UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549







FORM
10-Q








x
            QUARTERLY REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934


For the
quarterly period ended: October
31, 2008


or





 ̈
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF
      1934


For the
transition period from: _____________ to _____________








TISSERA,
INC.


(Exact
name of registrant as specified in its charter)








Washington
              0-32801
              91-2034750(State
      or Other Jurisdiction
              (Commission
              (I.R.S.
      Employerof
      Incorporation)
              File
      Number)
              Identification
      No.)




Avner
2 Herzlia, Israel 46602


(Address
of Principal Executive Office) (Zip Code)





+972-9-9561151


(Registrant’s
telephone number, including area code)











Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. xYes    ̈No




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.





Large
      accelerated filer
             ̈
            
            Accelerated
      filer
             ̈Non-accelerated
      filer
             ̈
            
            Smaller
      reporting company
            x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).  ̈Yes  xNo




As of
January 22, 2009, there were 45,591,809 shares of the issuer's common stock, par
value $0.001 per share, outstanding.










TISSERA
INC.




INDEX
PAGE





PAGEForward
      Looking StatementsPART
      I - FINANCIAL INFORMATIONItem
      1.       Financial
StatementsConsolidated
      Balance Sheets
              1Consolidated
      Statements of Operations
              2Consolidated
      Statements of Changes in Stockholder Equity
              3Consolidated
      Statements of Cash Flows
              5Notes
      to the Unaudited Consolidated Financial Statements
              6Item
      2.       Management's Discussion and
      Analysis of Financial Condition and Results of Operation
              11Item
      4t.      Controls and Procedures
              14PART
      II - OTHER INFORMATIONItem
      5.       Other Information
              14Item
      6.       Exhibits
              14SIGNATURES
              15










FORWARD
LOOKING STATEMENTS




The
following discussion should be read in conjunction with the financial statements
and related notes contained elsewhere in this quarterly report on
Form 10-Q. We make forward-looking statements in this report, in other
materials we file with the Securities and Exchange Commission (the “SEC”) or
that we otherwise release to the public, and on our website. In addition, our
senior management might make forward-looking statements orally to analysts,
investors, the media, and others. Statements concerning our future operations,
prospects, strategies, Financial Condition and Results of Operations, future
economic performance (including growth and earnings) and demand for our products
and services, and other statements of our plans, beliefs, or expectations,
including the statements contained in Item 2, “Management’s Discussion and
Analysis of financial condition,” regarding our future plans, strategies and
expectations are forward-looking statements. In some cases these statements are
identifiable through the use of words such as “anticipate,” “believe,”
“estimate,” “predict,” “expect,” “intend,” “plan,” “project,” “target,”
“continue,” “can,” “could,” “may,” “should,” “will,” “would,” and similar
expressions. You are cautioned not to place undue reliance on these
forward-looking statements because these forward-looking statements we make are
not guarantees of future performance and are subject to various assumptions,
risks, and other factors that could cause actual results to differ materially
from those suggested by these forward-looking statements. Thus, our ability to
predict results or the actual effect of our future plans or strategies is
inherently uncertain. Factors which could have a material adverse effect on our
operations and future prospects include, but are not limited to, our inability
to continue operations; our inability to obtain necessary financing; the effect
of a going concern statement by our auditors; changes in: economic conditions
generally and our specific market areas, changes in technology, legislative or
regulatory changes that affect us, the availability of working capital, changes
in costs and the availability of goods and services, the introduction of
competing products, changes in our operating strategy or development plans, our
ability to attract and retain qualified personnel, and changes in our
acquisition and capital expenditure plans. These risks and uncertainties,
together with the other risks described from time to time in reports and
documents that we file with the SEC, should be considered in evaluating
forward-looking statements and undue reliance should not be placed on such
statements. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
performance or achievements. Indeed, it is likely that some of our assumptions
will prove to be incorrect. Our actual results and financial position will vary
from those projected or implied in the forward-looking statements and the
variances may be material. Moreover, we do not assume the responsibility for the
accuracy and completeness of these forward-looking statements. We expressly
disclaim any obligation to update or revise any forward-looking statements,
whether as a result of new information, future events, or otherwise, except as
required by law.







TISSERA
INC. AND ITS SUBSIDIARY
 (A
development stage company)
 CONSOLIDATED BALANCE
SHEETS
 U.S.
dollars in thousands, except share and per share data
 
 October
      31,
                                        
                                        
                                        July
      31,2008
                                        
                                        
                                        2008UnauditedASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                                        
                                        $
                                        21
                                        
                                        
                                        $
                                        88Accounts
      receivable and prepaid expenses
                                        
                                        
                                        11
                                        
                                        
                                        
                                        40Totalcurrent assets
                                        
                                        
                                        32
                                        
                                        
                                        
                                        128RESTRICTED
      CASH
                                        
                                        
                                        -
                                        
                                        
                                        
                                        7SEVERANCE
      PAY FUND
                                        
                                        
                                        -
                                        
                                        
                                        
                                        78Totalassets
                                        
                                        $
                                        32
                                        
                                        
                                        $
                                        213LIABILITIES
      AND STOCKHOLDERS' DEFICIENCYCURRENT
      LIABILITIES:Trade
      payables
                                        
                                        $
                                        9
                                        
                                        
                                        $
                                        12Other
      accounts payable and accrued expenses
                                        
                                        
                                        351
                                        
                                        
                                        
                                        260Convertible
      debentures and warrants
                                        
                                        
                                        236
                                        
                                        
                                        
                                        200Totalcurrent liabilities
                                        
                                        
                                        596
                                        
                                        
                                        
                                        472ACCRUED
      SEVERANCE PAY
                                        
                                        
                                        -
                                        
                                        
                                        
                                        78Totalliabilities
                                        
                                        
                                        596
                                        
                                        
                                        
                                        550STOCKHOLDERS'
      DEFICIENCY:Stock
      capital -Common
      stock of $ 0.0001 par value each - Authorized: 100,000,000 shares at
      October 31, 2008 and July 31, 2008; Issued and outstanding: 45,591,809
      shares at October 31, 2008 and July 31, 2008
                                        
                                        
                                        5
                                        
                                        
                                        
                                        5Preferred
      stock of $ 0.0001 par value each - Authorized: 20,000,000 shares at
      October 31, 2008 and July 31, 2008; Issued and outstanding: 0 shares at
      October 31, 2008 and July 31, 2008
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Additional
      paid-in capital
                                        
                                        
                                        30,793
                                        
                                        
                                        
                                        30,793Deficit
      accumulated during the development stage
                                        
                                        
                                        (31,362
                                        )
                                        
                                        
                                        (31,135
                                        )Totalstockholders' deficiency
                                        
                                        
                                        (564
                                        )
                                        
