PIMI AGRO CLEANTECH, INC. - FORM 10-Q

Attached files

file	filename
EX-32.2 - EXHIBIT 32.2 - PIMI AGRO CLEANTECH, INC.	v353312_ex32-2.htm
EX-31.1 - EXHIBIT 31.1 - PIMI AGRO CLEANTECH, INC.	v353312_ex31-1.htm
EX-32.1 - EXHIBIT 32.1 - PIMI AGRO CLEANTECH, INC.	v353312_ex32-1.htm
EX-31.2 - EXHIBIT 31.2 - PIMI AGRO CLEANTECH, INC.	v353312_ex31-2.htm
EXCEL - IDEA: XBRL DOCUMENT - PIMI AGRO CLEANTECH, INC.	Financial_Report.xls

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

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

For the transition period from to

Commission file number 001-35138

PIMI AGRO CLEANTECH, INC.

(Exact name of registrant as specified in its charter)

Delaware	26-4684680
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

269 South Beverly Drive suite 1091

Beverly Hills California 90212 USA

(Address of principal executive offices)

(310) 203-8278

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act) Yes ¨ No þ

The number of shares of common stock outstanding as of June 30, 2013 was 9,336,487.

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

Condensed Consolidated Interim Financial Statements

as of June 30, 2013 (Unaudited)

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

Condensed Consolidated Financial Statements

as of June 30, 2013 (Unaudited)

Table of Contents

	Page

Condensed Consolidated Financial Statements

Balance Sheets	2

Statements of Operations and Comprehensive Loss	3

Statements of Changes in Stockholders’ Deficit	4 – 10

Statements of Cash Flows	11

Notes to Condensed Consolidated Financial Statements	12 – 16

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

	US dollars (except share data)
	June 30,			December 31,
	2013			2012
	(unaudited)
ASSETS
Current Assets
Cash and cash equivalents		44,964			33,484
Accounts receivable		15,186			138,040
Other current assets		31,648			29,409
Total current assets		91,798			200,933

Property and Equipment, Net		37,311			25,633

Funds in Respect of Employee Rights Upon Retirement		94,955			86,270
Total assets		224,064			312,836

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable:
Trade		40,261			141,078
Other		324,468			212,854
Convertible Bonds		265,885			187,177
Total current liabilities		630,614			541,109

Series A Convertible Preferred Stock		-			571,225

Liability for Employee Rights Upon Retirement		95,403			86,704
Total liabilities		726,017			1,199,038

Stockholders’ Deficit
Common stocks of US$ 0.01 par value ("Common stocks"):
30,000,000 shares authorized as of June 30, 2013 and December 31, 2012; issued and outstanding 9,336,087 shares and 8,553,587 shares as of June 30, 2013 and December 31, 2012, respectively		93,360			85,535
Preferred stocks of US$ 0.01 par value ("Preferred stocks"):
600,000 shares authorized as of June 30, 2013 and December 31, 2012; issued and outstanding 0 shares as of June 30, 2013 and December 31, 2012		-			-
Additional paid in capital		4,707,819			4,100,695
Accumulated other comprehensive loss		(71,446	)		(65,015	)
Deficit accumulated during the development stage		(5,231,686	)		(5,007,417	)
Total stockholders' deficit		(501,953	)		(886,202	)
Total liabilities and stockholders’ deficit		224,064			312,836

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

- 2 -

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

	US dollars (except share data)
	Six month period ended June 30,						Three month period ended June 30,						Cumulative period from January 14, 2004 (date of inception) through June 30,
	2013			2012			2013			2012			*2013^()**
	(unaudited)						(unaudited)						(unaudited)
Revenues from sales of products		182,064			128,295			33,548			27,352			1,537,345
Research and development expenses		(312,458	)		(330,633	)		(129,398	)		(170,346	)		(4,552,344	)
General and administrative expenses, net		(73,941	)		(168,934	)		(57,715	)		(98,961	)		(1,899,798	)
Operating loss		(204,335	)		(371,272	)		(153,565	)		(241,955	)		(4,914,797	)
Financing expenses, net		(19,934	)		(31,605	)		(2,749	)		(16,501	)		(236,555	)
Loss from continuing operation		(224,269	)		(402,877	)		(156,314	)		(258,456	)		(5,151,352	)
Loss from discontinued operation, net		-			-			-			-			(80,334	)
Loss for the period		(224,269	)		(402,877	)		(156,314	)		(258,456	)		(5,231,686	)
Other comprehensive income (loss):
Foreign currency translation adjustments		(6,431	)		(158	)		10,291			2,356			(73,446	)
Comprehensive loss for the period		(230,700	)		(403,035	)		(146,023	)		(256,100	)		(5,303,132	)

Loss per share (basic and diluted) (Note 4)		(0.02	)		(0.05	)		(0.02	)		(0.03	)

(*)

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

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

- 3 -

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT (*)

	US Dollars (except share data)
	Common stock													Deficit
	Number of shares		Amount		Additional paid in capital			Accumulated other comprehensive income (loss)			Receipts on account of shares			accumulated during the development stage			Total stockholders equity (deficit)
January 14, 2004 (date of inception)		-		-		-			-			-			-			-
120,000 common stock issued for cash of US$ 0.002 per share		120,000		1,200		(932	)		-			-			-			268
Balance as of December 31, 2004		120,000		1,200		(932	)		-			-			-			268

