UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
DC 20549


______________




FORM
10-K/A-1




ANNUAL
REPORT


PURSUANT
TO SECTION 13 OR 15(d) OF THE


SECURITIES
EXCHANGE ACT OF 1934




For
the fiscal year ended December 31, 2008




Commission
file number:  0-30391




MEDIS
TECHNOLOGIES LTD.


(Exact
name of registrant as specified in its charter)




Delaware
              (State
      of incorporation)
            
            13-3669062
              (I.R.S.
      Employer Identification No.)




805
Third Avenue


New
York, New York 10022


(Address
of principal executive offices, including zip code)




(212) 935-8484


(Registrant’s
telephone number, including area code)




Securities
registered pursuant to Section 12(b) of the Exchange Act:




Title of Each
      Class
            Name of Each Exchange
      on Which RegisteredCommon
      Stock, $.01 Par Value per Share
            The
      NASDAQ Stock Market LLC




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


None




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  Yes  o   No 
x




Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Exchange Act.Yes  oNo  x




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




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the
best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  o




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.






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




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




As of
June 30, 2008, the aggregate market value of the registrant’s common stock held
by non-affiliates of the registrant was approximately $133,839,600.




As of
April 15, 2009, there were outstanding 46,349,555 shares of the registrant’s
common stock.








TABLE
OF CONTENTS




PART
      III
              
              1Item
      10.
              Directors,
      Executive Officers and Corporate Governance
              1Item
      11.
              Executive
      Compensation
              6Item
      12.
              Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
              20Item
      13.
              Certain
      Relationships and Related Transactions, and Director
      Independence
              24Item
      14.
              Principal
      Accounting Fees and Services
              26PART
      IV
              
              27Item
      15.
              Exhibits
      and Financial Statement Schedules
              27






References
in this annual report to “we,” “us,” or “our” are to Medis Technologies Ltd. and
its direct and indirect subsidiaries, unless the context specifies or requires
otherwise.




All
dollar amounts are in U.S. dollars unless otherwise noted.

















FORWARD-LOOKING
STATEMENTS




This
annual report includes forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange
Act. Words such as “will,” “may,” ‘‘expects,’’ ‘‘anticipates,’’
‘‘approximates,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘intends’’ and ‘‘hopes’’ and
variations of such words and similar expressions are intended to identify such
forward-looking statements. We have based these statements on our current
expectations and projections about future events. These forward-looking
statements are not guarantees of future performance and are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected in these statements. These risks and uncertainties include those set
forth under ‘‘Risk Factors.’’ The forward-looking statements contained in this
annual report include, among others, statements about:




·
            the
      development and commercialization schedule for our fuel cell technology
      and products;




·
            our
      financial condition;




·
            the
      expected cost competitiveness of our fuel cell technology and
      products;




·
            rapid
      technological change;




·
            our
      intellectual property;




·
            the
      timing and availability of our
products;




·
            our
      business strategy; and




·
            general
      economic conditions.




Except
for our ongoing obligations to disclose material information under the federal
securities laws, we are not obligated to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this annual report might not
occur.













PART
III




Item
      10.
            Directors,
      Executive Officers and Corporate
Governance




Name
            Age
            Position
      with Our CompanyJose
      Mejia
            47
            Director,
      Chairman, President and Chief Executive OfficerStephen
      N. Crea
            47
            Chief
      Financial OfficerThomas
      Finn
            49
            Executive
      Vice President of Operational RestructuringJohn
      P Giere
            46
            Chief
      Commercial OfficerAmos
      Eiran
            72
            DirectorZeev
      Nahmoni
            68
            DirectorMitchell
      H. Freeman
            59
            DirectorSteve
      M. Barnett
            67
            DirectorDaniel
      A. Luchansky
            49
            DirectorAndrew
      A. Levy
            62
            DirectorBarry
      Newman
            56
            Director.Gennadi
      Finkelshtain
            49
            Key
      Employee (Chief Technical Officer and General Manager of More
      Energy)




Jose Mejiahas served as our
Chairman, President, Chief Executive Officer and director since September
2008.  From 2006 until he joined our company, Mr. Mejia was a
private investor and a Board member of several companies.  From 1999
until 2006, Mr. Mejia worked at Lucent Technologies in several executive
positions of increasing responsibility, the last being as president of its
Supply Chain Networks where he oversaw all aspects of Lucent’s worldwide supply
chain.  Mr. Mejia earned a BS in Industrial Operations Engineering at the
University of Michigan and MBA in Finance and Operations Research from Duke
University’s Fuqua School of Business as well as an honorary masters degree from
the W.P. Carey Graduate School of Business at the Arizona State University. Mr.
Mejia serves as a director of Pella Corporation and is a trustee of Liberty
Property Trust.




Stephen N. Crea has served as
our Chief Financial Officer since March 2009.  From March 2008 until
joining our company, Mr. Crea was the Chief Financial Officer and Treasurer of
Risk Management Solutions, Inc., a third party administrator of workers
compensation claims, where he managed all financial, treasury and human resource
activities. Prior to that, from October 2006 until March 2008, Mr. Crea was the
Chief Financial officer and Treasurer of Cooperative Business International,
Inc., an international trading and processing company of commodities, where he
managed all financial and treasury activities. Prior to that, from March 2003
until October 2006, Mr. Crea was the Chief Financial Officer and Treasurer of
Select Sires, Inc., a developer and marketer of artificial insemination genetics
and related products and services to the dairy and beef industries, where he
managed all financial, treasury, human resources and information systems
activities. From February 1995 until March 2003, he had increasingly senior
roles, culminating in the position of Vice President and Treasurer, at Insilco




1


Technologies,
Inc. and ThermaSys Corporation. Insilco was then a global manufacturer of
electronic interconnect components and ThermaSys was formerly Insilco’s
automotive segment spun off from Insilco in August 2000. From December 1984
until February 1995, he was employed at Weyerhaeuser Company, a global forest
products company, his most recent position as Plant
Superintendent.  Mr. Crea holds a degree in Accounting from The Ohio
State University and an MBA from the University of Nebraska -
Omaha.




Thomas P. Finn has served as
our Executive VP of Operational Restructuring since February
2009.  From 2007 until joining our company, Mr. Finn worked as an
independent consultant, specializing in strategy, planning, development, and
sustainability. From 2000 through 2006, Mr. Finn served as chief supply chain
officer, Asia Pacific and China, and earlier as vice president, manufacturing
transformation for Lucent Technologies. He previously served four years as vice
president of worldwide supply for Solectron Corporation. As a graduate of Texas
Instruments’ (TI) Material Management Rotation Program, he served 11 years with
TI holding various positions in operations and supply chain management. He began
his career as a design engineer and project manager for a privately held
engineering firm. Mr. Finn holds a bachelor’s degree in civil engineering from
Worcester Polytechnic Institute and a master’s in finance from the University of
Texas at Dallas.




John P. Giere has served as
our Chief Commercial Officer since December 2008.  From 2003 until
September 2008, Mr. Giere was a Chief Marketing Officer at Alcatel-Lucent. He
has also held a number of senior marketing roles with leading companies in the
technology and telecommunications sector, including Vice President – New
Business Development and Vice President – Global Branding & Marketing for
Ericsson. Mr. Giere holds a Master of Business Administration from the
University of Maryland and a Bachelor of Science degree from Georgetown
University. He has also completed a Senior Executive Management Program at
Columbia University.




Amos Eiran has served as our
director since 1997. Mr. Eiran serves as the Chairman of Biolight, a publicly
traded company in the Tel Aviv Stock Exchange active in development of
pharmaceuticals, clinical treatment technology and medical diagnostics, since
December 2005. He also serves as Chairman of the Investments Committee of Clal
Insurance Group, an Israeli insurance company. In the years 2004 to 2009, Mr.
Eiran was Chairman and Chief Executive Officer of Tissera Inc., a biotechnology
company involved in research and development in the field of tissue transplants.
He also serves as a director of Deleck Oil Exploration. He served as Chairman of
Atudot, a major Israeli pension fund, until April 2006. Through the summer of
2002, Mr. Eiran served as the Chairman of the Industrial Cooperation Authority,
the agency in charge of the buy-back and offset programs of the State of Israel,
for seven years. Mr. Eiran was Director General of the Prime Minister’s office
during Yitzhak Rabin’s first term as Prime Minister. Prior to that, he was
Director General and Chairman of Mivtahim, the largest pension fund in
Israel.




Zeev Nahmoni has served as our
director since 1997. Mr. Nahmoni serves as the Chairman & C.E.O. of EMIT, an
Israeli company that develops and produces unmanned air vehicles, since August
2006. He was the Chief Executive Officer and Co-Chairman of Petrus Business
Development and Marketing from December 2003 to August 2006. During 2004, he was
the Chief Executive Officer of Cellot Inc., a start-up company seeking to
develop electronic chips for digital applications. He retired in June 2003 from
the position of Vice President of Marketing and Business Development of Israel
Aircraft Industries International in the U.S. and Canada, which he had held
since 2002. Prior to that, he was the Vice President and General Manager of the
Electronics Group of Israel Aerospace from 1997 and the Deputy General Manager
of the Electronics Group of Israel Aerospace from 1995 to 1997. Prior to that,
he was the General Manager of the Tamam Division of the Electronics Group of
Israel Aerospace from 1992 to 1995.




2


Mitchell H. Freeman has served
as our director since 2004.  Mr. Freeman is a consultant and private
investor focused on strategic financial advisory activities, business
development and capital raising opportunities. From January 2003 to September
2005, he was Chief Executive Officer of Freeman Meyer and Associates, LLC, a
financial advisory and consulting firm specializing in business development,
turnarounds, strategic financial advisory assignments and capital investment
projects. In February 1994, Mr. Freeman founded Interactive Ventures
Incorporated, a value added reseller of interactive voice response systems to
the regional shopping center industry, and served as its Chief Executive Officer
until the sale of the business in February 2001. He was also a founding director
and shareholder of a major central station alarm company providing high level
security to commercial businesses in New York City, a business that was sold in
1997. Mr. Freeman has served in other senior level investment banking and
management positions, primarily in investment banking and real estate, at
Fuji-Wolfensohn Inc., a joint venture between James D. Wolfensohn, Inc., an
international investment banking firm, and Fuji Bank; Corporate Property
Investors; Lazard Realty Inc. (a subsidiary of Lazard Freres & Co. LLC); and
J.P. Morgan Investment Management Inc. Mr. Freeman is a founding member and was
Chairman of the Board until December 2008 of Replications Inc., a not-for-profit
education organization committed to replicating successful public schools in new
environments. He received a Masters degree in Business Administration from
Columbia University and holds a B.A. from George Washington University. Mr.
Freeman is Chairman of our Audit Committee and a member of our Compensation
Committee, and is also a member of the Board of Directors of Cell Kinetics
Ltd.




Steve M. Barnett has served as
our director since 2004.  Mr. Barnett is an investor in and advisor on
improving operations to senior management of public and private marketing,
manufacturing and distribution companies. For more than two decades, Mr. Barnett
has been President and Chairman of inContact, Inc. whose principal focus has
been the acquisition and management of eight mid-sized manufacturing and
distribution companies. Since April 2000, Mr. Barnett has served on the Board of
Directors and as Chairman of the Audit Committee of UCN, Inc., a public network
application provider specializing in hosted automated call distribution and
performance management software services, including a wide range of long
distance, data transmission and related communication services.  As
well, since April 2009, Mr. Barnett has served on the Board of Directors of OSI
Geospatial, Inc., a public company delivering advanced marine navigation and
command and control systems that provide shared real-time situational awareness
for military, safety and security applications.  Mr. Barnett has also
served on the Board and as an advisor to senior management of Grayhill, Inc., a
manufacturer of electrical systems since 1993, and Joseph Freed &
Associates, a national real estate development company, since 1998. He has
served as Vice-Chairman of the Board and Director of Chicago’s Jewish Federation
since 1997, and as a member of the Board of Governors for the Reconstructionist
Rabbinical College since 2003. Mr. Barnett graduated from the University of
Chicago Law School with a Doctor of Jurisprudence degree. Mr. Barnett is
Chairman of our Compensation Committee.




