
              **SIGNIFICANT
                  ACCOUNTING POLICIES**
 The
          financial statements have been prepared in accordance with accounting principles
          generally accepted in the United States ("U.S. GAAP"). The significant
          accounting policies followed in the preparation of the financial statements,
          on
          a consistent basis, are:
 
 a.
                Financial
                    statements in U.S. dollars:
 
 The
          functional currency of the Company is the U.S dollar ("dollar") since the
          dollar
          is the currency of the primary economic environment in which the Company
          has
          operated and expects to continue to operate in the foreseeable future.
          A
          majority of the transactions of the subsidiary is recorded including the
          Company's finance activity which is dollar nominated, in addition, all
          of the
          subsidiary's revenues from transactions with the Company are generated
          in
          dollars and all intercompany balances are denominated in dollars and a
          substantial portion of the subsidiary's costs is incurred in dollars.
          Accordingly, management has designated the dollar as the currency of its
          and its
          subsidiary's primary economic environment and thus their functional and
          reporting currency.
  -
              10
              -
  **TISSERA
          INC. AND ITS SUBSIDIARY**
 **(A
          development stage company)** **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **U.S.
          dollars in thousands, except share and per share data**
 
 
 **NOTE
                    3:-**
                **SIGNIFICANT
                    ACCOUNTING POLICIES
                    (Cont.)**
 
 Transactions
          and balances denominated in dollars are presented at their original amounts.
          Non-dollar transactions and balances have been remeasured to dollars in
          accordance with the provisions of Statement of Financial Accounting Standard
          No.
          52, "Foreign Currency Translation". All transaction gains and losses from
          remeasurement of monetary balance sheet items denominated in non-dollar
          currencies are reflected in the statement of operations as financial income
          or
          expenses, as appropriate.
 
 b.
                Principles
                    of consolidation:
 
 The
          consolidated financial statements include the accounts of the Company and
          its
          wholly-owned subsidiary. Intercompany balances and transactions have been
          eliminated upon consolidation.
 
 c.
                Cash
                    equivalents:
 
 Cash
          equivalents are short-term highly liquid investments that are readily
          convertible to cash with maturities of three months or less as of the date
          acquired.
 
 d.
                Short-term
                    deposits:
 
 The
          Company classified deposits with original maturities of more than three
          months
          and less than one year as short-term deposits. The short-term deposits
          are
          presented at cost, including accrued interest.
 
 e.
                Property
                    and equipment:
 
 Property
          and equipment are stated at cost, less accumulated depreciation. Depreciation
          is
          calculated by the straight-line method over the estimated useful lives
          of the
          assets.
 The
          annual depreciation rates are as follows:
 
 **%**Office
                    furniture and equipment
                
                7Computers,
                    software and electronic equipment
                
                33Leasehold
                    improvements
                
                Over
                    the term of the lease
 -
              11
              -
  **TISSERA
          INC. AND ITS SUBSIDIARY**
 **(A
          development stage company)** **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **U.S.
          dollars in thousands, except share and per share data**
 
 
 **NOTE
                    3:-**
                **SIGNIFICANT
                    ACCOUNTING POLICIES
                    (Cont.)**
 
 f.
                Impairment
                    of long-lived assets:
 
 The
          Company's long-lived assets are reviewed for impairment in accordance with
          Statement of Financial Accounting Standard No. 144, "Accounting for the
          Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144") whenever
          events or
          changes in circumstances indicate that the carrying amount of an asset
          may not
          be recoverable. Recoverability of assets to be held and used is measured
          by a
          comparison of the carrying amount of the assets to the future undiscounted
          cash
          flows expected to be generated by the assets. If such assets are considered
          to
          be impaired, the impairment to be recognized is measured by the amount
          by which
          the carrying amount of the assets exceeds their fair value. During the
          years
          ended July 31, 2007 and 2006, no impairment losses have been
          identified .
 
 g.
                Research
                    and development costs:
 
 Research
          and development costs are charged to expenses as incurred.
 
 h.
                Severance
                    pay:
 
 The
          liability of the subsidiary for severance pay is calculated pursuant to
          the
          Severance Pay Law in Israel, based on the most recent salary of the employees
          multiplied by the number of years of employment as of the balance sheet
          date and
          is presented on an undiscounted basis.
 
 The
          subsidiary's employees are entitled to one month's salary for each year
          of
          employment or a portion thereof. The Company's liability for all of its
          employees is fully provided by monthly deposits with insurance policies
          and by
          an accrual. The value of these policies is recorded as an asset in the
          Company's
          balance sheet.
 
 The
          deposited funds may be withdrawn only upon the fulfillment of the obligation
          pursuant to Israel's Severance Pay Law or labor agreements. The value of
          the
          deposited funds is based on the cash surrendered value of these policies,
          and
          includes immaterial profits accumulated up to the balance sheet
          date.
 
 Severance
          expenses for the years ended July 31, 2007 and 2006 amounted to $ 7 and
          $ 5, respectively.
 
 i.
                Use
                    of estimates:
 
 The
          preparation of financial statements in conformity with accounting principles
          generally accepted in the United States requires management to make estimates
          and assumptions that affect the reported amounts of assets and liabilities
          and
          disclosure of contingent assets and liabilities at the date of the financial
          statements and the reported amounts of income and expenses during the reporting
          period. Actual results could differ from those estimates.
  -
              12
              -
  **TISSERA
          INC. AND ITS SUBSIDIARY**
 **(A
          development stage company)** **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **U.S.
          dollars in thousands, except share and per share data**
 
 
 **NOTE
                    3:-**
                **SIGNIFICANT
                    ACCOUNTING POLICIES
                    (Cont.)**
 
 j.
                Accounting
                    for share-based compensation:
 
 On
          August 1, 2006, the Company adopted Statement of Financial Accounting
          Standards No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123(R)")
          which requires the measurement and recognition of compensation expense
          based on
          estimated fair values for all share-based payment awards made to employees
          and
          directors. SFAS 123(R) supersedes Accounting Principles Board Opinion
          No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), for periods
          beginning in fiscal 2006. In March 2005, the Securities and Exchange Commission
          issued Staff Accounting Bulletin No. 107 ("SAB 107") relating to SFAS
          123(R). The Company has applied the provisions of SAB 107 in its adoption
          of
          SFAS 123(R).
 
