----

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**U.S.      SECURITIES AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM      10-QSB**

**TISSERA,      INC.**

| **Washington**                                          | **91-2034750**                     |
|---------------------------------------------------------|------------------------------------|
| (State                or other jurisdiction of          | (I.R.S.                Employer    |
| incorporation                of organization)           | Identification                No.) |
|                                                    |                               |
| **Maskit                8, 4th floor, Herzlia**         | **46733                Israel**    |
| (Address                of principal executive offices) | (Zip                Code)          |
|                                                    |                               |

Issuer's      telephone number: **+**      972-9-9561151

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**Tissera,      Inc.**

**INDEX**

|                                                                                                                                       | PAGE NUMBER |
|--------------------------------------------------------------------------------------------------------------------------------------------|------------------|
| PART                I. FINANCIAL                INFORMATION                                                                           |             |
|                                                                                                                                       |             |
| Item                1. Financial statements                                                                                                |             |
| (unaudited)                                                                                                                                |             |
|                                                                                                                                       |             |
| Consolidated                Balance Sheets                                                                                                 | 4                |
|                                                                                                                                       |             |
| Consolidated                Statements of Operations                                                                                       | 5                |
|                                                                                                                                       |             |
| Consolidated                Statements of Changes in Stockholders’ Equity (Deficiency)                                               | 6                |
|                                                                                                                                       |             |
| Consolidated                Statements of Cash Flows                                                                                       | 8                |
|                                                                                                                                       |             |
| Notes                to Financial Statements                                                                                               | 9-19             |
|                                                                                                                                       |             |
| Item                2. Management's Discussion and Analysis of Financial Condition and                Results                of Operations | 20               |
|                                                                                                                                       |             |
| Item                3. Controls and Procedures                                                                                             | 25               |
|                                                                                                                                       |             |
| PART                II. OTHER INFORMATION                                                                                                  | 26               |
|                                                                                                                                       |             |
| Item                1. Legal Proceedings                                                                                                   | 27               |
|                                                                                                                                       |             |
| Item                2. Change in Securities                                                                                                | 27               |
|                                                                                                                                       |             |
| Item                3. Defaults Upon Senior Securities                                                                                     | 27               |
|                                                                                                                                       |             |
| Item                4. Submission of Matters to Vote of Security Holders                                                                   | 27               |
|                                                                                                                                       |             |
| Item                5. Other Information                                                                                                   | 27               |
|                                                                                                                                       |             |
| Item                6. Exhibits                                                                                                            | 27               |
|                                                                                                                                       |             |
| SIGNATURES                                                                                                                                 | 27               |

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**DRAFT:        10.3.08**

**TISSERA        INC.**

**(A        development stage company)**

**INTERIM        CONSOLIDATED FINANCIAL STATEMENTS**

**AS        OF JANUARY 31, 2008**

**IN        U.S. DOLLARS **

**UNAUDITED**

**INDEX**

|                                                                            | **Page**                    |
|---------------------------------------------------------------------------------|-----------------------------|
|                                                                            |                        |
| **Consolidated                  Balance Sheets**                                | **4**                       |
|                                                                            |                        |
| **Consolidated                  Statements of Operations**                      | **5**                       |
|                                                                            |                        |
| **Statements                  of Changes in Stockholders' Equity (Deficiency)** | **6                  - 7**  |
|                                                                            |                        |
| **Consolidated                  Statements of Cash Flows**                      | **8**                       |
|                                                                            |                        |
| **Notes                  to Consolidated Financial Statements**                 | **9                  - 19** |

