----

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

**Washington,      D.C. 20549**

**FORM      10-QSB**

**TISSERA,      INC.**

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

**+**

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**Tissera,      Inc.**

**INDEX**

|                                                                          |   | PAGE                NUMBER |
|--------------------------------------------------------------------------|--------|----------------------------|
|                                                                     |   |                       |
| PART                I. FINANCIAL INFORMATION                             |   |                       |
|                                                                     |   |                       |
| Item                1. Financial statements                              |   |                       |
| (unaudited)                                                              |   |                       |
|                                                                     |   |                       |
| Consolidated                Balance Sheets                               |   | 1                          |
|                                                                     |   |                       |
| Consolidated                Statements of Operations                     |   | 2                          |
|                                                                     |   |                       |
| Consolidated                Statements of Changes in Stockholders’ |   |                       |
| Equity                (Deficiency)                                       |   | 3                          |
|                                                                     |   |                       |
| Consolidated                Statements of Cash Flows                     |   | 4                          |
|                                                                     |   |                       |
| Notes                to Financial Statements                             |   | 5-15                       |
|                                                                     |   |                       |
| Item                2. Management's Discussion and Analysis of Financial |   |                       |
| Condition                and Results of Operations                       |   | 16                         |
|                                                                     |   |                       |
| Item                3. Controls and Procedures                           |   | 21                         |
|                                                                     |   |                       |
| PART                II. OTHER INFORMATION                           |   | 22                         |
|                                                                     |   |                       |
| Item                1. Legal Proceedings                                 |   | 22                         |
|                                                                     |   |                       |
| Item                2. Change in Securities                              |   | 23                         |
|                                                                     |   |                       |
| Item                3. Defaults Upon Senior Securities                   |   | 23                         |
|                                                                     |   |                       |
| Item                4. Submission of Matters to Vote of Security Holders |   | 24                         |
|                                                                     |   |                       |
| Item                5. Other Information                       |   | 24                         |
|                                                                     |   |                       |
| Item                6. Exhibits                                          |   | 24                         |
|                                                                     |   |                       |
| SIGNATURES                                                               |   | 24                         |

----

**TISSERA          INC.**

**(A          development stage company)**

**CONSOLIDATED          BALANCE SHEETS**

----

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

|                                                                                                                                                                                                                                                                                                                                                                        |   | **January                    31,** |    | **July                    31,** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|---------|---------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                        |   | **2007**                           |    | **2006**                        |   |
|                                                                                                                                                                                                                                                                                                                                                                        |   | **Unaudited**                      |    |                            |   |
| ASSETS                                                                                                                                                                                                                                                                                                                                                                      |   |                               |    |                            |   |
|                                                                                                                                                                                                                                                                                                                                                                        |   |                               |    |                            |   |
| CURRENT                    ASSETS:                                                                                                                                                                                                                                                                                                                                          |   |                               |    |                            |   |
| Cash                    and cash equivalents                                                                                                                                                                                                                                                                                                                                |   | $                                  | 1,482   |                            | $      | 111 |   |
| Short-term                    deposit                                                                                                                                                                                                                                                                                                                                       |   |                               | 194     |                            |   | 844 |   |
| Accounts                    receivable and prepaid expenses                                                                                                                                                                                                                                                                                                                 |   |                               | 140     |                            |   | 174 |   |
|                                                                                                                                                                                                                                                                                                                                                                        |   |                               |    |                            |   |   |   |
| Total                    current assets                                                                                                                                                                                                                                                                                                                                     |   |                               | 1,816   |                            |   | 1,129 |   |
|                                                                                                                                                                                                                                                                                                                                                                        |   |                               |    |                            |   |   |   |
| RESTRICTED                    CASH                                                                                                                                                                                                                                                                                                                                          |   |                               | 5       |                            |   | 5 |   |
|                                                                                                                                                                                                                                                                                                                                                                        |   |                               |    |                            |   |   |   |
| SEVERANCE                    PAY FUND                                                                                                                                                                                                                                                                                                                                       |   |                               | 39      |                            |   | 33 |   |
|                                                                                                                                                                                                                                                                                                                                                                        |   |                               |    |                            |   |   |   |
| PROPERTY                    AND EQUIPMENT, NET                                                                                                                                                                                                                                                                                                                              |   |                               | 9       |                            |   | 13 |   |
|                                                                                                                                                                                                                                                                                                                                                                        |   |                               |    |                            |   |   |   |
| Total                    assets                                                                                                                                                                                                                                                                                                                                             |   | $                                  | 1,869   |                            | $      | 1,180 |   |
|                                                                                                                                                                                                                                                                                                                                                                        |   |                               |    |                            |   |   |   |
| LIABILITIES                    AND STOCKHOLDERS' EQUITY                                                                                                                                                                                                                                                                                                                     |   |                               |    |                            |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                        |   |                               |    |                            |   |   |   |
| CURRENT                    LIABILITIES:                                                                                                                                                                                                                                                                                                                                     |   |                               |    |                            |   |   |   |
| Trade                    payables                                                                                                                                                                                                                                                                                                                                           |   | $                                  | 12      |                            | $      | 4 |   |
| Other                    accounts payable and accrued expenses                                                                                                                                                                                                                                                                                                              |   |                               | 628     |                            |   | 626 |   |
|                                                                                                                                                                                                                                                                                                                                                                        |   |                               |    |                            |   |   |   |
| Total                    current liabilities                                                                                                                                                                                                                                                                                                                                |   |                               | 640     |                            |   | 630 |   |
|                                                                                                                                                                                                                                                                                                                                                                        |   |                               |    |                            |   |   |   |
| ACCRUED                    SEVERANCE PAY                                                                                                                                                                                                                                                                                                                                    |   |                               | 54      |                            |   | 44 |   |
|                                                                                                                                                                                                                                                                                                                                                                        |   |                               |    |                            |   |   |   |
| Total                    liabilities                                                                                                                                                                                                                                                                                                                                        |   |                               | 694     |                            |   | 674 |   |
|                                                                                                                                                                                                                                                                                                                                                                        |   |                               |    |                            |   |   |   |
| STOCKHOLDERS'                    EQUITY:                                                                                                                                                                                                                                                                                                                                    |   |                               |    |                            |   |   |   |
| Stock                    capital (Note 5) -Common                    stock of $ 0.0001 par value each - Authorized: 100,000,000 shares at                    January 31, 2007 and July 31, 2006; Issued and outstanding: 44,314,332                    and                    27,814,332 shares at January 31, 2007 and July 31, 2006,                    respectively |   |                               | 3       |                            |   | 3 |   |
| Preferred                    stock of $ 0.0001 par value each - Authorized: 20,000,000 shares at                    January 31, 2007 and July 31, 2006; Issued and outstanding: 0                    shares at                    January 31, 2007 and July 31, 2006                                                                                              |   |                               | -       |                            |   | - |   |
| Additional                    paid-in capital                                                                                                                                                                                                                                                                                                                               |   |                               | 30,634  |                            |   | 28,839 |   |
| Deferred                    stock based compensation                                                                                                                                                                                                                                                                                                                        |   |                               | -       |                            |   | (4 | ) |
| Deficit                    accumulated during the development stage                                                                                                                                                                                                                                                                                                         |   |                               | (29,462 | )                               |   | (28,332 | ) |
|                                                                                                                                                                                                                                                                                                                                                                        |   |                               |    |                            |   |   |   |
| Total                    stockholders' equity                                                                                                                                                                                                                                                                                                                               |   |                               | 1,175   |                            |   | 506 |   |
|                                                                                                                                                                                                                                                                                                                                                                        |   |                               |    |                            |   |   |   |
| Total                    liabilities and stockholders' equity                                                                                                                                                                                                                                                                                                               |   | $                                  | 1,869   |                            | $      | 1,180 |   |