 SFAS
          123(R) requires companies to estimate the fair value of equity-based payment
          awards on the date of grant using an option-pricing model. The value of
          the
          portion of the award that is ultimately expected to vest is recognized
          as an
          expense over the requisite service periods in the Company's consolidated
          income
          statement. Prior to the adoption of SFAS 123(R), the Company accounted
          for
          equity-based awards to employees and directors using the intrinsic value
          method
          in accordance with APB 25 as allowed under Statement of Financial Accounting
          Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123").
 
 The
          Company adopted SFAS 123(R) using the modified prospective transition method,
          which requires the application of the accounting standard starting from
          August 1, 2006, the first day of the Company's fiscal year 2007. Under that
          transition method, compensation cost recognized in the nine months period
          ended
          April 30, 2007, includes: (a) compensation cost for all share-based payments
          granted prior to, but not yet vested as of August 1, 2006, based on the
          grant date fair value estimated in accordance with the original provisions
          of
          Statement 123, and (b) compensation cost for all share-based payments
          granted subsequent to August 1, 2006, based on the grant-date fair value
          estimated in accordance with the provisions of Statement 123(R). Results
          for
          prior periods have not been restated.
 
 The
          Company recognizes compensation expenses for the value of its awards, which
          have
          graded vesting based on the straight line method over the requisite service
          period of each of the awards.
 
 As
          a
          result of adopting SFAS 123(R) on August 1, 2006, the Company's loss before
          income taxes and net loss for the year ended ended July 31, 2007, is $
          430
          higher than if it had continued to account for stock-based compensation
          under
          APB 25. Basic and diluted net loss per share for the year ended July 31,
          2007,
          are $ 0.011 higher, than if the Company had continued to account for share-based
          compensation under APB 25.
 
 Prior
          to
          August 1, 2006, the Company applied the intrinsic value method of
          accounting for stock options as prescribed by APB 25, whereby compensation
          expense is equal to the excess, if any, of the quoted market price of the
          stock
          over the exercise price at the grant date of the award.
  -
              13
              -
  **TISSERA
          INC. AND ITS SUBSIDIARY**
 **(A
          development stage company)** **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **U.S.
          dollars in thousands, except share and per share data**
 
 
 **NOTE
                    3:-**
                **SIGNIFICANT
                    ACCOUNTING POLICIES
                    (Cont.)**
 
 The
          Company applies SFAS 123 and EITF 96-18, "Accounting for Equity Instruments
          That
          are Issued to Other Than Employees for Acquiring, or in Conjunction with
          Selling, Goods or Services" ("EITF 96-18") with respect to options and
          warrants
          issued to non-employees. SFAS 123 requires the use of an option valuation
          model
          to measure the fair value of the options at the grant date.
 
 k.
                Basic
                    and diluted net loss per share:
 
 Basic
          net
          loss per share is computed based on the weighted average number of shares
          outstanding during each year. Diluted net loss per share is computed based
          on
          the weighted average number of shares outstanding during each year, plus
          the
          dilutive potential of the Common stock considered outstanding during the
          year,
          in accordance with Statement of Financial Standard No. 128, "Earnings per

          Share." ("SFAS No. 128").
 
 All
          outstanding share options and warrants have been excluded from the calculation
          of the diluted loss per share for the years ended July 31, 2007 and 2006,
          because all such securities have an anti-dilutive effect.
 
 Such
          outstanding securities consist of the following:
 **Year
                    ended**
                  **July
                    31,****2007**Options
                
                
                2,646,206Warrants
                
                
                25,421,864Total
                
                
                28,068,070
 
 l.
                Income
                    taxes:
 
 The
          Company and its subsidiary account for income taxes in accordance with
          Statement
          of Financial Accounting Standard No. 109, "Accounting for Income Taxes".
          This
          Statement requires the use of the liability method of accounting for income
          taxes, whereby deferred tax asset and liability account balances are determined
          based on the differences between financial reporting and tax bases of assets
          and
          liabilities and are measured using the enacted tax rates and laws that
          will be
          in effect when the differences are expected to reverse. The Company and
          its
          subsidiary provide a valuation allowance, if necessary, to reduce deferred
          tax
          assets to their estimated realizable value.
 
 In
          July
          2006, the FASB issued FASB Interpretation No. 48, an Interpretation of
          FASB
          Statement No. 109, effective for fiscal years commencing after December
          15,
          2006, see Note 3o.
  -
              14
              -
  **TISSERA
          INC. AND ITS SUBSIDIARY**
 **(A
          development stage company)** **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **U.S.
          dollars in thousands, except share and per share data**
 
 
 **NOTE
                    3:-**
                **SIGNIFICANT
                    ACCOUNTING POLICIES
                    (Cont.)**
 
 m.
                Fair
                    value of financial instruments:
 
 The
          following methods and assumptions were used by the Company and its subsidiary
          in
          estimating their fair value disclosures for financial instruments:
 
 The
          carrying values of cash and cash equivalents, short-term deposits, accounts
          receivable, trade payables and other accounts payable, approximate their
          fair
          value due to the short-term maturity of these instruments.
 
 n.
                Concentrations
                    of credit risks:
 
 Financial
          instruments that potentially subject the Company and its subsidiary to
          concentrations of credit risk consist principally of cash and cash equivalents
          and short term deposits.
 
 Cash
          and
          cash equivalents and short-term deposits are deposited in banks in Israel
          and in
          the United States. Such deposits in the United States may be in excess
          of
          insured limits and are not insured in other jurisdictions. Management believes
          that the financial institutions that hold the Company's investments are
          financially sound and, accordingly, minimal credit risk exists with respect
          to
          these investments.
 
