UNITED STATES SECURITIES AND EXCHANGE COMMISSION  Washington, D.C. 20549  Form 10-K  þANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2010oroTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  Commission file number 333-158986  PIMI AGRO CLEANTECH, INC. (Exact name of registrant as specified in
its charter)  Delaware
    26-4684680(State or other jurisdiction of
    (I.R.S. EmployerIncorporation or organization)
    Identification No.)  269 South Beverly Drive Suite 1091 Beverly Hills California 90212 USA (Address of principal executive offices)  (310) 203-8278 ( Registrant’s telephone number,
including area code )  Securities registered pursuant to Section
12(b) of the Act: None  Securities registered pursuant to Section
12(g) of the Act: Common Stock, $.01 Par Value Per Share  Indicate by check mark whether the registrant
is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes
 Nox  Indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
 Nox  Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. YesxNo   Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.x  Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and
large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):  Large
accelerated fileroAccelerated fileroNon-accelerated fileroSmaller reporting companyx  1  Indicate
by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act) Yes  Nox



As of March 31, 2011, the aggregate market
value of the issued and outstanding common stock held by non-affiliates of the registrant, computed by reference to the price at
which the common equity was last sold of $0.80 was approximately $2,223,569 For purposes of the above statement only, all directors,
executive officers and 10% shareholders are assumed to be affiliates. This determination of affiliate status is not necessarily
a conclusive determination for any other purpose.



Number of shares of common stock outstanding as of March 31, 2011
was 7,660,964.



DOCUMENTS INCORPORATED BY REFERENCE –
None







2
FORM 10-K



FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010



INDEX





PagePART IItem 1
    Business
    5Item 1A
    Risk Factors
    16Item 1B
    Unresolved Staff Comments
    21Item 2
    Properties
    21Item 3
    Legal Proceedings
    21Item 4
    Reserved
    21PART IIItem 5
    Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
    21Item 6
    Selected Financial Data
    22Item 7
    Management’s Discussion and Analysis of Financial Condition and Results of Operations
    22Item 7A
    Quantitative and Qualitative Disclosures About Market Risk
    26Item 8
    Financial Statements and Supplementary Data
    27Item 9
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    28Item 9A
    Controls and Procedures
    28Item 9B
    Other Information
    28PART IIIItem 10
    Directors, Executive Officers, and Corporate Governance
    29Item 11
    Executive Compensation
    30Item 12
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    33Item 13
    Certain Relationships and Related Transactions
    35Item 14
    Principal Accountant Fees and Services
    36PART IVItem 15
    Exhibits and Financial Statement Schedules
    37Signatures
    40SIGNATURES







3

CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS



In this annual report, references to "Pimi
Agro Cleantech, Inc.," "Pimi," "the Company," "we," "us," and "our" refer
to Pimi Agro Cleantech, Inc. and its subsidiary, Pimi Agro CleanTech, Ltd.



Except for the historical information contained
herein, some of the statements in this Report contain forward-looking statements that involve risks and uncertainties. These statements
are found in the sections entitled "Business," "Management's Discussion and Analysis of Financial Condition and
Results of Operation," and "Risk Factors." They include statements concerning: our business strategy; expectations
of market and customer response; liquidity and capital expenditures; future sources of revenues; expansion of our proposed product
line; and trends in industry activity generally. In some cases, you can identify forward-looking statements by words such as "may,"
"will," "should," "expect," "plan," "could," "anticipate," "intend,"
"believe," "estimate," "predict," "potential," "goal," or "continue"
or similar terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors,
including, but not limited to, the risks outlined under "Risk Factors," that may cause our or our industry's actual results,
levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance
or achievements expressed or implied by such forward-looking statements. For example, assumptions that could cause actual results
to vary materially from future results include, but are not limited to: our ability to successfully develop and market our products
to customers; our ability to generate customer demand for our products in our target markets; the development of our target markets
and market opportunities; our ability to manufacture suitable products at competitive cost; market pricing for our products and
for competing products; the extent of increasing competition; technological developments in our target markets and the development
of alternate, competing technologies in them; and sales of shares by existing shareholders. Although we believe that the expectations
reflected in the forward looking statements are reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Unless we are required to do so under federal securities laws or other applicable laws, we do not intend to update
or revise any forward-looking statements.








4

PART I



ITEM 1. BUSINESS



Organization



Pimi Agro CleanTech, Inc. is a Delaware Corporation
with one operating subsidiary, Pimi Agro CleanTech, Ltd, which is an Israeli Limited Company (“Pimi Israel”). The Company
was formed on April 1, 2009, under the laws of the State of Delaware, and its subsidiary Pimi Israel was formed on January 2004
in the State of Israel under the name "Pimi Marion Holdings Ltd.", and has since changed its name to "Pimi Agro
Cleantech Ltd.", on October 2008. The Company, through Pimi Israel, owns a patented technology for the treatment of pre and
post-harvest of fruits and vegetables utilizing environmentally friendly products.



On April 27, 2009 we purchased all the issued
shares of Pimi Israel from the Pimi Israel shareholders in consideration for 6,313,589 shares of Common Stock of the Company to
the Pimi Israel shareholders. As a result, Pimi Israel became a wholly owned subsidiary of the Company.



We are a development stage company and have
had limited revenues since our formation. There is currently limited public market for our common stock. The purchase of our shares
is highly speculative and involves a high degree of risk, including, but not necessarily limited to, the “Risk Factors”
described else where in this report. Any person who cannot afford the loss of their entire investment should not purchase our shares.



The Company’s principal executive offices
are located at 269 South Beverly Drive suite 1091, Beverly Hills California 90212, and its telephone number is (310) 203-8278.



Overview



The Company focuses on developing environmentally friendly solutions
for extending storability and shelf life of vegetables and fruits. As of the date of this report, the Company is developing five
(5) products (CitrusGuardTM, SpuDefenderTM, SweetGuardTM, StorGuardTM and OnionGuard) and has started the commercialization
of four (4) of these products (CitrusGuardTM, SpuDefenderTM, SweetGuardTM and OnionGuardTM).



Currently, the Company is focused on solutions related to consumed
Citrus and Potato crops. Based on recent statistics, Citrus are the largest consumption fruits world wide. Total fresh citrus consumed
is over 60 million tons a year, and its consumption increases every year mainly in developing countries. According to the food
and Agriculture Organization of the United Nation, the total crop of the 20 major producers of Potatoes in the year 2008 was approximately
259 million metric tons (see: http://faostat.fao.org/site/339/default.aspx). We estimate that
Table Potatoes are 30%-40% of the total world produced potatoes.



All of our products are based on Stabilized Hydrogen Peroxide ("STHP")
and food grade acids, which has the ability to increase shelf life while reducing residue pesticides in consumed fruits
and vegetables.



Industry Overview



The fresh fruits and vegetables industry is constantly seeking technologies
and methods to prolong shelf life, reduce quality losses and keep freshness of crops. In most cases the only way to prolong shelf
life and reduce quality losses is by using chemicals which leave residues. The processed food industry is also using chemicals
which leave residues and contaminate water and livestock.



Leading retailers and agricultural regulatory bodies such as European
Commission of Health and Consumer Protection the “European Commission" or the " EC") and the US Environment
Protection Agency (the "EPA"), are increasingly focusing to reduce the use of residue chemicals in treating fruits, vegetables,
seeds and soil in favor of environment-friendly alternatives.



In addition, organic food and organic agriculture is rapidly gaining
momentum and is advocating chemical and residue-free use from growth, harvest to storage and maintenance. This is strengthened
by the relatively new trend to consume low or non-residue produce, which have risen to 20%-25% of consumed produce in developed
countries like Netherlands (see "Reducing Residue Rising up Priority List" 78 FGJ 1 February 2008. at: http://www.bcpcertis.com/Certis.bcp/English/Home/News/page.aspx/565?xf_itemId=522&xf_selectionDatapartId=512.



The Company’s management believes that the trend in the market
[as may be exhibited by market leaders such as Wal-Mart (see at: http://www.nytimes.com/2011/01/20/business/20walmart.html), Marks
& Spencer, Tesco and Sainsbury in the UK and EDEKA chain in


5


Germany] is to replace, as much as possible, fruits and vegetables
treated with chemical which leave residues with fruits and vegetables with no residue or low residue.



Losses of agricultural produce, as high as 40% in countries such
as India (see: http://www.postharvestindia.com ) and China (see Post harvest Handling of Fresh Vegetables edited by Tina
O'Hare, published 2001 at ACIAR, and see Kader at Acta Horticular. 682, ISHS2005), due to diseases and lack of correct supply chain,
from the field to the stores, are exacerbated by the increasing demand for food produce, especially in developing countries.



Accordingly, there is a significant need to find alternative solutions
to current chemical treatments for pre- and post- harvest treatments of fruits and vegetables that will provide the following benefits:
Reduce spoilage and losses of produce; Extend shelf-life and improve quality of fruits and vegetables; is non-residue and leave
no harmful chemical by-products, are cost effective; and is approved for organically produced crops.



The Citrus Industry- The Need to Replace Imazalil and TBZ



To date, green mold on Citrus is controlled in the USA and other
places, including Israel, by application of the fungicides Ortho-phenyl Phenate (OPP or SOPP), Imazalil, and Thiabendazole (TBZ).
However retailers demand to reduce the Maximum Residue Levels (MRL) of pesticides in their fresh fruits has led producers to seek solutions such
as CitrusGuardTM, which is a cleanser aimed to reduce pesticide levels of residues.



More over, there are pathogens which have developed resistance to
the current pesticides. This prevented the packers from effectively manage decay control pathogen's. The combination of these two
factors has posed an urgent need to identify an alternative to current packing methods. Pimi’s solution may reduce the Imazalil
level from today’s MRL of 5 ppm to 0.5 ppm, while not adding any Fungicide material and improving yield losses.



The Potato Industry - the Need to Replace CIPC and prolong
shelf life



Potatoes are the fourth largest crop in the world. According to
the food and Agriculture Organization of the United Nation, the total crop of the 20 major producers of Potatoes in the year 2008
was approximately 259 million metric tons (see: http://faostat.fao.org/site/339/default.aspx).
We estimate that Table Potatoes are 30%-40% of the total world produced potatoes (see also "The Market" elsewhere in
this report). In developed countries roughly one third of the crop is used for direct use by households (table potatoes) and the rest
for processing, such as chips/crisps and French fries ( processed potatoes). In non-developed countries, 80% of the crop is used
as table potatoes and the rest as processed potatoes. Therefore we estimate that the annual crop of potatoes is divided between
35% table potatoes and 65% processed potatoes.



Stored potatoes begin sprouting, in most circumstances, after two to three
months in storage. Effective sprout control is a major component of managing stored potato quality. If proper sprout control is
not maintained, significant reduction to tuber quality will occur, and the ability to store for extended periods of time is diminished.
Sprouting causes high yield loss and low quality produce for consumers and for processing. Sprouting is also associated with the
conversion of starch to sugars, which is undesirable in the processing industry, due to the darkening effect of fried products.
In the table potatoes industry, visible sprouts on potatoes are unacceptable to consumers.



The primary method to control sprouting in storage is with post
harvest application of isopropyl N-(3-chlorphenyl) carbamate ("Chlorpropham" or "CICP") a synthetic hormone
that is used worldwide. For the toxic effects of CIPC see: http://pmep.cce.cornell.edu/profiles/extoxnet/carbaryl-dicrotophos/chlorpropham-ext.html.



CICP is a high stable chemical compound, therefore it has high residue
where ever it is applied. Today CIPC is applied in storage rooms as well as in packing houses before distribution to retailers.
Therefore its residues can be found on the wall and floors of storage houses, on the processing lines, in water used for washing
the potatoes and also in livestock which are fed with the potatoes peel.



Regulators such as the European Commission ("The EC")
and United States EPA are pushing for substantial reduction of permitted maximum residues level of CIPC in crops, livestock and
water. The EU has issued in 2008, a Directive (196/2008 of January 29, 2008) which sets the MRL of CIPC to 10mg per ton. The UK
has recently regulated that potatoes treated with more than 36g of CIPC per ton should only be used for commercial processing.
The British Potato Council together with the industry in the UK, have set a maximum of 63.75mg per ton for commercial processing.



In the US, in August 1996, a federal Registration Eligibility Decision
(RED) for CIPC was issued by the EPA for the continued use of this chemical as sprout inhibitor of harvested potatoes in storage.
A mandate regulated in 2002 by the Environmental Protection Agency, resulted in a reduction in allowable CIPC tolerance of residue,
on fresh potatoes from 50ppm to 30ppm per kg. Residues as high as 40 ppm are permitted by EPA on wet peel potatoes, which goes
to life feed stock. Similar consequences of CIPC reassessment are common in potato-growing region in the world such as Canada and
Australia. In Sweden CIPC has been banned for use since 2005.


6


Pimi has developed patented formula, application methods and storage
protocols which are environmental friendly and which leave no residue after washing. Pimi’s product (SpuDefenderTM) is aimed at substituting
CIPC as a sprout inhibitor, increasing shelf life, and preventing quality reduction. The Product and its applications prevent dehydration
and quantity losses.



Our Products and Technology



As of the date of this report, Pimi develops, tests and markets
three lines of products: cleansers for treatment of fruits and vegetables on packing line, prior to distribution. This line of
products includes: CitrusGuardTM for treatment of Mandarins, Oranges Grapefruits and Lemons, and SweetGuardTM
for treatment of Sweet Potatoes; sprout control line of products which include SpuDefenderTM, for treatment of stored
table potatoes, and storage control line of products which includes: StorGuardTM for treatment of vegetables such as
broccoli and cabbage and OnionGuardTM for treatment in storage of Onions.



Cleanser line of Products



CitrusGuardTM



On March and April 2010, we have completed
successfully small scale trials, as well as commercial trials applying CitrusGuardTM, for the treatment of Mandarins, which is
one of the most sensitive and problematic Citrus, as well as treatment of Grapefruits. CitrusGuardTM is designed for cleaning
citrus fruits surface prior to waxing. Cleaning of surface reduces decay of Citrus fruits which may occur during storage, shipment and
shelf life.



The trials
were carried out with Mehadrin Pri-Or (“Mehadrin”), the largest packing houses in Israel, who exports citrus fruits
to the United States and Europe. In these trials, CitrusGuardTM has demonstrated superiority in extending shelf life, comparing
to current treatment that is being used which is adding almost double the amount of pesticides to reach the required shelf life.



As a result of these commercial trials, Mehadrin has decided to
implement CitrusGuardTM, in the cleaning process of its packing lines for commercial usage. Those lines pack mainly mandarins
and grapefruits and small volumes of oranges and lemons as well. The total quantity of citrus fruits which was treated by our product
in the season of 2010-2011 is over 50,000 tons.



On January 2011, we concluded successfully a trial on commercial
scales with Sun Pacific Inc, one of the leading packing houses in California, U.S.A. The trial was successful and showed significant
advantages of CitrusGuardTM in comparison to current treatments and materials, while reducing dramatically the residue level
of pesticide on citrus fruits. As a result of the trials Sun Pacific has decided to implement CitrusGuardTM on one commercial
line in the coming citrus season subject to regulatory approval with an option to scale up to additional lines after a trial period.



We are targeting more experiments and penetration into other packing
houses in the U.S subject to regulatory approval and other territories for next Citrus season which starts on October 2011.



SweetGuardTM



According to the Unite States Sweet Potato Council Inc., the United
States produces approximately 1.8 billion pounds of sweet potatoes a year, with an average crop value of $400 million.



On January, 2010, we completed our first commercial trial utilizing
SweetGuardTM for treatment of sweet potatoes. Similar to Pimi’s CitrusGuardTM, SweetGuardTM is designed for
improving sweet potatoes cleaning properties. SweetGuardTM causes sweet potatoes bright appearance due to its cleaning
effects.



The trials were carried out in two cooperative farms in Israel,
with two separate packing houses that export sweet potatoes from Israel to Europe. In these trials, SweetGuardTM demonstrated
efficacy in various areas of post-harvest treatment of crop, which came from different growing soils.



As a result of these trials, the two
cooperative farms have decided to include SweetGuardTM in their regular working program for the packing line.Consumers presented with treated and untreated sweet potatoes, on the same shelf, preferred
those which were cleaned with SweetGuardTM.



As of date of this report, we have agreed with a packer of sweet potatoes,
located in the U.S. to conduct the same trial with SweetGuardTM on sweet potatoes.




7

Sprouting Control line of products



SpuDefender TM




Pimi develops and markets the SpuDefenderTM.
SpuDefenderTM is a formulated STHP designed for use in potato storage treatment to inhibit sprouting. SpuDefenderTM is
patent protected. SpuDefenderTM is applied in stored potatoes inside storehouses, or on packing lines, by using Pimi’s proprietary
storage application protocol which is based on
an especially designed system and ultrasonic atomizers to provide optimum results (the "Technology"). SpuDefenderTM
is able to extend storability and shelf life of crops, to reduce quantity and quality losses thus, and to increase yield and revenues
for growers and producers.



SpuDefenderTM is an external treatment, and therefore, after
washing it leaves no residue. At the end of the application process the active ingredient of SpuDefenderTM decomposes
into water and oxygen, unlike existing chemical alternatives, such as CIPC.



The market for SpuDefenderTM is
mainly for stored table potatoes.



In the United States, Pimi presented (under
the label VegiSafe) the new concept of CIPC-free table potatoes. These started in 2009, following consummation of our joint venture
with VegiSafe LLC (see “Customers and Partners” elsewhere in this Report). As a result, we have been requested to perform
efficacy trials with storage providers, as described in “Customer and Partners” elsewhere in this Report.





Storage Control Line of Products



StorGuardTM



StorGuardTM was developed for extending the shelf life
of fruits and vegetables in storage, by reducing air pathogens in storage rooms a treatment which improves storage conditions. StorGuardTM
enriches storage room with Oxygen and humidity, which are key factors for good storability process. The active ingredient of StorGuardTM
is STHP, which has abilities to oxidize air spores [see EPA Hydrogen Peroxide (000595) Federal Register Notices at: http://www.epa.gov/pesticides/biopesticides/ingredients/fr
notices/frnotices 000595.htm].



OnionGuardTM



At the date of this report there is no known effective treatment
to reduce Botrytis Neck Rot and Aspergillus Black Mold, which are the two main onion diseases. The two diseases can damage up to
40 percent of an onion harvest. On October 2009, we started a trial with Idaho State University and McCain Foods Limited (“McCain”)
to extend storability of onions by using OnionGuardTM, which is a formula of our StorGuardTM. We have run a trial comparing
OnionGuardTM to current storage without any treatment. The test was performed in cooperation with and McCain, which stores
onions for their onion rings production line and encountered storability problems. The results received in June 2010 have shown improvement of storability
in room temperature, as well as in cold storage temperature, of up to 40%. After six months of storage, defects were reduced from
35 percent to 15 percent. The trial’s results were presented to one of the leading retailers in the
US who have ordered commercial test of 20,000 pounds of onions, which started on October 2010, under of the supervision of the
Washington State University. Initial results from January 2011 presented high performance with OnionGuardTM. Final results
are expected on May 2011.



Pimi anticipates starting EPA registration of OnionGuardTM
as a pesticide in the coming months.



Products planned for Research and Development



Pimi plans to extend its line of products in the coming years by
devoting substantial R&D for other areas, where we have identified a market need for environmental friendly solutions. As of
the date of this report, the company is in the process of re-evaluation of its R&D plans.



SeedGuard TM



Potatoes are susceptible to a variety of diseases that lower yields
and tuber quality which might cause significant losses in the quantities and quality of crops. What's more, pathogens accumulate
in successive cloning of tubers and in the soil used to grow them. That is why sustainable potato production depends on a constantly
renewed supply of disease-free planting material. According to numerous international regulations, seeds, of all types, must be
disinfected to prevent the transfer of diseases between countries, between seeds, from seeds to soil, and from seeds to crop.



Seed tuber disinfection treatments are used to reduce seed borne
diseases. However organic mercury which has been used for this purpose has been banned and the alternative agents available are
effective against only some of the pathogens. Moreover an increasing number of pathogens are found to be unaffected by any of these
treatments (see Lea Tsror and al. "Survey of Bacterial and Fungal Seed borne diseases in Imported and Domestic Seed Tubers"
(1999) at http://www.pimiagro.com/upload_pdf/1241461817_4.pdf).



Pimi has embarked on a R&D plan for potato-seed applications,
aimed for the development of an innovative, holistic and ecological solution to treat potato seeds throughout their lifecycle,
which was approved for receiving grants from the Israeli Chief Scientist Office (see "Governmental Support ").
SeedGuard TM is designed to provide added-value to the seed producer and potato growers owing to its long lasting disinfectant
effect, versus existing aggressive chemical treatments which are not environmental friendly solutions.


8

From 2005 until 2009, we have conducted extensive laboratory and
field trials with SeedGuard TM in order to test its effectiveness against pathogens. We have conducted laboratory screening
tests with SeedGuard TM of most common seed pathogens (bacteria, fungi, molds, yeast) diseases under the supervision of the
Vulcani institute Israel. The results have shown that SeedGuard TM is effective in controlling diseases caused by the major
pathogens (These tests have shown that SeedGuard TM has the ability to reduce pathogens such as Late Blight, Silver Scurf
Dry Rot, Black Scurf, Black dot, Early blight, Tuber Rot, Common Scab, Powdery Scab between 50% to 100% ). We have also conducted
"in situ" tests on seed potatoes, in order the test SeedGuard’s efficacy on these seeds. We have conducted several
field trials on different seed varieties, different soil profiles and different climates. The conclusions from all of these tests
and trials were that SeedGuardTM is able to control seedborne diseases and does not have negative effect on the yield.



An advantage of SeedGuard TM, which was discovered in connection
with the tests described above, that SeedGuard TM does not harm the potato seeds, which, immediately after harvest, have a
very delicate peel. In addition, SeedGuard TM has been found to protect the seeds against seedborne, storage and soil borne
diseases during the entire lifecycle of the potato seeds, from harvest to storage and planting. Management believes, based on the
tests described above, that SeedGuard TM is suited for this early stage of the life cycle of seeds, and believes this
unique advantage will help in the promotion and sales of SeedGuard TM.



Management estimates that additional substantial R&D is required
to tailor SeedGuardTM to specific seeds, which will take several years of work. Therefore management has decided to postpone
the development of this product until full commercialization of its other products.



Our Technology



Pimi’s technology is based on unique proprietary solutions
using only edible product and proprietary designed delivery system.



Active Ingredient - Stabilized Hydrogen Peroxide solution
(STHP)



Pimi has developed a patented Stabilized Hydrogen Peroxide (H2O2)
formula which includes other edible ingredients. Hydrogen Peroxide is widely used in various industrial applications, such as:
Cleaning soaps, wound disinfection, hair coloring and teeth whitening. The formulations were developed by Nimrod Ben Yehuda, Pimi’s
co-founder, with the assistance of leading research institutes.



Fogging delivery system



By harnessing the advanced fogging technology of ultrasonic micro
Droplets (which was developed by third parties and was upgraded by Pimi) and the special distribution method developed by the Company,
Pimi's Technology is capable of distributing a lower than 10 micron droplet cloud in the storage room. This ultrasonic droplet
diameter and the application method generate “Dry Fog”, forms a highly effective vehicle for distributing Pimi’s
products. An added benefit comes with the ability to raise relative humidity to a very high level of 99% without causing the devastating
effects of a condensation event. The system is fully automated, thus enabling a cost-effective implementation for customers, reducing
many hours of labor and minimizing user intervention.



Manufacturing Process Supply of Raw Material



Pimi’s products are currently produced by Solvay Chemical
International S.A in their plant located in Houston TX ("Solvay") and also by Zohar Dalia Ltd in Israel. Solvay
is one of the leading world-wide producers of Hydrogen Peroxide. Solvay manufactures STHP for us and we anticipate that Solvay
will produce our products for North America.



Transportation and Storage of our Products



Hydrogen Peroxide is a common chemical sold and transported worldwide
in 50% concentrations. Transported Hydrogen Peroxide in such concentrations is defined as dangerous goods by the industry.



We have decided to supply our products with stable Hydrogen Peroxide
and at low concentration of under 20%, which is graded as low product risk. At this grade of risk the product should be transported
by certified truck drivers, and the truck should be marked with special signs. The delivery of the product, as any other chemical,
should be transported together with Material Safety Data Sheets (MSDS) which show the hazards related to the product and the safety
procedures, including how the product should be handled.