                                        
                                        (337
                                        )Totalliabilities and stockholders'
    deficiency
                                        
                                        $
                                        32
                                        
                                        
                                        $
                                        213
  The
accompanying notes are an integral part of the consolidated financial
statements.
  - 1
-
  TISSERA
INC. AND ITS SUBSIDIARY
 (A
development stage company)
 CONSOLIDATED STATEMENTS OF
OPERATIONS
 U.S.
dollars in thousands, except share and per share data
 
 Three
      months ended
                              October
      31,
                            
                            
                            Year
      ended
                              July
      31,
                            
                            
                            From
                              May
      31, 2000
                              (inception
                              date)
      through
                              October
      31,2008
                            
                            
                            2007
                            
                            
                            2008
                            
                            
                            2008Unaudited
                            
                            
                            
                            
                            
                            UnauditedOperating
      expenses:Research
      and development *)
                            
                            $
                            73
                            
                            
                            $
                            158
                            
                            
                            $
                            608
                            
                            
                            
                            16,818General
      and administrative  **)
                            
                            
                            121
                            
                            
                            
                            201
                            
                            
                            
                            249
                            
                            
                            
                            14,435194
                            
                            
                            
                            359
                            
                            
                            
                            857
                            
                            
                            
                            31,253Financial
      income (expenses), net
                            
                            
                            (35
                            )
                            
                            
                            (22
                            )
                            
                            
                            (77
                            )
                            
                            
                            50Loss
      from continuing operations before income taxes (tax
    benefit)
                            
                            
                            229
                            
                            
                            
                            381
                            
                            
                            
                            934
                            
                            
                            
                            31,203Income
      taxes (tax benefit)
                            
                            
                            (2
                            )
                            
                            
                            4
                            
                            
                            
                            4
                            
                            
                            
                            67Net
      loss from continuing operations
                            
                            
                            227
                            
                            
                            
                            385
                            
                            
                            
                            938
                            
                            
                            
                            31,270Loss
      from discontinued operations
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            92Net
      loss
                            
                            $
                            227
                            
                            
                            $
                            385
                            
                            
                            $
                            938
                            
                            
                            
                            31,362Basic
      and diluted net loss per share
                            
                            $
                            0.005
                            
                            
                            $
                            0.01
                            
                            
                            $
                            0.021Weighted
      average number of shares used in computing basic and diluted net loss per
      share
                            
                            
                            45,591,809
                            
                            
                            
                            44,553,462
                            
                            
                            
                            45,215,568
 
 *)
              Including
      expenses related to options granted to employees and warrants granted to
      Yeda and to service providers in the amount of $ 0, $ 0 and $ 5
      for the three months ended October 31, 2008 and 2007 and for the year
      ended July 31, 2008, respectively.
 
 **)
              Including
      expenses related to warrants, options and shares granted to service
      providers, employees and directors in the amount of $ 0, $ 28
      and $ 101 for the three months ended October 31, 2008 and 2007 and for the
      year ended July 31, 2008, respectively. In addition, general and
      administrative expenses include the cancellation of provisions in an
      amount aggregating to about $ 430 for the year ended July 31,
      2008 (see Note 4)
  The
accompanying notes are an integral part of the consolidated financial
statements.
 
 - 2
-
  TISSERA
INC. AND ITS SUBSIDIARY
 (A
development stage company)
 STATEMENTS
OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
 U.S.
dollars in thousands, except share data
 
 Deficitaccumulated
                    
                    
                    TotalAdditional
                    
                    
                    Deferred
                    
                    
                    during
      the
                    
                    
                    stockholders'Stock
      capital
                    
                    
                    paid-in
                    
                    
                    stock
      based
                    
                    
                    development
                    
                    
                    equityNumber
                    
                    
                    Amount
                    
                    
                    capital
                    
                    
                    compensation
                    
                    
                    stage
                    
                    
                    (deficiency)Balance
      as of May 31, 2000
                    
                    
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -Stock
      issued for cash on May 31, 2000
                    
                    
                    15,036,000
                    
                    
                    
                    2
                    
                    
                    
                    8
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    10Net
      loss
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (5
                    )
                    
                    
                    (5
                    )Balance
      as of July 31, 2000
                    
                    
                    15,036,000
                    
                    
                    
                    2
                    
                    
                    
                    8
                    
                    
                    
                    -
                    
                    
                    
                    (5
                    )
                    
                    
                    5Stock
      issued for cash on July 17, 2001
                    
                    
                    3,000,000
                    
                    
                    
                    *)  -
                    
                    
                    
                    40
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    40Contribution
      of capital
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    15
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    15Net
      loss
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (30
                    )
                    
                    
                    (30
                    )Balance
      as of July 31, 2001
                    
                    
                    18,036,000
                    
                    
                    
                    2
                    
                    
                    
                    63
                    
                    
                    
                    -
                    
                    
                    
                    (35
                    )
                    
                    
                    30Contribution
      of capital
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    15
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    15Net
      loss
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (39
                    )
                    
                    
                    (39
                    )Balance
      as of July 31, 2002
                    
                    
                    18,036,000
                    
                    
                    
                    2
                    
                    
                    
                    78
                    
                    
                    
                    -
                    
                    
                    
                    (74
                    )
                    
                    
                    6Contribution
      of capital
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    15
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    15Net
      loss
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (31
                    )
                    
                    
                    (31
                    )Balance
      as of July 31, 2003
                    
                    
                    18,036,000
                    
                    
                    
                    2
                    
                    
                    
                    93
                    
                    
                    
                    -
                    
                    
                    
                    (105
                    )
                    
                    
                    (10
                    )Stock
      issued for cash related to PPM1, net of $ 176 of cash issuance
      expenses
                    
                    
                    1,767,200
                    
                    
                    
                    *)  -
                    
                    
                    
                    2,033
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2,033Stock
      issued for cash related to PPM2, net of $ 517 of cash issuance
      expenses
                    
                    
                    3,142,858
                    
                    
                    
                    1
                    
                    
                    
                    4,983
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    4,984Stock
      based compensation related to warrants granted to service
      providers
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    11,429
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    11,429Stock
      based compensation related to options granted to employees and
      directors
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,130
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,130Compensation
      related to stock granted to service providers and
employees
                    
                    
                    3,067,090
                    
                    
                    
                    *)  -
                    
                    
                    
                    7,366
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    7,366Deferred
      stock based compensation
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    163
                    
                    
                    
                    (163
                    )
                    
                    
                    -
                    
                    
                    
                    -Exercise
      of options
                    
                    
                    1,543,766
                    
                    
                    
                    *)  -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    *)  -Net
      loss
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (22,529
                    )
                    