 The
          Company has no off-balance-sheet concentration of credit risk such as foreign
          exchange contracts, option contracts or other foreign hedging arrangements.
 
 o.
                Recently
                    issued accounting pronouncements:
 
 1.
                In
                    July 2006, the FASB issued FASB Interpretation No. 48, "Accounting
                    for
                    Uncertainty in Income Taxes, an Interpretation of FASB Statement
                    No. 109"
                    ("FIN 48"). FIN 48 clarifies the accounting for income taxes by
                    prescribing the minimum recognition threshold a tax position
                    is required
                    to meet before being recognized in the financial statements.
                    FIN 48
                    utilizes a two-step approach for evaluating tax positions. Recognition
                    (step one) occurs when an enterprise concludes that a tax position,
                    based
                    solely on its technical merits, is more-likely-than-not to be
                    sustained
                    upon examination. Measurement (step two) is only addressed if
                    step one has
                    been satisfied (i.e., the position is more-likely-than-not to
                    be
                    sustained).
 
 Under
                    step two, the tax benefit is measured as the largest amount of
                    benefit,
                    determined on a cumulative probability basis that is more-likely-than-not
                    to be realized upon ultimate settlement.
 
 FIN
          48
          applies to all tax positions related to income taxes subject to the Financial
          Accounting Standard Board Statement No. 109, "Accounting for Income Taxes"
          ("SFAS 109"). This includes tax positions considered to be "routine" as
          well as
          those with a high degree of uncertainty.
  -
              15
              -
  **TISSERA
          INC. AND ITS SUBSIDIARY**
 **(A
          development stage company)** **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **U.S.
          dollars in thousands, except share and per share data**
 
 
 **NOTE
                    3:-**
                **SIGNIFICANT
                    ACCOUNTING POLICIES
                    (Cont.)**
 
 FIN
          48
          has expanded disclosure requirements, which include a tabular roll forward
          of
          the beginning and ending aggregate unrecognized tax benefits as well as
          specific
          details related to tax uncertainties for which it is reasonably possible
          the
          amount of unrecognized tax benefit will significantly increase or decrease
          within 12 months. These disclosures are required at each annual reporting
          period
          unless a significant change occurs in an interim period.
 
 FIN
          48 is
          effective for fiscal years beginning after December 15, 2006. The cumulative
          effect of applying FIN 48 will be reported as an adjustment to the opening
          balance of retained earnings.
 
 The
          Company is currently evaluating the effect of the adoption of FIN 48 on
          its
          financial statements.
 
 2.
                In
                    September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
                    ("SFAS No. 157"). This statement provides a single definition
                    of fair
                    value, a framework for measuring fair value, and expanded disclosures
                    concerning fair value. Previously, different definitions of fair
                    value
                    were contained in various accounting pronouncements creating
                    inconsistencies in measurement and disclosures. SFAS No. 157
                    applies under
                    those previously issued pronouncements that prescribe fair value
                    as the
                    relevant measure of value, except SFAS No. 123(R) and related
                    interpretations. The statements does not apply to accounting
                    standard that
                    require or permit measurement similar to fair value but are not
                    intended
                    to measure fair value. This pronouncement is effective for fiscal
                    years
                    beginning after November 15, 2007.The
                    Company is currently evaluating the impact of adopting SFAS
                    157.
  
 In
          February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
          Financial Assets and Financial Liabilities" ("SFAS No. 159"), which permits
          companies to choose to measure certain financial instruments and other
          items at
          fair value that are not currently required to be measured at fair value.
          SFAS
          No. 159 is effective for fiscal years beginning after November 15, 2007.
          The
          Company will adopt SFAS No. 159 no later than January 1, 2008. The Company
          has
          not yet determined the effect that the adoption of SFAS No. 159 will have
          on its
          consolidated financial statements.
 
 **NOTE
          4:-**  **SHORT-TERM
          DEPOSITS**
 
 During
          2007, short-term deposits bore an effective annual interest rate of
          5%.
  -
              16
              -
  **TISSERA
          INC. AND ITS SUBSIDIARY**
 **(A
          development stage company)** **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **U.S.
          dollars in thousands, except share and per share data**
 
 
 **NOTE
                    5:-**
                **ACCOUNTS
                    RECEIVABLE AND PREPAID
                    EXPENSES**
  **July
                    31,****2007**
                
                **2006**Government
                    authorities
                
                $
                5
                
                $
                5Prepaid
                    expenses
                
                
                220
                
                
                169$
                225
                
                $
                174
  **NOTE
                    6:-**
                **PROPERTY
                    AND EQUIPMENT**
 
 Cost:Office
                    furniture and equipment
                
                $
                2
                
                $
                2Computer
                    software and electronic equipment
                
                
                29
                
                
                29Leasehold
                    improvements
                
                
                6
                
                
                637
                
                
                37Accumulated
                    depreciation:Office
                    furniture and equipment
                
                
                *)
                    -
                
                
                *)
                    -Computer
                    software and electronic equipment
                
                
                24
                
                
                18Leasehold
                    improvements
                
                
                6
                
                
                630
                
                
                24Depreciated
                    cost
                
                $
                7
                
                $
                13
 *) Represents
          an amount lower than $ 1.
 
 
 **NOTE
                    7:-**
                **LONG-TERM
                    PREPAID EXPENSES**
 
 Long-term
                    prepaid expenses are composed of long-term lease
                    deposits.
 