Hydrogen Peroxide is an oxidizer and will corrode many materials.
Hydrogen Peroxide should be stored in a cool, dry, well-ventilated area and away from any flammable or combustible substances.
It should be transported in special tanks and vehicles and should be stored in a container composed of non-reactive materials.



Pimi is carefully and diligently following the above rules and regulations
in handling its products in transportation and storage.





9


Governmental Support



Pimi Israel has received grants from the Israeli Chief Scientist
under a program of investment in research and development for a solution for disinfection of potato seeds (SeedGuardTM) under
a 6-stage method. The approval of the Chief Scientist was extended and changed in order to enable certain expenses to be recognized
for the grant. Pimi has received from the Chief Scientist the sum of $121,753 (484,429 NIS) as grant under this program.



Pimi is obligated to pay the grant back to the Chief Scientist in
the form of royalties. In the first 3 years of sales we shall pay 3% out of the sales of the product which was developed under
the R&D program. In the fourth, fifth and sixth years of sales we shall pay 4% of such sales, and from the seventh year and
on we shall pay 5% up to the amount of the grant. If there will be no sales of the product which was developed under the program,
Pimi will not be required to pay back the grant.



Under the law and regulations relating to the grant, sale of the
IP developed under the program to a foreign entity will require the approval of the Israeli Chief Scientist.



Intellectual Property



We have developed a significant intellectual property portfolio
of patents. We believe that our intellectual property portfolio, coupled with our strategic relationships (see "Customers
and Partners") and accumulated experience in the field, gives us an advantage over potential competitors. In the last
year we have filled two new provisional patents that cover new developed products and technologies we started to implement at the
end of this year. We currently maintain the following patents (for the agreement of the transfer of the rights in the patents and
patents applications to us, see "Certain Relations and Related Parties transaction"):



Country
    
    Patent Register No.
    
    Application No.
    
    Status
    
    Validity DateU.S.A
    
    6,797,302
    
    
    
    Granted
    
    July 2019U.S.A
    
    6,946,155
    
    
    
    Granted
    
    July 2019U.S.A
    
    7,147,872
    
    
    
    Granted
    
    July 2019U.S.A
    
    
    
    12/691,3161
    
    PendingEurope
    
    
    
    99933105.1
    
    PendingChina
    
    99810112.5
    
    
    
    Granted
    
    July 2019Russia
    
    2262230
    
    
    
    Granted
    
    July 2019Russia
    
    
    
    2005115093
    
    PendingAustralia
    
    757,181
    
    
    
    Granted
    
    July 2019South Africa
    
    2001/1528
    
    
    
    Granted
    
    July 2019Israel
    
    
    
    125520
    
    PendingChile
    
    
    
    1675-99
    
    PendingMexico
    
    230589
    
    
    
    Granted
    
    July 2019Canada
    
    
    
    2,338,718
    
    PendingKenya
    
    
    
    PCT/IL99/00403
    
    PendingArgentina
    
    AR 019937- B1
    
    
    
    Granted
    
    July 2019Bulgaria
    
    
    
    105167
    
    PendingBolivia
    
    
    
    P990103701
    
    PendingBrazil
    
    
    
    PI9912697-4
    
    PendingColombia
    
    
    
    99047340
    
    PendingCosta Rica
    
    
    
    6061
    
    PendingCuba
    
    
    
    22/2001
    
    PendingCzech Republic
    
    
    
    PV 2001-254
    
    PendingGeorgia
    
    
    
    AP1999004257
    
    PendingGuatemala
    
    
    
    PI99-01099
    
    PendingHonduras
    
    
    
    PCT/IL99/120
    
    PendingHungary
    
    
    
    P0201109
    
    PendingKorean
    
    
    
    2001-7001082
    
    PendingLatvia
    
    12750
    
    
    
    Granted
    
    July 2019Nicaragua
    
    1441
    
    
    
    Granted
    
    July 2019New Zealand
    
    509566
    
    
    
    Granted
    
    July 2019Peru
    
    3093
    
    
    
    Granted
    
    July 2019Poland
    
    P-348722
    
    
    
    Granted
    
    July 2019Paraguay
    
    4217
    
    
    
    Granted
    
    July 2019Slovenia
    
    9920057-20615
    
    
    
    Granted
    
    July 2019Slovakia
    
    
    
    PV97-2001
    
    PendingTurkey
    
    TR2001-231
    
    
    
    Granted
    
    July 2019Uruguay
    
    
    
    025.625
    
    PendingSerbia
    
    
    
    P-51/01
    
    PendingNorway
    
    
    
    20010447
    
    PendingRomania
    
    
    
    A 2001-00090
    
    Pending__________________________________________________________________________

1The application was filed on January 21, 2010 for a continuation patent of patent No. 7,147,872.





10


Regulatory Approval of Pimi's Products



Products such as StorGuardTM and SpuDefenderTM have to
be approved by regulators before usage as post-harvest chemicals. CitrusGuardTM as well as SweetGuardTM which are cleansers
are treated differently by regulators in each county it will be sold. The following description will relate to the countries in
which the Company intends to sell its products in the following year.



Regulatory Process in the United States



The U.S. regulatory authority in charge of the approval of our product
is the Environmental Protection Agency (EPA) as well as the FDA. The FDA regulates cleansers and EPA regulates pesticide chemicals used in foods through a regulatory tolerance
publication process. Under EPA regulations, specific pesticide chemicals may be used in specific foods for particular reasons.
The amount and kinds of pesticide chemical residues permitted to remain on food vary according to FDA regulation. Although the
EPA establishes pesticide use tolerances and exemptions from tolerances for pesticide residues by its regulations, FDA enforces
the EPA regulations through several provisions in the Food Drug and Cosmetic Act.



In order to issue its approval for the use of such products, the
EPA requires that we will show, through a series of physical and chemical tests done by approved laboratories, that the registered
product conforms with regulatory requirements and meets minimum standards of safety to humans and the environment. While the
EPA does not require submission of efficacy data, EPA does hold companies responsible for insuring that the performance of a product
conforms to label claims.



At the date of this report, we have received the EPA approval for
our SpuDefenderTM and also approval of the State of Wisconsin. This will enable us to sell SpuDefenderTM for commercial
use in this state.



With regard to our CitrusGuardTM we have received advice from
our regulatory consultant, that it could be approved as “GRAS” (Generally Recognized As Safe) by the FDA, or to receive
FDA as FCN (Food Contact Notification). We have decided to file it as FCN with the FDA and as of the date of this report, we have
filed a PNC (pre notice Certification) for CitrusGuard TM with the FDA, in order that the FDA will review the PNC and will
advise us as to it adequacy. We forecast to finalize the process prior to October 2011 when Citrus Packing season starts.



Regulatory Process in Israel



SpuDefenderTM has been approved by the Israeli Plant Protection
Authority for use on potatoes and sweet potatoes in Israel. CitrusGuardTM, which is a cleanser, does
not require approval by the Israeli Plant Protection Authority.



Regulatory Process in Europe



In Europe the authority in charge of the approval of our product
is the European Commission. Under the Plant Protection Products Directive 91/414 (the "EU Directive 91/414"), the European
Commission requires that we will show that the product is not toxic, has physical and chemical safety properties and is effective
(i.e. it achieves the statement under its label). In order to submit the application ("Dossier") we have engaged Redebel
S.A from Brussels, Belgium ("Redebel"), who is a specialist in such process.



We have been advised by Redebel that in order to register our product
in the European Community the complete Dossier for inclusion of Hydrogen Peroxide on "Annex I" of EU Directive 91/414
must be approved by the European Commission ("Annex I Listing"). Such file has to include documentation and information
concerning the active ingredient (in our case Hydrogen Peroxide). Important elements of such documentation are toxicological and
eco-toxicological profile of the molecule and eventual dangers and hazards coming from human exposition. An example of use of this
substance in “formulated “product has to be also presented, and the most important element of this part is demonstration
of the efficacy – prove of the activity of the product declared on the label.



Concurrently, we have to apply for registration of the formulation
under (Annex II) and also to execute efficacy tests for the product and its application under what is called Annex III. In July
2009 we met with the British Health and Safety Executive (formerly known as the Pesticide Safety Directorate PSD) and we have been
advised that we will have to execute six efficacy trials and that due to a new regulation of the EU from May 2009, the valuation
period of the file by the reporting country will take up to 2 years (which formerly was only one year).



Normal procedure for efficacy testing is two years of trials. After
having the efficacy results we will have to file the product for examination which can last for another 2 years.



Due to this long regulatory process, we have decided that we will
concentrate on sales in the US, and other territories outside the EU, prior to finalizing the European file for pesticide. Therefore as of the date of this report
we have halted the regulatory process of our products in the EU.



11

Customers and Partners



As a small company with roots in Israel, one method by which Pimi
is able to contract with potential partners, in particular those having a favorable foot-print in their respective markets
and having the ability to educate end-users (i.e. their customers), is by gaining recognition and acceptance of market leaders
having the best leverage point to our prospective customers. These companies, being opinion leaders with high sensitivity to environmental-friendly
growing demands, are in the best position to influence their suppliers, who are Pimi's potential customers, in testing and ultimately
adopting Pimi's technology, as their next generation solution for post-harvest treatment.



VegiSafe LLC (Earthbound LLC Group)



On January 2009 Pimi Israel entered into a Joint Venture
Agreement ("The Joint Venture") with VegiSafe LLC ("VegiSafe"), an affiliate of Earthbound LLC
("EB"), a group of companies engaged in consulting to mass-market retailers and major supermarket chains in North
America (see: http://www.earthboundllc.com/).





The Joint Venture will market, sell and distribute Pimi's technology
throughout the United States, on an exclusive basis, and throughout Canada and Mexico, on a non-exclusive basis. VegiSafe will
market and handle the sales activities of the Joint Venture. The exclusivity of the Joint Venture is subject to fulfillment of
certain milestones of annual sales as herein described. We will have 70% of the rights in the Joint Venture and will nominate two
of its directors; VegiSafe will have 30% of the rights, and will nominate one director. We will grant a sub-license to the Joint
Venture for the use of our patents and technology, relating to the products and to any new product developed by us, for the term
of the JV.



We have obligated to continue to operate the Joint Venture so long
as certain trigger events occur prior to December 31, 2009. The Trigger event is defined as: an event, where any retailer and any
fast food chain, or any major packaged, frozen or snack food marketer, or any major or national vegetable (or fruit) growers and
major or national distributors in the U.S expresses an interest in launching CIPC free potatoes or CIPC free potato products at
any Retailer or by any distributor, by requesting its supplier/s to use our technology for potatoes or potato products, in order
to produce or to supply CIPC free potatoes or CIPC free potato products for its consumption.



In May 2009, Pimi and VegiSafe mutually agreed that the trigger event
occurred, thereby obligating, the continuation of the Joint Venture. Accordingly, VegiSafe’s exclusivity is subject to the
following milestones: Entering a CIPC free branding program with two retailers or distributors prior to September 2010; the treatment
of 150,000 tons of potatoes in the season of 2011 (September 2011); the treatment of 350,000 tons of potatoes in the season of
2012 (September 2012).



VegiSafe will invest in the Joint Venture an aggregate amount of
$250,000 which will be used to cover expenses reflected in a budget prepared for the J.V, and approved by VegiSafe and Pimi. The
Joint Venture will use the VegiSafe Trade Mark as the trademark for fruits and vegetables, which will be treated by our products.
Any additional investment in the Joint Venture in excess of the $250,000 shall be contributed by the parties according to their
share in the Joint Venture upon mutual consent, taking into account the Joint Venture's business and its needs.



On August 9, 2010 we have signed with Vegisafe an Addendum to the
Agreement dated January 20, 2009 under which we agreed to expand the activities of the JV in the US to Sweet Potatoes, Yams, Onions,
Cabbage and Mushrooms. In addition we have agreed to expand the activity of JV in the US to Citrus fruits provided Vegisafe will
bear all the costs and expenses, which in our opinion is reasonable for the progress of the distribution and the implementation
of our CitrusGuardTM in The US.



As of the date of this report, VegiSafe introduced our products
and technology to one of the major retail chain in the US who has, in turn, introduced us to their suppliers of Table Potatoes,
Citrus, Onions and Sweet Potatoes, in order that we shall present to these suppliers the efficacy of our products.



Solvay Chemical International S.A

Solvay is a world leader in production of Hydrogen Peroxide. Solvay
supplies our products in the U.S under our name, in accordance with a non exclusive oral agreement. Solvay follows ISO and GMP quality
programs at its sites and is responsible for keeping standards of the products and supply the products within specifications and
within required shelf life.



As of the date of this report, we are preparing together with Solvay
the methods of supply of our products to customers in the U.S for the coming season.



Zohar Dalia



Zoahar Dalia is the manufacturer of our Products in Israel. It manufactures
our products under our name in accordance with an oral agreement. Zohar Dalia follows ISO and GMP quality programs at its site,
and is responsible for keeping the standards of the products and to supply our products with in specifications and with in required
shelf life.


12

Mehadrin Pri-Or



Mehadrin Pri-Or (“Mehadrin”) is the biggest distributor
and exporter of Citrus fruits in Israel. Mehadrin is exporting approximately two third of the Israeli Citrus crop to Europe, US,
Canada and the Far East. Mehadrin has its own orchards and packing houses and they also purchase packed fruits from other farmer
and packing houses. We have started to work commercially with Mehadrin on October 2010 implementing our CitrusGuardTM on one
packing line of Grapefruits. On January 2011 we have started treating with CitrusGuardTM additional 2 packing lines of Clementine.
We anticipate that until the end of this citrus season (April 2011) we shall treat with our CitrusGuard TM approximately 50,000
tons of Citrus fruits.



Sun Pacific Inc.



Sun Pacific Inc., is one of the leading packing houses in the U.S.
for Clementine's and Oranges. Pimi was introduced to Sun Pacific by one of the major retail chain in the U.S., to whom Sun Pacific
supplies its produce. We have conducted during the months of December 2010 until February 2011, a trial in Sun Pacific’s
Mandarins packing house, at Maricopa CA, which is, to management best knowledge, the biggest Clementine’s packing house in
the U.S.



The trial was conducted on one of the commercial lines using CitrusGuardTM
treatment, which was compared to current cleaning and waxing treatment. The trial results have shown that applying CitrusGuardTM
on Clementine improves the shelf life of the fruits versus the current treatment.



On February 2011, Sun Pacific has notified us that they have decided
to implement CirusGuardTM on one the their packing lines at Maricopa in the next Citrus season, which will start on October
2011, subject to regulatory approval of CitrusGuardTM by the US relevant authority.



Addressable Market of our Products



Fresh Citrus Fruits



Total World Production of Fresh Citrus Fruits (1000 metric tons)*Oranges
    Tangerines and Mandarins
    Grapefruits
    Lemons and limes
    Total(1)2008-2009
    51,751
    19,864
    5,228
    6,372
    83,2152009-2010
    49,360
    21,810
    5,458
    5,911
    82,5392010-2011
    51,379
    20,280
    5,163
    6,314
    83,136* The data refer to total production of selected major countries.Source:  Foreign Agriculture Service/USDA Office of global Analysis - see: http://www.fas.usda.gov/htp/2010January_Citrus.pdf(1) Management estimates that 70% of these quantities are consumed
citrus and the balance is used by the industry for juices.


13

Potatoes

Top Ten Potatoes Producers 2008 (1000 metric tons)Country
    ProductionChina
    68,760India
    34,658Russian Federation
    28,873United States of America
    18,827Germany
    11,369Ukraine
    19,544Poland
    10,461France
    6,807Netherlands
    6,923Bangladesh
    6,648Source: Food and Agricultural commodities production/ FAOSTAT –
Food and Agriculture Organization of The United Nation – see: http://faostat.fao.org/site/339/default.aspx.



According to the Food and Agriculture Organization of the United
Nation, the total crop of the 20 major producers of Potatoes in the year 2008 was approximately 259 million metric tons (see: http://faostat.fao.org/site/339/default.aspx).
We estimate that Table Potatoes are 30%-40% of the total produced potatoes.



Competition



CitrusGuard TM



CitrusGuardTM is formulated to clean Citrus Fruits on packing
lines. Good cleaning practice reduces the surface dirt and soil and by that reduces microflora load prior to waxing the fruits with pesticides that prevents mold contamination,
during its storage, transportation and shelf life. CitrusGuardTM was developed in order to reduce residue treatments of pesticides
such as Imazalil and TBZ, which are the current treatment.



As of the date of this report, we are not aware of any other product
which has the same cleaning properties, which can reduce pesticide residues. However, our management forecasts that service providers
for packing houses, who supply all the materials, required for packing lines, such as Decco Ltd, and Pace International, LLC will
try to develop other products which have the same abilities, in order to compete with our CitrusGuardTM.



SpuDefenderTM



The manufacturers and distributors of CIPC, which compete with our
SpuDefenderTM, are large chemical companies such as Cerits Europe B.V, Loxan B.V, Aceto Agriculture Chemical Corporation,
United Phosphorous limited, Mirfield Sales Services Limited, Standon Chemicals limited, Atlas Crop Protection Limited and Whyte
Agrochemical LTD. These manufacturers have promoted the "CIPC Stewardship Action Plan 2008" for the UK, which was introduced
in order to monitor and control the application of the CIPC, in order not to exceed the current EU MRL of 10mg/kg, and at the same
time to enable the continued use of CIPC in the UK. We expect significant competition from these manufacturers and distributors
of CIPC.



At the same time, there are several products which aim to substitute
the CIPC which are in potential competition with our SpuDefenderTM :



·
    Greenvale, UK launched the Ethylene gas solution that may control sprouts at low dosage. It has been used in some storage rooms in Europe. In management’s opinion the Ethylene has some disadvantages: it requires relatively expensive equipment for its distribution and after potatoes are released from storage accelerated sprouting occurs.

·
    Certis, Belgium launched the Caraway oil extract, however, in Management’s opinion, this substitute is not demonstrating an ability to replace CIPC due to fact that it is not palatable and it affects the fry colors.

·
    Certis also manufactures Clove oil which, in Management’s opinion, has several disadvantages: The oils affect taste, aroma as well as cooking and fried taste. To the best of management’s knowledge the Industry banned it due to bad fry colors.

Other product are: 1.4-Dimethylnaphthalene (1.4-DMN) and 2,6-Disopropylnaphthalene: This two synthetic hormones are the replication of natural hormones within the potato that induce and prolong its dormancy. This chemicals application in combination with CIPC can control effectively sprouting but has no disinfection capability, to the best of management’s knowledge. The compounds are several years in the US market with no significant presence.
14

·
    There are several other hydrogen peroxide products that claim, as Pimi claims, substantial bacteriologic control abilities. To the best of Management’s knowledge all of these products are based on HP and Acetic & Peracetic acide. These compounds are used in the food industry for more the 60 years and are very effective as disinfectant but limited in scope; in the niche of fruits and vegetables the application suffers several disadvantages, and in particular they have no long-term effect as disinfectant.

StorGuardTM



StorGuardTM is used mainly to increase shelf life and storability
of crops, such as Cabbage Broccoli and Onions. As of the date of this report and to Pimi’s best knowledge there are other
methods to increase storability as described herein:



·Ozone- Ozone started to be popular solution to prevent air pathogens in storage rooms. Management
believes this solution has health risks, since people may be exposed to carcinogenic residues.

·Chlorine-Dioxide- a strong chlorination detergent which aerosol the room with Chlorine. Chlorine
is not welcomed by the industry due to the fact that it may create connections with the surface of the produce, and to management knowledge it may create
a carcinogenic compound. This product is aggressive for the workers its and residues stay in the air. This product has significant
smell and odor that may remain on the product during shelf life.



OnionGuardTM



OnionGuardTM isintended to increase storability
of the produce. As of the date of this report, we are not aware of any competing products to OnionGuardTM.



SweetGuardTM



SweetGuardTM isintended to increase cleaning ability
of sweet potatoes and to improve its appearance. As of the date of this report, we are not aware of any competing products with
SweetGuardTM.



Price Competition



Management believes that the trend in the markets to use environmentally
friendly products, which are residue free, or low residue, and to replace the subsisting chemicals, which are high residue, together
with the trend of the regulators, to reduce the usage of high residue chemicals (such as CIPC), will cause farmers and packing
houses to prefer Pimi’s solutions. However, this trend will not create a huge price difference from current procedures. Therefore,
Pimi products prices are aimed at the same level as current solutions prices.



Strategy



Since the trend in the market which is lead by big retail companies,
is to increase freshness while reducing residue pesticides in consumed goods, we have adopted a strategy under which, we shall
create awareness of the retail companies, as well as their suppliers to our solutions which meet the market trend.



After presenting our solutions to market leaders, they usually connect
us to their suppliers, in order that we shall present the suppliers with our solutions. Then usually we will run Beta site trials,
and there after commercial trials, with these suppliers. Once we present success in these trials, we approve the product by the
regulator, and then start selling our product to these suppliers.



Under this strategy we have established our Joint Venture with VegiSafe
LLC, whose mother company- Earthbound LLC -is engaged in consulting to mass market retail companies and major supermarket
chains in North America, in brand development. Our Joint Venture has contacted already with major retail chain stores in the U.S.
See “Customers and Partners”, elsewhere in this report.



We plan to sell Pimi’s solutions to farmers and growers with
large storage houses, to storage providers, and to packing companies. Initially, we will sell our products through local distributors
who serve this target market. Once we establish a foothold in the market, we will attempt to establish strategic relations with
several large distributors and licensed firms who already have a regional distribution network. This will enable us to rapidly
increase our global market share and coverage without investing in building a global distribution network from scratch. At this
stage, based on this model, we will furnish the know-how of our technology to these strategic partners, which will be responsible
for ordering the product from our OEM manufacturers and marketing and sales activities, enabling us to focus on developing additional
products. The distributors will also be in charge of marketing of our products, and we intend that each distributor will be
obligated to minimum sales. We intend to support our distributors with technical support, research and tests results, and professional`s
publication relating to our products. We will also support our distributors in the education of the market, in regulating of our
products and with professional advice.



Pimi’s distributors will purchase our solution from us, and
we will take care to deliver it to the customers through our OEM producers. The distributors will be trained by


15

our technical team and will be responsible
for recommending, training, and optionally also designing and installing the required systems that distributes the products in
the storehouse and packing lines. For customers who do not have the required systems, we and our distributors will either provide
one at a cost to be determined or alternatively, bundled with a minimum order of goods.



Employees



As of the date of this report, we employ 4 full-time and 3 part
time employees.



Corporate Development



Subject to additional fund raising and regulatory approvals, management
plans to expand the Company’s activity to the U.S., Mexico, Chile, Turkey and Morocco as the markets for our CitrusGuardTM,
and mainly to the U.S as our major market for all our other Products.



In order to execute our expansion plan to the U.S, we intend to
establish until 2012, a subsidiary that will undertake the development, marketing and technical support of the sales of our products
within the U.S. Management intends that this subsidiary will execute the Joint Venture with VegiSafe for the marketing of CitrusGuardTM,
SpuDefenderTM SweetGuardTM,and OnionGuardTM. The subsidiary will employ special product
managers, and the necessary staff to handle the development of and marketing of our products within the U.S.



Dividends



We have not declared any cash dividends on our common stock since
our inception and do not anticipate paying such dividends in the foreseeable future. We plan to retain any future earnings for
use in our business. Any decisions as to future payments of dividends will depend on our earnings and financial position and such
other facts, as our Board of Directors deems relevant.



ITEM 1A. RISK FACTORS



You should carefully consider the following risk factors and the
other information included herein as well as the information included in other reports and filings made with the SEC before investing
in our common stock. The following factors, as well as other factors affecting our operating results and financial condition, could
cause our actual future results and financial condition to differ materially from those projected. The trading price of our common
stock could decline due to any of these risks, and you may lose part or all of your investment.



Risks Related to Our Business and Industry



Our independent auditors have expressed doubt about our ability
to continue our activities as a going concern, which may hinder our ability to obtain future financing.



Since we have been focused in developing our propriety technology
for availability of commercialization, we have suffered recurring losses from operations. The continuation of our company as a
going concern is dependent upon our company attaining and maintaining profitable operations and raising additional capital. The
financial statements do not include any adjustment relating to the recovery and classification of recorded asset amounts or the
amount and classification of liabilities that might be necessary should our company discontinue operations.



Due to the uncertainty of our ability to meet our current operating
expenses and the capital expenses noted above, in their report on the annual financial statements for the years ended December
31, 2010, and 2009 our independent auditors included an explanatory paragraph regarding the doubt about our ability to continue
as a going concern. Our financial statements contain additional note disclosures describing the status of the company.