**-          - - - - - - - - - -**

----

**TISSERA          INC.**

**(A          development stage company)**

**CONSOLIDATED        BALANCE SHEETS**

----

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

|                                                                                                                                                                                                                                                                                                                   |   | **January 31,****2008** |    | **July 31,****2007** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|---------|---------------------------|--------|
|                                                                                                                                                                                                                                                                                                                   |   | **Unaudited**                |    |                      |   |
| ASSETS                                                                                                                                                                                                                                                                                                                 |   |                         |    |                      |   |   |   |
|                                                                                                                                                                                                                                                                                                                   |   |                         |    |                      |   |   |   |
| CURRENT                  ASSETS:                                                                                                                                                                                                                                                                                       |   |                         |    |                      |   |   |   |
| Cash                  and cash equivalents                                                                                                                                                                                                                                                                             |   | $                            | 193     |                      | $      | 999 |   |
| Marketable                  securities                                                                                                                                                                                                                                                                                 |   |                         | 150     |                      |   | - |   |
| Accounts                  receivable and prepaid expenses                                                                                                                                                                                                                                                              |   |                         | 139     |                      |   | 221 |   |
|                                                                                                                                                                                                                                                                                                                   |   |                         |    |                      |   |   |   |
| Total                  current assets                                                                                                                                                                                                                                                                                  |   |                         | 482     |                      |   | 1,220 |   |
|                                                                                                                                                                                                                                                                                                                   |   |                         |    |                      |   |   |   |
| RESTRICTED                  CASH                                                                                                                                                                                                                                                                                       |   |                         | 7       |                      |   | 5 |   |
|                                                                                                                                                                                                                                                                                                                   |   |                         |    |                      |   |   |   |
| SEVERANCE                  PAY FUND                                                                                                                                                                                                                                                                                    |   |                         | 64      |                      |   | 47 |   |
|                                                                                                                                                                                                                                                                                                                   |   |                         |    |                      |   |   |   |
| PROPERTY                  AND EQUIPMENT, NET                                                                                                                                                                                                                                                                           |   |                         | 5       |                      |   | 7 |   |
|                                                                                                                                                                                                                                                                                                                   |   |                         |    |                      |   |   |   |
| LONG-TERM                  PEPAID EXPENSES                                                                                                                                                                                                                                                                             |   |                         | 4       |                      |   | 4 |   |
|                                                                                                                                                                                                                                                                                                                   |   |                         |    |                      |   |   |   |
| Total                  assets                                                                                                                                                                                                                                                                                          |   | $                            | 562     |                      | $      | 1,283 |   |
|                                                                                                                                                                                                                                                                                                                   |   |                         |    |                      |   |   |   |
| LIABILITIES                  AND STOCKHOLDERS' EQUITY (DEFICIENCY)                                                                                                                                                                                                                                                     |   |                         |    |                      |   |   |   |
|                                                                                                                                                                                                                                                                                                                   |   |                         |    |                      |   |   |   |
| CURRENT                  LIABILITIES:                                                                                                                                                                                                                                                                                  |   |                         |    |                      |   |   |   |
| Trade                  payables                                                                                                                                                                                                                                                                                        |   | $                            | 17      |                      | $      | 12 |   |
| Other                  accounts payable and accrued expenses                                                                                                                                                                                                                                                           |   |                         | 627     |                      |   | 611 |   |
|                                                                                                                                                                                                                                                                                                                   |   |                         |    |                      |   |   |   |
| Total                  current liabilities                                                                                                                                                                                                                                                                             |   |                         | 644     |                      |   | 623 |   |
|                                                                                                                                                                                                                                                                                                                   |   |                         |    |                      |   |   |   |
| ACCRUED                  SEVERANCE PAY                                                                                                                                                                                                                                                                                 |   |                         | 90      |                      |   | 64 |   |
|                                                                                                                                                                                                                                                                                                                   |   |                         |    |                      |   |   |   |
| Total                  liabilities                                                                                                                                                                                                                                                                                     |   |                         | 734     |                      |   | 687 |   |
|                                                                                                                                                                                                                                                                                                                   |   |                         |    |                      |   |   |   |
| COMMITMENTS                  AND CONTINGENCIES (Note 4)                                                                                                                                                                                                                                                                |   |                         |    |                      |   |   |   |
|                                                                                                                                                                                                                                                                                                                   |   |                         |    |                      |   |   |   |
| STOCKHOLDERS'                  EQUITY (DEFICIENCY):                                                                                                                                                                                                                                                                    |   |                         |    |                      |   |   |   |
| Stock                  capital -                                                                                                                                                                                                                                                                                       |   |                         |    |                      |   |   |   |
| Common                  stock of $ 0.0001 par value each - Authorized: 100,000,000 shares at                  January 31, 2008 and July 31, 2007; Issued and outstanding: 45,314,332                  and                  44,314,332 shares at January 31, 2008 and July 31, 2007,                  respectively |   |                         | 5       |                      |   | 5 |   |
| Preferred                  stock of $ 0.0001 par value each - Authorized: 20,000,000 shares at                  January 31, 2008 and July 31, 2007; Issued and outstanding: 0 shares                  at                  January 31, 2008 and July 31, 2007                                                 |   |                         | -       |                      |   | - |   |
| Additional                  paid-in capital                                                                                                                                                                                                                                                                            |   |                         | 30,788  |                      |   | 30,788 |   |
| Deferred                  stock based compensation                                                                                                                                                                                                                                                                     |   |                         | -       |                      |   | - |   |
| Deficit                  accumulated during the development stage                                                                                                                                                                                                                                                      |   |                         | (30,965 | )                         |   | (30,197 | ) |
|                                                                                                                                                                                                                                                                                                                   |   |                         |    |                      |   |   |   |
| Total                  stockholders' equity (deficiency)                                                                                                                                                                                                                                                               |   |                         | (172    | )                         |   | 596 |   |
|                                                                                                                                                                                                                                                                                                                   |   |                         |    |                      |   |   |   |
| Total                  liabilities and stockholders' equity (deficiency)                                                                                                                                                                                                                                               |   | $                            | 562     |                      | $      | 1,283 |   |