 
 **NOTE
                    8:-**
                **OTHER
                    ACCOUNTS PAYABLE AND ACCRUED
                    EXPENSES**
 
 **July
                    31,****2007**
                
                **2006**Government
                    authorities
                
                $
                359
                
                $
                348Employees
                    and payroll accruals
                
                
                104
                
                
                80Accrued
                    expenses
                
                
                148
                
                
                198$
                611
                
                $
                626
  -
              17
              -
  **TISSERA
          INC. AND ITS SUBSIDIARY**
 **(A
          development stage company)** **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **U.S.
          dollars in thousands, except share and per share data**
 
 
 **NOTE****9:-**
                **COMMITMENTS
                    AND CONTINGENCIES**
 
 a.
                The
                    facilities and motor vehicles of the Company are rented under
                    operating
                    leases. Minimum rental commitments under the non-cancelable lease
                    as of
                    July 31, 2007 are for one additional year and amount to
                    $ 61.
 
 b.
                The
                    Company's subsidiary obtained a bank guarantee in the amount
                    of $ 5
                    to secure a rent agreement.
 
 c.
                On
                    September 7, 2004, the Board of Directors decided to terminate the
                    employment of the Chief Executive Officer of the Company ("the
                    Former
                    CEO"). According to the Former CEO's employment agreement, the
                    Former CEO
                    is entitled to payments totaling approximately $ 78 upon termination
                    of employment with the Company. On December 21, 2004, a claim against
                    the Company was filed with the Israeli Labor Court by the Former
                    CEO for a
                    payment of approximately $ 131 (NIS 564 thousand) in respect of
                    payments allegedly due to her. The Company has filed a statement
                    of
                    defense against the Former CEO's claim. The Company's management
                    and its
                    legal advisors are of the opinion that the Company has reasonably
                    good
                    defense against the claim. In the year ended July 31, 2005, a
                    provision in the amount of $ 100, in respect of net salary expenses
                    was recorded under operating expenses, with respect to the Former
                    CEO. As
                    of July 31, 2007, this provision is in place.
 
 During
          2004, the Former CEO's brother, was granted 280,000 shares of Common stock
          for
          no cash consideration. In March 2004, the Board decided to grant him an
          additional 280,000 warrants to purchase 280,000 shares of Common stock,
          the
          vesting of which is subject to signing a definitive employment agreement
          with
          the Company. Such agreement was never entered into. As a result, on
          November 4, 2004, the Board of Directors cancelled the warrants. The
          cancelled warrants are not presented in these financial statements, nor
          were any
          compensation expenses recorded in respect of these warrants.
 
 The
          Company filed a counterclaim against its Former CEO in the amount of
          approximately $ 2,185 (NIS 9,405 thousand) which includes, inter alia,
          the issues described above. The Company's management and its legal advisors
          are
          of the opinion that the Company has a reasonably good assertion in its
          counterclaim.
 
 d.
                On
                    July 11, 2005, the Former CEO submitted to the Company a letter
                    claiming that the Company included in its Form 10-QSB filed on
                    June 24, 2005 slanderous allegations regarding the Former CEO. The
                    Former CEO demanded a retraction and asserted damages of at least
                    $ 23. The Company's management denies the claim. In addition, the
                    Company cannot, at this time, predict the out come of this
                    claim.
  -
              18
              -
  **TISSERA
          INC. AND ITS SUBSIDIARY**
 **(A
          development stage company)** **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **U.S.
          dollars in thousands, except share and per share data**
 
 
 **NOTE****9:-**
                **COMMITMENTS
                    AND CONTINGENCIES (Cont.)**
 
 e.
                In
                    March 2004, the Former CEO was granted 2,267,046 options to purchase
                    a
                    total of 2,267,046 shares of Common stock, out of which 270,000
                    options
                    were exercised into 249,859 shares of Common stock on a cashless
                    basis.
                    The total number of options to which the Former CEO is entitled
                    should
                    have been based on a formula that was determined in the agreement
                    with the
                    Former CEO. However, the number of options that were granted
                    in March 2004
                    was incorrect. In November 2004, the Company's Board of Directors
                    decided
                    to amend the number of options granted to the Former CEO to a
                    total of
                    2,042,551 options to purchase a total of 2,042,551 shares of
                    Common stock.
                    The amended calculation is based on the formula determined in
                    the
                    agreement.Under
                    the Former CEO’s Employment agreement upon termination the options become
                    fully vested and shall become immediately exercisable for a period
                    of
                    twelve months after the effective date of termination. The options
                    terminated on February 2006.
 
 The
          number of options and related compensation recorded in the financial statements
          are based on the revised calculation.
 
 f.
                On
                    September 7, 2004, certain shareholders demanded from the Former CEO
                    to repay the Company the amount of $ 1,074 (which is the value of the
                    shares that the Company issued as a result of the Former CEO's
                    cashless
                    exercise of the abovementioned options, at the date of exercise,
                    and which
                    were sold by the Former CEO), claiming that the exercise of the
                    options
                    was executed before the end of the vesting period. In addition,
                    the
                    shareholders demanded that the Former CEO pays the Company compensation
                    in
                    the amount of $ 645 for damages. The Company's management and its
                    legal advisors are of the opinion that the vast majority of the
                    assertions
                    are against the Former CEO and not against the Company. The Company
                    denies
                    the assertions that may imply to the Company's responsibility
                    and,
                    accordingly, no provision has been made in the financial statements.
  -
              19
              -
  **TISSERA
          INC. AND ITS SUBSIDIARY**
 **(A
          development stage company)** **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **U.S.
          dollars in thousands, except share and per share data**
 
 
 **NOTE
                    10:-**
                **TAXES
                    ON INCOME**
 
 a.
                Deferred
                    income taxes:
 
 Deferred
          income taxes reflect the net tax effects of temporary differences between
          the
          carrying amounts of assets and liabilities for financial reporting purposes
          and
          the amounts used for income tax purposes. Significant components of the
          Company's deferred tax assets are as follows:
 
 **July
                    31,****2007**
                
                **2006**Operating
                    loss carryforward
                
                $
                1,291
                
                $
                2,217Reserves
                    and allowances
                
                
                27
                
                
                23Net
                    deferred tax asset before valuation allowance
                
                
                1,318
                
                
                2,240Valuation
                    allowance
                
                
                1,318
                
                
                2,240Net
                    deferred tax asset
                
                $
                -
                
                $
                -
 
 As
          of
          July 31, 2007, the Company has provided valuation allowances of $ 1,318, in
          respect of deferred tax assets resulting from tax loss carryforwards and
          other
          temporary differences. Management currently believes that since the Company
          has
          a history of losses, it is more likely than not that the deferred tax regarding
          the loss carryforwards and other temporary differences will not be realized
          in
          the foreseeable future.
 
 b.
                Available
                    carryforward tax losses:
 