Loss for the year		-		-		-			-			-			(223,285	)		(223,285	)
Other comprehensive (loss) income		-		-		-			5,989			-			-			5,989
Receipts on account of shares		-		-		-			-			100,000			-			100,000
Balance as of December 31, 2005		120,000		1,200		(932	)		5,989			100,000			(223,285	)		(117,028	)

Loss for the year		-		-		-			-			-			(831,415	)		(831,415	)
Other comprehensive (loss) income		-		-		-			(12,748	)		-			-			(12,748	)
Issuance of 25,200 common stock for cash of US$ 7.50 per share on January 2, 2006		25,200		252		188,748			-			(100,000	)		-			89,000
Issuance of 24,000 common stock for cash of US$ 7.56 per share on July 19, 2006		24,000		240		181,293			-			-			-			181,533
Issuance of 72,000 common stock for cash of US$ 7.53 per share on December 28, 2006		72,000		720		541,600			-			-			-			542,320
Issuance of 1,688 common stock for cash of US$ 8.33 per share on December 28, 2006		1,688		17		14,043			-			-			-			14,060
Receipts on account of shares		-		-		-			-			33,644			-			33,644
Balance as of December 31, 2006		242,888		2,429		924,752			(6,759	)		33,644			(1,054,700	)		(100,634	)

(*)

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

- 4 -

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

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

	US Dollars (except share data)
	Common stock													Deficit
	Number of shares		Amount		Additional paid in capital			Accumulated other comprehensive income (loss)			Receipts on account of shares			accumulated during the development stage			Total stockholders equity (deficit)

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

(*)

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

- 5 -

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

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

	US Dollars (except share data)
	Common stock												Deficit
	Number of shares		Amount		Additional paid in capital		Accumulated other comprehensive income (loss)			Receipts on account of shares			accumulated during the development stage			Total stockholders equity (deficit)

Loss for the year		-		-		-		-			-			(602,994	)		(602,994	)
Other comprehensive (loss) income		-		-		-		109			-			-			109
Issuance of 716,589 common stock for cash of US$ 0.041 per share in February 2008		716,589		7,166		22,370		-			-			-			29,536
Issuance of 235,334 common stock for cash of US$ 0.72 per share in February 2008		235,334		2,353		166,600		-			(100,000	)		-			68,953
Issuance of 291,515 common stock for cash of US$ 0.69 per share in June 2008		291,515		2,915		197,085		-			-			-			200,000
Issuance of 310,382 common stock for cash of US$ 0.71 per share in September 2008		310,382		3,104		216,161		-			-			-			219,265
Issuance of 444,004 common stock for cash of US$ 0.74 per share in November 2008		444,004		4,440		323,548		-			-			-			327,988
Stock based compensation		-		-		43,767		-			-			-			43,767
Balance as of December 31, 2008		6,031,658		60,316		2,114,872		(29,856	)		-			(1,999,147	)		146,185

(*)

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

- 6 -

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

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

	US Dollars (except share data)
	Common stock											Deficit
	Number of shares		Amount		Additional paid in capital		Accumulated other comprehensive income (loss)			Receipts on account of shares		accumulated during the development stage			Total stockholders equity (deficit)

Loss for the year		-		-		-		-			-		(1,076,624	)		(1,076,624	)
Other comprehensive (loss) income		-		-		-		(11,810	)		-		-			(11,810	)
Issuance of 26,399 common stock for cash of US$ 1.33 per share in January 2009		26,399		264		34,721		-			-		-			34,985
Issuance of 3,373 common stock for cash of US$ 1.33 per share in March 2009		3,373		34		24,966		-			-		-			25,000
Issuance of 201,972 common stock for cash of US$ 0.73 per share in March 2009		201,972		2,020		122,980		-			-		-			125,000
Issuance of 45,328 common stock for cash of US$ 1.32 per share in March 2009		45,328		453		59,547		-			-		-			60,000
Issuance of 4,459 common stock for cash of US$ 1.32 per share in April 2009		4,459		45		5,516		-			-		-			5,561
Issuance of 45,328 common stock for cash of US$ 1.32 per share in June 2009		45,328		453		59,547		-			-		-			60,000
Issuance of 40,000 common stock for cash of US$ 1.35 per share in June 2009		40,000		400		53,600		-			-		-			54,000
Issuance of 20,000 common stock for cash of US$ 1.35 per share in August 2009		20,000		200		26,800		-			-		-			27,000
Issuance of 20,000 common stock for cash of US$ 1.35 per share in September 2009		20,000		200		26,800		-			-		-			27,000
Issuance of 35,000 common stock for cash of US$ 1.35 per share in October 2009		35,000		350		46,900		-			-		-			47,250
Issuance of 45,330 common stock for cash of US$ 1.32 per share in October 2009		45,330		453		59,547		-			-		-			60,000
Issuance of 54,263 common stock for cash of US$ 1.35 per share in November 2009		54,263		542		68,193		-			-		-			68,735
Stock based compensation		-		-		91,077		-			-		-			91,077
Balance as of December 31, 2009		6,573,110		65,730		2,795,066		(41,666	)		-		(3,075,771	)		(256,641	)

(*)

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

- 7 -

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

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

	US Dollars (except share data)
	Common stock											Deficit
	Number of shares		Amount		Additional paid in capital		Accumulated other comprehensive income (loss)			Receipts on account of shares		accumulated during the development stage			Total stockholders equity (deficit)