----

**TISSERA          INC.**

**(A          development stage company)**

**CONSOLIDATED**
**STATEMENTS        OF OPERATIONS**

----

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

|                                                                                                                                        |   | **Six months ended****January 31,** |       | **Three months ended****January 31,** |   | **Year ended****July 31,** |   | **From May 31,****2000 (date of****inception) through****January 31,** |       |
|---------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|------------|------------------------------------------------------|--------|--------------------------------------|--------|------------------------------------------------------------------------------------------------------|------------|
|                                                                                                                                        |   | **2008**                                           |       | **2007**                                             |   | **2008**                             |   | **2007**                                                                                             |       | **2007** |   | **2008** |   |
|                                                                                                                                        |   | **Unaudited**                                      |       |                                                 |   | **Unaudited**                        |   |
| Operating                  expenses:                                                                                                        |   |                                               |       |                                                 |   |                                 |   |                                                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Research                  and development *)                                                                                                |   | $                                                  | 317        |                                                 | $      | 653                                  |   | $                                                                                                    | 159        |   | $ | 399 |   | $ | 1,073 |   | $ | 16,454 |   |
| General                  and administrative **)                                                                                             |   |                                               | 403        |                                                 |   | 477                                  |   |                                                                                                 | 202        |   |   | 203 |   |   | 812 |   |   | 14,468 |   |
|                                                                                                                                        |   |                                               |       |                                                 |   |                                 |   |                                                                                                 |       |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                        |   |                                               | 720        |                                                 |   | 1,130                                |   |                                                                                                 | 361        |   |   | 602 |   |   | 1,885 |   |   | 30,922 |   |
| Financial                  expenses (income), net                                                                                           |   |                                               | 41         |                                                 |   | (5                                   | )      |                                                                                                 | 19         |   |   | (7 | ) |   | (37 | ) |   | (121 | ) |
|                                                                                                                                        |   |                                               |       |                                                 |   |                                 |   |                                                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Loss                  from continuing operations before income taxes                                                                        |   |                                               | 761        |                                                 |   | 1,125                                |   |                                                                                                 | 380        |   |   | 595 |   |   | 1,848 |   |   | 30,801 |   |
| Income                  taxes                                                                                                               |   |                                               | 7          |                                                 |   | 5                                    |   |                                                                                                 | 3          |   |   | 2 |   |   | 17 |   |   | 72 |   |
|                                                                                                                                        |   |                                               |       |                                                 |   |                                 |   |                                                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Loss                  from continuing operations                                                                                            |   |                                               | 768        |                                                 |   | 1,130                                |   |                                                                                                 | 383        |   |   | 597 |   |   | 1,865 |   |   | 30,873 |   |
| Loss                  from discontinued operations                                                                                          |   |                                               | -          |                                                 |   | -                                    |   |                                                                                                 | -          |   |   | - |   |   | - |   |   | 92 |   |
|                                                                                                                                        |   |                                               |       |                                                 |   |                                 |   |                                                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Net                  loss                                                                                                                   |   | $                                                  | 768        |                                                 | $      | 1,130                                |   | $                                                                                                    | 383        |   | $ | 597 |   | $ | 1,865 |   | $ | 30,965 |   |
|                                                                                                                                        |   |                                               |       |                                                 |   |                                 |   |                                                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Basic                  and diluted net loss per share                                                                                       |   | $                                                  | 0.017      |                                                 | $      | 0.037                                |   | $                                                                                                    | 0.008      |   | $ | 0.018 |   | $ | 0.05 |   |   |   |   |
|                                                                                                                                        |   |                                               |       |                                                 |   |                                 |   |                                                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Weighted                  average number of shares used in computing basic and diluted net                  loss per                  share |   |                                               | 44,933,897 |                                                 |   | 30,863,245                           |   |                                                                                                 | 45,314,332 |   |   | 33,912,158 |   |   | 37,533,510 |   |   |   |   |

| *) | Including                  expenses related to options granted to employees and warrants granted                  to                  Yeda and to service providers in the amount of $ 0, $ 239, $ 0,                  $ 192 and $ 280 for the six months ended January 31, 2008 and 2007,                  for the three months ended January 31, 2008 and 2007 and for the                  year                  ended July 31, 2007,                  respectively. |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **) | Including                  expenses related to warrants, options and shares granted to service                  providers, employees and directors and compensation to investors                  in the                  amount of $ 55, $ 136, $ 0, $ 27 and $ 150 for                  the six months ended January 31, 2008 and 2007, for the three months                  ended January 31, 2008 and 2007 and for the year ended July 31, 2007,                  respectively. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**TISSERA          INC.**

