UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                Annual Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934
                                   (Mark One)
                [X] Annual report pursuant to section 13 or 15(d)
                     of the Securities Exchange Act of 1934
                   For the fiscal year ended December 31, 2007

             [_] Transition report under section 13 or 15(d) of the
            Securities Exchange Act of 1934 For the transition period
                   from ___________________ to ______________

                        Commission File Number 000-22151

                              ORGANITECH USA, INC.
                 (Name of small business issuer in its charter)

             Delaware                                    93-0969365
   (State or other jurisdiction of            (IRS Employer Identification No.)
    incorporation or organization)

          Yoqneam Industrial Area, P.O. Box 700, Yoqneam 20692, Israel
                    (Address of principal executive offices)

                                 972-4-9590-515
                           (Issuer's telephone number)

    Securities registered pursuant to Section 12(b) of the Exchange Act: None

         Securities registered under Section 12(g) of the Exchange Act:

                         Common stock, without par value
                                (Title of class)

Check whether the issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such report(s), and (2) has been
subject to such filing requirements for the past 90 days.

                               Yes [X]     No [_]

Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this form 10-KSB or any
amendment to this Form 10-KSB. [X]

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

                               Yes [_]     No [X]

The issuer's revenues for the fiscal year ending December 31, 2007 were:
$1,487,334

The aggregate market value of the registrant's voting and non-voting common
equity held by non-affiliates of the registrant as of December 31, 2007 was
$3,296,938 based upon the closing price of the registrant's common stock.

As of December 31, 2007, the issuer had 36,632,642 shares of its common stock
outstanding.

                       Transitional Small Business Format:

                               Yes [_]     No [X]


                                       2

                              ORGANITECH USA, Inc.
                            Form 10-KSB Annual Report

                                TABLE OF CONTENTS

Cautionary Statement on Forward Looking Statements

         Part I

Item 1   Description of Business
Item 2   Description of Property
Item 3   Legal Proceeding
Item 4   Submission of Matters to a Vote of Security Holders

         Part II

Item 5   Market for Common Equity and Related Stockholder Matters
Item 6   Management Discussion and Analysis of Financial Condition and Results of Operation

Item 7   Selected Financial Data
Item 8   Financial Statements
Item 8A  Change in and Disagreements with Accountants on Accounting Financial Disclosure
Item 8B  Controls and Procedures

         Part III

Item 9   Directors and Executive  Officers of the  Registrant;  Compliance  with Section 16(a) of
         the Exchange Act.
Item 10  Executive Compensation
Item 11  Security Ownership of Certain Beneficial Owners and Management and Related
         Stockholder Matters
Item 12  Certain Relationships and Related Transactions
Item 13  Exhibits
Item 14  Principal Accountant Fees and Services

Signatures

Exhibits


                                       3

               CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements (Forward-looking statements are
typically identified by the words "believe," "expect", "intend", "estimate" and
similar expressions). Those statements appear in a number of places in this
report and include statements regarding our plans, objectives, expectations and
intentions. Except for historical matters, the matters discussed are
forward-looking statements, which reflect our current views with respect to
future events and financial performance. In particular, these include statements
relating to the development of products, future revenues, capital expenditures,
research and development expenditures, future financings and collaborations,
personnel, manufacturing requirements and capabilities, and other statements
regarding matters that are not historical facts or statements of current
condition (hereon "Cautionary Statements"). Various risk factors could cause
actual results to differ materially from historical or anticipated results. The
accompanying information contained in this report, including the information set
forth under "Management's Discussion and Analysis of Financial Condition and
Results of Operations", identifies important factors that could cause such
differences. These forward-looking statements are subject to certain risks and
uncertainties which could cause actual results to differ materially from
historical results or those anticipated. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of their
dates. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. All subsequent written or oral forward-looking statements
attributable to us or persons acting on our behalf are expressly qualified in
their entirety by the Cautionary Statements.


                                       4

                                     PART I

ITEM 1 DESCRIPTION OF BUSINESS

We design, develop, manufacture, market and support hydroponics solutions and
platforms for the Agriculture and Life-Science industries ("Hydroponics Growing
Factories"). Our products enable the growth of lettuce, green leafy vegetables,
herbs and other plants in a highly economic, clean and automated surrounding,
making optimal use of resources such as water, energy, labor and land,
significantly saving distribution costs, and producing extremely high yields
year round while maintaining significantly lower production costs than the
traditional alternatives.

Our core business is conducted primarily through our wholly-owned subsidiary,
OrganiTECH Ltd., a company organized under the laws of Israel. OrganiTECH Ltd.
operates mainly in the field of providing advanced technologies to agriculture
industry. Since its formation in 1999, it has been developing, producing and
marketing our proprietary technology. Our leading products are:

a)   GrowTech(TM)2500 - our principal product - a highly automated,
     computer-controlled hydroponics sustainable greenhouse designed to grow and
     harvest extremely high quantities of pesticide free and clean lettuce,
     green leafy vegetables, herbs and other plants while making optimal use of
     resources such as water, energy, labor and land and significantly saving on
     distribution costs. Backed with its patented and proprietary know-how, the
     GrowTech(TM)2500 is unaffected by weather conditions, and enables
     consistent year round yields that are much higher than traditional
     soil-based cultivation methods, in both the open- field and regular
     greenhouses.

     The GrowTech(TM)2500's most unique feature is the Rotating Field-System, or
     RFS, whereby lettuce and green leafy vegetables float in styrofoam trays on
     water tables, which serve both as a nutritious solution and a means of
     transport through the growth process.

b)   GrowTech(TM)2000 - a self-contained, portable, robotic, sustainable and
     fully-controlled agricultural platform designed to automatically seed,
     transplant, grow and harvest commercial quantities of pesticide free green
     leafy vegetables. The GrowTech(TM)2000 may also have life-science
     applications since it is a non-soil and environmentally safe technology
     with optimal and fully controlled growth conditions, which can be used to
     grow certain plants used by the pharmaceutical, food enhancement, detergent
     and cosmetic industries. However it has yet to be matured and additional
     development work is still required before its full commercialization.

CORPORATE HISTORY

We are a Delaware corporation, initially organized as a Colorado corporation on
December 8,1981 under the name Triangle, Inc. ("Triangle"), for the purpose of
evaluating, structuring and completing a merger with, or acquisition of,
prospects consisting of private companies, partnerships or sole proprietorships.
Since our formation, we have undergone numerous transitions and changes in our
development and business strategies, as well as our name.

In 1989, under the name Triangle, we closed a public offering of our common
stock and warrants to purchase our common stock and were funded as a "blank
check" company.

On June 20, 2000, we entered into an Investment Agreement (the "Investment
Agreement") with OrganiTECH Ltd. We agreed to invest a total of $1,000,000 for
12,460 shares of preferred stock of OrganiTECH Ltd. at a price of $80.25 per
preferred share. Under the terms of the Investment Agreement, we were given
options to purchase additional shares at specified prices, within specified time
periods.

On October 18, 2000, pending shareholder approval, we entered into a Share
Exchange Agreement with OrganiTECH Ltd. (the "Share Exchange Agreement"( whereby
OrganiTECH Ltd. shareholders would exchange 100% of the issued and outstanding
shares of OrganiTECH Ltd.'s capital stock in exchange for no less than62.5% of
issued and outstanding shares of our common stock.

On January 16, 2001, we changed our state of incorporation from Colorado to
Delaware. This change in our state of incorporation was approved by a vote of
the requisite number of holders of outstanding shares of our common stock at a
special meeting of shareholders held on January 5, 2001.


                                       5

At the end of January 2001, following shareholder approval for the transaction
at the Special Meeting, we consummated the Share Exchange Agreement with
OrganiTECH Ltd.. We issued 7.5 million shares of common stock to OrganiTECH Ltd.
shareholders in exchange, and as consideration, for all of the outstanding
shares of capital stock of OrganiTECH Ltd. not owned by us. No cash was
exchanged in the transaction. As a result of the Share Exchange Agreement,
OrganiTECH Ltd. became our wholly-owned subsidiary and OrganiTECH Ltd.'s selling
shareholders became the owners of approximately 67.57% of our common stock.
Accordingly, the foregoing business combination is considered a reverse merger.
As such, for accounting purposes, OrganiTECH Ltd. was considered to be the
acquirer while we were considered to be the acquired.

In March 2001, we changed our name to "OrganiTECH Ltd. USA, Inc." to more
accurately reflect our new focus on our agricultural applied engineering
initiatives.

INDUSTRY OVERVIEW

There are several key factors that influence the overall demand for hydroponics
systems, as follows:

1.   GROWING DEMAND FOR GREEN LEAFY VEGETABLES

WORLDWIDE DEMAND FOR GREEN LEAFY PRODUCTS IS RAPIDLY INCREASING

By the year 2030, the world's population is projected to reach an estimated 8
billion people - approximately 2 billion more than today. Additionally, during
the next 50 years, worldwide demand for green leafy vegetables is expected to
triple as the amount of arable land decreases by one half. Agricultural
trade-flow statistics derived from the Food and Agriculture Organization of The
United Nations (FAOSTAT) indicate that in 2005, the world market for lettuce was
more than 22 million tones and out of which approximately half was consumed in
Europe and North America, and that this multi-billion Dollar market is expected
to continue to increase annually. Statistics derived from the same source
indicate similar trends for other green leafy vegetables, such as spinach,
broccoli, cauliflower, cabbages and herbs, in terms of volume and trade
potential.

Advances in technology are expected to continue to assist producers in
increasing their overall productivity and hydroponics production systems
represent an efficient means towards meeting this goal.

MOVING TO VEGETABLE-BASED NUTRITION

Lately, an additional new trend can be identified, especially in the Western
world - the growing demand for vegetable based nutrition over other nutrition
components such as proteins. Demand for vegetables in general and for green
leafy vegetables in particular, is rapidly increasing.

RAPIDLY GROWING DEMAND FOR CLEAN VEGETABLES WITH EXTENDED SHELF-LIFE

We have identified a new trend of rapidly growing demand for 'high-end', ready
to eat vegetables where customers are willing to pay more for cleaner,
unnecessary to wash before packing and before eating, longer shelf-life
vegetables. By using our GrowTech(TM)2500, the cultivated vegetables do not
require a wash process before packaging and are ready to eat; and since washing
harms their protective tissue, the shelf-life of hydroponically grown
vegetables, is dramatically increased. Moreover, given a longer shelf-life,
distribution to remote areas is possible and new markets are available.

2.   RAPIDLY INCREASING PRODUCTION COSTS

INCREASE IN DISTRIBUTION COSTS

Transportation costs for lettuce and green leafy vegetables are relatively large
as a result of the high space/weight ratio when transporting these products. As
a result producers typically seek locations near to the point of sale, which
will often be close to large conurbations where overhead costs, especially
energy and labor, are very high. The GrowTech(TM)2500 can offer a cost-effective
localization of production, causing significant saving in distribution costs.


                                       6

INCREASE IN COST FACTORS IN THE PRODUCTION PROCESS

Additionally, over the last decade, agricultural growers in western countries
have faced increasing costs. The cost of labor increased, even where an
unqualified work force is utilized, ; energy has become expensive due to the
increases in the price of oil; water is more expensive and in some territories
are not available, particularly where there are purification and
quotas/accessibility problems; and the price of land near market places has
increased disproportionately. The GrowTech(TM)2500 enables the growth of
lettuce, herbs, green leafy vegetables and other plants in a highly economical
and automated surrounding, saving significantly in resources such as water and
labor while making optimal use of energy and land.

All of these factors have resulted in materially increased production costs in a
market with rapidly increasing demand. As cost factors are expected to continue
to rise, particularly in Western countries, due mainly to increases in the price
of oil and other manufacturing resources, overall production costs are expected
to continue to increase, with the price ultimately being passed on to the final
consumer.

3.       ENVIRONMENTAL IMPACT

THE NEED FOR SUSTAINABLE AGRICULTURE

The practice of reducing inputs while raising output is a growing trend referred
to as "sustainable agriculture". According to many industry experts, one of the
most critical elements for agricultural equipment innovations is that they
should be guided by ecological considerations that not only increase world food
production, but also preserve our non-renewable resources, such as water, reduce
chemical usage and reduce the ecological damage which result from fertilizers
and increased reliance on pesticides.

Hydroponics in general is an example of a sustainable agricultural technology
that reduces input costs, increases yield, and is more "earth friendly". Such
technologies are expected to drive the frontline of growth in the agriculture
equipment industry.

Our GrowTech(TM)2500, because of its extremely low demand for pesticides,
insecticide and other chemicals, represents an environment-friendly solution.
Moreover, it also supports "sustainable agriculture" by saving water and energy
while enabling the use of available wasted/unused resources of energy and water.

RESIDUE PROBLEMS OF TRADITIONAL GREENHOUSES

Growers of soil-grown crops are faced with numerous and potentially
insurmountable problems associated with soil-borne pathogens, pests and weeds
and the concomitant application of pesticides or plant protection products, or
PPP's, which lead on occasions to unacceptable residues at harvest. This has
recently been made worse due to the revocation of methyl bromide as an effective
soil sterilizer which has exacerbated the need for additional PPPs.

It is now understood that a transitioning away from soil and into a hydroponics
production system could potentially solve many of the current residue problems,
increase throughput and ultimately improve the longer-term economic outlook for
the crop. Our GrowTech(TM)2500 offers growers a novel, environmentally friendly
growing system.

4.   HYDROPONICS IS TAKING OFF

We believe that hydroponics cultivation is becoming a genuine, inevitable
alternative for traditional soil-based cultivation, whether in the open fields
or in greenhouses. The transition from the soil to hydroponics production
systems is becoming an attractive business opportunity for growers.

OUR POTENTIAL CUSTOMERS

Based on the above, we have identified our potential segments and customers as
follows:

1.   Replacing importation - existing farmers, growers and distributors, who
     currently do not grow lettuce and green leafy vegetables, but who wish to:


                                       7

     -    Save transportation costs of imported produce;

     -    Establish cost-effective local production of lettuce and green leafy
          vegetables;

     -    Expand operations while enhancing competitiveness with local
          soil-based and imported produce;

2.   Existing soil-based farmers and growers of lettuce and green leafy
     vegetables, in particular those who suffer from expensive resources, who
     wish to:

     -    Save production costs and optimize use of resources;

     -    Have constant, year round produce, of high quality;

     -    Overcome crucial problems of traditional cultivation in open-fields
          and soil-based greenhouses;

     -    Increase productivity and expand their operations;

3.   Food industry companies, who wish to expand their operations by the growth
     of green leafy vegetables, thereby controlling their value chain.

4.   Entrepreneurs who wish to take advantage of new business opportunities,
     especially in markets where lettuce and green leafy vegetables cannot
     currently be grown, and where there are high costs of transportation.

We are in the early stage of expanding our marketing and sales efforts,
especially where we find strong competitive advantages

OUR  STRATEGY

Our goal is to be a world's leading provider of hydroponics solutions and
systems to the Agriculture and Bio-Tech industries. Key elements of our strategy
include the following:

PRESERVING AND IMPROVING EXISTING DEPLOYMENTS OF OUR PRODUCTS

We intend to constantly preserve and improve our existing deployed projects
while they serve both as proof that our technology concept works and as a
reference point for new customers.

MAINTAIN TECHNOLOGY LEADERSHIP

We believe we have established a leading technology position in the market for
hydroponics solutions, and have made it a priority to maintain this position by
continuing to make substantial investments in research and development while
establishing new strategic co-operation with leading institutions in the
agriculture and bio-tech industries. Our research and development efforts are
mainly focused on (i) improving the existing technology and the hydroponics -
agronomic know how to achieve higher yields of produce per hydroponics unit;
(ii) expanding our systems for the growing of new varieties of green leafy
vegetables; (iii) implementing engineering and technological improvements and
enhancements to the system, (iv) expanding our systems into new usages (i.e. new
green leafy vegetables and new life-science applications); and (v) adjusting and
adapting our products to the specific requirements of new and different climate
environments around the world.

APPROACHING KEY MARKETS OPPORTUNITIES

We are in the early stage of expanding our marketing and sales efforts,
especially where we find strong competitive advantages and where the potential
demand for our products is expected to be high, such as in markets where lettuce
and green leafy vegetables cannot currently be grown, and where there are high
costs of transportation; among growers who wish to increase productivity; in
markets where there is a high demand for clean green vegetables and/or long
shelf-life vegetables; in markets where the impact of environmental issues
imposes restrictions or limitations; and among food manufacturers who wish to
expand their value chain. In general, we believe our opportunities are much
broader due to the current trends in the industry discussed earlier.

DEVELOP NEW STRATEGIC ALLIANCES AND MARKET PRESENCE

We intend to develop and expand our strategic alliances with agents and
distributors in different regions around the world, aiming to leverage their
experience and market presence to help us market our products. Additionally, we
intend to expand and form new alliances with research institutions to leverage
our technology and products into new usages for new industries, especially in
the field of Bio-tech.


                                       8

OUR PRODUCTS

THE GROWTECH(TM) 2500

Our leading product to date is the GrowTech(TM)2500. It is a highly automated
platform using OrganiTECH Ltd's patented technology and proprietary know-how,
and combining it within a greenhouse controlled growing environment. The
GrowTech(TM)2500 enables the growth of lettuce, herbs, green leafy vegetables
and other plants in a highly economical, clean and automated surrounding, saving
significantly in resources such as water and labor while making optimal use of
energy and land.

The GrowTech(TM)2500's most unique feature is the Rotating Field-System, or RFS,
whereby lettuce and green leafy vegetables float in styrofoam trays on water
tables, which serve both as a nutritious solution and a means of transport
through the growth process.

By floating the plants on water rather than planting them in the growing media,
the GrowTech(TM)2500 enables growers to control and therefore optimize the
density of the plants growing over the water-tables at each stage of the growth
process. By maximizing land/space utilization, the GrowTech(TM)2500 achieves
extremely high yields which, using information published by farming
associations, equipment providers and our competitors, we calculate to be
approximately 20 times more than that achieved in the open field and 5-7 times
more than conventional greenhouse yields (for lettuce as an example).

By optimizing the integration of automation in production (seeding and
harvesting process) and optimizing the use of resources such as energy and land
through the hydroponics growing process, the GrowTech(TM)2500 can offer a
cost-effective production process, enabling significant reductions in the cost
of labor and water, compared to traditional soil-based growing methods. Given
the extremely high yields, production costs in general and energy cost in
particular per a plant are cost-effective in most territories.

Moreover, where the production cost is reduced, the localization of production
has become more attractive, causing additional significant savings in
distribution costs, thereby reducing the cost to the consumer. This enables
either local growers of lettuce and other green leafy vegetable produce or
importers of such green leafy vegetable produce to situate in locations of their
choice, in countries and regions where climate conditions prevent the open-field
growing of such vegetables, while simultaneously enabling them to compete with
local/imported products.

The GrowTech(TM)2500 enables year round, high yield production of quality,
clean, pesticide free plants with extended shelf-life - all in an environment
friendly system that enables utilizing available alternative energy and water
resources. Although already successfully commercially deployed, we intend to
continuously invest in the advanced development of GrowTech(TM)2500, adding and
enhancing functionalities while adjusting it to new types of growing and usage.
To date we have successfully deployed GrowTech(TM)2500 systems in Spain, Russia,
Ireland and Israel.

THE GROWTECH(TM) 2000

Our first product was the GrowTech(TM)2000, a unique and patented, state of the
art, hydroponics growing system.

It is a low input/high output, robotic, self-contained, portable, sustainable
and controlled hydroponics growing platform, designed to fully automate the
entire cultivation/production process (seeding, germination, growing and
harvesting) of clean, pesticide free, green leafy vegetables. This is done by
utilizing advanced growth systems such as artificial lighting systems, climate
and environmental control systems, revolutionary robotics and management
systems; and integrating them with our hydroponics technology into a closed and
fully controlled environment, usually of a standard size container or other
industrial platform.

Designed for highly controlled environments in closed spaces (i.e. containers)
where sunlight is not available (and as a result, full artificial lighting and
controlled weather conditions are required for the cultivation process), the
cost-efficiency of the GrowTech(TM)2000 is generally determined by the cost of
energy and can therefore vary significantly. GrowTech(TM)2000 has yet to be
matured and additional development work is still required before its full
commercialization. However, we believe that such a patented platform will
provide a strong advantage over our competitors and enable us to increase
research and development efforts for the integration of GrowTech(TM)2000
technologies into new platforms and products.


                                       9

PHYTOCHAMBER(TM) - LIFE-SCIENCE AND BIO-TECH PLATFORMS

Based on our proprietary hydroponics know-how and GrowTech(TM)2000 technology,
we have been also developing our PhytoChamber(TM) product - a state of the art,
two-chambered, cost-effective hydroponics growth platform designed to maximize
and provide optimal growth conditions for certain plants to be utilized by the
biotechnology and life-science industries as well as by researchers.

The PhytoChamber(TM) is designed for the production of proteins and other
bio-molecules intended for research and for the
"laboratory"/pre-commercial/commercial manufacturing of NUTRACEUTICALS and
pharmaceuticals, by creating a contained, fully controlled, cost effective
production environment, isolating the plants from detrimental external elements
and utilizing our advanced hydroponics growing system. This combination of
technologies creates a superior method in the bio-manufacturing multi-billion
Dollars market, due to its non-soil, clean and environmentally safe conditions.

One PhytoChamber(TM) unit was sold to a German customer for research and
development purposes in 2005.

The product is in its early stage of development and extensive additional
development work is required before achieving commercial maturity.

TECHNOLOGY AND RESEARCH & DEVELOPMENT ACTIVITY

EXISTING PRODUCT LINES

We are continuously investing in Research and Development to improve and enhance
the existing product lines, especially in order to extend our capabilities to
the growing of new varieties of green leafy vegetables and to maximize the yield
of produce per each growing unit. We are researching new applications for the
GrowTECH(TM) platforms for the emerging agricultural-biotechnology spheres.

As part of an on-going process we invest time and effort in extending the use of
our existing products into new growing projects and also by improving their
functionalities. Technical improvements are being made continuously to
strengthen the reliability of the systems.