Daniel A. Luchansky has served
as our director since 2007.  Mr. Luchansky has been President and CEO
of DCL Holdings LLC, a privately held alternative energy start-up focusing on
the solar power and renewable energy industries, since 2006. Mr. Luchansky has
spent the past twenty-five years as an investment professional involved in all
aspects of asset management including credit and equity analysis, as well as
trading and portfolio management in a broad range of asset classes. From 1986 to
2006, Mr. Luchansky served in various capacities with Merrill Lynch Investment
Managers and its successor, BlackRock, Inc., most recently as a Director in
charge of convertible investing for the Americas Fixed Income Division. In this
capacity, Mr. Luchansky was responsible for making primary and secondary market
investments in both public and private companies issuing convertible securities,
with holdings in excess of $650 million. Concurrently, Mr. Luchansky served as
the senior analyst covering the Oil and Gas and Alternative Energy sectors, with
holdings in excess of $750 million. Previously, Mr. Luchansky was Senior
Portfolio Manager for the Merrill Lynch Convertible Fund, ML Convertible
Holdings, the




3


Global
Convertible Fund, and the offshore Convertible Securities Portfolio. He also
served as co-manager of the Merrill Lynch World Income Fund. He was responsible
for initiating the first convertible arbitrage program in several public mutual
funds within the Merrill Lynch Investment Managers complex in the early 1990’s.
Also during this period, Mr. Luchansky was instrumental in representing and
protecting stakeholders interests in several highly visible negotiations notably
with Emmis Communications, Wyndham International, Energy Corporation of America,
Benton Oil & Gas, and Alliant Computer. Mr. Luchansky was instrumental in
the financing which founded Allied Waste Industries, a leading pollution control
company in 1993. Prior to joining Merrill Lynch, Mr. Luchansky was an Investment
Officer, equity analyst and credit analyst for First Fidelity Bank, a
predecessor of Wachovia Bank, including acting as co-manager of The Value Fund,
a private equity fund affiliated with First Fidelity Bank. Mr. Luchansky
received his MBA from Monmouth University and his B.S. from Kean
University.  Mr. Luchansky is a member of our Audit Committee and is
also a member of the Board of Directors of Cell Kinetics Ltd.




Andrew A. Levy has served as
our director since 2008. Mr. Levy has been Chief Executive Officer of Redstone
Capital Corporation and its predecessors since 1978. Redstone Capital
Corporation is an investment banking firm involved in advising on acquisitions,
mergers and restructurings in manufacturing and military industries, project
financings in the oil and gas and cogeneration fields, and leverage buyouts. Mr.
Levy, who holds a B.S. (Engineering) from Yale University, and a J.D. from
Harvard Law School, is Chairman of Fraser-Volpe LLC, a company which
manufactures military electro-optic equipment, a Chairman of CNC Diversified
Mfg. Incorporated, a company which manufactures components for the aerospace
industry and a Chairman of Esco Marine, Inc.




Barry Newmanhas served as our
director since 2008. Mr. Newman, CPA, is a founding partner of Lehman, Newman
& Flynn, a Manhattan-based professional accounting firm serving individuals
and closely held businesses in all matters related to accounting and taxes,
which was formed in 1994. He has worked with a wide range of product and
services businesses, including real estate, construction, mortgage banking and
not-for-profit. In 1979, Mr. Newman joined the accounting firm of Philip Weisser
CPA, P.C., a practice for general accounting and taxes, where he rose to partner
in 1983. He is currently a member of the Accountants Club of America, American
Institute of CPA’s, New York State Society of CPA’s, National Conference of CPA
Practitioners, and has participated on several panels, discussing many topics
related to accounting and income taxes.




Gennadi Finkelshtain,a key employee, has
served as a director of More Energy Ltd., its General Manager since October 2000
and its Director of Research and Development from its establishment in 1998 to
October 2000. He has also been our Chief Technical Officer-New Energies since
2002. From 1996 to 1998, he served as Production Manager at Limat
electrochemical company in Israel. Following his immigration to Israel in 1990,
he was employed, among other employers, by Homesh Contractors where he managed
and installed systems at Hadera power station in Israel. Prior to this, from
1984 to 1989, he was the Chief Project Engineer at the Leningrad Technological
Institute of Building Materials, being responsible for planning, installing,
setting up and running various types of energy systems and production lines.
Mr. Finkelshtain received his BS degree in power engineering from Leningrad
Technological Institute of Pulp and Paper Industries in 1981.
Mr. Finkelshtain has been included in “Who’s Who in the World” for his
innovations in the field of fuel cell technology for portable electronic
applications and has been granted several patents related to fuel cell
technology, which patents have been assigned to us.




All our
directors hold office until the next annual meeting of stockholders and until
their successors have been elected and qualify. All our executive officers and
key employees serve at the discretion of the board of
directors.


4


Section
16(a) Beneficial Ownership of Reporting Compliance




Section
16(a) of the Exchange Act requires our directors and executive officers and
persons who own beneficially more than 10% of our common stock to file reports
of ownership and changes in ownership of such common stock with the Securities
and Exchange Commission, or the SEC, and to file copies of such reports with us.
Based solely upon a review of the copies of such reports filed with us, we
believe that during 2008 such reporting persons complied with the filing
requirements of Section 16(a), with the exception of Messrs. Andrew Levy
and Steve Barrett filing their respective Form 3s one day after the due
date.




Code
of Conduct




Our Board
of Directors unanimously adopted a Code of Conduct applicable to our principal
executive officer, principal financial officer, principal accounting officer and
our other employees and employees of our subsidiaries. We have made the Code of
Conduct available on our website at www.medistechnologies.com under “Investor
Relations.”  Stockholders may also request, without charge, a copy of the
Code of Conduct by contacting us, care of  Omer Masud, Vice President of
Investor Relations, at our principal office.




Audit
Committee.




Our Audit
Committee consists of Mitchell H. Freeman, Chairman, Daniel A. Luchansky and
Barry Newman. Our Board of Directors has determined that each member of the
Audit Committee meets the NASDAQ Marketplace Rule definition of “independent”
for audit committee purposes.  Our Board of Directors has also
determined that Mr. Freeman meets the SEC definition of an “audit committee
financial expert.”












5


Item
      11.
            Executive
      Compensation




Compensation
Discussion and Analysis




Overview




This
compensation discussion and analysis describes the material elements of the
compensation awarded to, earned by, or paid to our officers who are considered
to be “named executive officers” during our last fiscal year. Named executive
officers consist of the two individuals who served as our principal executive
officers in 2008, the individual who served as our principal financial officer
for a portion of 2008, one executive officer serving at the end of 2008 and one
other executive officer who served for a portion of 2008. For purposes of this
annual report, “named executive officers” refers to:  Jose Mejia, our
current Chairman, President and Chief Executive Officer; Robert K. Lifton, our
former Chairman and Chief Executive Officer; Israel Fisher, our former Senior
Vice President-Finance and Chief Financial Officer; Howard Weingrow, our former
Deputy Chairman, Chief Operating Officer and Executive Vice President; and Jacob
Weiss, our former Executive Vice President and President.  We do not
have any other officers who would be a candidate for inclusion as a “named
executive officer” in this annual report.




Our
compensation programs are intended to:




·
            Attract,
      motivate and retain superior
talent;




·
            Encourage
      high performance and promote accountability;
and




·
            Ensure
      that the executive officers have financial incentives to achieve
      substantial growth in stockholder
value.




To
achieve these objectives, the Compensation Committee of our board of directors,
which currently consists of three independent members of our board of directors,
Steve M. Barnett, Mitchell H. Freeman and Andrew A. Levy, implements and
maintains compensation plans and policies that ensure that executive
compensation is fair, reasonable and competitive, and that reward executives’
contributions to our overall short and long-term growth, all while being mindful
of the expenses needed to complete development or commercialization of our
products as well as our historic and current lack of material revenues. We have
historically used short-term compensation (base salaries and, in limited
instances, cash bonuses) and long-term incentive compensation in the form of
stock options to achieve our goal of driving long-term
growth.  Recently, since the adoption of our 2007 Equity Incentive
Plan, we added to this mix the grant of restricted share awards and/or other
stock-based awards.




The
compensation of our executive officers and other employees is primarily composed
of base salaries and long-term equity incentives in the form of stock options,
restricted stock awards and other stock-based awards, as well as other benefits
for our Israeli-based executive officers. For 2008, compensation for our
officers and other employees, including our named executive officers, was
determined first by considering our overall financial position in light of any
recent capital raises and the state of the programs to develop or commercialize
our products. We would then, with respect to each officer and other employee,
consider individual performance, level of responsibility, and skills and
experience, taking into account the anticipated level of difficulty in replacing
such officers and employees with persons of comparable experience, skill and
knowledge.




Our
Compensation Committee performed in 2008 its review of our compensation
policies, including policies and strategies relating to executive compensation,
such as the appropriate mix of base salary, bonuses and long-term incentive
compensation, as well as tax and other jurisdictional issues that relate to
a significant number of our employees, including named executive officers, being
residents of the State of Israel.




Our
Compensation Committee is also charged with reviewing and approving our equity
incentive plans, as well as any other compensation plan or arrangement available
to our named executive officers and other officers and employees. It has not
adopted any formal or informal policies or guidelines for allocating
compensation between long-term and currently paid out compensation, between cash
and non-cash compensation, or among different forms of compensation. This is due
to the small size of our executive team and the need to tailor each executive’s
award to attract and retain that executive. We have not historically identified
a set of peer companies against which we benchmark compensation, and we have not
yet determined if we will so identify a set of peer companies in
2009.


6
 
 The
individual compensation of non-executive officers and other employees are
determined by our executive officers or non-executive officers, depending on the
employee, based upon a range of percentage increases previously determined by
our Compensation Committee. Furthermore, these same executive officers and
non-executive officers make recommendations with respect to stock-based awards
to people at these levels, which are then submitted to our Compensation
Committee for final determination. The Compensation Committee determines the
compensation of our named executive officers in executive session.


Elements of Compensation




In
furtherance of our general compensation philosophy, our compensation program
emphasizes long-term incentives, such as stock options and more recently,
restricted stock,  as a major component of total compensation in order
to more closely align the interests of executives with the interests of our
stockholders, to increase the total mix of compensation in light of our
historical lack of cash flow to pay increased base salaries and bonuses, and,
with respect to stock options, to assist us with raising additional capital upon
option exercises. Additionally, as part of our Compensation Committee’s review
of our compensation program, we may in the future further emphasize that as an
executive’s level of responsibility increases, a greater portion of the total
compensation opportunity should be leveraged with stock and other performance
incentives.




Base
Salaries.  Base salaries for our executives are generally
established based on the scope of their responsibilities, level of experience
and individual performance, taking into account internal equity considerations.
Base salaries are reviewed annually in accordance with each named executive
officer’s compensation arrangement, and adjusted to account for individual
responsibilities, performance and experience as well as our overall financial
health.