**(A          development stage company)**

**STATEMENTS        OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)**

----

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

|                                                                                                                                                                |   | **Stock capital** |       | **Additional****paid-in** |   | **Deferred****stock-based** |   | **Deficit****accumulated****during the****development** |                  | **Total****stockholders'****equity** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|------------|---------------------------|--------|-----------------------------|--------|--------------------------------------------------------------|-----------------------|--------------------------------------|--------|
|                                                                                                                                                                |   | **Number**             |       | **Amount**                |   | **capital**                 |   | **compensation**                                             |                  | **stage**                            |   | **(deficiency)** |   |
|                                                                                                                                                                |   |                   |       |                      |   |                        |   |                                                         |                  |                                 |   |   |   |
| Balance                  as of May 31, 2000 (date of inception)                                                                                                     |   |                   | -          |                      | $      | -                           |   | $                                                            | -                     |                                 | $      | - |   | $ | - |   | $ | - |   |
| Stock                  issued for cash on May 31, 2000                                                                                                              |   |                   | 15,036,000 |                      |   | 2                           |   |                                                         | 8                     |                                 |   | - |   |   | - |   |   | 10 |   |
| Net                  loss                                                                                                                                           |   |                   | -          |                      |   | -                           |   |                                                         | -                     |                                 |   | - |   |   | (5 | ) |   | (5 | ) |
|                                                                                                                                                                |   |                   |       |                      |   |                        |   |                                                         |                  |                                 |   |   |   |   |   |   |   |   |   |
| Balance                  as of July 31, 2000                                                                                                                        |   |                   | 15,036,000 |                      |   | 2                           |   |                                                         | 8                     |                                 |   | - |   |   | (5 | ) |   | 5 |   |
| Stock                  issued for cash on July 17, 2001                                                                                                        |   |                   | 3,000,000  |                      |   | *)                  -       |   |                                                         | 40                    |                                 |   | - |   |   | - |   |   | 40 |   |
| Contribution                  of capital                                                                                                                            |   |                   | -          |                      |   | -                           |   |                                                         | 15                    |                                 |   | - |   |   | - |   |   | 15 |   |
| Net                  loss                                                                                                                                           |   |                   | -          |                      |   | -                           |   |                                                         | -                     |                                 |   | - |   |   | (30 | ) |   | (30 | ) |
|                                                                                                                                                                |   |                   |       |                      |   |                        |   |                                                         |                  |                                 |   |   |   |   |   |   |   |   |   |
| Balance                  as of July 31, 2001                                                                                                                        |   |                   | 18,036,000 |                      |   | 2                           |   |                                                         | 63                    |                                 |   | - |   |   | (35 | ) |   | 30 |   |
| Contribution                  of capital                                                                                                                            |   |                   | -          |                      |   | -                           |   |                                                         | 15                    |                                 |   | - |   |   | - |   |   | 15 |   |
| Net                  loss                                                                                                                                           |   |                   | -          |                      |   | -                           |   |                                                         | -                     |                                 |   | - |   |   | (39 | ) |   | (39 | ) |
|                                                                                                                                                                |   |                   |       |                      |   |                        |   |                                                         |                  |                                 |   |   |   |   |   |   |   |   |   |
| Balance                  as of July 31, 2002                                                                                                                        |   |                   | 18,036,000 |                      |   | 2                           |   |                                                         | 78                    |                                 |   | - |   |   | (74 | ) |   | 6 |   |
| Contribution                  of capital                                                                                                                            |   |                   | -          |                      |   | -                           |   |                                                         | 15                    |                                 |   | - |   |   | - |   |   | 15 |   |
| Net                  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                 |                                 |   | - |   |   | - |   |   | 2,033 |   |
| Stock                  issued for cash related to PPM2, net of $ 517 of cash issuance                  expenses                                                     |   |                   | 3,142,858  |                      |   | 1                           |   |                                                         | 4,983                 |                                 |   | - |   |   | - |   |   | 4,984 |   |
| Stock-based                  compensation related to warrants granted to service                  providers                                                         |   |                   | -          |                      |   | -                           |   |                                                         | 11,429                |                                 |   | - |   |   | - |   |   | 11,429 |   |
| Stock-based                  compensation related to options granted to employees and directors                                                                     |   |                   | -          |                      |   | -                           |   |                                                         | 1,130                 |                                 |   | - |   |   | - |   |   | 1,130 |   |
| Compensation                  related to stock granted to service providers and to                  employees                                                       |   |                   | 3,067,090  |                      |   | *)                  -       |   |                                                         | 7,366                 |                                 |   | - |   |   | - |   |   | 7,366 |   |
| Deferred                  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 | ) |   | 4,403 |   |
| Stock-based                  compensation related to warrants granted to investors                                                                                  |   |                   | -          |                      |   | -                           |   |                                                         | 1,980                 |                                 |   | - |   |   | - |   |   | 1,980 |   |
| Warrants                  granted to Yeda and to service providers                                                                                                  |   |                   | -          |                      |   | -                           |   |                                                         | (362                  | )                                    |   | - |   |   | - |   |   | (362 | ) |
| Amortization                  of stock-based compensation related to options granted to employees                  and                  directors                   |   |                   | -          |                      |   | -                           |   |                                                         | -                     |                                 |   | 176 |   |   | - |   |   | 176 |   |
| Deferred                  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 | ) |   | 2,214 |   |
| Exercise                  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 |   |   | - |   |   | 27 |   |
| Net                  loss                                                                                                                                           |   |                   | -          |                      |   | -                           |   |                                                         | -                     |                                 |   | - |   |   | (1,715 | ) |   | (1,715 | ) |
|                                                                                                                                                                |   |                   |       |                      |   |                        |   |                                                         |                  |                                 |   |   |   |   |   |   |   |   |   |
| Balance                  as of July 31, 2006                                                                                                                        |   |                   | 27,814,332 |                      |   | 3                           |   |                                                         | 28,839                |                                 |   | (4 | ) |   | (28,332 | ) |   | 506 |   |
| Reclassification                  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                 |                                 |   | - |   |   | - |   |   | 1,424 |   |
| Shares                  granted to service providers                                                                                                                |   |                   | -          |                      |   | -                           |   |                                                         | 110                   |                                 |   | - |   |   | - |   |   | 110 |   |
| Stock-based                  compensation related to options granted to employees and                  directors                                                    |   |                   | -          |                      |   | -                           |   |                                                         | 271                   |                                 |   | - |   |   | - |   |   | 271 |   |
| Warrants                  granted to Yeda                                                                                                                           |   |                   | -          |                      |   | -                           |   |                                                         | 150                   |                                 |   | - |   |   | - |   |   | 150 |   |
| Net                  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. |
|----|-------------------------------------------------------|