                    
                    (22,529
                    )Balance
      as of July 31, 2004
                    
                    
                    27,556,914
                    
                    
                    
                    3
                    
                    
                    
                    27,197
                    
                    
                    
                    (163
                    )
                    
                    
                    (22,634
                    )
                    
                    
                    4,403Stock
      based compensation related to warrants granted to
investors
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,980
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,980Warrants
      granted to Yeda and to service providers
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (362
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (362
                    )Amortization
      of stock based compensation related to options granted to employees and
      directors
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    176
                    
                    
                    
                    -
                    
                    
                    
                    176Deferred
      stock based compensation
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    44
                    
                    
                    
                    (44
                    )
                    
                    
                    -
                    
                    
                    
                    -Exercise
      of options
                    
                    
                    25,200
                    
                    
                    
                    *)  -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Net
      loss
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (3,983
                    )
                    
                    
                    (3,983
                    )Balance
      as of July 31, 2005
                    
                    
                    27,582,114
                    
                    
                    
                    3
                    
                    
                    
                    28,859
                    
                    
                    
                    (31
                    )
                    
                    
                    (26,617
                    )
                    
                    
                    2,214Exercise
      of options
                    
                    
                    232,218
                    
                    
                    
                    *)  -
                    
                    
                    
                    *)  -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    *)  -Warrants
      granted to service providers
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (20
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (20
                    )Amortization
      of stock based compensation related to options granted to employees and
      directors
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    27
                    
                    
                    
                    -
                    
                    
                    
                    27Net
      loss
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (1,715
                    )
                    
                    
                    (1,715
                    )Balance
      as of July 31, 2006
                    
                    
                    27,814,332
                    
                    
                    
                    3
                    
                    
                    
                    28,839
                    
                    
                    
                    (4
                    )
                    
                    
                    (28,332
                    )
                    
                    
                    506
 
 *)           Represents
an amount lower than $ 1.
 
 The
accompanying notes are an integral part of the consolidated financial
statements.
  - 3
-
  TISSERA
INC. AND ITS SUBSIDIARY
 (A
development stage company)
 STATEMENTS
OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
 U.S.
dollars in thousands, except share data
 
 Deficitaccumulated
                          
                          
                          TotalAdditional
                          
                          
                          Deferred
                          
                          
                          during
      the
                          
                          
                          stockholders'Stock
      capital
                          
                          
                          paid-in
                          
                          
                          stock
      based
                          
                          
                          development
                          
                          
                          equityNumber
                          
                          
                          Amount
                          
                          
                          capital
                          
                          
                          compensation
                          
                          
                          stage
                          
                          
                          (deficiency)Balance
      as of July 31, 2006
                          
                          
                          27,814,332
                          
                          
                          
                          3
                          
                          
                          
                          28,839
                          
                          
                          
                          (4
                          )
                          
                          
                          (28,332
                          )
                          
                          
                          506Reclassification
      of deferred stock-based compensation into additional paid-in capital upon
      adoption of SFAS 123R
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (4
                          )
                          
                          
                          4
                          
                          
                          
                          -
                          
                          
                          
                          -Issuance
      of shares and warrants, net
                          
                          
                          16,500,000
                          
                          
                          
                          2
                          
                          
                          
                          1,422
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,424Shares
      granted to service providers
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          110
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          110Stock
      based compensation related to options granted to employees and
      directors
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          271
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          271Warrants
      granted to Yeda
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          150
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          150Net
      loss
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (1,865
                          )
                          
                          
                          (1,865
                          )Balance
      as of July 31, 2007
                          
                          
                          44,314,332
                          
                          
                          
                          5
                          
                          
                          
                          30,788
                          
                          
                          
                          -
                          
                          
                          
                          (30,197
                          )
                          
                          
                          596Issuance
      of shares granted to service providers in previous years
                          
                          
                          1,000,000
                          
                          
                          
                          *) 
      -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          *) 
      -Exercise
      of options
                          
                          
                          277,477
                          
                          
                          
                          *) 
      -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          *) 
      -Warrants
      granted to Yeda
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          5
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          5Net
      loss
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (938
                          )
                          
                          
                          (938
                          )Balance
      as of July 31, 2008
                          
                          
                          45,591,809
                          
                          
                          
                          5
                          
                          
                          
                          30,793
                          
                          
                          
                          -
                          
                          
                          
                          (31,135
                          )
                          
                          
                          (337
                          )Net
      loss
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (227
                          )
                          
                          
                          (227
                          )Balance
      as of October 31, 2008 (unaudited)
                          
                          
                          45,591,809
                          
                          
                          $
                          5
                          
                          
                          $
                          30,793
                          
                          
                          $
                          -
                          
                          
                          $
                          (31,362
                          )
                          
                          $
                          (564
                          )
 
 *)           Represents
an amount lower than $ 1.
 
 The
accompanying notes are an integral part of the consolidated financial
statements.
  - 4
-
  TISSERA
INC. AND ITS SUBSIDIARY
 (A
development stage company)
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 U.S.
dollars in thousands
 
 Three
      months ended
                                      October
      31,
                                    
                                    
                                    Year
      ended
                                      July
      31,
                                    
                                    
                                    From
      May 31,
                                      2000
      (inception
                                      date)
      through
                                      October
      31,2008
                                    
                                    
                                    2007
                                    
                                    
                                    2008
                                    
                                    
                                    2008Unaudited
                                    
                                    
                                    
                                    
                                    
                                    UnauditedCash flows from operating
      activities:Net
      loss
                                    
                                    $
                                    (227
                                    )
                                    
                                    $
                                    (385
                                    )
                                    
                                    $
                                    (938
                                    )
                                    
                                    $
                                    (31,362
                                    )Adjustments
      required to reconcile net loss to net cash used in operating
      activities:Depreciation
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1
                                    
                                    
                                    
                                    2
                                    
                                    
                                    
                                    33Increase
      of fair value of  convertible debentures and
      warrants
                                    
                                    
                                    36
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    36Expenses
      related to warrants granted to Yeda and to service
    providers
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    5
                                    
                                    
                                    
                                    11,202Expenses
      related to options granted to employees and directors
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1,604Expenses
      related to shares granted to service providers
                                    
                                    
                                    -
                                    
                                    
                                    
                                    28
                                    
                                    
                                    
                                    101
                                    
                                    
                                    
                                    9,456Interest
      accrued on short-term deposit
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (17
                                    )Decrease
      (increase) in accounts receivable and prepaid expenses
                                    
                                    
                                    29
                                    
                                    
                                    
                                    10
                                    
                                    
                                    
                                    84
                                    
                                    
                                    
                                    (7
                                    )Increase
      in trade payables
                                    
                                    
                                    (3
                                    )
                                    