Bonuses. We did not have a
bonus program established for any of our officers or employees in 2008, although
we pay bonuses to officers and employees on occasion. Our Compensation Committee
will continue to assess the need to implement a bonus or other non-equity
incentive program for our officers or employees as a means to add specific
incentives towards achievement of specific company-wide or departmental goals
that would be the factors in our success.




Long-Term Incentive
Compensation–Equity.  We believe that long-term incentives are
an integral part of the overall executive compensation program and that our
long-term performance will be enhanced through the use of equity awards that
reward our executives for maximizing stockholder value over time. We have
historically elected to use stock options as the primary long-term equity
incentive vehicle; however, since the adoption of our 2007 Equity Incentive
Plan, we have granted restricted stock and may elect in the future to use other
forms of stock-based awards.  We have not adopted stock ownership
guidelines.




Our 1999
Stock Option Plan authorizes us to grant options to purchase shares of common
stock to our employees, directors, including independent directors, and
consultants. Our Compensation Committee oversees the administration of the 1999
Option Plan. Historically, our board and Compensation Committee have made stock
option grants to employees who have been employed by us for more than six months
and annually thereafter, and, occasionally, following a significant change in
job responsibilities or to meet other special retention or award objectives. We
have also in special cases granted options upon the employment of a particular
employee candidate because we determined that the grant of options upon
employment is a necessary recruiting tool for such person’s acceptance of our
employment offer. We do not intend to grant any further awards under our 1999
Option Plan.  Going forward, the Compensation Committee intends to
continue to make annual and special grants to employees of stock options and/or
other stock-based awards pursuant to our 2007 Equity Incentive Plan, subject to
changes in our overall compensation philosophy or changes to our mix of
compensation as determined by the Compensation Committee.




In 2008,
the named executive officers were awarded stock options or restricted stock in
the amounts indicated in the section entitled “Grants of Plan-Based Awards.” All
stock options granted by us have been based on the closing market value of our
stock as reported on The NASDAQ Global Market (and predecessor or preceding
markets) on the date of grant. Stock options granted in 2006, 2007 and




7


2008 vest
in full on the
one year anniversary of the grant date, and expire four years after the date of
grant.  Restricted stock granted in 2008 vest in full on the one year
anniversary of the grant date.




We expect
to continue to use stock options as a long-term incentive vehicle
because:




·
            stock
      options help to attract executives, and the option term helps to retain
      those executives;




·
            the
      value received by the recipient of a stock option is based on the growth
      of the stock price; therefore, stock options enhance the executives’
      incentive to increase our stock price and maximize stockholder
      value;




·
            stock
      options help to provide a balance to the overall executive compensation
      program as base salary focuses on short-term compensation, while stock
      options reward executives for increases in stockholder value over the
      longer term; and




·
            the
      exercise price we receive upon exercise supplements our capital raising
      efforts.




In
addition, our Compensation Committee has in 2008 and may in the future award
other forms of stock-based awards, including restricted stock. Restricted stock
may be an attractive alternative or supplement to stock options because, among
other things:




·
            Restricted
      stock fosters an ownership culture and provides a similarly motivating
      form of incentive compensation as stock
options;




·
            Restricted
      stock retains value even in volatile
markets;




·
            Option
      grants, unlike restricted stock, can take a number of years to accrue
      value; and




·
            Awarding
      restricted stock permits us to use fewer shares then options to deliver
      comparable value to the recipient, which reduces the potential dilution to
      our stockholders.




In
determining the number of stock-based awards to be granted to executives, we
take into account the individual’s position, scope of responsibility, ability to
affect revenue and stockholder value and the value of such stock-based awards in
relation to other elements of the individual executive’s total compensation. We
do not review existing equity holdings of our named executive officers in
determining a particular grant. All stock options and other equity awards are
made by the Compensation Committee. Neither the 1999 Option Plan nor the 2007
Equity Incentive Plan provides for, nor does the Compensation Committee have a
plan relating to, the grant date of individual awards, nor do we have a specific
policy in place regarding the coordination of option issuances with the release
of material non-public information.




Other
Benefits.  Our named executive officers residing in Israel are
eligible to participate in all of our employee benefit plans, such as savings
plans, including the savings plans described in “—Non-Qualified Deferred
Compensation” below, and long and short-term disability and life insurance, in
each case on the same basis as our other Israel-based employees. We also offer
to our Israeli named executive officers, as well as many of our other Israel
officers and employees, additional benefits, such as an automobile allowance.
The Compensation Committee believes that these perquisites for our Israel-based
officers and employees are standard for, and competitive with other, high
technology companies in the State of Israel. Other than in the cases of our
President and Chief Executive Officer, Jose Mejia, and our Chief Commercial
Officer, John Giere, who each receive a $600 monthly automobile allowance,
we do not offer any of such benefits to our U.S.-based officers or employees,
including U.S.-based named executive officers.




8


Other Compensation – Cell Kinetics
Ltd.  Mitchell Freeman and Daniel Luchansky are each directors,
and, until December 1, 2008, Jacob Weiss and Israel Fisher were each executive
officers, of Cell Kinetics Ltd., which we spun off to our stockholders in a
rights offering in January 2008. Cell Kinetics Ltd. did not directly pay base
salary, bonus or other cash compensation to either of Jacob Weiss or Israel
Fisher for services they provided to that company. All such compensation to
Messrs. Weiss and Fisher was paid by us pursuant to a Services Agreement entered
into between us and Cell Kinetics Ltd., a portion of which is charged as a
contribution of capital from Medis to Cell Kinetics Ltd. Each of Messrs. Weiss,
Fisher, Freeman and Luchansky receive long-term incentive compensation directly
from Cell Kinetics Ltd., which amounts are disclosed in the applicable tables
below.




Employment
Agreement with Chief Executive Officer




Effective
September 19, 2008, Jose Mejia was appointed as our president and chief
executive officer. Pursuant to an employment agreement approved by our
Compensation Committee, Mr. Mejia will receive a base salary of $350,000 per
year. Commencing on and for the fiscal year ending December 31, 2009 and
annually thereafter, Mr. Mejia will be eligible to receive a performance bonus
as determined by our board of directors and compensation committee. Pursuant to
the employment agreement, we granted Mr. Mejia options under our 2007 Equity
Incentive Plan to purchase 250,000 shares of our common stock at an exercise
price of $2.38 per share and warrants to purchase 125,000 shares of our
common stock at an exercise price of $2.38 per share.
  2009
Compensation Plan
  On
February 10, 2009, our Compensation Committee approved a compensation plan for
our executive officers (the “Compensation Plan”). Pursuant to the Compensation
Plan, for the fiscal year ending December 31, 2009, our Compensation Committee
and Jose Mejia, our Chief Executive Officer, will set performance targets based
upon sales, costs and financing goals for each of the executive officers of our
company (other than Mr. Mejia), that the executives must accomplish as a group
by June 30, 2009. If the executives meet these performance targets, we will
allocate an aggregate of $600,000 in cash bonuses to the executives.
Furthermore, an aggregate of up to 1,000,000 restricted shares under
our  2007 Equity Incentive Plan will be issuable to the executives as
follows:
  ·
              An
      aggregate of 300,000 restricted shares will be issuable if sales
      objectives are met by June 30, 2009. If such objectives are met, the
      restricted shares will vest and be distributed to the executives in two
      equal installments ending on June 30, 2010. Executives will be required to
      hold 20% of the restricted shares for so long as they are executive
      officers of our company.
  ·
              An
      aggregate of 300,000 restricted shares shall be issuable if cost
      reductions or improvements in the our financial position are met by June
      30, 2009. If such objectives are met, the restricted shares will vest and
      be distributed to the executives in two equal installments ending on June
      30, 2010. Executives will be required to hold 20% of the restricted shares
      for so long as they are executive officers of our
  company.
  ·
              An
      aggregate of 200,000 restricted shares will be issuable based upon
      increases in the value of the our common stock. Fifty percent of such
      restricted shares will be issuable and vest when the price per share of
      our common stock reaches $1.00 and fifty percent of such restricted shares
      will be issuable and vest when the price per share of our common stock
      reaches $2.00.
  ·
              An
      aggregate of 200,000 restricted shares will be issuable when we complete a
      financing of at least $5,000,000. The restricted shares will vest in 50%
      increments on the 12 and 18 month anniversary of February 13,
      2009.
  9


On
February 10, 2009, our Compensation Committee approved a separate, additional
compensatory arrangement for Jose Mejia, our president and chief executive
officer, pursuant to which Mr. Mejia would receive a $500,000 bonus upon
meeting performance targets based upon sales, costs and financing
goals by June 30, 2009. Furthermore, an aggregate of up to 600,000 restricted
shares under our 2007 Equity Incentive Plan will be issuable to Mr. Mejia as
follows:
 ·
                An
      aggregate of 175,000 restricted shares shall be issauable if sales
      objectives are met by June 30, 2009. If such objectives are met, the
      restricted shares will vest and be distributed to Mr. Mejia in two equal
      installments ending on June 30, 2010. Mr. Mejia will be required to hold
      30% of the restricted shares for so long as he is the chief executive
      officer of our company.
  ·
                An
      aggregate of 175,000 restricted shares shall be issuable if cost
      reductions or improvements in our financial position are met by June 30,
      2009. If such objectives are met, the restricted shares will vest and be
      distributed to Mr. Mejia in two equal installments ending on June 30,
      2010. Mr. Mejia will be required to hold 30% of the restricted shares for
      so long as he is the chief executive officer of our
    company.
  ·
                An
      aggregate of 90,000 restricted shares will be issuable based upon
      increases in the value of our common stock. Fifty percent of such
      restricted shares will be issuable and vest when the price per share of
      our common stock reaches $1.00 and fifty percent of such restricted shares
      will be issuable and vest when the price per share of our common stock
      reaches $2.00.
  ·
                An
      aggregate of 160,000 restricted shares will be issuable when we complete a
      financing of at least $5,000,000. The restricted shares will vest in 50%
      increments on the 12 and 18 month anniversary of February 13,
      2009.
  The
objectives approved by the Compensation Committee to be met by the executive
officers prior to June 30, 2009 include: (a) achieving five major contracts
with channel partners to carry our products; (b) achieving between 35,000 and
45,000 units sold by June 30, 2009; (c) successfully restructure supplier
agreements by reducing 2009 commitments by 50%; and (d) reducing product costs
by 10%.
  All of
the above grants of restricted stock are subject to and conditioned upon our
company increasing the number of shares available for grant under our 2007
Equity Incentive Plan at our 2009 Annual Meeting of
Stockholders.






Report
of the Compensation Committee




The
Compensation Committee has reviewed and discussed the above Compensation
Discussion and Analysis with management of the Company. Based on this review and
discussion, we have recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in this annual report.






April 28,
      2009
            Compensation
      Committee of the Board of Directors
              Steve
      M. Barnett, Chairman
                Mitchell
      H. Freeman
                Andrew
      A. Levy




10


Summary
Compensation Table




The
following table shows information regarding the compensation earned during the
three fiscal years ended December 31, 2008 by our named executive
officers.