The continuation of our business is dependent upon us raising additional
financial support. The issuance of additional equity securities by us could result in a substantial dilution in the equity interests
of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities
and future cash commitments. If the Company should fail to continue as a going concern, you may lose the value of your investment
in the Company.



We have a limited operating history upon which to base an
investment decision.



Our operating subsidiary, Pimi Israel, was formed in January 2004
and we have only recently begun selling our products. We have a limited operating history as a company. As a result, there is very
limited historical performance upon which to evaluate our prospects for achieving our business objectives. Our prospects must be
considered in light of the risks, difficulties and uncertainties frequently encountered by



16

development stage entities.



We will need significant additional capital, which we may
be unable to obtain.



Our capital requirements in connection with our research and development
activities and transition to commercial operations have been and will continue to be significant. We will require additional funds
to continue research, development and testing of our technologies and products, to obtain intellectual property protection relating
to our technologies when appropriate, and to market our products. There can be no assurance that financing will be available in
amounts or on terms acceptable to us, if at all. There is no assurance additional funds will be available from any source; or,
if available, such funds may not be on terms acceptable to the Company. In either of the aforementioned situations, the Company
may not be able to fully implement its growth plans.



In order to continue our operations, without expanding our activities,
we estimate that we will need minimum capital in the sum of $850,000 in 2011. As of March 31, 2011 we have unused credit lines
in the sum of $17,000 and $280,000 in cash. Currently our net burn rate is approximately $50,000 per month. Thus, we will need
additional sums of approximately $450,000 through December 31, 2011.



If we are unable to obtain such additional capital as discussed
above, we will be required to limit our operations to the US and Israel only, and will extend our activities to other countries,
only after such capital is raised.



We expect to face significant competition from other companies
looking to develop or acquire new alternative environment-friendly solutions for the treatment of fruits and vegetables.



We expect to face significant competition in every aspect of
our business, and particularly from other companies that seek to enter our market. As regulators are pushing to move away from
current residue chemical solutions, such as Chlorpropham or CIPC (“CIPC”), existing suppliers of these solutions are
anxiously looking to develop or acquire new alternative environment-friendly solutions that can sustain their market share and
revenue streams, or to enable the continuance of CIPC at current levels in new ways of treatment. Additionally, as market opportunity
becomes eminent, competitors and new players will most likely attempt to develop similar or comparable solutions. Although Pimi
believes its technology is unique, and will provide it with a significant competitive barrier, it is nevertheless possible that
superior or more cost-effective alternative technology will emerge that will achieve greater market acceptance and render Pimi’s
products less competitive. Furthermore, existing vendors can cooperate to combat new players by reducing market prices and margins
or other competitive initiatives. The future success of Pimi will therefore depend, to a large extent, upon the company’s
ability to achieve market acceptance of its innovative solutions as well as develop and introduce new products and enhancements
to existing products. No assurance can be given that the Company will be able to compete in such a market place.



We have incurred significant losses to date and expect to
continue to incur losses.



During the year ended December 31, 2010, we incurred net losses
in the sum of $629,038. Since we have started our operation in 2004 and until December 31, 2010 we incurred accumulated losses
in the sum of $3,704,809. We expect to continue to incur losses for the fiscal year ended December 31, 2011. Continuing losses
will have an adverse impact on our cash flow and may impair our ability to raise additional capital required to continue and expand
our operations.



We are dependent upon our Managers for the operating of the
Company.



The Company is dependent upon the services of its management to
determine and implement the strategy of the Company. Furthermore, the Company is dependent upon the Managers to oversee the operations
of Pimi and Pimi Israel. Thus, there can be no assurance that the Managers’ experience will be sufficient to successfully
achieve the business objectives of the Company. All decisions regarding the management of the Company’s affairs will be made
exclusively by the Officers and Directors of the Company. In the event these persons are ineffective, the Company’s business
and results of operation would likely be adversely affected.



Our success is dependent upon our ability to achieve regulatory
approvals in the U.S. and in other countries.



A critical key to our success and ability to expand our business
is our ability to obtain regulatory approvals in United States and in other countries for the use of our products. The regulatory
approvals of some of our products are dependent, on trials to show the efficacy or the non toxicity of our products, and are time
and cost consuming. Such registration filling might take longer period than expected, and it might delay obtaining such regulatory
approvals, or might cause delay in starting operations on a large scale in these countries and other jurisdictions.



Our success is dependent upon our ability to achieve market
acceptance.



In order to achieve high volume sales, and attain a leading market
share and become the new standard of treatment, the Company’s products must not only be approved by the regulators, but also
endorsed by the major packers and storage providers, retailer of fruits and vegetables as


17

well as environment
organizations. Pimi is aware of this key factor and is focusing on conducting large scale trials with major fruits and vegetables
packers and retail suppliers of fresh consumed goods in several countries, in order to show the efficacy of the products and our
technology and to receive these recognition of the packers and retailers, but no assurances can be made that we will succeed in
such endeavor and how long it will take until we shall receive market recognition.



Our products and technology are still in development stage
and require additional trials and development.



Our products and technology have been tested in numerous trials,
in the U.S and in Israel on vegetable and fruits varieties which are grown in hot climate, as well as storage rooms with refrigeration,
and also on certain type of processes which are used in these countries. We still need to present efficacy in other climates and
other countries with different types of processes than those we have presented performance with our products.



We rely on our Technologies to successfully develop and market
new and existing products.



Our product has been tested in multiple commercial and small scale
tests. Some of our products are still under evaluation in Beta sites trails in the U.S with leading vegetables and fruits packers
and suppliers. It is possible that the results from these large scale tests may show lower efficacy than tests conducted previously,
and may require some product improvements as well as possible changes in the application and usage protocol. These factors may
significantly delay our product’s introduction to market. Likewise, we cannot be sure these products will be commercially
viable, and have no assurances that we will be able to expand upon our current product offerings or that any such expansion will
result in revenues to the company.



We rely on rapidly establishing a global distributorship network
in order to effectively market our products.



The company, through its wholly owned subsidiary, Pimi Israel, has
developed initial partnerships with local partners. In order to expand sales and marketing globally, and capture a leading market
share before any potential reaction from the competition, The Company will need to rapidly expand geographically and establish
a global distribution network. This is likely to put pressure on management, financial and operational resources of the Company.
In order to mitigate this factor, once Pimi establishes a significant presence in the market, it will proceed to establish strategic
partnerships with some of the leading players in the market, however, there are no assurances that we will succeed in establishing
such partnerships, which may harm the marketing of our products and the development of our business.



Our inability to attain and protect our intellectual
property rights could reduce the value of our products, services and brand.



Patents and pending patents, trademarks, trade secrets, copyrights
and other intellectual property rights may be important assets for us. Various events outside of our control pose a threat to our
ability to attain or protect intellectual property rights as well as to our products and services. For example, effective intellectual
property protection may not be available in every country in which our products are distributed. Also, the efforts we have taken
to protect our proprietary rights may not be sufficient or effective. Any significant impairment of our ability to attain or protect
our intellectual property rights could harm our business or our ability to compete. Also, protecting intellectual property rights
is costly and time consuming. Any increase in the unauthorized use of our future intellectual property could make it more expensive
to do business and harm our operating results.



Our success is dependent upon the acceptance of environment-friendly
solutions for fruits and vegetables.



The future of the company is dependent upon the acceptance of environment-friendly,
non-residue treatment solutions for fruits and vegetables. Although this appears to be the direction the market is going in the
coming years, these trends as well as the future size of this market, and other potential markets for the Company’s products,
depend upon a number of factors, many of which are beyond the control of the Company. For example, failure to convince retailers,
to bear additional cost for residue free fruit and vegetables, failure to convince the consumers to purchase residue free fruits
and vegetables for higher prices, could have adverse effects on Pimi’s business, financial condition, operating results and
cash flow going forward.



Our business and operations may be affected by climate change
conditions, which could materially harm our financial results



Our business may be affected from changes in climate conditions
as such events would affect the storability of crops (such as potatoes) in those cases where there is unusually warm, dry, humid
or cold weather before cropping.



For example, in the recent 2009-2010 potato season, parts of Europe
experienced a very dry period prior to the picking of potatoes. This condition affected the storability of the potatoes and, as
a result, we were required to release one store room earlier than anticipated.



In such instances, we may suffer a decrease in revenues as a result
of a smaller storage volume of rooms or shorter storage period. While as of December 31, 2010 climate change events did not influence
us materially, we anticipate that once we will increase our operations, and


18

certain territories will experience significant climate
change, such as above-common rains, heat waves, dry air conditions, and unusually cold or prolonged cold weather conditions, such
events may materially impact our financial results.



Our operating results may fluctuate, which makes our results
difficult to predict and could cause our results to fall short of expectations.



Our operating results may fluctuate as a result of a number of factors,
many outside of our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful, and
you should not rely on our past results as an indication of our future performance. Our quarterly, year-to-date and annual expenses
as a percentage of our revenues may differ significantly from our historical or projected rates. Our operating results in future
quarters may fall below expectations. Any of these events could cause our stock price to fall. Each of the risk factors listed
in the section Risk Factors, and the following factors may affect our operating results:



•
    
    Our ability to attract users for our products.•
    
    Our ability to generate revenue from our products.•
    
    The amount and timing, of operating costs and capital expenditures related to the maintenance and expansion of our businesses, and operations.•
    
    Our focus on long-term goals over short-term results.•
    
    Global economic situation.•
    
    Fluctuations in weather conditions.•
    
    The seasonal nature of our business.

Our business depends to some extent on international transactions.



As a result of the international nature of Pimi’s business,
the company is exposed to risks associated with changes in foreign currency exchange rates. A majority of the company’s revenues
and substantially all of its cost of sales are in USD, whilst our management, marketing, sales and R&D costs are in NIS. The
Company is therefore exposed to foreign currency risk due to fluctuations in exchange rates. This may result in gains or losses
with respect to movements in exchange rates, which may be significant and may also cause fluctuations in reported financial information
that are not necessarily related to the Company’s operating results.



The inherent dangers in production and transportation of Hydrogen
Peroxide could cause disruptions and could expose us to potentially significant losses, costs or liabilities.



Pimi's operations are subject to significant hazards and risks inherent
in transporting of the active ingredient of our Product- Hydrogen Peroxide. In high concentrations, Hydrogen Peroxide is an aggressive
oxidizer and will corrode many materials. We are working with limited low concentration of the product, however in high concentrations
of H2O2 it will react violently. Hydrogen Peroxide should be stored in a cool, dry, well-ventilated area and away from any flammable
or combustible substances. It should be transported in special tanks and vehicles and should be stored in a container composed
of non-reactive materials. These hazards and risks include, but are not limited to, fires, explosions, third-party interference
(including terrorism) and mechanical failure of equipment at Pimi’s or third-party facilities. The occurrence of any of these
events could result in production and distribution difficulties and disruptions, personal injury or wrongful death claims and other
damage to properties.



Risks Related to our Location in Israel



Conditions in Israel may limit our ability to manage and market
our products, which would lead to a decrease in revenues.



Because part of our operations is conducted in Israel and our management
is located in Israel, our operations are directly affected by economic, political and military conditions affecting Israel. Specifically,
we could be adversely affected by:



▪
    any major hostilities involving Israel;▪
    risks associated with outages and disruptions of communications networks due to any hostilities involving Israel; and▪
    a significant downturn in the economic or financial conditions in Israel.

As of the date of this report, a major part of our sales are made
in Israel, and consequently our financial performance is dependent to a


19

significant extent on the economy of Israel.



Political, economic and military conditions in Israel have a direct
influence on us because our operations are located there. Any hostilities involving Israel or the interruption or curtailment of
trade between Israel and its present trading partners could materially and adversely affect our operations. Several Arab countries
still restrict business with Israeli companies and these restrictions may have an adverse impact on our operating results, financial
condition or the expansion of our business. We could be adversely affected by restrictive laws or policies directed towards Israel
and Israeli businesses. The establishment in 2006 of a government in the Palestinian Authority by representatives of the Hamas
militant group has created additional unrest and uncertainty in the area. In December 2008, Israel was engaged in an armed conflict
with Hamas in the Gaza Strip, in the southern region of Israel. During the summer of 2006, Israel was engaged in an armed conflict
with Hezbollah, a Lebanese Islamic Shiite militia group, which disrupted most daily civilian activity in northern Israel. These
events have at times caused considerable damage to the Israeli economy. As a result of the political and military situation, Israel’s
economy has at times suffered considerably. Ongoing or revived hostilities related to Israel may have a material adverse effect
on our business and on our share price.



Additionally, boycotts of products, prompted by political, religious
or other factors, may affect our financial condition and results of operations. For example, the recent war on Gaza and the United
Nations fact-finding mission on the Gaza conflict at the start of 2009, commonly known as the “Goldstone Report,” have
found evidence that both Israeli forces and Palestinian militants committed serious war crimes and breaches of humanitarian law,
which may amount to crimes against humanity. The Goldstone Report and the Gaza conflict has resulted in grass root boycott movements
all over the world on Israeli products or boycotts on products that are distributed by Jews. If such boycott movements were to
become widespread, it could have a significant impact on our revenues.



Furthermore, there are a number of countries that restrict business
with Israel or with Israeli companies, which may limit our ability to promote our products and services in those countries.



We may not be able to enforce covenants not-to-compete under
current Israeli law that might result in added competition for our products.



We have non-competition agreements with all of our employees, all
of which are governed by Israeli law. These agreements prohibit our employees from competing with or working for our competitors,
generally during their employment in Pimi and for up to 6 months after termination of their employment. However, Israeli courts
are reluctant to enforce non-compete undertakings of former employees and tend, if at all, to enforce those provisions for relatively
brief periods of time in restricted geographical areas, and only when the employee has obtained unique value to the employer specific
to that employer’s business and not just regarding the professional development of the employee. If we are not able to enforce
non-compete covenants, we may be faced with added competition.



It will be extremely difficult to acquire jurisdiction and
enforce liabilities against our officers and directors who are based in Israel.



The majority of our officers and present directors reside outside
of the United States and most of our operations at the time of the filing of this report are located outside the United States. As
a result, it may not be possible for United States investors to enforce their legal rights, to effect service of process upon our
directors or officers or to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties
of our directors and officers under Federal securities laws. Moreover, we have been advised that Israel does not have treaties
providing for the reciprocal recognition and enforcement of judgments of courts with the United States. Further, it is unclear
if extradition treaties now in effect between the United States and Israel would permit effective enforcement of criminal penalties
of the Federal securities laws.



Risks Related to Share Prices.



The Shares are an illiquid investment as there is presently
limited market for our Shares, and transferability of the Shares is subject to significant restriction.



There is presently a limited market for our shares, and we cannot
be certain that a public market will become available, or that there will be sufficient liquidity to allow for sale or transferability
of the shares within the near future. Therefore, the purchase of the Shares must be considered a long-term investment acceptable
only for prospective investors who are willing and can afford to accept and bear the substantial risk of the investment for an
indefinite period of time. There is a limited public market for the resale of the Shares. A prospective investor, therefore, may
not be able to liquidate its investment, even in the event of an emergency, and Shares may not be acceptable as collateral for
a loan.



Because We May Be Subject To The “Penny Stock”
Rules, You May Have Difficulty In Selling Our Common Stock.



If a public market develops for our common stock and our stock price
is less than $5.00 per share, our stock may be subject to the SEC’s penny stock rules. These rules impose additional sales
practice requirements and restrictions on broker-dealers that sell our stock to persons other than established customers and institutional
accredited investors. The application of these rules may affect the ability of broker-dealers to sell our


20

common stock and may
affect your ability to sell any common stock you may own. According to the SEC, the market for penny stocks has suffered in recent
years from patterns of fraud and abuse. Such patterns include:



•
    Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;•
    Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;•
    “Boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced salespersons;•
    Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and•
    The wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.

If we are subject to penny stock rules, you may have difficulty
selling your shares of our common stock. For more information about penny stocks, please visit http://www.sec.gov/answers/penny.htm.



ITEM 1B. UNRESOLVED STAFF COMMENTS



Not applicable.



ITEM 2. PROPERTIES



The Company and its subsidiary currently lease office space at Kibutz
Alonim. The Company currently pays monthly rent of $830 (3,000 NIS) plus VAT per month pursuant to a 12 month lease started Jan
1, 2011 until December 31 2011.



ITEM 3. LEGAL PROCEEDINGS



From time to time, we may be a defendant and plaintiff in various
legal proceedings arising in the normal course of our business. We are currently not a party to any material pending legal proceedings
or government actions, including any bankruptcy, receivership, or similar proceedings. In addition, management is not aware of
any known litigation or liabilities that could affect our operations. Should any liabilities be incurred in the future, they will
be accrued based on management’s best estimate of the potential loss. As such, there is no adverse effect on our consolidated
financial position, results of operations or cash flow at this time. Furthermore, management does not believe that there are any
proceedings to which any director, officer, or affiliate of the Company, any owner of record of the beneficially or more than five
percent of the common stock of the Company, or any associate of any such director, officer, affiliate of the Company, or security
holder is a party adverse to the Company or has a material interest adverse to the Company.



ITEM 4. RESERVED



PART II



ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES



In February 2010, our common stock began quotation on the OTC Bulletin
Board under the symbol "PIMZ.OB".



Holders



As of December 31, 2010, the approximate number of stockholders
of record of the Common Stock of the Company was 57.



Dividends



We have never declared or paid cash dividends on our common stock.
We currently anticipate that we will retain all future earnings to fund the operation of our business and do not anticipate paying
dividends on our common stock in the foreseeable future.



Recent Issuances of Stock



On March 2, 2011 the Company has entered into subscription agreements
with 4 individuals residing in Israel for the total sum of $100,000 at a purchase price of $0.80 per share. For each share of Common
Stock purchased, the investors received a warrant with an exercise price of $0.80, exercisable until March 2, 2013.



On January 24, 2011, the Company entered into an Agreement with
three private individuals residing in Israel (two of whom will invest through a joint company the “Investors”). Pursuant
to the Agreement, the Investors shall invest a minimum of $50,000 and up to an aggregate of $500,000, at a purchase price of $0.80
per share. For each share of Common Stock purchased, the Investors shall receive a warrant with an exercise price of $0.80, exercisable
until December 31, 2012. The private placement shall take place in five tranches, provided an amount


21

beyond the minimum is financed. The first 3 tranches of $50,000 each were made by the Investors
on January 27, 2011, February 16, 2011 and March 16, 2011 respectively. The remaining tranches shall take place on or prior to April 15, 2011,
and May 15, 2011.



On December 30, 2010 the company issued 70,000 shares Common Stock
to Ashdor Assets Managements and Trusts Ltd, who holds the shares in trust for four attorneys in Sadot & Co., Law offices among
them Advocate Eitan Shmueli, who is one of the major shareholders of our company through Omdan consulting and instructing Ltd (who
purchased 50,771 shares) for the sum of $42,000 ($0.6 per one share of common stock). On December 30, 2010 the company further
issued 34,013 share of Common Stock to Nir Ecology Ltd, one of the major shareholders of the company for the sum of 20,408 ($0.6
per one share of common stock) which was paid by Nir Ecology. The company also issued, on the same date, 25,000 share of Common
Stock to Mr. Alon Carmel, one of the major shareholders of the Company for the sum of $15,000 ($0.6 per one share of common stock),
which was paid by Alon Carmel.



On December 28, 2010, the Company entered into an Agreement with
a private individual residing in Israel, or a company under this control. Pursuant to the Agreement, the Investor shall invest
a minimum of $100,000 and up to an aggregate of $400,000, at a purchase price of $0.80 per share. The private placement shall take
place in four tranches, provided an amount beyond the Minimum is financed. The initial tranche of $50,000 was made by the Investor
on January 3, 2011. The second tranche in the sum of $50,000 was made on February 5, 2011 and the third tranche of the sum of $50,000
was made on March 10, 2011. Additional tranche may take place on April 30, 2011. For each share of Common Stock purchased, the
Investor shall receive a warrant having an exercise price of $0.80, exercisable for a period of two years from the date of issuance.



On August 24, 2010, the Company closed a private placement of 335,108
shares of common stock and warrants to purchase 335,108 shares of common stock with 11 investors (the “Investors”),
who were existing shareholders of the Company, for aggregate gross proceeds of $201,066 pursuant to a Securities Purchase Agreement
and Warrant Agreement. Each unit of the offering was offered at a purchase price of $0.60 per Unit, and consisted of one share
of common stock and one warrant, exercisable at $0.90 for a period of two years.




On
May 16, 2010, the Company issued convertible bonds in the amount US$79,808 to one of its Stockholders,
or its registered assigns, which can be converted until May 15, 2011 for common shares of the corporation,
at the price of US$1.35 per share. The loan bears interest of 8% per annum. In addition, on May 16, 2010,
the Company issued a detachable warrant to purchase 59,117 shares of common stock of the corporation
to the same Shareholder, at a purchase price of US$1.35 per share to be exercised until November 15,
2011.



On
May 13, 2010, the Company issued convertible bonds in the amount US$20,000 to one of its Stockholders,
or its registered assigns, which can be converted until May 13, 2011 for common shares of the corporation,
at the price of US$1.35 per share. The loan bears interest of 8% per annum. In addition, on May 13, 2010,
the Company issued a detachable warrant to purchase 14,815 shares of common stock of the corporation
to the same Shareholder, at a purchase price of US$1.35 per share to be exercised until November 13,
2011.



On
April 29, 2010, the Company issued convertible bonds in the amount US$60,000 to one of its Stockholders,
or its registered assigns, which can be converted until April 30, 2011 for common shares of the
corporation, at the price of US$1.35 per share. The loan bears interest of 8% per annum. In addition,
on April 29, 2010, the Company issued a detachable warrant to purchase 44,444 shares of common stock
of the corporation to the same Shareholder, at a purchase price of US$1.35 per share to be exercised
until October 30, 2011.





All proceeds received were utilized for working capital purposes.



No advertising or general solicitation was employed
in offering the securities. The offerings and sales were made to a limited number of persons, all of whom were
accredited investors, business associates of Pimi or executive officers of Pimi, and transfer was restricted by Pimi in
accordance with the requirements of the Securities Act of 1933. In addition to representations by the
above-referenced persons, we have made independent determinations regarding
the above-referenced persons were accredited or sophisticated investors, and that they were capable
of analyzing the merits and risks of their investment, and that they understood the
speculative nature of their investment.



ITEM 6. SELECTED FINANCIAL DATA



Not Applicable



ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS



Forward Looking Statements



Please see page i of this Annual Report for “Information Regarding
Forward Looking Statements” appearing throughout this Annual Report.



Introduction



The following discussion should be read in conjunction with the
Financial Statements and Notes thereto. Our fiscal year ends December 31. This document contains certain forward-looking statements
including, among others, anticipated trends in our financial condition and results of operations and our business strategy. (See
Part I, Item 1A, "Risk Factors"). These forward-looking statements are based largely on our current expectations and
are subject to a number of risks and uncertainties. Actual results could differ materially from these forward-looking statements.
Important factors to consider in evaluating such forward-looking statements include (i) changes in external factors or in our internal
budgeting process which might impact trends in our results of operations; (ii) unanticipated working capital or other cash requirements;
(iii) changes in our business strategy or an inability to execute our strategy due to unanticipated changes in the industries in
which we operate; and (iv) various competitive market factors that may prevent us from competing successfully in the marketplace.



Company History



Pimi Israel was established in 2004 with a vision towards developing
environmentally friendly alternative solutions to current chemical treatments of agricultural harvest, such as fruits,
vegetables and grains, thereby improving the well-being of consumers, growers and the environment. Pimi Israel has devoted significant
research in developing environmentally friendly solutions for pre and post harvest treatments of fruits and vegetables. The company's
technology is based on unique, patented formulations of Stabilized Hydrogen Peroxide, combined with a controlled distribution system
used to apply it.



22

On April 27, 2009 we purchased all the issued and outstanding shares
of Pimi Israel from Pimi Israel’s shareholders in consideration for 6,313,589 shares of our Common Stock. As a result, Pimi
Israel became a wholly-owned subsidiary of the Company.



Overview



The Company focuses on developing cleansers and pesticide environmentally
friendly solutions for extending storability and shelf life of vegetables and fruits. As of the date of this report, the Company has developed
five products (CitrusGuardTM, SpuDefenderTM SweetGuardTM,OnionGuardTM and
StoreGuardTM) and has started the commercialization of four products: CitrusGuardTM, SpuDefenderTM,
SweetGuardTM and OnionGuardTM.