----

**TISSERA          INC.**

**(A          development stage company)**

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

----

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

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | **Six                    months ended****January                    31** |       | **Three                    months ended****January                    31,** |   | **Year                    ended July 31,** |   | **From                    May 31,****2000                    (date of inception) through****January                    31,** |       |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------|--------|--------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------|------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | **2007**                                                                 |       | **2006**                                                                    |   | **2007**                                   |   | **2006**                                                                                                                     |       | **2006** |   | **2007** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | **Unaudited**                                                            |       |                                                                        |   | **Unaudited**                              |   |
| Operating                    expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                                     |       |                                                                        |   |                                       |   |                                                                                                                         |       |   |   |   |   |
| Research                    and development (including expenses (income) related to options                    granted to                    employees and warrants granted to Yeda and to service providers                    in the                    amount of $ 239, $ 0, $ 192, $ 0 and $ (20) for the six                    months ended January 31, 2007 and 2006, three months ended January                    31,                    2007 and 2006 and for the year ended July 31, 2006,                    respectively)                                                      |   | $                                                                        | 653        |                                                                        | $      | 589                                        |   | $                                                                                                                            | 399        |   | $ | 293 |   | $ | 1,031 |   | $ | 15,717 |   |
| General                    and administrative (including expenses related to warrants, options                    and                    shares granted to service providers, employees and directors                    and                    compensation to investors in the amount of $ 136, $ (5),                    $                    27 $  (2), $ 27 for the six months ended January 31, 2007 and                    2006, for the three months ended January 31, 2007 and 2006 and                    for the                    year ended July 31, 2006, respectively) |   |                                                                     | 477        |                                                                        |   | 300                                        |   |                                                                                                                         | 203        |   |   | 135 |   |   | 729 |   |   | 13,730 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                     |       |                                                                        |   |                                       |   |                                                                                                                         |       |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                     | 1,130      |                                                                        |   | 889                                        |   |                                                                                                                         | 602        |   |   | 428 |   |   | 1,760 |   |   | 29,447 |   |
| Financial                    income, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                     | 5          |                                                                        |   | 45                                         |   |                                                                                                                         | 7          |   |   | 26 |   |   | 55 |   |   | 130 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                     |       |                                                                        |   |                                       |   |                                                                                                                         |       |   |   |   |   |   |   |   |   |   |   |
| Loss                    from continuing operations before income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                                     | 1,125      |                                                                        |   | 844                                        |   |                                                                                                                         | 595        |   |   | 402 |   |   | 1,705 |   |   | 29,317 |   |
| Income                    taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                     | 5          |                                                                        |   | 7                                          |   |                                                                                                                         | 2          |   |   | 4 |   |   | 10 |   |   | 53 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                     |       |                                                                        |   |                                       |   |                                                                                                                         |       |   |   |   |   |   |   |   |   |   |   |
| Loss                    from continuing operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                     | 1,130      |                                                                        |   | 851                                        |   |                                                                                                                         | 597        |   |   | 406 |   |   | 1,715 |   |   | 29,370 |   |
| Loss                    from discontinued operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                     | -          |                                                                        |   | -                                          |   |                                                                                                                         | -          |   |   | - |   |   | - |   |   | 92 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                     |       |                                                                        |   |                                       |   |                                                                                                                         |       |   |   |   |   |   |   |   |   |   |   |
| Net                    loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | $                                                                        | 1,130      |                                                                        | $      | 851                                        |   | $                                                                                                                            | 597        |   | $ | 406 |   | $ | 1,715 |   | $ | 29,462 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                     |       |                                                                        |   |                                       |   |                                                                                                                         |       |   |   |   |   |   |   |   |   |   |   |
| Basic                    and diluted net loss per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | $                                                                        | 0.037      |                                                                        | $      | 0.03                                       |   | $                                                                                                                            | 0.018      |   | $ | 0.015 |   | $ | 0.06 |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                     |       |                                                                        |   |                                       |   |                                                                                                                         |       |   |   |   |   |   |   |   |   |   |   |
| Weighted                    average number of shares used in computing basic and diluted                    net loss per                    share                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                                                     | 30,863,245 |                                                                        |   | 27,582,114                                 |   |                                                                                                                         | 33,912,158 |   |   | 27,814,332 |   |   | 27,662,795 |   |   |   |   |