                                    
                                    15
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    9Increase
      (decrease) in other accounts payable and accrued expenses
                                    
                                    
                                    91
                                    
                                    
                                    
                                    41
                                    
                                    
                                    
                                    (351
                                    )
                                    
                                    
                                    351Capital
      loss from fixed assets
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    4
                                    
                                    
                                    
                                    4Increase
      (decrease) in accrued severance pay, net
                                    
                                    
                                    -
                                    
                                    
                                    
                                    3
                                    
                                    
                                    
                                    (17
                                    )
                                    
                                    
                                    -Net
      cash used in continuing operating activities
                                    
                                    
                                    (74
                                    )
                                    
                                    
                                    (287
                                    )
                                    
                                    
                                    (1,110
                                    )
                                    
                                    
                                    (8,691
                                    )Net
      cash provided by discontinued operating activities
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    75Total
      net cash used in operating activities
                                    
                                    
                                    (74
                                    )
                                    
                                    
                                    (287
                                    )
                                    
                                    
                                    (1,110
                                    )
                                    
                                    
                                    (8,616
                                    )Cash flows from investing
      activities:Short-term
      deposit
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    17Sales
      of property and equipment
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1
                                    
                                    
                                    
                                    10Purchase
      of property and equipment
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (47
                                    )Restricted
      cash
                                    
                                    
                                    7
                                    
                                    
                                    
                                    (1
                                    )
                                    
                                    
                                    (2
                                    )
                                    
                                    
                                    -Lease
      deposits
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (4
                                    )Net
      cash provided by (used in) continuing investing activities
                                    
                                    
                                    7
                                    
                                    
                                    
                                    (1
                                    )
                                    
                                    
                                    (1
                                    )
                                    
                                    
                                    (24
                                    )Net
      cash used in discontinued investing activities
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (15
                                    )Total
      net cash provided by (used in) investing activities
                                    
                                    
                                    7
                                    
                                    
                                    
                                    (1
                                    )
                                    
                                    
                                    (1
                                    )
                                    
                                    
                                    (39
                                    )Cash flows from financing
      activities:Issuance
      of shares and warrants, net
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    8,441Issuance
      of convertible debentures and warrants
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    200
                                    
                                    
                                    
                                    200Net
      cash provided by continuing financing activities
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    200
                                    
                                    
                                    
                                    8,641Net
      cash provided by discontinued financing activities
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    35Total
      net cash provided by financing activities
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    200
                                    
                                    
                                    
                                    8,676Increase
      (decrease) in cash and cash equivalents
                                    
                                    
                                    (67
                                    )
                                    
                                    
                                    (288
                                    )
                                    
                                    
                                    (911
                                    )
                                    
                                    
                                    21Cash
      and cash equivalents at beginning of period
                                    
                                    
                                    88
                                    
                                    
                                    
                                    999
                                    
                                    
                                    
                                    999
                                    
                                    
                                    
                                    -Cash
      and cash equivalents at end of period
                                    
                                    $
                                    21
                                    
                                    
                                    $
                                    711
                                    
                                    
                                    $
                                    88
                                    
                                    
                                    $
                                    21Non-cash activity:Prepaid
      expenses
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    (101
                                    )
                                    
                                    $
                                    (101
                                    )
 
 *)           Represents
an amount lower than $ 1.
 
 The
accompanying notes are an integral part of the consolidated financial
statements.
 
 - 5
-


TISSERA
INC. AND ITS SUBSIDIARY
 (A
development stage company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 U.S.
dollars in thousands, except share and per share data
 
 NOTE
      1:-
                GENERAL
 
 a.
                Tissera
      Inc. ("the Company") was incorporated under the laws of the State of
      Washington on May 31, 2000. The Company is in the development stage.
      The Company is engaged in developing and testing organ transplantation
      therapies based on an approach employing organ-specific precursor
      tissues.
 
 On
September 4, 2003, the former president of the Company (and a former major
shareholder) entered into a share purchase agreement ("the Agreement") with the
Company's shareholders, who purchased 15,000,000 shares of the then issued and
outstanding 18,036,000 shares of the Company's Common stock. In connection with
the agreement, the president of the Company resigned as president and sole
director of the Company.
 
 On
October 8, 2003, the Company entered into a research and license agreement
with Yeda Research and Development Company Limited ("Yeda"), according to which
Yeda provided the Company with a worldwide exclusive license to develop,
manufacture and sell Yeda's tissue transplant technologies. Yeda is entitled to
cancel the agreement under certain conditions determined in the agreement (see
Note 2). The Company currently bases its entire operations on the license
provided from Yeda. Should Yeda terminate the agreement with the Company, the
Company will not be able to continue its current research operations. Regarding
the extension of the research and development agreement, see Note
2.
 
 On
October 9, 2003, the Company's Board of Directors resolved to change the name of
the Company from Bert Logic, Inc. to "Tissera, Inc".
 
 b.
                On
      October 27, 2003, the Company incorporated a wholly-owned subsidiary
      in Israel, Tissera Ltd. ("the subsidiary"), which is engaged in research
      and development.
 
 c.
                Going
      concern considerations:
 
 The
Company's accumulated deficit and net loss as of October 31, 2008 and for the
three months then ended amounted to $ 31,362 and $ 227, respectively. The
Company's ability to continue to operate as a going concern is dependent on its
ability to generate sufficient cash flows to meet its obligations on a timely
basis, to obtain additional financing and to ultimately attain profitability.
The Company is in the development stage and, as such, has no revenues (and is
not expected to generate revenues in the near future), has incurred recurring
operating losses, and an accumulated deficit and has a negative cash flow from
operating activities (amounting to $ 74 and $ 287 for the three months
ended October 31, 2008 and 2007, respectively). The process of developing
commercial products will require significant additional expenditures for
research and development, maintaining the key technology license, pre-clinical
testing and clinical trials, as well as obtaining regulatory approval. These
activities, together with general and administrative expenses, are expected to
result in substantial operating losses in the foreseeable future.
 
 The
Company needs to raise funds on an immediate basis. Since August 2008, the
Company has significantly curtailed its design, development and marketing
efforts and released all of its non-management employees. As of the date of this
report, the Company has on its staff only its Chief Executive Officer and Chief
Financial Officer. If the Company is unable to raise capital on an immediate
basis, it will be forced to either restructure or cease operations entirely. The
Company is continuing its efforts to raise additional capital in order to resume
its activities and development projects. The Company currently has not received
any financing commitment and there can be no assurance that funds will be
available on terms acceptable to the Company, or at all.
 
 - 6
-
  TISSERA
INC. AND ITS SUBSIDIARY
 (A
development stage company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 U.S.
dollars in thousands, except share and per share data
 NOTE
      1:-
              GENERAL
      (Cont.)
 