Currently, the Company is focused
on solutions related to fresh Citrus Fruits, table potatoes and Sweet Potatoes. Citruses are the biggest fresh fruit consumed world
wide. World fresh Citrus market is estimated at above 50 million tons per annum. Potatoes are the second largest crop (after grain)
worldwide. According to the food and Agriculture Organization of the United Nation, the total crop of the 20 major producers of
Potatoes in 2008 was approximately 259 million metric tons (see: http://faostat.fao.org/site/339/default.aspx).
We estimate that Table Potatoes, which our solution is currently aimed for, is 30%-40% of the total world produced potatoes.



Our products are based on Stabilized Hydrogen Peroxide ("STHP"),
which has the high ability of cleaning of surface, as well as to improve storage atmosphere, as also to control sprouting.
STHP breaks-down after usage into water and oxygen while the stabilizers are washed away. Accordingly, our products are environmental
friendly.



Critical Accounting Policies



The Securities and Exchange Commission ("SEC") defines
"critical accounting policies" as those that require application of management's most difficult, subjective or complex
judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change
in subsequent periods. Our accounting policies are described in Note 2 to the financial statements appearing elsewhere in this
report. Not all of the accounting policies require management to make difficult, subjective or complex judgments or estimates.
Due to the early stage of operations of the Company there are no accounting policies that are considered to be critical accounting
policies by the management.



Recently issued accounting pronouncements



ASC Topic 605 - 25 “Revenue Recognition - Multiple-Element
Arrangements”



In October 2009, the FASB issued amendments to the accounting and
disclosure for revenue recognition. These amendments, effective for fiscal years beginning on or after June 15, 2010 (fiscal year
2011 for the Company), with early adoption permitted, modify the criteria for recognizing revenue in multiple element arrangements
and require companies to develop a best estimate of the selling price to separate deliverables and allocate arrangement consideration
using the relative selling price method. Additionally, the amendments eliminate the residual method for allocating arrangement
considerations. The Company does not believe that the adoption of the amendments will have any material impact on its consolidated
financial statements.



ASC Topic 820, “Fair Value Measurements and Disclosures”



In January 2010, the FASB updated the “Fair Value Measurements
Disclosures” accounting standard. This update will require (a) an entity to disclose separately the amounts of significant
transfers in and out of Levels 1 and 2 fair value measurements and to describe the reasons for the transfers; and (b) information
about purchases, sales, issuances and settlements to be presented separately (i.e. present the activity on a gross basis rather
than net) in the reconciliation for fair value measurements using significant unobservable inputs (Level 3 inputs). The update
clarifies existing disclosure requirements for the level of disaggregation used for classes of assets and liabilities measured
at fair value, and requires disclosures about the valuation techniques and inputs used to measure fair value for both recurring
and nonrecurring fair value measurements using Level 2 and Level 3 inputs.



As applicable to the Company, the update became effective as of
the beginning of the three month interim period ended March 31, 2010, except for the disclosures of the Level 3 roll forward information,
which is required for annual reporting periods beginning after December 15, 2010 and for interim reporting periods within those
years.



The adoption of the new guidance did not have a material impact
on the Company’s financial position, results of operations or cash flows.



ASC Topic 718, “Compensation - Stock Compensation”



In April 2010, the FASB issued guidance to clarify that an employee
share-based payment award that has an exercise price denominated in the currency of the market in which a substantial portion of
the entity’s equity shares trades should not be considered to contain a condition that is not a market, performance, or service
condition. Therefore, an entity should not classify such an award as a liability if it otherwise qualifies


23

as equity. The amended
guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010
(fiscal year 2011 for the Company).



The adoption of the new guidance is not expected to have a material
impact on the company’s financial position, results of operations
or cash flow.



ASC Topic 310, “Receivables”



In July 2010, the FASB issued Accounting Standards Update 2010-20,
Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses ASU
2010-22). ASU 2010-20 provides guidance to enhance disclosures about the credit quality of a creditor’s financing receivables
and the adequacy of its allowance for credit losses. Financial instruments that may subject the Company to significant concentrations
of credit risk consist principally of trade receivable and account receivables.



For public entities, the disclosures as of the end of a
reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010 (these financial
statements for the Company). The disclosures about activity that occurs during a reporting period are effective for interim
and annual reporting periods beginning on or after December 15, 2010 (fiscal 2011 for the Company).



Results of Operations for the Year Ended December 31, 2010
compared to Year Ended December 31, 2009



Total Net Sales: Total Net Sales increased $177,495, or 184%
to $274,001 in 2010, from $96,506 for 2009. The increase is due to the commencing of sales of our products on small commercial
scale in Israel.



R&D Expenses: R&D Expenses for 2010 of $567,115 decreased
$196,714, or 26% from the $763,289 in 2009, due to decrease in cost of salaries and professional services ($297,233), balanced
by increase in materials and costs related ($100,519).



General and Administrative Expenses: General and administrative
expenses decreased by $127,304, or 31% in 2010, to $280,499 from $407,803 in 2009, mostly due to decrease in Professional fees
expenses



Loss from Operations: Loss from operations for 2010
of $573,613 was down $501,513 or 47% from the loss from operations in 2009 of $1,075,126, mainly as a result of the increase in
sales ($177,495), decrease in R&D expenses ($196,714) and in G&A expenses ($127,304).



Financing Expenses: Total financing expenses in 2010 amounted
to $55,425, which were $53,927 higher than our financing expenses of $1,498 in 2009. Theses changes was a result of Convertible
Bonds interest ($8,000) and beneficial conversion feature with respect to convertible bonds ($34,340), credit lines usage as well as higher
bank expenses and changes in the exchange rates.



Net Loss: Net loss of $629,038 in 2010 was $447,586,
or 42% less than the net loss in 2009 of $1,076,624, mainly as a result of increase in sales ($177,495), decrease in R&D expenses
($196,714) and in G&A expenses ($127,304), balanced by increase in Financing expenses ($53,927)



Results of Operations for the Year Ended December 31, 2009
compared to Year Ended December 31, 2008



Total
Net Sales: Total Net Sales decreased $8,106 or 8% to $96,506
in 2009, from $104,612 for 2008. These changes in 2009, were derived from smaller sales of our products and technology to pilot storage
rooms in order to show efficacy in the UK, Ukraine and Germany.



R&D
Expenses: R&D Expenses for 2009 of $763,829 increased $248,675
or 48% from the $515,154 in 2008, due to cost of the pilot storage rooms and costs related to these pilot rooms such as travel
expenses.

General
and Administrative Expenses: General and administrative expenses
increased by $220,771, or 118% in 2009 to $407,803 from



24

$187,032 in 2008, mostly due to increase in Professional fees expenses

Loss
from Operations: Loss from operations for 2009 of $1,075,126
was up $477,552, or 80% from the loss from operations in 2008 of $597,574, mainly as a result of the growth in R&D expenses
($248,675) and in G&A expenses ($220,771).

Financing
Expenses: Total financing expenses in 2009, amounted to $1,498,
which were $3,922 lower than our financing expenses of $5,420 in 2008. Theses changes was a result of higher activity, higher
net interest and bank expenses as well as changes in the exchange rates.

Net
Loss: Net loss of $1,076,624 in 2009, was $473,630 or
79% more than the net loss in 2008 of $602,994, mainly as a result of the growth in R&D expenses ($248,675) and in G&A
expenses ($220,771).

Liquidity and Capital Resources



As of December 31, 2010, we had liabilities of $699,935 ($386,919
as of December 31, 2009), including $126,275 ($0 as of December 31, 2009) of Convertible Bonds, $375,529 ($224,411 as of December
31, 2009) of third party liabilities, and $198,131 ($162,508 as of December 31, 2009) was due to related parties. The amounts
due to related parties are for consulting, services and salaries.



As of December 31, 2010 we used credit lines in the sum of $63,216.
As of March 31, 2011 we have unused credit lines in the sum of $17,000, and have $280,000 in cash. Currently our net burn rate
is approximately $50,000 per month. Thus, we will need additional sum of approximately $300,000 through December 31, 2011.



Management believes that as a result of anticipated financings which
are anticipated to take place in 2011, and with certain revenues to be received from the sale and delivery of its products to clients,
there will be sufficient capital to meet operating needs for the year ended December 31, 2011. However, there can be no assurance
that we will be able to obtain such financing on terms acceptable to us and at the times required, or at all.



The Company has sustained operating losses and its cash needs extend
beyond its current resources. In addition, the Company does not have a reliable consistent source of future funding. These factors
create an uncertainty about the Company’s ability to continue as a going concern.



The Company anticipates that it will begin to realize material revenues
in the Citrus and Potato season of 2011 (the fourth quarters of 2011), as customers will begin to buy and pay for the Company’s
products and technologies. The Company determined that approximately $450,000 of additional funding is necessary to bridge
the Company working plan for 2011. Realization of revenues is subject to regulatory approval of the relevant regulator, in
each country where we intend to deliver, distribute and sell our products, which we currently do not have, except for the state
of Israel, and the U.S for our SpuDefenderTM.



Net Cash Used in Operating Activities for the
years 2010 and 2009



Net cash used in operating activities, generated from continuing
operations was $430,887 and $847,772 for the years ended December 31, 2010 and 2009, respectively. Net cash used in operating activities
primarily reflects the net loss for those periods, which was reduced in part by depreciation and amortization, stock-based compensation
and changes in operating assets and liabilities.



Net Cash Used in Investing Activities
for the years 2010 and 2009



Net cash used in investing activities was $33,161 and $26,678, for
the years ended December 31, 2010 and 2009, respectively, which was used primarily to purchase equipment (such as computers,
and office equipment), and funds deposit in respect of employees rights upon retirement.



Net Cash provided by Financing Activities
for the years 2010 and 2009



Net cash provided by financing activities was $464,084 and $603,645
for the years ended December 31, 2010 and 2009, respectively, primarily attributable to capital raised.



Net Cash Used in Operating Activities for the
years 2009 and 2008

Net cash used in operating activities, generated from continuing operations was $847,772, and $589,632 for the years ended December
31, 2009 and 2008, respectively. Net cash used in operating activities primarily reflects the net loss for those periods, which
was reduced in part by depreciation and amortization, stock-based compensation and changes in operating assets and liabilities.



25Net Cash Used in Investing Activities for the
years 2009 and 2008



Net cash used in investing activities was $26,678 and $18,682 for
the years ended December 31, 2009 and 2008, respectively, which was used primarily to purchase equipment (such as computers,
and office equipment), and funds deposit in respect of employees rights upon retirement.



Net Cash Used in Financing Activities for the
years 2009 and 2008



Net cash provided by financing activities was $603,645 and $845,744
for the years ended December 31, 2009 and 2008, respectively, primarily attributable to capital raised in 2009 and 2008.



Off-Balance Sheet Arrangements



We do not have any off balance sheet arrangements that are reasonably
likely to have a current or future effect on our financial condition, revenues, and results of operations, liquidity or capital
expenditures.



Contractual Obligations



The Company has no outstanding contractual obligations as of December
31, 2010.



Effect of Recently Issued Accounting Pronouncements



N/A



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK



Not applicable.

26
    
    

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





PIMI AGRO
CLEANTECH, INC.

(A Development
Stage Company)



Consolidated
Financial Statements

as of December
31, 2010






PIMI AGRO
CLEANTECH, INC.

(A Development
Stage Company)



Consolidated
Financial Statements

as of December
31, 2010



Table of Contents



PageReport
    of Independent Registered Public Accounting Firm
    F-1Consolidated
    Financial StatementsConsolidated
    Balance Sheets
    F-2Consolidated
    Statements of Operations
    F-3Consolidated
    Statements of Changes in Stockholders’ Deficit
    F-4
    – F-8Consolidated
    Statements of Cash Flows
    F-9Notes to Consolidated Financial Statements
    F-10
    – F-28


27

    
    
    

Fahn Kanne & Co.
Head Office 
Levinstein Tower 
23 Menachem
Begin Road 
Tel-Aviv 66184, ISRAEL 
P.O.B. 36172, 61361 
T +972 3 7106666 
F +972 3 7106660 
www.gtfk.co.il







Report of Independent Registered Public Accounting Firm



To the Stockholders of



PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)



We have audited the accompanying consolidated
balance sheets of Pimi Agro Cleantech, Inc. (a development stage company) (hereinafter: the "Company") and subsidiary
as of December 31, 2010 and 2009, and the related consolidated statements of operations, changes in stockholders’ deficit
and cash flows for each of the three years in the period ended December 31, 2010 and for the cumulative period from January 14,
2004 (date of inception) through December 31, 2010. These financial statements are the responsibility of the Board of Directors
and management of the Company. Our responsibility is to express an opinion on these consolidated financial statements based on
our audits.

We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the consolidated financial position of Pimi Agro Cleantech,
Inc. and subsidiary as of December 31, 2010 and 2009, and the consolidated results of their operations, and their cash flows for
 each of the three years in the period ended December 31, 2010 and for the cumulative period from
January 14, 2004 (date of inception) through December 31, 2010, in conformity with accounting principles generally accepted
in the United States of America.

The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.As
discussed in Note 1, the Company is in the development stage as defined in FASB Accounting Standards
Codification (ASC) Topic 915, "Development Stage Entities". It has not yet generated sufficient revenues
from its operations to fund its activities and is therefore dependent upon external sources for financing its operations. Since
inception, the Company has incurred accumulated losses of US$ 3,704,809 and cumulative negative operating cash flow of US$ 3,089,953.
These factors among others, as discussed in Note 1 raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 1 to the financial statements. The
financial statements do not include any adjustments that might result from the outcome of this uncertainty.







FAHN KANNE & CO.

Certified Public Accountants (Isr.)



Tel-Aviv, Israel

April 12, 2011





Certified Public Accountants
 Fahn Kanne & Co. is the
Israeli member firm of Grant Thornton International Ltd

F-1


    
    
    

PIMI
AGRO CLEANTECH, INC.

(A
Development Stage Company)



CONSOLIDATED BALANCE SHEETS



US dollars (except share data)December 31,2010
    2009A S S E T SCurrent AssetsAccounts receivable
    128,695
    30,448Other current assets (Note 3)
    54,194
    32,472Total current assets
    182,889
    62,920Property and Equipment, Net (Note 4)
    36,720
    24,810Funds in Respect of Employee Rights Upon Retirement
    61,967
    42,548Total assets
    281,576
    130,278LIABILITIES AND STOCKHOLDERS’ DEFICITCurrent LiabilitiesCredit from banking institution
    63,216
    9,114Accounts payable:Trade (Note 5A)
    164,729
    52,930Other (Note 5B)
    285,609
    276,751Convertible Bonds (Note 7)
    126,275
    -Total current liabilities
    639,829
    338,795Liability for employee rights upon retirement
    60,106
    48,124Total liabilities
    699,935
    386,919Commitments (Note 8)Stockholders’ Deficit (Note 9)Common stocks of US$ 0.01 par value ("Common stocks"):30,000,000 shares authorized as of December 31, 2010 and 2009; issued and outstanding 7,160,564 shares and 6,573,110 shares as of December 31, 2010 and 2009, respectively
    71,604
    65,730Additional paid in capital
    3,284,728
    2,795,066Accumulated other comprehensive loss
    (69,882)
    (41,666)Accumulated deficit
    (3,704,809)
    (3,075,771)Total stockholders' deficit
    (418,359)
    (256,641)Total liabilities and stockholders’ deficit
    281,576
    130,278



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


F-2

    
    
    

PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)





CONSOLIDATED STATEMENTS OF OPERATIONS





US dollars (except share data)Year ended December 31,
    Cumulative period from January 14, 2004 (date of inception) through December 31,2010
    2009(*)
    2008(*)
    2010(*)Revenues from sales of products
    274,001
    96,506
    104,612
    543,793Research and development expenses (Note 10)
    (567,115)
    (763,829)
    (515,154)
    (2,852,516)General and administrative expenses (Note 11)
    (280,499)
    (407,803)
    (187,032)
    (1,231,822)Operating loss
    (573,613)
    (1,075,126)
    (597,574)
    (3,540,545)Financing expenses, net
    (55,425)
    (1,498)
    (5,420)
    (83,930)Loss from continuing operation
    (629,038)
    (1,076,624)
    (602,994)
    (3,624,475)Loss from discontinued operation, net
    -
    -
    -
    (80,334)Loss for the period
    (629,038)
    (1,076,624)
    (602,994)
    (3,704,809)

Loss per share (basic and diluted) (Note 13)
    (0.09)
    (0.17)
    (0.12)

Weighted average number of shares outstanding 
(basic and diluted)
    6,764,020
    6,365,330
    5,029,208



(*)	   As described in Note 1A, the financial statements were retroactively restated to reflect the historical financial statements
of the subsidiary Pimi Agro Cleantech Ltd., which was acquired by the Company from its stockholders on April 27, 2009.




The accompanying notes are an integral part
        of the consolidated financial statements.
F-3

    








    
    
    

PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)





CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT (*)US Dollars (except share data)Common stockNumberof shares
    Amount
    Additionalpaid in capital
    Accumulated
    other 
comprehensive income (loss)
    Receipts on account of shares
    Accumulated deficit
    Total stockholders
 equity (deficit)January 14, 2004 (date of inception)
    -
    -
    -
    -
    -
    -
    -120,000 common stock issued for cash of US$ 0.002 per share
    120,000
    1,200
    (932)
    -
    -
    -
    268Balance as of December 31, 2004
    120,000
    1,200
    (932)
    -
    -
    -
    268Loss for the year
    -
    -
    -
    -
    -
    (223,285)
    (223,285)Gain on translation of subsidiary functional currency to the reporting currency
    -
    -
    -
    5,989
    -
    -
    5,989Total comprehensive loss
    
    
    
    
    
    
    (217,296)Receipts on account of shares
    -
    -
    -
    -
    100,000
    -
    100,000Balance as of December 31, 2005
    120,000
    1,200
    (932)
    5,989
    100,000
    (223,285)
    (117,028)Loss for the year
    -
    -
    -
    -
    -
    (831,415)
    (831,415)Loss on translation of subsidiary functional currency to the reporting currency
    -
    -
    -
    (12,748)
    -
    -
    (12,748)Total comprehensive loss
    
    
    
    
    
    
    (844,163)Issuance of 25,200 common stock for cash of  US$ 7.50 per share on January 2, 2006
    25,200
    252
    188,748
    -
    (100,000)
    -
    89,000Issuance of 24,000 common stock for cash of US$ 7.56 per share on July 19, 2006
    24,000
    240
    181,293
    -
    -
    -
    181,533Issuance of 72,000 common stock for cash of US$ 7.53 per share on December 28, 2006
    72,000
    720
    541,600
    -
    -
    -
    542,320Issuance of 1,688 common stock for cash of US$ 8.33 per share on December 28, 2006
    1,688
    17
    14,043
    -
    -
    -
    14,060Receipts on account of shares
    -
    -
    -
    -
    33,644
    -
    33,644Balance as of December 31, 2006
    242,888
    2,429
    924,752
    (6,759)
    33,644
    (1,054,700)
    (100,634)

(*)	   As described in Note 1A, the financial statements were retroactively restated to
reflect the historical financial statements of the subsidiary Pimi Agro Cleantech Ltd., which was acquired by the Company
from its stockholders on April 27, 2009.

The accompanying capital notes are an integral
        part of the consolidated financial statements.F-4


    




PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)



CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT (*) (cont.)



US Dollars (except share data)Common stockNumber  of shares
    Amount
    Additional paid in capital
    Accumulated
other comprehensive income (loss)
    Receipts on account of shares
    Accumulated deficit
    Total stockholders
 equity (deficit)Loss for the year
    -
    -
    -
    -
    -
    (341,453)
    (341,453)Loss on translation of subsidiary functional currency to the reporting currency
    -
    -
    -
    (23,206)
    -
    -
    (23,206)Total comprehensive loss
    
    
    
    
    
    
    (364,659)Issuance of 8,708 common stock for cash of US$ 2.37 per share, 30,006 common stock for cash of US$ 3.28 per share, 7,754 common stock for cash of US$ 0.0025 per share and 591 common stock for cash of US$ 3.45 per share in April 2007
    47,059
    471
    119,375
    -
    (33,644)
    -
    86,202Issuance of  6,937 common stock for cash of US$ 4.10 per share in June 2007
    6,937
    69
    28,339
    -
    -
    -
    28,408Issuance of 747,390 common stock for cash of US$ 0.078 per share in July 2007
    747,390
    7,474
    51,061
    -
    -
    -
    58,535Issuance of 996,520 common stock for cash of US$ 0.024 per share in August 2007
    996,520
    9,965
    14,007
    -
    -
    -
    23,972Issuance of 996,520 common stock for cash of US$ 0.024 per share in November 2007
    996,520
    9,965
    15,212
    -
    -
    -
    25,177Issuance of 996,520 common stock for cash of US$ 0.0026 per share in December 2007
    996,520
    9,965
    (7,405)
    -
    -
    -
    2,560Receipts on account of shares
    -
    -
    -
    -
    100,000
    -
    100,000Balance as of December 31, 2007
    4,033,834
    40,338
    1,145,341
    (29,965)
    100,000
    (1,396,153)
    (140,439)

(*)	   As described in Note 1A, the financial statements were retroactively restated to reflect the historical financial statements
of the subsidiary Pimi Agro Cleantech Ltd., which was acquired by the Company from its stockholders on April 27, 2009.

    The accompanying capital notes are an integral part of the consolidated financial statements.
F-5

PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)





CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT (*) (cont.)



US Dollars (except share data)Common stockNumber  of shares
    Amount
    Additional paid in capital
    Accumulated
other comprehensive income (loss)
    Receipts on account of shares
    Accumulated deficit
    Total stockholders
 equity (deficit)Loss for the year
    -
    -
    -
    -
    -
    (602,994)
    (602,994)Gain on translation of subsidiary functional currency to the reporting currency
    -
    -
    -
    109
    -
    -
    109Total comprehensive loss
    
    
    
    
    
    
    (602,885)Issuance of 716,589 common stock for cash of US$ 0.041 per share in February 2008
    716,589
    7,166
    22,370
    -
    -
    -
    29,536Issuance of 235,334 common stock for cash of US$ 0.72 per share in February 2008
    235,334
    2,353
    166,600
    -
    (100,000)
    -
    68,953Issuance of 291,515 common stock for cash of US$ 0.69 per share in June 2008
    291,515
    2,915
    197,085
    -
    -
    -
    200,000Issuance of 310,382 common stock for cash of US$ 0.71 per share in September 2008
    310,382
    3,104
    216,161
    -
    -
    -
    219,265Issuance of 444,004 common stock for cash of US$ 0.74 per share in November 2008
    444,004
    4,440
    323,548
    -
    -
    -
    327,988Stock based compensation
    -
    -
    43,767
    -
    -
    -
    43,767Balance as of December 31, 2008
    6,031,658
    60,316
    2,114,872
    (29,856)
    -
    (1,999,147)
    146,185

(*)	   As described in Note 1A, the financial statements were retroactively restated to reflect the historical financial statements
of the subsidiary Pimi Agro Cleantech Ltd., which was acquired by the Company from its stockholders on April 27, 2009.


The accompanying notes are an integral part
        of the consolidated financial statements.
F-6


PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)




CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT (*) (cont.)



US Dollars (except share data)Common stockNumber  of shares
    Amount
    Additional  paid in capital
    Accumulated
other comprehensive income (loss)
    Receipts on account of shares
    Accumulated deficit
    Total stockholders
 equity (deficit)Loss for the year
    -
    -
    -
    -
    -
    (1,076,624)
    (1,076,624)Loss on translation of subsidiary functional currency to the reporting currency
    -
    -
    -
    (11,810)
    -
    -
    (11,810)Total comprehensive loss
    
    
    
    
    
    
    (1,088,434)Issuance of 26,399 common stock for cash of US$ 1.33 per share in January 2009
    26,399
    264
    34,721
    -
    -
    -
    34,985Issuance of 3,373 common stock for cash of US$ 1.33 per share in March 2009
    3,373
    34
    24,966
    -
    -
    -
    25,000Issuance of 201,972 common stock for cash of US$ 0.73 per share in March 2009
    201,972
    2,020
    122,980
    -
    -
    -
    125,000Issuance of 45,328 common stock for cash of US$ 1.32 per share in March 2009
    45,328
    453
    59,547
    -
    -
    -
    60,000Issuance of 4,459 common stock for cash of US$ 1.32 per share in April 2009
    4,459
    45
    5,516
    -
    -
    -
    5,561Issuance of 45,328 common stock for cash of US$ 1.32 per share in June 2009
    45,328
    453
    59,547
    -
    -
    -
    60,000Issuance of 40,000 common stock for cash of US$ 1.35 per share in June 2009
    40,000
    400
    53,600
    -
    -
    -
    54,000Issuance of 20,000 common stock for cash of US$ 1.35 per share in August 2009
    20,000
    200
    26,800
    -
    -
    -
    27,000Issuance of 20,000 common stock for cash of US$ 1.35 per share in September 2009
    20,000
    200
    26,800
    -
    -
    -
    27,000Issuance of 35,000 common stock for cash of US$ 1.35 per share in October 2009
    35,000
    350
    46,900
    -
    -
    -
    47,250Issuance of 45,330 common stock for cash of US$ 1.32 per share in October 2009
    45,330
    453
    59,547
    -
    -
    -
    60,000Issuance of 54,263 common stock for cash of US$ 1.35 per share in November 2009
    54,263
    542
    68,193
    -
    -
    -
    68,735Stock based compensation
    -
    -
    91,077
    -
    -
    -
    91,077Balance as of December 31, 2009
    6,573,110
    65,730
    2,795,066
    (41,666)
    -
    (3,075,771)
    (256,641)(*)	   As described in Note 1A, the financial statements were retroactively restated to reflect the historical financial statements
of the subsidiary Pimi Agro Cleantech Ltd., which was acquired by the Company from its stockholders on April 27, 2009.