Name and
                principal
      position
              
              Year
              
              Salary
              
              Bonus
              
              Option
                awards
      (1)
              
              Stock
                awards
      (1)
              
              All
      other compensation
              
              TotalJose
      Mejia
                Chairman,
      President and Chief Executive Officer (2)
              
              2008
              
              $98,000
              
              —
              
              $110,000
              
              —
              
              $37,000 (14)
              
              $245,000Robert
      K. Lifton
                Chairman
      and Chief Executive Officer (3)
              
              2008
                2007
                2006
              
              $308,000
                $315,000
                $295,000
              
              —
                —
                —
              
              —
                $447,000
                $366,000
              
              $388,000
                $321,000
                —
              
              —
                —
                —
              
              $696,000
                $1,083,000
                $661,000Israel
      Fisher
                Senior
      Vice President–Finance and Chief Financial Officer (4)
              
              2008
                2007
                2006
              
              $207,000
                $219,000
                $209,000
              
              $18,000
                —
                $18,000 (7)
              
              $94,000 (5)
                $283,000 (5)
                $132,000
              
              $126,000
                —
                —
              
              $475,000
      (15)
                $47,000
      (6)
                $44,000
      (8)
              
              $920,000
                $549,000
                $403,000Howard
      Weingrow
                Deputy
      Chairman and Chief Operating Officer (9)
              
              2008
                2007
                2006
              
              $308,000
                $289,000
                $270,000
              
              —
                —
                —
              
              $447,000
                $366,000
              
              $388,000
                $321,000
                —
              
              —
                —
                —
              
              $696,000
                $1,057,000
                $636,000Jacob
      S. Weiss*
                President
      (10)
              
              2008
                2007
                2006
              
              $266,000
                $134,000
                $118,000
              
              —
                —
              
              $380,000 (11)
                $845,000 (11)
                $331,000
              
              $309,000
                —
                —
              
              $352,000
      (16)
                $185,000
      (12)
                $186,000
      (13)
              
              $1,307,000
                $1,164,000
                $635,000


__________




(1)
            Option
      awards and stock awards are based on recorded expense for the years
      2006 to 2008, determined pursuant to SFAS 123(R) utilizing the
      assumptions discussed in Note I, Note L and Note K, respectively, to
      our consolidated financial statements included in our 2006, 2007 and 2008
      Annual Report filed with the SEC on March 15, 2007,  on
      March 17, 2008 and on March 31, 2009,
  respectively.




(2)
            Effective
      September 19, 2008, our board of directors appointed Jose Mejia as our
      president and chief executive
officer.




(3)
            Robert
      K. Lifton was our chief executive officer until September 19,
      2008.  Mr. Lifton continued to serve as chairman of our board of
      directors until February 16, 2009.




(4)
            Effective
      December 1, 2008, Israel Fisher ceased to be employed by us and our
      subsidiaries.




(5)
            Includes
      $300 for 2007 and $1,000 for 2008, relating to expenses for the grant of
      options to purchase 20,000 ordinary shares of Cell Kinetics Ltd. for
      services Mr. Fisher provided to Cell Kinetics Ltd. as its Chief Financial
      Officer.




(6)
            Includes:  annual
      car allowance of $17,000; employer contribution to savings funds of
      approximately $18,000; and a tax gross up of $12,000 relating to the
      above-mentioned car allowance and other immaterial
      perquisites.




(7)
            Such
      amount represents a one-time merit
bonus.




(8)
            Includes:  annual
      car allowance of $17,000; employer contribution to savings funds of
      approximately $16,000; and a tax gross up of $11,000 relating to the
      above-mentioned car allowance and other immaterial
      perquisites.




(9)
            Effective
      November 10, 2008, Howard Weingrow resigned as our chief operating officer
      and was appointed as our executive vice president.  Mr. Weingrow
      continued to serve as our deputy chairman, executive vice president and
      treasurer until February 16, 2009.




(10)
            Jacob
      S. Weiss was our president until September 16, 2008.  Mr. Weiss
      continued to serve as an executive vice president until December 1, 2008
      and a member of our board of directors until January 12,
    2009.




11


(11)
            Includes
      $1,000 for 2007 and 2008, recorded as expense for the grant of options to
      purchase 25,000 ordinary shares of Cell Kinetics Ltd. for services Mr.
      Weiss provided to Cell Kinetics Ltd. as its Chairman of the
      Board.




(12)
            Includes:  payments
      of $144,000 for consulting services to More Energy, an indirect
      wholly-owned subsidiary, pursuant to Mr. Weiss’ consulting contract;
      annual car allowance of $21,000; employer contribution to savings funds of
      approximately $17,000; and a tax gross up of $3,000 relating to the
      above-mentioned car allowance and other immaterial
      perquisites.




(13)
            Includes:  payments
      of $144,000 for consulting services to More Energy, an indirect
      wholly-owned subsidiary, pursuant to Mr. Weiss’ consulting contract;
      annual car allowance of $20,000; employer contribution to savings funds of
      approximately $19,000; and a tax gross up of $3,000 relating to the
      above-mentioned car allowance and other immaterial
      perquisites.




(14)
            Includes:  $35,000
      for relocation allowance and $2,000 for vehicle
  allowance.




(15)
            Includes:
      payments of six months salary upon termination of Mr. Fisher's employment
      in the amount of approximately $140,000; payment of two months
      notification in the amount of approximately $38,000; payment in lieu of
      accrued vacation in the amount of approximately $50,500; car allowance of
      approximately $27,000; contribution to a retirement fund of $22,000;
      contribution to a saving fund of $3,600; and a tax gross up of $15,600
      relating to the above-mentioned car allowance and other immaterial
      perquisites. We also paid severance to Mr. Fisher of approximately
      $178,000, which amount was based upon a statutory percentage under Israeli
      Law of Mr. Fisher's salary at the termination of his employment. Such
      amounts do not include an aggregate of approximately $133,000 held in
      saving funds and made available to Mr. Fisher for his withdrawal upon his
      retirement.




(16)
            Includes:
      payment of one month notification in the amount of approximately $24,000;
      payment in lieu of accrued vacation in the amount of approximately
      $125,000; car allowance of approximately $29,000; contribution to a
      retirement fund of $25,000; contribution to a saving fund of $3,600; and a
      tax gross up of $15,400 relating to the above-mentioned car allowance and
      other immaterial perquisites. We also paid severance to Mr. Weiss of
      approximately $130,000, which amount was based upon a statutory percentage
      under Israeli Law of Mr. Weiss' salary at the termination of his
      employment. Such amounts do not include an aggregate of approximately
      $72,000 held in saving funds and made available to Mr. Weiss for his
      withdrawal upon his retirement.




The
amount of salary, bonus and other cash remuneration granted to the named
executive officers in 2008 in proportion to total compensation is as
follows:  Jose Mejia - approximately 55%; Robert K. Lifton -
approximately 44%; Israel Fisher - approximately 76%; Howard Weingrow -
approximately 44%; and Jacob S. Weiss - approximately 47%. The amount of salary,
bonus and other cash remuneration granted to the named executive officers in
2007 in proportion to total compensation is as follows:  Robert K.
Lifton - approximately 29%; Israel Fisher - approximately 48%; Howard Weingrow -
approximately 27%; and Jacob S. Weiss - approximately 27%.  As stated
earlier, we do not have any policies or guidelines for allocating compensation
between cash remuneration and long-term compensation.




Employment
Contracts




Jose Mejia.  On
September 19, 2008, we entered into an employment agreement with Jose Mejia,
whereby Mr. Mejia will serve as our President and Chief Executive
Officer.  The initial term of Mr. Mejia’s employment agreement expires
on December 31, 2011 and, unless earlier terminated, will be automatically
renewed at the end of the initial term for a period of one year and thereafter
for successive one year terms until either he or we notifies the other that the
employment agreement shall not be renewed.  Our employment agreement
with Mr. Mejia provides that he will receive a base salary of $350,000 per year,
subject to increase after the initial term in the good faith discretion of the
board of directors or the Compensation Committee, in consultation with Mr.
Mejia.  Commencing on and for the fiscal year ending December 31, 2009
and annually thereafter, Mr. Mejia will be eligible to receive a performance
bonus, based upon our company’s level of achievement of pre-established
performance goals as determined by our board of directors and the Compensation
Committee, in consultation with Mr. Mejia. Under the terms of his employment
agreement, Mr. Mejia will also be entitled to receive certain additional
benefits and compensation, including $35,000 for relocation expenses and a $600
per month automobile allowance.  Upon entering into his employment
agreement, we granted Mr. Mejia options under our 2007 Equity Incentive Plan to
purchase 250,000 shares of our common stock.  Such options are
exercisable at $2.38 per share, being the market price of our common stock on
the grant date.  These options have a term of seven years and provide
for vesting of 100,000 shares on September 19, 2009, 100,000 shares on September
19, 2010 and 50,000 shares on September 19, 2011, respectively.  We
also issued warrants to Mr. Mejia to purchase 125,000 shares of our common stock
at an exercise price of $2.38 per share.  These warrants have a term
of seven years and provide for vesting of 50,000 shares on September 19, 2009,
25,000 shares on September 19, 2010 and 50,000 shares on September 19, 2011,
respectively.  In the event of our termination of Mr. Mejia’s
employment without cause or by his resignation
for good reason (i)we will
be obligated to continue to pay Mr. Mejia his then current base salary for a
period of twelve months after such termination or resignation, and (ii) Mr.
Mejia’s options and warrants will immediately vest in full, to the extent
unvested, and be fully exercisable.  Mr. Mejia’s employment agreement
subjects him to non-competition and confidentiality covenants in our
favor.


12


Stephen Crea. On March 30, 2009 we entered
into a Consulting Agreement with Stephen Crea, the term of which commenced
on April 1, 2009 and ends on June 30, 2009, with an automatic six month renewal
period unless terminated by either us or Mr. Crea. Both parties have the right
to terminate the Consulting Agreement upon 30 days prior written notice. Mr.
Crea will be paid a fee of $200,000 per year for his services. He will be
eligible to participate in our equity incentive
plan.




Thomas Finn.  On
February 17, 2009, we entered into an employment agreement with Thomas Finn,
effective as of January 13, 2009, whereby Mr. Finn will serve as our Executive
Vice President. He will receive a base salary of $220,000 per year. For the
fiscal year ended December 31, 2009, Mr. Finn will be eligible to receive
approximately 150,000 restricted shares and a cash bonus, subject to meeting
certain performance goals.  The issuance of the restricted shares is
subject to stockholder approval of an increase in the number of shares
authorized under the 2007 Equity Incentive Plan. Mr. Finn will also be entitled
to receive certain additional benefits and compensation from us. If Mr. Finn is
terminated without cause or if Mr. Finn terminates his employment for good
reason, he will be entitled to severance payments equal to one year’s
salary.  Mr. Finn’s employment agreement expires on December 31, 2011
and, unless earlier terminated, shall be automatically renewed at the end of the
initial term for a period of one year and thereafter for successive one year
terms until either he or we notifies the other that the employment agreement
shall not be renewed.