The main goals of our research and development efforts are to:

(i)  Improve and adjust the functionality (agronomics and engineering) of our
     products, especially the GrowTECH2500, for different varieties of lettuce
     and herbs and for new green leafy plants,

(ii) Improve the engineering and operational characteristics and capabilities of
     the GrowTECH2500,

(iii) Improve the engineering capabilities of the GrowTECH2500 for different
     climate conditions, and

(iv) Continue the research and development of new platforms, especially through
     the migration of our existing technologies into new Life-Science
     applications.

OTHER PRODUCT LINES

We believe that technologies incorporated in the GrowTECH(TM) are potentially
extendable to the development of a number of other potential applications. These
include the cultivation of pharmaceutical plants, herbs, spices, fruits, and
flowers, seedling and transplant propagation; and the assisting of biotechnology
companies in fields such as molecular farming, transgenic engineering,
nutraceutical cultivation, and phytoremediation applications.

INTELLECTUAL PROPERTY

On June 12, 2001, OrganiTECH Ltd. received a United States patent No. 6243987
for the GrowTECH technology and mechanism, which includes protection for 56
claims covering a wide range of new technologies and designs developed for an
automated system that provides a continuous yield of fresh agricultural produce.


                                       10

On January 21, 2003, OrganiTECH Ltd. received a United States patent No. 6508033
for a self contained, fully automated robotic crop production facility.

On February 28, 2002, OrganiTECH Ltd. filed its patent for a self contained,
fully automated robotic crop production facility with the European Patent Office
(European Patent Application No. 0095965.1), as publication No. 1241927. Based
on such application, OrganiTECH Ltd. filed a similar patent application in
Canada.

We believe that such patents will provide a strong advantage over our
competitors and enable us to increase research and development efforts for the
integration of our patented technologies into new platforms and products.

In May 2003, OrganiTECH Ltd. received a notice of allowance for the "GrowTECH"
and "OrganiTECH Ltd." trademarks, from the United States Patent and Trademark
Office.

We posses significant know-how that relates to agronomic procedures, nutrition
formulas and growing protocols associate with hydroponics growing.

RESEARCH & DEVELOPMENT EXPENDITURE

We incur research and development expenses in an effort to enhance agronomics
efficiency and nutrition protocols, improve and implement engineering components
and capabilities, reduce manufacturing costs, and develop new product
applications and enhancements, while replacing old technologies with more
advanced ones. Our net research and development expenses for fiscal years ended
December 31, 2007 and 2006 were $319,120 and $510,163, respectively.

MARKETING AND DISTRIBUTION

Moving into a new stage of sales and profitability, we intend to increase
marketing and sales efforts through indirect channels in selected regions. We
have entered into marketing, distribution and development agreements with agents
and distributors, in several territories, for the sale and distribution of the
GrowTECH(TM)2500 systems. We plan to further increase our marketing and
distribution channels in the future as we believe the need for our products is
worldwide and our sales volume is directly influenced by the sales and marketing
efforts invested.

Our direct marketing efforts with respect to the GrowTECH(TM)2500 systems are
limited and include, among others, test-system in the UK, sales presentations,
developing brochures and other marketing materials and engaging in various forms
of public relations.

Our Marketing and Sales expenses for fiscal years ended December 31, 2007 and
2006 were $663,083, and $848,504, respectively.

GOVERNMENT REGULATION

INDUSTRY STANDARD

For Bio-Tech applications, the P-1 and P-2 standards are biological safety
regulations that mandate levels of containment in the genetic engineering of
plants. As we intend to operate in the Ag-Bio field, if required, the
GrowTECH(TM) systems can comply with P-1 and P-2 standards under the European
Union regulatory standards for use in the cultivation of Genetically Modified
Organisms (GMO).

In 2007, we did not incur any expenses in complying with environmental laws and
regulations.

GRANTS FROM THE OFFICE OF THE CHIEF SCIENTIST OF ISRAEL

OrganiTECH Ltd. has received from the Israeli Government, through the Office of
the Chief Scientist ("OCS"), certain research and development grants. As a
condition to its participation in the funding program of the OCS, OrganiTECH
Ltd. may not transfer the technologies developed using such funds or manufacture
its products outside of Israel without the consent of the OCS. Moreover, the
OCS' grant programs currently in effect require OrganiTECH Ltd. to comply with
various conditions in order for OrganiTECH Ltd. to continue to be eligible for
participation. Also, OrganiTECH Ltd. is required as well to pay royalties to the
OCS in an amount ranging from 3% to 5% (up to the amount of the grants received,
which are linked to the U.S. $ and bear annual interest at LIBOR) of sales from
products developed using the grants received from the OCS, which could cause an
increase in OrganiTECH Ltd.'s operating expenses. OrganiTECH Ltd. anticipates
that for so long as such grants continue to be available, it will likely seek
from time to time to utilize such grants. As of December 31, 2007, the balance
of royalty bearing grants received by the OCS net of royalties paid or provided
for, is $178,770 (as of December 31, 2006 - $230,827). Royalties' expenses
amounted to $52,057 and $118,600 in 2007 and 2006, respectively.


                                       11

APPROVED ENTERPRISE STATUS

In April 2001, OrganiTech Ltd. submitted a request to be granted a status of an
"Approved Enterprise" under the Israeli Law for the Encouragement of Capital
Investments, 1959 as amended (the - "Law") According to the "Alternative
Benefits program" status. During the period of benefits, the income deriving
from "Approved Enterprise" will be tax exempt for a period of ten years,
commencing the first year the "Approved Enterprise" generates taxable income.
Notwithstanding the foregoing, the period of benefits will expire in the year
2014. If these retained tax-exempt profits are distributed in a manner other
than in the complete liquidation of the Company they would be taxed at the
corporate tax rate applicable to such profits as if the Company had not elected
the alternative program of benefits (depending on the level of foreign
investment in the Company) currently between 10% to 25% for an approved
enterprise. On February 20, 2007 OrganiTech Ltd. received final approval for its
Approved Enterprise status.

As of December 31, 2007 we have carried forward tax losses in the amount of $9.4
million, out of which $8.0 million are from OrganiTech Ltd.

OTHER ROYALTY OBLIGATIONS

SINGAPORE-ISRAEL INDUSTRIAL RESEARCH AND DEVELOPMENT FUND (SIIRD)

During fiscal year 2001, OrganiTECH Ltd. entered into a Research and Development
grants and royalties arrangement whereby OrganiTECH Ltd., together with its
Singaporean joint venture partner, Agronaut, is required to pay royalties to the
SIIRD in an amount ranging from 1.5% to 2.5% of sales of products developed with
the grants from SIIRD, such royalties not to exceed the total amount of grants
received from SIIRD. As of the date of this report, the total of royalty bearing
grants received by OrganiTECH Ltd. from SIIRD is $250,505. Our management
believes that this amount will not be due for payment however we have
conservatively recorded royalties' expenses to SIIRD on the amounts of $37,183
and $84,714 in 2007 and 2006, respectively.

THE WEIZMANN INSTITUTE

OrganiTECH Ltd. is also obligated to pay royalties to the Israeli Weizmann
Institute pursuant to a Memorandum of Understanding signed in September 2001
between the parties. The MOU included a development work performed by the
Weitzman Institute, for the sales of miniature tomato seeds and OrganiTECH
Ltd.'s obligation to pay to the Weizmann Institute royalties in an amount not to
exceed 5% of the sales of such miniature tomato plants. As of the date of this
report, we did not generated revenues from miniature tomato seeds.

BIO DISC PROGRAM

During November 2005, OrganiTech Ltd., together with six companies and
institutions from Israel and Germany, signed a cooperation agreement in order to
carry out a joint project for the development of Molecular Farming in Closed
Systems ("MoFaCS" or "Bio Disc") based on the OrganiTECH Ltd.'s GrowTECH(TM)2000
and the PhytoChamber. Based on such cooperation, the OCS approved a grant to
OrganiTECH Ltd. upon the following terms: a 30% participation in the R&D
expenses incurred by OrganiTECH Ltd., limited to a maximum amount of $210,000.
Royalty payments to be based on all OrganiTECH Ltd.'s sales at a rate 3% to 5%.
The commitment to the OCS is limited to the amount of the received
participation, linked to the U.S. $ and shall bear annual interest at LIBOR, and
is not a liability until a sale is made. As of the date of this report, the
total of royalty bearing grants received by OrganiTECH Ltd. from the OCS for
this project is $11,297.


                                       12

PRINCIPAL SUPPLIERS

During fiscal year 2007, our principal expenses were for raw materials,
equipment and expenses related to subcontractors. We do not work with one main
supplier and purchase our products from approximately 50 suppliers with which we
have no long-term purchase commitments or exclusive contracts. We have
historically enjoyed a positive experience with our suppliers with respect to
supplier fulfillment and retention, and we have generally not experienced
difficulty in obtaining desired materials from suppliers on acceptable terms.

CUSTOMERS

Our existing and target customers are principally (i) existing soil-based
farmers and growers of lettuce and leafy vegetables (who mainly wish to increase
productivity and save production costs); (ii) existing farmers and growers, who
do not currently grow lettuce and leafy vegetables (and who wish to expand their
operations in the most cost-effective and competitive manner), (iii) food
industry companies (seeking to expand their value chain by controlling the
growth of leafy vegetables), and (iv) new entrepreneurs seeking new business
opportunities. Our first commercial sale was during 2003 (recorded during 2004)
and currently we have deployed our products at a few customers' locations world
wide.

Generally, we sell two types of projects: (i) a Turn Key Project for a
Hydroponics Growing Factory, in which we build the fully acclimatized controlled
greenhouse, and provides the hydroponics core systems including the
hydroponics-agronomic know-how, and (ii) projects in which the greenhouse is
built by the customer and we sell only the hydroponics core systems and
hydroponics-agronomic know-how, in addition to the greenhouse upgrade, if
needed. Each project is planned, designed and tailor-made per the customer's
specific site-location and requirements that can vary depending on several
different factors such as kind of growing, climate and environmental conditions,
size of greenhouse, etc.

A typical project has the following stages/milestones: (i) entering into an
agreement in parallel to performing a detailed design work planned by our
engineers and other experts; (ii) purchasing / assembling / manufacturing of the
different systems/components by our manufacturing personnel, (iii)
shipment/delivery, (iv) building the greenhouse, (v) installation and
integration of climate control systems/components and the hydroponics systems,
including their integration with computerized control and management system (vi)
training and guidance by our agronomy and technical experts until the system has
completed several cycles of production (vii) warranty period. A project
performance/installation time is generally one to three quarters.

A typical contract with a customer includes the delivery of product and
services, including installation, commissioning, training and warranty for the
equipment and software for a limited period of time. Our contracts are generally
non-exclusive and may contain provisions allowing both us and our customers to
terminate the agreement for default. Our contracts may also specify the
achievement of shipment, delivery and service commitments. We are generally able
to meet these commitments.

COMPETITION

The agricultural equipment industry is highly competitive. Our technologies are
subject to competition from either other agricultural equipment and/or
technology providers or other providers of hydroponics solutions. We compete
with both conventional methods of growing and directly against other hydroponics
solution providers. The conventional methods are principally open field methods
of growing or growing using soil-based greenhouses, as well as classic soil-less
methods, which involve inert solid growing media and specialized irrigation
systems, where water can be drained to waste (open systems) or re-circulated
(closed system).

While the hydroponics market is an emerging one, in which there are no
significant hydroponics solution providers and only a few tens of hectares of
hydroponics systems deployed world-wide, our principal competitors are Hydronov
Canada and Hortiplan Belguim. Hydronov Canada uses the Deep Flow Technique in
which water is re-circulated in deep water beds that serve as a growing system.
Since 1988 Hydronov Canada and other hydroponics solution providers have
deployed this technique over approximately 20 hectares, mainly in Canada, China
and Mexico. Hortiplan Belguim uses the Nutrient Film Technique, or NFT, in which
a shallow nutrient film runs in narrow channels where the plant roots are
located. The NFT systems are the most common hydroponics systems in the world
and have been deployed mainly in the United States, Western Europe, Australia
and New Zealand.


                                       13

Many of our potential competitors have substantially longer operating histories,
larger installed client bases, greater name recognition, more experience and
significantly greater financial, technical, marketing and other resources than
we have.

We believe that a wide range of factors, such as productivity, reliability,
price, and other unique performance characteristics of OrganiTECH Ltd.'s
technologies, differentiate us from our competitors and will be the principal
competitive factor expected to affect future sales of our systems. Additionally,
we believe that our intellectual property will provide us with a strong
advantage over our competitors around the world in general and in the United
States in particular, and will enable us to increase both sales and research and
development efforts for the integration of the GrowTECH(TM) technologies into
new platforms.

EMPLOYEES

As of December 31, 2007, we together with OrganiTECH Ltd. had 18 employees, all
of whom were full-time. Additionally we are engaged with sub-contractors to
reinforce our personnel to the extent needed in several fields of expertise.
Management believes that we have an adequate number of employees to support our
current operations and projects in process, which are managed partially with
subcontractors. OrganiTECH Ltd. intends to hire additional employees as
required, upon the ordering of additional projects, commercialization of its
products and the receipt of additional financing.

ITEM 2 DESCRIPTION OF PROPERTY

We currently utilize, as an interim executive office, the corporate facilities
of OrganiTECH Ltd. The facility, which is in good condition, serves as the
corporate, research, and manufacturing facility of OrganiTECH Ltd. Located in
Yoqneam, Israel, the facility is approximately 2,500 square meters, including
offices and an integration hall and laboratory space, as well as 2,000 square
meters of yard space. We currently lease this property at a price of $3,500 per
month. The lease for the offices is for two years and is due to terminate on
June 2, 2008. The lease for the integration hall and laboratory space is for two
years as well and is due to terminate August 1, 2008.

The change in location during 2003 to Yoqneam was done partially due to the
approval OrganiTech Ltd. received from the Investment Center of the Israel
Ministry of Commerce and Trade to operate a production facility under certain
tax exempt conditions. The receipt of such tax benefits is conditional upon
OrganiTECH Ltd. fulfilling certain obligations stipulated by Israeli law, such
as moving its operations into a certain geographic area as determined by the
Investment Center. If OrganiTECH Ltd. fails to comply with such conditions, the
tax benefits may be canceled and OrganiTECH Ltd. may be required to refund, in
whole or in part, any benefits previously received.

We have no real estate investment policies.

ITEM 3 LEGAL PROCEEDINGS

We are, from time to time, subject to claims arising in the ordinary course of
our business, including patent, product liability and other litigation. In
determining whether liabilities should be recorded for pending litigation
claims, we assess the allegations made and the likelihood that we will
successfully defend the suit. When management believes that it is probable that
we will not prevail in a particular matter, management then estimates the amount
of the liability based in part on advice of outside legal counsel.


                                       14

In February 2005, a legal suit was filed with the Haifa Regional Tribunal,
Israel, against OrganiTECH Ltd. by Leami 2000 (96) Ltd. ("Leami") in the amount
of approximately $295,500, arising out of the sale of one of OrganiTECH Ltd.'s
products for which Leami had paid $60,000 out of the total purchase price of
$100,000. Leami claimed that the product had not operated in the manner that it
had anticipated and that as a result Leami had suffered damages. OrganiTECH Ltd.
disputes the claim of Leami, and has stated in its defense that the product sold
was a product at a development stage and that this fact was clearly stated in
the sales contract. On April 20, 2005 OrganiTECH Ltd. filed a counter lawsuit
against Leami in the amount of $148,800 claiming that Leami had not fulfilled
its obligations and commitments under the sale agreement signed with OgraniTECH,
and by not doing so and taking other actions, it caused OrganiTECH Ltd. to
suffer damages and expenses. A Regional Tribunal has held several preliminary
hearings in order to prepare the claim and counter-claim for trial. A full trial
date has yet to be set. Our management believes, based on the opinion of our
legal counsel, that this claim will not have material adverse effect on our
financial condition.

In August 2006, a claim for approximately $15,000 against OrganiTECH Ltd., and
Mr. Shimon Zanaty, one of our former directors who resigned from the board of
directors of the Company in July 2007, in connection with the Katzir Investment
(see "Material Agreements" Item 6 later in this Annual Report), was filed with
the Haifa Magistrates' Court in Israel. The claim was filed by a private
individual who entered into an agreement in 2003 with one of our principal
shareholders, BLM NV, to purchase our shares which had previously been purchased
by BLM and were held by a trustee. The plaintiff claims that she paid BLM for
the shares, but has never received them. In October 16, 2006, OrganiTECH Ltd.,
received a letter from the attorney representing the plaintiff, stating that
OrganiTECH Ltd., was not required to file a statement of defense and on November
20, 2006, the attorney representing the plaintiff informed OrganiTECH Ltd., in
writing that it would be removed as a defendant in the action. OrganiTECH Ltd.,
has so far not received a copy of the decision removing it as defendant. Our
management believes, based on the opinion of our legal counsel, that this claim
will not have material adverse effect on our financial condition.

As of December 31, 2007 none of our directors, officers, affiliates or any owner
of record or beneficially of more than 5% of the shares of our common stock is a
party to any proceedings against us or has material interests adverse to our
own.

ITEM 4 SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS

None


                                       15

                                     PART II

ITEM 5 MARKETS FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a)  Market Information.

From March 26, 2001 through April 14, 2005 our common stock, under the symbol
"ORGT", was quoted on the OTC Electronic Bulletin Board ("ORGT.OB"). From April
14, 2005, our common stock became ineligible for further quotation on the OTC
Bulletin Board and our shares have since been quoted only on the Pink Sheets
Electronic Quotation Service ("ORGT.PK"), due to our failure to fulfill our
reporting requirements. We completed the fulfillment of these requirements in
March 2007 and as a result, since July 2, 2007, our common stock has been quoted
on the OTC Electronic Bulletin Board under the symbol ORGT.OB.

The current price quotation as of February 27, 2008 was $0.07.

The following table sets forth the range of the high and low closing share price
of our common stock for each quarterly period within the past two fiscal years:

                          CLOSING SHARE PRICES
PERIOD                    LOW              HIGH
--------------           -----            ------

2006
First Quarter            $0.22            $0.35
Second Quarter           $0.26            $0.33
Third Quarter            $0.23            $0.35
Fourth Quarter           $0.12            $0.28

2007
First Quarter            $0.20            $0.26
Second Quarter           $0.18            $0.23
Third Quarter            $0.13            $0.20
Fourth Quarter           $0.09            $0.14

These quotations reflect closing share prices, without retail mark-up, markdown,
or commission, and may not represent actual transactions.

(b)  Approximate Number of Security Holders:

As of December 31, 2007 and the date of this report, there were approximately
120 shareholders of record of our common stock.

(c)  Dividends.

We have not paid any cash dividends with respect to our common stock. There are
no contractual restrictions on our present or future ability to pay cash
dividends. However, we may retain any earnings in the near future for
operations, thus we do not anticipate that any cash dividends will be paid in
the foreseeable future.

In the event OrganiTECH Ltd. distributes cash dividends from income which was
tax-exempt as a result of OrganiTECH Ltd.'s Approved Enterprise status,
OrganiTECH Ltd. may have to withhold for the Israeli tax authorities between 10%
to 25% (depending on the level of foreign investment in our company) of the
amount of cash dividends distributed and this payment could restrict OrganiTECH
Ltd.'s ability to pay dividends.


                                       16

(d)  Securities authorized for issuance under equity compensation plans

                                                                                             Number of securities
                                                                                            remaining available for
                                Number of Securities to be     Weighted-average exercise     future issuance under
                                  issued upon exercise of        price of outstanding      equity compensation plans
                                   outstanding, options,         options, warrants and       (excluding securities
                                   warrants and rights                  rights              reflected in column (a))
    Plan Category                           (a)                           (b)                          (c)
    -------------                        ---------                       -----                       -------

Equity compensation plans
approved by security holders             3,851,508                       0.235                       867,000

Equity compensation plans not
approved by security holders                     -                           -                             -

Total                                    3,851,508                       0.235                       867,000

On May 29, 2000 we granted a key employee options to purchase 96,508 shares of
our common stock at an exercise price of $1 per share. The options can be
exercised upon the occurrence of our making a public issuance of our shares, a
merger or an acquisition of our company.

On May 31, 2005, the Board of Directors approved a Stock Option Plan ("SOP") for
our executives, directors, key employees and service providers comprising
options to purchase up to 1,622,000 shares of our common stock. On February 19,
2006, the Board of Directors approved the increase of the SOP by a further
3,000,000 shares of common stock, so that options to purchase a total of
4,622,000 shares of common stock of the Company were available for grant under
the SOP. As of December 31, 2007, options for the purchase of 867,000 shares of
common stock of the Company were still available for future grants.

The SOP provides that no option may be granted at an exercise price less than
the fair market value of the common shares on the date of grant and no option
can have a term in excess of ten years. Options which are canceled or forfeited
before expiration become available for future grants.

Options vest over a period of zero to four years from the date of grant and
expire no longer than ten years of grant.

(e)  Sales of Unregistered Securities.

During 2007, our company or OrganiTECH Ltd. sold the following securities
without registration under the Securities Act of 1933, as amended (the
"Securities Act"):

     (i)  In July 2007 we executed an investment agreement, or the Katzir
          Investment, which was consummated on July 19, 2007 with `Keren Katzir
          Debenture for Investment Ltd.' or Katzir, an Israeli investment
          company publicly traded on the Tel- Aviv Stock Exchange, pursuant to
          which we issued (i) 10,000,000 shares of our common stock, equal to
          approximately 27.3% of our issued and outstanding share capital
          (post-investment) in consideration for $2 million and (ii) a three
          year warrant for the purchase of up to 3,846,154 shares of our common
          stock for an exercise price of $0.26 per share in consideration for an
          additional $20,000.

     (ii) On March 1, 2007 we entered into an agreement with a certain third
          party, or Lender, pursuant to which the Lender provided us with a
          convertible loan, or Loan, in the amount of $357,500 for a period of 3
          years, bearing net interest of 9% per annum to be paid at the end of
          each calendar quarter. The Loan or any part of it may be converted
          into shares of our common stock with a conversion price of $0.26 per
          share, which was considered the fair market value of our shares of
          common stock on the date of the agreement.