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

F-7

|PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)
|--------------------------------------------------------

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT (*)
(cont.)



US Dollars (except share data)Common stockNumberof shares
    Amount
    Additionalpaid in capital
    Accumulated
other comprehensive income (loss)
    Receipts on account of shares
    Accumulated deficit
    Total stockholders
 equity (deficit)Loss for the year
    -
    -
    -
    -
    -
    (629,038)
    (629,038)Loss on translation
    of subsidiary functional currency tothe reporting currency
    -
    -
    -
    (28,216)
    -
    -
    (28,216)Total comprehensive
    loss
    
    
    
    
    
    
    (657,254)Issuance of 3,225 common
    stock for cash of US$ 1.55 per share in February 2010
    3,225
    32
    4,968
    -
    -
    -
    5,000Issuance of 35,000 common
    stock for cash of US$ 1.35 per share in February 2010
    35,000
    350
    46,900
    -
    -
    -
    47,250Issuance of common stock
    and warrants, net of issuance costs in August 2010 (**)
    385,108
    3,851
    197,215
    -
    -
    -
    201,066Issuance of 134,121 common
    stock for cash of US$ 0.6 per share in December 2010
    134,121
    1,341
    76,118
    -
    -
    -
    77,459Amounts attributed to
    detachable warrants issued in connection with convertible bonds (***)
    -
    -
    41,208
    -
    -
    -
    41,208Beneficial conversion
    feature on convertible bonds (***)
    -
    -
    41,207
    -
    -
    -
    41,207Stock based compensation
    (****)
    30,000
    300
    82,046
    -
    -
    -
    82,346Balance
    as of December 31, 2010
    7,160,564
    71,604
    3,284,728
    (69,882)
    -
    (3,704,809)
    (418,359)

(*)        	As described
in Note 1A, the financial statements were retroactively restated to reflect the historical financial statements of the subsidiary
Pimi Agro Cleantech Ltd., which was acquired by the Company from its stockholders on April 27, 2009.

(**)      	See
Note 9G.

(***)    	See
Note 7.

(****)	  Including
US$ 24,850 with respect to the issuance of 30,000 common stock to a service provider.



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

F-8

    
    
    

PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)CONSOLIDATED STATEMENTS OF CASH FLOWS

US dollarsYear ended December 31,
    Cumulative period from January 14, 2004 (date of inception) until December 31,2010
    2009(*)
    2008(*)
    2010(*)Cash flows from operating activities:Loss for the period
    (629,038)
    (1,076,624)
    (602,994)
    (3,704,809)Adjustments to reconcile net loss for the period to net cash used in operating activities:Depreciation
    7,433
    7,510
    7,325
    30,992Increase in liability for employee rights upon retirement
    8,485
    10,204
    17,747
    54,224Stock based compensation
    82,346
    91,077
    43,767
    217,190Interest on convertible bonds
    42,340
    -
    -
    42,340Interest on stockholders loans
    -
    -
    -
    (2,409)Changes in assets and liabilities:Increase in accounts receivable
    (91,634)
    (16,481)
    (4,988)
    (120,617)Decrease (increase) in other current assets
    (18,700)
    13,929
    (19,718)
    (147,213)Increase in accounts payable – trade
    103,167
    20,997
    13,092
    151,782Increase (decrease) in accounts payable – other
    64,714
    101,616
    (43,863)
    308,233Net cash used in operating activities generated from continuing operations
    (430,887)
    (847,772)
    (589,632)
    (3,170,287)Net cash provided in operating activities generated from discontinued operations
    -
    -
    -
    80,334Net cash used in operating activities
    (430,887)
    (847,772)
    (589,632)
    (3,089,953)Cash flows from investment activities:Increase in funds in respect of employee rights upon retirement
    (15,899)
    (13,005)
    (8,816)
    (55,508)Purchase of property and equipment
    (17,262)
    (13,673)
    (9,866)
    (62,651)Net cash used in investment activities
    (33,161)
    (26,678)
    (18,682)
    (118,159)Cash flows from financing activities:Credit from banking institution
    50,924
    9,114
    -
    60,017Proceeds from issuance of common stock and warrants
    253,316
    594,531
    845,744
    2,551,149Payment on account of shares
    -
    -
    -
    233,644Proceeds from issuance of convertible bonds and warrants, net
    159,808
    -
    -
    159,808Proceeds from loans from stockholders
    -
    -
    -
    194,083Net cash provided by financing activities
    464,048
    603,645
    845,744
    3,198,701Effect of exchange rate changes on cash and cash equivalents
    -
    (6,605)
    4,925
    9,411Increase (decrease) in cash and cash equivalents
    -
    (277,410)
    242,355
    -Cash and cash equivalents at beginning of the period
    -
    277,410
    35,055
    -Cash and cash equivalents at end of the period
    -
    -
    277,410
    -(*)	   As described in Note 1A, the financial statements were retroactively restated to reflect the historical financial statements
of the subsidiary Pimi Agro Cleantech Ltd., which was acquired by the Company from its stockholders on April 27, 2009.

Supplementary information on financing activities
not involving cash flows:

During December 2010, the Company issued 134,121
shares of common stock to its stockholders in respect of accounts payable in an amount of US$ 77,459.

The accompanying notes are an integral part
        of the financial statements.
F-9

    




    
    PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE
1	      -	      GENERAL

A.     	
Pimi Agro Cleantech, Inc. (the "Company") was incorporated on April 1, 2009, under the laws of the State of
Delaware. On April 27, 2009, the Company acquired from its stockholders all of the issued and outstanding shares of Pimi
Agro Cleantech Ltd. (hereinafter: "Pimi Israel"), including preferred and ordinary shares. As a consideration for
the transaction, the Company issued its stockholders an equal number of its common stock (6,313,589 shares). As a result of
the acquisition, Pimi Israel became a wholly-owned subsidiary of the Company. The transaction involves companies under common
control, and accordingly, the acquisition has been accounted for at historical cost in a manner similar to a pooling of
interests. On this basis, the stockholders’ equity has been retroactively restated to reflect the equivalent number of
shares of common stock of the Company issued for the acquisition of Pimi Israel as if such shares were issued at the dates
they were issued by Pimi Israel to its stockholders on the basis of 1 common stock for each 1 preferred share or 1 ordinary
share of Pimi Israel. The historical financial statements prior to April 27, 2009 were retroactively restated to reflect the
activities of Pimi Israel.

Pimi
Israel was incorporated in 2004 and commenced its operations in 2005. Pimi Israel develops, produces and markets products for improving
the quality and extending the shelf-life of fruits and vegetables. Since its inception, Pimi Israel has devoted substantially all
of its efforts to business planning, research and development and raising capital, and has not yet generated significant revenues.
Accordingly, Pimi Israel and the Company are considered to be in the development stage as defined in FASB Accounting Standards
Codification (ASC) Topic 915, "Development Stage Entities".



B.     	
On
October 22, 2010 the Company received approval from the United States Environmental Protection Agency for its SpudefenderTM
product. The product is now an approved registered product which can be used in the United States as a post-harvest sprout suppressor
for stored potatoes.




C.    	Going
concern uncertainty

Since its incorporation
(April 1, 2009), the Company does not have any operations other than those carried out by Pimi Israel. The development and
commercialization of Pimi Israel's product will require substantial expenditures. Pimi Israel has not yet generated sufficient
revenues from its operations to fund its activities, and is therefore dependent upon external sources for financing its operations.
There can be no assurance that Pimi Israel will succeed in obtaining the necessary financing to continue its operations. Since
inception, Pimi Israel has incurred accumulated losses of US$ 3,704,809 and cumulative negative operating cash flow of US$ 3,089,953.

Continuation
of the Company's current operations after utilizing its current reserves is dependent upon the generation of additional financial
resources either through fund raising or by generating revenues from its products. The Company focuses its solutions towards vegetables
and fruits which are considered the largest in terms of worldwide consumption. Among other things, the Company tries to cooperate
with major fruit packing houses in Israel and abroad.
F-10

    
    
    

PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(cont.)





NOTE
1	      -	      GENERAL (cont.)

C.    	Going
concern uncertainty (cont.)

In addition
the Company is exploring several options to raise funds. Among other things, in order to improve its liquidity the Company, issued
certain service providers (including related parties) common stock as payment for accounts payables for services received, and
subsequent to balance sheet date the Company entered into several agreements to issue common stock and warrants. (See Note 15.)

These factors
raise substantial doubt about Pimi Israel and the Company's ability to continue as a going concern.

The consolidated
financial statements do not include any adjustments that might result from the outcome of this uncertainty.



D.     	
Risk factors

The Company and Pimi Israel (the
"Group") have a limited operating history and faces a number of risks, including uncertainties regarding finalization
of the development process, demand and market acceptance of the Group's products, the effects of technological changes, competition
and the development of other new products. Additionally, other risk factors also exist, such as the ability to manage growth and
the effect of planned expansion of operations on the Group's future results.

In addition, the Group expects
to continue incurring significant operating costs and losses in connection with the development of its products and increased marketing
efforts.

As mentioned above, the Group has
not yet generated significant revenues from its operations to fund its activities, and therefore the continuance of its activities
as a going concern depends on the receipt of additional funding from its stockholders and investors.




E.     	Use
of estimates in the preparation of financial statements

The preparation of consolidated
financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial
statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those
estimates.





NOTE
2	      -	      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial
statements were prepared in accordance with accounting principles generally accepted in the United States of America ("US
GAAP").



A.     	Functional
currency and translation to the reporting currency

The functional currency of the
Company is the US dollar (“US$”), which is the currency of the primary economic environment in which the operations
of the Company are conducted. The functional currency of its foreign subsidiary is the New Israeli Shekel ("NIS").

The financial statements of the
subsidiary were translated into US dollars in accordance with the relevant standards of the Financial Accounting Standards Board
("FASB"). Accordingly, assets and liabilities were translated from NIS to US dollars using year-end exchange rates, and
income and expense items were translated at average exchange rates during the year.

Gains or losses resulting from
translation adjustments are reflected in stockholders' deficit, under “accumulated other comprehensive income (loss)”.
F-11

    
    
    

PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(cont.)





NOTE
2	      -	      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

A.     	Functional
currency and translation to the reporting currency (cont.)

Balances denominated in, or linked
to foreign currency are stated on the basis of the exchange rates prevailing at the balance sheet date. For foreign currency transactions
included in the statements of operations, the exchange rates applicable on the relevant transaction dates are used. Transaction
gains or losses arising from changes in the exchange rates used in the translation of such balances are carried to financing income
or expenses.

Year ended December 31,2010
    2009
    2008Official exchange rate of NIS 1
    0.282
    0.265
    0.263


B.     	Principles
of consolidation

The consolidated financial statements
include the accounts of the Company and its subsidiary. All significant intercompany balances and transactions have been eliminated
on consolidation.

As described
in Note 1A above, the acquisition of Pimi Israel has been accounted for in a manner similar to a pooling of interests at historical
cost.



C.     	Cash
and cash equivalents

The Group considers
all highly liquid investments, which include short-term bank deposits that are not restricted as to withdrawal or use, and short-term
debentures, with original periods to maturity not exceeding three months, to be cash equivalents.



D.     	Property
and equipment

1.	      Property
and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over
the estimated useful lives of the assets. When asset are retired or otherwise disposed of, the related carrying value and accumulated
depreciation are removed from the respective accounts and the net difference less any amount realized from disposition is reflected
in the statements of operations.



2.	      Rates of depreciation:

%Computers
    33Furniture and office equipment
    7-15

E.     	Impairment
of long-lived assets

The Group's
long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount
of an asset to the future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. The
Group has not recorded any impairment losses in the reported periods.


F-12

    
    
    

PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(cont.)





NOTE
2	      -	      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

F.     	Deferred
income taxes

Deferred income
taxes are determined utilizing the asset and liability method based on the estimated future tax effects of differences between
the financial accounting and the tax bases of assets and liabilities under the applicable tax law. Deferred tax balances are computed
using the tax rates expected to be in effect at the time when these differences reverse. Valuation allowances in respect of the
deferred tax assets are provided for if, based upon the weight of available evidence, it is more likely than not that all or a
portion of the deferred income tax assets will not be realized.




G.     Liability
for employee rights upon retirement

Pimi
Israel's liability for employee rights upon retirement with respect to its Israeli employees is calculated, pursuant to Israeli
severance pay law, based on the most recent salary of each employee multiplied by the number of years of employment, as of the
balance sheet date. Employees are entitled to one month's salary for each year of employment, or a portion thereof. Pimi Israel
makes monthly deposits to insurance policies and severance pay funds. The liability of the Company is fully provided for.

The
deposited funds include profits accumulated up to the balance sheet date. The deposited funds may be withdrawn upon the fulfillment
of the obligation pursuant to Israeli severance pay laws or labor agreements. The value of the deposited funds is based on the
cash surrender value of these policies, and includes immaterial profits/losses.

Severance
expenses for the years ended December 31, 2010, 2009 and 2008, amounted to US$ 8,485, US$ 10,204 and US$ 17,747,
respectively.



H.     Revenue
recognition

Revenues
are recognized when delivery has occurred and there is persuasive evidence of an agreement, the fee is fixed or determinable and
collection of the related receivables is reasonably assured and no further obligations exist.

Revenues from
sales of products are recognized when title and risk and rewards for the products are transferred to the customer.



I.     	Research
and development costs

Research and development expenses
are charged to operations as incurred. Grants received from the Government of Israel for development of approved projects are recognized
as a reduction of expenses when the related costs are incurred (see also J. below).



J.     	Royalty-bearing grants

Royalty-bearing
grants from the Office of the Chief Scientist of the Ministry of Industry, Trade and Labor of Israel (the "OCS") for
funding approved research and development projects are recognized at the time Pimi Israel is entitled to such grants, on the basis
of the costs incurred and included as a reduction of research and development costs. Research and development grants recognized
in 2008 amounted to US$ 30,505 (cumulative since inception US$ 121,753).

As of December 31,
2010, the Company has not accrued any royalties, since no revenues were recognized in respect of the funded projects.


F-13

    
    
    

PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(cont.)





NOTE
2	      -	      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

K.     Loss
per share

Basic loss per share is computed
by dividing loss by the weighted average number of shares outstanding during the year.

In computing diluted loss per share,
basic losses per share are adjusted to reflect the potential dilution that could occur upon the exercise of options issued or granted
using the treasury stock method and upon the conversion of convertible bonds using the if-converted method. The effect of such
exercise or conversion is considered dilutive.



L.     Stock-based
compensation

Stock based compensation to employees
is recognized in the statement of operations as an operating expense, based on the fair value of the award on the date of grant.
The fair value of stock-based compensation is estimated using the Black Scholes option-pricing model. The Group has expensed compensation
costs, net of estimated forfeitures, applying the accelerated vesting method, over the requisite service period.

Stock based payments awarded to
consultants (non-employees) are accounted for in accordance with ASC Topic 505-50, "Equity-Based Payments to Non-Employees".




M.     Fair
value of financial instruments

ASC Topic 825-10 (formerly SFAS
107, “Disclosures about Fair Value of Financial Instruments”) defines financial instruments and requires disclosure
of the fair value of financial instruments held by the Company. The Company considers the carrying amount of accounts receivable,
other receivables, credit from banking institution, accounts payable and other payables, to approximate their fair values because
of the short period of time between the origination of such instruments and their expected realization.



N.     Beneficial
conversion feature on convertible bonds

The Company has considered the
provisions of ASC Topic 815 - 40, "Derivatives and Hedging - Contracts in Entity's Own Equity", and determined
that the embedded conversion feature should not be separated from the host instrument because it qualifies for equity classification.
Furthermore, the Company applied ASC Topic 470 - 20, "Debt - Debt with Conversion and Other Options" which clarifies
the accounting for instruments with beneficial conversion features or contingency adjustable conversion ratios.

The beneficial conversion feature
has been calculated by allocating the proceeds received in financing transactions to the convertible instrument and to any detachable
warrants included in the transaction based and by measuring the intrinsic value of the convertible instrument based on the effective
conversion price as a result of the allocated proceeds.

The amount of the beneficial conversion
feature with respect to convertible bonds was recorded as a discount on the convertible bonds with a corresponding amount credited
directly to equity as additional paid-in capital. After the initial recognition, the discount on the convertible bonds is amortized
as interest expenses over the term of the bonds.




O.     Comprehensive
income (loss)

Comprehensive
income (loss), presented in stockholders' equity (deficit), includes, in addition to loss, gains and losses from the translation
of the results of foreign subsidiary to the reporting currency.


F-14

    
    
    

PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(cont.)





NOTE
2	-	      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)


P.     	Fair
value measurements

The Company applies ASC Topic
820-10 (formerly SFAS 157, “Fair Value Measurements”) which defines fair value, establishes a three-level valuation
hierarchy for disclosures of fair value measurement and requires disclosures for fair value measurements.

Fair value is based on the price
that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date.

As of December 31, 2010, the
Company did not identify any assets or liabilities that are required to be presented on the balance sheet at fair value in accordance
with ASC 820-10.



Q.     	Recently
issued accounting pronouncements

1.	     ASC
Topic 605 - 25 “Revenue Recognition - Multiple-Element Arrangements”

In October 2009, the FASB issued
amendments to the accounting and disclosure for revenue recognition. These amendments, effective for fiscal years beginning on
or after June 15, 2010 (fiscal year 2011 for the Company), with early adoption permitted, modify the criteria for recognizing
revenue in multiple element arrangements and require companies to develop a best estimate of the selling price to separate deliverables
and allocate arrangement consideration using the relative selling price method. Additionally, the amendments eliminate the residual
method for allocating arrangement considerations. The Company does not believe that the adoption of the amendments will have any
material impact on its consolidated financial statements.



2.	     ASC
Topic 820, “Fair Value Measurements and Disclosures”

In January 2010, the FASB updated
the “Fair Value Measurements Disclosures” accounting standard. This update will require (a) an entity to
disclose separately the amounts of significant transfers in and out of Levels 1 and 2 fair value measurements and to describe the
reasons for the transfers; and (b) information about purchases, sales, issuances and settlements to be presented separately
(i.e. present the activity on a gross basis rather than net) in the reconciliation for fair value measurements using significant
unobservable inputs (Level 3 inputs). The update clarifies existing disclosure requirements for the level of disaggregation used
for classes of assets and liabilities measured at fair value and requires disclosures about the valuation techniques and inputs
used to measure fair value for both recurring and nonrecurring fair value measurements using Level 2 and Level 3 inputs.

As applicable to the Company,
the update became effective as of the beginning of the three month interim period ended March 31, 2010, except for the disclosures
of the Level 3 roll forward information, which is required for annual reporting periods beginning after December 15, 2010
and for interim reporting periods within those years.

The adoption of the new guidance
did not have a material impact on the Company’s financial position, results of operations or cash flows.



3.	     ASC
Topic 718, “Compensation - Stock Compensation”

In April 2010, the FASB issued
guidance to clarify that an employee share-based payment award that has an exercise price denominated in the currency of the market
in which a substantial portion of the entity’s equity shares trades should not be considered to contain a condition that
is not a market, performance, or service condition. Therefore, an entity should not classify such an award as a liability if it
otherwise qualifies as equity. The amended guidance is effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2010 (fiscal year 2011 for the Company).

The adoption of the new guidance
is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
F-15

    
    
    

PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(cont.)





NOTE
2	      -	      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)


Q.     	Recently
issued accounting pronouncements (cont.)

4.	     ASC
Topic 310, “Receivables”

In July 2010, the FASB issued
Accounting Standards Update 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables
and the Allowance for Credit Losses ASU 2010-22). ASU 2010-20 provides guidance to enhance disclosures about the credit quality
of a creditor’s financing receivables and the adequacy of its allowance for credit losses. Financial instruments that may
subject the Company to significant concentrations of credit risk consist principally of trade receivable and account receivables.

For public entities, the disclosures
as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010
(these financial statements for the Company). The disclosures about activity that occurs during a reporting period are effective
for interim and annual reporting periods beginning on or after December 15, 2010 (fiscal 2011 for the Company).





NOTE
3	      -	      OTHER CURRENT ASSETS

US dollarsDecember 31,2010
    2009Prepaid expenses
    26,755
    11,751Government of Israel
    17,335
    9,514Others (*)
    10,104
    11,20754,194
    32,472(*)            Related parties
    4,236
    6,677



NOTE
4	      -	      PROPERTY AND EQUIPMENT, NET

US dollarsDecember 31,2010
    2009Computers
    21,924
    21,924Furniture and office equipment
    43,900
    26,63865,824
    48,562Less – accumulated depreciation
    (29,104)
    (23,752)36,720
    24,810In the years ended December 31,
2010, 2009 and 2008, depreciation was US$ 7,433, US$ 7,510, and US$ 7,325, respectively, and additional equipment
was purchased in an amount of US$ 17,262, US$ 13,673 and US$ 9,866, respectively.


F-16

    
    
    

PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(cont.)





NOTE
5	      -	      ACCOUNTS PAYABLE

A.	  Trade

US dollarsDecember 31,2010
    2009Open accounts
    123,658
    50,623Checks payable
    41,071
    2,307164,729
    52,930

B.	  Other

US dollarsDecember 31,2010
    2009Employees and related institutions
    51,458
    43,814Accrued expenses
    234,151
    232,937285,609(*)
    276,751(*)(*)      Related parties
    175,566
    131,603



NOTE
6	      -	      LINE OF CREDIT

As of December 31, 2010, the
Company has an unutilized credit line of approximately US$ 16,906, with an Israeli Bank.





NOTE
7	      -	      CONVERTIBLE BONDS

A.	     On
April 29, 2010, the Company issued convertible bonds in the amount US$60,000 to one of its Stockholders, or its registered assigns,
which can be converted until April 30, 2011 for common shares of the corporation, at the price of US$1.35 per share. The loan
bears interest of 8% per annum. In addition, on April 29, 2010, the Company issued a detachable warrant to purchase 44,444
shares of common stock of the corporation to the same Shareholder, at a purchase price of US$1.35 per share to be exercised until
October 30, 2011.



B.	     On
May 13, 2010, the Company issued convertible bonds in the amount US$20,000 to one of its Stockholders, or its registered assigns,
which can be converted until May 13, 2011 for common shares of the corporation, at the price of US$1.35 per share. The loan bears
interest of 8% per annum. In addition, on May 13, 2010, the Company issued a detachable warrant to purchase 14,815 shares of common
stock of the corporation to the same Shareholder, at a purchase price of US$1.35 per share to be exercised until November 13, 2011.



C.	     On
May 16, 2010, the Company issued convertible bonds in the amount US$79,808 to one of its Stockholders, or its registered assigns,
which can be converted until May 15, 2011 for common shares of the corporation, at the price of US$1.35 per share. The loan
bears interest of 8% per annum. In addition, on May 16, 2010, the Company issued a detachable warrant to purchase 59,117 shares
of common stock of the corporation to the same Shareholder, at a purchase price of US$1.35 per share to be exercised until November
15, 2011.
F-17

    
    
    

PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(cont.)





NOTE
7	      -	      CONVERTIBLE BONDS (cont.)

D.	     As
a result of the above issuances, the Company recorded a total amount of US$ 41,208 in respect of the warrants and a total
amount of US$ 41,207 as beneficial conversion feature in respect of the convertible bonds, as a credit to stockholders' equity
(additional paid in capital).