 As
          of
          July 31, 2007 and 2006, the Company has an accumulated tax loss carryforward
          of
          approximately $ 7,159 and $ 5,600, respectively. Carryforward tax
          losses in the U.S. can be carried forward and offset against taxable income
          in
          the future for a period of 20 years. Utilization of U.S. net operating
          losses
          may be subject to substantial annual limitations due to the "change in
          ownership" provisions of the Internal Revenue Code of 1986 and similar
          state
          provisions. The annual limitation may result in the expiration of net operating
          losses before utilization.
 
 c.
                Loss
                    before taxes on income consists of the
                    following:
 
 **Year
                    ended July 31,****2007**
                
                **2006**United
                    States
                
                $
                (1,893
                )
                $
                (1,739
                )Israel
                
                
                45
                
                
                34$
                (1,848
                )
                $
                (1,705
                )
  -
              20
              -
  **TISSERA
          INC. AND ITS SUBSIDIARY**
 **(A
          development stage company)** **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **U.S.
          dollars in thousands, except share and per share data**
 
 
 **NOTE****10:-**
                **TAXES
                    ON INCOME (Cont.)**
 
 d.
                Taxes
                    on income included in the statement of
                    operations:
 **Year
                    ended July 31,****2007**
                
                **2006**Current
                    taxes:Domestic
                
                $
                -
                
                $
                -Foreign
                    *)
                
                
                17
                
                
                10$
                17
                
                $
                10
 
 *)
                In
                    2004, the Company signed an agreement with its subsidiary effective
                    as of
                    October 27, 2003, according to which the subsidiary will provide
                    research,
                    development and other services to the Company. The Company will
                    reimburse
                    the subsidiary for expenses on a cost plus 10%
                    basis.
 
 e.
                The
                    main reconciling item between the statutory tax rate of the Company
                    and
                    the effective tax rate is the non-recognition of tax benefits
                    from
                    accumulated net operating losses carry forward due to the uncertainty
                    of
                    the realization of such tax
                    benefits.
 
 
 **NOTE
                    11:-**
                **STOCK
                    CAPITAL**
 
 a.
                Common
                    stock:
 
 Common
          stock confers on its holders the right to receive notice to participate
          and vote
          in general meetings of the Company, the right to a share in the excess
          of assets
          upon liquidation of the Company, and the right to receive dividends, if
          declared.
 
 Shares
          of
          Common stock are registered and publicly traded on the Over-the-Counter
          Bulletin
          Board service of the National Association of Securities Dealers, Inc. under
          the
          symbol TSSR.
 
 b.
                Bonus
                    shares:
 
 On
          November 4, 2003, it was resolved to allot a total of 12,024,000 bonus
          shares at the rate of three fully-paid bonus shares for each then outstanding
          share. All the shares and per share amounts have been adjusted to give
          retroactive effect to the allotment.
 
 c.
                Investments,
                    warrants and options:
 
 1.
                *Private
                    placements***
 
 a)
                On
                    February 1, 2004, the Company completed a private placement ("PPM1")
                    for
                    the sale of 1,767,200 units at a price per unit of $ 1.25. Each unit
                    consists of one Common share and three Common shares purchase
                    warrants.
                    The Company granted the investors 5,301,600 warrants with an
                    exercise
                    price in a range of $ 3.75 - $ 6.00 per share. The warrants are
                    exercisable within periods that range from six months to three
                    years. The
                    contractual life of the warrants ranges from one year to three
                    years. As
                    of July 31, 2007, 1,767,200 all warrants have
                    expired.
  -
              21
              -
  **TISSERA
          INC. AND ITS SUBSIDIARY**
 **(A
          development stage company)** **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **U.S.
          dollars in thousands, except share and per share data**
 
 
 **NOTE
          11:-        STOCK CAPITAL
          (Cont.)**
 
 b)
                On
                    March 18, 2004, the Company completed an additional PPM ("PPM2") for
                    the sale of 3,142,858 units at a price per unit of $ 1.75. Each unit
                    consists of one Common share and three Common shares purchase
                    warrants
                    that were exercisable at a price range of $ 3.75 - $ 6.00 per
                    share. The warrants were exercisable within periods that range
                    from six
                    months to three years. In order to settle a dispute with the
                    investors in
                    March 2005, the Company entered into a Settlement Agreement in
                    which it
                    amended the terms of the private offering as
                    follows:
 
 The
          Company reduced the exercise price of each of the warrants to $ 0.50.
 
 The
          Company extended the period over which the Class A Common Stock Purchase
          Warrants can be exercised from one year from March 2004 to one year from
          the
          effective date of the Form SB-2, the SB-2 become effective on September
          2,
          2005.
 
 The
          period over which Class B Common Stock Purchase Warrants and Class C Common
          Stock Purchase Warrants remained the same.
 
 In
          addition, the Company issued Class D Common Stock Purchase Warrants to
          purchase
          an aggregate of 6,285,716 shares of Common stock. The Class D Common Stock
          Purchase Warrants are exercisable for a period of one year from the effective
          date of the Form SB-2 at an exercise price of $ 0.15 per share.
 
 In
          light
          of the above, the Company recorded, in 2005, general and administration
          expenses
          in the amount of $ 1,980, calculated as the difference between the fair
          value of the warrants that were granted on March 18, 2004 at the date of
          the
          settlement agreement and the fair value of the warrants granted and modified
          at
          the date of the settlement agreement, in respect of the settlement
          agreement.
 