 These
conditions raise substantial doubt about the Company's ability to continue to
operate as a going concern. The accompanying financial statements do not include
any adjustments to reflect the possible future effect on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainly.
 
 d.
                Risk
      factors:
 
 The
Company depends on Yeda to conduct its research and development activities. As
discussed in Note 2, the research services are to be provided until April 2009.
Thereafter, the Company will have to negotiate for new research services to be
received, whether by Yeda or by other service providers. If Yeda fails to
provide the research services or is unwilling to continue to provide research
services after April 2009, at terms that are acceptable to the Company, the
Company may be required to seek alternative sources of research services. A
change in service provider could result in delays in the research activities, an
increase in expenses and could adversely affect the Company's results of
operations and cash flows. In addition, as discussed in Note 2, Yeda may
terminate the research and license agreement ("the Agreement") under certain
conditions.
 
 NOTE
      2:-
              RESEARCH
      AND LICENSE AGREEMENT
 
 On
October 8, 2003, the Company entered into a research and license agreement ("the
agreement") with Yeda. The Company conducted the research for a period of three
years, at the Weizmann Institute of Science. On April 11, 2006, the Company
signed an agreement with Yeda, extending the research period by one additional
year, until April 2007. In April 2007, the agreement was further extended until
April 2008, and in July 2008, the research period has been extended by one
additional year, until April 2009. The research relates to an invention
comprising methods of organ transplantation employing nephric tissues. The
license that was granted to the Company shall expire at the later of (i) the
expiration of the patents in the country of sale, or (ii) 15 years from the date
of receipt of FDA new drug approval (in the United States), or the equivalent in
any other country in which the products are sold. In addition, Yeda may
terminate the agreement if the Company fails to achieve certain
commercialization and development milestones, as defined in the agreement.
Currently, the Company complies with all of the terms of the
agreement.
 
 The
Company committed to grant Yeda, within 120 days of the date on which the
agreement is signed, (i) a warrant, exercisable at an aggregate exercise price
of $ 0.9 to purchase up to 2.23% of the issued and outstanding Common stock
of the Company immediately following the exercise of such warrant, and (ii) a
warrant, exercisable at an aggregate exercise price of $ 1.1 to purchase up
to 2.67% of the issued and outstanding shares of the Company immediately
following the exercise of such warrant, provided that the maximum number of
shares of Common stock that Yeda may exercise under the warrants shall be
3,010,699 and 3,612,839, respectively (the number of shares of Common stock
shall be appropriately adjusted in the event of stock splits, stock dividends,
capital reorganizations, reclassifications, recapitalizations and the like as
well as issuances or sales by the Company of shares for par value only, for a
consideration of less than par value and for no consideration, all in accordance
with the terms and conditions of said warrant). Each such warrant shall be
exercisable for a period beginning one year after the date on which the
agreement is signed, and ending at the later of (a) one year following the
termination of the agreement and (b) October 7, 2013. As of the balance sheet
date, 2,349,105 of the Company's shares of Common stock are underlying the
warrants. The warrants are exercisable on a cashless basis.
  - 7
-
 TISSERA
INC. AND ITS SUBSIDIARY
 (A
development stage company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 U.S.
dollars in thousands, except share and per share data
  NOTE
      2:-
              RESEARCH
      AND LICENSE AGREEMENT (Cont.)
 
 The fair
value of the warrants was determined based on the number of shares underlying
the warrants as of the balance sheet date. The number of shares underlying the
warrants as of the balance sheet date was determined based on the actual issued
and outstanding shares of the Company and any options to acquire Company's
shares for a nominal consideration, totaling 2,681,150 shares of Common stock.
Each such warrant shall be immediately exercisable until the later of (a) one
year following the termination of the agreement and (b) October 7,
2013.
 
 Prior to
the actual issuance of the warrants, the value of the warrants for recording the
research and development expenses was remeasured at each reporting period based
on the number of shares underlying the warrants as of each reporting period with
the entire change in the fair value of the underlying shares reported in
research and development expenses.
 
 After the
issuance of the warrants, since the warrants entitle the investors to a final
percentage of the Company's shares (up to a certain maximum number of shares),
with each change in the number of the Company's issued and outstanding shares or
the number of options with a nominal exercise price, the fair value of the
additional shares underlying the warrants will be recorded as research and
development expenses. Once the number of shares underlying the warrants will
reach the maximum number of shares that can be issued under the warrants, the
warrants will cease to be further re-measured.
 
 According
to the agreement and addendums, regarding the first, second and third years of
the research period commencing April 9, 2003, the Company paid Yeda an
annual amount of $ 900.
 
 In April
2006, the Company signed a third addendum to the agreement with Yeda extending
the research period by one more year to April 9, 2007. In respect of this fourth
year of research, the Company paid Yeda an amount of $ 600.
 
 In April
2007, the Company signed a fourth addendum to the agreement with Yeda and
committed to pay Yeda an amount of $ 400 to be paid in four equal installments
payable in advance in respect of the fifth year of the research period ending
April 9, 2008. In respect of this fifth year of research, the Company paid Yeda
an amount of $ 400.
 
 In August
2008, the Company signed a fifth addendum to the agreement commencing April
2008, with Yeda and committed to pay Yeda $ 200 to be paid in four equal
installments payable in advance in respect of this sixth year research for the
period ending April 9, 2009.
 
 The above
annual payments to Yeda were recorded as research and development expenses in
the amount of $ 50 and $ 100 for the three months ended October 31, 2008
and 2007, respectively.
 
 The
Company undertook to make its best efforts to commercialize the licensed
products. The Company also agreed to pay Yeda a license fee of (i) $ 50 per
year, to be paid commencing the first year after the completion of the research
and development period; (ii) 4% of net sales of all products using the licensed
technology; (iii) 33% of all sublicense fees for all agreements entered into
within one year following the agreement date, and (iv) 16% of all sublicense
fees for all agreements entered into after such one-year period.
 
 - 8
-
 TISSERA
INC. AND ITS SUBSIDIARY
 (A
development stage company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 U.S.
dollars in thousands, except share and per share data
 
 NOTE
      3:-
              CONVERTIBLE
      DEBENTURES AND WARRANTS
 
 a.
                On
      July 8, 2008, the Company entered into a Bridge Loan Agreement, dated June
      18, 2008 (the "Agreement"), which contemplated an aggregate purchase price
      of up to $1,650 ("the 2008 financing") with an accredited investor. On
      that date the Company completed its initial closing of $200 ("the initial
      closing"). Investors who were participants in the Company's December 2006
      transaction were given the first opportunity to participate in the 2008
      financing; to the extent such investors' subscriptions are less than the
      maximum, the Company may accept other investors as
  well.
 