The fair value of the Warrants was
determined using the Black-Scholes pricing model, assuming a risk free rate of 3%, a volatility factor of 50.00%, dividend yields
of 0% and an expected life of 1.5 years.





NOTE
8	      -	      COMMITMENTS

A.	     Pimi
Israel is committed to pay royalties to the OCS on the proceeds from sales of systems resulting from research and development projects
in which the OCS participates by way of grants. In the first 3 years of sales the Company shall pay 3% out of the sales of the
product which was developed under the research and development projects. In the fourth, fifth and sixth years of sales, the Company
shall pay 4% of such sales and from the seventh year onwards the Company shall pay 5% up to 100% of the amount of grants received
plus interest at LIBOR. Pimi Israel is entitled to the grants only upon incurring research and development expenditures. There
were no future performance obligations related to the grants received from the OCS. As of December 31, 2010, the contingent
liabilities with respect to grants received from the OCS, subject to repayment under these royalty agreements on future sales is
NIS 484,429 (US$ 121,753), not including interest.



B.	     The
Company and its subsidiary currently lease office space at Kibbutz Alonim. The Company paid monthly rent of NIS 2,500 (US$ 638)
plus VAT per month during the years 2010 and 2009. The Company currently pays monthly rent of NIS 3,000 (US$ 845) plus
VAT per month pursuant to a 12 month lease starting on January 1, 2011 and terminating on December 31, 2011.



C.	     On
January 9, 2008, Pimi Israel signed a Consulting Agreement with the Center for Potato Research in a Warm Climate Ltd. (the
"Center") which is controlled by Pimi Israel members of the Advisory board. Under the Agreement, Pimi Israel is obligated
to pay a consulting fee in an amount of NIS 10,000 (US$2,818) a month plus VAT to the Center. Following a capital raise by
Pimi Israel, the monthly consultancy fee was updated to NIS 12,000 (US$3,381) a month. The consultancy period is for three
years commencing January 1, 2008 and may be extended with the approval of both sides. On August 2010 Pimi Israel agreed with the
Centre to reduce its monthly fee to NIS 6,000 (US$1,690).



D.	     Joint venture Agreement
with Vegiesafe LLC

In January 2009, Pimi Israel entered
in a Joint Venture Agreement ("JV") with Vegiesafe LLC ("Vegiesafe") a Limited Liability Company registered
in the USA, and part of a group of companies engaged in consulting to mass-market retailers and major supermarket chains in North
America.

The JV will market, sell and distribute
Pimi Israel's product and technology throughout the USA on an exclusive basis, and throughout Canada and Mexico on a non-exclusive
basis. Vegiesafe shall seek retailers and/or major distributors in the USA, who will recommend to its producer and/or suppliers
to produce and supply the Isopropyl (N-3 – Chlorophenyl) carbamate (CIPC) free potatoes or CIPC free potato products. The
exclusivity of the JV will be subject to fulfillment of certain trigger event and milestones of annual sales. Pimi Israel shall
have 70% of the rights in the JV and will nominate two of its directors, and Vegiesafe will have 30% of the rights and will nominate
one director. In May 2009 Pimi Israel and Vegiesafe mutually agreed that a trigger event as defined in the agreement, has occurred,
thereby obligating, the continuation of the Joint Venture. Accordingly, Vegiesafe’s exclusivity is subject to the following
milestones: Entering a CIPC free branding program with two retailers or distributors prior to September 2010; the treatment of
150,000 tons of potatoes in the season of 2011 (September 2011); the treatment of 350,000 tons of potatoes in the season of 2012
(September 2012).
F-18

    
    
    

PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(cont.)





NOTE
8	      -	      COMMITMENTS (cont.)

D.	     Joint venture Agreement
with Vegiesafe LLC (cont.)

Vegiesafe will invest in the JV
an aggregate amount of US$250,000 which will be used to cover expenses reflected in a budget prepared for the JV and approved by
Vegiesafe and Pimi Israel. Any additional investment in excess of the US$250,000 shall be contributed by the parties to the JV
upon the mutual consent of the parties taking into account the JV's business and needs and will be transferred to the Joint Venture
as follows: 70% by Pimi Israel and 30% by Vegiesafe.

On August 9, 2010 Pimi Israel
signed with Vegiesafe an Addendum to the Agreement dated January 20, 2009, under which Pimi Israel agreed to expand the activities
of the JV in the USA to Sweet Potatoes, Yams, Onions, Cabbage and Mushrooms. In addition, Pimi Israel has agreed to expand the
activities of JV in the USA to citrus fruits, provided Vegiesafe will bear all the costs and expenses related to this activity.

As of December 31, 2010, the
activities of the JV have not been material.





NOTE
9	      -	      SHARE CAPITAL

A.	     Description of the
rights attached to the Shares in the Company

Each share of common stock entitles
the holder to one vote, either in person or by proxy, at meetings of stockholders. The holders are not permitted to vote their
shares cumulatively. Accordingly, the stockholders of the Company's common stock who hold, in the aggregate, more than fifty percent
of the total voting rights can elect all of the directors and, in such event, the holders of the remaining minority shares will
not be able to elect any of such directors. The vote of the holders of a majority of the issued and outstanding shares of common
stock entitled to vote thereon is sufficient to authorize, affirm, ratify or consent to such act or action, except as otherwise
provided by law.



B.	     Stock-option plans

In January
2008, Pimi Israel’s Board of Directors ("Pimi Israel's Board") approved a stock option plan for the grant,
without consideration ("Pimi Israel's plan"), of up to 623,547options ("Pimi
Israel's Options" or "Plan"), exercisable into 623,547 ordinary shares
of NIS 0.01 par value of Pimi Israel to employees officers and directors of Pimi Israel. The exercise
price and vesting period for each grantee of Options will be determined by Pimi Israel's Board and specified in such grantee's
option agreement. The options will vest over a period of 1-16 quarters based on each grantee's option agreement. Any option
not exercised within 10 years after the date of grant thereof expires.

On the April 27, 2009, following
the acquisition of Pimi Israel, the Company adopted the 2009 Share Incentive Plan (the "2009 Share Incentive Plan"),
pursuant to which the Company's Board of Directors is authorized to grant up to 3,000,000 options, exercisable into 3,000,000 shares
of the Company. The purpose of the 2009 Share Incentive Plan is to offer an incentive to employees, directors, officers, consultants,
advisors, suppliers and any other person or entity whose services are considered valuable to the Company, as well as to replace
the Pimi Israel Plan.

Upon the adoption of the 2009
Share Incentive Plan, all options granted under the Pimi Israel Plan were replaced by options subject to the 2009 Share Incentive
Plan on a 1 for 1 basis (561,191 options were replaced). In addition, during 2009 (following the acquisition of Pimi Israel by
the Company), the Company issued 31,176 additional options (with a vesting period of 8 quarters), of which 11,690 options
were forfeited during 2010.
F-19

    
    
    

PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(cont.)





NOTE
9	      -	      SHARE CAPITAL (cont.)

B.	     Stock-option plans (cont.)

Until the date of Pimi Israel's
acquisition by the Company, 436,482 options out of the Pimi Israel plan have been granted to employees and 124,709 options to non-employees.
As stated above, all such options were replaced to options of the Company and are subject to the 2009 Share Incentive Plan. (See
also D. and E. below regarding stock-based compensation to non-employees).

The non-cash compensation relating
to options granted to employees and directors was US$ 24,194 and US$ 53,956 during the years ended December 31,
2010 and 2009, respectively (of which US$ 17,467 and US$ 40,195 was charged to research and development expenses, respectively
and US$ 6,727 and US$ 13,761 was charged to general and administrative expenses, respectively).

The remaining amount of approximately
US$ 6,113 will be charged to the statements of operations in future periods over the vesting period (7 quarters).

The fair value of options granted
under the plan was estimated at the date of grant using the Black-Scholes option pricing model. The following are the data and
assumptions used:

Dividend yield (%)
    0Expected volatility (%) (*)
    50Risk free interest rate (%) (**)
    3Expected term of options (years) (***)
    5-7Exercise price (US dollars)
    US$0.01/0.72/1.37Share price (US dollars)
    US$0.2/0.72/1.37Fair value (US dollars)
    US$0.19-0.7

(*)	       Due
to the fact that until September 2009 the Company was a nonpublic entity, the expected volatility was based on the historic volatility
of public companies which operate in the same industry sector (agricultural chemical industry).

(**)	     The
risk free interest rate represents the risk free rate of US$ zero – coupon US Government Bonds.

(***)	   Due
to the fact that the Company does not have sufficient historical exercise data, the expected term was determined based on the "simplified
method" in accordance with Staff Accounting Bulletin No. 110.



The
following table presents a summary of the status of the grants to employees and directors as of December 31, 2010 and 2009:

Number
    Weighted average exercise priceYear ended December 31,
    2 0 1 0Balance outstanding at beginning of year
    467,658
    0.29Granted
    -
    -Exercised
    -
    -Forfeited
    (11,690)
    1.37Balance outstanding at end of the year
    455,968
    0.26Balance exercisable at the end of the year
    346,846
    0.28
F-20

    
    
    

PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(cont.)



NOTE
9	      -	      SHARE CAPITAL (cont.)

B.	     Stock-option
plans (cont.)

Number
    Weighted average exercise priceYear ended December 31,
    2 0 0 9Balance outstanding at beginning of year
    436,482
    0.21Granted
    31,176
    1.37Exercised
    -
    -Forfeited
    -
    -Balance outstanding at end of the year
    467,658
    0.29Balance exercisable at the end of the year
    206,547
    0.20The aggregate intrinsic value
of the balances outstanding and exercisable as of December 31, 2010 and 2009 is US$ 137,959 and US$ 238,348, respectively.
These amounts represent the total intrinsic value, based on the Company's stock price of US$ 0.6 and US$ 1.35 as of December 31,
2010 and 2009, respectively, less the weighted exercise price. This represents the potential amount received by the option holders
had all option holders exercised their options as of that date.

Range of  exercise prices
    Outstanding at December 31,
    Weighted average remaining contractual life
    Weighted average exercise price
    Exercisable at December 31,
    Weighted average exercise priceUS$
    2010
    years
    
    20100.01
    311,773
    6.92
    0.01
    233,829
    0.010.72
    124,709
    7.86
    0.72
    93,531
    0.721.37
    19,486
    8.5
    1.37
    19,486
    1.37455,968
    
    
    346,846

Range of  exercise prices
    Outstanding at December 31,
    Weighted average remaining
 contractual life
    Weighted average 
exercise price
    Exercisable at December 31,
    Weighted average 
exercise priceUS$
    2009
    years
    
    20090.01
    311,773
    7.91
    0.01
    155,886
    0.010.72
    124,709
    8.92
    0.72
    46,764
    0.721.37
    31,176
    9.5
    1.37
    3,897
    1.37467,658
    
    
    206,547

C.	     Investor's Options of
Pimi Israel

1.	     Exercise of Existing Option
in Pimi Israel

During 2008, Pimi Israel issued
239,193 options with an exercise price of US$ 0.695 per option to several investors, exercisable until June 2009 and issued
769,526 options with an average exercise price of US$ 0.695 per option to several other investors, exercisable until the end
of February 2009.

During the months of January and
February 2009, 201,972 options exercisable until February 2009 were exercised into 201,972 Pimi Israel common shares for a total
amount of US$145,000 at an average price of US$0.721 per share (the original exercise price was denominated in NIS). All such shares
were replaced during the acquisition of Pimi Israel by the Company with shares of the Company and the remaining 567,554 options
exercisable until February 2009 expired. The 239,193 options exercisable until June 2009 were replaced with 239,193 options exercisable
into shares of the Company at the same exercise price and contractual life. Until June 30, 2009, the options were not exercised
and therefore expired.
F-21

    
    
    

PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(cont.)





NOTE
9	      -	      SHARE CAPITAL (cont.)

C.	     Investor's Options of
Pimi Israel (cont.)

2.	     On
January 20, 2009 an investment agreement was entered into between Pimi Israel and Earthbound LLC a Limited Liability Company registered
in Delaware ("EB"). It was agreed that EB will invest the total sum of US$300,000. The investment was paid to
Pimi Israel in tranches as follows: first tranche of US$60,000 was paid on March 15, 2009. The second tranche of US$60,000
was paid on June 15, 2009. The balance of US$180,000 was to be paid in two installments as follows: US$90,000 on September 15,
2009 and US$90,000 on January 15, 2010. On October 19, 2009, EB paid only US$60,000 of the first installment and are
not expected to transfer the remaining US$120,000 (US$30,000 of the first installment and the entire second installment of US$90,000).
Accordingly they received the proportionate amount of allocated shares pro rata from the first installment. EB has received the
allocated shares pro rata to the investments based on the amount actually paid. On August 24, 2010, EB invested an additional
US$30,000 under the Private Placement mentioned in Note 9G and received 50,000 shares of common stock.

As of December 31, 2010,
EB has invested a total sum of US$210,000 and received 185,986 shares of common stock of the Company. As of December 31, 2010,
EB is not expected to pay any amounts under the agreement described above.

In addition, on May 3, 2009,
the Company issued to EB a warrant for the purchase of 145,985 shares of common stock at the price of US$1.37 per share to be exercised
until June 15, 2009. On June 7, 2009, this date was extended to July 31, 2009 and was again extended to August 30,
2009. The options were not exercised and therefore expired.

3.	     
See Note 7 with respect to convertible bonds and warrants issued during the reporting period.



D.	     In
December 2008, a member of the Advisory Board received options under the Plan as part of the compensation for his consulting services.
Pimi Israel has granted the consultant a total sum of 31,176 options to be vested over a period of 8 quarters, each quarter 3,897
shares, provided the advisor will provide Pimi Israel consulting services for a period of 2 years. The exercise price of each
option shall be US$0.72 per share.

The non-cash compensation relating
to options granted to the consultant was US$ 12,870 and US$ 14,595 during the years ended December 31, 2010 and
2009 respectively.



E.	     In
December 2008, a member of the Advisory Board received options under the Plan as part of the compensation for his consulting services.
Pimi Israel has granted the consultant a total sum of 93,532 options to be vested over a period of 16 quarters, each quarter 5,846
options for shares, provided the advisor will provide Pimi Israel consulting services for a period of 4 years. The exercise
price of each option shall be US$0.72 per share.

The non-cash compensation relating
to options granted to consultants was US$ 20,432 and US$ 21,422 during the years ended December 31, 2010 and 2009
respectively.

As of December 31, 2010, the
fair value of the options that are subject to future consulting services is US$ 39,161. This amount will be charged to operations
in future periods over the vesting period (8 quarters).



F.	     On
March 31, 2010, the Company issued 30,000 shares of its common stock to Lampost Capital LLC in consideration for the financial
advisory services that will be rendered to the Company commencing March 1, 2010 and until December 31, 2010.

The advisor will be entitled to
a transaction finder's fee of certain percentage (up to 5%) of the proceeds of a transaction (as defined in the agreement) with
a third party introduced to the Company by the advisor.
F-22

    
    
    

PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(cont.)





NOTE
9	      -	      SHARE CAPITAL (cont.)

F.     (cont.)

In addition, the advisor will
be entitled to a financing fee in the event that the advisor will effect, introduce or participate in a financing transaction of
a debt or equity. In which case, the fee shall be mutually determined between the Company and the advisor at the time of such financing.

During fiscal year 2010, there were
no transactions that entitled the advisors to additional fees.



G.	     On
August 24, 2010, the Company closed a private placement of 335,108 shares of common stock and warrants to purchase 335,108 shares
of common stock to 11 investors, all of whom are existing stockholders of the Company, for aggregate proceeds of US$201,066 pursuant
to a Securities Purchase Agreement and Warrant Agreement. Each unit of the Offering was offered at a purchase price of US$0.60
per Unit, and consisted of one share of common stock and one warrant, exercisable at US$0.90 for a period of two years. In addition,
the Company issued 50,000 shares to the service providers who dealt with these transactions.



H.	     On
December 30, 2010, the Company issued 70,000 shares of common stock to Ashdor Assets Managements and Trusts Ltd. (a trust company
under the control of Mr. Eitan Shmueli), who holds the shares in trust for four attorneys in Sadot & Co Law offices among them
Advocate Eitan Shmueli (who purchased 50,771 shares), as a payment of accounts payable in an amount of US$42,000 (US$0.6 per one
share of common stock) for services received by the Company in past periods.



I.	      On
December 30, 2010, the Company issued 34,013 shares of common stock to Nir Ecology Ltd, one of its major stockholders as a payment
of accounts payable in an amount of US$20,408 (US$0.6 per one share of common stock) for services received by the Company during
2010.



J.	     On
December 30, 2010, the Company issued 25,000 shares of common stock to Mr. Carmel, as a payment of accounts payable in an
amount of US$15,000 (US$0.6 per one share of common stock) for services received by the Company in past periods.



K.	     See
Note 15.


F-23

    
    
    

PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(cont.)





NOTE
10     -	     RESEARCH AND DEVELOPMENT EXPENSES

US dollarsYear ended December 31,
    Cumulative period from January 14, 2004 (date of inception) until December 31,2010
    2009
    2008
    2010Salaries and related expenses
    252,170
    369,028
    210,037
    1,316,870Professional fees
    69,208
    183,197
    104,104
    510,872Materials
    158,990
    55,499
    84,762
    439,502Depreciation
    5,646
    6,910
    6,739
    27,087Travel expenses
    7,165
    73,551
    52,959
    198,416Vehicle maintenance
    43,368
    39,946
    55,424
    304,320Office maintenance and other
    30,568
    35,698
    31,634
    177,202567,115
    763,829
    545,659
    2,974,269Less:   Grants from the OCS (*)
    -
    -
    (30,505)
    (121,753)567,115
    763,829
    515,154
    2,852,516

(*)	See
Note 8A.





NOTE
11     -	     GENERAL AND ADMINISTRATIVE EXPENSES

US dollarsYear ended December 31,
    Cumulative period from January 14, 2004 (date of inception) until December 31,2010
    2009
    2008
    2010Salaries and related expenses
    33,921
    53,779
    93,378
    409,868Professional fees
    236,218
    350,216
    81,230
    516,007Depreciation
    1,787
    601
    586
    3,906Office maintenance and other
    8,573
    3,207
    11,838
    302,041280,499
    407,803
    187,032
    1,231,822



NOTE
12	     -	     INCOME TAX

A.	     Measurement of results
for tax purposes under the Israeli Income Tax (Inflationary Adjustments) Law, 1985 (the “Inflationary Adjustment Law”)

Until
December 31, 2007, Pimi Israel reported for tax purposes in accordance with the provisions of the Inflationary Adjustments
Law, whereby taxable income is measured in NIS, adjusted for changes in the Israeli Consumer Price Index.

Results
of operations for tax purposes are measured in terms of earnings in NIS after adjustments for changes in the Israeli Consumer Price
Index ("CPI"). Commencing January 1, 2008 this law became void and in its place there are transition provisions,
whereby the results of operations for tax purposes are to be measured on a nominal basis.
F-24

    
    
    

PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(cont.)





NOTE
12	     -	     INCOME TAX (cont.)

B.	     Reduction in Israeli
corporate tax rates

On July 25, 2005, the Israeli
Parliament passed an amendment to the Income Tax Ordinance (No. 147) – 2005, gradually reducing the tax rate applicable
to the Company as follows: in 2008 – 27%, in 2009 – 26% and in 2010 and thereafter – 25%.

On July 23, 2009, as part of the
Economic Efficiency Law (Legislative Amendments for the Implementation of the Economic Plan for the years 2009 and 2010) –
2009 (the “Arrangements Law”), article 126 of the Income Tax Ordinance (New Version) – 1961 was amended, whereby
the corporate tax rate would be gradually reduced commencing in the 2011 tax year and thereafter, as follows: 2011 – 24%,
2012 – 23%, 2013 – 22%, 2014 – 21%, 2015 – 20% and 2016 and thereafter – 18%.



C.	     Tax assessments

The Company and Pimi Israel have
not received final tax assessments since their inception.



D.	     Carryforward tax losses

As at December 31, 2010, Pimi
Israel has loss carry forward balances for income tax purposes of US$ 4 million that are available to offset future taxable
income, if any.



E.     
The following is reconciliation between the theoretical tax on pre-tax income, at the tax rate applicable to the Company (federal tax
rate) and the tax expense reported in the financial statements:

US dollarsYear ended December 31,2010
    2009
    2008Pretax loss
    (629,038)
    (1,076,624)
    (602,994)Federal tax rate
    15%
    15%
    15%Income tax computed at the ordinary tax rate
    94,356
    161,494
    90,449Non-deductible expenses
    (1,139)
    (1,128)
    (1,280)Stock-based compensation
    (14,374)
    (23,680)
    (11,817)Tax in respect of differences in corporate tax rates
    62,903
    118,429
    72,359Losses and timing differences in respect of which no deferred taxes were generated
    (141,746)
    (255,115)
    (149,711)-
    -
    -

F.     Deferred
taxes result principally from temporary differences in the recognition of certain revenue and expense items for financial and income
tax reporting purposes. Significant components of the Group's future tax assets are as follows:

US dollarsYear ended December 31,2010
    2009
    2008Composition of deferred tax assets:Provision for employee related obligation
    30,022
    27,378
    28,316Non-capital loss carry forwards
    1,005,347
    834,514
    534,792Valuation allowance
    (1,035,369)
    (861,892)
    (563,108)-
    -
    -F-25

    
    
    

PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(cont.)





NOTE
13	    -	    LOSS PER SHARE

Basic loss per share is computed
by dividing net loss by the weighted average number of shares outstanding during the year.

The net loss and the weighted
average number of shares used in computing basic and diluted loss per share for the years ended December 31, 2010, 2009 and
2008, are as follows:

US dollarsYear ended December 31,2010
    2009
    2008Net loss used for the computation of loss per share
    (629,038)
    (1,076,624)
    (602,994)

Number of sharesYear ended December 31,2010
    2009
    2008Weighted average number of shares used in the computation of basic and diluted earnings per share
    6,764,020
    6,365,330
    5,029,208(*)	The
effect of the inclusion of options and convertible bonds in 2010, 2009 and 2008 is anti-dilutive.





NOTE
14	     -	     RELATED PARTIES

A.	     On
July 12, 2004, Nir Ecology Ltd. ("Nir", a shareholder of the Company), and Machteshim Chemical Works Ltd. ("Machteshim")
entered into an agreement (the "Assignment Agreement"), under which Machteshim transferred to Pimi Israel, all of its
rights in the know-how and/or information relating to the product known as MC-10, which is the previous name of the Pimi Israel's
product SpuDefender (the "Product"). In addition, Machteshim transferred to Pimi Israel all the rights in the patents
and/or patent requests and/or licenses and/or documents related to the Product. Under the Assignment Agreement, Machteshim undertook
to register, at its own expense, all the rights in the patent and/or patent request, relating to the Product, in the countries
set out in an appendix to Assignment Agreement. If Machteshim does not register the patents, it was agreed that Machteshim will
transfer all the required documents to Nir, or any party on its behalf, and Nir, or any party on its behalf, shall carry out the
registration. Under an agreement dated, November 11, 2005 between Nir and Pimi Israel, Nir declared and confirmed that the
know-how and patents and patent application and/or licenses relating to the Product which were transferred to Pimi Israel from
Machteshim under the Assignment Agreement (the "Intellectual Property") belong exclusively to Pimi Israel except for
the right of use of the Intellectual Property for water treatment applications which was granted irrevocably and exclusively on
a world-wide basis to Nir or to its controlling stockholders (or any company in which Nir’s controlling stockholders have
an interest). Nir undertook to sign all necessary documents for the completion of the assignment of the Intellectual Property to
Pimi Israel.

B.	     Nir
has been engaged in treatment of Pimi Israel's patents and IP during the years 2006-2009 and has incurred expenses related to such
services. During 2008, Pimi Israel has agreed to pay to Nir for these services and in reimbursement of the expenses incurred by
it a sum of NIS 100,000 (US$ 26,490). Nir is the agent with respect to the region of the State of Israel for raw materials
utilized by Pimi Israel in the formulation of its products. During the development stage of its formulation, Pimi Israel imported
to Israel the raw materials in order to formulate its products. Under an agreement dated November 11, 2005, Pimi Israel purchased
from Nir such raw materials at cost plus a 10% handling commission. Under this agreement, Pimi Israel paid to Nir as handling commission
an amount of US$1,461 in the year 2007. During 2010 Nir has given Pimi Israel services related to importation of Hazard Materials
for a total sum of NIS 73,000 (US$20,408).