----

**TISSERA          INC.**

**(A          development stage company)**

**STATEMENTS          OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)**

----

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

|                                                                              |   | **Stock capital** |       | **Additional****paid-in** |   | **Deferred****stock-based** |                     | **Deficit****accumulated****during the****development** |   | **Total****stockholders'****equity** |   |
|-----------------------------------------------------------------------------------|--------|------------------------|------------|---------------------------|--------|-----------------------------|--------------------------|--------------------------------------------------------------|--------|--------------------------------------|--------|
|                                                                              |   | **Number**             |       | **Amount**                |   | **capital**                 |                     | **compensation**                                             |   | **stage**                            |   | **(deficiency)** |   |
|                                                                              |   |                   |       |                      |   |                        |                     |                                                         |   |                                 |   |   |   |
| Balance                  as of July 31, 2007                                      |   |                   | 44,314,332 |                      |   | 5                           |                     |                                                         | 30,788 |                                 |   | - |   |   | (30,197 | ) |   | 596 |   |
|                                                                              |   |                   |       |                      |   |                        |                     |                                                         |   |                                 |   |   |   |   |   |   |   |   |   |
| Issuance                  of shares granted to service providers in previous year |   |                   | 1,000,000  |       |   | *)                  -       |      |                                                         | -      |                  |   | - |      |   | - |   |   | *)                  - |   |
| Net                  loss                                                         |   |                   | -          |                      |   | -                           |                     |                                                         | -      |                                 |   | - |   |   | (768 | )    |   | (768 | ) |
|                                                                              |   |                   |       |                      |   |                        |                     |                                                         |   |                                 |   |   |   |   |   |   |   |   |   |
| Balance                  as of January 31, 2008 (unaudited)                       |   |                   | 45,314,332 |                      | $      | 5                           |                     | $                                                            | 30,788 |                                 | $      | - |   | $ | (30,965 | ) | $ | (172 | ) |

| *) | Represents                  an amount lower than $ 1. |
|----|-------------------------------------------------------|