 In
connection with each closing of the financing, the Company issued to the sole
Investors a Bridge Note (the "Note") with an original issue discount of 14% (out
of which approximately 6% are issuance expenses). By their terms, the Notes were
to become payable on the earlier of (i) January 4, 2009 (the "Scheduled Maturity
Date"), which is 180 days from the initial closing, or (ii) the consummation of
the transaction in which the Company receives, on a cumulative basis, gross
proceeds of at least $2,000. The principal of the note will be convertible
through the scheduled maturity date at a conversion price of $0.10 per share.
The Note was subsequently exchanged for a new note in the principal amount of
$222 See Note 5.
 
 Additionally,
in connection with the closing of the financing, the Company issued to the
Investor warrants ("the warrants") to purchase a number of shares of the
Company's Common stock equal to 4,280,000 shares of the Company’s Common Stock.
The warrants will be exercisable until July 31, 2013, at an exercise price
of $ 0.185 per share, and are exercisable on a cashless basis.
 
 The
Warrants and the conversion option within the Note have an anti-dilution
mechanism for any case of future modification in the Company's
equity.
 
 The
Company recorded the Note in fair value in accordance with SFAS 155. In February
2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial
Instruments," an amendment of SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," and SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No.
155 permits fair value re-measurement for any hybrid financial instrument that
contains an embedded derivative that otherwise would require bifurcation. SFAS
No. 155 is effective for all financial instruments acquired or issued after
August 1, 2007.
 
 The
Company classified the Warrants as a liability according to SFAS 150 and EITF
00-19 and recorded the Warrants in fair value.
 
 b.
                Under
      the terms of the Bridge Loan Agreement, the Company is required to pay a
      penalty for the non-timely filings of periodic reports under The Exchange
      Act of 1934, as amended.
 In
respect of the filing of the annual report on Form 10-K for the year ended July
31, 2008, and for Form 10-Q for the three months ended October 31, 2008, the
total amount of such penalty is approximately $140. The Company has accrued $76
in the financial statements for the three months ended October 31, 2008. The
company recorded a provision for such penalty in the General and administrative
expenses.
 The
Company and the Investor have reached an agreement-in-principle to waive these
penalties; however, no assurance can be provided that the Company and the
investor will in fact enter into a legally binding written.
 - 9
-
 TISSERA
INC. AND ITS SUBSIDIARY
 (A
development stage company)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 U.S.
dollars in thousands, except share and per share data
 NOTE
      4:-
              COMMITMENTS
      AND CONTINGENCIES
 
 On
September 7, 2004, the Board of Directors decided to terminate the
employment of the Chief Executive Officer of the Company ("the Former CEO"). 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 $ 141
(NIS 564 thousand) in respect of payments allegedly due to her. The Company
filed a counterclaim against its Former CEO in the amount of approximately
$ 2,371 (NIS 9,405 thousand).
 
 On March
31, 2008, the Company and its former CEO reached a settlement which was approved
by the Israeli court.
 
 According
to the settlement, the former CEO is responsible for paying all taxes and
related costs owed in the United States and Israel in connection with her
profits deriving from the exercise of certain options granted to her by the
Company. The Company shall provide the former CEO with a Form W-2 for the 2004
evidencing any tax payments made by the Company in connection with her exercise
of options.
 
 Moreover,
the reported bonus to the former CEO in the amount of $ 110, which was
previously paid to the former CEO and cancelled by the Company's board of
directors, will be re-approved. Any applicable taxes related to such bonus, in
excess of the amount of about $ 26, which was already paid by the Company
to the tax authorities in the U.S., shall be borne by, and be the sole
responsibility of, the former CEO.
 
 In
addition, within 14 days of the Israeli court's approval of the settlement, the
former CEO shall pay the Company about $ 63. In addition, the Company shall
also release to the former CEO her social benefits funds.
 
 In view
of the above, the Company cancelled provisions in an amount of approximately
$ 430 and recorded this cancellation in the statement of operations as
general and administrative income for the year ended July 31, 2008.
 
 NOTE
      5:-
              SUBSEQUENT
      EVENTS
 
 a.
                Between
      November 18, 2008 and January 9, 2009, a previous investor in the Company
      and the holder of the Note referred to in Note 3 advanced to the Company
      loans in the aggregate amount of $ 60 of which $ 30 was advanced on
      November 18, 2008 and an additional $30 was advanced on January 9,
      2009. The loans are evidenced by two promissory notes issued by the
      Company, in the aggregate principal amount of $ 68 and are scheduled to
      become due at the earlier to occur of (i) the date we consummate a
      financing where it raises minimum gross proceeds of $2000 or (ii) April
      14, 2009.  These proceeds from the above loans were used for
      general corporate purposes.
 
 b.
                The
      investor and holder of the Note referred to in Note 3 that became due by
      its terms on January 4, 2009 and the Company agreed to exchange such note
      for a new promissory note, issued by the Company, in the principal amount
      of $ 222 The new note becomes due at the earlier to occur of (i) the date
      we consummate a financing where it raises minimum gross proceeds of $ 2000
      or (ii) April 14, 2009.
 
 c.
                In
      connection with the above transactions, the Company issued to the investor
      warrants, exercisable through January 31, 2014, to purchase up to
      1,359,344 shares of the Company’s Common Stock at a per share exercise
      price of $0.185.
 
 - - - - -
- - - -
 
 - 10
-




ITEM
      2
            MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATION





Overview





We were
incorporated under the laws of the State of Washington on May 31, 2000. We
develop, test and intend to commercialize solid organ transplantation therapies
based on an approach employing organ-specific precursor tissues. Our approach
involves harvesting embryonic mammalian tissue at the most appropriate stage
after which stem cells commit to becoming organ-specific precursor tissues and
transplanting them in target human organ systems. The optimal windows for
embryonic tissue transplantation were defined by Prof. Reisner's lab at the
Weizman Institute. On October 8, 2003, we entered into a Research and License
Agreement with Yeda, whereby Yeda procures the performance of research at the
Weizman Institute of Science, under the supervision of Professor Reisner of the
Department of Immunology. We have a world wide license that shall expire in each
country with respect to each product at the later of (i) the expiration of the
patents covering such product in the country of sale, or (ii) 15 years from the
date of receipt of FDA New Drug Approval in the United States for such product,
or the equivalent in any other country in which the products are
sold.




We are at
development stage and devoting substantially all of our efforts toward
conducting R&D activities, raising capital, pursuing regulatory approval,
recruiting personnel and building infrastructure. Our former line of business
was selling bit error testers. Our license in connection with bit error testers
expired in May 2004.