----

**TISSERA          INC.**

**(A          development stage company)**

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

----

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

|                                                                                                                                                    |   |                                 |       |        |   |                               |   |             |                    | **Deficit**                       |   |              |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|------------|-------------|--------|------------------------------------|--------|------------------|-------------------------|-----------------------------------|--------|-------------------|--------|
|                                                                                                                                                    |   |                                 |       |        |   |                               |   |             |                    | **accumulated**                   |   | **Total**         |   |
|                                                                                                                                                    |   |                                 |       |        |   | **Additional**                     |   | **Deferred**     |                    | **during                    the** |   | **stockholders'** |   |
|                                                                                                                                                    |   | **Stock                    capital** |       | **paid-in** |   | **stock                    based** |   | **development**  |                    | **equity**                        |   |
|                                                                                                                                                    |   | **Number**                           |       | **Amount**  |   | **capital**                        |   | **compensation** |                    | **stage**                         |   | **(deficiency)**  |   |
|                                                                                                                                                    |   |                                 |       |        |   |                               |   |             |                    |                              |   |              |   |
| Balance                    as of May 31, 2000                                                                                                           |   |                                 | -          |        | $      | -                                  |   | $                | -                       |                              | $      | -                 |   | $ | - |   | $ | - |   |
| Stock                    issued for cash on May 31, 2000                                                                                                |   |                                 | 15,036,000 |        |   | 2                                  |   |             | 8                       |                              |   | -                 |   |   | - |   |   | 10 |   |
| Net                    loss                                                                                                                             |   |                                 | -          |        |   | -                                  |   |             | -                       |                              |   | -                 |   |   | (5 | ) |   | (5 | ) |
|                                                                                                                                                    |   |                                 |       |        |   |                               |   |             |                    |                              |   |              |   |   |   |   |   |   |   |
| Balance                    as of July 31, 2000                                                                                                          |   |                                 | 15,036,000 |        |   | 2                                  |   |             | 8                       |                              |   | -                 |   |   | (5 | ) |   | 5 |   |
| Stock                    issued for cash on July 17, 2001                                                                                          |   |                                 | 3,000,000  |        |   | *)                    -            |   |             | 40                      |                              |   | -                 |   |   | - |   |   | 40 |   |
| Contribution                    of capital                                                                                                              |   |                                 | -          |        |   | -                                  |   |             | 15                      |                              |   | -                 |   |   | - |   |   | 15 |   |
| Net                    loss                                                                                                                             |   |                                 | -          |        |   | -                                  |   |             | -                       |                              |   | -                 |   |   | (30 | ) |   | (30 | ) |
|                                                                                                                                                    |   |                                 |       |        |   |                               |   |             |                    |                              |   |              |   |   |   |   |   |   |   |
| Balance                    as of July 31, 2001                                                                                                          |   |                                 | 18,036,000 |        |   | 2                                  |   |             | 63                      |                              |   | -                 |   |   | (35 | ) |   | 30 |   |
| Contribution                    of capital                                                                                                              |   |                                 | -          |        |   | -                                  |   |             | 15                      |                              |   | -                 |   |   | - |   |   | 15 |   |
| Net                    loss                                                                                                                             |   |                                 | -          |        |   | -                                  |   |             | -                       |                              |   | -                 |   |   | (39 | ) |   | (39 | ) |
|                                                                                                                                                    |   |                                 |       |        |   |                               |   |             |                    |                              |   |              |   |   |   |   |   |   |   |
| Balance                    as of July 31, 2002                                                                                                          |   |                                 | 18,036,000 |        |   | 2                                  |   |             | 78                      |                              |   | -                 |   |   | (74 | ) |   | 6 |   |
| Contribution                    of capital                                                                                                              |   |                                 | -          |        |   | -                                  |   |             | 15                      |                              |   | -                 |   |   | - |   |   | 15 |   |
| Net                    loss                                                                                                                             |   |                                 | -          |        |   | -                                  |   |             | -                       |                              |   | -                 |   |   | (31 | ) |   | (31 | ) |
|                                                                                                                                                    |   |                                 |       |        |   |                               |   |             |                    |                              |   |              |   |   |   |   |   |   |   |
| Balance                    as of July 31, 2003                                                                                                          |   |                                 | 18,036,000 |        |   | 2                                  |   |             | 93                      |                              |   | -                 |   |   | (105 | ) |   | (10 | ) |
| Stock                    issued for cash related to PPM1, net of $ 176 of cash issuance                    expenses                                |   |                                 | 1,767,200  |        |   | *)                    -            |   |             | 2,033                   |                              |   | -                 |   |   | - |   |   | 2,033 |   |
| Stock                    issued for cash related to PPM2, net of $ 517 of cash issuance                    expenses                                     |   |                                 | 3,142,858  |        |   | 1                                  |   |             | 4,983                   |                              |   | -                 |   |   | - |   |   | 4,984 |   |
| Stock                    based compensation related to warrants granted to service                    providers                                         |   |                                 | -          |        |   | -                                  |   |             | 11,429                  |                              |   | -                 |   |   | - |   |   | 11,429 |   |