We believe that the transactions described above were exempt from registration
under Section 4(2) of the Securities Act because none of the investors was a
"U.S. Person" as that term is defined in Rule 902(k) of Regulation S promulgated
under the Securities Act, and each investor represented that it was not
acquiring the securities for the account or benefit of any U.S. person.
Additionally, we believe that the transaction described above was exempt from
registration under Section 4(2) of the Securities Act because the subject
securities were sold to a limited group of persons, each of whom was believed to
have been a sophisticated investor and to have been purchasing for investment
without present intention to distribute.


                                       17

ITEM 6 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
       OPERATIONS

The following management's discussion and analysis of financial condition and
results of operations should be read in conjunction with our audited
consolidated financial statements and notes thereto contained elsewhere in this
report. This discussion contains forward-looking statements based on current
expectations that involve risks and uncertainties. Actual results and the timing
of certain events may differ significantly from those projected in such
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of their dates.

OVERVIEW

We design, develop, manufacture, market and support hydroponics solutions and
platforms for the Agriculture and Life-Science industries, enabling the growth
of lettuce, green leafy vegetables, herbs and other plants in a highly economic,
clean and automated surrounding, making optimal use of resources such as water,
energy, labor and land and producing extremely high yields while maintaining
significantly lower production costs than the traditional alternatives. Since
2003 we have been offering our "Hydroponics Growing Factory".

With the introduction of the GrowTECH2500 we can now offer a highly automated,
computerized controlled hydroponics sustainable greenhouse designed to grow and
harvest commercial quantities of hydroponics, pesticide free and clean, lettuce,
green leafy vegetables, herbs and other plants while making optimal use of
resources such as water, energy, labor and land. See "Item 1 - Description of
Business".

Following a small number of successful small-scale projects that were deployed
during 2004 and accepted mainly during 2005 (the majority of which were deployed
in Israel), since the middle of 2005 we have deployed three large scale
hydroponics projects of our GrowTECH2500 system. The first project of 1.2
Hectare of hydroponics greenhouse was executed in mid- 2005 and deployed in
Russia for a Russian local grower. The second project of 1.2 Hectare of
hydroponics greenhouse was executed in mid- 2006 and deployed in Spain for a
traditional lettuce grower who is a principle exporter of green leafy produce to
whole Europe. The third project of 0.6 Hectare of hydroponics greenhouse was
executed in mid- 2007 in Israel.

During 2008 management intends to continuously increase investment in both its
selling and marketing activities and in improving and enhancing our product
lines.

CHANGES IN MANAGEMENT

On July 19, 2007, upon the consummation, and as part of the Katzir Investment
(as described later in this Item 6 under "Material Agreements"), Messrs. Shimon
Zenaty and Samuel Hessel resigned from our Board of Directors. Messrs. Yossi
Hevron, Rami Mandola, Yossi Levi and Meir Miran and Ms. Rona Rephaely, were
appointed to our Board of Directors.

Immediately following the consummation of the Katzir Investment, Mr. Lior
Hessel, resigned as chairman of our Board of Directors and on July 23, 2007, our
Board of Directors elected Mr. Yossi Hevron as the new Chairman of our Board of
Directors. Additionally, on August 13, 2007 and November 5, 2007, Messrs. Amnon
Sudri and Gideon Sturlesi, respectively, were appointed to our Board of
Directors. On November 4, 2007, Mr. Lior Hessel resigned from our Board of
Directors.

Following Mr. Hevron's resignation on November 5, 2007, from our Board of
Directors and from serving as its chairman, due to ill health, our Board of
Directors elected Mr. Gideon Sturlesi to serve as our new chairman.

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

The preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions in certain circumstances that
affect amounts reported in the accompanying consolidated financial statements
and related footnotes. Actual results may differ from these estimates. To
facilitate the understanding of the business activities, described below are
certain of the Company's accounting policies that are relatively more important
to the portrayal of the financial condition and results of operations and that
require management's subjective judgments. We base our judgments on our
experience and various other assumptions that the management believes to be
reasonable under the circumstances.


                                       18

The following listing is not intended to be a comprehensive list of all of our
accounting policies. In many cases, the accounting treatment of a particular
transaction is specifically dictated by generally accepted accounting
principles, with no need for management's judgment in their application. There
are also areas in which management's judgment in selecting any available
alternative would not produce a materially different result.

DEVELOPMENT STAGE COMPANY

Since its inception and until 2006 the Company has devoted substantially most of
its efforts to business planning, marketing, research and development,
recruiting management and technical staff, acquiring assets and raising capital.
Commencing 2006, the Company has generated significant revenues and accordingly,
the Company is not considered to be as a development stage company, as defined
in Statement of Financial Accounting Standards No. 7, "Accounting and reporting
by development Stage Enterprises" ("SFAS No. 7").

REVENUE RECOGNITION

We believe our most critical accounting policy relates to revenue recognition as
described below.

The Company generates revenues from long-term contracts which are recognized
based on Statement of Position 81-1 "Accounting for Performance of
Construction-Type and Certain Production-Type Contracts" ("SOP 81-1") according
to which revenues are recognized based on either the completed contract basis or
the percentage of completion basis.

Based on the percentage-of-completion method, sales and profits under long-term
fixed-price contracts which provide for a substantial level of development and
design efforts in relation to total contract efforts are recorded based on the
ratio of hours incurred by key personnel to estimated total hours required from
such key personnel at completion.

The percentage-of-completion method of accounting requires management to
estimate the cost and gross profit margin for each individual contract.
Estimated gross profit or loss from long-term contracts may change due to
changes in estimates resulting from differences between actual performance and
original estimated forecasts. Such changes in estimated gross profit are
recorded in results of operations when they are reasonably determinable by
management, on a cumulative catch-up basis. Anticipated losses on contracts are
charged to earnings when determined to be probable.

The Company believes that the use of the percentage-of-completion method is
appropriate since the Company has the ability to make reasonably dependable
estimates of the extent of progress towards completion, contract revenues and
contract costs. In addition, contracts executed include provisions that clearly
specify the enforceable rights regarding services to be provided and received by
the parties to the contracts, the consideration to be exchanged and the manner
and terms of settlement. In all cases the Company expects to perform its
contractual obligations, and its customers are expected to satisfy their
obligations under the contract. In 2007 the Company recorded provision for loss
in the amount of $190,000.

Penalties applicable to performance of contracts are considered in estimating
sales and profit rates and are recorded when there is sufficient information to
assess anticipated contract performance.

In 2007 we derived most of our revenues from two projects, each of a single
customer. In 2006 we also derived most of our revenues from two projects, each
of a single customer, out of which the deployment of one project continued
throughout 2007.

STOCK-BASED COMPENSATION

The Company adopted SFAS 123(R) using the modified prospective transition
method, which requires the application of the accounting standard starting from
January 1, 2006, the first day of the Company's fiscal year 2006. Under that
transition method, compensation costs recognized in the years ended December 31,
2006 and 2007, include: (a) compensation cost for all share-based payments
granted prior to, but not yet vested as of January 1, 2006, based on the grant
date fair value estimated in accordance with the original provisions of
Statement 123, and (b) compensation cost for all share-based payments granted
subsequent to January 1, 2006, based on the grant-date fair value estimated in
accordance with the provisions of Statement 123(R). Results for prior periods
have not been restated.


                                       19

The Company recognizes compensation expenses for the value of its awards, which
have graded vesting based on the straight line method over the requisite service
period of each of the awards.

As a result of adopting SFAS 123(R) on January 1, 2006, the Company's financial
position and result of operation had an immaterial change, than if it had
continued to account for stock-based compensation under SFAS 123.

The fair value of the options granted during years 2005, 2006 and 2007 were
estimated using a Black & Scholes option pricing model. The expected volatility
was calculated based upon actual historical stock price movements over the most
recent periods ending on the grant date, equal to the expected option term. The
expected option term represents the period that the Company's stock options are
expected to be outstanding and was determined based on simplified method
permitted by SAB 107 as the average of the vesting period and the contractual
term. The Company has historically not paid dividends and has no foreseeable
plans to issue dividends. The risk-free interest rate is based on the yield from
U.S. Treasury zero-coupon bonds with an equivalent term.

The Company granted the options to its key employees and directors, and
currently estimates that all options will be vested.

The Company applies SFAS No. 123 and Emerging Issues Task Force No. 96-18
"Accounting for Equity Instruments that are Issued to other than Employees for
Acquiring, or in conjunction with selling, goods or services" ("EITF 96-18"),
with respect to options and warrants issued to non-employees. SFAS No. 123
requires the use of option valuation models to measure the fair value of the
options and warrants at the date of grant.

CONTINGENCIES

The Company is, from time to time, subject to claims arising in the ordinary
course of its business, including patent, product liability and other
litigation. In determining whether liabilities should be recorded for pending
litigation claims, the Company assesses the allegations made and the likelihood
that it will successfully defend the suit. When management believes that it is
probable that the Company will not prevail in a particular matter, management
then estimates the amount of the liability based in part on advice of outside
legal counsel.

RESULTS OF OPERATIONS

The following table sets forth certain selected financial data, and is qualified
in its entirety by reference to our financial statements and the notes to the
financial statements:

                                    Year ended December 31,
                                -----------------------------
                                    2007              2006
                                -----------       -----------

Total Assets                    $ 1,563,472       $   924,846

Short Term Obligations          $ 1,969,918       $ 2,188,128

Revenue                         $ 1,487,334       $ 3,395,338

Net Loss                        $(1,556,396)      $(1,379,761)

Net Loss per Common Share       $     (0.05)      $     (0.05)

Dividends per Common Share      $         0       $         0

YEAR ENDED DECEMBER 31, 2007 COMPARED TO THE YEAR ENDED DECEMBER 31, 2006

REVENUES

Revenues decreased 56.2% to $1,487,334 for the year ended December 31, 2007 from
$3,395,338 for the year ended December 31, 2006. The $1,908,004 decrease in
revenues is due to a decrease in new sales of our products.

We believe that in 2008 our revenues will come from a limited number of
customers.


                                       20

COST OF REVENUES AND GROSS PROFIT/LOSS

Cost of revenues decreased 45.9% from $2,811,564 in the year ended December 31,
2006 to $1,522,342 in the year ended December 31, 2007. This decrease was due
primarily to the decrease in revenues. As a percentage of revenues, our cost of
revenues was 102.4% in 2007 and 82.8% in 2006. Cost of revenue for fiscal 2007
includes mainly (i) cost of materials and salaries in addition to the decrease
in sales related expenses such as provision for warranties and royalties to the
Israeli Office of Chief Scientist; (ii) a provision for estimated loss from a
new project entered into during June 2007 for which revenues are recognized
commencing the third quarter of 2007; and (iii) an off-setting adjustment to a
provision for warranty related to the recognized revenues.

For the reasons described above, during fiscal year 2007 we had a gross loss of
$35,008 versus a gross profit of $583,774 for the fiscal year 2006.

RESEARCH AND DEVELOPMENT EXPENSES

Research and development, net expenses decreased 37.4% from $510,163 in the year
ended December 31, 2006 to $319,120 in the year ended December 31, 2007. The
decrease was primarily due to decreased payroll and related costs, materials and
sub-contractors' costs during year 2007. As a percentage of revenue, our R&D
expenses were 15.0% in 2006 and 21.5% in 2007. In 2008, we expect to continue to
incur R&D costs, however limited to our available financial resources, related
to our continued GrowTECH2500 development and to a lesser extent, our continued
development of other life science applications.

SELLING AND MARKETING EXPENSES

Selling and marketing expenses decreased 21.9% from $848,504 in the year ended
December 31, 2006 to $663,083 in the year ended December 31, 2007. The decrease
in selling and marketing expenses is primarily attributable to the decreased
sales' commission and to the decrease in marketing expenses of Demo systems. As
a percentage of revenues, our selling and marketing expenses were 25.0% in 2006
and 44.6% in 2007.

As of the date of the report, we maintain one demo-site for which the majority
of the expense was already incurred. However, in 2008 we expect to continue to
incur other increased selling and marketing expenses (limited to our available
financial resources), as we believe that the need for our products is worldwide
and our sales volume is directly influenced by the selling and marketing efforts
invested.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses decreased 8.4% from $637,529 in the year
ended December 31, 2006 to approximately $583,684 in the year ended December 31,
2007. The decrease in general and administrative expenses was primarily in
professional services and write-off of impaired fixed assets in 2006. As a
percentage of revenues, our general and administrative were 18.8% in 2006 and
39.2% in 2007. In 2008, we expect to maintain this level of general and
administrative expenses, limited to our available financial resources.

FINANCIAL INCOME/EXPENSES

Financial income increased from $32,661 in the year ended December 31, 2006 to
$42,499 in the year ended December 31, 2007. During 2007 financial income
consisted primarily of a gain from exchange rate differences and interest on
cash, net of interest and other expenses related to a convertible loan. During
year 2006 financial income consisted primarily of a cancellation of a provision
for a fine in connection with a PIPE & interest on cash, net of financing
expenses related to short term bank credit and others.

OPERATING LOSS AND NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS

Our operating loss increased by 13.2% to $1,598,895 for the year ended December
31, 2007 from $1,412,422 for the year ended December 31, 2006 and our net loss
increased by 12.8% to $1,556,396 for the year ended December 31, 2007 from
$1,379,761 for the year ended December 31, 2006.


                                       21

YEAR ENDED DECEMBER 31, 2006 COMPARED TO THE YEAR ENDED DECEMBER 31, 2005

REVENUES

Revenues increased 106% to approximately $3.4 million for the year ended
December 31, 2006 from approximately $1.65 million for the year ended December
31, 2005. The approximately $1.75 million increase in revenues is primarily from
the completion of the deployment of a large scale project in Russia and a
substantial progress we made in the deployment of a large scale project in
Spain- - both projects were recognized based on the percentage-of-completion
method.

We believe that in 2007 our revenues will come from a limited number of
customers out of which a significant amount will be attributed to our Spanish
customer.

COST OF REVENUES AND GROSS PROFIT/LOSS

Cost of revenues increased 67% from approximately $1.686 million in the year
ended December 31, 2005 to approximately $2.812 million in the year ended
December 31, 2006. This increase was due primarily to the increase in revenues.
As a percentage of revenues, our cost of revenues was improved to 83% in 2006
from 102% in 2005. Cost of revenues for fiscal 2006 includes mainly cost of
materials and salaries in addition to the increase in sales related expenses
such as provision for warranties and royalties to the Israeli Office of Chief
Scientist.

For the reasons described above, during fiscal year 2006 we had gross profit of
17% (approximately $584,000) versus gross loss of 2% for the fiscal year 2005
(approximately $36,000).

RESEARCH AND DEVELOPMENT EXPENSES

Research and development, net expenses increased 236% from approximately
$152,000 in the year ended December 31, 2005 to approximately $510,000 in the
year ended December 31, 2006. The increase was primarily due to increased
payroll and related costs, materials and sub-contractors' costs during year
2006. As a percentage of revenues, our R&D expenses were 9% in 2005 and 15% in
2006. In 2007, we expect to continue to incur R&D costs, however limited to our
available financial resources, related to our continued GrowTECH2500 development
and to a lesser extent, our continued development of other life science
applications.

SELLING AND MARKETING EXPENSES

Selling and marketing expenses increased 187% from approximately $296,000 in the
year ended December 31, 2005 to approximately $849,000 in the year ended
December 31, 2006. The increase in selling and marketing expenses is primarily
attributable to the increased payroll costs, amortization of deferred stock
based compensation and to expenses related to demo-systems deployed in Europe
and the USA. As a percentage of revenues, our selling and marketing expenses
were 18% in 2005 and 25% in 2006.

As of the date of the report, we maintain two demo-sites for which the majority
of the expense was already incurred. However, in 2007 we expect to continue to
incur other increased selling and marketing expenses (limited to our available
financial resources), as we believe that the need for our products is worldwide
and our sales volume is directly influenced by the selling and marketing efforts
invested.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses increased 89% from approximately $338,000 in
the year ended December 31, 2005 to approximately $638,000 in the year ended
December 31, 2006. The increase in general and administrative expenses was
primarily in payroll costs and amortization of deferred stock based
compensation, the majority of which was related to the recruiting of a new chief
executive officer and chief financial officer, and in professional services. As
a percentage of revenues, our general and administrative were 20% in 2005 and
19% in 2006.

In 2007, we expect to maintain this level of general and administrative
expenses, limited to our available financial resources.


                                       22

FINANCIAL INCOME/EXPENSES

Financial income was approximately $33,000 in the year ended December 31, 2006
compared to an expense of approximately $177,000 in the year ended December 31,
2005. During 2006 financial income consisted primarily of writing off of a
provision recorded in 2005 for a possible fine related to an equity investment
in our company (for further information see note 11-E(4). of our annual
consolidated financial statements for the year ended December 31, 2006 of this
Report) that was set-off by expenses related to currency exchange rates. During
year 2005 financial expenses consisted primarily of interest on a convertible
loan received from a related party and of a provision recorded for a possible
fine related to an equity investment in our company.

OPERATING LOSS AND NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS

Our operating loss increased by 72% to approximately $1.412 million for the year
ended December 31, 2006 from approximately $822,000 for the year ended December
31, 2005 and our net loss increased by 38% to approximately $1.38 million for
the year ended December 31, 2006 from approximately $998,000 for the year ended
December 31, 2005.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

YEAR ENDED DECEMBER 31, 2007 COMPARED TO THE YEAR ENDED DECEMBER 31, 2006

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2007, we had cash and cash equivalents totaling $909,551
versus approximately $569,319 as of December 31, 2006.

Since our inception in 1999, we have financed our operations through private
sales of shares of our common stock and convertible loans, which have totaled as
of December 31, 2007 $8 million (net of issuance expenses). We have used the
proceeds of the sale of all securities for working capital and other general
corporate purposes.

Until we are able to generate sufficient cash from operations, we intend to use
our existing cash resources to finance our operations. Based on our monthly
expenses, we did not have sufficient cash to satisfy our company's and
OrganiTECH Ltd.'s operational and development requirements over the next 12
months. The report of our independent public accountants on our consolidated
financial statements for the fiscal years ended December 31, 2007 includes an
explanatory paragraph which states that we have suffered recurring losses from
operations and a negative cash flow from operating activities that raise
substantial doubt about its ability to continue as a going concern.

For the year ended December 31, 2007, we had $1,885,117 cash used in operating
activities compared with $746,297 for the year ended December 31, 2006. The
operating cash outflow for fiscal year 2007 was primarily a result of our net
loss of $1,556,396 and a decrease in trade payable and customer advances and by
an increase in trade receivables. The cash outflow was partially offset by a
decrease in costs incurred in relation to contracts in progress, by an increase
in other payables and accrued expenses, and by amortization of deferred
stock-based compensation.

The net cash provided by investment activities for the year ended December 31,
2007 was $1,470 compared with $19,366 used in investment activities for the year
ended December 31, 2006. The cash provided by investment activities for fiscal
2007 was a result of disposal of property and equipment net of purchases of new
equipment.

Our net cash inflow from financing activities for the year ended December 31,
2007 was $2,223,879 compared with $885,908 for the year ended December 31, 2006.
The net cash inflow from financing activities for fiscal year 2007 was generated
primarily from the proceeds of the issuance of shares, net of issuance expenses
and from a convertible loan, off-set by an increase in short-term credit from
financial institutions.

For further information relating to an investment in our company by Keren Katzir
Debenture for Investment Ltd., see under "Material Agreements" later in this
Item 6.

Other than as otherwise mentioned in this quarterly report, there were no
material long term loans, commitments or off-balance sheet guarantees as of
December 31, 2007.


                                       23

OFF-BALANCE SHEET ARRANGEMENTS

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

YEAR ENDED DECEMBER 31, 2006 COMPARED TO THE YEAR ENDED DECEMBER 31, 2005

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2006, we had cash and cash equivalents totaling approximately
$569,000 versus approximately $449,000 as of December 31, 2005.

For the year ended December 31, 2006, we had approximately $746,000 cash used in
operating activities compared with approximately $14,000 for the year ended
December 31, 2005. The operating cash outflow for fiscal 2006 was primarily a
result of our loss of approximately $1.38 million and a decrease in customer
advances. The cash outflow was partially offset by a decrease in costs incurred
on contracts in progress and other receivables, by an increase in other payables
and accrued expenses, and by amortization of deferred stock-based compensation.

The net cash used in investment activities for the year ended December 31, 2006
was approximately $19,000 compared with approximately $58,000 provided by
investment activities for the year ended December 31, 2005. The cash used in
investment activities for fiscal 2006 was a result of property and equipment
purchases.

Our net cash inflow from financing activities for the year ended December 31,
2006 was approximately $886,000 compared with approximately $408,000 for the
year ended December 31, 2005. The net cash inflow from financing activities for
both periods was generated primarily from the proceeds of the issuance of
shares, net of issuance expenses.

There were no long term loans and commitments or off balance sheet guarantees as
of December 31, 2006.

OFF-BALANCE SHEET ARRANGEMENTS

As of December 31, 2006, we did not have any off-balance sheet arrangements that
had or were reasonably likely to have a current or future effect on our
financial condition, changes in future condition, revenues or expenses, results
of operations, liquidity, capital expenditures or capital resources.

UNCERTAINTIES THAT MAY AFFECT OUR FUTURE RESULTS AND FINANCIAL CONDITIONS

Described below are a number of uncertainties which, in addition to
uncertainties and risks presented elsewhere in this annual report, may adversely
affect our business, operating results and financial condition. The
uncertainties enumerated below as well as those presented elsewhere in this
annual report should be considered carefully in evaluating the company, its
business and the value of its securities.

WE ARE A COMPANY WITH LIMITED OPERATIONAL HISTORY

We have a limited operating history upon which an investor can evaluate an
investment in our business. Our limited operating history will make it
difficult, if not impossible, to predict future operating results and to assess
the likelihood of our business success in considering an investment in our
company. We cannot give any assurance that we will successfully address these
risks, which may limit the ability to encourage further investment in our
company.