 As
          of
          July 31, 2007, all of the warrants related to the March 18, 2004 private
          placements expired.
 
 c)
                In
                    2004, the Company granted two finders involved with the Company's
                    first
                    PPM, 93,480 fully vested warrants, exercisable until May 2005.
                    On
                    October 27, 2005, the Board of Directors has extended the warrants
                    exercise period until May 2006 at no consideration. The Company
                    has
                    recorded the benefit totaling $ 10 in general and administrative
                    expenses. During 2006, the above warrants were
                    exercised.
  -
              22
              -
  **TISSERA
          INC. AND ITS SUBSIDIARY**
 **(A
          development stage company)** **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **U.S.
          dollars in thousands, except share and per share data**
 
 
 **NOTE
          1** **1:-       
          STOCK CAPITAL (Cont.)**
 
 d)
                On
                    December 28, 2006, the Company has completed a private placement for
                    the sale of 16,500,000 shares of Common stock ("the shares")
                    at a price of
                    $ 0.1 per share. For each two shares of Common stock purchased,
                    each
                    investor will receive a Series E Common Stock Purchase Warrant
                    to purchase
                    one share of Common stock of the Company (the "Series E Warrants")
                    and a
                    Series F Common Stock Purchase Warrant to purchase one share
                    of Common
                    stock of the Company (the "Series F Warrants"). The Series E
                    Warrants
                    shall be exercisable for a period commencing six months from
                    the issue
                    date through five years from the issue date at an exercise price
                    of $
                    0.165 per share. The Series F Warrants shall be exercisable for
                    a period
                    commencing six months from the issue date through five years
                    from the
                    issue date at an exercise price of $ 0.1815 per share. The Series E
                    Warrants and the Series F Warrants are exercisable on a cashless
                    basis.
 
 The
          Company has agreed to file a registration statement registering the shares
          within 180 days after the closing date and have such registration statement
          declared effective within 270 days from the closing date. The Company's
          registration statement has been declared effective as of May 25,
          2007.
 
 In
          connection with the above closing, the Company paid $ 165 to Burstein &
Lindsay Security Corp. ("the finder") for its services as a finder in connection
          with this transaction and agreed to pay the finder 10% of all cash proceeds,
          if
          any, generated as a result of the exercise of the Series E warrants and
          the
          Series F warrants. In addition, the finder also received a Common stock
          purchase
          warrant to purchase 3,300,000 shares of Common stock at an exercise price
          of
          $ 0.10 per share exercisable for a period commencing six months from the
          issuance date through five years from the issuance date. These warrants
          are
          exercisable on a cashless basis.
 
 As
          of
          July 31, 2007, all of the warrants related to the December 28, 2006 private
          placements, are exercisable.
 
 e)
                On
                    December 28, 2006 the Company granted 3,300,000 warrants to finders
                    in
                    connection with the issuance of Common stock. The fair value
                    of the
                    abovementioned warrants calculated as for the grant date is $
                    495. This
                    fair value was estimated using the following weighted average
                    assumptions:
 
 Risk
                    free interest
                
                4.85%Dividend
                    yields
                
                0%Volatility
                
                155%Expected
                    term (in years)
                
                5
  -
              23
              -
  **TISSERA
          INC. AND ITS SUBSIDIARY**
 **(A
          development stage company)** **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **U.S.
          dollars in thousands, except share and per share data**
  
 **NOTE
          1** **1:-       
          STOCK CAPITAL (Cont.)**
 
 2.
                *Shares
                    and warrants to service
                    providers*
 
 a)
                The
                    Company granted in prior years 2,429,722 warrants to purchase
                    Common stock
                    at an exercise price of $ 0.0001 per share, 150,000 warrants to
                    purchase Common stock at an exercise price of $ 0.01 per share,
                    600,000
                    warrants to purchase 600,000 shares of Common stock at an exercise
                    price
                    of $ 1 per share and 2,777,000 shares of Common stock at no
                    consideration. The warrants and shares were granted to service
                    providers
                    and to advisory board members, in exchange for research and development
                    services and general and administrative services. 3,040,984 warrants
                    are
                    fully vested as of July 31, 2007. In addition, as of July 31,
                    2007 and 2006, 138,738 and 0 warrants were exercised into 138,738
                    and 0
                    shares of Common stock,
                    respectively.
 
 The
          Company accounted for such warrants and shares under the provisions of
          EITF
          96-18. The fair value of fully vested warrants and shares was recorded
          as
          research and development expenses and general and administrative expenses
          at the
          grant date. The fair value of the warrants that vest over the three years
          period
          is amortized as an expense over the vesting period.
 
 The
          fair
          value for these options was estimated at the grant date and at each subsequent
          vesting date using the Black-Scholes option-pricing model with the following
          weighted-average assumptions: expected volatility of 90%, risk-free interest
          rates of 1.5% - 5.34%, dividend yields of 0% and an expected life equal
          to the
          options' contractual life.
 
 b)
                The
                    Company granted 2,580,829 warrants to Yeda (see Note 2), out
                    of which
                    955,839 and 54,180 were issued during the year ended July 31,
                    2007 due to
                    issuance of Common stock on December 28, 2006 and July 1, 2007,
                    respectively.
 
 c)
                On
                    June 26, 2007, the Company signed an agreement with a consultant
                    ("the
                    Consultant"), effective July 1, 2007 in which the Consultant
                    will provide
                    the Company consulting and advisory services in connection with
                    strategic
                    business planning, corporate finance, investor support, broker
                    relations
                    and related matters ("the Services"), for one year commencing
                    July 1,
                    2007.
 
 In
          consideration for the services, the Company issued on October 9, 2007 to
          the
          Consultant 1,000,000 shares of Common stock, par value $ 0.0001 per share.
          As of
          July 31, 2007, the fair value of the services was recorded at the fair
          value of
          the share on the agreement's effective date, and the relative portion of
          the
          expense was recorded in the statement of operations.
  -
              24
              -
  **TISSERA
          INC. AND ITS SUBSIDIARY**
 **(A
          development stage company)** **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **U.S.
          dollars in thousands, except share and per share data**
  
 **NOTE
          11:-        STOCK CAPITAL
          (Cont.)**
 
 d)
                A
                    summary of warrants to service providers activity as of July
                    31, 2007, and
                    changes during the year ended July 31, 2007, are as follows:
 
 **Number
                    of warrants**
                
                **Weighted-average
                    exercise price**
                
                **Weighted-
                    average remaining contractual term (in years)**
                
                **Aggregate
                    intrinsic**
                  **value**Outstanding
                    at August 1, 2006
                
                
                1,570,861
                
                $
                *)
                    -Granted
                
                
                4,310,019
                
                $
                0.08Exercised
                
                
                -
                
                $
                -Forfeited
                
                
                -
                
                $
                -Outstanding
                    at July 31, 2007
                
                
                5,880,880
                
                $
                0.06
                
                
                5.19
                
                
                245,184Exercisable
                    at July 31, 2007
                
                
                5,880,880
                
                $
                *)
                    -
                
                
                5.19
                
                
                245,184Vested
                    and expected to vest
                
                
                5,880,880
                
                $
                0.06
                
                
                5.19
                
                
                245,184
 
 *)
                Represents
                    an amount lower than $ 0.01.
 