Loss for the year		-		-		-		-			-		(629,038	)		(629,038	)
Other comprehensive (loss) income		-		-		-		(28,216	)		-		-			(28,216	)
Issuance of 3,225 common stock for cash of US$ 1.55 per share in February 2010		3,225		32		4,968		-			-		-			5,000
Issuance of 35,000 common stock for cash of US$ 1.35 per share in February 2010		35,000		350		46,900		-			-		-			47,250
Issuance of common stock and warrants, net of issuance costs in August 2010		385,108		3,851		197,215		-			-		-			201,066
Issuance of 134,121 common stock for cash of US$ 0.6 per share in December 2010		134,121		1,341		76,118		-			-		-			77,459
Amounts attributed to detachable warrants issued in connection with convertible bonds		-		-		41,208		-			-		-			41,208
Beneficial conversion feature on convertible bonds		-		-		41,207		-			-		-			41,207
Stock based compensation		30,000		300		82,046		-			-		-			82,346
Balance as of December 31, 2010		7,160,564		71,604		3,284,728		(69,882	)		-		(3,704,809	)		(418,359	)

(*)

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

- 8 -

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

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

	US Dollars (except share data)
	Common stock												Deficit
	Number of shares		Amount		Additional paid in capital			Accumulated other comprehensive income (loss)			Receipts on account of shares		accumulated during the development stage			Total stockholders equity (deficit)

Loss for the year		-		-		-			-			-		(606,866	)		(606,866	)
Other comprehensive (loss) income		-		-		-			8,114			-		-			8,114
Issuance of 125,000 common stock and warrants for cash of US$ 0.8 per share in January 2011		125,000		1,250		98,750			-			-		-			100,000
Issuance of 125,000 common stock and warrants for cash of US$ 0.8 per share in February 2011		125,000		1,250		98,750			-			-		-			100,000
Issuance of 250,000 common stock and warrants for cash of US$ 0.8 per share in March 2011		250,000		2,500		197,500			-			-		-			200,000
Issuance of 368,750 common stock and warrants for cash of US$ 0.8 per share in April 2011		368,750		3,688		291,312			-			-		-			295,000
Issuance of 125,000 common stock and warrants for cash of US$ 0.8 per share in May 2011		125,000		1,250		98,750			-			-		-			100,000
Issuance of 12,500 common stock and warrants for cash of US$ 0.8 per share in September 2011		12,500		125		9,875			-			-		-			10,000
Issuance of 62,500 common stock and warrants, and payment of US$ 50,000 in cash as equity issuance costs (see Note 10O)		62,500		625		(50,625	)		-			-		-			(50,000	)
Exercise of options		311,773		3,118		-			-			-		-			3,118
Stock based compensation		-		-		25,986											25,986
Balance as of December 31, 2011		8,541,087		85,410		4,055,026			(61,768	)		-		(4,311,675	)		(233,007	)

(*)

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

- 9 -

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

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

	US Dollars (except share data)
	Common stock											Deficit
	Number of shares		Amount		Additional paid in capital		Accumulated other comprehensive income (loss)			Receipts on account of shares		accumulated during the development stage			Total stockholders equity (deficit)

Balance as of January 1, 2012		8,541,087		85,410		4,055,026		(61,768	)		-		(4,311,675	)		(233,007	)
Loss for the year		-		-		-		-			-		(695,742	)		(695,742	)
Other comprehensive loss		-		-		-		(3,247	)		-		-			(3,247	)
Issuance of 12,500 common stock and warrants for cash of US$ 0.8 per share in March 2012		12,500		125		9,875		-			-		-			10,000
Stock based compensation		-		-		35,794		-			-		-			35,794
Balance as of December 31, 2012		8,553,587		85,535		4,100,695		(65,015	)		-		(5,007,417	)		(886,202	)
Loss for the period		-		-		-		-			-		(224,269	)		(224,269	)
Other comprehensive loss		-		-		-		(6,431	)		-		-			(6,431	)
Conversion of Series A convertible preferred stock into common shares (**)		782,500		7,825		563,400		-			-		-			571,225
Amounts attributed to detachable warrants issued in connection with convertible bonds		-		-		14,692		-			-		-			14,692
Stock based compensation		-		-		29,032		-			-		-			29,032
Balance as of June 30, 2013 (unaudited)		9,336,087		93,360		4,707,819		(71,446	)		-		(5,231,686	)		(501,953	)

(*)

(**)

See Note 3A.

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

- 10 -

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

	US dollars
	Six month period ended June 30,						Cumulative period from January 14, 2004 (date of inception) through June 30,
	2013			2012			*2013^()**
	(unaudited)						(unaudited)
Cash flows from operating activities:
Loss for the period		(224,269	)		(402,877	)		(5,231,686	)
Adjustments to reconcile net loss for the period to net cash used in operating activities:
Depreciation		4,210			3,828			51,263
Increase in liability for employee rights upon retirement		5,870			5,666			90,065
Stock based compensation		29,032			470			308,002
Interest on convertible bonds		4,800			6,400			108,047
Interest on stockholders loans		-			-			(2,409	)
Issuance costs of convertible preferred stock		-			62,600			62,600
Change in fair value of convertible preferred stock		-			(54,775	)		(54,775	)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable		125,679			144,697			(15,146	)
Increase in other current assets		(1,287	)		(33,065	)		(124,992	)
Decrease (increase) in accounts payable – trade		(104,191	)		(29,024	)		31,952
Increase in accounts payable – other		103,560			(6,316	)		349,027
Net cash used in operating activities generated from continuing operations		(56,596	)		(302,396	)		(4,428,052	)
Net cash provided from operating activities generated from discontinued operations		-			-			80,334
Net cash used in operating activities		(56,596	)		(302,396	)		(4,347,718	)
Cash flows from investment activities:
Increase in funds in respect of employee rights upon retirement		(5,870	)		(5,663	)		(88,680	)
Purchase of property and equipment		(14,940	)		(3,801	)		(84,170	)
Net cash used in investment activities		(20,810	)		(9,464	)		(172,850	)
Cash flows from financing activities:
Credit from banking institution		-			-			(2,615	)
Issuance of convertible preferred stock, net		-			563,400			563,400
Proceeds from issuance of common stock and warrants		-			10,000			3,319,267
Payment on account of shares		-			-			233,644
Proceeds from issuance of convertible bonds and warrants, net		88,900			-			248,708
Proceeds from loans from stockholders		-			-			194,083
Net cash provided by financing activities		88,900			573,400			4,556,487
Effect of exchange rate changes on cash and cash equivalents		(14	)		(584	)		9,045
Increase in cash and cash equivalents		11,480			260,956			44,964
Cash and cash equivalents at beginning of the period		33,484			22,446			-
Cash and cash equivalents at end of the period		44,964			283,402			44,964