NO SIGNIFICANT REVENUES AND LACK OF FUNDS

We have accumulated losses since our inception in the amount of $11,030,385 and
currently have no material revenues. Our inability to generate revenues and
profits from products we have introduced onto the market could cause us to go
out of business, and for our investors to lose their entire investment.


                                       24

We will most likely need to raise cash to cover the anticipated fall in our cash
flow until such time as we become cash flow positive based solely on sales less
operating and other costs. We will seek to raise additional cash and working
capital, should it become necessary, through the public or private sales of
equity securities, the procurement of advances on contracts, funding from
joint-venture or strategic partners, or a combination of the foregoing. We may
also seek to satisfy indebtedness without any cash outlay through the private
issuance of debt or equity securities. We cannot give any assurance that we will
be able to secure any additional cash we may require to continue our operations.

Our independent auditors stated in their report accompanying the financial
statements for the fiscal year ended December 31, 2007 that we have not yet
generated sufficient revenues from our operations and are dependent on external
sources for financing its operations. Additionally we have incurred recurring
net losses, negative cash flows from operations and a negative working capital.
These factors raise substantial doubt about our ability to continue as a going
concern.

INTENSE COMPETITION

The agro-technology market is a competitive industry, in which the standards are
constantly evolving. There are no substantial barriers to entry, and we expect
that competition will be intense and may increase.

Many of our existing competitors may have substantially greater financial,
technical and marketing resources, larger customer bases, longer operating
histories, greater name recognition and more established relationships in the
industry than we have. As a result, certain of these competitors may be able to
develop and expand their product and service offerings more rapidly, adapt to
new or emerging technologies and changes in customer requirements more quickly,
take advantage of acquisitions and other opportunities more readily, devote
greater resources to the marketing and sales of their products and services, or
aggressively reduce their sales prices below the our costs. We cannot give any
assurance that we will be able to compete successfully with existing or new
competitors.

WE DEPEND ON A LIMITED NUMBER OF KEY PERSONNEL WHO WOULD BE DIFFICULT TO REPLACE

We are dependent for our success on a few key executive officers. Our inability
to retain these officers would impede our business plan and growth strategies,
which would have a negative impact on our business and the value of an
investment. We currently have a small staff comprised of four executive officers
and sixteen employees. Although we believe that these officers and employees
will be able to handle the administrative, research and development, sales and
marketing, and manufacturing requirements in the short-term as we increase sales
and operations, we will nevertheless be required over the longer-term to hire
highly skilled managerial, engineering, technical, sales and marketing and
administrative personnel to fully implement our business plan and growth
strategies. We cannot assure that we will be able to engage the services of such
qualified personnel at competitive prices, or at all, particularly given the
risks of employment attributable to our limited financial resources and lack of
an established track record.

THE ABILITY TO MANAGE OPERATION GROWTH

We plan to grow very rapidly, which will strain our management team and other
company resources to both implement more sophisticated managerial, operational
and financial systems, procedures and controls and to train and manage the
personnel necessary to implement those functions. Our inability to manage our
growth could impede our ability to generate revenues and profits and to
otherwise implement our business plan and growth strategies, which would have a
negative impact on our business and the value of an investment.

We will need to significantly expand our operations to implement our longer-term
business plan and growth strategies. We will also be required to manage multiple
relationships with various strategic partners, customers, manufacturers and
suppliers, consultants and other third parties. This will require us to
significantly improve or replace our existing managerial, operational and
financial systems, procedures and controls; to improve the coordination between
our various corporate functions; and to manage, train, motivate and maintain a
growing employee base. The time and costs to effect these steps may place a
significant strain on our management personnel, systems and resources,
particularly given the limited amount of financial resources and skilled
employees that may be available at the time. We cannot give any assurance that
we will institute, in a timely manner or at all, the improvements to our
managerial, operational and financial systems, procedures and controls necessary
to support our anticipated increased level of operations and to coordinate our
various corporate functions, or that we will be able to properly manage, train,
motivate and retain our anticipated increased employee base.


                                       25

RELIANCE ON KEY MARKETING AND DISTRIBUTION PARTNERS

We intend to rely upon strategic partners or third party marketing and
distribution agents to provide a significant part of our marketing and sales
function. Should they fail to perform as expected, our ability to generate
revenues and profits and to otherwise implement our business plan and growth
strategies will be adversely affected

RELIANCE ON INTELLECTUAL PROPERTY

We rely on a combination of patent, patent pending and trademark, proprietary
rights agreements and non-disclosure agreements, to protect our intellectual
properties. We cannot give any assurance that these measures will prove to be
effective in protecting our intellectual properties.

In the case of patents, we cannot give any assurance that our existing patents
will not be invalidated, that any patents that we currently or prospectively
apply for will be granted, or that any of these patents will ultimately provide
significant commercial benefits. Furthermore, competing companies may circumvent
any patents that we may hold by developing products which closely emulate but do
not infringe upon our patents. While we intend to seek patent protection for our
products in selected foreign countries, those patents may not receive the same
degree of protection as they would in the United States. We can give no
assurance that we will be able to successfully defend our patents and
proprietary rights in any action we may file for patent infringement. Similarly,
we cannot give any assurance that we will not be required to defend against
litigation involving the patents or proprietary rights of others, or that we
will be able to obtain licenses for these rights. Legal and accounting costs
relating to prosecuting or defending patent infringement litigation may be
substantial.

We also rely on proprietary designs, technologies, processes and know-how not
eligible for patent protection. We cannot give any assurance that our
competitors will not independently develop the same or superior designs,
technologies, processes and know-how.

POTENTIAL DIFFICULTIES IN ENFORCING CONTRACTS WITH CUSTOMERS

Our contracts and purchase orders are separately negotiated with each of our
customers and the terms vary. Some of the customers execute short-term purchase
orders for small deployments as opposed to long-term contracts for large-scale
deployments of our products. These short term contracts do not ensure that the
customer will purchase any additional products beyond those specifically listed
in the order. Moreover, since we believe that these purchase orders may
represent the early portion of longer-term customer programs, we spend
significant financial sums, personnel and operational resources to fulfill these
orders. If our customers fail to purchase additional products to fulfill their
programs as we hope, we may be unable to recover the costs it incurred and our
business could suffer.

In addition, our general framework contracts are generally non-exclusive and
contain provisions allowing our customers to terminate the agreement without
significant penalties. Our contracts may also specify our shipment, delivery and
installation commitments. If we fail to meet these commitments or negotiate
extensions in a timely manner, our customers may choose to terminate their
contracts or impose monetary penalties.

SALES AND OPERATIONS ARE DIFFICULT AND COSTLY AS A RESULT OF THE POLITICAL RISKS
WORLD WIDE

Our sales to customers based outside Israel account for the majority of our
revenues and may be influenced by the following factors: (i) longer payment
cycles and customers seeking extended payment terms, (ii) tariffs, duties, price
controls or other restrictions on foreign currencies or trade barriers imposed
by foreign countries which may make our systems expensive and uncompetitive for
local operators; (iii) import or export licensing or product-certification
requirements; (iv) unexpected changes in regulatory requirements and delays in
receiving licenses to operate; (v) political and economic instability, including
the impact of economic recessions; (vi) reluctance to staff and manage foreign
operations as a result of political unrest; and (vii) limited ability to enforce
agreements in regions where the judicial systems may be less developed.

INTERNATIONAL TRANSACTIONS AND FOREIGN CURRENCY FLUCTUATIONS

We intend to export our products. This will subject us to various risks
associated with international transactions that may adversely affect our results
of operations, including risks associated with fluctuating exchange rates;
foreign government regulation of fund transfers and export and import duties and
tariffs; and political instability. We do not currently engage in activities to
mitigate the effects of foreign currency fluctuations, and we anticipate being
paid in U.S. dollars or Euro with respect to any international transactions we
may enter into. If earnings from international operations increase, our exposure
to fluctuations in foreign currencies may increase, and we may utilize forward
exchange rate contracts or engage in other efforts to mitigate foreign currency
risks. We can give no assurance as to the effectiveness of these efforts in
limiting any adverse effects of foreign currency fluctuations on our
international operations and our overall results of operations.


                                       26

PAYING CASH DIVIDENDS

We anticipate that we will not pay cash dividends on the shares of our common
stock in the foreseeable future, and we cannot guarantee that funds will be
legally available to pay dividends.

LOW VOLUME TRADE

The shares of our common stock are listed on the OTC Bulletin Board and as a
result, our shares are sporadically or "thinly-traded" meaning that the number
of persons interested in purchasing our shares at or near ask prices at any
given time may be relatively small or non-existent. This situation is
attributable to a number of factors, including the fact that we are a small
company, relatively unknown to stock analysts, stock brokers, institutional
investors and others in the investment community that generate or influence
sales volume, and that even if we came to the attention of such persons, they
tend to be risk-averse and would be reluctant to follow an unproven company or
purchase or recommend the purchase our shares. As a consequence, there may be
periods of several days or more when trading activity in our shares is minimal
or non-existent, as compared to other issuers which have a large and steady
volume of trading activity that will generally support continuous sales without
an adverse effect on share price. We cannot give any assurance that a broader or
more active public trading market for the shares of its common stock will
develop or be sustained, or that current trading levels will be sustained.

HIGH VOLATILITY IN SHARE PRICE AND POTENTIAL DILUTION

The market price for the shares of our common stock is particularly volatile
given our status as a relatively unknown company with a small and thinly-traded
public float, limited operating history and lack of material revenues, which
could lead to wide fluctuations in our share price. The purchase price for our
shares may not be indicative of the price that will prevail in the trading
market. Investors may be unable to sell their shares of common stock at or above
their purchase price, which may result in substantial losses. Additionally,
should we issue additional shares of common stock, options or warrants to
purchase those shares, it would dilute proportionate ownership and voting
rights.

MATERIAL AGREEMENTS

INVESTMENT BY KEREN KATZIR DEBENTURE FOR INVESTMENT LTD.

In July 2007 we executed an investment agreement, or the Katzir Investment,
which was consummated on July 19, 2007 with `Keren Katzir Debenture for
Investment Ltd.' or Katzir, an Israeli investment company publicly traded on the
Tel- Aviv Stock Exchange which specializes in investing in industrial companies,
pursuant to which we issued (i) 10,000,000 shares of our common stock, equal to
approximately 27.3% of our issued and outstanding share capital
(post-investment) in consideration for $2 million and (ii) a three year warrant
for the purchase of up to 3,846,154 shares of our common stock for an exercise
price of $0.26 per share in consideration for an additional $20,000. As part of
the Katzir Investment, certain of our shareholders who hold collectively greater
than 50% of our issued and outstanding shares entered into an agreement pursuant
to which they agreed to vote their shares in favor of a board comprised of 11
members, 5 of whom would be nominated by Katzir.

PURCHASE AGREEMENT WITH A SPANISH CUSTOMER

On June 28, 2006, we entered into a purchase agreement for the sale of our
hydroponics greenhouses to a Spanish customer for Euro 1.8 million. The purchase
agreement also provides the customer with an option to purchase two further
systems for an aggregate of an additional Euro 3.6 million. The agreement was
fully recognized during year 2007.

CLAL INVESTMENTS LTD.

(1)  Pursuant to a series of investment agreements between February 2005 and
     January 2006 (the "PIPE Agreements"), we issued several investors including
     Clal Investments Ltd., ("Clal") (which also represented the investors), an
     aggregate of 6,000,000 shares of our common stock for an aggregate purchase
     price of $1,500,000 (the "Investment Shares"). Pursuant to the PIPE
     Agreements we also issued warrants to the investors, which warrants have
     since expired without having been exercised.The Investment Shares are
     included in a Form SB-2 which was declared effective on October 4, 2006. As
     a result, we didn't pay the investors and Clal any fine with regards to the
     said registration statement.


                                       27

(2)  On March 14, 2006, we entered into an agreement with Clal for the provision
     of past and future services provided to us by Clal in securing part of the
     investments mentioned above. Under the agreement, Clal is entitled to an
     aggregate payment of $30,000 +VAT (of which $22,000 + VAT has previously
     been paid) and to A-1 Warrants for the purchase of an additional 180,000
     shares of our common stock (of which 82,500 warrants have previously been
     issued to Clal) and A-2 Warrants for the purchase of additional 180,000
     shares of our common stock (of which 82,500 warrants have previously been
     issued to Clal).

(3)  On November 16, 2004, we entered into a service agreement with a consultant
     whereby the consultant will present us to potential investors and as part
     of the success-based consideration. Following the PIPE Agreements for which
     he provided services, the consultant is entitled to A-1 Warrants for the
     purchase of 27,500 shares of our common stock and A-2 Warrants for the
     purchase of 27,500 shares of our common stock under the same terms and
     conditions detailed in the PIPE agreement.

ITEM 7 FINANCIAL STATEMENTS

Our financial statements, as of December 31, 2007 and for the two years then
ended are included in this Report and appear at pages F-1 through F-27.

ITEM 8 CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL
       DISCLOSURE

There have been no change in and disagreements with our accountants on
accounting financial disclosure.

ITEM 8A(T) CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.

Our management, including our chief executive officer and chief financial
officer, evaluated the effectiveness of our disclosure controls and procedures
as of the end of the period covered by this report. Based on that evaluation,
our management concluded that our disclosure controls and procedures as of the
end of the period covered by this report were effective such that the
information required to be disclosed by us in reports filed under the Securities
Exchange Act of 1934 is (i) recorded, processed, summarized and reported within
the time periods specified in the SEC's rules and forms and (ii) accumulated and
communicated to our management, including our President, as appropriate to allow
timely decisions regarding disclosure. A controls system cannot provide absolute
assurance, however, that the objectives of the controls system are met, and no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within a company have been detected.

MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended) for us.

In order to ensure whether our internal control over financial reporting is
effective, management has assessed such controls for its financial reporting as
of December 31, 2007. This assessment was based on criteria for effective
internal control over financial reporting described in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission ("COSO").

In performing this assessment, management has identified the following material
weaknesses:

Absence of adequate segregation of duties relating to oversight and management
of our systems. This resulted primarily from the fact that certain part of the
work of our chief financial officer is not monitored or reviewed. The absence of
adequate segregation of duties may have an affect on the systems which we use in
the evaluation and processing of certain accounts and areas and in the posting
and recording of journal entries into certain accounts, as described below:


                                       28

     o    REVENUE & RECEIVABLES PROCESS - There was a material weakness in the
          sub-process of `Expenses/Costs Related To Recognized Revenues' which
          resulted from the fact that there are certain calculations (such as
          (i) processing of purchase orders or other commercial engagements
          signed with customers, and (ii) distribution & delivery of goods sold
          to customers) that are made by our chief financial officer and which
          are not reviewed or approved by anyone else.

     o    PURCHASING & INVENTORY PROCESSES in Relation to the Allocations
          between Expense and Inventory - There was a material weakness in the
          sub-processes of `Purchasing and Recording Inventory' which resulted
          from the fact that there are certain calculations in relation to
          capitalizations of purchasing to Inventory, that are made by our chief
          financial officer and which are not reviewed by anyone else.

     o    FINANCIAL STATEMENTS CLOSING PROCESS- There was a material weakness in
          the process of closing our financial statements which resulted from
          the fact that the work of our chief financial officer in this process
          (starting with processing the trial balance, through the evaluation
          and implementation of policies and accounting issues, until the
          complete production of comprehensive financial statements) is not
          reviewed by anyone else.

     o    TREASURY AND CASH PROCESS - There was a material weakness in the
          sub-process of debt management which resulted from the fact that our
          chief financial officer manages, evaluates, and discloses all matters
          which relate to debts, convertible loans, hybrid debts, issuance
          expenses, interest, etc. whose work is not reviewed by anyone else.

As a result of these material weaknesses in our internal control over financial
reporting, our management concluded that our internal control over financial
reporting, as of December 31, 2007, was not effective based on the criteria set
forth by COSO in Internal Control - Integrated Framework. A material weakness in
internal control over financial reporting is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the company's annual or
interim financial statements will not be prevented or detected on a timely
basis.

MANAGEMENT'S PLAN FOR REMEDIATION OF MATERIAL WEAKNESSES

In light of the conclusion that our internal control over financial reporting
was not effective, our management is in the process of implementing a plan
intended to remediate such ineffectiveness and to strengthen our internal
controls over financial reporting through the implementation of certain remedial
measures, which include:

     o    Improving the control and oversight of the duties relating to the
          systems we use in the evaluation and processing of certain accounts
          and areas and in the posting and recording of journal entries into
          certain accounts (in which material weaknesses have been identified as
          described above);

     o    The segregation of duties relating to the processing of accounts and
          the recording of journal entries into certain accounts; and

     o    Obtaining the assistance of experienced financial personnel to enhance
          our financial reporting capabilities by overseeing and reviewing the
          chief financial officer's work

We have commenced implementing controls to address the segregation of duties
relating to the systems we use in the evaluation and processing of certain
accounts and areas and in the posting and recording of journal entries into
certain accounts (in which material weaknesses have been identified as described
above). Additionally, we intend to actively obtain the assistance of experienced
financial personnel to enhance our financial reporting capabilities by
reviewing/overseeing the chief financial officer's work.

This annual report does not include an attestation report of our public
accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management's report in this annual
report.


                                       29

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of the Company has evaluated, with the participation of the Chief
Executive Officer of the Company, any change in the Company's internal control
over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) that occurred during the fourth fiscal quarter of the period
covered by this Annual Report on Form 10-KSB. There were no changes in our
internal control over the financial reporting identified in that evaluation that
occurred during the fourth fiscal quarter of the period covered by this Annual
Report on Form 10-KSB that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting. However, since
January 1, 2008, we have commenced implementing controls to address the
segregation of duties relating to the systems we use in the evaluation and
processing of certain accounts and areas and in the posting and recording of
journal entries into certain accounts (in which material weaknesses have been
identified as described above). Additionally, we intend to actively obtain the
assistance of experienced financial personnel to enhance our financial reporting
capabilities by reviewing/overseeing the chief financial officer's work.


                                       30

                                    PART III

ITEM 9 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT; COMPLIANCE WITH
     SECTION 16(A) OF THE EXCHANGE ACT

Our executive officers and directors and their ages as of the date of this
report are as follows:

      Name                    Age       Position
      ----                    ---       --------

      Gideon Sturlesi         49        Chairman of Board of Directors
      Heli Ben-Nun            56        Chief Executive Officer, Director
      Yaron Shalem            35        Chief Financial Officer
      Arieh Keidan            58        Director
      Yaacob Hannes           71        Director
      Ohad Hessel             39        Director
      Rami Mandola            49        Director
      Yossi Levi              47        Director
      Meir Meiran             32        Director
      Rona Rephaely           26        Director
      Amnon Sudri             45        Director

BIOGRAPHIES OF EXECUTIVE OFFICERS AND DIRECTORS

Mr. Gideon Sturlesi - Mr. Sturlesi was appointed to serve on our board of
directors and act as its chairman on November 5, 2007. Mr. Sturlesi is the
founder and since 2001 has been serving as a general partner of BioMedical
Israel Ltd., a private life-science fund. Since 2004 Mr. Sturlesi has served as
a venture partner in Ofer Hi-Tech LP, a leading investor in technology-based
Israeli-related companies. Mr. Sturlesi is also a co-founder and since 1996 till
2001 has served as Executive Vice President of Galil Medical Ltd., a developer
of minimal invasive devices for use in urology, general surgery and
interventional MRI, and a founder and CEO of their US subsidiary, Galil Medical
Inc. Additionally, from 1989 until 1996 Mr. Sturlesi served as a divisional
director for marketing & business development and as a group manager of R&D in
Rafael Israel's Armaments Development Authority. Mr. Sturlesi holds a Master's
degree (cum-laude), in Engineering from Technion Institute of Technology, Haifa,
Israel.

Mrs. Rachel Ben-Nun - Since January 2, 2006, Mrs. Ben-Nun has served as our
Chief Executive Officer and since February 19, 2006 Mrs Ben-Nun has served as a
member of our Board of Directors. Mrs. Ben-Nun is a co-founder of Arel
Communication and Software Ltd. ("Arel") and a co-founder of Arelnet Ltd.
("ArelNet") a leading provider of VOIP systems. Mrs. Ben-Nun was the CEO of Arel
during its initial public offering on the NASDAQ National Market in 1994 and
Arelnet's CEO during its initial public offering on the Tel-Aviv Stock Exchange
(TASE: ARNT) in 2000 and at the time of its acquisition in June 2005 by Airspan
Networks Inc., a Washington company traded on the Nasdaq National Market
(NASDAQ: AIRN). Mrs. Ben-Nun has over 25 years of experience in the Hi-Tech
industry mainly in management and development of Telecommunication systems and
software. Mrs. Ben-Nun holds a Master's degree, in Industrial Engineering from
Ben-Gurion University, Israel.

Mr. Yaron Shalem - Since February 23, 2006 Mr. Shalem has served as our Chief
Financial Officerl. Prior to joining OrganiTech he was the CFO of Arelnet Ltd,
an Israeli company traded on the Tel-Aviv Stock Exchange, (TASE: ARNT) which was
purchased by Airspan Networks Inc., a Washington company traded on the Nasdaq
National Market (NASDAQ: AIRN). Prior to joining ArelNet Mr. Shalem was CFO of
CellPay Ltd, an Israeli start-up - a worldwide leading technology provider in
the Mobile Payment arena, at Telrad Networks group, a leading Israeli
Telecommunications Company, and served as an accountant at Price Waterhouse
Coopers Israel. Yaron is an experienced CPA and holds a B.A. in Economics &
Accounting from Tel Aviv University and an EMBA from Bar-Ilan University.

Mr. Arieh Keidan - Mr. Keidan has been a member of our board of directors since
August 2002. Mr. Keidan has more than 30 years of experience in banking and
finance management in Israel. Mr. Keidan was the Finance Officer of
American-Israel Paper Mills Ltd., throughout the 1970's, a manager of real
estate investments for Migdal Insurance Company, and Bank Leumi Leisrael, and a
manager of the real estate development of Shikun Vebinui, one of Israel's
largest corporations.