| Stock                    based compensation related to options granted to employees and                    directors                                    |   |                                 | -          |        |   | -                                  |   |             | 1,130                   |                              |   | -                 |   |   | - |   |   | 1,130 |   |
| Compensation                    related to stock granted to service providers and to                    employees                                       |   |                                 | 3,067,090  |        |   | *)                    -            |   |             | 7,366                   |                              |   | -                 |   |   | - |   |   | 7,366 |   |
| Deferred                    stock based compensation                                                                                                    |   |                                 | -          |        |   | -                                  |   |             | 163                     |                              |   | (163              | )      |   | - |   |   | - |   |
| Exercise                    of options                                                                                                                  |   |                                 | 1,543,766  |        |   | *)                    -            |   |             | -                       |                              |   | -                 |   |   | - |   |   | *)                    - |   |
| Net                    loss                                                                                                                             |   |                                 | -          |        |   | -                                  |   |             | -                       |                              |   | -                 |   |   | (22,529 | ) |   | (22,529 | ) |
|                                                                                                                                                    |   |                                 |       |        |   |                               |   |             |                    |                              |   |              |   |   |   |   |   |   |   |
| Balance                    as of July 31, 2004                                                                                                          |   |                                 | 27,556,914 |        |   | 3                                  |   |             | 27,197                  |                              |   | (163              | )      |   | (22,634 | ) |   | 4,403 |   |
| Stock                    based compensation related to warrants granted to                    investors                                                 |   |                                 | -          |        |   | -                                  |   |             | 1,980                   |                              |   | -                 |   |   | - |   |   | 1,980 |   |
| Warrants                    granted to Yeda and to service providers                                                                                    |   |                                 | -          |        |   | -                                  |   |             | (362                    | )                                 |   | -                 |   |   | - |   |   | (362 | ) |
| Amortization                    of stock based compensation related to options granted to employees                    and                    directors |   |                                 | -          |        |   | -                                  |   |             | -                       |                              |   | 176               |   |   | - |   |   | 176 |   |
| Deferred                    stock based compensation                                                                                                    |   |                                 | -          |        |   | -                                  |   |             | 44                      |                              |   | (44               | )      |   | - |   |   | - |   |
| Exercise                    of options                                                                                                                  |   |                                 | 25,200     |        |   | *)                    -            |   |             | -                       |                              |   | -                 |   |   | - |   |   | - |   |
| Net                    loss                                                                                                                             |   |                                 | -          |        |   | -                                  |   |             | -                       |                              |   | -                 |   |   | (3,983 | ) |   | (3,983 | ) |
|                                                                                                                                                    |   |                                 |       |        |   |                               |   |             |                    |                              |   |              |   |   |   |   |   |   |   |
| Balance                    as of July 31, 2005                                                                                                          |   |                                 | 27,582,114 |        |   | 3                                  |   |             | 28,859                  |                              |   | (31               | )      |   | (26,617 | ) |   | 2,214 |   |
| Exercise                    of options                                                                                                                  |   |                                 | 232,218    |        |   | *)                    -            |   |             | *)                    - |                              |   | -                 |   |   | - |   |   | *)                    - |   |
| Warrants                    granted to service providers                                                                                                |   |                                 | -          |        |   | -                                  |   |             | (20                     | )                                 |   | -                 |   |   | - |   |   | (20 | ) |
| Amortization                    of stock based compensation related to options granted to employees                    and                    directors |   |                                 | -          |        |   | -                                  |   |             | -                       |                              |   | 27                |   |   | - |   |   | 27 |   |
| Net                    loss                                                                                                                             |   |                                 | -          |        |   | -                                  |   |             | -                       |                              |   | -                 |   |   | (1,715 | ) |   | (1,715 | ) |
|                                                                                                                                                    |   |                                 |       |        |   |                               |   |             |                    |                              |   |              |   |   |   |   |   |   |   |
| Balance                    as of July 31, 2006                                                                                                          |   |                                 | 27,814,332 |        |   | 3                                  |   |             | 28,839                  |                              |   | (4                | )      |   | (28,332 | ) |   | 506 |   |
| Deferred                    stock-based compensation                                                                                                    |   |                                 | -          |        |   | -                                  |   |             | (4                      | )                                 |   | 4                 |   |   | - |   |   | - |   |
| Issuance                    of shares and warrants, net                                                                                                 |   |                                 | 16,500,000 |        |   | *)                    -            |   |             | 1,424                   |                              |   | -                 |   |   | - |   |   | 1,424 |   |
| Amortization                    of stock based compensation related to options granted to employees                    and                    directors |   |                                 | -          |        |   | -                                  |   |             | 232                     |                              |   | -                 |   |   | - |   |   | 232 |   |
| Warrants                    granted to Yeda                                                                                                             |   |                                 | -          |        |   | -                                  |   |             | 143                     |                              |   | -                 |   |   | - |   |   | 143 |   |
| Net                    loss                                                                                                                             |   |                                 | -          |        |   | -                                  |   |             | -                       |                              |   | -                 |   |   | (1,130 | ) |   | (1,130 | ) |
|                                                                                                                                                    |   |                                 |       |        |   |                               |   |             |                    |                              |   |              |   |   |   |   |   |   |   |
| Balance                    as of January 31, 2007 (unaudited)                                                                                           |   |                                 | 44,314,332 |        | $      | 3                                  |   | $                | 30,634                  |                              | $      | -                 |   | $ | (29,462 | ) | $ | 1,175 |   |