----

**TISSERA          INC.**

**(A          development stage company)**

**CONSOLIDATED          STATEMENTS OF CASH FLOWS**

----

**U.S.        dollars in thousands**

|                                                                                                                                     |   | **Six months ended****January 31,** |   | **Year ended****July 31,** |   | **From May 31,****2000 (date of****inception)****through****January 31,** |   |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|--------|--------------------------------------|--------|----------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                     |   | **2008**                                           |   | **2007**                             |   | **2007**                                                                                           |   | **2008** |   |
|                                                                                                                                     |   | **Unaudited**                                      |   |                                 |   | **Unaudited**                                                                                      |   |
| Cash                  flows from operating activities:                                                                                   |   |                                               |   |                                 |   |                                                                                               |   |   |   |   |   |   |   |
| Net                  loss                                                                                                                |   | $                                                  | (768   | )                                    | $      | (1,130                                                                                             | )      | $ | (1,865 | ) | $ | (30,965 | ) |
| Adjustments                  required to reconcile net loss to total net cash used in continuing                  operating activities:  |   |                                               |   |                                 |   |                                                                                               |   |   |   |   |   |   |   |
| Depreciation                                                                                                                             |   |                                               | 2      |                                 |   | 4                                                                                                  |   |   | 6 |   |   | 33 |   |
| Expenses                  related to warrants granted to Yeda and to service                  providers                                  |   |                                               | -      |                                 |   | 239                                                                                                |   |   | 150 |   |   | 11,197 |   |
| Expenses                  related to options granted to employees and directors                                                          |   |                                               | -      |                                 |   | 136                                                                                                |   |   | 271 |   |   | 1,604 |   |
| Expenses                  related to shares granted to service providers and compensation                  to                  investors |   |                                               | 55     |                                 |   | -                                                                                                  |   |   | 9 |   |   | 9,410 |   |
| Interest                  accrued on short-term deposit                                                                                  |   |                                               | -      |                                 |   | (26                                                                                                | )      |   | - |   |   | (17 | ) |
| Decrease                  (increase) in accounts receivable and prepaid expenses                                                         |   |                                               | 27     |                                 |   | 34                                                                                                 |   |   | 54 |   |   | (93 | ) |
| Increase                  in trade payables                                                                                              |   |                                               | 5      |                                 |   | 8                                                                                                  |   |   | 8 |   |   | 17 |   |
| Increase                  (decrease) in other accounts payable and accrued expenses                                                      |   |                                               | 16     |                                 |   | 2                                                                                                  |   |   | (15 | ) |   | 627 |   |
| Increase                  in accrued severance pay, net                                                                                  |   |                                               | 9      |                                 |   | 4                                                                                                  |   |   | 6 |   |   | 26 |   |
|                                                                                                                                     |   |                                               |   |                                 |   |                                                                                               |   |   |   |   |   |   |   |
| Net                  cash used in continuing operating activities                                                                        |   |                                               | (654   | )                                    |   | (729                                                                                               | )      |   | (1,376 | ) |   | (8,161 | ) |
| Net                  cash provided by discontinued operating activities                                                                  |   |                                               | -      |                                 |   | -                                                                                                  |   |   | - |   |   | 75 |   |
|                                                                                                                                     |   |                                               |   |                                 |   |                                                                                               |   |   |   |   |   |   |   |
| Total                  net cash used in operating activities                                                                             |   |                                               | (654   | )                                    |   | (729                                                                                               | )      |   | (1,406 | ) |   | (8,086 | ) |
|                                                                                                                                     |   |                                               |   |                                 |   |                                                                                               |   |   |   |   |   |   |   |
| Cash                  flows from investing activities:                                                                                   |   |                                               |   |                                 |   |                                                                                               |   |   |   |   |   |   |   |
| Purchase                  of marketable securities                                                                                       |   |                                               | (150   | )                                    |   | -                                                                                                  |   |   | - |   |   | (150 | ) |
| Short-term                  deposit                                                                                                      |   |                                               | -      |                                 |   | 676                                                                                                |   |   | 844 |   |   | 17 |   |
| Sale                  of property and equipment                                                                                          |   |                                               | -      |                                 |   | -                                                                                                  |   |   | - |   |   | 9 |   |
| Purchase                  of property and equipment                                                                                      |   |                                               | -      |                                 |   | -                                                                                                  |   |   | - |   |   | (47 | ) |
| Restricted                  cash                                                                                                         |   |                                               | -      |                                 |   | -                                                                                                  |   |   | - |   |   | (5 | ) |
| Lease                  deposits                                                                                                          |   |                                               | -      |                                 |   | -                                                                                                  |   |   | (4 | ) |   | (4 | ) |
|                                                                                                                                     |   |                                               |   |                                 |   |                                                                                               |   |   |   |   |   |   |   |
| Net                  cash provided by (used in) continuing investing activities                                                          |   |                                               | (150   | )                                    |   | 676                                                                                                |   |   | 840 |   |   | (180 | ) |
| Net                  cash used in discontinued investing activities                                                                      |   |                                               | -      |                                 |   | -                                                                                                  |   |   | - |   |   | (15 | ) |
|                                                                                                                                     |   |                                               |   |                                 |   |                                                                                               |   |   |   |   |   |   |   |
| Total                  net cash provided by (used in) investing activities                                                               |   |                                               | (150   | )                                    |   | 676                                                                                                |   |   | 840 |   |   | (195 | ) |
|                                                                                                                                     |   |                                               |   |                                 |   |                                                                                               |   |   |   |   |   |   |   |
| Cash                  flows from financing activities:                                                                                   |   |                                               |   |                                 |   |                                                                                               |   |   |   |   |   |   |   |
| Restricted                  cash                                                                                                         |   |                                               | (2     | )                                    |   | -                                                                                                  |   |   | - |   |   | (2 | ) |
| Issuance                  of shares and warrants, net                                                                                    |   |                                               | -      |                                 |   | 1,424                                                                                              |   |   | 1,424 |   |   | 8,441 |   |
|                                                                                                                                     |   |                                               |   |                                 |   |                                                                                               |   |   |   |   |   |   |   |
| Net                  cash provided by (used in) continuing financing activities                                                          |   |                                               | (2     | )                                    |   | -                                                                                                  |   |   | 1,424 |   |   | 8,439 |   |
| Net                  cash provided by discontinued financing activities                                                                  |   |                                               | -      |                                 |   | -                                                                                                  |   |   | - |   |   | 35 |   |
|                                                                                                                                     |   |                                               |   |                                 |   |                                                                                               |   |   |   |   |   |   |   |
| Total                  net cash provided by (used in) financing activities                                                               |   |                                               | (2     | )                                    |   | 1,424                                                                                              |   |   | 1,424 |   |   | 8,474 |   |
|                                                                                                                                     |   |                                               |   |                                 |   |                                                                                               |   |   |   |   |   |   |   |
| Increase                  (decrease) in cash and cash equivalents                                                                        |   |                                               | (806   | )                                    |   | 1,371                                                                                              |   |   | 888 |   |   | 193 |   |
| Cash                  and cash equivalents at beginning of period                                                                        |   |                                               | 999    |                                 |   | 111                                                                                                |   |   | 111 |   |   | - |   |
|                                                                                                                                     |   |                                               |   |                                 |   |                                                                                               |   |   |   |   |   |   |   |
| Cash                  and cash equivalents at end of period                                                                              |   | $                                                  | 193    |                                 | $      | 1,482                                                                                              |   | $ | 999 |   | $ | 193 |   |
|                                                                                                                                     |   |                                               |   |                                 |   |                                                                                               |   |   |   |   |   |   |   |
| Non-cash                  activity:                                                                                                      |   |                                               |   |                                 |   |                                                                                               |   |   |   |   |   |   |   |
| Prepaid                  expenses                                                                                                        |   | $                                                  | -      |                                 | $      | -                                                                                                  |   | $ | 101 |   | $ | 101 |   |

| *) | Represents                  an amount lower than $ 1. |
|----|-------------------------------------------------------|

----

**TISSERA          INC.**

**(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. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**TISSERA          INC.**

**(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: |
|--------|----|------------------------------------------------|

|   | d. | Risk                  factors: |
|--------|----|--------------------------------|

----

**TISSERA          INC.**

**(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** |
|-------------------------------|-----------------------------------------------------|

----

**TISSERA          INC.**

**(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.)** |
|-------------------------------|----------------------------------------------------------------|

|   |   | 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 $ 200 and $ 300 for the six months ended                  January 31, 2008 and 2007,                  respectively. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **NOTE                  3:-** | **SIGNIFICANT                  ACCOUNTING POLICIES** |
|-------------------------------|------------------------------------------------------|

|   | a. | The                  significant accounting policies followed in the preparation of                  these                  financial statements are identical to those applied in the preparation                  of                  the latest annual financial statements except as detailed in d                  below. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b. | Use                  of estimates: |
|--------|----|------------------------------------|