John P. Giere.  On
December 18, 2008, we entered into a consulting and employment agreement with
John P. Giere.  Pursuant to the consulting arrangement of the
consulting and employment agreement, from December 18, 2008 until February 28,
2009, Mr. Giere was to provide us with the consulting services consistent with
the position of the Chief Commercial Officer in return for a consulting fee of
$10,349.46 for a partial month of December 2008 and thereafter $22,916.66 per
each month of the consulting.  Pursuant to the employment arrangement
of the consulting and employment agreement, beginning on March 1, 2009 and
through the end of the employment term, Mr. Giere is to be employed by us as the
Chief Commercial Officer and Executive Vice President of Sales and
Marketing.  The initial term of Mr. Giere’s employment expires on
December 31, 2009 and, unless earlier terminated, will be automatically renewed
at the end of the initial term for a period of one year and thereafter for
successive one year terms until either he or we notifies the other that the
employment agreement shall not be renewed.  Our employment agreement
with Mr. Giere provides that he will receive a base salary of $275,000 per year,
subject to increase after the initial term in the good faith discretion of the
board of directors or the Compensation Committee, in consultation with Mr.
Giere.  Commencing on and for the fiscal year ending December 31, 2009
and annually thereafter, Mr. Giere will be eligible to receive a performance
bonus, based upon our company’s level of achievement of pre-established
performance goals as determined by our board of directors and the Compensation
Committee, in consultation with Mr. Giere. Under the terms of his employment
agreement, Mr. Giere will also be entitled to receive certain additional
benefits and compensation, including a $600 per month automobile
allowance.  Upon entering into his consulting and employment
agreement, we granted Mr. Giere options under our 2007 Equity Incentive Plan to
purchase 250,000 shares of our common stock.  The issuance of such
options is subject to stockholder approval of an increase in the number of
shares authorized under the 2007 Equity Incentive Plan.  These options
have a term of seven years and provide for vesting of 100,000 shares on December
18, 2009, 100,000 shares on December 18, 2010 and 50,000 shares on December 18,
2011, respectively.  In the event of our termination of Mr. Giere’s
employment without cause or by his resignation for good reason (i) we will be
obligated to continue to pay Mr. Giere his then current base salary for a period
of twelve months after such termination or resignation, and (ii) Mr. Giere’s
options will immediately vest in full, to the extent unvested, and be fully
exercisable.  Mr. Giere’s employment agreement subjects him to
non-competition and confidentiality covenants in our favor.


Severance
Agreements





On February 13, 2009, we
entered into a Severance Agreement and a Consulting Agreement with each of
Robert K. Lifton and Howard Weingrow.  The Severance Agreements and
the Consulting Agreements are effective as of February 16, 2009 (the “Effective
Date”).  Pursuant to the Severance Agreements, Messrs. Lifton and
Weingrow are each to receive a payment of $180,000, payable during the one year
period commencing after the six month anniversary of the Effective Date (the
“Severance Period”). Furthermore, in the event we achieve $5,000,000 in gross
revenue during each of two consecutive fiscal quarters during the Severance
Period, we shall pay to each of Messrs. Lifton and Weingrow an additional
$30,000 severance payment.




13


Pursuant
to the applicable Consulting Agreement, for a period of six months from the
Effective Date, Mr. Lifton will provide services pertaining to government and
military affairs as they relate to our business and will endeavor to secure
funding for us from the United States government, and Mr. Weingrow will provide
financial and treasury related services as they relate to our business. In
consideration of the services to be rendered by each of Messrs. Lifton and
Weingrow, we will pay to each of them during the six month term a monthly fee
equal to $16,667.




Pursuant
to the Consulting Agreements, effective as of the Effective Date, Mr. Lifton
resigned as Chairman of our Board of Directors and as a member of the Board, and
Mr. Weingrow resigned as Deputy Chairman, Executive Vice President, Treasurer
and as a member of the Board.




As of the
Effective Date, the Consulting Agreement, dated as of January 2, 2000, between
Mr. Lifton and the Company, and the Consulting Agreement, dated as of January 2,
2000, between Mr. Weingrow and the Company, were terminated.




On
December 15, 2008, we entered into a Consulting Agreement with Israel Fisher,
which remains in effect until terminated by either us or Mr. Fisher upon 15 days
prior written notice.  Pursuant to the Consulting Agreement, Mr.
Fisher receives a monthly fee equal to $4,000 per month for performing such
consulting services and duties concerning our business and operations as our
senior executive officers direct him to perform.




When
Jacob S. Weiss ceased his employment with us on December 1, 2008, his stock
agreement was amended to reflect that the restricted shares granted to him
were not cancelled due to such termination.




Grants
of Plan-Based Awards




The named
executive officers were awarded the number of stock options or restricted stock
awards shown in the table below.







Estimated
      Future Payouts Under
              Equity
      Incentive Plan AwardsName
            
            Grant
              Date
            
            Threshold
            
            Target
            
            Maximum
            
            Exercise or Base Price of
      Option Awards (1)
            
            Grant Date Fair Value of Stock
      and Option Awards
      (2)Jose
      Mejia
            
            09/19/2008
            
            —
            
            375,000
            
            —
            
            $2.38
            
            $599,000Robert
      K. Lifton*
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —Israel
      Fisher*
            
            04/25/2008
            
            —
            
            38,000
            
            —
            
            —
            
            $171,000Howard
      Weingrow*
            
            —
            
            —
            
            —
            
            —
            
            —
            
            —Jacob
      S. Weiss*
            
            04/25/2008
            
            —
            
            92,000
            
            —
            
            $ 
      —
            
            $423,000


__________


*
      No longer employed by us or our
subsidiaries.




(1)
            Amounts
      are equal to the closing price of our common stock on each respective date
      of grant.




(2)
            Valuation
      of awards is based on the grant date fair value of the awards, determined
      pursuant to SFAS 123(R) utilizing the assumptions discussed
      in Note K to our consolidated financial statements included in
      our 2008 Annual Report filed with the SEC on March 31,
      2009.







14


Outstanding
Equity Awards at Fiscal Year-End




The
following table presents the outstanding equity awards held by each of the named
executive officers as of the end of the fiscal year ended December 31,
2008.  Except as otherwise indicated below, each option granted to the
named executive officers has a term of four years and vests in full one year
after the grant date.  All of the below-listed options to purchase
Medis common stock were granted under the terms of our 1999 Stock Option
Plan or the 2007 Equity Incentive Plan, except as otherwise
indicated.




Option
      Awards
              
              Stock
      AwardsName
              
              Number
      of Securities
                Underlying
      Unexercised
                Options
      Exercisable
              
              Number
      of Securities Underlying Unexercised
                Options
      Unexercisable
              
              Option
                Exercise
                Price
              
              Option
                Expiration
                Date
              
              Number
      of Shares or Units of Stock That Have Not Vested
              
              Market
      Value of Shares or Units of Stock That Have Not VestedJose
      Mejia
              
              —
              
              375,000
      (3)
              
              $2.38
              
              09/19/2015
              
              —
              
              —Robert
      K. Lifton*
              
              —
              
              —
              
              —
              
              —
              
              —
              
              —Israel
      Fisher*
              
              —
              
              —
              
              —
              
              —
              
              32,000
              
              $14,0006,666 (1)
              
              13,334
      (1)
              
              $0.30
              
              10/1/2011
              
              —
              
              —Howard
      Weingrow*
              
              —
              
              —
              
              —
              
              —
              
              —
              
              —Jacob
      S. Weiss*
              
              —
              
              —
              
              —
              
              —
              
              78,000
              
              $35,00085,000
              
              —
              
              $11.19
              
              8/9/2011
              
              —
              
              —25,000 (2)
              
              —
              
              $0.30
              
              10/1/2011
              
              —
              
              —


__________




*  No
longer employed by us or our subsidiaries.




(1)
            Represents
      options to purchase the ordinary shares of Cell Kinetics Ltd. The options
      vest in three equal annual installments commencing on October 1,
      2008.




(2)
            Represents
      options to purchase the ordinary shares of Cell Kinetics Ltd. The options
      vested in four equal quarterly installments, with all having vested by
      December 31, 2008.




(3)
            Includes
      warrants to purchase 125,000 shares of common
  stock.




Option
Exercises and Stock Vested








Stock AwardsName
                      
                      
                      Number
      of Shares Acquired on Vesting
                      
                      Value
      Realized on VestingJose
      Mejia
                      
                      
                      —
                      
                      —Robert
      K. Lifton*
                      
                      
                      50,000
                      
                      $183,000Howard
      Weingrow*
                      
                      
                      50,000
                      
                      $183,000Israel
      Fisher*
                      
                      
                      6,000
                      
                      $9,000Jacob
      S. Weiss*
                      
                      
                      14,000
                      
                      $20,000




* No
longer employed by us or our subsidiaries




15


Non-Qualified
Deferred Compensation




We offer
our Israeli employees, including Messrs. Fisher and Weiss, our two Israeli-based
named executive officers, savings plans that give officers and employees the
option to make payroll deductions which are then, along with a matching amount
we pay equal to a statutory percentage of the employee’s salary, deposited with
one or more third party insurance company administrators.  Upon
retirement (as defined in applicable Israeli tax regulations) and subject to
applicable Israeli tax and other regulations governing these savings plans, each
of such officers and employees are entitled to payment out of such savings fund
accounts equal to the aggregate amount contributed by the employee through
payroll deductions, the aggregate matching amount we contributed and other
statutory amounts we may be required to contribute upon retirement, and any
other amounts contributed by any other previous employers of the
employee.  Such amounts are payable in accordance with the rules of
the administrator of each fund, and may be a lump-sum payment upon retirement
and/or monthly payments thereafter. Monthly payment amounts are not determinable
at retirement.




Name
            
            Executive
      Contribution in Last Fiscal Year
            
            Registrant
      Contributions in Last Fiscal Year
            
            Aggregate
      Earnings in Last Fiscal Year
            
            Aggregate
      Withdrawals/Distributions
            
            Aggregate
      Balance at Last Fiscal Year End (1)Robert
      K. Lifton*
            
            —
            
            —
            
            —
            
            —
            
            —Israel
      Fisher*
            
            $8,000
            
            $26,000(2)
            
            (3)
            
            —
            
            $611,000(4)Howard
      Weingrow*
            
            —
            
            —
            
            —
            
            —
            
            —Jacob
      S. Weiss*
            
            $8,000
            
            $29,000(2)
            
            (3)
            
            —
            
            $206,000(5)


__________




*  No
      longer employed by us or our
subsidiaries.




(1)
            Estimated
      based on information made available to us by the administrators of such
      savings funds and other information available to
  us.




(2)
            Such
      amounts are also reported in the column entitled “All Other Compensation”
      in the Summary Compensation Table earlier in this Compensation Discussion
      and Analysis.




(3)
            The
      administrators of the savings funds do not make available such information
      and we are unable to obtain accurate information regarding such
      earnings.




(4)
            Of
      such amount, $295,000 was reported as compensation to Mr. Fisher in our
      Summary Compensation Table for each of the years 1999 -
    2008.




(5)
            Of
      such amount, $140,000 was reported as compensation to Mr. Weiss in our
      Summary Compensation Table for each of the years 2001 -
    2008.




16


Potential
Payments Upon Termination




This
section describes the payments and benefits that Jose Mejia would have been
entitled to had his employment been terminated under the circumstances described
below on December 31, 2008.  See “— Severance and Consulting
Agreements” for payments made to Robert K. Lifton and Howard
Weingrow  upon their respective resignations on February 16,
2009.




Cash Payments. In the event
of our termination of Mr. Mejia’s employment without cause or by his resignation
for good reason, we will be obligated to continue to pay Mr. Mejia his then
current base salary for a period of twelve months after such termination or
resignation.  If such termination or resignation had occurred on
December 31, 2008, Mr. Mejia would have been entitled to $350,000 .




Option and Warrants. In the
event of our termination of Mr. Mejia’s employment without cause or by his
resignation for good reason, Mr. Mejia’s options and warrants will immediately
vest in full, to the extent unvested, and be fully
exercisable. On
December 31, 2008, the closing market share price of our common stock was
$0.45.  Since the exercise price of the options and warrants was $2.38
per share, such options and warrants had no intrinsic value on December 31,
2008.