                                       31

Mr. Yaacob Hannes - Mr. Hannes has served on our board of directors since 2003.
Mr. Hannes served for 20 years as CFO of the Israeli holding company Elron
Electronic Industries Ltd. and of several of its affiliated companies. Since
1989 Mr. Hannes has worked as an independent financial consultant to various
companies in various industries. Mr. Hannes also serves as director of the
following public companies; Caprice Jewelry Ltd., Afsek Industries Ltd., Kalil
Industries Ltd. and the following companies: Clal Finance Underwriters Ltd.,
Rosario Capital Underwriters Ltd. and HerbaMed Ltd. Mr. Hannes is a Director and
Owner of Y.Hannes & Co. Ltd. and Hannes Holdings Ltd. Mr. Hannes is deemed by
our board of directors as our financial expert.

Mr. Ohad Hessel - Mr. Hessel has served on our board of directors since January
2001 and acted as the Company's Vice President of Operations from January 2001
until April 2003. From 1993 to 1999, Mr. Hessel served as Executive Vice
President of the Northern Region for D.G. Pizza. Mr. Hessel earned a degree in
industrial management engineering from ORT College in Israel and has completed
additional studies in international executive management both in the United
States and Israel.

Mr. Amnon Sudri - Mr. Sudri was appointed to serve on our board of directors on
August 13, 2007. Mr. Sudri has been serving as a director in Katzir Fund
Debentures for Investments Ltd., a public fund traded on the TASE, since August
2007, and as chairman of the board of directors of Galil Mountain Winery since
December 1999. Until December 2006, Mr. Sudri served as CEO of Paskal
Technologies. Additionally, between the years 1998 and 2003, Mr. Sudri served as
CEO of Kibbutz Yiron and prior to that, as CFO of Kibbutz Yiron. Mr. Sudri holds
a B.A degree in Management & Economics from Rupin Academic Center, Israel.

Mr. Rami Mandola - Mr. Mandola was appointed to serve on our board of directors
on July 19, 2007. Mr. Mandola is the founder of Katzir Fund Debentures for
investments Ltd., a public fund traded on the TASE, and has been acting as its
CEO since January 2006. Until 2006, Mr. Mandola served as partner with Ernst &
Young Israel. For the last decade, Mr. Mandola has accompanied companies into
the stock market, private placements and strategic partnerships. Mr. Mandola
holds a C.P.A license (Isr.) and a B.A degree in Economics & Accounting from
Tel-Aviv University, Israel.

Mr. Yossi Levi - Mr. Levy was appointed to serve on our board of directors on
July 19, 2007. Mr. Levy has been serving as a Chief Analyst in Katzir Fund
Debentures for investments Ltd., a public fund traded on the TASE, since July
2007. Between the years 1997 and 2006, Mr. Levy served as the CFO of Gibor Sport
Active Wear, an international manufacturer of branded textile from Israel.

Mr. Meir Miran - Mr. Miran was appointed to serve on our board of directors on
July 19, 2007. Mr. Miran has been serving as CFO of Katzir Fund Debentures for
investments Ltd., a public fund traded on the TASE, since January 2006. Between
the years 2003 and 2006, Mr. Miran was a manager with E&Y Israel. Mr. Miran
holds a C.P.A license (Isr.) and a B.A degree in Economics & Accounting from
Hebrew University, Jerusalem, Israel.

Ms. Rona Rephaely - Miss Rephaely was appointed to serve on our board of
directors on July 19, 2007. Miss Rephaely has been serving as an operational
manager in Katzir Fund Debentures for investments Ltd., a public fund traded on
the TASE, since January 2006. Miss Rephaely holds a B.A degree, in Biochemistry
and Food science from Hebrew University, Jerusalem, Israel.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Section 16(a) of the Exchange Act, as amended, requires our executive officers,
directors and persons who beneficially own more than 10% of our common stock to
file reports of their beneficial ownership and changes in ownership, Forms 3, 4
and 5, and any amendment thereto, with the SEC. Executive officers, directors,
and greater-than-ten percent holders are required to furnish us with copies of
all Section 16(a) forms they file. Based on our review of the activity of our
officers and directors for the fiscal year ended December 31, 2007, we believe
all Forms 3, 4 or 5 were timely filed.

CODE OF ETHICS

On August 13, 2007, we adopted a formal Code of Ethics, that applies to all of
our employees, officers and directors, including our Chief Executive Officer,
our Chief Financial Officer and our principal accounting officer or controller
or other persons performing similar functions.

Copies of our code of ethics will be available at our executive offices upon
request.


                                       32

ITEM 10 EXECUTIVE COMPENSATION

The following table sets forth all compensation paid in respect of our Chief
Executive Officer and those individuals who received compensation in excess of
$100,000 per year (collectively, the "Named Executive Officers") for our last
two completed fiscal years:

                                                                                 Non-Equity      Nonqualified
                                                                                 Incentive         Deferred
  Name and                                            Stock       Option           Plan          Compensation        All Other
  Principal                   Salary        Bonus     Awards      Awards*       Compensation        Earnings       Compensation
  Position        Year          ($)          ($)       ($)          ($)             ($)               ($)               ($)
    (a)            (b)          (c)          (d)       (e)          (f)             (g)               (h)               (i)
-------------   ---------   -----------   --------   --------   ------------   ---------------   --------------   ---------------
Gideon            2007            -           -          -             -                 -                -                 -
Sturlesi
-Chairman         2006
(1)               (N/A)
-------------   ---------   -----------   --------   --------   ------------   ---------------   --------------   ---------------
Lior              2007      139,500 (2)       -          -        19,323 (3)             -                -                 -
Hessel-
Previous
Chairman          2006      117,018 (2)                           58,180 (3)
-------------   ---------   -----------   --------   --------   ------------   ---------------   --------------   ---------------
Heli Ben-         2007      129,412 (4)       -          -        78,750 (5)             -                -                 -
Nun -
CEO &
Director          2006      113,448 (4)                          157,500 (5)
-------------   ---------   -----------   --------   --------   ------------   ---------------   --------------   ---------------
Yaron             2007       96,323 (6)       -          -        17,167 (7)             -                -                 -
Shalem -
CFO               2006       81,504 (6)                           27,500 (7)
-------------   ---------   -----------   --------   --------   ------------   ---------------   --------------   ---------------

(1)  We have not entered into any agreement for compensation with Mr. Gideon
     Sturlesi.

(2)  On May 2, 2006 we entered into an employment agreement with Mr. Lior
     Hessel, who served on our Board of Directors until November 4, 2007, which
     replaced his previous employment agreement dated November 1999. The new
     agreement provides for an annual base salary of approximately U.S. $80,000
     plus certain benefits, including a pension plan. Each side may terminate
     the agreement upon 180 days notice. On December 18, 2007 our employment of
     Mr. Hessel was terminated.

(3)  On December 29, 2005, we granted Mr. Hessel 360,000 options to purchase
     shares of our common stock with an exercise price of $0.187 per share. The
     options vest over 2 years and are exercisable for a period of 10 years
     following the grant. The weighted fair market value of the options as
     calculated in accordance with FAS 123R is $0.22 per share, constituting a
     total benefit at the date of grant of $77,715, amortizing equally over the
     vesting period, with an expense of $19,323 and $58,180 being recorded for
     fiscal years 2007 and 2006, respectively. For more information see, note 10
     D of our annual financial statements for the year ended December 31, 2007.

(4)  On May 2, 2006 we entered into an employment agreement with Rachel Ben-Nun,
     our CEO, which replaced the initial letter of intent entered into with her
     on January 1, 2006. The employment agreement provides for an annual base
     salary of approximately U.S. $80,000 plus certain benefits, including a
     vehicle and insurance and pension policies. Each side may terminate the
     agreement upon 180 days notice. On July 19, 2007 we approved an agreement
     and undertaking by Mrs. Ben-Nun, that in consideration for our agreeing to
     extend the exercise period of Mrs. Ben-Nun's options to purchase shares of
     our common stock to twenty-four months, the execution of the Katzir
     Investment and the issuance of securities to Katzir thereunder would not
     cause acceleration of the vesting of her option.

(5)  On January 2, 2006, we granted Ms. Ben Nun 1,500,000 options to purchase
     shares of our common stock with an exercise price of $0.20 per share. The
     options vest over 3 years and are exercisable for a period of 10 years
     following the grant. The weighted fair market value of the options as
     calculated in accordance with FAS 123R is $0.21 per share, constituting a
     total benefit at the date of grant of $315,000, amortizing equally over the
     vesting period, with an expense of $78,750 and $157,500 being recorded for
     fiscal year 2007 and 2006, respectively. Additionally, according to the
     employment agreement, should we complete a re-organization, merger,
     acquisition or similar transaction with an unaffiliated third party, in
     which we issue at least 25% of our share capital outstanding at such time,
     then in the event that Ms. Ben-Nun's employment is terminated for any
     reason within 12 months of the completion of such transaction, all of Ms.
     Ben-Nun's unvested options shall become immediately exercisable. For more
     information see, note 10 D of our annual financial statements for the year
     ended December 31, 2007.


                                       33

(6)  On May 2, 2006 we entered into an employment agreement with Yaron Shalem,
     our CFO, which replaced the initial letter of intent entered into with him
     on February 15, 2006. The employment agreement provides for an annual base
     salary of approximately U.S. $61,000 plus certain benefits, including a
     vehicle and insurance and pension policies. Each side may terminate the
     agreement upon 90 days notice. On July 19, 2007 we approved an agreement
     and undertaking signed by Mr. Shalem, that in consideration for our
     agreeing to extend the exercise period of Mr, Shalem's options to purchase
     shares of our common stock to twenty-four months, the execution of the
     Katzir Investment and the issuance of securities to Katzir thereunder would
     not cause acceleration of the vesting of his option.

(7)  On February 19, 2006, we granted Mr. Shalem 250,000 options to purchase
     shares of our common stock with an exercise price of $0.25 per share and on
     and on April 16, 2007 we granted Mr. Shalem 50,000 options to purchase
     shares of our common stock with an exercise price of $0.26 per share. The
     options vest over 3 years and are exercisable for a period of 10 years
     following the grant. The weighted fair market value of the options as
     calculated in accordance with FAS 123R is $0.22 and $0.16 per share,
     respectively, constituting a total benefit at the date of grant of $55,000
     and $8,000, amortizing equally over the vesting period, with an expense of
     $17,167 and $27,500 being recorded for fiscal years 2007 and 2006,
     respectively. Additionally, according the employment agreement, should we
     complete a re-organization, merger, acquisition or similar transaction with
     an unaffiliated third party, in which we issue at least 25% of our share
     capital outstanding at such time, then in the event that Mr. Shalem's
     employment is terminated for any reason within 12 months of the completion
     of such transaction, all of Mr. Shalem's unvested options shall become
     immediately exercisable. For more information see, note 10 D of our annual
     financial statements for the year ended December 31, 2007.

The following table provides a summary of the outstanding equity awards held by
Named Executive Officers, as of December 31, 2007:



                                                 Outstanding Equity Awards at Fiscal Year-End
                 ---------------------------------------------------------------------------------------------------------
                                            Option Awards                                      Stock Awards
                 -----------------------------------------------------------------  --------------------------------------
                                                                                                                   Equity
                                                                                                                  Incentive
                                                                                                                    Plan
                                                                                                                   Awards:
                                                                                                                   Market
                                                                                                        Equity       or
                                                                                                      Incentive    Payout
                                                                                               Market    Plan       Value
                                                                                        No.    Value    Awards:      of
                                               Equity                                   of       of     Number    Unearned
                                              Incentive                               Shares   Share      of       Shares,
                                                Plan                                    or       or    Unearned     Units
                                               Awards:                                Units    Unites   Shares,      or
                  Number of    Number of      Number of                                 of       of    Units or     Other
                 Securities    Securities    Securities                               Stock    Stock    Other      Rights
                 Underlying    Underlying    Underlying                                that     that    Rights      That
                 Unexercised  Unexercised     Uxercised       Option      Option       have     have     That       Have
Name and           Options      Options       Unearned       Exercise   Expiration      not     not     Have Not     Not
Principal            (#)          (#)          Options        Price        Date       Vested   Vested    Vested    Vested
Position         Exercisable Unexercisable       (#)           ($)         ($)          (#)      ($)      (#)        (#)
   (a)               (b)          (c)            (d)           (e)         (f)          (g)      (h)      (i)        (j)
-------------    ----------- -------------  -------------  -----------  ----------  ---------  ------  ---------  --------
Lior Hessel         360,000                       -           $0.187    December         -       -        -           -
(1)                                                                     29, 2015
-------------    ----------- -------------  -------------  -----------  ----------  ---------  ------  ---------  --------
Heli Ben-Nun        750,000      750,000          -           $ 0.20    January 2,       -       -        -           -
- CEO &                                                                 2016
Director (2)
-------------    ----------- -------------  -------------  -----------  ----------  ---------  ------  ---------  --------
Yaron                12,500       37,500          -           $ 0.26    April 16        -       -        -           -
Shalem -                                                                2017
CFO (3)             125,000      125,000                      $ 0.25    February
                                                                        19, 2016
-------------    ----------- -------------  -------------  -----------  ----------  ---------  ------  ---------  --------

During the fiscal year 2007 none of the Named Executive Officers exercised
options at fiscal year end.

The following table presents the compensation of each of our directors for the
year ended December 31 2007:


                                       34

                                             Director Compensation
----------------------------------------------------------------------------------------------------------------
                                                                      Nonqualified
                Fees                                  Non-Equity        Deferred
              Earned or      Stock        Option    Incentive Plan    Compensation      All Other
              Paid In       Awards        Awards     Compensation       Earnings      Compensation      Total
   Name *       Cash          ($)          ($)            ($)             ($)              ($)           ($)
    (a)          (b)          (c)          (d)            (e)             (f)              (i)           (j)
------------- ----------- ------------ ----------- ---------------- --------------- ---------------- -----------
Arieh Keidan         -         -         2,684 (1)        -               -                -               2,684
------------- ----------- ------------ ----------- ---------------- --------------- ---------------- -----------
Yaacob Hannes   4,910 (2)      -         5,397 (3)        -               -                -              10,307
------------- ----------- ------------ ----------- ---------------- --------------- ---------------- -----------
Ohad Hessel          -         -         1,611 (4)        -               -                -               1,611
------------- ----------- ------------ ----------- ---------------- --------------- ---------------- -----------
Rami Mandola         -         -             - (5)        -               -                -                   -
------------- ----------- ------------ ----------- ---------------- --------------- ---------------- -----------
Yossi Levi           -         -             - (5)        -               -                -                   -
------------- ----------- ------------ ----------- ---------------- --------------- ---------------- -----------
Meir Meiran          -         -             - (5)        -               -                -                   -
------------- ----------- ------------ ----------- ---------------- --------------- ---------------- -----------
Rona Rephaely        -         -             - (5)        -               -                -                   -
------------- ----------- ------------ ----------- ---------------- --------------- ---------------- -----------
Amnon Sudri          -         -             - (5)        -               -                -                   -
------------- ----------- ------------ ----------- ---------------- --------------- ---------------- -----------

*    Details regarding compensation paid to Mrs. Heli Ben-Nun who is a member of
     our board of directors are included earlier in this Item 10.

(1)  On December 29, 2006, we granted Mr. Arieh Keidan 50,000 options to
     purchase shares of our common stock with an exercise price of $0.187 per
     share. The options vest over 2 years and are exercisable for a period of 10
     years following the grant. The weighted fair market value of the options as
     calculated in accordance with FAS 123R is $0.22 per share, constituting a
     total benefit at the date of grant of $10,794, amortizing equally over the
     vesting period, with an expense of $2,684 and $8,081 being recorded for
     fiscal years 2007 and 2006, respectively. For more information see, note 10
     D of our annual financial statements for the year ended December 31, 2007.

(2)  On March 26, 2007, our Board of Directors approved the payment to Mr.
     Hannes of external director fees upon terms equivalent to the terms set
     forth in the Israel Companies Law and Regulations for an external director
     of a publicly traded Israeli company of the size of OrganiTech USA Inc.
     commencing January 1, 2007. These fees are in the approximate amount of NIS
     15,000 per year, plus approximately NIS 1000 per each Board meeting he
     attends.

(3)  On December 29, 2006, we granted Mr. Yaakob Hannes 100,000 options to
     purchase shares of our common stock with an exercise price of $0.187 per
     share. The options vest over 3 years and are exercisable for a period of 10
     years following the grant. The weighted fair market value of the options as
     calculated in accordance with FAS 123R is $0.22 per share, constituting a
     total benefit at the date of grant of $21,587, amortizing equally over the
     vesting period, with an expense of $5,397 and $10,784 being recorded for
     fiscal years 2007 and 2006, respectively. For more information see, note 10
     D of our annual financial statements for the year ended December 31, 2007.

(4)  On December 29, 2006, we granted Mr. Ohad Hessel 30,000 options to purchase
     shares of our common stock with an exercise price of $0.187 per share. The
     options vest over 2 years and are exercisable for a period of 10 years
     following the grant. The weighted fair market value of the options as
     calculated in accordance with FAS 123R is $0.22 per share, constituting a
     total benefit at the date of grant of $6,476, amortizing equally over the
     vesting period, with an expense of $1,611 and $4,848 being recorded for
     fiscal years 2007 and 2006, respectively. For more information see, note 10
     D of our annual financial statements for the year ended December 31, 2007.

(5)  Pursuant to the Katzir Investment, we pay Katzir a Management Fee. For
     information on the Management Fee, see Item 12 later in this Annual Report.
     We have not entered into any agreement for compensation with the directors
     appointed by Katzir.


                                       35

ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
     RELATED STOCKHOLDER MATTERS

For securities authorized for issuance under equity compensation plans, see ITEM
5(d) earlier in this Annual Report.

In this Item, a person is deemed to be a beneficial owner of securities that can
be acquired by such person within 60 days from the filing of this report upon
the exercise of options and warrants or conversion of convertible securities.
Each beneficial owner's percentage ownership is determined by assuming that
options, warrants and convertible securities that are held by such person (but
not held by any other person) and that are exercisable or convertible within 60
days from the filing of this report have been exercised or converted. Except as
otherwise indicated, and subject to applicable community property and similar
laws, each of the persons named has sole voting and investment power with
respect to the shares shown as beneficially owned. All percentages are
determined based on 36,632,642 shares issued and out standing on December 31,
2007.

(a)  Security ownership of certain beneficial owners.

     The table below sets forth the beneficial owners or groups of beneficial
     owners (with the exception of our executive officers and directors) who are
     known by us to beneficially own more than 5% of our outstanding common
     stock, as of February 27, 2008.

(1) Title of Class    (2) Name of Beneficial Owner   (3) Amount and Nature of    (4) Percent of Class
                                                       Beneficial Ownership
------------------    ----------------------------   ------------------------    --------------------

Common                BLM NV                                    5,448,416 (1)                  14.85%
Common                Keren Katzir Debenture for
                      Investment Ltd. (2)                      13,846,154 (3)                  34.21%

                      TOTAL AS A GROUP                         19,294,570                      47.61%

(1)  Includes an option to purchase 46,242 ordinary shares exercisable within 60
     days

(2)  Rami Mandola, Yossi Levi, Meir Miran, Rona Rephaely and Gideon Sturlesi are
     directors appointed by Katzir pursuant to the Katzir Investment and are
     office holders of Katzir, and therefore may be considered, together, to be
     the beneficial holders of the 27.3% of our issued share capital held by
     Katzir.

(3)  Includes 3,846,154 shares of common stock issuable upon the exercise of
     warrants which are exercisable within 60 days.


(b)  Security ownership of management

     The following tables, sets forth information, as of February 27, 2008,
     regarding stock ownership of our executive officers, all directors, and all
     our directors and officers as a group:

(1) Title of Class    (2) Name of Beneficial Owner   (3) Amount and Nature of        (4) Percent of Class
                                                      Beneficial Ownership(a)
------------------    ----------------------------   ------------------------        --------------------

Common                Lior Hessel (1)                       3,900,288 (1)                   10.54%
Common                Shmuel Hessel (2)                        50,000 (2)                    0.14%
Common                Ohad Hessel                             230,000 (3)                    0.63%
Common                Arie Keidan                              50,000 (4)                    0.14%
Common                Simon Zenaty (5)                      1,821,699 (5)                    4.96%
Common                Yaacob Hannes                            90,000 (6)                    0.25%
Common                Heli Ben-Nun                          2,325,000 (7)                    6.16%
Common                Yaron Shalem                            400,000 (8)                    1.09%

                      ALL OFFICERS AND DIRECTORS
                      AS A GROUP                            8,866,987 (1)-(8)               22.98%(1)-(8)


                                       36

(1)  Includes an option to purchase 360,000 ordinary shares exercisable within
     60 days. Mr. Hessel resigned from our Board of Directors on July 23, 2007.

(2)  Includes an option to purchase 50,000 ordinary shares exercisable within 60
     days. Mr. Hessel resigned from our Board of Directors on July 19, 2007.

(3)  Includes an option to purchase 30,000 ordinary shares exercisable within 60
     days.

(4)  Includes an option to purchase 50,000 ordinary shares exercisable within 60
     days.

(5)  Includes an option to purchase 60,000 ordinary shares exercisable within 60
     days and 1,109,090 shares held by SH.A Gali Ltd., a company controlled by
     Simon Zenaty. Mr. Zenaty resigned from our Board of Directors on July 19,
     2007.

(6)  Includes an option to purchase 75,000 ordinary shares exercisable within 60
     days.

(7)  Includes an option to purchase 1,125,000 ordinary shares exercisable within
     60 days.

(8)  Includes an option to purchase 200,000 ordinary shares exercisable within
     60 days.

ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

(a)  We have been engaged in the following transactions with related persons
     since the beginning of fiscal year 2007:

THE KATZIR INVESTMENT

For information on the Katzir Investment, see `Material Agreements'.

MONTHLY MANAGEMENT FEE TO KEREN KATZIR DEBENTURE FOR INVESTMENT LTD.