We need
to raise additional funds on an immediate basis in order to meet our operating
requirements and to fulfill our business plan as well as satisfy the working
capital loans that mature in January 2009. Since August 2008, we have
significantly curtailed all of our product design, development and marketing
efforts and released all of our non-management employees. As of the date of this
report, we have on staff only our Chief Executive Officer and Chief Financial
Officer. If we are unable to raise capital on an immediate basis, we will be
forced to either restructure or cease operations entirely. While we continue to
attempt to raise funds, we have no funding commitment and assurance can be given
that we will be able to raise funds. These conditions raise substantial doubt
about our ability to continue as a going concern.




Research
and License Agreement




On
October 8, 2003, we entered into a Research and License Agreement (the "Research
Agreement") with Yeda. The agreement relates to the rights of our company to
have the license from Yeda related to research conducted and to be conducted at
the Weizmann Institute of Science, under the supervision of Professor Reisner of
the Department of Immunology, and relates to an invention comprising methods of
organ transplantation utilizing developing pancreatic and other tissues. The
License granted to us shall expire in each country with respect to each product
at the later of the following:




·
            the
      expiration of the patents covering such product in the country of sale;
      or




·
            15
      years from the date of receipt of FDA New Drug Approval (in the United
      States), or the equivalent in any other country in which the products are
      sold.




In
addition, Yeda may terminate the Research and License Agreement if we are in
breach thereof and Yeda may, at its option, terminate the Research and License
Agreement, in whole or in part, or make it non-exclusive if we fail to reach
certain commercialization and development goals as set out in the Research and
License Agreement. Yeda is entitled to unilaterally amend the license so that it
is non-exclusive or terminate the license in the event that we fail to achieve
commercialization of at least one product within certain time limits, fail to
commence various phases of clinical trials within certain time limits or fail to
sell a product after certain milestones. Further, if we contest the validity of
the patents, Yeda may terminate the license. In the event that Yeda would like
to pursue sponsored research with respect to, or the commercialization of, a
given product that would otherwise be subject to the Research and License
Agreement that we have not already commenced developing, then Yeda may provide
us with notice of its intention. Upon receipt of such notice, we will then have
three months to submit a product development program. If we do not submit such
program, the license will be terminated with respect to said given
product.




As part
of the Research and License Agreement, on February 24, 2005, the Company agreed
to issue to Yeda the following:




·
            a
      warrant, exercisable at an aggregate exercise price of US $900 to purchase
      up to 2.23% of the issued and outstanding shares of common stock of our
      company immediately following the exercise of such warrant;
      and




·
            a
      warrant, exercisable at an aggregate exercise price of US $1,100 to
      purchase up to 2.67% of the issued and outstanding shares of our company
      immediately following the exercise of such
  warrant.




- 11
-




However,
the Research and License Agreement provides that the maximum number of shares of
common stock that Yeda may exercise into for each warrant is 3,010,699 and
3,612,839, respectively (in each case as such number of shares of common stock
shall be appropriately adjusted in the event of stock splits, stock dividends,
capital reorganizations, reclassifications, recapitalizations and the like as
well as issuances or sales by us of shares for par value only, for consideration
less than par value and for no consideration, all in accordance with the terms
and conditions of said warrant, which shall be satisfactory to Yeda and us). The
share amounts described above are adjusted to reflect the three for one split,
but not the other adjustment events described above that have occurred through
the date hereof. Each such warrant shall be exercisable for a period beginning
on the date of its issuance and ending at the later of the
following:




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




·
            October
      7, 2013.




We also
agreed to pay or have paid to Yeda the following:




·
            with
      regard to the first year of the research period (commencing on April 9,
      2003), we paid the amount of US $450,000 of which a non-refundable
      installment of US $450,000 was paid on December 23, 2003. This amount is
      in addition to the $450,000 paid to Yeda in connection with researched
      performed by Yeda during the first
year;




·
            with
      regard to the second year of research we paid an amount of US $900,000 of
      which $225,000 was paid on April 23, 2004; $225,000 was paid on July 8,
      2004; $225,000 was paid on October 8, 2004; and $225,000 was paid on
      January 10, 2005;




·
            with
      regard to the third year of research we paid an amount of US $900,000 of
      which $225,000 was paid on April 18, 2005; $225,000 was paid on July 11,
      2005; $225,000 was paid on October 12, 2005 and $225,000 was paid on
      January 9, 2006.




·
            Pursuant
      to the third addendum of the Research Agreement dated April 11, 2006, with
      regard to the fourth year of research we paid an amount of US $600,000 of
      which $150,000 was paid on May 2, 2006 and $150,000 was paid on July 19,
      2006, $150,000 was paid on October 13, 2006 and $150,000 was paid on
      January 17, 2007. Further, the termination for the research period was
      extended from April 10, 2006 to April 9,
2007.





·
            Pursuant
      to the fourth addendum of the Research Agreement dated April 1, 2007, with
      regard to the fifth year of research we committed to pay an amount of
      $400,000 of which $100,000 was paid on April 11, 2007, $100,000 was paid
      on July 10, 2007 and$100,000 was paid on October 11,  2007. The
      termination of the research period was extended from April 9, 2007 to
      April 9, 2008.




·
            Pursuant
      to the fifth addendum of the Research Agreement dated July 10, 2008, with
      regard to the sixth year of research we committed to pay an amount of
      $200,000 of which $50,000 was paid on July 10, 2008, The termination of
      the research period was extended from April 10, 2008 to April 9,
      2009.





We have
also agreed that within one year from the date of the Research and License
Agreement, we will submit a development program to Yeda for its approval, and
eventually a progress report every 6 months, in every December and June. In
agreement with Yeda, the product development plan was submitted to Yeda in
September 2005, and eventual progress reports were submitted at the appropriate
dates. The last progress report was timely submitted in June 2008. We further
undertook to use our best efforts to commercialize the licensed products. We
also agreed to pay Yeda a license fee as follows:




·
            $50,000
      per year commencing from the end of the license period, which has been
      extended until April 9, 2008;




·
            4%
      of net sales of all products covered by the Research and License
      Agreement;




·
            33%
      of all sublicense fees for all agreements entered into within one year of
      the Agreement; and




·
            16%
      of all sublicense fees for all agreements entered into after such one year
      period.





- 12
-


RESULTS
OF OPERATIONS – COMPARISON OF THE THREE MONTHS ENDED OCTOBER 31, 2008 COMPARED
TO OCTOBER 31, 2007





REVENUES
AND COSTS OF GOODS SOLD




We are in
a development stage and, therefore, have no revenues and cost of goods
sold.




OPERATING
EXPENSES




Operating
expenses for the three months ended October 31, 2008 amounted to $194,000
compared to $359,000 for the corresponding period in 2007. Since August 2008, we
have curtailed our operations resulting in a significant decrease in operating
cost.