Supplementary information on financing activities not involving cash flows:

On March 9, 2013, all issued and outstanding shares of Series A Preferred Stock in an amount of US$ 571,225, have been automatically converted into Common Stock.

(*)

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

- 11 -

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1

- GENERAL

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

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

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

Going concern uncertainty

Since its incorporation (April 1, 2009), the Company has not had any operations other than those carried out by Pimi Israel. The development and commercialization of Pimi Israel's products will require substantial expenditures. Pimi Israel and the Company have not yet generated sufficient revenues from their operations to fund the Group activities, and are therefore dependent upon external sources for financing their operations. There can be no assurance that Pimi Israel and the Company will succeed in obtaining the necessary financing to continue their operations. Since inception, the Company (and Pimi Israel) has incurred accumulated losses of US$ 5,231,686, stockholders deficit of US$ 501,953 and cumulative negative operating cash flow of US$ 4,347,718.

The Company will need to secure additional capital in the future in order to meet its anticipated liquidity needs, primarily through the sale of additional Common Stock or other equity securities and/or debt financing. Funds from these sources may not be available to the Company on acceptable terms, if at all, and the Company cannot give assurance that it will be successful in securing such additional capital.

Furthermore, the Company focuses its solutions towards vegetables and fruits which are considered the largest in terms of worldwide consumption. Among other things, the Company tries to cooperate with major fruit packing houses in Israel and abroad.

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

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

- 12 -

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont.)

NOTE 1

- GENERAL (cont.)

Risk factors

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

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

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

Use of estimates in the preparation of financial statements

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

As applicable to these consolidated financial statements, the most significant estimates and assumptions relate to the going concern assumption.

NOTE 2

- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying unaudited financial statements of the Company have been prepared in accordance with generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments necessary (consisting of normal recurring adjustments) for a fair presentation of the Company’s financial position at June 30, 2013 and the results of its operations and cash flow for the six and three month periods then ended.

The unaudited condensed interim financial statements were prepared on a basis consistent with the Company’s annual financial statements on Form 10-K for the year ended December 31, 2012. Results of operations for the six and three month periods ended June 30, 2013 are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2013.

The consolidated balance sheet as of December 31, 2012 was derived from the audited financial statements at that date but does not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. For further information, including a discussion of the significant accounting policies and estimates, refer to the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2012.

- 13 -

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont.)

NOTE 2

- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Fair value of financial instruments

ASC Topic 825-10, "Financial Instruments" defines financial instruments and requires disclosure of the fair value of financial instruments held or issued by the Company. The Company considers the carrying amount of cash and cash equivalents, accounts receivable, other current assets, accounts payable and other current liabilities balances, to approximate their fair values because of the short period of time between the origination of such instruments and their expected realization. The convertible notes represent a derivative liability and therefore are measured and presented in the balance sheets at fair value. The fair value measurement of such financial liability is classified as level 3.

Recently issued accounting pronouncements

ASC Topic 220, "Comprehensive Income"

Effective January 1, 2013, the Company adopted Accounting Standard Update No. 2013-02 “Comprehensive Income (Topic 220) “Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income” (ASU 2013-02). ASU 2013-02 requires an entity to provide information about amounts reclassified out of accumulated other comprehensive income.

According to ASU 2013-02, significant items that are required under U.S. GAAP to be reclassified to net income in their entirety shall be presented by the respective line items of net income either on the face of the financial statements or in the footnotes. Items that are not required under U.S. GAAP to be reclassified to net income in their entirety, will be required to be cross-referenced to other disclosures required under U.S. GAAP that provide additional detail about those amounts. The standard became effective, prospectively, for interim and annual periods beginning after December 15, 2012.

The adoption of ASU 2013-02 did not have a material impact on the financial position or results of operations of the Company.

ASC Topic 210, “Balance Sheet”

Effective January 1, 2013, the Company adopted Accounting Standard Update (ASU) 2011-11, “Balance Sheet (Topic 210) - Disclosures about Offsetting Assets and Liabilities” (ASU 2011-11). ASU 2011-11 enhances disclosures about financial instruments and derivative instruments that are either offset in accordance with the Accounting Standards Codification or are subject to an enforceable master netting arrangement or similar agreement.

The amended guidance became effective, in a retrospective manner to all comparative periods presented, for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods.

The adoption of ASU 2011-11 did not have a material impact on the financial position or results of operations of the Company.