As part of the Katzir Investment, we agreed to pay the Chairman of the Board a
monthly fee in the amount of US $5,000, plus reimbursement of expenses, or
Management Fee, for so long as Katzir holds at least 14% of the issued and
outstanding share capital of the Company. Since the completion of the
Investment, the Management Fee has been paid directly to Katzir pursuant to a
provision in the Investment agreement, which entitles the Management Fee to be
assigned by the Chairman to Katzir.

RACHEL BEN-NUN EMPLOYMENT AGREEMENT

For information on the Employment Agreement of Rachel Ben-Nun, see footnote (4)
to the first table under Item 10 - Executive Compensation.

YARON SHALEM EMPLOYMENT AGREEMENT

For information on the Employment Agreement of Yaron Shalem, see footnote (6) to
the first table under Item 10 - Executive Compensation.

(b)  Director Independence

Of our directors, Yaacob Hannes is an independent director as defined by the
independence standard under Section (b)(1) of Rule 10A-3 of the Securities
Exchange Act of 1934.

CURRENT NON-INDEPENDENT DIRECTORS

None of the following directors may be deemed to be an independent director as
defined by the aforementioned standard, due to the following reasons:


                                       37

     1.   Rami Mandola, Gideon Storlezi, Amnon Sudri, Yossi Levi, Meir Merian
          and Rona Rephaely are either executive officers of Katzir, employees
          of Katzir or nominated solely by Katzir.

     2.   Heli Ben-Nun is an executive officer of the Company.

     3.   Arieh Keidan is a controlling shareholder of one of our principal
          shareholders, BLM NV.

     4.   Ohad Hessel is a family member of one of our major shareholders, Lior
          Hessel, who holds more than 10% of our issued share capital.

PAST NON-INDEPENDENT DIRECTORS

None of the following persons who served on our board of directors during any
part of the last completed fiscal year may be deemed to be an independent
director as defined by the aforementioned standard, due to the following
reasons:

     1.   Yossi Hevron was an executive officer of Katzir.

     2.   Lior Hessel was an executive officer of the Company.

     3.   Shimon Zenaty is a shareholder of the Company.

     4.   Samuel Hessel is a family member of Lior Hessel, who acted as an
          executive officer of the Company until November 4, 2007, and who is
          one of our major shareholders.

ITEM 13 EXHIBITS AND REPORTS ON FORM 8K

(a)  EXHIBITS

EXHIBIT No.    Description
-----------    -------------------------------------------------------------------------------------------------

3.1            Certificate of Incorporation of the Company. (1)

3.2            Bylaws of the Company (1)

3.3            Amendment to Bylaws (2)

10.1           1997 Stock Award Plan. (3)

10.2           Incentive Stock Option Plan. (3)

10.3           Agreement between OrganiTECH Ltd. and OCS, dated January 30, 2002 (English Translation). (4)

10.4           Investment Agreement between the Company and Keren Katzir Debenture for Investment Ltd., dated
               July 10, 2007. (5)

10.5           Registration Rights Agreement between the Company and Keren Katzir Debenture for Investment Ltd.,
               dated July 19, 2007. (5)

10.6           Form of Common Stock Purchase Warrant issued to Keren Katzir Debenture for Investment Ltd. (5)

21.1           Subsidiaries of the Registrant. (6)

23.1           Consent of Kost Forer Gabbay & Kasierer +

31.1           Certification  of Chief Executive Officer pursuant  to  Rule  13a-14(a)  or Rule 15d-14(a), as
               adopted pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002  +

31.2           Certification  of Chief Financial Officer pursuant  to  Rule  13a-14(a)  or Rule 15d-14(a), as
               adopted pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002  +

32.1           Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
               to Section 906 of the Sarbanes-Oxley Act of 2002 +

32.2           Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
               to Section 906 of the Sarbanes-Oxley Act of 2002 +


                                       38

(1)  Incorporated by reference to exhibits filed with the Company's Form 8-K,
     filed with the Commission on February 22, 2001.

(2)  Incorporated by reference to exhibits filed with the Company's Form 8-K,
     filed with the Commission on November 26, 2007.

(3)  Incorporated by reference to exhibits filed with the Company's Registration
     Statement on Form S-8, filed February 21, 1997, registration number
     333-22203.

(4)  Incorporated by reference to exhibits filed with the Company's Form 10-KSB,
     filed with the Commission on April 15, 2002.

(5)  Incorporated by reference to exhibits filed with the Company's Form 8-K,
     filed with the Commission on July 23, 2007.

(6)  Incorporated by reference to exhibits filed with the Company's Form
     10-KSB/A, filed with the Commission on August 23, 2005.

+Filed herewith.

     (b)  REPORTS ON FORM 8-K.

Our current reports on Form 8-K filed since the date of filing our previous
Annual Report on Form 10-KSB/A, March 27, 2007 are as follows:

o    Report on Form 8-K filed on February 7, 2007.

o    Report on Form 8-K filed on July 5, 2007.

o    Report on Form 8-K filed on July 11, 2007.

o    Report on Form 8-K filed on July 23, 2007.

o    Report on Form 8-K filed on August 14, 2007.

o    Report on Form 8-K filed on November 6, 2007.

o    Report on Form 8-K filed on November 26, 2006.

ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES

Our board of directors reviews and approves audit and permissible non-audit
services performed by its independent accountants, as well as the fees charged
for such services. In its review of non-audit service fees and its appointment
of the firm Kost, Forer, Gabbay, & Kasierer, member of Ernst & Young Global, as
our independent registered accounting firm, the board of directors considered
whether the provision of such services is compatible with maintaining
independence. All of the services provided and fees charged by Kost, Forer,
Gabbay, & Kasierer in 2007 were approved by the board of directors.

AUDIT FEES

The aggregate fees billed by our independent registered accounting firm, Kost,
Forer, Gabbay, & Kasierer, for professional services for the audit of our annual
financial statements for 2007 and 2006 were $50,000 and $50,000, respectively,
net of expenses.

The aggregate fees billed by our independent registered accounting firm, Kost,
Forer, Gabbay, & Kasierer, for other services (including Tax services) for the
years 2007 and 2006 were $20,000 and $21,000, respectively, net of expenses.


                                       39

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, on February 27, 2008.

ORGANITECH USA, INC.

By: /s/ Gideon Sturlesi
-----------------------
Gideon Sturlesi, Chairman of the Board of Directors

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant on August 27, 2008, in the
capacities indicated.

By: /s/ Gideon Sturlesi            Chairman of the Board of Directors
-----------------------
Gideon Sturlesi

By: /s/ Rachel Ben-Nun             Director and Chief Executive Officer
----------------------
Rachel Ben-Nun

By: /s/ Ohad Hessel                Director
----------------------
Ohad Hessel

By: /s/ Arieh Keidan               Director
----------------------
Arieh Keidan

By: /s/ Yaacob Hannes              Director
----------------------
Yaacob Hannes

By: /s/ Rami Mandola               Director
----------------------
Rami Mandola

By: /s/ Amnon Sudri                Director
----------------------
Amnon Sudri

By: /s/ Yossi Levi                 Director
----------------------
Yossi Levi

By: /s/ Meir Meiran                Director
----------------------
Meir Meiran


                                       40

By: /s/ Rona Rephaely              Director
----------------------
Rona Rephaely

By: /s/ Yaron Shalem               Chief Financial Officer (Principal Accounting Officer)
----------------------
Yaron Shalem


                                       41

                            ------------------------
                              ORGANITECH USA, INC.
                            ------------------------

                        CONSOLIDATED FINANCIAL STATEMENTS
                             AS OF DECEMBER 31, 2007

                            ------------------------
                              ORGANITECH USA, INC.
                            ------------------------

                        CONSOLIDATED FINANCIAL STATEMENTS
                             AS OF DECEMBER 31, 2007

                                    CONTENTS

                                                                Page
                                                                -----

Report of Independent Registered Public Accounting Firm          F-3

Consolidated Balance Sheet                                       F-4

Consolidated Statements of Operations                            F-5

Statements of Changes in Shareholders` Deficiency                F-6

Consolidated Statements of Cash Flows                            F-7

Notes to the Consolidated Financial Statements                F-8 - F-27


                                     F - 2

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

                  TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
                              ORGANITECH USA, INC.

We have audited the accompanying consolidated balance sheet of OrganiTech USA
Inc. ("the Company") and its subsidiary as of December 31, 2007 and the related
consolidated statements of operations, changes in shareholders' deficiency and
cash flows for each of the two years in the period ended December 31, 2007.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. We were not engaged to
perform an audit of the Company's internal control over financial reporting. Our
audit included considerations of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, based on our audits the consolidated financial statements,
referred to above, present fairly, in all material respects, the consolidated
financial position of the Company and its subsidiary as of December 31, 2007 and
the consolidated results of their operations and their cash flows for each of
the two years in the period ended December 31, 2007, in conformity with U.S.
generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1B to
the consolidated financial statements, the Company has incurred recurring net
losses, negative cash flows from operations and has working capital deficiency.
In addition the Company is dependent on external sources for financing its
operations. These factors raise substantial doubt about the Company's ability to
continue as a going concern. The consolidated financial statements do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that might be necessary should the Company unable to continue as a
going concern.

Haifa, Israel                                 KOST FORER GABBAY & KASIERER
February 27, 2008                           A Member of Ernst & Young Global


                                     F - 3

                                                            ORGANITECH USA, INC.
CONSOLIDATED BALANCE SHEET
--------------------------------------------------------------------------------
IN U.S. DOLLARS (EXCEPT SHARE DATA)

                                                                     DECEMBER 31,
                                                           NOTE         2007
                                                        ---------   ------------

 ASSETS

Current assets :

Cash and cash equivalents                                    (3)    $    909,551
Trade receivables                                                        277,596
Unbilled receivables                                                      76,306
Other receivables and prepaid expenses                       (4)          34,883
Related parties                                             (13)           1,508
Inventories                                                  (5)          70,545
                                                                    ------------

                                                                       1,370,389
                                                                    ------------
Long-term assets:

Long-term lease deposit                                                   13,372
Severance pay fund                                                        86,851
Property and equipment, net                                  (6)          92,860
                                                                    ------------

                                                                         193,083
                                                                    ------------

                                                                    $  1,563,472
                                                                    ============

LIABILITES AND SHAREHOLDERS' DEFICIENCY

 Liabilities :

 Trade payables                                              (7)         348,480
 Other payables and accrued expenses                         (8)       1,473,876
 Related parties                                            (13)          12,562
 Customers advances                                                      135,000
                                                                    ------------

                                                                       1,969,918
                                                                    ------------

 Convertible loan                                          (10A)         357,500
 Accrued severance pay                                                   175,856
                                                                    ------------

                                                                         533,356
                                                                    ------------

 Contingencies and commitments                               (9)

 Shareholders' deficiency                                   (10)

 Common shares of $0.001 par value, authorized
   - 80,000,000 shares, issued
   and outstanding - 36,632,642 shares                                    36,633
 Additional paid in capital                                           10,053,950
 Accumulated deficit                                                 (11,030,385)
                                                                    ------------

 Total shareholders' deficiency                                         (939,802)
                                                                    ------------

                                                                    $  1,563,472
                                                                    ============

         THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED
                             FINANCIAL STATEMENTS.


                                     F - 4

                                                            ORGANITECH USA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
IN U.S. DOLLARS (EXCEPT SHARE DATA)

                                                                                   YEAR ENDED DECEMBER 31
                                                                               ------------------------------
                                                                  NOTE             2007              2006
                                                              ------------     ------------      ------------

Revenues                                                                       $  1,487,334      $  3,395,338

Cost of revenues                                                                  1,522,342         2,811,564
                                                                               ------------      ------------

Gross profit (loss)                                                                 (35,008)          583,774
                                                                               ------------      ------------

Research and development expenses                                                   319,120           510,163

Selling and marketing expenses                                                      663,083           848,504

General and administrative expenses                                                 581,684           637,529
                                                                               ------------      ------------

Total operating expenses                                                          1,563,887         1,996,196
                                                                               ------------      ------------

Operating loss                                                                   (1,598,895)       (1,412,422)

Financing income, net                                             (11)               42,499            32,661
                                                                               ------------      ------------

Net loss                                                                       $ (1,556,396)     $ (1,379,761)
                                                                               ============      ============

Basic and diluted net loss per common share                                    $      (0.05)     $      (0.05)
                                                                               ============      ============

Weighted average number of common shares outstanding used
   In basic and diluted net loss per share calculation                           31,165,609        26,133,738
                                                                               ============      ============

         THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED
                             FINANCIAL STATEMENTS.


                                     F - 5

                                                            ORGANITECH USA, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIENCY
--------------------------------------------------------------------------------
IN U.S. DOLLARS (EXCEPT SHARE DATA)

                                                         NUMBER OF        COMMON         ADDITIONAL                            TOTAL
                                                        OUTSTANDING       SHARES           PAID IN          DEFICIT         SHAREHOLDERS'
                                                       COMMON SHARES      CAPITAL         CAPITAL (1)     ACCUMULATED        DEFICIENCY
                                                       ------------     ------------     ------------     ------------      ------------
                                                       IN THOUSANDS
                                                       ------------

Balance as of January 1, 2006                                23,033     $     23,033     $  6,753,152     $ (8,079,228)     $ (1,303,043)

Common shares ($0.25) issued in April 2006                    3,600            3,600          880,900                -           884,500

Amortization of stock-based compensation                          -                -          353,575                -           353,575

Net loss                                                          -                -                -       (1,379,761)       (1,379,761)
                                                       ------------     ------------     ------------     ------------      ------------

Balance as of December 31, 2006                              26,633           26,633        7,987,627       (9,458,989)       (1,444,729)
Common shares ($0.20) issued in July 2007, net (*)           10,000           10,000        1,857,953                -         1,867,953

Amortization of stock-based compensation                          -                -          203,007                -           203,007

Warrants granted to non employees                                 -                -            5,363                -             5,363

Cumulative impact of change in accounting for
uncertainties in income taxes (Fin 48)                            -                -                -          (15,000)          (15,000)

Net loss                                                          -                -                -       (1,556,396)       (1,556,396)
                                                       ------------     ------------     ------------     ------------      ------------

Balance as of December 31, 2007                              36,633     $     36,633     $ 10,053,950     $(11,030,385)     $   (939,802)
                                                       ============     ============     ============     ============      ============

(*) net of issuance expenses of $152,047

        THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED
                              FINANCIAL STATEMENTS.


                                     F - 6

                                                            ORGANITECH USA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
IN U.S. DOLLARS

                                                              YEAR ENDED DECEMBER 31,
                                                           ----------------------------
                                                              2007             2006
                                                           -----------      -----------

Cash flows from operating activities:

Net loss                                                   $(1,556,396)     $(1,379,761)
                                                           -----------      -----------

Adjustments to reconcile net loss to net cash
used in operating activities :
Amortization of stock - based compensation                     203,007          353,575
Depreciation                                                    27,593           34,145
Write down of inventories                                        5,094           28,000
Changes in accrued severance pay, net                            7,085           34,144
Loss from disposal of property and equipment                       106           32,443
Amortization of warrants' compensation                           1,493                -
Decrease (increase) in trade receivables                      (353,902)          68,890
Decrease (increase) in other receivables and
long term lease deposit                                         (5,490)         231,796
Decrease in inventories                                        236,523          448,269
Increase (decrease) in trade payables                         (394,584)          69,280
Increase in other payables and accrued expenses                393,634          469,181
Decrease in customers advances                                (449,280)      (1,136,259)
                                                           -----------      -----------

Total adjustments                                             (328,721)         633,464
                                                           -----------      -----------

Net cash used in operating activities                       (1,885,117)        (746,297)
                                                           -----------      -----------

Cash flows from investing activities :
Proceeds from disposal of property and equipment                 3,813                -
Purchase of property and equipment                              (2,343)         (19,366)
                                                           -----------      -----------

Net cash provided by (used in) investing activities              1,470          (19,366)
                                                           -----------      -----------

Cash flows from financing activities :
Increase (decrease) in short-term credit, net                   (1,574)           1,408
Proceeds from issuance of a convertible loan                   357,500                -
Proceeds from issuance of shares, net (Note 10B(2))          1,867,953          884,500
                                                           -----------      -----------

Net cash provided by financing activities                    2,223,879          885,908
                                                           -----------      -----------

Net increase in cash and cash equivalents                      340,232          120,245

Cash and cash equivalents at the beginning of the year         569,319          449,074
                                                           -----------      -----------

Cash and cash equivalents at the end the year              $   909,551      $   569,319
                                                           ===========      ===========

Interest paid                                              $    26,813      $         -
                                                           ===========      ===========

Income tax paid                                            $     2,939      $     2,707
                                                           ===========      ===========

        THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED
                              FINANCIAL STATEMENTS.


                                     F - 7

                                                            ORGANITECH USA, INC.
NOTES TO THE CONLSIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
IN U.S. DOLLARS

NOTE 1 - GENERAL

     A.   OrganiTech USA Inc. ("the Company" or "OrganiTECH"), a Delaware
          corporation, incorporated in 1981, and its subsidiary (collectively
          "the Group") design, develop, manufacture, market and support
          Hydroponics solutions and platforms for the Agriculture and
          Life-Science industries.

          The Company's core business is conducted primarily through its
          wholly-owned subsidiary, OrganiTECH Ltd., a company organized under
          the laws of Israel. OrganiTECH Ltd. operates mainly in the Agriculture
          Industrialization arena. Since its formation in 1999, it has been
          developing, producing and marketing its leading proprietary technology
          - a Self-contained, highly automated, robotic, sustainable
          agricultural platforms designed to automatically seed, transplant and
          harvest commercial quantities of hydroponics, pesticide free, green
          leafy vegetables, while maintaining lowest production costs and making
          optimal use of resources such as water, energy, labor and land/space.

          Since its inception and until 2006 the Company has devoted
          substantially most of its efforts to business planning, marketing,
          research and development, recruiting management and technical staff,
          acquiring assets and raising capital. Commencing 2006, the Company has
          generated significant revenues and accordingly, the Company is not
          considered to be as a development stage company, as defined in
          Statement of Financial Accounting Standards No. 7, "Accounting and
          reporting by development Stage Enterprises" ("SFAS No. 7").

     B.   The Company is devoting substantial efforts towards activities such as
          marketing its products, financial planning and capital raising. In the
          course of such activities, the Company and its subsidiary have
          sustained operating losses. The Company and its subsidiary have not
          achieved profitable operations or positive cash flows from operations
          or positive working capital. The Company's accumulated deficit
          aggregated to $11,030,385 through December 31, 2007. There is no
          assurance that profitable operations, if ever achieved, could be
          sustained on a continuing basis.

          The Company plans to continue to finance its operations with a
          combination of stock issuance and private placements and from its
          revenues. There are no assurances, however, that the Company will be
          successful in obtaining an adequate level of financing needed.

          These conditions raise substantial doubt about the Company's ability
          to continue as a going concern. The consolidated financial statements
          do not include any adjustments relating to the recoverability and
          classification of recorded assets amounts or the amounts and
          classification of liabilities that might be necessary should the
          Company be unable to continue as a going concern.

     C.   In 2006 and 2007, the Company derived most of its revenues from two
          projects, each of a single customer. One of the projects was finalized
          in 2007.


                                     F - 8

                                                            ORGANITECH USA, INC.
NOTES TO THE CONLSIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
IN U.S. DOLLARS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

     The consolidated financial statements have been prepared in accordance with
     generally accepted accounting principles in the United States ("U.S.
     GAAP"), applied on a consistent basis, as follows:

     A.   USE OF ESTIMATES

          The preparation of financial statements in conformity with generally
          accepted accounting principles requires management to make estimates
          and assumptions that affect the amounts reported and disclosure of
          contingent assets and liabilities in the financial statements and
          accompanying notes. Actual results could differ from those estimates.

     B.   FINANCIAL STATEMENTS IN U.S. DOLLARS

          The Company's revenues are expected to be mainly in U.S. dollars. Most
          of the Company's costs are incurred in U.S. dollars. In addition, the
          Company raised its financing resources in U.S. dollars. The Company's
          management believes that the U.S. dollar is the primary currency of
          the economic environment in which the Company operates. Thus, the
          functional and reporting currency of the Company is the U.S. dollar.

          Transactions and balances originally denominated in U.S. dollars are
          presented at their original amounts. Transaction and balances in other
          currencies have been remeasured into U.S. dollars in accordance with
          principles set forth in SFAS No. 52 "Foreign Currency Translation".
          All exchange gains and losses from the remeasurement mentioned above
          are reflected in the statement of income in financial income or
          expenses.

     C.   PRINCIPLES OF CONSOLIDATION

          The consolidated financial statements include the accounts of the
          Company and its wholly-owned subsidiary, OrganiTech Ltd. All
          Intercompany transactions and balances have been eliminated upon
          consolidation.

     D.   CASH EQUIVALENTS

          Cash equivalents, are short-term highly liquid investments that are
          readily convertible to cash with maturities of three months or less at
          the date of acquisition.

     E.   INVENTORIES

          Inventories are stated at the lower of cost or market value.

          Costs incurred on long-term contracts in progress and finished goods
          include direct labor costs, material costs, subcontractors, other
          direct costs and overheads. These costs represent recoverable costs
          incurred for production and allocable operating overhead cost.


                                     F - 9

                                                            ORGANITECH USA, INC.
NOTES TO THE CONLSIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
IN U.S. DOLLARS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)

     F.   PROPERTY AND EQUIPMENT

          Property and equipment are stated at cost, net of accumulated
          depreciation.

          Depreciation is calculated by the straight-line method over the
          estimated useful lives of the assets, as follows:

                                                   Years
                                                   -----

          Computers                                   3
          Furniture and office equipment             17
          Communication equipment                     7
          Other equipment                          10-14
          Motor vehicles                              7

          Leasehold improvements are amortized using the straight-line method
          over the shorter of the terms of the lease or useful life.

     G.   IMPAIRMENT OF LONG-LIVED ASSETS

          The Company's long-lived assets are reviewed for impairment in
          accordance with SFAS No. 144 "Accounting for the Impairment or
          Disposal of Long-Lived Assets" 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 an
          asset is determined 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.