The
research and development expenses amounted to $76,000 for the three months ended
October 31, 2008compared to 158,000 for the three months ended October 31,
2007.  This decrease in research and development expenses is mainly
attributable to a decrease in expenses related to Yeda. In the fiscal year 2008,
we committed to pay Yeda $200,000 compared to $400,000 in the previous
fiscal year. In addition our former vice president for research and
development has left the Company on July 31, 2008, which resulted in a
decrease in Research and development expenses.




We had
general and administrative expenses of $121,000 during the three months ended
October 31, 2008 compared to $201,000 for the three months ended October 31,
2007.  Since August 2008, we have significantly curtailed our general
and administrative expenses relating to salaries, rent, legal, accounting and
other general and administrative expenses, thereby resulting in a significant
decrease general and administrative expenses during the three month period ended
October 31, 2008 as compared to the corresponding period in 2007.





The
general and administrative expenses also contain a provision for penalties with
respect to the late filing of our quarterly report for the three months ended
October 31, 2008 in the aggregate amount of $76,000. We and the investor have
reached an agreement-in-principle to waive these penalties; however, no
assurance can be provided that we and the investor will in fact enter into
legally binding written agreements waiving these penalties.





NET
LOSS




As a
result of the above, we incurred a net loss of $227,000 for the three months
ended October 31, 2008, compared to a net loss of $385,000 for the corresponding
period in 2007.




LIQUIDITY
AND CAPITAL RESOURCES




Our cash
equivalents and short term deposits were 21,000 as of October 31, 2008, compared
to 88,000 as of July 31, 2008. We had a negative working capital of $564,000 as
of October 31, 2008, compared to negative working capital of $344,000 as of July
31, 2008.





As noted
above, we need to raise additional funds on an immediate basis in order to meet
our operating requirements and to fulfill our business plan as well as satisfy
the working capital loans that mature in April 2009. We continue in our efforts
to raise funds. However, we may not be successful in our efforts to raise
additional funds. Even if we are able to raise additional funds through the
issuance of debt or other means, our cash needs could be heavier than
anticipated in which case we could be forced to raise additional capital. At the
present time, we have no commitments for any additional financing, and there can
be no assurance that, if needed, additional capital will be available to us on
commercially acceptable terms or at all. These conditions raise substantial
doubts as to our ability to continue as a going concern, which may make it more
difficult for us to raise additional capital when needed. Additional equity
financings are likely to be dilutive to holders of our Common Stock and debt
financing, if available, may involve significant payment obligations and
covenants that restrict how we operate our business.





Due to
our being a development stage company and not having generated revenues, in the
consolidated financial statements for the year ended July 31, 2008, we included
an explanatory paragraph regarding concerns about our ability to continue as a
going concern. Our consolidated financial statements contain additional note
disclosures describing the circumstances that lead to this
disclosure.


- 13
-


APPLICATION
OF CRITICAL ACCOUNTING POLICIES





Going
Concern




Our
period financial statements have been prepared on the going concern basis, which
assumes the realization of assets and liquidation of liabilities in the normal
course of operations. The financial statements have been prepared assuming we
will continue as a going concern. However, certain conditions which exist are
raising doubt about our ability to continue as a going concern. We have suffered
recurring losses from operations and have accumulated deficit during the
development stage of approximately $31,362,000 since inception through the
period ended October 31, 2008.




ITEM
4T. CONTROLS AND PROCEDURES




We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms, and that such information is accumulated and communicated
to management, including our President and Chief Executive Officer (who also
serves as our principal executive officer and principal financial and accounting
officer) to allow timely decisions regarding required disclosure based closely
on the definition of "disclosure controls and procedures" in
Rule 13a-15(e).





As of the
end of the period covered by this report, we carried out an evaluation, under
the supervision and with participation of management, including our Chief
Executive Officer and Chief Financial Officer of the effectiveness of the design
and operation of our disclosure controls and procedures. Based on the foregoing,
our acting Chief Executive Officer and Chief Financial Officer concluded that
our disclosure controls and procedures were effective.




During
the quarter ended October 31, 2008, there have been no changes in our internal
controls over financial reporting that have materially affected, or are
reasonably likely to materially affect, these controls.





PART
II - OTHER INFORMATION




ITEM
5.  OTHER INFORMATION





(i)
Between November 18, 2008 and January 9, 2009, a previous investor in our
company advanced to us loans in the amount of $60,000, of which $30,000 was advanced on
November 18, 2008 and an additional $30,000 was advanced on January 9,
2009. The loans are evidenced by two promissory notes issued by us,
in the aggregate principal amount of $67,967.22, and are scheduled to become due
at the earlier to occur of (i) the date we consummate a financing where it
raises minimum gross proceeds of $2 million or (ii) April 14,
2009.  These proceeds from the above loans were used for general
corporate purposes.





(ii) The
investor is the holder of a promissory note issue by us that  became
due by its terms on January 4, 2009. We and the investor agreed to exchange such
note for a new promissory note, issued by the Company, in the principal amount
of $222,322.22. The new note becomes due at the earlier to occur of (i) the date
we consummate a financing where it raises minimum gross proceeds of $2 million
or (ii) April 14, 2009.





(iii) In
connection with the above transactions, the Company issued to the investor
warrants, exercisable through January 31, 2014, to purchase up to 1,359,344
shares of the Company’s Common Stock at a per share exercise price of
$0.185.





The Notes
were issued in accordance with Section 4(2) under the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.




ITEM
6.  EXHIBITS





Exhibit No.
                    
                    Description31.1
                    
                    Certification
      of the Acting Chief Executive Officer of Tissera, Inc. pursuant to Section
      302 of the Sarbanes-Oxley Act of 200231.2
                    
                    Certification
      of the Chief Financial Officer of Tissera, Inc. pursuant to Section 302 of
      the Sarbanes-Oxley Act of 200232.1
                    
                    Certification
      of the Acting Chief Executive Officer of Tissera, Inc. pursuant to Section
      906 of the Sarbanes-Oxley Act of 200232.2
                    
                    Certification
      of the Chief Financial Officer of Tissera, Inc. pursuant to Section 906 of
      the Sarbanes-Oxley Act of
2002


- 14
-




SIGNATURES




Pursuant
to the requirements of the Securities Exchange Act of 1934 the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.





TISSERA,
      INC.By:
                  /s/
      Amos Eiran
                  
                  By:
                  /s/
      Alex WeberAmos
      Eiran
                  
                  
                  Alex
      WeberChief
      Executive Officer
                    (Principal
      Executive Officer)
                  
                  
                  Chief
      Financial Officer
                    (Principal
      Financial Officer)Date:
      January 22, 2009
                  
                  Date:
      January 22, 2009




- 15
-