----

**TISSERA          INC.**

**(A          development stage company)**

**CONSOLIDATED          STATEMENTS OF CASH FLOWS**

----

**U.S.          dollars in thousands**

|                                                                                                                                           |   | **Six                    months ended****January                    31,** |   | **Year                    ended July 31,** |   | **From                    May 31, 2000 (inception date) through January 31,** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|--------|--------------------------------------------|--------|-------------------------------------------------------------------------------|--------|
|                                                                                                                                           |   | **2007**                                                                  |   | **2006**                                   |   | **2006**                                                                      |   | **2007** |   |
|                                                                                                                                           |   | **Unaudited**                                                             |   |                                       |   | **Unaudited**                                                                 |   |
| Cash                    flows from operating activities:                                                                                       |   |                                                                      |   |                                       |   |                                                                          |   |   |   |
| Net                    loss                                                                                                                    |   | $                                                                         | (1,130 | )                                          | $      | (851                                                                          | )      | $ | (1,715 | ) | $ | (29,462 | ) |
| Adjustments                    required to reconcile net loss to total net cash used in operating                    activities:               |   |                                                                      |   |                                       |   |                                                                          |   |   |   |   |   |   |   |
| Depreciation                                                                                                                                   |   |                                                                      | 4      |                                       |   | 4                                                                             |   |   | 8 |   |   | 29 |   |
| Expenses                    (income) related to warrants granted to Yeda and to service                    providers                           |   |                                                                      | 239    |                                       |   | (18                                                                           | )      |   | (20 | ) |   | 11,286 |   |
| Expenses                    related to options granted to employees and directors                                                              |   |                                                                      | 136    |                                       |   | 13                                                                            |   |   | 27 |   |   | 1,469 |   |
| Expenses                    related to shares granted to service providers and compensation                    to                    investors |   |                                                                      | -      |                                       |   | -                                                                             |   |   | - |   |   | 9,346 |   |
| Interest                    accrued on short-term deposit                                                                                      |   |                                                                      | (26    | )                                          |   | -                                                                             |   |   | (17 | ) |   | (43 | ) |
| Decrease                    (increase) in accounts receivable and prepaid expenses                                                             |   |                                                                      | 34     |                                       |   | 43                                                                            |   |   | 91 |   |   | (140 | ) |
| Increase                    (decrease) in trade payables                                                                                       |   |                                                                      | 8      |                                       |   | 1                                                                             |   |   | (1 | ) |   | 12 |   |
| Increase                    (decrease) in other accounts payable and accrued expenses                                                          |   |                                                                      | 2      |                                       |   | (72                                                                           | )      |   | (34 | ) |   | 628 |   |
| Increase                    in accrued severance pay, net                                                                                      |   |                                                                      | 4      |                                       |   | -                                                                             |   |   | 1 |   |   | 15 |   |
|                                                                                                                                           |   |                                                                      |   |                                       |   |                                                                          |   |   |   |   |   |   |   |
| Net                    cash used in continuing operating activities                                                                            |   |                                                                      | (729   | )                                          |   | (880                                                                          | )      |   | (1,660 | ) |   | (6,860 | ) |
| Net                    cash provided by discontinued operating activities                                                                      |   |                                                                      | -      |                                       |   | -                                                                             |   |   | - |   |   | 75 |   |
|                                                                                                                                           |   |                                                                      |   |                                       |   |                                                                          |   |   |   |   |   |   |   |
| Total                    net cash used in operating activities                                                                                 |   |                                                                      | (729   | )                                          |   | (880                                                                          | )      |   | (1,660 | ) |   | (6,785 | ) |
|                                                                                                                                           |   |                                                                      |   |                                       |   |                                                                          |   |   |   |   |   |   |   |
| Cash                    flows from investing activities:                                                                                       |   |                                                                      |   |                                       |   |                                                                          |   |   |   |   |   |   |   |
| Short-term                    deposit                                                                                                          |   |                                                                      | 676    |                                       |   | -                                                                             |   |   | (827 | ) |   | (151 | ) |
| Sale                    of property and equipment                                                                                              |   |                                                                      | -      |                                       |   | -                                                                             |   |   | - |   |   | 9 |   |
| Purchase                    of property and equipment                                                                                          |   |                                                                      | -      |                                       |   | -                                                                             |   |   | - |   |   | (47 | ) |
| Restricted                    cash                                                                                                             |   |                                                                      | -      |                                       |   | (5                                                                            | )      |   | (5 | ) |   | (5 | ) |
|                                                                                                                                           |   |                                                                      |   |                                       |   |                                                                          |   |   |   |   |   |   |   |
| Net                    cash provided by (used in) continuing investing activities                                                              |   |                                                                      | 676    |                                       |   | (5                                                                            | )      |   | (832 | ) |   | (194 | ) |
| Net                    cash used in discontinued investing activities                                                                          |   |                                                                      | -      |                                       |   | -                                                                             |   |   | - |   |   | (15 | ) |
|                                                                                                                                           |   |                                                                      |   |                                       |   |                                                                          |   |   |   |   |   |   |   |
| Total                    net cash provided by (used in) investing activities                                                                   |   |                                                                      | 676    |                                       |   | (5                                                                            | )      |   | (832 | ) |   | (209 | ) |
|                                                                                                                                           |   |                                                                      |   |                                       |   |                                                                          |   |   |   |   |   |   |   |
| Cash                    flows from financing activities:                                                                                       |   |                                                                      |   |                                       |   |                                                                          |   |   |   |   |   |   |   |
| Issuance                    of shares and warrants, net                                                                                        |   |                                                                      | 1,424  |                                       |   | -                                                                             |   |   | *)                    - |   |   | 8,441 |   |
|                                                                                                                                           |   |                                                                      |   |                                       |   |                                                                          |   |   |   |   |   |   |   |
| Net                    cash provided by continuing financing activities                                                                        |   |                                                                      | -      |                                       |   | -                                                                             |   |   | *)                    - |   |   | 8,441 |   |
| Net                    cash provided by discontinued financing activities                                                                      |   |                                                                      | -      |                                       |   | -                                                                             |   |   | - |   |   | 35 |   |
|                                                                                                                                           |   |                                                                      |   |                                       |   |                                                                          |   |   |   |   |   |   |   |
| Total                    net cash provided by financing activities                                                                             |   |                                                                      | 1,424  |                                       |   | -                                                                             |   |   | *)                    - |   |   | 8,476 |   |
|                                                                                                                                           |   |                                                                      |   |                                       |   |                                                                          |   |   |   |   |   |   |   |
| Increase                    (decrease) in cash and cash equivalents                                                                            |   |                                                                      | 1,371  |                                       |   | (885                                                                          | )      |   | (2,492 | ) |   | 1,482 |   |
| Cash                    and cash equivalents at beginning of period                                                                            |   |                                                                      | 111    |                                       |   | 2,603                                                                         |   |   | 2,603 |   |   | - |   |
|                                                                                                                                           |   |                                                                      |   |                                       |   |                                                                          |   |   |   |   |   |   |   |
| Cash                    and cash equivalents at end of period                                                                                  |   | $                                                                         | 1,482  |                                       | $      | 1,718                                                                         |   | $ | 111 |   | $ | 1,482 |   |

----

**TISSERA          INC.**

**(A          development stage company)**

**NOTES          TO CONSOLIDATED FINANCIAL STATEMENTS**

----

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

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

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

|   | b. | The                    accompanying unaudited interim consolidated financial statements                    have been                    prepared as of January 31, 2007 and for the six months then ended,                    in                    accordance with accounting principles generally accepted in the                    United                    States relating to the preparation of financial statements for                    interim                    periods. Accordingly, they do not include all the information                    and                    footnotes required by generally accepted accounting principles                    for                    complete financial statements. In the opinion of management,                    all                    adjustments (consisting of normal recurring accruals) considered                    necessary                    for a fair presentation have been included. Operating results                    for the six                    months ended January 31, 2007 are not necessarily indicative                    of the                    results that may be expected for the year ending July 31,                    2007. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | c. | Going                    concern considerations: |
|--------|----|--------------------------------------------------|

----

**TISSERA        INC.**

**(A        development stage company)**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

----

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

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

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

| **NOTE                  2:-** | **RESEARCH                  AND LICENSE AGREEMENT** |
|-------------------------------|-----------------------------------------------------|

----

**TISSERA          INC.**

**(A          development stage company)**

**NOTES          TO CONSOLIDATED FINANCIAL STATEMENTS**

----

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

| **NOTE                  2:-** | **RESEARCH                  AND LICENSE AGREEMENT                  (Cont.)** |
|-------------------------------|------------------------------------------------------------------------------|

----

**TISSERA        INC.**

**(A        development stage company)**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

----

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

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

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

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

|   | c. | On                  August 1, 2006, the Company adopted Statement of Financial Accounting                  Standards No. 123 (revised 2004), "Share-Based Payment" ("SFAS                  123(R)") which requires the measurement and recognition of compensation                  expense based on estimated fair values for all share-based payment                  awards                  made to employees and directors. SFAS 123(R) supersedes Accounting                  Principles Board Opinion No. 25, "Accounting for Stock Issued to                  Employees" ("APB 25"), for periods beginning in fiscal 2006. In                  March                  2005, the Securities and Exchange Commission issued Staff Accounting                  Bulletin No. 107 ("SAB 107") relating to SFAS 123(R). The Company has                  applied the provisions of SAB 107 in its adoption of SFAS 123(R). |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**TISSERA        INC.**

**(A        development stage company)**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

----

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

| **NOTE                  3:-** | **SIGNIFICANT                  ACCOUNTING POLICIES                  (Cont.)** |
|-------------------------------|-------------------------------------------------------------------------------|