- 14 -

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont.)

NOTE 3

- EVENTS DURING THE REPORTING PERIOD

On March 9, 2013, 62,600 issued and outstanding shares of Series A Preferred Stock have been automatically converted into the Common Stock and cancelled, thereby, 782,500 shares of the Company’s Common Stock have been issued to the former holders of Series A Preferred Stock.

On March 13, 2013, Mr. Shorrer, one of the directors, was granted 48,000 options for 48,000 shares of Common stock to be vested over 12 quarters, 4,000 options each quarter, commencing on March 1, 2013. The exercise price per each common stock share is US$ 1.00.

The fair value of options granted in March 2013, was estimated at the dates of grant using the Black-Scholes option pricing model. The following are the data and assumptions used:

Dividend yield (%)			0
Expected volatility (%) (*)			50
Risk free interest rate (%) (**)			3
Expected term of options (years) (***)			6
Exercise price (US dollars)			1
Share price (US dollars)			0.73
Fair value (US dollars)			0.19

(*)

Due to the very limited volume of trade of the Company's shares, the expected volatility was based on the historic volatility of public companies which operate in the same industry sector (agricultural chemical industry).

(**)

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

(***)

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

The total fair value estimation of the non-cash compensation of this grant was approximately US$ 5,306.

In May 2013, the Company issued convertible notes totaling approximately $94,000 to finance their short-term operations. The loans bear interest at 10% and were issued to seven (7) of Pimi's shareholders, including two controlling shareholders (Alon Carmel; and, Omdan Consulting and Instructing Ltd., a company owned by Mr. Eitan Shmueli and his wife Mrs. Vivy Shmueli). Each note is secured by Pimi Israel’s guarantee and a pledge on Pimi Israel’s patents in Israel and the U.S. The notes are repayable on the earlier to occur of: (i) a raise of $1 million financing or (ii) 6 months following the effective date. Each lender is entitled to convert the unpaid principal and the interest accrued into shares of the Company's common stock, at a conversion price of $1.00 per share. In addition, for each dollar, each lender received a two years warrant to purchase a share of the Company's common stock, at an exercise price of $1.00 per share. The total consideration received in the issuance was allocated to the convertible notes and detachable warrants based on their relative fair value.

- 15 -

PIMI AGRO CLEANTECH, INC.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (cont.)

NOTE 4

- LOSS PER SHARE

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

The net loss and the weighted average number of shares used in computing basic and diluted loss per share for the six and three month periods ended June 30, 2013 and 2012, respectively, are as follows:

	US dollars				US dollars
	Six month period ended June 30,				Three month period ended June 30,
	2013		2012		2013		2012
	(unaudited)				(unaudited)
Net loss used for the computation of loss per share		224,269		402,877		156,314		258,456

	Number of shares				Number of shares
	Six month period ended June 30,				Three month period ended June 30,
	2013		2012		2013		2012
	(unaudited)				(unaudited)
Weighted average number of shares used in the computation of basic and diluted earnings per share		9,044,823		8,548,379		9,336,087		8,553,587

Total weighted average number of ordinary shares to be issued upon the exercise of outstanding options ,warrants and issued upon conversion of the convertible preferred stock were excluded from the calculations of diluted loss per share (*)		852,359		136,400		852,359		136,400

(*)

The effect of the inclusion of options, convertible bonds and convertible preferred stock for all reported periods was anti-dilutive.

- 16 -

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Statement of Forward-Looking Information

In this quarterly report, references to "Pimi Agro CleanTech, Inc.," "Pimi," "the Company," "we," "us," and "our" refer to Pimi Agro Cleantech, Inc. and its wholly owned subsidiary, Pimi Agro CleanTech, Ltd. (“Pimi Israel”).

Except for the historical information contained herein, some of the statements in this Report contain forward-looking statements that involve risks and uncertainties. These statements are found in the sections entitled "Business," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Risk Factors" in our Annual Report on Form 10-K for the period ended December 31, 2012. They include statements concerning: our business strategy; expectations of market and customer response; liquidity and capital expenditures; future sources of revenues; expansion of our proposed product line; and trends in industry activity generally. In some cases, you can identify forward-looking statements by words such as "may," "will," "should," "expect," "plan," "could," "anticipate," "intend," "believe," "estimate," "predict," "potential," "goal," or "continue" or similar terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including, but not limited to, the risks outlined under "Risk Factors" in 2012 10-K, that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. For example, assumptions that could cause actual results to vary materially from future results include, but are not limited to: our ability to successfully develop and market our products to customers; our ability to generate customer demand for our products in our target markets; the development of our target markets and market opportunities; our ability to manufacture suitable products at competitive cost; market pricing for our products and for competing products; the extent of increasing competition; technological developments in our target markets and the development of alternate, competing technologies in them; and sales of shares by existing shareholders. Although we believe that the expectations reflected in the forward looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Unless we are required to do so under federal securities laws or other applicable laws, we do not intend to update or revise any forward-looking statements.

Overview

The Company focuses on developing environmentally friendly solutions for extending storability and shelf life of vegetables and fruits. As of the date of this report, the Company develops, tests and markets four lines of products: (i) Citrus treatment line of products, which includes: CitruWash™, Super Clean™, CitrusGuard™ and FreshProtect™; (ii) Sweet Potatoes treatment line of products, which include SweetGuard™; (iii) Stored Table Potatoes treatment line of products which include SpuDefender™; and (iv) other fruits and vegetables storage control line of products which includes: StorGuard™ for treatment of vegetables such as broccoli and cabbage and OnionGuard™ for treatment in storage of Onions. We have started the commercialization of six (6) of these products (CitrusGuard™, FreshProtect™, SpuDefender™, SweetGuard™, Super Clean™ and CitruWash™).