See also Note 9I.
F-26

    
    
    

PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(cont.)





NOTE
14	     -	     RELATED PARTIES (cont.)

C.	     Until
December 31, 2009, Nir and Pimi Israel shared the same office space in Kibbutz Alonim. Pimi Israel subleased to Nir 10 square
meters of office space for US$75 per month.

D.	     Mr. Nimrod
Ben Yehuda and Mr. Eitan Shmueli (the controlling shareholder of Omdan Consulting and Instructions Ltd. ("Omdan"),
one of the stockholders of the Company), have guaranteed to Bank Hapoalim the line of credit to Pimi Israel.

E.	     Pimi
Israel entered into an Employment Agreement on November 27, 2006 with Mr. Yuval Saly regarding his employment as the CEO of
Pimi Israel. On October 29, 2008, Pimi Israel entered into an Addendum to the Employment Agreement under which Mr. Saly is entitled
to total compensation of NIS 50,000 (US$14,088) plus VAT per month from the month of October 2008. This consideration is paid
against VAT receipts and covers all social benefits, car maintenance and cellular phone expenses of Mr. Saly. Mr. Saly has taken
upon himself the payment for the social security, the pension fund and any other social insurance and benefits.

In August
2010, Pimi Israel agreed with Mr. Saly to reduce his employment and therefore decrease the compensation to be paid to him, to NIS 30,000
(US$8,673) per month, until at such time the Company was able to raise additional funds.

In February
2011, Pimi Israel agreed to increase his payment to NIS 40,000 (US$11,564) per month and in March 2011 Pimi Israel agreed
with him that he return to a full time job (180 hours per month) and that the compensation shall return to NIS 50,000 (US$14,088)
per month.

Pimi Israel
paid Mr. Saly the total sum of NIS 418,212 (US$112,121), NIS 655,882 (US$167,317) and NIS 437,400 (US$119,715) in
2010, 2009 and 2008, respectively, as consideration under his employment agreement.

In addition, Mr. Saly is
entitled to options under the Plan in the total sum of 311,773 options for 311,773 ordinary shares to be vested over 16 quarters
starting in December 2007 with 19,486 shares vesting each quarter. The exercise price per ordinary share is US$0.01.

F.	     According
to an agreement dated November 13, 2005, as amended on November 16, 2006, and of April 28, 2009, Mr. Ben Yehuda has been appointed
as Pimi Israel's CTO. Mr. Ben Yehuda is entitled to a monthly gross salary of NIS 25,000 (US$7,044), plus benefits such as
executive insurance, education fund at the rate of 10 % (7.5% contribution by us), and disability insurance. Furthermore, Mr. Ben
Yehuda is entitled to a credit card for approved expenses, including traveling expenses, a fully paid rental car (including taxes
assessed for private use) and a mobile phone which will be fully covered by the Company.

In August
2010, Pimi Israel agreed with Mr. Ben Yehuda that his gross salary will be reduced to NIS 15,000 per month until additional
funds can be raised.

In February 2011, Pimi Israel
agreed with Mr. Ben Yehuda that his salary will be set again to NIS 25,000 per month.

Pimi Israel paid Mr. Ben Yehuda
the total sum of NIS 335,337 (US$89,913), NIS 422,904 (US$107,884) and NIS 430,441 (US$119,900) in 2010, 2009 and
2008, respectively.

G.	     Pimi
Israel has entered into a Personal Service Agreement in November 2008 with accountant Avi Lifshitz. Mr. Lifshitz and Ad Wise Ltd.,
a company under the control of Mr. Lifshitz ("Ad Wise"), under which Ad Wise and Mr. Lifshitz are entitled together to
a total consideration of NIS 10,000 (US$2,818) plus VAT per month as from October 2008 and starting July 1, 2009 additional
NIS 1,667 (US$470) per month. Until the date of which Pimi Israel raises capital from an external investor for a sum exceeding
US$1,000,000, Pimi Israel shall pay Mr. Lifshitz and Ad Wise, on behalf of the consideration, a sum of NIS 5,000 (US$1,409)
plus VAT, and the balance of the consideration shall accrue to the credit of Mr. Lifshitz and Ad Wise and shall be paid to them
after the raising of capital as aforesaid.

Pimi Israel expenses amounted
to the total sum of NIS 132,281 (US$ 35,464), NIS 136,284 (US$34,766) and NIS 30,000 (US$7,891) in 2010, 2009
and 2008, respectively.
F-27

    
    
    

PIMI AGRO CLEANTECH, INC.

(A Development
Stage Company)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(cont.)





NOTE
14	     -	     RELATED PARTIES (cont.)

G.	     (cont.)

In addition, the CFO is entitled
to options under the 2000 Plan under which he will be entitled to 62,355 options for 62,355 Company shares to be vested over 16
quarters as of October 1, 2008, with 3,897 shares vesting each quarter. The exercise price per ordinary share is US$0.72.

H.	     Legal
Services

Sadot & Co. Law offices in
which Mr. Eitan Shmueli (a controlling shareholder of Omdan Consulting and Instructing Ltd. ("Omdan"), one of the Company
stockholders), is a partner, has a retainer and other consulting agreements with Pimi Israel. Sadot & Co. Law offices has received
fees from Pimi Israel (as legal fees), NIS 95,062 (US$25,486), NIS 428,454 (US$109,299) and NIS 91,142 (US$23,250),
respectively and in the years 2010, 2009 and 2008, respectively.

See also Note 9H.

I.	     Chairman
of the BOD

In August 2010, the Company entered
into an oral agreement with Mr. Alon Carmel, who serves as the Company's Chairman of the Board and is one of its major stockholders,
pursuant to which Mr. Carmel (or a company under his control) will receive US$3,000 per month in consideration for services rendered
as Chairman of the Board.

See also Note 9J.





NOTE
15	     -	     SUBSEQUENT EVENTS

A.	     On
December 28, 2010, the Company entered into an Agreement with a private individual residing in Israel or a company under his control
(the "Investor"). Pursuant to the Agreement, the Investor shall invest a minimum of US$100,000 and up to an aggregate
of US$400,000, at a purchase price of US$0.80 per share. The private placement shall take place in four tranches, provided an amount
beyond the minimum is financed. The initial tranche of US$50,000 was made by the Investor on January 3, 2011. The second tranche
in the sum of US$50,000 was made on February 5, 2011 and the third tranche of the sum of US$50,000 was made on March 10, 2011.
In each such tranche, the Company issued the Investor 40,000 shares. Additional tranche may take place on April 30, 2011. In addition,
for each share of common stock purchased, the Investor is entitled to receive warrants having an exercise price of US$0.80, exercisable
for a period of two years from the date of issuance.

B.	     On
January 24, 2011, the Company entered into an Agreement with three private individuals residing in Israel (the “Investors”).
Pursuant to the Agreement, the Investors shall invest a minimum of US$50,000 and up to an aggregate of US$500,000, at a purchase
price of US$0.80 per share. For each share of common stock purchased, the Investors shall receive a warrant with an exercise price
of US$0.80, exercisable until December 31, 2012. The private placement shall take place in five tranches, provided an amount beyond
the minimum is financed. The first 3 tranches of US$50,000 each were made by the Investors on January 27, 2011, February 16, 2011
and March 16, 2011 respectively. The remaining tranches shall take place on or prior to April 15, 2011, and May 15, 2011.

C.	     On
March 2, 2011, the Company entered into subscription agreements with 4 individuals residing in Israel for the total sum of US$100,000
at a purchase price of US$0.80 per share. For each share of common stock purchased, the investor received a warrant with an exercise
price of US$0.80, exercisable until March 2, 2013.



=============================

===============




F-28

    
    
    
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE



None.



ITEM 9A. CONTROLS AND PROCEDURES



Not applicable



ITEM 9A(T). CONTROLS AND PROCEDURES



Not applicable.



ITEM 9B. OTHER INFORMATION



None.

28

PART III



ITEM 10. DIRECTORS, OFFICERS AND CORPORATE GOVERNANCE.



The following table sets forth the names and ages of the members
of our Board of Directors and our executive officers and the positions held by each, as of December 31, 2010. A majority vote
of the directors who are in office is required to fill vacancies. Each director is elected for the term of one year, and until
his or her successor is elected and qualified, or until his or her earlier resignation or removal.



Name
    
    Age
    
    PositionAlon Carmel
    
    55
    
    Chairman of the BoardYouval Saly
    
    53
    
    Chief Executive OfficerAvi Lifshitz
    
    53
    
    Chief Financial OfficerNimrod Ben Yehuda*
    
    58
    
    Chief Technology Officer, DirectorDoron Shorrer (1)
    
    57
    
    Director* Aside from Mr. Nimrod Ben Yehuda, there is no other director who
is also an officer or employee of the Company.

(1) On January 16, 2011, Mr. Doron Shorrer resigned as a member
of the board of directors of the Company.



Alon Carmel



Mr. Alon Carmel is the Chairman of the Board of Directors, and has
served as such since September 2008. Alon Carmel co-founded Spark Networks (AMEX:LOV) in 1998, which created and runs such websites
as JDate.com, Cupid.co.il, AmericanSingles.com, among others. Prior to co-founding Spark Networks, Mr. Carmel enjoyed a successful
career in real estate from 1983 until 1991. Since leaving Spark Networks in 2005, Mr. Carmel has invested in a wide range of early
stage start-ups which are mainly internet technologies. He is a graduate of the Technion Institute, Haifa, Israel as practical
civil engineering. Mr. Carmel is also member of the board of Spateva LTD, InterLogic LTD, Pipl Search LTD, My League LTD Alefo
Interactive Ltd., Audiogate Technologies LTD, Clicknlink.com Inc, Jlove LLC and Rodeo Consulting LLC.



Youval Saly



Mr. Youval Saly is our Chief Executive Officer, and joined the Company
in November 2007. In 2007, prior to joining the company he was the CEO of High-Tech Lipids LTD a Biotech Company. From 2005 to
2007 Mr. Saly was the founder and served as CEO of Aqua Solutions Ltd which developed detergent-free industrial laundry systems.
From 2002 until 2005 Mr. Saly served as the marketing and sales manager in Europe at Galam Ltd. a company which is an Israeli market
leader in the manufacture of Fructose, Glucose and Starch. From 2001 until 2002 Mr. Saly was the vice president of marketing and
sales of Spandex Israel Ltd- a textile company. Previously Mr. Saly served as the marketing and sales manager of Haifa chemicals
Ltd from 1997-2001, and was the Chief Technologist of “Pri Hagalill”- the biggest fruit and vegetable processor in
Israel, from 1992 until 1997. From 1987 until 1992 Mr. Saly was a head technologist in "Alkol" and from 1985-1987 served
as a technologist in "Pri Haemek". Youval Saly earned a B.Sc. in Biotechnology and Food Engineering from Technion Institute,
Haifa, Israel.



Avi Lifshitz



Mr. Avi Lifshitz is our Chief Financial Officer, and brings to Pimi
more than 25 years of experience in accounting, finance and business management. Mr. Lifshitz is serving for 16 years as CFO of
Jordan Valley Semiconductors Ltd which is preparing its financial statement in accordance with the US GAAP. He is the Secretary
of Jordan Valley Semiconductors UK Ltd and Jordan Valley Semi Conductors Gmbh (Germany). He has joined Meiri-Lifshitz Accounting
firm in 1990 and is a partner since then. Mr. Lifshitz is a director in Bede Scientific Inc (US) in Efrat Consultants Ltd (ISR)
and in Ed-Wise Ltd (ISR). Mr. Lifshitz teaches at the Technion-Israel Institute of Technology where he won an award for excellence
in 1998. He is certified as a public accountant in Israel, and holds a B.A. in economics and accounting from Haifa University.



Nimrod Ben-Yehuda



Mr. Nimrod Ben-Yehuda is our Chief Technology Officer responsible
for developing the Company’s technology, and also serves as a member of our Board of Directors. During the past 18 years,
Mr. Ben-Yehuda has been a leading entrepreneur in the field of environment friendly solutions using STHP in many applications.
He is the Co-Founder of Pimi and was the inventor of its IP and products. From 1986-1989 served as Joint CEO of NitroJet LTD, from
1989 until 2003 served as CEO of Nir Ecology LTD which develops ecological solutions for veterinary, food industries and hospitals
and from 1993 until 2003 serves as joint CEO and CTO of Swissteril Water Purifications Ltd, which developed a protocol for purification
of water. Since 2003 until today he serves as CTO of Pimi Israel.





29

Doron Shorrer



Mr. Doron Shorrer was a member of our Board of Directors. Until
January 2011 Mr. Shorrer is also currently Chairman and CEO of Shorrer International Ltd. (Investment and financial consulting)
in which he has been serving in such capacities since 1998, he is a member of the board of Goldbond Ltd (traded on Tel-Aviv Stock
Exchange), Bank Massad Ltd (banking) and B. Yair Ltd (traded on Tel-Aviv Stock Exchange) Since 2009 and is a member of the board
of AIG and Omer Insurance Companies in Israel since 2006, 2008 respectively. From 2005-2007 Mr. Shorrer was Chairman of Lito Group
(industrial). From 2003 until 2006 Mr. Shorrer was the Chairman of Pluristem Life System, Inc. (bio-technology) (traded on
Nasdaq), and he still serves as member of the board of this company. From 2004 -2005 Mr. Shorrer served as the Deputy Chairman
of Milomor (construction), and from 2002-2004 Mr. Shorrer served as Chairman of the Israeli Phoenix Insurance Company. Mr. Shorrer
has a BA in Economics and Accounting and an MA in Business Administration from the Hebrew University of Jerusalem; He is a Certified
Public Accountant.





ITEM 11. EXECUTIVE COMPENSATION



Summary Compensation Table



The following table sets forth information regarding compensation
paid to our principal executive officer, principal financial officer, and our highest paid executive officer, all of whose total
annual salary and bonus for the years ended December 31, 2010 and 2009 exceeded $100,000:



SUMMARY COMPENSATION TABLEName and principal position
    
    
    Salary
    
    
    Bonus
    
    
    Stock Awards
    
    
    
    Option awards (4)
    
    
    Non-equity incentive plan compensation
    
    
    Change in pension value and non qualified deferred compensation
    
    
    All Other Compensation
    
    
    TotalYear
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    
    ($), (a)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)Youval Saly,
    2010
    
    
    112,121
    
    
    
    -
    
    
    
    -
    
    
    (6)
    
    7,062
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    119,183Chief Executive Officer (1)
    2009
    
    
    167,317
    
    
    
    
    
    
    
    
    
    
    (6)
    
    14,511
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    181,828Avi Lifshitz,
    2010
    
    
    35,464
    
    
    
    -
    
    
    
    -
    
    
    (7)
    
    4,961
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    40,425Chief Financial Officer (2)(5)
    2009
    
    
    34,766
    
    
    
    -
    
    
    
    -
    
    
    (7)
    
    10,133
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    44,899Nimrod Ben-Yehuda,
    2010
    
    
    89,913
    
    
    
    -
    
    
    
    -
    
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    13,158
    
    
    
    103,071Chief Technology Officer (3)
    2009
    
    
    107,884
    
    
    
    -
    
    
    
    -
    
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    11,617
    
    
    
    119,501

(1) Mr. Saly has started to be employed by us on December 2007.(2) Mr. Lifshitz has started to be employed by us on November 2008.(3) Mr. Ben Yehuda has started to be employed by us in 2005.(4) For the assumptions made in the valuation of the options see
note 9B. to the financial statements.

(5) An amount in the sum of $47,980 ($20,132 in 2009) was not paid
and was recorded as a loan Mr. Lifshitz granted the Company.

(6) Mr. Saly was granted 311,773 options for 311,773 Common Stock
shares to be vested in 16 quarters starting as of December 2007, each quarter 19,486 shares.

(7) Mr. Lifshitz was granted 62,355 options for 62,355 Common Stock
shares to be vested in 16 quarters starting as of October, 2008 each quarter 3,897 shares.


30

Youval Slay-CEO



Pimi entered into an Employment Agreement on November 27th, 2006
with Mr. Saly. On October 29, 2008, we entered into an Addendum to the Employment Agreement. Mr. Saly is entitled to total
compensation of 50,000 NIS ($14,088) plus VAT per month from the month of October 2008. This consideration is paid against VAT
receipt and covers all social benefits, car maintenance and cellular phone expenses of Mr. Saly. Mr. Saly has taken upon himself
the payment for the social security, the pension fund and any other social insurance and benefits. On August 2010, we agreed with
Mr. Saly we would pay him 30,000 NIS ($8,673) per month and than he could work at another job until we shall raise additional funds.
On February 2011 we agreed to raise his payment to 40,000 NIS ($11,564) per month, and on March 2011 we agreed with him he will
return to full time job (180 hours per month) and he will be paid 50,000 NIS ($14,088) per month. Pimi has paid Mr. Saly the total
sum of 418,212 NIS ($112,121) and 655,882 NIS ($167,317) in 2010 and 2009 respectively, as consideration under his employment agreement.
Until August 2010 and starting March 2011,Mr. Saly devotes approximately 180 hours a month in connection with his full-time employment
with the Company, and devotes 100% of his working time to the business and affairs of the Company.



In addition the CEO is entitled to options under the 2009 Share
Incentive Plan in the total amount of 311,773 options for 311,773 common stock shares to be vested in 16 quarters starting as of
December 2007. Vesting of 19,486 shares each quarter. The exercise price per each common stock stave share is 0.01 US$.



Nimrod Ben Yehuda - CTO



According to an agreement dated November 13, 2005, as amended on
November 16, 2006, and of April 28, 2009, Mr. Ben Yehuda has been appointed as Pimi's CTO. Mr. Ben Yehuda is entitled to a monthly
gross salary of 25,000 NIS ($7,044), plus benefits such as executive insurance, education fund at the rate of 10 % (7.5% contribution
by us), and disability insurance. Furthermore, Mr. Ben Yehuda is entitled to a credit card for approved expenses, including traveling
expenses, a fully paid rental car (including taxes assessed for private use) and a mobile phone which will be fully covered by
the Company. Mr. Ben Yehuda devotes approximately 180 hours a month in connection with his full-time employment with the Company,
and devotes 100% of his working time to the business and affairs of the Company. On August 2010 we agreed with Mr. Ben Yehuda that
his gross salary will be reduced to 15,000 NIS per month until additional funds will be raised. On February 2011, we agreed with
Mr. Ben Yehuda that his salary will be set again to 25,000 NIS per month. Pimi has paid Mr. Ben Yehuda the total sum of 335,337
NIS ($89,913) and 422,904 NIS ($107,884) and in 2010 and 2009, respectively.



Avi Lifshitz- CFO



Pimi has entered into a Personal Service Agreement in November 2008
with accountant Avi Lifshitz. Mr. Lifshitz and Ad wise Ltd., a company under the control of Mr. Lifshitz ("Ad wise"),
under which Ad Wise and Mr. Lifshitz are entitled together to a total consideration of 10,000 NIS ($2,818) plus VAT per month as
from October 2008,and starting July 1,2009 additional 1,667 NIS ($470) per month. Until the date of which Pimi raises capital from
an external investors for a sum exceeding $1,000,000, Pimi shall pay Mr. Lifshitz and Ad wise, on behalf of the consideration,
a sum of 5,000 NIS ($1,409) plus VAT, and the balance of the consideration shall accrue to the credit of the Mr. Lifshitz and Ad
wise and shall be paid to them after the raising of capital as aforesaid. The consideration to Mr. Lifshitz is paid as salary
and the consideration to Ad wise is paid against VAT receipt, the consideration shall not exceed the amount of 10,000 NIS ($2,818)
plus VAT until June 30, 2009, and 11,667 NIS ($3,091) starting July 1, 2009. The consideration covers taxes, national insurance,
pension fund and/or any other social insurance and/or benefits, car maintenance and cellular phone expense. Pimi expenses amounted
to the total sum of 132,281 NIS ($35,464) and 136,284 NIS ($34,766) in 2010 and 2009, respectively, under this Personal Service
Agreement. Mr. Lifshitz's works approximately 36 hours a month in connection with the business and affairs of the Company and his
position is considered to be part-time. Mr. Lifshitz devotes approximately 20% of his working time to the business of the Company.



In addition the CFO is entitled to options under the 2009 Share
Incentive Plan under which he will be entitled to 62,355 options for 62,355 company shares of common stock to be vested in
16 quarters as of October 1, 2008 with 3,897 shares vesting each quarter. The exercise price per each Ordinary share is U.S $0.72
per share.



DIRECTOR COMPENSATION



The Company’s directors, who are not part of the controlling
shareholders, were granted options. The former director Mr. Doron Shorrer was granted under the Company’s 2009 Share Incentive
Plan in exchange for the cancellation of options under the Pimi Israel Plan, and the former Director Mr. Rami Triger to whom options
were granted on July 1, 2009, under the Company’s 2009 Share Incentive Plan.


31

Name
    Year
    Fees
        Earned
 or Paid in Cash
        ($)
    Stock
        Awards
        ($)
    
    Option
        Awards
        ($)(3)
    
    Non-Equity
    Incentive Plan Compensation
 ($)
    Change
    in Pension Value and Nonqualified Deferred 
Compensation Earnings
    All
        Other Compensation
        ($)
    
    Total
        ($)Doron Shorrer (1)
    2010
    
    None
    
    
    1,783
    
    None
    None
    None
    
    
    1,7832009
    None
    None
    
    
    8,333
    
    None
    None
    None
    
    
    8,333Rami Triger (2)
    2010
    None
    None
    
    8,605
    
    None
    None
    None
    
    8,6052009
    None
    None
    
    12,035
    
    None
    None
    None
    
    12,035



(1)
    Mr. Shorrer was granted on December 1, 2008, 31,176 options for 31,176 Ordinary shares to be vested in 8 quarters as of December, 2008 each quarter 3,897 options. Until his resignation from the board Mr. Shorrer has been vested with 31,177 options.

(2)
    Mr. Triger was granted on July 1, 2009- 31,176 options for 31,176 common shares to be vested in 8 quarters as of July 1, 2009, each quarter 3,897 options. Therefore, in 2008 Mr. Triger did not receive any options. Until his resignation from the board Mr. Triger has been vested with 19,486 options.

(3)
    The fair value of options granted under the plan was estimated at the date of grant using the Black-Scholes option pricing model. The following are the data and assumptions used:

Dividend yield (%)
    0Expected volatility (%) (*)
    50Risk free interest rate (%) (**)
    3Expected term of options (years) (***)
    5-7Exercise price (US dollars)
    0.01/0.72/1.37Share price (US dollars)
    0.2/0.72/1.37Fair value (US dollars)
    0.19-0.7

(*)
    Due to the fact that the Company was a nonpublic entity, the expected volatility was based on the historic volatility of public companies which operate in the same industry sector (agricultural chemical industry).

(**)
    The risk free interest rate represents the risk free rate of US$ zero – coupon US Government Bonds.

(***)
    Due to the fact that the Company does not have historical exercise data, the expected term was determined based on the "simplified method" in accordance with Staff Accounting Bulletin No. 110.

Doron Shorrer- Former Director



Mr. Shorrer has been granted options under the ESOP for Israel for
2008 in the total amount of 31,176 options for 31,176 Ordinary shares to be vested in 8 quarters as of December, 2008 each quarter
3,897 shares. The exercise price per each Ordinary share is $0.72 per share. The options were converted into 31,176 options for
31,176 common shares of our company under our 2009 Share Incentive Plan with the exercise price of $0.72 for each common share,
and the same vesting period.



Rami Triger- Former Director

Mr. Triger was granted to options under the Company's 2009 Share
Incentive Plan in the total amount of 31,176 options for 31,176 common shares to be vested in 8 quarters as of July 1, 2009, each
quarter 3,897 common shares. The exercise price per each Ordinary share is $1.37 per common share. Until his resignation Mr. Triger has been vested with 19,486 options.



Business Advisory Board



On December 31, 2010 the Business Advisory Board was composed of
two select individuals who have significant business expertise that the company relies on. Professor Avi Nachmias is a leading
figure in the global potato industry. He served as advisor to Nestle, MacDonald's, and Marks & Spencer, and to leading potato
processing companies in South America and South Africa. Prior he was Chief Deputy of the Vulcani Research Center of Israel's Ministry
of Agriculture.