     H.   SEVERANCE PAY

          The Company's liability for severance pay to its Israeli employees is
          calculated pursuant to Israeli severance pay law based on the most
          recent salary of the employees 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.
          The Company's liability for all of its employees is fully provided by
          monthly deposits with insurance policies and by an accrual. The value
          of these policies is recorded as an asset in the Company's balance
          sheet. The deposited funds include profits accumulated up to the
          balance sheet date. The deposited funds may be withdrawn only upon the
          fulfillment of the obligation pursuant to Israeli severance pay law or
          labor agreements. The value of the deposited funds is based on the
          cash surrendered value of these policies, and includes immaterial
          profits.

          Severance expenses for the years ended December 31, 2007 and 2006,
          amounted to approximately $63,993 and $67,657, respectively.


                                     F - 10

                                                            ORGANITECH USA, INC.
NOTES TO THE CONLSIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
IN U.S. DOLLARS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)

     I.   REVENUE RECOGNITION

          The Company generates revenues from long-term contracts involving the
          design, development, manufacture and integration of Hydroponics
          systems and solutions.

          Revenues from long-term contracts are recognized based on Statement of
          Position 81-1 "Accounting for Performance of Construction-Type and
          Certain Production-Type Contracts" ("SOP 81-1") according to which
          revenues are recognized based on either the completed contract basis
          or the percentage of completion basis.

          Based on the percentage-of-completion method, sales and profits under
          long-term fixed-price contracts which provide for a substantial level
          of development and design efforts in relation to total contract
          efforts are recorded based on the ratio of hours incurred by key
          personnel to estimated total hours required from such key personnel at
          completion.

          The percentage-of-completion method of accounting requires management
          to estimate the cost and gross profit margin for each individual
          contract. Estimated gross profit or loss from long-term contracts may
          change due to changes in estimates resulting from differences between
          actual performance and original estimated forecasts. Such changes in
          estimated gross profit are recorded in results of operations when they
          are reasonably determinable by management, on a cumulative catch-up
          basis. Anticipated losses on contracts are charged to earnings when
          determined to be probable. In 2007 the Company recorded provision for
          loss in the amount of $190,000.

          Penalties applicable to performance of contracts are considered in
          estimating sales and profit rates and are recorded when there is
          sufficient information to assess anticipated contract performance.

     J.   WARRANTY

          The Company estimates the costs that may be incurred under its basic
          warranty and records a liability in the amount of such costs at the
          time revenue is recognized. The specific terms and conditions of those
          warranties vary depending upon the product sold and the country in
          which the Company does business. Factors that affect the Company's
          warranty liability include the number of delivered products,
          engineering estimates and anticipated rates of warranty claims. The
          Company periodically assesses the adequacy of its recorded warranty
          liability and adjusts the amount as necessary.

          Changes in the Company's provision for warranty during the year are as
          follows:

YEAR                                                2007           2006
-----                                            ---------      ---------

Balance, at the beginning of the year            $ 196,884      $  33,345
Warranties utilized or ended during the year      (160,852)       (33,345)
Warranties issued during the year                   30,100        196,884
                                                 ---------      ---------
Balance, at the end of the year                  $  66,132      $ 196,884
                                                 =========      =========


                                     F - 11

                                                            ORGANITECH USA, INC.
NOTES TO THE CONLSIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
IN U.S. DOLLARS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)

     K.   RESERCH AND DEVELOPMENT EXPENSES

          Research and development expenses are charged to the statement of
          operations as incurred.

          The Company's subsidiary in Israel received grants (mainly
          royalty-bearing) from the Government of Israel and from other sources
          for the purpose of funding approved research and development projects.
          These grants were recognized as a deduction from research and
          development expenses at the time the Company was entitled to such
          grants on the basis of the research and development expenses incurred.

     L.   DEFERRED INCOME TAXES

          The Company accounts for income taxes in accordance with SFAS No. 109,
          "Accounting for Income Taxes". This Statement prescribes the use of
          the liability method whereby deferred tax assets and liability account
          balances are determined based on differences between financial
          reporting and tax bases of assets and liabilities and are measured
          using the enacted tax rates and laws that will be in effect when the
          differences are expected to reverse. The Company provides a valuation
          allowance to reduce deferred tax assets to their estimated realizable
          value.

          In September 2006, the Financial Accounting Standards Board ("FASB")
          issued FASB interpretation ("FIN") No. 48, "Accounting for Uncertainty
          in Income Taxes - an Interpretation of FASB Statement 109" ("FIN 48").
          FIN 48 establishes a single model to address accounting for uncertain
          tax positions. FIN 48 clarified the accounting for income taxes by
          prescribing the minimum recognition threshold a tax position is
          required to meet before being recognized in the financial statements.
          FIN 48 also provides guidance on recognition, measurement,
          classification, interest and penalties, accounting in interim periods,
          disclosure and transition. The Company adopted the provisions of FASB
          Interpretation No. 48, ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES, on
          January 1, 2007. As a result of the implementation of Interpretation
          48, the Company recognized an increase of approximately $15,000 in the
          liability for unrecognized tax benefits, which was accounted for as a
          reduction to the January 1, 2007, balance of retained earnings

     M.   STOCK-BASED COMPENSATION

          On January 1, 2006, the Company adopted Statement of Financial
          Accounting Standards No. 123 (revised 2004), "Share-Based Payment"
          ("SFAS 123(R)") which requires the measurement and recognition of
          compensation expense based on estimated fair values for all
          share-based payment awards made to employees and directors. The
          Company has applied the provisions of Staff Accounting Bulletin No.
          107 ("SAB 107") in its adoption of SFAS 123(R), which allows the use
          of the "simplified method" in determining the expected life of the
          options. (See note 2P(3)).

          SFAS 123(R) require companies to estimate the fair value of
          equity-based payment awards on the date of grant using an
          option-pricing model. The value of the portion of the award that is
          ultimately expected to vest is recognized as an expense over the
          requisite service periods in the Company's consolidated statement of
          operations.

          The Company recognizes compensation expenses for the value of its
          awards, which have graded vesting based on the straight line method
          over the requisite service period of each of the awards.


                                     F - 12

                                                            ORGANITECH USA, INC.
NOTES TO THE CONLSIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
IN U.S. DOLLARS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)

     M.   STOCK-BASED COMPENSATION (Cont.)

          As a result of adopting SFAS 123(R) on January 1, 2006, the Company's
          financial position and result of operation had an immaterial change,
          than if it had continued to account for stock-based compensation under
          SFAS 123.

          The fair value of the options granted during years 2006 and 2007 were
          estimated using a Black & Scholes option pricing model, with the
          following weighted average assumptions:

Year of grant                     2007            2006
-------------                   -------         -------

Divided yield                       0%              0%
Expected volatility                118%            122%
Risk-free interest rate           4.74%           4.70%
Expected life                    6 years         6 years

          Expected volatility was calculated based upon actual historical stock
          price movements over the most recent periods ending on the grant date,
          equal to the expected option term. The expected option term represents
          the period that the Company's stock options are expected to be
          outstanding and was determined based on simplified method permitted by
          SAB 107 as the average of the vesting period and the contractual term.
          The Company has historically not paid dividends and has no foreseeable
          plans to issue dividends. The risk-free interest rate is based on the
          yield from U.S. Treasury zero-coupon bonds with an equivalent term.

          The Company applies SFAS No. 123(R) and Emerging Issues Task Force No.
          96-18 "Accounting for Equity Instruments that are Issued to other than
          Employees for Acquiring, or in conjunction with selling, goods or
          services" ("EITF 96-18"), with respect to options and warrants issued
          to non-employees. SFAS No. 123(R) requires the use of option valuation
          models to measure the fair value of the options and warrants at the
          date of grant.

     N.   FAIR VALUE OF FINANCIAL INSTRUMENTS

          The carrying amount reported in the balance sheet for cash and cash
          equivalents, trade receivables, other receivables and prepaid
          expenses, short-term bank credit and loans, trade payables and other
          payables approximate their fair values due to the short-term
          maturities of such instruments.

     O.   BASIC AND DILUTED NET LOSS PER SHARE

          Basic net loss per share is computed based on the weighted average
          number of common shares outstanding during each year. Diluted net loss
          per share is computed based on the weighted average number of common
          shares outstanding during each period, plus dilutive potential common
          shares considered outstanding during the year in accordance with
          Statement of Financial Accounting Standard No. 128, "Earnings Per
          Share" (SFAS No. 128"). Outstanding stock options and warrants are
          excluded from the calculation of the diluted net loss per common share
          when such securities are anti-dilutive. All outstanding stock options
          and warrants have been excluded from the calculation of the diluted
          loss per common share because all such securities are anti-dilutive
          for each of the periods presented.


                                     F - 13

                                                            ORGANITECH USA, INC.
NOTES TO THE CONLSIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
IN U.S. DOLLARS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)

     P.   IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

          (1)  In September 2006, the FASB issued SFAS No. 157, "Fair Value
               Measurements" ("SFAS 157"). This statement provides a single
               definition of fair value, a framework for measuring fair value,
               and expanded disclosures concerning fair value. Previously,
               different definitions of fair value were contained in various
               accounting pronouncements creating inconsistencies in measurement
               and disclosures. SFAS 157 applies under those previously issued
               pronouncements that prescribe fair value as the relevant measure
               of value, except SFAS 123(R) and related interpretations. The
               statement does not apply to accounting standard that require or
               permit measurement similar to fair value but are not intended to
               represent fair value. This pronouncement is effective for fiscal
               years beginning after November 15, 2007. The Company is currently
               evaluating the impact of adopting SFAS 157. On February 12, 2008,
               the FASB issued FASB Staff Position No. FAS 157-2, EFFECTIVE DATE
               OF FASB STATEMENT NO. 157 (the FSP). The FSP amends FASB
               Statement No. 157, FAIR VALUE MEASUREMENTS (Statement 157), to
               delay the effective date of Statement 157 for nonfinancial assets
               and nonfinancial liabilities, except for items that are
               recognized or disclosed at fair value in the financial statements
               on a recurring basis (that is, at least annually). For items
               within its scope, the FSP defers the effective date of Statement
               157 to fiscal years beginning after November 15, 2008, and
               interim periods within those fiscal years. The Company is
               currently evaluating the impact of adopting SFAS 157.

          (2)  In February 2007, the FASB issued SFAS No. 159, "The Fair Value
               Option for Financial Assets and Financial Liabilities"("SFAS
               159"). This Statement provides companies with an option to report
               selected financial assets and liabilities at fair value.
               Generally accepted accounting principles have required different
               measurement attributes for different assets and liabilities that
               can create artificial volatility in earnings. The Statement's
               objective is to reduce both complexity in accounting for
               financial instruments and the volatility in earnings caused by
               measuring related assets and liabilities differently. This
               Statement is effective as of the beginning of an entity's first
               fiscal year beginning after November 15, 2007. Adoption of the
               standard will not have any effect on the Company.

          (3)  On December 21, 2007 the SEC staff issued Staff Accounting
               Bulletin No. 110 (SAB 110), which, effective January 1, 2008,
               amends and replaces SAB 107, Share-Based Payment. SAB 110
               expresses the views of the SEC staff regarding the use of a
               "simplified" method in developing an estimate of expected term of
               "plain vanilla" share options in accordance with FASB Statement
               No. 123(R), Share-Based Payment. Under the "simplified" method,
               the expected term is calculated as the midpoint between the
               vesting date and the end of the contractual term of the option.

               The use of the "simplified" method, which was first described in
               Staff Accounting Bulletin No. 107, was scheduled to expire on
               December 31, 2007. SAB 110 extends the use of the "simplified"
               method for "plain vanilla" awards in certain situations. The SEC
               staff does not expect the "simplified" method to be used when
               sufficient information regarding exercise behavior, such as
               historical exercise data or exercise information from external
               sources, becomes available. The Company is currently evaluating
               the potential impact that the adoption of SAB 110 could have on
               its financial statements.


                                     F - 14

                                                            ORGANITECH USA, INC.
NOTES TO THE CONLSIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
IN U.S. DOLLARS

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)

     P.   IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS (Cont.)

          (4)  SFAS 141(R) - In December 2007, the FASB issued SFAS 141(R),
               Business Combinations. This Statement replaces SFAS 141, Business
               Combinations, and requires an acquirer to recognize the assets
               acquired, the liabilities assumed, including those arising from
               contractual contingencies, any contingent consideration, and any
               noncontrolling interest in the acquiree at the acquisition date,
               measured at their fair values as of that date, with limited
               exceptions specified in the statement. SFAS 141(R) also requires
               the acquirer in a business combination achieved in stages
               (sometimes referred to as a step acquisition) to recognize the
               identifiable assets and liabilities, as well as the
               noncontrolling interest in the acquiree, at the full amounts of
               their fair values (or other amounts determined in accordance with
               SFAS 141(R)). In addition, SFAS 141(R)'s requirement to measure
               the noncontrolling interest in the acquiree at fair value will
               result in recognizing the goodwill attributable to the
               noncontrolling interest in addition to that attributable to the
               acquirer.

               SFAS 141(R) amends SFAS No. 109, Accounting for Income Taxes, to
               require the acquirer to recognize changes in the amount of its
               deferred tax benefits that are recognizable because of a business
               combination either in income from continuing operations in the
               period of the combination or directly in contributed capital,
               depending on the circumstances. It also amends SFAS 142, Goodwill
               and Other Intangible Assets, to, among other things, provide
               guidance on the impairment testing of acquired research and
               development intangible assets and assets that the acquirer
               intends not to use. SFAS 141(R) applies prospectively to business
               combinations for which the acquisition date is on or after the
               beginning of the first annual reporting period beginning on or
               after December 15, 2008. The Company is currently evaluating the
               potential impact that the adoption of SFAS 141(R) could have on
               its financial statements.

          (5)  SFAS 160 - In December 2007, the FASB issued SFAS 160,
               Noncontrolling Interests in Consolidated Financial Statements.
               SFAS 160 amends Accounting Research Bulletin 51, Consolidated
               Financial Statements, to establish accounting and reporting
               standards for the noncontrolling interest in a subsidiary and for
               the deconsolidation of a subsidiary. It also clarifies that a
               noncontrolling interest in a subsidiary is an ownership interest
               in the consolidated entity that should be reported as equity in
               the consolidated financial statements. SFAS 160 also changes the
               way the consolidated income statement is presented by requiring
               consolidated net income to be reported at amounts that include
               the amounts attributable to both the parent and the
               noncontrolling interest. It also requires disclosure, on the face
               of the consolidated statement of income, of the amounts of
               consolidated net income attributable to the parent and to the
               noncontrolling interest. SFAS 160 requires that a parent
               recognize a gain or loss in net income when a subsidiary is
               deconsolidated and requires expanded disclosures in the
               consolidated financial statements that clearly identify and
               distinguish between the interests of the parent owners and the
               interests of the noncontrolling owners of a subsidiary. SFAS 160
               is effective for fiscal periods, and interim periods within those
               fiscal years, beginning on or after December 15, 2008. The
               Company is currently evaluating the potential impact that the
               adoption of SFAS 160 could have on its financial statements.


                                     F - 15

                                                            ORGANITECH USA, INC.
NOTES TO THE CONLSIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
IN U.S. DOLLARS

NOTE 3 - CASH AND CASH EQUIVALENTS

                                                      DECEMBER 31,
                                                         2007
                                                      ----------

In New Israeli Shekels                                $  702,205
In other currencies (mainly U.S. Dollars)                207,346
                                                      ----------

                                                      $  909,551
                                                      ==========

NOTE 4 - OTHER RECEIVABLES AND PREPAID EXPENSES

                                                      DECEMBER 31,
                                                         2007
                                                      ----------

Prepaid expenses                                      $   29,292
Government department                                      5,591
                                                      ----------

                                                      $   34,883
                                                      ==========

NOTE 5 - INVENTORIES

                                                      DECEMBER 31,
                                                         2007
                                                      ----------

  Cost incurred on long-term contract in progress     $   53,976
  Finished goods                                          16,569
                                                      ----------
                                                      $   70,545
                                                      ==========

NOTE 6 - PROPERTY AND EQUIPMENT, NET

                                                      DECEMBER 31,
                                                         2007
                                                      ----------

Cost:

Computers                                             $   69,226
Furniture and Office equipment                             2,983
Other equipment                                            8,172
Communication equipment                                    9,972
Leaseholds improvements                                   59,576
Motor vehicles                                            79,082
                                                      ----------

                                                         229,011
                                                      ----------
Accumulated depreciation:

Computers                                                 60,997
Furniture and Office equipment                               608
Other equipment                                            5,341
Communication equipment                                    3,696
Leaseholds improvements                                   25,748
Motor vehicles                                            41,761
                                                      ----------

                                                         138,151
                                                      ----------

Depreciated cost                                          90,860

Base stock                                                 2,000
                                                      ----------

                                                      $   92,860
                                                      ==========


                                     F - 16

                                                            ORGANITECH USA, INC.
NOTES TO THE CONLSIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
IN U.S. DOLLARS

NOTE 6 - PROPERTY AND EQUIPMENT, NET (CONT.)

     Depreciation expenses amounted to $ 27,593 and $ 34,145 for the years ended
     December 31, 2007 and 2006, respectively.

NOTE 7 - TRADE PAYABLES


                                                      DECEMBER 31,
                                                         2007
                                                      ----------

Open accounts                                         $  131,697
Notes payable                                            216,783
                                                      ----------

                                                      $  348,480
                                                      ==========

NOTE 8 - OTHER PAYABLES AND ACCRUED EXPENSES

                                                      DECEMBER 31,
                                                         2007
                                                      ----------

Provision for payroll and related expenses            $  137,290
Vacation pay                                              66,101
Provision for Warranty                                    66,132
Accrued expenses                                         613,799
Royalties                                                375,554
Provision for income taxes                                15,000
Other                                                    200,000
                                                      ----------

                                                      $1,473,876
                                                      ==========

NOTE 9 - CONTINGENCIES AND COMMITMENTS

     A.   Royalty Commitments

          (1)  OrganiTech Ltd. is committed to pay royalties to the Office of
               the Chief Scientist ("OCS") on proceeds from the sales of
               products, which the OCS participated in their research and
               development. Royalty payments are computed on the portion of
               sales from such products at a rate 3% to 5% up to the amount of
               the grants received, which are linked to the U.S. $ and bear
               annual interest at Libor.

               The terms of the OCS grants provide certain restriction on
               OrganiTech Ltd's ability to manufacture products or transfer the
               technologies developed using these grants outside of Israel.

               As of December 31, 2007, the balance of royalty bearing grants
               received by the OCS net of royalties paid or provided for, is
               $178,770 (as of December 31, 2006 - $230,827).

               Royalties' expenses amounted to $52,057 and $118,600 in 2007 and
               2006, respectively.

          (2)  In September 2001, OrganiTech Ltd. received an approval for
               Magnaton Research and Development program from the OCS. Magnaton
               program reflects a joint venture between OrganiTech Ltd. and the
               Weitzman Institute (Yeda Research and Development Ltd. ("Yeda"))
               in order to develop new varieties of miniature tomatoes that can
               be adapted to the GrowTECH 2000 system.

               Through December 31, 2007, OrganiTech Ltd received from the OCS a
               payment of $66,508. OrganiTech Ltd. is committed to pay royalties
               to the Weitzman Institute up to 5% on sales of products developed
               with the grants participation of the Magnaton program up to the
               amount of grant received.


                                     F - 17

                                                            ORGANITECH USA, INC.
NOTES TO THE CONLSIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
IN U.S. DOLLARS

NOTE 9 - CONTINGENCIES AND COMMITMENTS (CONT.)

     A.   Royalty Commitments (cont.)

          (3)  In November 2001, OrganiTech Ltd. and a third party -"Agronaut"
               received approval from the Singapore-Israel Industrial Research
               and Development ("SIIRD") for funding the development of an
               updated commercial version of the GrowTECH. As of December 31,
               2007 OrganiTech Ltd. has received $250,505 from SIIRD.

               OrganiTech Ltd. and Agronaut are committed to pay royalties to
               SIIRD ranging from 1.5% to 2.5% on sales of products developed
               with the grants participation of SIIRD. The commitment for
               royalty payments to SIIRD is limited to the amount of received
               participation.

               Royalties' expenses to SIIRD amounted to $37,183 and $84,714 in
               2007 and 2006, respectively.

          (4)  In August 2005, OrganiTech Ltd and a German R&D institute
               received approval from the OCS and the Industrial Research and
               Development fund ("Bio Disc") for development of a Bio-Tech
               system based on OrganiTECH's GrowTECH(TM)2000 and
               PhytoChamber(TM) . OrganiTech Ltd will be committed to royalty
               payments computed on the all sales of the Company at a rate 3% to
               5%. The commitment to the OCS is limited to the amount of the
               received participation, link to the U.S. dollar and bears annual
               interest at Libor. As of December 31, 2007 OrganiTech Ltd. has
               received $11,297 from the OCS.

     B.   Legal claim

          (1)  In February 2000, OrganiTech Ltd. signed a distribution agreement
               with Leami ("Leami"), whereby it granted Leami the exclusive
               right to market OrganiTech Ltd's GrowTECH platforms in Israel.
               Under the terms of the agreement, Leami agreed to purchase two
               GrowTECH platforms in consideration for $100,000. In March 2000
               OrganiTech Ltd. received an advance payment from Leami in an
               amount of $60,000. In July 2000, OrganiTech Ltd. delivered the
               two GrowTECH platforms to Leami.

               OrganiTech Ltd. and Leami negotiated certain claims of Leami
               concerning the GrowTECH platforms delivered and the distribution
               agreement. On February 2, 2005, Leami filed a lawsuit against
               OrganiTech Ltd. in the amount of $295,500.

               On April 20, 2005 the Company filed a counter lawsuit against
               Leami at the amount of $148,800 claiming that Leami had not
               fulfilled its obligations and commitments under the sale
               agreement signed and by not doing so and taking other actions, it
               caused OrganiTech Ltd. to suffer damages and expenses. A Regional
               Tribunal has held several preliminary hearings in order to
               prepare the claim and counter-claim for trial. A full trial date
               has yet to be set.