----

**TISSERA          INC.**

**(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.)** |
|-------------------------------|-------------------------------------------------------------------------------|

|   | c. | Marketable                  securities: |
|--------|----|-----------------------------------------|

|   | d. | In                  July 2006, the FASB issued FASB Interpretation 48, "Accounting                  for                  Uncertainty in Income Taxes" ("FIN 48"). FIN 48 defines the threshold                  for                  recognizing the benefits of tax return positions in the financial                  statements as "more-likely-than-not" to be sustained by the taxing                  authority. The recently issued literature also provides guidance                  on                  derecognition, measurement and classification of income tax uncertainties,                  along with any related interest and penalties. FIN 48 also includes                  guidance concerning accounting for income tax uncertainties in                  interim                  periods and increases the level of disclosures associated with                  any income                  tax uncertainties. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**TISSERA          INC.**

**(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.)** |
|-------------------------------|-------------------------------------------------------------------------------|

|   | e. | 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). |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*Shares        and options to employees and directors*

----

**TISSERA        INC.**

**(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.)** |
|-------------------------------|-------------------------------------------------------------------------------|

| Risk                  free interest       |   |   | 3.84 | %      |
|-------------------------------------------|--------|--------|------|--------|
| Dividend                  yields          |   |   | 0    | %      |
| Volatility                                |   |   | 217  | %      |
| Expected                  term (in years) |   |   | 5    |   |
| Forfeiture                  rate          |   |   | 0    | %      |

|                                             |   | **Number of****options** |      | **Weighted-****Average****exercise price** |   | **Weighted-****Average****Remaining****contractual term****(in years)** |   | **Aggregate****Intrinsic****value  *)** |   |
|--------------------------------------------------|--------|-------------------------------|-----------|-------------------------------------------------|--------|-----------------------------------------------------------------------------------|--------|---------------------------------------------------|--------|
|                                             |   | **Unaudited**                 |      |
|                                             |   |                          |      |                                            |   |                                                                              |   |                                              |   |
| Outstanding                  at August 1, 2007   |   |                          | 2,646,206 |                                            | $      | 0.301                                                                             |   |                                              |   |   |   |   |   |
| Granted                                          |   |                          | -         |                                            |   |                                                                              |   |                                              |   |   |   |   |   |
| Exercised                                        |   |                          | -         |                                            |   |                                                                              |   |                                              |   |   |   |   |   |
| Forfeited                                        |   |                          | -         |                                            |   |                                                                              |   |                                              |   |   |   |   |   |
|                                             |   |                          |      |                                            |   |                                                                              |   |                                              |   |   |   |   |   |
| Outstanding                  at January 31, 2008 |   |                          | 2,646,206 |                                            | $      | 0.301                                                                             |   |                                              | 1.42   |   |   | - |   |
|                                             |   |                          |      |                                            |   |                                                                              |   |                                              |   |   |   |   |   |
| Exercisable                  at January 31, 2008 |   |                          | 2,646,206 |                                            | $      | 0.301                                                                             |   |                                              | 1.42   |   |   | - |   |
|                                             |   |                          |      |                                            |   |                                                                              |   |                                              |   |   |   |   |   |
| Vested                  and expected to vest     |   |                          | 2,646,206 |                                            | $      | 0.301                                                                             |   |                                              | 1.42   |   |   | - |   |

----

**TISSERA        INC.**

**(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.)** |
|-------------------------------|-------------------------------------------------------------------------------|

*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 January 31, 2008. In addition, as of                  January 31, 2008 and 2007, there were no warrants exercised into                  shares of Common stock. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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 October 9, 2007                  (see c)                  below), respectively. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | c) | On                  June 26, 2007, the Company signed an agreement with a consultant                  ("the                  Consultant"), effective July 1, 2007, according to 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. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**TISSERA          INC.**

**(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.)** |
|-------------------------------|-------------------------------------------------------------------------------|

|   | d) | A                  summary of the activity in warrants to service providers as of                  January 31,                  2008, and changes during the six months ended January 31, 2008,                  are as                  follows: |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                             |   | **Number of****warrants** |      | **Weighted-****Average****exercise price** |   | **Weighted-****Average****Remaining****contractual term****(in years)** |   | **Aggregate****intrinsic ****value  ** |   |
|--------------------------------------------------|--------|--------------------------------|-----------|-------------------------------------------------|--------|-----------------------------------------------------------------------------------|--------|-------------------------------------------------------|--------|
|                                             |   |                           |      |                                            |   |                                                                              |   |                                                  |   |
| Outstanding                  at August 1, 2007   |   |                           | 5,880,880 |                                            | $      | 0.06                                                                              |   |                                                  |   |   |   |   |   |
| Granted                                          |   |                           | -         |                                            | $      | -                                                                                 |   |                                                  |   |   |   |   |   |
| Exercised                                        |   |                           | -         |                                            | $      | -                                                                                 |   |                                                  |   |   |   |   |   |
| Forfeited                                        |   |                           | -         |                                            | $      | -                                                                                 |   |                                                  |   |   |   |   |   |
|                                             |   |                           |      |                                            |   |                                                                              |   |                                                  |   |   |   |   |   |
| Outstanding                  at January 31, 2008 |   |                           | 5,880,880 |                                            | $      | 0.06                                                                              |   |                                                  | 4.69   |   |   | 154,853 |   |
|                                             |   |                           |      |                                            |   |                                                                              |   |                                                  |   |   |   |   |   |
| Exercisable                  at January 31, 2008 |   |                           | 5,880,880 |                                            | $      | 0.06                                                                              |   |                                                  | 4.69   |   |   | 154,853 |   |
|                                             |   |                           |      |                                            |   |                                                                              |   |                                                  |   |   |   |   |   |
| Vested                  and expected to vest     |   |                           | 5,880,880 |                                            | $      | 0.06                                                                              |   |                                                  | 4.69   |   |   | 154,853 |   |