Due to
the number of factors that affect the nature and amount of any benefits provided
upon the events discussed above, any actual amounts paid or distributed may be
different.  Factors that could affect these amounts include the timing
during the year of any such event and our stock price.




Director
Compensation




The
compensation and benefits for service as a member of the board of directors is
determined by the Compensation Committee.  Directors employed by us
are not compensated for service on the board or on any committee of the board;
however, we reimburse each of our directors for any out-of-pocket expenses in
connection with attending meetings of our board of directors and committees of
our board of directors.




As of
January 2008, non-employee directors were entitled to receive $1,500 for each
board of directors meeting attended, and members of our Audit Committee and
Compensation Committee are each entitled to receive $2,000 for each committee
meeting attended.  Furthermore, directors were entitled to receive
reimbursement for travel, lodging and a flat per diem of $85 for each board or
committee meeting attended out of town.  Directors of Cell Kinetics
were entitled to receive $750 for each board of directors meeting attended for
that company.




As of
January 2009, non-employee directors were entitled to receive a cash payment of
$5,000 per quarter, plus a grant of 25,000 shares of restricted stock to be
issued on the first day when such restricted stock is available.  In
addition, members of our
Audit Committee and Compensation Committee are entitled to receive a cash
payment of $2,000 per quarter, plus a grant of 10,000 shares of restricted stock
to be issued on the first day when such restricted stock is
available.  Finally, the Chairmen of our Audit Committee and
Compensation Committee are also entitled to a grant of 5,000 shares of
restricted stock to be issued on the first day when such restricted stock is
available.


17


Non-employee
directors are entitled to participate in both our 1999 Stock Option Plan and
2007 Equity Incentive Plan.  Furthermore, our directors who are also
directors of Cell Kinetics Ltd. are eligible to participate in that company’s
2007 Equity Incentive Plan for services rendered to it.  While we have
no formal policy with respect to the awarding of stock options to non-employee
directors, we have granted stock options to non-employee directors upon their
first election or appointment to the board of directors and we may do so for and
upon any future new appointments to our board.  In addition, each
person who was already serving as a non-employee member of the board of
directors and will continue to serve on the board of directors is typically
granted stock options on an annual basis.  These options have an
exercise price per share equal to the closing price of our common stock on the
date of grant and, like options granted to officers and employees, in recent
years have vested in full on the one year anniversary of the grant date.The following table sets forth a summary
of the compensation we paid to our non-employee directors in
2008:








Name(1)
                  
                  Fees
      Earned or Paid in Cash
                  
                  Option Awards (2)
                  
                  
                  Restricted
      Stock Awards(3)
                  
                  
                  All
      Other Compensation
                  
                  TotalAmos
      Eiran
                  
                  
                  $7,500
                  
                  
                  $46,000
                  
                  
                  —
                  
                  
                  —
                  
                  
                  $53,500Zeev
      Nahmoni
                  
                  
                  $7,500
                  
                  
                  $46,000
                  
                  
                  —
                  
                  
                  —
                  
                  
                  $53,500Philip
      Weisser*
                  
                  
                  $6,000
                  
                  
                  $59,000
                  
                  
                  —
                  
                  
                  —
                  
                  
                  $65,000Jacob
      E. Goldman*
                  
                  
                  $17,000
                  
                  
                  $129,000
                  
                  
                  —
                  
                  
                  —
                  
                  
                  $146,000Mitchell
      H. Freeman
                  
                  
                  $30,500
                  
                  
                  $149,000 (4)
                  
                  
                  $9,000
                  
                  
                  —
                  
                  
                  $188,500Steve
      M. Barnett
                  
                  
                  $20,000
                  
                  
                  $97,000
                  
                  
                  $6,000
                  
                  
                  —
                  
                  
                  $123,000Daniel
      A. Luchansky
                  
                  
                  $19,500
                  
                  
                  $98,000 (4)
                  
                  
                  $22,000
                  
                  
                  —
                  
                  
                  $139,500Barry
      Newman
                  
                  
                  $7,500
                  
                  
                  $12,000
                  
                  
                  $6,000
                  
                  
                  —
                  
                  
                  $25,500Andrew
      Levy
                  
                  
                  $9,000
                  
                  
                  $13,000 (4)
                  
                  
                  $6,000
                  
                  
                  —
                  
                  
                  $28,000


_________




*
      Such person was not a director of our company on December 31,
      2008.




(1)
            Jose
      A. Mejia, Robert K. Lifton, Howard Weingrow and Jacob S. Weiss are not
      included in this table as they are or were paid as employees and/or
      consultants and thus received no compensation for their services as
      directors. The compensation received by each of them as employees is shown
      above under the heading “Summary Compensation
  Table.”




(2)
            Option
      awards are based on recorded expense for 2008, determined pursuant to SFAS
      123(R) utilizing the assumptions discussed in Note K to our consolidated
      financial statements included in our 2008 Annual Report filed with the SEC
      on March 31, 2009. The full grant date fair value computed in accordance
      with SFAS 123(R) of such option awards to the named director in 2008 is as
      follows:  Amos Eiran - $87,000; Zeev Nahmoni - $87,000; Philip
      Weisser - $108,000; Jacob E. Goldman - $226,000; Mitchell H. Freeman -
      $291,000; Steve M. Barnett - $197,000, Daniel A. Luchansky - $265,000,
      Barry Newman $34,000 and Andrew Levy
$34,000.




(3)
            Restricted
      stock awards are based on recorded expense for 2008, determined pursuant
      to SFAS 123(R) utilizing the assumptions discussed in Note K to our
      consolidated financial statements included in our 2008 Annual Report filed
      with the SEC on March 31, 2009. The full grant date fair value computed in


18
 accordance
      with SFAS 123(R) of such option awards to the named director in 2008 is as
      follows:  Amos Eiran - $-; Zeev Nahmoni - $-; Philip Weisser -
      $-; Jacob E. Goldman - $-; Mitchell H. Freeman - $32,000; Steve M. Barnett
      - $22,000 and Daniel A. Luchansky - $66,000; Barry Newman $21,000 and
      Andrew Levy $21,000 .


(4)
            Includes
      $1,000 recorded as expense for the grant of options to purchase 25,000
      ordinary shares of Cell Kinetics Ltd. for services the named director
      provided to Cell Kinetics Ltd. as a
director.




Compensation
Committee Interlocks and Insider Participation




Steve
Barnett, Mitchell Freeman and Jacob Goldman served as members of our
Compensation Committee in 2008.  Messrs. Barnett and Freeman continue
to serve in that capacity, along with Andrew Levy, who was appointed to our
Compensation Committee in August, 2008 following the retirement of Mr. Goldman.
None of the persons who served on our Compensation Committee are, or have
been, an employee or officer of our company or had any relationship requiring
disclosure under Item 404 of Regulation S-K under the Securities Act of 1933, as
amended, except as described in this annual report. In addition, none of our
executive officers serves, or has served during 2008, as a member of the board
of directors or compensation committee of any other entity that has or has had
one or more of its executive officers serving as a member of our board of
directors, other than Jacob Weiss, our Executive Vice President, who, prior to
September 19, 2008, was both our President as well as Chairman of Cell Kinetics
Ltd. Furthermore, Mitchell Freeman and Daniel Luchansky are directors of both
Medis and Cell Kinetics Ltd., and any or all of them may be considered by the
Board of Directors of Cell Kinetics for a position on its compensation
committee.



















19


Item
      12.
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters




The
following table sets forth certain information regarding ownership of our common
stock as of April 15, 2009:




·
            all
      those known by us to be beneficial owners of five percent or more of our
      common stock;




·
            each
      of our current directors;




·
            each
      of our executive officers named in the summary compensation table
      contained in this annual report;
and




·
            all
      of our current directors and executive officers as a
  group.




The
amounts and percentages of common stock beneficially owned are reported on the
basis of regulations of the SEC governing the determination of beneficial
ownership of securities. Under the rules of the SEC, a person is deemed to be a
“beneficial owner” of a security if that person has or shares “voting power,”
which includes the power to vote or to direct the voting of such security, or
“investment power,” which includes the power to dispose of or to direct the
disposition of such security. A person is also deemed to be a beneficial owner
of any securities of which that person has the right to acquire beneficial
ownership within 60 days of April 15, 2009. Under these rules more than one
person may be deemed a beneficial owner of the same securities and a person may
be deemed to be a beneficial owner of securities as to which such person has no
economic interest.




Unless
otherwise indicated, we believe that all persons named in the table have sole
voting and investment power with respect to all shares of common stock
beneficially owned by them. Additionally, unless otherwise indicated, the
address of each beneficial holder of our common stock is our corporate
address.




Name
      and Address of Beneficial Owner
            
            Number
      of Shares of Common Stock
              Beneficially
      Owned
            
            Ownership
              Percentage





Israel
      Aerospace Industries Ltd. (1)
              
              5,516,457
              
              11.9%BlackRock,
      Inc. (2)
              
              4,289,468
              
              9.3%Citigroup
      Inc. (3)
              
              3,283,524
              
              7.1%CVF,
      LLC (4)
              
              2,317,959
              
              5.0%Robert
      K. Lifton (5)
              
              4,151,344
              
              9.0%Howard
      Weingrow(6)
              
              3,425,316
              
              7.4%Jose
      Mejia (7)
              
              —
              
              —Jacob
      S. Weiss**(8)
              
              197,000
              
              *Israel
      Fisher** (9)
              
              32,000
              
              *Amos
      Eiran (10)
              
              25,475
              
              *Zeev
      Nahmoni (11)
              
              28,221
              
              *Mitchell
      H. Freeman (12)
              
              107,831
              
              *Steve
      M. Barnett (13)
              
              100,613
              
              *Daniel
      A. Luchansky (14)
              
              71,900
              
              *Barry
      Newman (15)
              
              42,975
              
              *Andrew
      A. Levy (16)
              
              16,875
              
              *All
      current directors and executive officers
                as a group (11 persons) (17)
              
              393,890
              
              *




20


__________________


*
Represents beneficial ownership of less than 1%.


**
Effective December 1, 2008, ceased to be employed by us and our
subsidiaries.





(1)
            Voting
      control of Israel Aerospace is held by the State of Israel. Israel
      Aerospace’s address is Ben Gurion International Airport, Tel Aviv 70100,
      Israel.




(2)
            Based
      on a Schedule 13G/A filed with the SEC on February 10, 2009, which
      BlackRock, Inc. (“BlackRock”) filed on behalf of itself and its investment
      advisory subsidiaries, the following investment advisory subsidiaries of
      BlackRock hold certain shares of our common stock:  BlackRock
      Advisors LLC; BlackRock Investment Management, LLC; BlackRock (Channel
      Islands) Ltd.; and BlackRock Investment Management UK Ltd. BlackRock’s
      address is 40 East 52nd  Street, New York, New York
      10022.




(3)
            Based
      on a Schedule 13G filed with the SEC on February 10, 2009, which Citigroup
      Inc. (“Citigroup”) filed on behalf of itself and its subsidiaries:
      Citigroup, which reported 3,283,524 shares; Citigroup Financial Products
      Inc. (“CFP”), which reported 3,279,494 shares; Citigroup Global Markets
      Holdings Inc. (“CGM Holdings”), which reported 3,279,494 shares; and
      Citigroup Global Markets Inc. (“CGM”), which reported 3,019,089
      shares.  All of the shares reported on the Schedule have shared
      voting and shared dispositive power.  The figures assume
      conversion/exercise of certain securities held and, with respect to
      Citigroup, includes shares held by other reporting persons. Citigroup’s
      Address is 399 Park Avenue New York, NY 10043.  CFP’s, CGM
      Holdings’s and CGM’s address is 388 Greenwich Street New York, NY
      10013.