 The
          aggregate intrinsic value in the table above represents the total intrinsic
          value (the difference between the Company's closing stock price on the
          last
          trading day of the year ended July 31, 2007 and the exercise price, multiplied
          by the number of in-the-money options) that would have been received by
          the
          option holders had all option holders exercised their options on July 31,
          2007.
          This amount changes based on the fair market value of the Company's stock.
          As of
          July 31, 2007, there was no compensation cost related to non-vested warrants
          issued to service providers.
  -
              25
              -
  **TISSERA
          INC. AND ITS SUBSIDIARY**
 **(A
          development stage company)** **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **U.S.
          dollars in thousands, except share and per share data**
 
 
 **NOTE
          11:-        STOCK CAPITAL
          (Cont.)**
 
 e)
                Summary
                    of warrants issued to service
                    providers:
 
 The
          Company's outstanding warrants that were granted to service providers and
          to
          investors as of July 31, 2007, are as follows:
 
 **Issuance
                    date**
                
                **Number
                    of warrants**
                
                **Exercise**
                  **price**
                
                **Warrants
                    exercisable**
                
                **Exercisable**
                  **through**January
                    2004
                
                
                1,519,815
                
                $
                *)
                    -
                
                
                1,519,815
                
                
                January
                    2014January
                    2004
                
                
                150,000
                
                $
                0.01
                
                
                150,000
                
                
                January
                    2009March
                    2004
                
                
                493,692
                
                $
                *)
                    -
                
                
                493,692
                
                
                March
                    2014March
                    2004
                
                
                277,477
                
                $
                *)
                    -
                
                
                184,985
                
                
                March
                    2014March
                    2004
                
                
                200,000
                
                $
                1
                
                
                155,556
                
                
                March
                    2009April
                    2004
                
                
                200,000
                
                $
                1
                
                
                155,556
                
                
                April
                    2009November
                    2004
                
                
                200,000
                
                $
                1
                
                
                116,667
                
                
                November
                    2009February
                    2005
                
                
                1,570,861
                
                $
                *)
                    -
                
                
                1,570,861
                
                
                October
                    2013December
                    2006
                
                
                955,839
                
                $
                *)
                    -
                
                
                955,839
                
                
                October
                    2013July
                    2007
                
                
                54,180
                
                $
                *)
                    -
                
                
                54,180
                
                
                October
                    20135,621,864
                
                
                
                
                
                5,621,864
 
 *)
                Represents
                    an amount lower than $ 0.01.
 
 The
          fair
          value of the warrants to service providers was estimated on the date of
          grant or
          at each balance sheet date (as applicable), using Black-Scholes option
          pricing
          model, with the following weighted-average assumptions for 2006 and 2005:
          weighted average volatility of 168% and 154%, risk-free interest rates
          of 4.88%
          and 3.73% dividend yields of 0% and a weighted average expected life of
          the
          options of four and five years, respectively.
 
 3.
                *Shares
                    and options to employees and to
                    directors*
 
 a)
                The
                    Company estimates the fair value of stock options granted using
                    the
                    Black-Scholes-Merton option-pricing model. The option-pricing
                    model
                    requires a number of assumptions, of which the most significant
                    are,
                    expected stock price volatility, and the expected option term.
                    Expected
                    volatility was calculated based upon actual historical stock
                    price
                    movements over the most recent periods ending on the grant date,
                    equal to
                    the expected option term. The expected option term represents
                    the period
                    that the Company's stock options are expected to be outstanding
                    and was
                    determined based on historical experience of similar options,
                    giving
                    consideration to the contractual terms of the stock options.
                    The Company
                    has historically not paid dividends and has no foreseeable plans
                    to issue
                    dividends. The risk-free interest rate is based on the yield
                    from U.S.
                    Treasury zero-coupon bonds with an equivalent
                    term.
  -
              26
              -
  **TISSERA
          INC. AND ITS SUBSIDIARY**
 **(A
          development stage company)** **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **U.S.
          dollars in thousands, except share and per share data**
 
 
 **NOTE
          11:-        STOCK CAPITAL
          (Cont.)**
 
 The
          fair
          value of the Company's stock options granted to employees and directors
          was
          estimated using the following weighted average assumptions:
 
 Risk
                    free interest
                
                3.84%Dividend
                    yields
                
                0%Volatility
                
                217%Expected
                    term (in years)
                
                5Forfeiture
                    rate
                
                0%
 
 The
          fair
          value of the options in the pro-forma table below was also calculated according
          to the above assumptions.
 
 During
          the year ended July 31, 2007 and 2006, no options were granted.
 
 b)
                During
                    2004, the Company granted two of its directors 541,080 options
                    to purchase
                    541,080 shares of the Company's Common stock at an exercise price
                    of
                    $ 1 per share. The options vest over a period of three years.
 
 During
          2004, 67,635 options were exercised into shares. On October 27, 2005, the
          Board of Directors decided to amend the exercise price of the remaining
          473,445
          options previously granted from $ 1 to $ 0.3 per share. The options
          are exercisable into Common stock on a cashless basis.
 
 The
          Company accounted for such options under the provision of APB 25 . Since
          the optionees are entitled to exercise their options on a cashless basis,
          the
          Company applied variable accounting and the compensation related to the
          options
          was recorded as research and development and general and administrative
          expenses
          over the vesting period based on the market price of the Company's stock
          at such
          reporting period.
 
 No
          compensation was recorded since the exercise price of the options is higher
          than
          the market price of the Company’s Common stock.
 