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

----

**TISSERA        INC.**

**(A        development stage company)**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

----

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

| **NOTE                  3:-** | **SIGNIFICANT                  ACCOUNTING POLICIES                  (Cont.)** |
|-------------------------------|-------------------------------------------------------------------------------|

|                                             |   | **Number                  of options** |      | **Weighted-average                  exercise price** |   | **Weighted-                  average remaining contractual term (in years)** |   | **Aggregate                  intrinsic value *)** |   |
|--------------------------------------------------|--------|----------------------------------------|-----------|------------------------------------------------------|--------|------------------------------------------------------------------------------|--------|---------------------------------------------------|--------|
|                                             |   | **Unaudited**                          |      |
|                                             |   |                                   |      |                                                 |   |                                                                         |   |                                              |   |
| Outstanding                  at July 31, 2006    |   |                                   | 2,646,206 |                                                 | $      | 0.301                                                                        |   |                                              |   |   |   |   |   |
| Granted                                          |   |                                   | -         |                                                 |   |                                                                         |   |                                              |   |   |   |   |   |
| Exercised                                        |   |                                   | -         |                                                 |   |                                                                         |   |                                              |   |   |   |   |   |
| Forfeited                                        |   |                                   | -         |                                                 |   |                                                                         |   |                                              |   |   |   |   |   |
|                                             |   |                                   |      |                                                 |   |                                                                         |   |                                              |   |   |   |   |   |
| Outstanding                  at January 31, 2007 |   |                                   | 2,646,206 |                                                 | $      | 0.301                                                                        |   |                                              | 2.42   |   |   | - |   |
|                                             |   |                                   |      |                                                 |   |                                                                         |   |                                              |   |   |   |   |   |
| Exercisable                  at January 31, 2007 |   |                                   | 2,600,131 |                                                 | $      | 0.301                                                                        |   |                                              | 2.42   |   |   | - |   |
|                                             |   |                                   |      |                                                 |   |                                                                         |   |                                              |   |   |   |   |   |
| Vested                  and expected to vest     |   |                                   | 2,646,206 |                                                 | $      | 0.301                                                                        |   |                                              | 2.42   |   |   | - |   |

----

**TISSERA        INC.**

**(A        development stage company)**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

----

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

| **NOTE                  3:-** | **SIGNIFICANT                  ACCOUNTING POLICIES                  (Cont.)** |
|-------------------------------|-------------------------------------------------------------------------------|

|                                                                                                                                                         |   | **Six                  months****ended****January                  31,****2006** |       | **Three                  months ended****January                  31,****2006** |   | **Year                  ended****July                  31,****2006** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|--------|
|                                                                                                                                                         |   | **Unaudited**                                                                    |       |                                                                            |   |
| Net                  loss as reported                                                                                                                        |   | $                                                                                | 851        |                                                                            | $      | 406                                                                  |   | $ | 1,715 |   |
|                                                                                                                                                         |   |                                                                             |       |                                                                            |   |                                                                 |   |   |   |   |
| Add                  (deduct): stock-based compensation income (expense) recognized                  under APB                  25                           |   |                                                                             | 5          |                                                                            |   | 2                                                                    |   |   | (27 | ) |
|                                                                                                                                                         |   |                                                                             |       |                                                                            |   |                                                                 |   |   |   |   |
| Add                  (deduct): stock-based compensation income (expense) determined                  under fair                  value method for all awards |   |                                                                             | (512       | )                                                                               |   | (256                                                                 | )      |   | 1,027 |   |
|                                                                                                                                                         |   |                                                                             |       |                                                                            |   |                                                                 |   |   |   |   |
| Pro                  forma net income                                                                                                                        |   | $                                                                                | 344        |                                                                            | $      | 152                                                                  |   | $ | 2,715 |   |
|                                                                                                                                                         |   |                                                                             |       |                                                                            |   |                                                                 |   |   |   |   |
| Basic                  and diluted earnings per share, as reported                                                                                           |   | $                                                                                | 0.018      |                                                                            | $      | 0.015                                                                |   | $ | 0.06 |   |
|                                                                                                                                                         |   |                                                                             |       |                                                                            |   |                                                                 |   |   |   |   |
| Pro                  forma basic and diluted earnings per share                                                                                              |   | $                                                                                | 0.01       |                                                                            | $      | 0.01                                                                 |   | $ | 0.1 |   |
|                                                                                                                                                         |   |                                                                             |       |                                                                            |   |                                                                 |   |   |   |   |
| Weighted                  average number of shares used in computing pro forma basic and                  diluted                  earnings per share        |   |                                                                             | 27,582,114 |                                                                            |   | 27,814,332                                                           |   |   | 27,662,795 |   |

----

**TISSERA          INC.**

**(A          development stage company)**

**NOTES          TO CONSOLIDATED FINANCIAL STATEMENTS**

----

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

| **NOTE                  3:-** | **SIGNIFICANT                  ACCOUNTING POLICIES                  (Cont.)** |
|-------------------------------|-------------------------------------------------------------------------------|

|  | 1. | The                  Company granted in prior years 2,429,722 warrants to purchase Common                  stock                  at an exercise price of $ 0.0001 per share, 150,000 warrants to                  purchase Common stock at an exercise price of $ 0.01 per share,                  600,000                  warrants to purchase 600,000 shares of Common stock at an exercise                  price                  of $ 1 per share and 2,777,000 shares of Common stock at no                  consideration. The warrants and shares were granted to service                  providers                  and to advisory board members, in exchange for research and development                  services and general and administrative services. In addition the                  Company                  issued 2,526,700 warrants to Yeda, see Note 2 above, out of which                  255,839                  were issued during the six months ended January 31, 2007 due to                  issuance                  of Common stock on December 28, 2006, see Note 5 below. The Company                  accounted for such warrants and shares under the provisions of                  EITF 96-18.                  The fair value of fully vested warrants and shares was recorded                  as                  research and development expenses and general and administrative                  expenses                  at the grant date. The fair value of the expected to vest warrants                  is                  amortized as an expense over the vesting period. |
|--|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 2. | On                  December 28, 2006 the Company granted 3,300,000 warrants to finders                  in                  connection with issuance of Common stock, see Note 5c. The fair                  value of                  the abovementioned warrants calculated as for the grant date is                  $ 495.                  This fair value was estimated using the following weighted average                  assumptions: |
|--|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Risk                  free interest       |   |   | 4.85 | %      |
|-------------------------------------------|--------|--------|------|--------|
| Dividend                  yields          |   |   | 0    | %      |
| Volatility                                |   |   | 155  | %      |
| Expected                  term (in years) |   |   | 5    |   |