               Company's management believes, based on the opinion of its legal
               counsel, that this claim will not have material adverse effect on
               the Company's financial condition.


                                     F - 18

                                                            ORGANITECH USA, INC.
NOTES TO THE CONLSIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
IN U.S. DOLLARS

NOTE 9 - CONTINGENCIES AND COMMITMENTS (CONT.)

     B.   Legal claim (Cont.)

          (2)  In August 2006, a claim for approximately $15,000 against
               OrganiTech Ltd and Mr. Shimon Zanaty, one of the Company's former
               directors (who resigned from the board of directors of the
               Company in July 2007, in connection with the Katzir investment -
               see note 10B(2)), was filed with the Haifa Magistrates' Court in
               Israel. The claim was filed by a private individual who entered
               into an agreement in 2003 with one of the Company's principal
               shareholders, BLM NV, to purchase shares of the Company which had
               previously been purchased by BLM and were held by a trustee. The
               plaintiff claims that she paid BLM for the shares, but has never
               received them. In October 16, 2006, OrganiTech Ltd received a
               letter from the attorney representing the plaintiff, stating that
               OrganiTech Ltd was not required to file a statement of defense
               and in November 20, 2006, the attorney representing the plaintiff
               informed OrganiTech Ltd in writing that it would be removed as a
               defendant in the action. The Company has so far not received a
               copy of the decision removing it as defendant.

               Company's management believes, based on the opinion of its legal
               counsel, that this claim will not have material adverse effect on
               the Company's financial condition.

     C.   Lease Commitment

          The future minimum lease commitment of the Company under
          non-cancelable operating lease agreement in respect of premises and
          vehicles is as of December 31, 2007 as follows:

          December 31, 2008 -        $ 72,800
          December 31, 2009 -        $ 32,010
          December 31, 2010 -        $  3,930

          Total -                    $108,740
                                     ========

          Lease expenses for years ended December 31, 2007 and 2006 were $87,070
          and $42,060, respectively.

NOTE 10 - SHARE CAPITAL

     A.   Convertible loan

          On March 1, 2007 the Company entered into an agreement with an
          investor (the "Investor") to grant the Company a convertible loan (the
          "Loan") in the amount of $357,500 for a period of 3 years, bearing net
          interest of 9% per annum to be paid at the end of each calendar
          quarter. The Loan or parts of it may be converted into the Company's
          shares with a conversion price of $0.26 per share, which was the fair
          market value of the Company's shares on the commitment date.

          Under the Loan agreement, the Investor is entitled to ask for early
          repayment, upon the occurrence of certain events including a failure
          by the Company to achieve at least $7,000,000 in sales in the year
          ending December 31, 2008. The Investor is entitled to request the
          registration of the shares issueable upon conversion of the Loan and
          will also be entitled to pre-emptive rights in the event that it
          converts the Loan into shares of the Company's common stock.

          According to SFAS 133 "Accounting for Derivative Instruments and
          Hedging Activities" the fair value of the early repayment feature,
          which should be separated as an embedded derivative is immaterial as
          of grant date and as of December 31, 2007.


                                     F - 19

                                                            ORGANITECH USA, INC.
NOTES TO THE CONLSIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
IN U.S. DOLLARS

NOTE 10 - SHARE CAPITAL (CONT.)

     B.   Private Investment in Public Entity ("PIPE")

          (1)  Clal Investments Ltd.'s PIPE

               (a)  On February 20, 2005 (the "closing date"), the Company and
                    several investors including and represented by Clal
                    Investments Ltd., ("Clal") entered into an investment
                    agreement whereby, the investors and Clal were entitled to
                    purchase up to 4,000,000 shares of the Company's common
                    stock (the "Investment Shares") for an aggregate purchase
                    price of $1,000,000 and options to purchase shares of common
                    stock of the Company.

                    Pursuant to the agreement, the Company agreed to issue to
                    the investors and Clal, two types of options, proportionally
                    to their effective investment: (i) Options type A ("A-1
                    Warrants") were for up to 2,000,000 shares of common stock
                    exercisable for the longer of 360 days from the closing date
                    or 3 months from the registration of the Investment Shares
                    for an exercise price of $0.75; and (ii) Options type B
                    ("A-2 Warrants") were for up to 2,000,000 shares of common
                    stock exercisable for the longer of 540 days from the
                    closing date or 3 months from the registration of the
                    Investment Shares for an exercise price of $1.00 or, in the
                    last 30 days of the life of the options, at a 10% discount
                    from the average share price within the 30 days period prior
                    to the date of the delivery notice.

               (b)  Pursuant to the agreement, during February 2005, the Company
                    received a total consideration of $550,000, for which,
                    during March and May 2005, the Company issued Clal and the
                    investors the following: 2,200,000 shares of the Company's
                    common stock, A-1 Warrants to purchase 1,100,000 shares of
                    the Company's common stock and A-2 Warrants to purchase
                    1,100,000 shares of the Company's common stock. On July 1,
                    2005 the Investors and Clal invested additional $50,000 in
                    consideration for 200,000 common shares of the Company,
                    issued on November 2005, A-1 Warrants to purchase a further
                    100,000 shares of the Company's common stock and A-2
                    Warrants to purchase a further 100,000 shares of the
                    Company's common stock.

               (c)  On January 31, 2006, Clal and the investors invested the
                    remaining $400,000 for which they received in April 2006 an
                    additional 1,600,000 shares of the Company's common stock,
                    A-1 Warrants to purchase 800,000 shares of the Company's
                    common stock and A-2 Warrants to purchase 800,000 shares of
                    the Company's common stock.


                                     F - 20

                                                            ORGANITECH USA, INC.
NOTES TO THE CONLSIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
IN U.S. DOLLARS

NOTE 10 - SHARE CAPITAL (CONT.)

     B.   Private Investment in Public Entity ("PIPE") (cont.)

          (1)  Clal Investments Ltd.'s PIPE (Cont.)

               (d)  On January 2, 2006, the Company's Board of Directors
                    approved the increase of the financing under the PIPE
                    agreement to 1.3M$ - 1.5M$ until February 1, 2006. Pursuant
                    to the above approval and to an amendment to the investment
                    agreement signed on January 31, 2006, Clal and the investors
                    invested an additional $500,000 for which they received in
                    April 2006, 2,000,000 common shares at $0.25 per share, and
                    additional options as follows: (i) A-1 Warrants for up to
                    1,000,000 shares of common stock for an exercise price of
                    $0.75 and (ii) A-2 Warrants for up to 1,000,000 shares for
                    common stock for an exercise price of $1.00 or, in the last
                    30 days of the options, at a 10% discount from the average
                    share price within the 30 days period prior to the date of
                    the delivery notice.

                    The final exercise date for all A-1 Warrants under the
                    original investment agreement was extended until the later
                    of April 30, 2007 or 3 months from the registration of the
                    Investment Shares and the final exercise date for all type
                    A-2 Warrants under the original investment agreement was
                    extended until the later of July 31, 2007 or 3 months from
                    the registration of the Investment Shares.

                    Under the amendment, the investors waived any claims that
                    any of them, had, has or may have had at any time in the
                    past until and including the date of the amendment, to
                    receive compensation pursuant to the Company's failure to
                    file the registration statement within the Registration
                    Period.

                    In addition, the amendment to the investment agreement
                    stated that the Company shall use its best efforts, as soon
                    as practicable, but not later than 75 business days
                    following January 31, 2006 (the "Amended Registration
                    Period"), to file a registration statement with the
                    Securities and Exchange Commission, on Form SB-2 or such
                    other applicable registration form available.

                    Should the Company fails to (i) file a registration
                    statement covering the Investment Shares and Warrants, or
                    (ii) respond to comments from the Security and Exchange
                    Commission ("SEC") within the time periods set forth in the
                    Investment Agreement, or (iii) maintain the registration
                    statement covering the Investment Shares and Warrants
                    effective, the Company will bear a fine equal to 1% of the
                    total amount under the PIPE agreement ($1.5M) per month. As
                    of December 31, 2005 the Company has recorded a provision in
                    the amount of $40,000 in consideration for the accrued fine.
                    The Company filed the requested Form SB-2 on May 12, 2006
                    which was declared effective on October 4, 2006 by the
                    United States Securities and Exchange Commission, therefore
                    in 2006 the $40,000 provision was cancelled.

               (e)  All A-1 Warrants and A-2 Warrants were not exercised until
                    their final exercise dates and have expired (on April 30,
                    2007 for all A-1 Warrants and on July 31, 2007 for all A-2
                    Warrants, respectively).


                                     F - 21

                                                            ORGANITECH USA, INC.
NOTES TO THE CONLSIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
IN U.S. DOLLARS

NOTE 10 - SHARE CAPITAL (CONT.)

     B.   Private Investment in Public Entity ("PIPE") (cont.)

          (2)  Katzir Debenture Fund for Investment Ltd 's PIPE

               On July 19, 2007, the Company signed an investment agreement with
               Katzir Debenture Fund for Investment Ltd. ("Katzir"), an Israeli
               investment company. Pursuant to the investment, Katzir invested
               $2 million in the Company in consideration for 10,000,000 common
               stock of the Company equal to approximately 27.3% of the
               Company's issued and outstanding share capital (post-investment).
               Katzir also paid $20,000 in consideration for a three year
               warrant for the purchase of up to 3,846,154 common stock of the
               Company for an exercise price of $0.26 per share. Pursuant to the
               investment agreement, settlement of the warrant could only be
               made by shares.

               In addition it was agreed that Katzir is entitled to a management
               fee in the amount of $5,000 per month, commencing July 19, 2007
               for so long as the chairman of the Company's board of director is
               appointed by Katzir.

               In addition, the Registration Rights Agreement ("RRA") entered
               into between the Company and Katzir, simultaneously with the
               investment agreement stated that upon certain occurrences, the
               Company shall use its best efforts, as soon as practicable, to
               file a registration statement with the Securities and Exchange
               Commission, on Form SB-2 or such other applicable registration
               form available. The RRA did not include any provisions with
               regards to liquidated damages.

               The Company evaluated its accounting treatment of the warrant
               issued pursuant to the investment agreement in accordance with
               EITF 00-19, "Accounting for Derivative Financial Instruments
               Indexed to, and Potentially Settled in, a Company's Own Stock"
               and concluded that the warrant should be classified as equity.

     C.   Options to Purchase Company Shares

          (1)  On March 14, 2006 the Company and Clal entered into an agreement
               for the provision of past services provided by Clal to the
               Company in securing part of the PIPE agreement. Under the
               agreement, Clal is entitled to A-1 Warrants for the purchase of
               additional 180,000 shares of the Company's common shares and A-2
               Warrants for the purchase of additional 180,000 shares of the
               Company's common shares under the same terms and conditions
               detailed in the PIPE agreement.

          (2)  On November 16, 2004 the Company entered into a service agreement
               with a consultant where by the consultant will present the
               Company to potential investors and as part of the success-based
               consideration. Following the PIPE agreement with Clal (see note
               10B(1)) the consultant is entitled to A-1 Warrants for the
               purchase of additional 27,500 shares of the Company's common
               shares and A-2 Warrants for the purchase of additional 27,500
               shares of the Company's common shares under the same terms and
               conditions detailed in the PIPE agreement.

          (3)  On December 3, 2006 the Company entered into a service agreement
               with a consultant where by the consultant will present the
               Company to potential investors for a success-based consideration.
               Following the receiving of the Convertible Loan (mentioned in
               Note 10(A)) on March 2, 2007, the consultant is entitled to
               warrants for the purchase of 41,250 shares of the Company's
               common shares for exercise price of $0.26 per share. The warrants
               will expire on March 2, 2010. The fair value of the warrants at
               the grant date was $5,363.


                                     F - 22

                                                            ORGANITECH USA, INC.
NOTES TO THE CONLSIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
IN U.S. DOLLARS

NOTE 10 - SHARE CAPITAL (CONT.)

     D.   Stock Option Plans

          (1)  On May 31, 2005, the Board of Directors approved a Stock Option
               Plan ("SOP") for the grant of options to purchase up to 1,622,000
               common shares of the Company to the Company's executives,
               directors, key employees and service providers. On February 19,
               2006, the Board of Directors approved the increase of the SOP by
               a further 3,000,000 shares of common stock, so that options to
               purchase a total of 4,622,000 shares of common stock of the
               Company were available for grant under the SOP. As of December
               31, 2007, options for the purchase of 867,000 shares of common
               stock of the Company were still available for future grants.

          (2)  A summary of the Company's stock option activity with regards to
               its employees, officers and directors, under the plan as of
               December 31, 2007, is as follows:

                                                DECEMBER 31, 2007
                            --------------------------------------------------------
                                                            WEIGHTED
                                             WEIGHTED       AVERAGE
                                             AVERAGE       REMAINING      AGGREGATE
                            NUMBER OF        EXERCISE     CONTRACTUAL     INTRINSIC
                             OPTIONS          PRICE       TERM (YEARS)   VALUE PRICE
                            ----------      ----------     ----------     ----------

Outstanding as of
  January 1,2006             1,281,508      $    0.248

Granted                      2,080,000      $    0.219
Forfeited                      (85,000)     $    0.187
                            ----------
Outstanding as of
  December 31, 2006          3,276,508      $    0.231

Granted                        430,000      $     0.26
                            ----------
Outstanding as of
  December 31, 2007          3,706,508      $    0.234           7.98     $        -
                            ==========      ==========     ==========     ==========
Vested and expected to
  be vest                    3,631,758      $    0.235           7.97     $        -
                            ==========      ==========     ==========     ==========
Exercisable as of
  December 31, 2007          2,211,508      $     0.24           7.71     $        -
                            ==========      ==========     ==========     ==========


                                     F - 23

                                                            ORGANITECH USA, INC.
NOTES TO THE CONLSIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
IN U.S. DOLLARS

NOTE 10 - SHARE CAPITAL (CONT.)

     D.   Stock Option Plans (CONT.)

          (3)  A summary of the Company's stock option activity with regards to
               its non-employees, as of December 31, 2007, under the plan is as
               follows:

                                                  DECEMBER 31, 2007
                               -------------------------------------------------------
                                                             WEIGHTED
                                               WEIGHTED       AVERAGE
                                                AVERAGE      REMAINING      AGGREGATE
                                NUMBER OF      EXERCISE     CONTRACTUAL     INTRINSIC
                                 OPTIONS         PRICE      TERM (YEARS)   VALUE PRICE
                               ----------     ----------     ----------     ----------

Outstanding as of
January 1, 2006                    45,000     $    0.187

Granted                           100,000     $     0.28
                               ----------
Outstanding - as of
  December 31, 2006               145,000     $    0.251           9.34     $    2,385
                               ==========     ==========     ==========     ==========
Outstanding - as of
  December 31, 2007               145,000     $    0.251           8.34     $        -
                               ==========     ==========     ==========     ==========
Exercisable - as of
  December 31, 2007                47,500     $    0.236           8.26     $        -
                               ==========     ==========     ==========     ==========

               The aggregated intrinsic value in the table above represents the
               total intrinsic value (the difference between the Company's
               closing stock price and the exercise price, multiplied by the
               number of in-the-money options) that would have been received by
               the option holders had all option holders exercised their options
               on the last trading day of the fiscal year. This amount changes
               based on the fair market value of the Company's stock.

          (4)  The weighted average grant date fair value of options granted to
               employees and non-employees during the years 2007 and 2006 was
               $0.21.

          (5)  As of December 31, 2007, the total unrecognized estimated
               compensation costs related to non-vested stock options granted
               prior to that date was $235,385, which is expected to be
               recognized over a weighted average period of 1.6 years.

          (6)  Compensation expenses were recognized during the years ended
               December 31, 2007 and 2006, respectively, as follows:

                                        YEAR ENDED DECEMBER 31,
                                        ---------------------
                                          2007         2006
                                        --------     --------

Cost of Revenues                        $ 35,604     $ 28,906
Research and Development expenses         20,640       28,660
Selling and Marketing expenses            63,859      137,460
General and Administration expenses       82,904      158,549
                                        --------     --------
                                        $203,007     $353,575
                                        ========     ========


                                     F - 24

                                                            ORGANITECH USA, INC.
NOTES TO THE CONLSIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
IN U.S. DOLLARS

NOTE 11 - FINANCING INCOME, NET

                                                                     YEAR ENDED DECEMBER 31,
                                                                     ----------------------
                                                                       2007          2006
                                                                     --------      --------

Bank commissions and interest expenses                               $ (8,539)     $(11,757)
Gain (loss) from exchange rate differences                             65,112        (1,644)
Interest on cash and cash equivalents                                  18,202         6,062
Interest related to convertible loan (see note 10(A))                 (26,813)            -
Commission related to convertible loan (see note 10(A))                (3,970)            -
Amortization of warrants' compensation                                 (1,493)            -
Provision for a fine in connection with a PIPE (see note 10B(1))            -        40,000
                                                                     --------      --------

                                                                     $ 42,499      $ 32,661
                                                                     ========      ========

NOTE 12 - INCOME TAXES

     A.   Tax laws applicable to the companies:

          (1)  The Company is taxed under U.S. tax laws.

          (2)  Organitech Ltd. is taxed under the Israeli income Tax Ordinance
               and the Income Tax (Inflationary Adjustments) Law, 1985: ("the
               law"). According to the law, the subsidiary's results for tax
               purposes are measured based on the changes in the Israeli CPI.

          (3)  The Law for the Encouragement of Capital Investment, 1959

               In April 2001, OrganiTech Ltd. has submitted a request to be
               granted a status of an "Approved Enterprise" under the Israeli
               Law for the Encouragement of Capital Investments, 1959 as amended
               (the - "Law") According to the "Alternative Benefits program"
               status. On February 20, 2007 OrganiTech Ltd. received final
               approval for its Approved Enterprise status.

               During the period of benefits, the income deriving from "Approved
               Enterprise" will be tax exempt for a period of ten years,
               commencing the first year the "Approved Enterprise" generates
               taxable income. Notwithstanding the foregoing, the period of
               benefits will expire in the year 2014.

          (3)  The Law for the Encouragement of Capital Investment, 1959 (Cont.)

               If these retained tax-exempt profits are distributed in a manner
               other than in the complete liquidation of the Company they would
               be taxed at the corporate tax rate applicable to such profits as
               if the Company had not elected the alternative program of
               benefits (depending on the level of foreign investment in the
               Company) currently between 10% to 25% for an approved enterprise.


                                     F - 25

                                                            ORGANITECH USA, INC.
NOTES TO THE CONLSIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
IN U.S. DOLLARS

NOTE 12 - INCOME TAXES (CONT.)

     B.   Net operating loss carried forwards

          (1)  As of December 31, 2007, for U.S. income tax purposes the Company
               had approximately $1.4 million of net operating losses which can
               be carried forward 20 years following the loss year. Such net
               operating losses begin expiring in 2017.

          (2)  As of December 31, 2007, OrganiTech Ltd. had net operating loss
               carry forwards for Israeli tax purposes of approximately $8.0
               million. The net operating loss carry forward are available to
               offset future taxable income, if any, for an indefinite period.
               OrganiTech Ltd. had accumulated capital losses carry forward of
               approximately $6,300 to be realized only from future capital
               gains.

     C.   Deferred tax assets

          Significant components of the Company's deferred tax assets are as
          follows:

                                        DECEMBER 31,
                                            2007
                                        -----------

Tax assets with respect to tax loss
carry forward                           $ 2,489,918
Other                                        38,777
Less - valuation allowance               (2,528,695)
                                        -----------

Net deferred tax assets                 $         -
                                        ===========

          Realization of deferred tax assets is depended on generating
          sufficient taxable income in the period that the deferred tax assets
          are realized. Based upon all available information and because the
          Company's lack of earnings history, deferred tax assets have been
          fully offset by a valuation allowance.

          The Company and OrganiTECH Ltd. have not been assessed for tax
          purposes since incorporation.


                                     F - 26

                                                            ORGANITECH USA, INC.
NOTES TO THE CONLSIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
IN U.S. DOLLARS

NOTE 12 - INCOME TAXES (CONT.)

     D.   Effective January 1, 2007, the company adopted the provision of FASB
          Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -
          an interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48
          prescribes a recognition threshold and a measurement attribute for the
          financial statement recognition and measurement of tax positions taken
          or expected to be taken in at tax return. For those benefits to be
          recognized, a tax position must to more-likely-than-not to be
          sustained upon examination by taxing authorities. There was not a
          material impact on the company's consolidated financial position and
          results of operations as a result of the adoption of the provisions of
          FIN 48. At December 31, 2007, the company had a liability for
          unrecognized tax benefits of $15,000. The Company does not believe
          there will be any material changes in its unrecognized tax positions
          over the net twelve months.

     E.   On July 25, 2005, the Israeli government approved the Law for the
          Amendment of the Income Tax Ordinance (No. 147), 2005, which
          prescribes, among other provisions, a gradual decrease in the
          corporate tax rate in Israel to the following tax rates: in 2006 -
          31%, in 2007 - 29%, in 2008 - 27%, in 2009 - 26% and in 2010 and
          thereafter - 25%.

NOTE 13 - TRANSACTION AND BALANCES WITH RELATED PARTIES

     The Company conducts transactions in the ordinary course of business with
     related parties.

     (1)  Balances with related parties are presented in:

                                               DECEMBER 31,
                                                  2007
                                                ---------

 Current assets                                 $   1,508
                                                =========

 Current liability                              $  12,562
                                                =========

     (2)  Transaction with related parties

                                                 YEAR ENDED DECEMBER 31,
                                                -----------------------
                                                   2007          2006
                                                ---------     ---------

Compensation, payroll expenses and
related benefits                                $ 496,941     $ 579,523
                                                =========     =========

Financing income                                        -     $  40,000
                                                =========     =========

Officers compensation, payroll expenses and
related benefits                                $ 130,864     $ 120,512
                                                =========     =========

Cost of revenue                                 $   5,094     $  28,000
                                                =========     =========


                                     F - 27