| **NOTE                  4:-** | **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                  January 31, 2008 amount to                  $ 38. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b. | The                  Company's subsidiary obtained a bank guarantee in the amount of                  $ 7                  to secure a rent agreement. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | c. | On                  October 29, 2007, the Company received a notice from the tax authorities                  requiring the Company to pay an amount of $ 118 with respect to the                  year ended December 31, 2004. The Company and its tax advisors                  are of the                  opinion that the notice is erroneous. In respect of the above,                  no                  provision was made. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**TISSERA        INC.**

**(A        development stage company)**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS **

----

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

| **NOTE                  4:-** | **COMMITMENTS                  AND CONTINGENCIES****(Cont.)** |
|-------------------------------|---------------------------------------------------------------|

|   | d. | 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 $ 156 (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                  defenses 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 January 31, 2008, this provision is in place. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | e. | 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 outcome of this                  claim. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | f. | 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 in February 2006. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**TISSERA          INC.**

**(A          development stage company)**

**NOTES          TO CONSOLIDATED FINANCIAL STATEMENTS **

----

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

| **NOTE                  4:-** | **COMMITMENTS                  AND CONTINGENCIES (Cont.)** |
|-------------------------------|------------------------------------------------------------|

|   | g. | 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 pay 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. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Overview**

----

**Research      and License Agreement**

| ·                     | 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. |
|--------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·      | 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. |
|--------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·      | one                year following the termination of the Research and License Agreement;                and |
|--------------------------------------|-------------------------------------------------------------------------------------------------------------|

| ·      | October                7, 2013. |
|--------------------------------------|---------------------------------|

| ·      | 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 committed to pay 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 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 2007, $100,000 was paid                on                July 10, 2007, $100,000 was paid on October 11, 2007, and $100,000                was                paid in January 10, 2008. The termination of the research period                was                extended from April 9, 2007 to April 9,                2008. |
|--------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·      | $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. |
|--------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------|

**Plan      of Operation**

*Cash      Requirements*

| **Expense**                                                |   | **Cost** |    |
|------------------------------------------------------------|--------|----------|---------|
| General                and Administrative                  |   | $        | 170,000 |   |
| Professional                Fees                           |   | $        | 160,000 |   |
| Research                and Development activity with Yeda |   | $        | 450,000 |   |

**Results      of Operations for the Six Months Ended January 31, 2008 Compared to the Six      Months Ended January 31, 2007**

**Revenues      and Cost of Goods Sold**

**Operating      Expenses**

----

**FINANCIAL      INCOME**

**Taxes      on Income**

**Net      Loss**

**LIQUIDITY      AND CAPITAL RESOURCES**

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**Item      3. Controls and Procedures**

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**Part      II: OTHER INFORMATION**

**Item      1. Legal Proceedings**

**ITEM      3. LEGAL PROCEEDINGS**

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**Item      2. Unregistered Sales of Equity Securities and Use of      Proceeds,**

**Item      3. Defaults Upon Senior Securities**

**Item      4. Submission of Matters to Vote of Security Holders**

**Item      5. Other Information**

**Item      6. Exhibits**

| (a)    | Exhibit | Description                                                                                                                                                           |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |                                                                                                                                                                  |
|   | 31.1    | Certification                of the Chief Executive Officer of Tissera, Inc. pursuant to Section                302 of                the Sarbanes-Oxley Act of 2002. |
|   |    |                                                                                                                                                                  |
|   | 31.2    | Certification                of the Chief Financial Officer of Tissera, Inc. pursuant to Section                302 of                the Sarbanes-Oxley Act of 2002. |
|   |    |                                                                                                                                                                  |
|   | 32.1    | Certification                of the Chief Executive Officer of Tissera, Inc. pursuant to Section                906 of                the Sarbanes-Oxley Act of 2002. |
|   |    |                                                                                                                                                                  |
|   | 32.2    | Certification                of the Chief Financial Officer of Tissera, Inc. pursuant to Section                906 of                the Sarbanes-Oxley Act of 2002. |

**SIGNATURES**

|                                 |                                   |                               |
|--------------------------------------|----------------------------------------|------------------------------------|
|                                 | TISSERA,                INC.           |
|                                 |                                   |                               |
| Dated:                March 17, 2008 | By:                          | /s/ Amos                Eiran |
|                                 | Amos                Eiran              |
|                                 | Chief                Executive Officer |

| Dated:                March 17, 2008 | By:                          | /s/                 Alex Werber |
|--------------------------------------|----------------------------------------|--------------------------------------|
|                                 | Alex                Werber             |
|                                 | Chief                Financial Officer |

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