(4)
            Based
      on a Schedule 13D filed with the SEC on September 2, 2003, a Form 4 filed
      with the SEC on November 17, 2003 and other information known to us, CVF,
      LLC, Richard C. Goodman, Longview Management Group, LLC, James A. Star,
      The Edward Memorial Trust and Geoffrey F. Grossman, not individually, but
      as trustee of The Edward Memorial Trust, have shared voting power and
      shared dispositive power of such shares of common stock. These shares are
      held of record by CVF. Based on such
filings:




·
            Richard
      C. Goodman is the Executive Manager of
CVF;




·
              Longview
      Management Group, LLC manages investment accounts for CVF and exercises
      voting and dispositive control over the securities held by
      CVF;




·
            James
      A. Star is president of Longview Management
  Group;




·
            The
      Edward Memorial Trust is a majority equity owner of Longview Management
      Group; and




·
            Geoffrey
      F. Grossman is the trustee of The Edward Memorial
  Trust.




·
            The
      address of CVF is 222 N. LaSalle Street, Suite 2000, Chicago, Illinois
      60601.




(5)
            Includes
      50,000 restricted shares granted to Mr. Lifton which vested in full on
      July 17, 2008, as well as 1,218,741 shares of our common stock held by
      Stanoff Corporation, which is beneficially owned by Messrs. Lifton and
      Weingrow.




(6)
            Includes
      50,000 restricted shares granted to Mr. Weingrow which vested in full on
      July 17, 2008, as well as 1,218,741 shares of our common stock held by
      Stanoff Corporation, which is beneficially owned by Messrs. Lifton and
      Weingrow.




(7)
            Does
      not include 250,000 shares of our common stock underlying options and
      125,000 shares of our common stock underlying warrants, which were granted
      to Mr. Mejia upon commencement of his employment as our President and
      Chief Executive Officer on September 19, 2008, and which will vest and
      become exercisable over a three-year period, commencing on September 19,
      2009.




21


(8)
            Includes
      options to acquire 85,000 shares of our common stock and 92,000 restricted
      shares granted to Mr. Weiss, which vest between November 3, 2008 and June
      25, 2009.




(9)
            Represents
      restricted shares granted to Mr. Fisher, which vest between April 25, 2009
      and June 25, 2009.




(10)
            Represents
      options to acquire shares of our common
stock.




(11)
            Includes
      options to acquire 25,475 shares of our common
  stock.




(12)
            Includes
      options to acquire 82,575 shares of our common stock and 25,256 restricted
      shares granted to Mr. Freeman, which vest on August 20,
    2009.




(13)
            Includes
      options to acquire 53,950 shares of our common stock and 17,663 restricted
      shares granted to Mr. Barnett, which vest on August 20,
    2009.




(14)
            Includes
      options to acquire 40,100 shares of our common stock and 31,800 restricted
      shares granted to Mr. Luchansky, which vest on August 20,
      2009.




(15)
            Includes
      16,875 restricted shares granted to Mr. Newman, which vest on August 20,
      2009, and 13,100 shares held by the Lehman, Newman & Flynn Profit
      Sharing Plan, and 2,000 shares held by a limited partnership of which Mr.
      Newman owns a limited partnership interest. Mr. Newman disclaims
      beneficial ownership except to the extent of his pecuniary interest
      therein.




(16)
            Represents
      restricted shares granted to Mr. Levy, which vest on August 20,
      2009.




(17)
            Includes
      options to acquire 227,575 shares of our common
  stock.




Equity
Compensation Plan Information




The
following table sets forth securities outstanding under existing equity
compensation plans of Medis and Cell Kinetics Ltd., as well as securities
remaining available for future issuance under those plans, in each case as of
December 31, 2008.




Plan
      Category
            
            Number
      of Securities to be Issued Upon Exercise of Outstanding Options, Warrants
      and Rights (A)
            
            
            Weighted-Average
      Exercise Price of Outstanding Options, Warrants and Rights
            
            
            Number
      of Securities Remaining Available for Future Issuance Under Equity
      Compensation Plans (Excluding Securities Reflected in Column
      (A))Equity
      Compensation Plans Approved by Stockholders:1999
      Stock Option Plan
            
            469,500
            
            
            $18.21
            
            
            —Medis
      2007 Equity Incentive Plan
            
            1,005,625
            
            
            $ 
      8.27
            
            
            —




22


Cell
      Kinetics 2007 Equity Incentive Plan
                
                921,750
                
                
                $ 
      0.23
                
                
                478,250Equity
      Compensation Plans Not Approved by Stockholders:Warrant
      Agreement (1)
                
                30,000
                
                
                $14.93
                
                
                —Warrant
      Agreement (2)
                
                12,000
                
                
                $16.87
                
                
                —Warrant
      Agreement (3)
                
                3,000
                
                
                $14.46
                
                
                —Warrant
      Agreement (4)
                
                20,000
                
                
                $11.36
                
                
                —Warrant
      Agreement (5)
                
                125,000
                
                
                $ 
      2.38
                
                
                —Warrant
      Agreement (6)
                
                100,000
                
                
                $ 
      3.21
                
                
                —Warrant
      Agreement (7)
                
                2,941,176
                
                
                $ 
      5.50
                
                
                —Warrant
      Agreement (7)
                
                294,118
                
                
                $ 
      5.50
                
                
                —Total
                
                3,525,294


______




(1)
            On
      August 26, 2005, we issued to our Vice President of Marketing a warrant to
      purchase an aggregate of 30,000 shares of our common stock. Such warrant
      has an exercise price per share of $14.93, vested on December 29, 2005 and
      expires on August 26, 2009. The warrant was not granted under any of our
      or our subsidiaries’ stock option or equity incentive
    plans.




(2)
            On
      August 29, 2005, we issued to a consultant a warrant to purchase an
      aggregate of 12,000 shares of our common stock. Such warrant has an
      exercise price per share of $16.87, vested on December 29, 2005 and
      expires on August 29, 2009. The warrant was not granted under any of our
      or our subsidiaries’ stock option or equity incentive
    plans.




(3)
            On
      December 20, 2005, we issued to a consultant a warrant to purchase an
      aggregate of 7,500 shares of our common stock. Such warrant has an
      exercise price per share of $14.46, vested on December 20, 2006 and
      expires on December 20, 2009. During the year ended December 31, 2007, the
      holder exercised 4,500 shares underlying such warrant. The warrant was not
      granted under any of our or our subsidiaries’ stock option or equity
      incentive plans.




(4)
            On
      August 2, 2007, we issued to a consultant a warrant to purchase an
      aggregate of 20,000 shares of our common stock. Such warrant has an
      exercise price per share of $11.37, vested immediately and expires on
      August 2, 2011. The warrant was not granted under any of our or our
      subsidiaries’ stock option or equity incentive
  plans.




(5)
            Upon
      entering into his employment agreement on September 19, 2008, we granted
      Jose Mejia warrants to purchase 125,000 shares of our common stock at an
      exercise price of $2.38 per share.  These warrants have a term
      of seven years and provide for vesting of 50,000 shares on September 19,
      2009, 25,000 shares on September 19, 2010 and 50,000 shares on September
      19, 2011, respectively.




(6)
            On
      August 15, 2008, we issued to our Senior Vice President of Product
      Management warrants to purchase an aggregate of 100,000 shares of our
      common stock. Such warrant has an exercise price per share of $3.21, and
      vest in three tranches on July 7, 2009, July 7, 2010 and July 7, 2011. All
      such warrants expire on August 15, 20012. The warrants were not granted
      under any of our or our subsidiaries’ stock option or equity incentive
      plans.




(7)
            On
      June 24, 2008, such warrants were issued in connection with our completion
      of a sale to selected institutional investors of an aggregate of 6,823,529
      shares of our common stock, along with such warrants to purchase 2,941,176
      shares of our common stock, for aggregate gross proceeds of $29,000,000,
      less costs of approximately $1,393,000. Such sale of securities was made
      pursuant to a June 19, 2008 Placement Agency Agreement and securities
      purchase agreements entered into with each investor. The warrants issued
      to investors have an initial exercise price of $5.50 per share, may be
      exercised beginning December 2008, and expire on December 18, 2013. As
      part of the issuance cost, pursuant to the placement agency agreement, the
      placement agent received as its fee $1,285,000 and such warrants to
      purchase 294,118 shares of our common stock, which bear the same terms as
      those issued to the investors




23


Item
      13.
            Certain
      Relationships and Related Transactions, and Director
      Independence




We paid
rent of approximately $100,000 in 2008 for the use of office space in premises
occupied by the Stanoff Corporation, which is beneficially owned by
Messrs. Lifton and Weingrow, our former Chief Executive Officer and Chief
Operating Officer. Furthermore, we reimbursed Stanoff for the use of its
administrative staff at such office in the amount of approximately $74,000 in
2008. These transactions were approved by our Audit Committee.




In 2007,
we decided that it would be prudent, given our primary focus upon the marketing
of our 24/7 Power Pack, to seek to commercially exploit, and raise financing
for, our Cell Carrier product through a stand-alone corporate entity. As a
result, we transferred our CellScan and Cell Carrier related businesses,
including our intellectual property rights relating to the CellScan and its Cell
Carrier technology, to our then wholly-owned Israeli subsidiary, Cell Kinetics
Ltd., pursuant to an asset purchase agreement dated July 26, 2007, in
consideration of Cell Kinetics’ issuance to Medis El Ltd., our indirect
wholly-owned subsidiary, of 15,500,000 of Cell Kinetics’ ordinary shares. We
also commenced a rights offering pursuant to which we offered our existing
stockholders the right to purchase Cell Kinetics ordinary shares. At the
expiration of that rights offering in January 2008, Cell Kinetics became our
indirect, majority-owned subsidiary and its ordinary shares and warrants
commenced trading on the OTC Bulletin Board. As part of the transfer of these
businesses and the spin-off, we also:




·
            granted
      Cell Kinetics a five year right of first refusal on all further medical
      diagnostic opportunities that are sourced by, or presented to,
      us;




·
            agreed
      to provide to Cell Kinetics a cash capital contribution of $1,500,000 over
      an 18 month period on an as needed basis commencing in January
      2008;




·
            agreed
      that, following the completion of the rights offering, we would provide
      Cell Kinetics with such office and laboratory facilities as Cell Kinetics
      may reasonably require to further the commercialization of the Cell
      Carrier and to launch and operate its proposed medical device incubator,
      as well as to provide it with administrative and professional services at
      cost, as a contribution to its capital, for a period of not less than 18
      months from the date of the rights offering;
and




·
            committed
      to provide Cell Kinetics with additional financing to carry out its
      operations for at least one year if its other resources are insufficient
      for such period of time.




On June
30, 2008, Medis El provided funding to Cell Kinetics in the amount of
$1,500,000, pursuant to a non-interest bearing, unsecured promissory note, with
a due date of January 1, 2010 – subject to certain other repayment conditions
that are based on Cell Kinetics’ receiving alternative sources of financing for
its operations or the sale of its business to or merger with a third party. At
the option of Medis El, any remaining balance on the promissory note may be
contributed to the capital of Cell Kinetics. Also on June 30, 2008, Cell
Kinetics entered into a second promissory note with Medis El in the amount of
$394,938, representing issuance costs related to its rights offering that Medis
Technologies and Medis El advanced on Cell Kinetics’ behalf. Such promissory
note is on substantially the same terms as the promissory note described
above




In
connection with the spin-off of Cell Kinetics, Messrs. Weiss and Fisher were
appointed as Chairman and Chief Financial Officer, respectively, of Cell
Kinetics, and Messrs. Freeman and Luchansky were requested to serve on the Cell
Kinetics board of directors.  Effective December 31, 2008,




24


Messrs.
Weiss and Fisher ceased their employment with our company as well as Cell
Kinetics.  These transactions were approved by our entire Board of
Directors.