Currently, the Company is focused on solutions related to fresh citrus fruits, table potatoes and sweet potatoes. Based on recent statistics, citruses are the most consumed fruits worldwide. The world fresh citrus market is estimated at over 50 million tons per annum. Potatoes are the fourth largest crop worldwide. According to the Food and Agriculture Organization of the United Nations, the total crop of the 20 major producers of Potatoes in 2011 was approximately 294 million metric tons (see: http://faostat.fao.org/site/339/default.aspx). We estimate that table potatoes, which our solution is currently aimed towards, are 30%-40% of the total world produced potatoes.

We intend to provide our customers a comprehensive environmentally friendly solution for post-harvest treatment of fruits and vegetables, commencing with harvest thereof and utilizing our products in different phases of the treatment process until their delivery to distributors. In accordance with this strategy as of the date of this report we develop cleansers and sanitizers for treatment of fruits and vegetables on packing line and sprout and disease control products for stored fruits and vegetables.

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

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

- 17 -

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

The Company’s management believes that the trend in the market [as may be exhibited by market leaders such as Wal-Mart (see at: http://www.nytimes.com/2011/01/20/business/20walmart.html), Marks & Spencer, Tesco and Sainsbury in the UK and EDEKA chain in Germany] is to replace, as much as possible, fruits and vegetables treated with chemicals which leave residues with fruits and vegetables with no residue or low residue.

Losses of agricultural produce, as high as 30% in countries such as India (see: http://agricoop.nic.in/sia111213312.pdf) and China (see http://www.ccsenet.org/journal/index.php/ijbm/article/view/19732), due to diseases and lack of correct supply chain, from the field to the stores, are exacerbated by the increasing demand for food produce, especially in developing countries.

Accordingly, there is a significant need to find alternative solutions to current chemical treatments for pre- and post- harvest treatments of fruits and vegetables that will provide the following benefits:

Reduce spoilage and losses of produce;

Extend shelf-life and improve quality of fruits, vegetables and grains;

Are non-residue and leave no harmful chemical by-products;

Are cost effective; and

Are approved for organically produced crops.

With millions of tons of stored fruits and vegetables annually world-wide, management believes there is an immediate, addressable market for Pimi’s products. Through our extensive communications with retailers, we understand a shortage of fresh goods is a primary concern for these groups – thus the ability to improve storability is critical and valuable.

Company History

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

On April 27, 2009 we purchased all the issued and outstanding shares of Pimi Israel from Pimi Israel’s shareholders in consideration for 6,313,189 shares of our Common Stock. As a result, Pimi Israel became a wholly owned subsidiary of the Company.

CRITICAL ACCOUNTING POLICIES

The Securities and Exchange Commission ("SEC") defines "critical accounting policies" as those that require application of management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Our accounting policies are described in Note 2 to the financial statements appearing elsewhere in our Annual Report on Form 10-K for the period ended December 31, 2012. Not all of the accounting policies require management to make difficult, subjective or complex judgments or estimates.

Our management believes that, as for the financial statements for the periods included in this report, the going concern assessment is viewed as critical accounting policy. However, due to the early stage of operations of the Company, there are no other accounting policies that are considered to be critical accounting policies by our management.

- 18 -

Going concern uncertainty

The development and commercialization of our product will require substantial expenditures. We have not yet generated sufficient revenues from operations to fund our activities, and therefore dependent upon external sources for financing our operations. There can be no assurance that we will succeed in obtaining the necessary financing to continue our operations. Since inception, we have incurred accumulated losses and cumulative negative operating cash flow. The continuation of our current operations after utilizing the current reserves is dependent upon the generation of additional financial resources either through fund raising or by generating revenues from our products. These factors raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements have been prepared on a going concern basis and do not include any adjustments that might result from the outcome of this uncertainty.

Recently issued accounting pronouncements

ASC Topic 220, "Comprehensive Income"

The adoption of ASU 2013-02 did not have a material impact on the financial position or results of operations of the Company.

ASC Topic 210, “Balance Sheet”

The adoption of ASU 2011-11 did not have a material impact on the financial position or results of operations of the Company.

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2013 COMPARED TO SIX MONTHS ENDED JUNE 30, 2012

Total Net Sales: Total Net Sales increased $53,769 or 42% to $182,064 in the 6 months ended June 30, 2013 from $128,295 for the 6 months ended June 30, 2012. The increase is due to the commencing of sales of our products on small commercial scale in Israel and the US.

R&D Expenses: Total net R&D Expenses for the 6 month ended June 30, 2013 of $312,458 decreased $18,175 or 5% from $330,633 for the 6 months ended June 30, 2012, due to decrease in cost of labor and professional services in the amount of $4,489, and decrease in travel and other expenses in the amount of $16,632 mostly due to refund of travel expenses during the 6 months ended June 30, 2013, partially balanced by increase in cost of materials in the amount of $2,946 driven by increase in sales (and materials utilized therein).

- 19 -

General and Administrative Expenses: General and administrative expenses decreased by $94,993 or 56% in the 6 months ended June 30, 2013 to $73,941 from $168,934 in the 6 months ended June 30, 2012 due to decrease in labor and professional fee expenses in the amount of $93,319 mostly due to decrease allowance to legal services, and decrease in other expenses in the amount of $1,674.