|                                             |   | **Number                  of warrants** |      | **Weighted-average                  exercise price** |   | **Weighted-                  average remaining contractual term (in years)** |   | **Aggregate                  intrinsic value** |   |
|--------------------------------------------------|--------|-----------------------------------------|-----------|------------------------------------------------------|--------|------------------------------------------------------------------------------|--------|------------------------------------------------|--------|
|                                             |   | **Unaudited**                           |      |
| Outstanding                  at July 31, 2006    |   |                                    | 1,570,861 |                                                 | $      | *)                  -                                                        |   |                                           |   |   |   |   |   |
| Granted                                          |   |                                    | 4,255,839 |                                                 | $      | 0.08                                                                         |   |                                           |   |   |   |   |   |
| Exercised                                        |   |                                    | -         |                                                 |   |                                                                         |   |                                           |   |   |   |   |   |
| Forfeited                                        |   |                                    | -         |                                                 |   |                                                                         |   |                                           |   |   |   |   |   |
|                                             |   |                                    |      |                                                 |   |                                                                         |   |                                           |   |   |   |   |   |
| Outstanding                  at January 31, 2007 |   |                                    | 5,826,700 |                                                 | $      | 0.06                                                                         |   |                                           | 5.71   |   |   | 544,005 |   |
|                                             |   |                                    |      |                                                 |   |                                                                         |   |                                           |   |   |   |   |   |
| Exercisable                  at January 31, 2007 |   |                                    | 2,526,700 |                                                 | $      | *)                  -                                                        |   |                                           | 6.75   |   |   | 379,005 |   |
|                                             |   |                                    |      |                                                 |   |                                                                         |   |                                           |   |   |   |   |   |
| Vested                  and expected to vest     |   |                                    | 5,826,700 |                                                 | $      | 0.06                                                                         |   |                                           | 5.71   |   |   | 544,005 |   |

----

**TISSERA        INC.**

**(A        development stage company)**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

----

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

| **NOTE                  3:-** | **SIGNIFICANT                  ACCOUNTING POLICIES                  (Cont.)** |
|-------------------------------|-------------------------------------------------------------------------------|

| **NOTE                  4:-** | **COMMITMENTS                  AND CONTINGENCIES** |
|-------------------------------|----------------------------------------------------|

|   | a. | The                  facilities and motor vehicles of the Company are rented under operating                  leases. Minimum rental commitments under the cancelable lease as                  of                  January 31, 2007 are for three additional years and amount to                  $ 38. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b. | The                  Company's subsidiary obtained a bank guarantee in the amount of                  $ 5                  to secure a rent agreement. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | c. | On                  September 7, 2004, the Board of Directors decided to terminate the                  employment of the Chief Executive Officer of the Company ("the                  Former                  CEO"). According to the Former CEO's employment agreement, the                  Former CEO                  is entitled to payments totaling approximately $ 72 upon termination                  of employment with the Company. On December 21, 2004, a claim against                  the Company was filed with the Israeli Labor Court by the Former                  CEO for a                  payment of approximately $ 134 (NIS 564 thousand) in respect of                  payments allegedly due to her. The Company has filed a statement                  of                  defense against the Former CEO's claim. The Company's management                  and its                  legal advisors are of the opinion that the Company has good defense                  arguments against the claim. In the year ended July 31, 2005, a                  provision in the amount of $ 100, in respect of net salary expenses                  was recorded under operating expenses, with respect to the Former                  CEO. As                  of January 31, 2007, this provision is in                  place. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**TISSERA          INC.**

**(A          development stage company)**

**NOTES          TO CONSOLIDATED FINANCIAL STATEMENTS**

----

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

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

|   | d. | On                  July 11, 2005, the Former CEO submitted to the Company a letter                  claiming that the Company included in its Form 10-QSB filed on                  June 24, 2005 slanderous allegations regarding the Former CEO. The                  Former CEO demanded a retraction and asserted damages of at least                  $ 23. The Company's management denies the                  claim. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | e. | In                  March 2004, the Former CEO was granted 2,267,046 options to purchase                  a                  total of 2,267,046 shares of Common stock, out of which 270,000                  options                  were exercised into 249,859 shares of Common stock on a cashless                  basis.                  The total number of options to which the Former CEO is entitled                  should                  have been based on a formula that was determined in the agreement                  with the                  Former CEO. However, the number of options that were granted in                  March 2004                  was incorrect. In November 2004, the Company's Board of Directors                  decided                  to amend the number of options granted to the Former CEO to a total                  of                  2,042,551 options to purchase a total of 2,042,551 shares of Common                  stock.                  The amended calculation is based on the formula determined in the                  agreement. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | f. | On                  September 7, 2004, certain shareholders demanded from the Former CEO                  to repay the Company the amount of $ 1,074 (which is the value of the                  shares that the Company issued as a result of the Former CEO's                  cashless                  exercise of the abovementioned options, at the date of exercise,                  and which                  were sold by the Former CEO), claiming that the exercise of the                  options                  was executed before the end of the vesting period. In addition,                  the                  shareholders demanded that the Former CEO pays the Company compensation                  in                  the amount of $ 645 for damages. The Company's management and its                  legal advisors are of the opinion that the vast majority of the                  assertions                  are against the Former CEO and not against the Company. The Company                  denies                  the assertions that may imply to the Company's responsibility and,                  accordingly, no provision has been made in the accounts. |
|--------|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **NOTE                  5:-** | **STOCK                  CAPITAL** |
|-------------------------------|------------------------------------|

|   | a. | On                  December 28, 2006, the Company has completed a private placement for                  the sale of 16,500,000 shares of common stock (the Shares) at a                  price of $                  0.1 per share. For each two shares of common stock purchased, each                  investor will receive a Series E Common Stock Purchase Warrant                  to purchase                  one share of common stock of the Company (the "Series E Warrants")                  and a                  Series F Common Stock Purchase Warrant to purchase one share of                  common                  stock of the Company (the "Series F Warrants"). The Series E Warrants                  shall be exercisable for a period commencing six months from the                  issue                  date through five years from the issue date at an exercise price                  of $                  0.165 per share. The Series F Warrants shall be exercisable for                  a period                  commencing six months from the issue date through five years from                  the                  issue date at an exercise price of $ 0.1815 per share. The Series                  E                  Warrants and the Series F Warrants are exercisable on a cashless                  basis. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**TISSERA          INC.**