We have
adopted a written policy in connection with related party transactions
involving our company. The policy requires the prior approval by our Audit
Committee for any transaction, arrangement or relationship in which (i) the
aggregate amount involved will or may be expected to reach $50,000 in any
calendar year, (ii) we are a participant and (iii) any related person has or
will have an interest. Related persons include our executive officers,
directors, greater than 5% stockholders or immediate family members of any of
the foregoing. Pursuant to the policy, the Audit Committee, among other factors,
is required to take into account whether the transaction is on terms no less
favorable than terms generally available to an unaffiliated third party under
the same or similar circumstances. In addition, the Chairman of the Audit
Committee has the authority to approve or ratify any interested transaction with
a related person in which the aggregate amount involved is expected to be less
than $25,000.




Director
Independence




Board of
Directors.  Our Board of Directors has determined that each of
our non-employee directors (Messrs. Eiran, Nahmoni, Weisser, Goldman, Freeman,
Barnett, Luchansky, Levy and Newman), who collectively constitute a majority of
our Board of Directors, meets the general independence criteria set forth in the
NASDAQ Marketplace Rules.




Compensation
Committee.  Our Board of Directors has determined that each
member of our Compensation Committee (Messrs. Barnett, Freeman and Levy) meets
the NASDAQ Marketplace Rule definition of “independent” for Compensation
Committee purposes.  In addition, Mr. Goldman, who has served on our
Compensation Committee for a portion of 2008, has also met the NASDAQ
Marketplace Rule definition of "independent" for compensation committee
purposes.




Audit
Committee.  Our Board of Directors has determined that each
member of our Audit Committee (Messrs. Freeman, Luchansky and Newman) meets the
NASDAQ Marketplace Rule definition of “independent” for audit committee
purposes.  In addition, Mr. Goldman, who has served on our Audit
Committee for a portion of 2008, has also met the NASDAQ Marketplace Rule
definition of “independent” for audit committee purposes.










25


Item
      14.
            Principal
      Accounting Fees and Services




Professional
Services Fees




Fees
incurred by us for professional services, to us and our subsidiaries, provided
by our independent auditors in each of the last two fiscal years, in each of the
following categories are approximately as follows:




2008
            
            
            2007Audit
            
            $
            203,000
            
            
            $
            308,000Audit-related
            
            
            –
            
            
            
            –Tax
            
            
            52,000
            
            
            
            42,000All
      other
            
            
            –
            
            
            
            –Total
            
            $
            255,000
            
            
            $
            350,000




Fees for
audit services include fees associated with the audit of our annual consolidated
financial statements, audit of our assessment of our internal controls over
financial reporting, review of financial statements included in our quarterly
reports on Form 10-Q and services provided by our auditors in connection
with statutory and regulatory filings or engagements, including review of
documents filed with the SEC. Tax fees included tax compliance and tax
consultations.




The Audit
Committee has adopted a policy that requires advance approval of all audit,
audit-related, tax services, and other services performed by the Company’s
independent auditor. Accordingly, the Audit Committee must approve the permitted
service before the independent auditor is engaged to perform it.  In
accordance with such policies, the Audit Committee approved 100% of the services
described above under “Audit Fees,” “Audit-Related Fees,” “Tax Fees” and “All
Other Fees.”




Our Audit
Committee has determined that the provision of the above services is compatible
with maintaining our auditor’s independence.















26


PART
IV




Item
      15.
            Exhibits
      and Financial Statement Schedules




(b)  Exhibits.




The
following exhibits, which are numbered in accordance with Item 601 of
Regulation S-K, are filed herewith or, as noted, incorporated by reference
herein:




3.(i)
            Restated
      Certificate of Incorporation of Medis Technologies Ltd., as amended
      (1)3.(ii)
            Restated
      By-Laws of Medis Technologies Ltd., as amended (2)4.1
            Form
      of certificate evidencing shares of common stock (2)4.2
            Certificate
      of Designation of 7.25% Series A Cumulative Convertible Perpetual
      Preferred Stock (3)10.1*
            Medis
      Technologies Ltd.’s 1999 Stock Option Plan, as amended
  (4)10.2*
            Medis
      Technologies Ltd.’s 2007 Equity Incentive Plan (5)10.3*
            Consulting
      Agreement dated December 15, 2008 between Israel Fisher and Medis
      Technologies Ltd. +10.4
            Letter
      Agreement dated June 1, 1993 between Medis El Ltd. and The Industrial
      Research and Development Institute of the Chief Scientist’s Office of the
      State of Israel (6)10.5
            Agreement
      dated October 17, 1991 between Bar-Ilan University and Israel Aircraft
      Industries Ltd. (6)10.6
            Amendment
      of License dated August 8, 1992 between Bar-Ilan University and Israel
      Aircraft Industries Ltd. and Medis El (6)10.7
            Assignment
      of License Agreement between Israel Aircraft Industries between Israel
      Aircraft Industries Ltd. and Bar-Ilan University dated August 13, 1992
      between Israel Aircraft Industries Ltd. and Medis Israel Ltd.
      (6)10.8
            Letter
      Agreement dated July 18, 1996 between Medis El Ltd. and Bar-Ilan
      University (6)10.9*
            Consulting
      Agreement dated as of February 16, 2009 between Medis Technologies Ltd.
      and Robert K. Lifton +10.10*
            Consulting
      Agreement dated as of February 16, 2009 between Medis Technologies Ltd.
      and Howard Weingrow +10.11*
            Severance
      Agreement dated as of February 16, 2009 between Medis Technologies Ltd.
      and Robert K. Lifton +10.12*
            Severance
      Agreement dated as of February 16, 2009 between Medis Technologies Ltd.
      and Howard Weingrow +10.13
            Summary
      of Material Lease Terms to Lod, Israel Facility (7)10.14**
            Capital
      Equipment Purchase Agreement, dated as of September 15, 2005, between
      Medis Technologies Ltd. and Ismeca Europe Automation S.A.
    (8)10.15**
            Agreement
      for Manufacture, dated as of September 27, 2005, between More Energy Ltd.
      and Celestica Ireland Limited and guaranty by Medis Technologies Ltd.
      (8)10.16
            Registration
      Rights Agreement, dated November 15, 2006, by and between the Registrant
      and Citigroup Global Markets Inc. (9)10.17
            Securities
      Purchase Agreement dated February 13, 2009 between Medis Technologies Ltd.
      and Ascendiant Capital Group, LLC (10)10.18*
            Employment
      Agreement, dated September 19, 2008, by and between Jose Mejia and Medis
      Technologies Ltd. (11)10.19*
            Warrant
      Agreement, dated September 19, 2008, by and between Jose Mejia and Medis
      Technologies Ltd. (11)




27


10.20*
            Employment
      Agreement, dated December 18, 2008, by and between John Giere and Medis
      Technologies Ltd. +10.21*
            Employment
      Agreement, dated February 17, 2009, by and between Thomas Finn and Medis
      Technologies Ltd. +10.22**
            Distribution
      Agreement, dated as of August 10, 2004, between ASE International Inc. and
      Medis Technologies Ltd. (12)10.25
            Form
      of stock option agreement (employee) (13)10.26
            Form
      of stock option agreement (non-employee) (13)10.27
            Form
      of restricted stock agreement (employee) (13)10.28
            Form
      of restricted stock agreement (non-employee) (13)14.1
            Code
      of Ethics (14)21.1
            Subsidiaries
      of the Registrant (15)23.1
            Consent
      of Kost Forer Gabbay & Kasierer, a Member of Ernst & Young Global
      +31.1
            Rule 13a-14(a)/15d-14(a)
      certification of Chief Executive Officer31.2
            Rule 13a-14(a)/15d-14(a)
      certification of Chief Financial Officer32.1
            Section 1350
      certifications+




*
            Management
      contract or compensatory plan




**
            Portions
      of this document have been omitted and submitted separately with the
      Securities and Exchange Commission pursuant to a request for “Confidential
      Treatment.”




+
            Filed
      on March 31, 2009 as an exhibit to this annual report on Form
      10-K.




(1)
            Filed
      as an exhibit to the Quarterly Report on Form 10-Q dated June 30,
      2006 of Medis Technologies Ltd. and incorporated herein by
      reference.


(2)
            Filed
      as an exhibit to the Current Report on Form 8-K dated December 18, 2007 of
      Medis Technologies Ltd. and incorporated herein by
    reference.


(3)
            Filed
      as an exhibit to the Current Report on Form 8-K dated November 9,
      2006 of Medis Technologies Ltd. and incorporated herein by
      reference.


(4)
            Filed
      as an exhibit to the Quarterly Report on Form 10-Q for the quarter
      ended September 30, 2004 of Medis Technologies Ltd. and incorporated
      herein by reference.


(5)
            Filed
      as Annex B to the Definitive Proxy Statement on Schedule 14A for the 2007
      Annual Meeting of Stockholders of Medis Technologies Ltd. and incorporated
      herein by reference.


(6)
            Filed
      as an exhibit to the Registration Statement on Form S-1, as amended
      (File No. 333-73276), of Medis Technologies Ltd. and incorporated herein
      by reference.


(7)
            Filed
      as an exhibit to the Annual Report on Form 10-K for the year ended
      December 31, 2004 of Medis Technologies Ltd. and incorporated herein by
      reference.


(8)
            Filed
      as an exhibit to the Quarterly Report on Form 10-Q for the quarter
      ended September 30, 2005 of Medis Technologies Ltd. and incorporated
      herein by reference.


(9)
            Filed
      as an exhibit to the Registration Statement on Form S-3 (File No.
      333-140508) of Medis Technologies Ltd. and incorporated herein by
      reference.


(10)
            Filed
      as an exhibit to the Current Report on Form 8-K dated February 10, 2009 of
      Medis Technologies Ltd. and incorporated herein by
    reference.


(11)
            Filed
      as an exhibit to the Current Report on Form 8-K dated September 25, 2008
      of Medis Technologies Ltd. and incorporated herein by
      reference.


(12)
            Filed
      as an exhibit to the Current Report on Form 8-K dated August 10, 2004
      of Medis Technologies Ltd. and incorporated herein by
      reference.


(13)
            Filed
      as an exhibit to the Quarterly Report on Form 10-Q dated June 30, 2007 of
      Medis Technologies Ltd. and incorporated herein by
    reference.


(14)
            Filed
      as an exhibit to the Annual Report on Form 10-K for the year ended
      December 31, 2003 of Medis Technologies Ltd. and incorporated herein by
      reference.


(15)
            Filed
      as an exhibit to the Annual Report on Form 10-K for the year ended
      December 31, 2006 of Medis Technologies Ltd. and incorporated herein by
      reference.












28


SIGNATURES




Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused Amendment No. 1 to this report to be
signed on its behalf by the undersigned, thereunto duly authorized.




MEDIS TECHNOLOGIES
      LTD.April
      30, 2009
              By:
              /s/ Jose
      MejiaJose
      MejiaChairman
      and Chief Executive Officer
















































29