Loss from Operations: Loss from operations for the 6 months ended June 30, 2013 of $204,335 was down $166,937 or 45% from the loss from operations in the 6 months ended June 30, 2012 of $371,272 as a result of growth in sales ($53,769), decrease in G&A expenses ($94,993), and decrease in R&D expenses ($18,175).

Financing Expenses: Total financing expenses for the 6 months ended June 30, 2013 amounted to $19,934, which was $11,671 lower than our financing expenses of $31,605 in the 6 months ended June 30, 2012. This was mostly a result of decrease in convertible loans interest and beneficial in the amount of $11,079 and decrease in bank expenses and credit usage interest in the amount of $2,128, partially balanced by increase in exchange rate expenses in the amount of $1,536.

Net Loss: Net loss of $224,269 in the 6 months ended June 30, 2013 was $178,608 or 44% lower than the net loss in the 6 months ended June 30, 2012 of $402,877 due to growth of sales ($53,769), decrease in G&A expenses ($94,993), decrease in R&D expenses of $18,175, and decrease in financing and foreign currency translation adjustments expenses of $11,671.

THREE MONTHS ENDED JUNE 30, 2013 COMPARED WITH THREE MONTHS ENDED JUNE 30, 2012

Total Net Sales: Total Net Sales increased $6,196, or 23%, to $33,548 in the 3 months ended June 30, 2013 from $27,352 for the 3 months ended June 30, 2012. The increase is due to commencement of small scale sales in the US during the 3 months ended June 30, 2013.

R&D Expenses: Total net R&D Expenses for the 3 months ended June 30, 2013 of $129,398 decreased $40,948, or 24%, from $170,346 for the 3 months ended June 30, 2012, due to decrease in cost of materials in the amount of $18,488, decrease in cost of labor and professional services in the amount of $5,001and decrease in travel and other expenses in the amount of $17,549.

General and Administrative Expenses: General and administrative expenses decreased by $41,246, or 42%, in the 3 months ended June 30, 2013 to $57,715 from $98,961 in the 3 months ended June 30, 2012 due to decrease in labor and professional fee expenses of $39,891, and decrease in other expenses of $1,355.

Loss from Operations: Loss from operations for the 3 months ended June 30, 2013 of $153,565 was down $88,390, or 37%, from the loss from operations in the 3 months ended June 30, 2012 of $241,955, due to the increase in sales of $6,196, decrease in R&D expenses of ($40,948) and decrease in G&A expenses of $41,246.

Financing Expenses: Total financing expenses in the 3 months ended June 30, 2013 amounted to $2,749, which was $13,752 lower than our financing expenses of $16,501 in the 3 months ended June 30, 2012. This was mostly a result of decrease in convertible loans interest expenses.

Net Loss: Net loss of $156,314 in the 3 months ended June 30, 2013 was $102,142, or 40%, lower than the net loss in the 3 months ended June 30, 2012 of $258,456 due to the increase in sales of $6,196, decrease in R&D expenses of $40,948, decrease in G&A expenses of $41,246, and decrease in financing expenses of $13,752.

Liquidity and Capital Resources

As of June 30, 2013, we had liabilities of $726,017 ($1,199,038 as of December 31, 2012), and did not use our credit lines of $16,584 ($0 usage as of December 31, 2012), $265,885 ($187,177 as of December 31, 2012) of Convertible Bonds and $0 ($571,225 as of December 2012) of series A convertible preferred stock, $207,474 ($293,261 as of December 31, 2012) of third party liabilities, and $252,658 ($147,375 as of December 31, 2012) was due to related parties. The amounts due to related parties are for consulting services and salaries.

- 20 -

As of June 30, 2013 we had unused credit lines in the sum of $16,584 and have $44,964 in cash. As of August 1, 2013 we had unused credit lines in the sum of $16,859 and cash on hand in the net amount of $15,837. Our shortage in available cash flow led us to a delay in interest payments on our convertible preferred stock and payments for certain service providers; these payments will be delayed until additional funds are secured. Our executive officers have also agreed to a postponement of salary payments aggregating approximately $13,500 per month. Payments to our executive officers have been postponed since September 2012. Starting May 1, 2013 our executive officers and employees have agreed to a postponement of salary payments aggregating approximately $25,000 per month.

Currently our net burn rate is approximately $25,000 (plus salary payments postponement of additional $25,000) per month. Our management is utilizing best efforts to reduce our burn rate and minimize Company expenses

In May 2013 we attained several convertible loans from our shareholders in total amount of approximately $89,000 to finance the Company’s operations in the short term. Thus we will need additional funding of $400,000 through December 31, 2013 (including payments of postponed salaries).

The Company has sustained operating losses and its cash needs extend beyond its current resources. In addition, the Company does not have a reliable consistent source of future funding. These factors create an uncertainty about the Company’s ability to continue as a going concern. Moreover, the Company’s auditors report expresses substantial doubt as to the Company’s ability to continue as a going concern. The Company is in discussions with several investors to provide interim financing pending our ability to secure additional funds necessary to fully implement our business plan. There are no assurances that the interim financing or additional funds will be obtained.

The Company has not yet generated sufficient revenues from its operations to fund its activities and is therefore dependent upon external sources for financing its operations.

Since an unconditional Notice of Registration for FreshProtect^TMhas been obtained from the EPA, as well as from the California Department of Pesticide Regulation (CDPR), the Company anticipates generating revenue from the sale of its products to growers and packaging facilities in the United States, and in particular in the State of California, in addition to current revenues from the sale of its products in Israel.