**(A          development stage company)**

**NOTES          TO CONSOLIDATED FINANCIAL STATEMENTS**

----

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

| **NOTE                  5:-** | **STOCK                  CAPITAL (Cont.)** |
|-------------------------------|--------------------------------------------|

|   | b. | The                  Company has agreed to file a registration statement registering                  the Shares                  within 180 days after the closing date and have such registration                  statement declared effective within 270 days from the closing date.                  In the                  event that the Company fails to have the registration statement                  filed or                  declared effective by the required dates, it must pay liquidated                  damages                  equal to 2% of the principal amount for each thirty days (or such                  lessor                  pro-rata amount for any period of less than thirty days) which                  may be                  paid, at the election of the Company, in cash or shares of common                  stock                  valued at $ 0.05 per share, until the registration statement is                  filed or                  declared effective as the case may be. However, in the event that                  the                  registration statement is delayed solely resulting from an issue                  raised                  under Rule 415 as promulgated under the Securities Act of 1933,                  then the                  liquidation damages shall be 1% of the principal amount for each                  thirty                  days (or such lessor pro-rata amount for any period of less than                  thirty                  days), which may be paid, at the election of the Company, in cash                  or                  shares of common stock valued at $0.05 per share. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | c. | In                  connection with the above closing, the Company paid $ 165 to Burstein                  & Lindsay Security Corp. (the "Finder") for its services as a finder                  in connection with this transaction and agreed to pay the Finder                  10% of                  all cash proceeds, if any, generated as a result of the exercise                  of the                  Series E Warrants and the Series F Warrants. In addition, the Finder                  also                  received a common stock purchase warrant to purchase 3,300,000                  shares of                  common stock at an exercise price of $ 0.10 per share exercisable                  for a                  period commencing six months from the issue date through five years                  from                  the issue date. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **NOTE                  6:-** | **RELATED                  PARTIES TRANSACTIONS** |
|-------------------------------|---------------------------------------------------|

----

**Overview**

----

**Research      and License Agreement**

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

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

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

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

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

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

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

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

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

| ·   | pursuant                to the third addendum of the Research Agreement dated April 11, 2006,                with                regard to the fourth year of research, we committed to pay an amount                of US                $600,000 of which $150,000 was paid on May 2, 2006; $150,000 was                paid on                July 19, 2006; and $150,000 was paid on October 9, 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. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | $50,000                per year commencing from the end of the license period, which has                been                extended until April 9, 2007; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

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

**Results      of Operations for the Three Months Ended January 31, 2007 Compared to the Three      Months Ended January 31, 2006**

**Revenues      and Cost of Goods Sold**

----

**Operating        Expenses **

**Financial      Income**

**Taxes      on Income **

**Net      Loss**

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**Results      of Operations for the Six Months Ended January 31, 2007 Compared to the Six      Months Ended January 31, 2006 **

**Revenues      and Cost of Goods Sold **

**Operating      Expenses **

**Financial      Income**

**Taxes      on Income **

----

**Net      Loss**

**LIQUIDITY      AND CAPITAL RESOURCES **

**Item      3. Controls and Procedures **

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**Part      II: OTHER INFORMATION**

**Item      1. Legal Proceedings**

| ·   | On                December 21, 2004, Dr. Rabenou, our former CEO and a director, filed                claim                in the District Labor Court located in Tel Aviv Israel ("Labor Court")                against the Company alleging that the Company owed Dr. Rabenou a                sum of                NIS 564,140 (approximately $134,000) pursuant to the terms of her                employment agreement. This claim remains pending, and the Company                intends                to continue its current defense efforts with respect to such claim.                In                addition, the Company, filed a counterclaim against Dr. Rabenou in                the                Labor Court based on damages incurred to the Company pursuant to                certain                of Dr. Rabenou's actions or omissions, during her tenure as the Company's                CEO. The counterclaim seeks damages against Dr. Rabenou in the amount                of                NIS 9,405,491 (approximately $2,240,000). These damages are based                primarily on certain actions taken by Dr. Rabenou as follows: (i)                the                issuance of an unauthorized bonus to Dr. Rabenou while she was CEO                in the                amount of $110,000 upon completion of the private offering in the                amount                of $5,500,000 in March 2004; (ii) the issuance of 280,000 shares                of common                stock to Pini Rabenou, the brother of Dr. Rabenou, for which the                Company                did not receive any discernable consideration; (iii) the failure                to                withhold Israeli income taxes with respect to the exercise of options                by                Dr. Rabenou; and (iv) the issuance of shares to Biogreen Ltd. as                more                fully described below. On January 15, 2004, when Dr. Rabenou recommended                the issuance of Company shares to number of specified entities and                individuals, including a company known as BioGreen Ltd. ("BioGreen"),                to                which the Company issued 397,000 shares (the "BioGreen Shares").                The                issuance of the BioGreen Shares gave rise to a Company expense of                $833,700. After Dr. Rabenou resigned as CEO, the Company commenced                an                internal investigation into all corporate actions taken during Dr.                Rabenou's tenure, including the BioGreen matter. The Company's management                attempted, unsuccessfully, to identify the specific services that                served                as the basis for BioGreen's compensation, and Dr. Rabenou refused                to                cooperate with the Company's investigation. Notwithstanding, in response                to the Company's counterclaim, Dr. Rabenou filed a reply brief within                which she denied our claims and asserted that she assigned her right                to                the BioGreen Shares to an unnamed offshore company incorporated in                the                Bahamas (that the Company believes is BioGreen), and asserting a                number of                new defenses and mitigating factors, which were not disclosed either                during or immediately subsequent to the January 15, 2004 Board of                Directors Meeting. The Company initially described the above litigation                proceedings, within its Form 10-QSB filed for the quarter ended April                30,                2005. Subsequent to the filing of such Form 10-QSB, Dr. Rabenou's                legal                counsel: (a) communicated to the Company that it believed that the                statements in such 10-QSB constituted libel; (b) threatened legal                action                against the Company if such statements were not withdrawn; and (c)                claimed                damages of approximately $23,000 related to such alleged libel. The                Company, based on the opinion of its legal advisors, does not intend                to                retract any of its public statements regarding the above matters.                The                Company attorneys are negotiating with Rabenou's attorneys to reach                a                settlement on this dispute of which there is no                guarantee |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

**Item      3. Defaults Upon Senior Securities**

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

**Item      5. Other Information**

**Item      6. Exhibits **

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

**SIGNATURES**

|                  |                    |          |
|-----------------------|-------------------------|---------------|
|                  | TISSERA, INC.           |
|             |               |     |
| Dated: March 14, 2007 | By:           | /s/Amos Eiran |
|                  | Amos              Eiran |
|                  | Chief Executive Officer |

|                  |                          |           |
|-----------------------|-------------------------------|----------------|
| Dated: March 14, 2007 | By:                 | /s/Alex Werber |
|                  | Alex              Werber      |
|                  | Chief Financial Officer  |

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