 During
          March 2004, the Company granted to certain employees 413,333 options to
          purchase
          413,333 shares of the Company's Common stock at an exercise price of $ 0.30
          per share. The options vest over a period of three years.
 
 c)
                On
                    May 25, 2004, the Company granted to a certain employee 10,090
                    fully
                    vested shares of Common stock at no
                    consideration.
 
 d)
                In
                    November 2004, the Company signed an employment agreement with
                    its current
                    CEO, according to which, the CEO will be granted 1,500,000 options
                    to
                    purchase 1,500,000 shares at an exercise price of $ 0.30 per share.
                    The options vested over a period of two years. The Company accounted
                    for
                    such options according to the provision of APB
                    25.
  -
              27
              -
  **TISSERA
          INC. AND ITS SUBSIDIARY**
 **(A
          development stage company)** **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **U.S.
          dollars in thousands, except share and per share data**
 
 
 **NOTE
          1** **1:-       
          STOCK CAPITAL (Cont.)**
 
 e)
                In
                    February 2005, the Company's Board of Directors decided to grant
                    a
                    director, 270,540 options to purchase 270,540 shares of Common
                    stock at an
                    exercise price of $ 0.31 per share. The options vested over a period
                    of two years commencing March 15, 2005. The Company accounted
                    for such
                    options according to the provisions of APB-25 and SFAS 123R (see
                    Note
                    3j).
 
 As
          of
          July 31, 2007 and 2006, no options were exercised.
 
 f)
                A
                    summary of option activity under the Company's Stock Option as
                    of July 31,
                    2007 and changes during the year ended July 31, 2007 are as follows:
 
 **Number
                    of options**
                
                **Weighted-average
                    exercise price**
                
                **Weighted-
                    average remaining contractual term (in years)**
                
                **Aggregate
                    intrinsic**
                  **value
                    *)**Outstanding
                    at August 1, 2006
                
                
                2,646,206
                
                $
                0.301Granted
                
                
                -Exercised
                
                
                -Forfeited
                
                
                -Outstanding
                    at April 30, 2007
                
                
                2,646,206
                
                $
                0.301
                
                
                1.93
                
                
                -Exercisable
                    at April 30, 2007
                
                
                2,636,206
                
                $
                0.301
                
                
                1.93
                
                
                -Vested
                    and expected to vest
                
                
                2,646,206
                
                $
                0.301
                
                
                1.93
                
                
                -
 
 *) As
          of
          reporting date, all of the options are out-of-the-money.
 
 The
          aggregate intrinsic value in the table above represents the total intrinsic
          value (the difference between the Company's closing stock price on the
          last
          trading day of year ended July 31, 2007 and the exercise price, multiplied
          by
          the number of in-the-money options) that would have been received by the
          option
          holders had all option holders exercised their options on July 31, 2007.
          This
          amount changes, based on the fair market value of the Company's stock.
          As of
          July 31, 2007, there was no unrecognized compensation cost related to non-vested
          share-based compensation arrangements granted under the Company's stock
          option
          plans.
 
 -
              28
              -
 **TISSERA
            INC. AND ITS SUBSIDIARY**
 **(A
            development stage company)** **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS**
 **U.S.
            dollars in thousands, except share and per share
            data**
  
 **NOTE
          11:-** **STOCK
          CAPITAL (Cont.)**
 
 g).
                The
                    pro forma table below reflects the Company's stock based compensation
                    expense, net income and basic and diluted earnings per share
                    for the year
                    ended July 31, 2006, had the Company applied the fair value recognition
                    provisions of SFAS 123, as follows:
 
 **Year
                    ended**
                  **July
                    31,**
                  **2006**Net
                    loss as reported
                
                $
                1,715Add
                    (deduct): stock-based compensation income (expense) recognized
                    under APB
                    25
                
                
                (7
                )Add:
                    stock-based compensation expense determined under fair value
                    method for
                    all awards
                
                
                1,027Pro
                    forma net loss
                
                $
                2,735Basic
                    and diluted loss per share, as reported
                
                $
                0.06Pro
                    forma basic and diluted loss per share
                
                $
                0.1Weighted
                    average number of shares used in computing pro forma basic and
                    diluted
                    earnings per share
                
                
                27,662,795
 
 For
          purpose of pro forma disclosures, stock based compensation is amortized
          over the
          vesting period using the straight-line method.
 
 Pro
          forma
          compensation expense under SFAS 123, among other computational differences,
          does
          not consider potential pre-vesting forfeitures. Because of these differences,
          the pro forma stock based compensation expense presented above for the
          prior
          year ended July 31, 2006 under SFAS 123 and the stock based compensation
          expense
          recognized during the current year ended July 31, 2007 under SFAS 123(R)
          are not
          directly comparable.
  -
              29
              -
  **TISSERA
          INC. AND ITS SUBSIDIARY**
 **(A
          development stage company)** **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **U.S.
          dollars in thousands, except share and per share data**
  
 **NOTE
                    1****2:-**
                **RELATED
                    PARTIES**
 
 a.
                From
                    April 2003 until October 2003, funds raised and expenses paid
                    by the
                    Company were managed by certain shareholders through a trustee,
                    at no
                    consideration.
 
 b.
                As
                    for claims, see Note 8.
 
 c.
                Transactions
                    with related parties:
 **Year
                    ended July 31,****2007**
                
                **2006**Fees
                    and related benefits and compensation expenses in respect of
                    options
                    granted to members of the Board of Directors
                
                $
                301
                
                $
                326
 
 d.
                In
                    January 2007, the Board of Directors granted to the Chief Executive
                    Officer a bonus in the amount of $ 30, in consideration of his
                    efforts
                    related to the latest fundraising for the
                    Company.
 
 
 **NOTE
                    1****3:-**
                **FINANCIAL
                    INCOME, NET**
 **Year
                    ended July 31,****2007**
                
                **2006**Income:Interest
                    income
                
                $
                48
                
                $
                65Expenses:Exchange
                    rate differences
                
                
                11
                
                
                10$
                37
                
                $
                55
 
 
 -
              30
              -