The Company anticipates that it will begin to realize material revenues in the Citrus season of 2013 (the fourth quarter of 2013), as customers will begin to buy the Company’s products and technologies. Realization of revenues is subject to regulatory approval of the relevant regulator, in each country where we intend to deliver, distribute and sell our products, which we currently do not have, except for the state of Israel, and the U.S for our FreshProtect™ and SpuDefender™.

Net Cash Used in Operating Activities for the six months period ended June 30, 2013 and June 30, 2012

Net cash used in operating activities, generated from continuing operations was $56,596 and $302,396 for the six months period ended June 30, 2013 and 2012, respectively. Net cash used in operating activities primarily reflects the net loss (not including foreign currency translation adjustments) for those periods of $224,269 and $402,877 respectively, which was reduced in part by non-cash stock-based compensation of $29,032 and $470 respectively, interest and beneficial expenses on convertible bonds $4,800 and $14,225 respectively, and reduced by cash provided due to the adjustment to the net loss and changes in operating assets and liabilities in the amounts of $133,841 and $(85,786), respectively.

- 21 -

Net Cash Used in Investing Activities for the six months period ended June 30, 2013 and June 30, 2012

Net cash used in investing activities was $20,810, and $9,464 for the 6 month period ended June 30, 2013 and 2012 respectively, and was used primarily to purchase R&D equipment, and fund deposits in respect of employees’ rights upon retirement.

Net Cash Used in Financing Activities for the six months period ended June 30, 2013 and June 30, 2012

Net cash provided by financing activities was $88,900, and $573,400 for the 6 month periods ended June 30, 2013 and 2012 respectively, which is attributable to capital raised.

Off-Balance Sheet Arrangement

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

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

ITEM 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Our principal executive and principal financial officers have evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a – 15(e) and 15d – 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. They have concluded that, based on such evaluation, our disclosure controls and procedures were not effective as of June 30, 2013.

(b) Management’s Report on Internal Control Over Financial Reporting

Overview

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for our company. In order to evaluate the effectiveness of internal control over financial reporting, our management has conducted an assessment using the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Our company’s internal control over financial reporting, as defined in rule 13a-15(f) under the Securities Exchange Act of 1934 (Exchange Act), is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

Based on our assessment, under the criteria established in Internal Control – Integrated Framework, issued by COSO, our management has concluded that our company has a material weakness in internal control over financial reporting as of June 30, 2013. The weakness exists with regard to segregation of duties, i.e. one employee does the accounting, accounts payable and banking transactions. Additionally, the Company does not have an audit committee to oversee the financial reporting and disclosure process. As a result, our internal controls were not effective at June 30, 2013.

Evaluation of the Company’s Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of June 30, 2013. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in reports it files or submits under the Exchange Act is accumulated and communicated to management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

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Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are not effective, as of June 30, 2013, in ensuring that material information relating to us required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities Exchange Commission rules and forms.

This report does not include an attestation report of the Company's independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's independent registered public accounting firm.

(c) Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings

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

Pimi Israel has recently opposed an application for patent, filed by third party with Israeli Patent Authority (IPA) which might jeopardize our recorded patents. In its opposition Pimi Israel argues that the patent application lacks novelty and is devoid of inventive step, as well as inequitable conduct from the third party’s side while hindering prior art from the IPA examiners. Following the IPA decision of May 19, 2013, Pimi Israel is awaiting the third party’s statement in response, to be submitted by August 19, 2013 (extendible).

ITEM 1A. Risk Factors

In addition to other information set forth in this Report, you should carefully consider the risk factors previously disclosed in “Item 1A to Part 1” of our Annual Report on Form 10-K for the year ended December 31, 2012. There were no material changes from the risk factors during the three months ended June 30, 2013.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

None.

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ITEM 5. Other Information

In May 2013 we attained several convertible loans in total amount of approximately $94,000 to finance our operations in the short term. The loans are bearing 10% interest and were raised from seven (7) Pimi's shareholders, including two controlling shareholders (Alon Carmel and Omdan Consulting and Instructing Ltd., the company owned by Mr. Eitan Shmueli and his wife Mrs. Vivy Shmueli). We issued a convertible debenture for each lender, secured by Pimi Israel guarantee of repayment and pledge on Pimi Israel patents in Israel and US. The loans shall be repaid on the earlier to occur: (i) raise of $1 million financing or (ii) 6 months as of the effective date. Each lender is entitled to convert the unpaid principal and the interest accrued into shares of our common stock, at a conversion price of $1.00 per share. In addition, for each dollar of his loan, each lender received a two years warrant to purchase a share of our common stock, at an exercise price of $1.00 per share.

ITEM 6. Exhibits

EXHIBIT
NUMBER		DESCRIPTION

31.1		Certification by Chief Executive Officer pursuant to Sarbanes Oxley Section 302 (1)

31.2		Certification by Chief Financial Officer pursuant to Sarbanes Oxley Section 302 (1)

32.1		Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350 (1)

32.2		Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (1)

(1) Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on this 20th day of August 2013.

	PIMI AGRO CLEANTECH, INC.

	By:	/s/ Ami Sivan
		Ami Sivan
		Chief Executive Officer
		Principal Executive Officer

	By:	/s/ Avi Lifshitz
		Avi Lifshitz
		Chief Financial Officer
		Principal Accounting and Financial Officer

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Attached files

PIMI AGRO CLEANTECH, INC. Reports

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