Professor Ilan Chet is a prominent, leading microbiology scientist.
Prof. Chet served as President of the Weizmann Institute of Science (2002-2006). Prof. Chet earned numerous high-level awards and
honors for his research. In 2001, his research on extensive control of plant diseases


32

using environment-friendly microorganisms,
earned him a nomination for the Nobel Prize. He is a professor at the Hebrew University of Jerusalem. On January 2011, the company
terminated the position of Professor Chet as member of the Business Advisory Board.



Name
        (1)
    Year
    
    Fees Earned or Paid in Cash
        ($)
    
    
    Stock Awards
        ($)
    
    
    Option
        Awards
        ($)(1)
    
    
    Non-Equity Incentive Plan Compensation ($)
    
    
    Change in Pension Value and Nonqualified Deferred Compensation Earnings
    
    
    All Other Compensation
        ($)
    
    
    Total
        ($)Prof. Avi Nachmias (2)
    2010
    
    
    17,814
    
    
    
    -
    
    
    
    12,870
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    30,6842009
    
    
    40,550
    
    
    
    -
    
    
    
    14.595
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    55,145Prof. Ilan Chet (3)
    2010
    
    
    
    
    
    
    
    
    
    
    20,432
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    20,4322009
    
    
    
    
    
    
    
    
    
    
    21,422
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    21,422

(1)
    For the assumptions made in the valuation of the options, see the table in "Directors Compensation".(2)
    Prof. Nachmias was granted 31,176 options for 31,176 Common stock shares to be vested in 8 quarters, each quarter 3,897 options, commencing on December 1, 2008.(3)
    Prof. Chet was granted 93,532 options for 93,532 Common Stock shares to be vested in 16 quarters, each quarter 5,846 options commencing on December 1, 2008.

Prof. Avi Nachmias- Member of the Advisory Board



On January 9, 2008 Pimi Israel signed a Consulting Agreement with
the Center for Potato Research in a Warm Climate Ltd (the "Center") which is controlled by Prof. Avi Nachmias, who is
a member of our advisory board. Under the Consulting Agreement, Pimi Israel is obligated to pay a consulting fee in an amount of
10,000 NIS ($2,818) a month plus VAT against a tax invoice to the Center. Following a capital raise by the Company, the monthly
consultancy fee shall be 12,000 NIS ($3,179) a month. The consultancy period is for three years commencing January 1 st 2008 and
may be extended with the approval of both sides. In 2010 we agreed with Prof. Nachmias to reduce his consulting scope and fees,
and total amounts paid were $17,814 and $40,550 for the years 2010 and 2009 respectively.



Prof. Nachmias received options under Pimi Israel’s 2008 ESOP
under an option agreement dated January 22, 2009. Pimi has granted Prof. Nachmias a total amount of 31,176 shares to be vested
over a period of 8 quarters, each quarter 3,897 shares, provided he is engaged as a Pimi consultant, as of December 1, 2008, for
a period of 8 quarters. The exercise price per each common share is $ 0.72 per share.



Prof. ILan Chet - Member of the Advisory Board



On January 10, 2009, Prof. Chet received Options under Pimi Israel’s
2008 ESOP. Pimi granted to Prof. Chet a total of 93,532 options of common stock to be vested for a period of 16 quarters,
each quarter 5,846 options for shares, provided he is engaged as Pimi consultant, as of December 1, 2008, for a period of 16 quarters.
The exercise price per each ordinary share is $0.72 per share. Until we terminated our consulting agreement with Prof. Chet he
has been vested 46,766 options.



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS



The following table sets forth the number of and percent of the
Company's common stock beneficially owned by:



·
    all directors and nominees, naming them,·
    our executive officers,·
    our directors and executive officers as a group, without naming them, and·
    persons or groups known by us to own beneficially 5% or more of our Common Stock or our Preferred Stock having voting rights:


The percentages in the table have been calculated
on the basis of treating as outstanding for a particular person, all shares of our capital stock outstanding on March 31, 2011,
and all shares of our common stock issuable to that person in the event of the exercise of outstanding



33

options and other derivative
securities owned by that person which are exercisable within 60 days of March 31, 2011. Except as otherwise indicated, the
persons listed below have sole voting and investment power with respect to all shares of our capital stock owned by them.



Name and address of owner
    
    Title of Class
    
    Capacity with Company
    
    Number of Shares Beneficially Owned (1)
    
    Percentage of Class (2)Alon Carmel (3)
        c/o Pimi Agro CleanTech, Inc.
        Kibutz Alonim, PO Box 117, Hutzot Alonim 30049
        Israel
    
    Common Stock
    
    Chairman of the Board
    
    2,512,895
    
    24.33%Youval Saly
        c/o Pimi Agro CleanTech, Inc.
        Kibutz Alonim, PO Box 117, Hutzot Alonim 30049
        Israel
    
    Common Stock
    
    Chief Executive Officer
    
    311,773
        (4)
    
    2.42%Avi Lifshitz
        c/o Pimi Agro CleanTech, Inc.
        Kibutz Alonim, PO Box 117, Hutzot Alonim 30049
        Israel
    
    Common Stock
    
    Chief Financial Officer
    
    62,355
        (5)
    
    0.37%Nimrod Ben-Yehuda (3)(6)
        c/o Pimi Agro CleanTech, Inc.
        Kibutz Alonim, PO Box 117, Hutzot Alonim 30049
        Israel
    
    Common Stock
    
    Chief Technology Officer, Director
    
    1,443,075
    
    13.78%Avi Nachmias
        c/o Pimi Agro CleanTech, Inc.
        Kibutz Alonim, PO Box 117, Hutzot Alonim 30049
        Israel
    
    Common Stock
    
    Chief Research Officer, Advisory Board
        Member
    
    31,177 (8)
    
    0.30%Omdan Consulting and InstructingLtd (3) (7)
        44 Nachal Amud St. Ramat-Hasharon, Israel, 47204
    
    Common Stock
    
    Shareholder
    
    905,533
    
    8.40%All Officers and
        Directors As a Group
        (6 persons)
    
    Common Stock
    
    
    
    5,266,808
    
    49.6%

(1)
    This column represents the total number of votes each named stockholder is entitled to vote upon matters presented to the shareholders for a vote.

(2)
    Applicable percentage ownership is based on 10,474,145 shares which are comprised of 7,660,964 shares of Common Stock outstanding as of March 31, 2011, together with securities exercisable or convertible into shares of Common Stock within 60 days of March 31, 2011, for each stockholder. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of Common Stock that are currently exercisable or exercisable within 60 days of March 31, 2011, are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

(3)
    For the terms of Voting Agreement between Alon Carmel, Nir Ecology and Omdan Consulting and Instruction Ltd see Certain Relationship and Related Transactions.

(4)
    This number represents the amount of options which become vested under Mr. Saly option agreement until May 31, 2010.

(5)
    This number represents the amount of options which become vested under Mr. Lifshitz option agreement until May 31, 2010.

34

(6)
    The shares are owned by Nir Ecology Ltd, a company under the control of Mr. Ben Yehuda and are held in trust for Nir Ecology by a trustee.

(7)
    A company owned by Mr. Eitan
Shmueli and his wife Mrs. Vivy Shmueli. Mr. Shmueli was the Co-Founder of Pimi Israel and serves as Pimi’s legal Advisor in Israel. This number is comprised of 859,762
shares owned by Omdan and 50,771 shares owned by Mr. Eitan Shmueli, which were purchased on December 30, 2010. The shares owned by Omdan and Mr. Shmueli are held by trustees.(8)
    This number represents the amount of options which becomes vested under Prof.
Nachmias option agreement until May 31, 2010.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE



Shareholder Agreement



Our shareholders Alon Carmel ("Carmel
"), Omdan Consulting and Instructing Ltd. a company under the control of Advocate Eitan Shmueli and his wife Mrs. Vivy Shmueli
("Omdan"), Nir Ecology Ltd. ("Nir") a company under the control of Mr. Nimrod Ben Yehuda
our CTO, by Ashdor Asset Management and Trust Ltd. (that held the shares in trust for Nir) (collectively the "Shareholders"),
entered into an agreement on February 24, 2009 (the "Shareholders Agreement "). Nir is a company under the control
of our director, Mr. Nimrod Ben-Yehuda. Under the Shareholders Agreement, the Shareholders have agreed to vote their shares in
the annual general meeting of the shareholders. Omdan and Nir will vote for 2 directors which will be proposed by Mr. Carmel. Mr.
Carmel and Nir will vote for one director which will be proposed by Omdan, and Mr. Carmel and Omdan will vote for one director
which will be proposed by Nir. The parties agreed that in case Mr. Carmel will hold less than 15% and more than 7.5% of Pimi's
share capital, Omdan and Nir shall vote for only one director which will be proposed by Mr. Carmel. In case the holdings of one
of the parties will be less than 7.5% of Pimi's share capital, the other two parties will not be obligated to vote for the director
proposed by this party. In case, the number of directors appointed by the parties will be more than 4 directors, the parties will
appoint an even number of directors. In case, six directors will be appointed, Mr. Carmel will propose the fifth director and Omdan
and Nir will vote for him, Nir will propose the sixth director and Mr. Carmel and Omdan will vote for him. In case eight directors
will be appointed, Mr. Carmel will propose the seventh director and Omdan and Nir will vote for such director. Omdan will propose
the eighth director and Mr. Carmel and Nir will vote for him. In case there will not be unanimous consent between the above shareholders
with regard to the identity of an outside director, the shareholders will vote against the appointment of such external director
in any general meeting it is brought for election. In an addendum to the Shareholders Agreement dated April 23, 2009, Nir and Omdan
agreed that in case of liquidation of the Company or a sale of the majority of its shares to an investor (collectively, the “Sale”)
under which Carmel will receive less than $965,000 from such event, they will pay to Carmel, out of the sum they have received
under the Sale the balance up to $965,000.



Relationship with Shareholders



On July 12, 2004 Nir, and Machteshim Chemical Works Ltd. ("Machteshim")
entered into an agreement (the "Assignment Agreement"), under which Machteshim transferred to Pimi Israel, all of its
rights in the know-how and/or information relating to the product known as MC-10, which is the previous name of the Pimi Israel's
product SpuDefenderTM (the "Product"). In addition, Machteshim transferred to Pimi Israel all the rights in the
patents and/or patent requests and/or licenses and/or documents related to the Product. Under the Assignment Agreement, Machteshim
undertook to register, at its own expense, all the rights in the patent and/or patent request, relating to the Product, in the
countries set out in an appendix to Assignment Agreement. If Machteshim does not register the patents, it was agreed that Machteshim
will transfer all the required documents to Nir, or any party on its behalf, and Nir, or any party on its behalf, shall carry out
the registration. Under an agreement dated, November 11, 2005 between Nir and Pimi Israel, Nir declared and confirmed that the
know-how and patents and patent application and/or licenses relating to the Product which were transferred to Pimi Israel from
Machteshim under the Assignment Agreement (the "Intellectual Property") belong exclusively to Pimi Israel except for
the right of use of the Intellectual Property for water treatment applications which was granted irrevocably and exclusively on
a world-wide basis to Nir or to its controlling shareholders (or any company in which Nir is controlling shareholder or have an
interest). Nir undertook to sign all necessary documents for the completion of the assignment of the Intellectual Property to Pimi
Israel.



On November 13, 2005 an Investment Agreement was entered into between
Nimrod Ben-Yehuda, Omdan, Mr. Carmel and JNS Capital LLC ("JNS") (the "Investment Agreement"). Under the Investment
Agreement, Mr. Carmel and JNS agreed to invest in Pimi Israel a total sum of $900,000 ("Investment Amount"), in quarterly
installments, in consideration for the issuance of 120,000 shares. On November 15, 2006 an Addendum to the Investment Agreement
was signed by the above parties (the "Addendum"). Until that time, Mr. Carmel and JNS have invested in Pimi Israel the
total sum of $785,000 out of their total Investment Amount. Under the Addendum JNS was released from its obligation to invest in
Pimi Israel the balance of the Investment Amount and Mr. Carmel agreed to pay to Pimi an additional sum of $215,000 out of which
$115,000 is the balance of the Investment Amount and $100,000 is an "Additional Investment." It was further agreed that
Mr. Carmel and JNS will be entitled, against the payment of the balance of the Investment Amount, to receive 120,000 preferred
shares of 0.01 NIS each of Pimi Israel instead of 120,000 Ordinary Shares of 0.01 NIS each. Pimi Israel has issued preferred shares
to Mr. Carmel and JNS, respectively, to their investments in Pimi Israel. Mr. Carmel has transferred the Additional Investment
amount to Pimi Israel in accordance with the Addendum and Pimi has issued to Mr. Carmel 30,006 preferred shares.


35

Nir has been engaged in treatment of Pimi Israel's patents and IP
during the years 2006-2009 and has incurred expenses related to such services. During 2008, Pimi Israel has agreed to pay to Nir
for these services and in reimbursement of the expenses incurred by it a sum of NIS 100,000 (US$ 26,490).



On August 2010 we entered into an agreement with Mr. Alon Carmel,
our Chairman of the Board, and one of our major shareholders, pursuant to which Mr. Carmel (or a company under his control) will
receive $3,000 per month in consideration for services rendered as Chairman of the Board. On December 30, 2010 we issued 25,000
share of Common Stock to Mr. Carmel, for the sum of $15,000 ($0.6 per one share of common stock), which was paid by Alon Carmel.



Mr. Eitan Shmueli (the controlling shareholder of Omdan) and Mr.
Nimrod Ben Yehuda, have guaranteed to Bank Hapoalim a line of credit of 60,000NIS ($16,906) granted to Pimi Israel.



Nir is the agent for Israel of a supplier of one of the raw materials
utilized by Pimi Israel in the formulation of its products. During the development stage of its formulation, Pimi Israel imported
to Israel the raw materials in order to formulate its products. Under an agreement dated November 11, 2005, Pimi Israel purchased
from Nir such raw materials at cost plus a 10% handling commission. Under this agreement, Pimi Israel paid to Nir as handling commission
an amount of US$1,461 in the year 2007. During 2010 Nir has given us services related to importation of hazard material and we
have paid Nir 73,000 NIS ($20,408) for theses services.



On December 30, 2010 the company further issued 34,013 share of
Common Stock to Nir for the sum of 20,408 ($0.6 per one share of common stock) which was paid by Nir Ecology.



Legal Services



Sadot & Co. Law offices in which Mr. Eitan Shmueli (a controlling
shareholder of Omdan, one of our shareholders), is a partner, has a retainer and other consulting agreements with Pimi. Sadot &
Co. Law offices has received fee from Pimi (as legal fees), 95,062 NIS ($25.486) and 428,454 NIS ($109,299) respectively and in
the years, 2010 and 2009, respectively.



On December 30, 2010 the company issued 70,000 shares Common Stock
to Ashdor Assets Managements and Trusts Ltd (a trust company under the control of Mr. Eitan Shmueli, who is one of the major shareholders
of our company through Omdan Consulting and Instructing Ltd), who holds the shares in trust for four attorneys in Sadot & Co
Law offices among them Advocate Eitan Shmueli, (who purchased 50,771 shares) for the total sum of $42,000 ($0.6 per one share of
common stock).



Director Independence



Our Board of Directors has determined that we do not currently have
any “independent” directors. Although Pimi currently is not a listed company on any national stock exchange, our Board
of Directors uses the AMEX company rules as a guideline in its determination of director independence. Under those rules,
no director would qualify as independent unless our Board of Directors affirmatively determines that the director does not have
a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Specifically, no director would qualify as independent if (a) during the past three years, the director or family member was employed
by the Company, (b) the director accepted or has an immediate family member who accepted any compensation from the Company in excess
of $120,000 during any period of twelve consecutive months within the three preceding years, or (c) the director is, or has an
immediate family member who is, a current partner of the Company's outside auditor, or was a partner or employee of the Company's
outside auditor who worked on the Company's audit at any time during any of the past three years.



ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES





Principal Accountant
    
    Year
    
    Amount billedFahn Kanne & Co.
    
    2009
    
    $
    87,5002010
    
    $
    25,368



36

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES





Exhibit Number
    
    Description3.1
    
    Articles of Incorporation of Pimi Agro Cleantech Ltd. (incorporated by reference to the Company’s registration on Form S-1 filed with the Securities and Exchange Commission on May 5, 2009)3.2
    
    Change of Name Certificate of Pimi Agro Cleantech Ltd. (incorporated by reference to the Company’s registration on Form S-1 filed with the Securities and Exchange Commission on May 5, 2009)3.3
    
    Certificate of Incorporation of Pimi Agro Cleantech, Inc. (incorporated by reference to the Company’s registration on Form S-1 filed with the Securities and Exchange Commission on May 5, 2009)3.4
    
    By-laws of Pimi Agro Cleantech Ltd. (incorporated by reference to the Company’s registration on Form S-1 filed with the Securities and Exchange Commission on May 5, 2009)10.1
    
    Employment Agreement by and between Mr. Youval Saly and Pimi Agro Cleantech Ltd. dated November 27, 2006. (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.2
    
    Addendum to the Employment Agreement with Mr. Youval Saly dated October 29, 2008. (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.3
    
    Employment Agreement with Mr. Nimrod Ben Yehuda dated November 13, 2005. (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.4
    
    Addendum to the Employment Agreement with Mr. Nimrod Ben Yehuda dated November 15, 2006 (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.5
    
    Addendum to the Employment agreement with Mr. Nimrod Ben Yehuda dated April 28, 2009. (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.6
    
    Agreement with Prof. Ilan Chet dated January 6, 2009 (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.7
    
    Employment Agreement by and between Mr. Avi Levi and Pimi Agro Cleantech Ltd. dated August 31, 2005. (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.8
    
    Employment Agreement by and between Mr. Avi Lifshitz and Pimi Agro Cleantech Ltd. dated November 19, 2008 (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.9
    
    Pimi Agro Cleantech Ltd. 2008 Share Option Plan and option Agreements with: Mr. Youval Saly, Mr. Avi Lifshitz, Mr. Avi Levi, Mr. Doron Shorrer, Prof. Avi Nachmias, Prof. Ilan Chet. (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.10
    
    Agreement between Machteshim Chemical Works Ltd. and Nir Ecology Ltd. dated July 12, 2004. (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.11
    
    Agreement between Nir Ecology Ltd. and Pimi Agro Cleantech Ltd both dated November 11, 2005. (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.12
    
    Agreement between Nir Ecology Ltd. and Pimi Agro Cleantech Ltd both dated November 11, 2005. (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.13
    
    Investment Agreement between Mr. Ben Yehuda, Omdan Consulting and Instruction Ltd., Mr. Carmel and JNS Capital LLC dated November 13, 2005. (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on August 3, 2009)
37

10.14
    
    Addendum to the Investment Agreement between Mr. Ben Yehuda, Omdan Consulting and Instruction Ltd., Mr. Carmel and JNS Capital LLC dated November 15, 2006 (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.15
    
    Overseas Market Development Consultancy Agreement by and between Pimi Agro Cleantech Ltd. and The Center for Potato Research in a Warm Climate dated January 9, 2008. (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.16
    
    MOU between Pimi Agro Cleantech LTD. and Omnivent Techniek BV dated May 19, 2008. (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.17
    
    Agreement for Services by and between Wagner Regulatory Associates, Inc. Pimi Agro Cleantech Ltd. dated September 21, 2008 (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.18
    
    Tenancy Agreement between Kibbuts Alonim and Pimi Agro Cleantech Ltd dated December 30, 2008. (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.19
    
    Agreement between Redebel S.A. and Pimi Cleantech Ltd. (Registration Assistance Agreement) dated December 23, 2008. (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.20
    
    Agreement by and between Omex Agriculture Ltd. and Pimi Agro Cleantech Ltd. dated January 11, 2009. (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)*10.21
    
    Letter of Intent Agreement by and between VegiSafe LLC and Pimi Agro Cleantech Ltd. dated January 20, 2009. (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on August 3, 2009)10.22
    
    Term Sheet with Earthbound LLC dated January 20, 2009. (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.23
    
    Voting Agreement between Alon Carmel, Omdan Consulting, and Instruction Ltd and Nir Ecology dated February 24, 2009. (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.24
    
    Addendum to the Voting Agreement of February 24, 2009 dated April 23, 2009. (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.25
    
    Share Exchange Agreement between Pimi Agro Cleantech Inc., Pimi Agro Cleantech Ltd. and the Shareholders of Pimi Agro Cleantech Ltd., dated April 27, 2009. (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.26
    
    Pimi Agro Cleantech, Inc. 2009 Stock Incentive Plan. (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.27
    
    Warrant issued by Pimi Agro Cleantech, Inc. to Earthbound LLC dated May 3, 2009. (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.28
    
    Amendment to Warrant issued by Pimi Agro Cleantech, Inc. to Earthbound LLC dated June 7, 2009. (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.29
    
    Amendment to Warrant issued by Pimi Agro Cleantech, Inc. to Earthbound LLC dated July 29, 2009 (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on August 3, 2009).
38

10.30
    
    Stock Purchase Agreement by and between Pimi Agro Cleantech, Inc. and Ehud Nahum dated June 4, 2009 (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.31
    
    Stock Purchase Agreement by and between Pimi Agro Cleantech, Inc. and Yuval Nahum dated June 4, 2009 (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)10.32
    
    Financial Advisory Agreement by and between Pimi Agro Cleantech, Inc. and Lampost Capital L.C., dated March 24, 2010 (incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on March 29, 2010)10.33
    
    Subscription Agreement by and between Pimi Agro Cleantech, Inc. and the subscribers thereto, dated April 15, 2010 (incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on April 21, 2010)10.34
    
    Stock
        Purchase Agreement dated August 24, 2010 (incorporated by reference
        to the Company’s Form 8-K filed with the Securities and Exchange Commission on August 30, 2010).10.35
    
    Warrant dated August 24, 2010 (incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on August 30, 2010).10.36
    
    Agreement dated December 28, 2010 by and between Pimi Agro Cleantech,
        Inc. and Mr. Uri Sheinbaum (incorporated by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission
        on January 4, 2011).10.37
    
    Subscription Agreement dated December 28, 2010 (incorporated by
        reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on January 4, 2011).10.38
    
    Warrant dated December 28, 2010 (incorporated by reference to the
        Company’s Form 8-K filed with the Securities and Exchange Commission on January 4, 2011).10.39
    
    Securities Purchase Agreement dated January 25, 2011 (incorporated
        by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on January 31, 2011).10.40
    
    Warrant dated January 25, 2011 (incorporated by reference to the
        Company’s Form 8-K filed with the Securities and Exchange Commission on January 31, 2011).10.41
    
    Addendum No 1 to Letter of Intent dated January 20, 2009, between Pimi Agro Cleantech Inc, and Vegisafe LLC. (filed herewith)21.1
    
    List of subsidiaries of the Company. (incorporated by reference to the Company’s registration on Form S-1 filed with the Securities and Exchange Commission on May 5, 2009)31.1
    
    Certification by Chief Executive Officer pursuant to Sarbanes Oxley Section 302 (filed herewith).31.2
    
    Certification by Chief Financial Officer pursuant to Sarbanes Oxley Section 302 (filed herewith).
39

32.1
    
    Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350 (filed herewith).

32.2
    
    Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (filed herewith).

99.2
    
    Approval of Office of the Chief Scientist, Ministry of Industry, Trade and Labor, State of Israel, dated April 11, 2007. (incorporated by reference to the Company’s registration on Form S-1/A filed with the Securities and Exchange Commission on July 2, 2009)

99.2
    
    Approval of Office of the Chief Scientist, Ministry of Industry, Trade and Labor, State of Israel, dated November 12, 2007. (incorporated by reference to the Company’s registration on Form S-1 filed with the Securities and Exchange Commission on May 5, 2009)*Portions of exhibit 10.20 have been omitted pursuant to a
request for confidential treatment filed separately with the Securities and Exchange Commission.



SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.



PIMI AGRO CLEANTECH, INC.April 12, 2011
    By:
    /s/ Youval SalyYouval SalyChief Executive Officer(Principal Executive Officer)April 12, 2011
    By:
    /s/ Avi LifshitzAvi LifshitzChief Financial Officer(Principal Financial and Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



Signature
    
    Title
    
    Date/s/ Youval Saly
    
    Chief Executive Officer
    
    April 12, 2011Youval Saly
    
    (Principal Executive Officer)/s/ Avi Lifshitz
    
    Chief Financial Officer
    
    April 12, 2011Avi Lifshitz
    
    (Principal Financial Officer and Principal Accounting Officer)/s/ Alon Carmel
    
    Chairman of the Board
    
    April 12, 2011Alon Carmel/s/ Nimrod Ben-Yehuda
    
    Chief Technology Officer, Director
    
    April 12, 2011Nimrod Ben-Yehuda


40