U.S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q



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

                         FOR THE QUARTERLY PERIOD ENDED
                                 MARCH 31, 2001


                         COMMISSION FILE NUMBER: 0-30391

                             MEDIS TECHNOLOGIES LTD.
             (Exact Name of Registrant as Specified in its Charter)

         DELAWARE                                           13-3669062
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                        Identification Number)

                                805 THIRD AVENUE
                            NEW YORK, NEW YORK 10022
              (Address of Principal Executive Offices and Zip Code)

                                 (212) 935-8484
              (Registrant's Telephone Number, Including Area Code)

     CHECK WHETHER THE REGISTRANT: (1) FILED ALL REPORTS REQUIRED TO BE FILED BY
SECTION 13 OR 15(D) OF THE SECURITIES  EXCHANGE ACT OF 1934 DURING THE PRECEDING
12 MONTHS (OR FOR SUCH SHORTER  PERIOD THAT THE  REGISTRANT WAS REQUIRED TO FILE
SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST
90 DAYS.

                      YES |X|                            NO |  |

The number of shares of Common Stock,  par value $.01 per share,  outstanding as
of May 1, 2001 was 16,830,991.

<PAGE>


                             MEDIS TECHNOLOGIES LTD.

                               INDEX TO FORM 10-Q

                      FOR THE QUARTER ENDED MARCH 31, 2001


PART I.   FINANCIAL INFORMATION                                      PAGE NUMBER
                                                                     -----------


Item 1.   Condensed Consolidated Financial Statements

          Condensed Consolidated Balance Sheets
          December 31, 2000 and March 31, 2001 (Unaudited)                  2

          Condensed Consolidated Statements of Operations (Unaudited)
          Three months ended March 31, 2000 and 2001                        3

          Condensed Consolidated Statements of Cash Flows (Unaudited)
          three months ended March 31, 2000 and 2001                        4

          Notes to Condensed Consolidated Financial Statements (Unaudited)  5-8

Item 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations                               8-12

Item 3.   Quantitative and Qualitative Disclosures About Market Risk        12


PART II.  OTHER INFORMATION


Item 6.          Exhibits and Reports on Form 8-K                           14

<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

                    MEDIS TECHNOLOGIES LTD. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                             DECEMBER 31, 2000       MARCH 31, 2001
                                                             -----------------       --------------
                         ASSETS                                                        (UNAUDITED)
<S>                                                             <C>                     <C>

Current assets
    Cash and cash equivalents                                   $   2,885,000           $  1,582,000
    Accounts receivable - other                                       228,000                 88,000
    Prepaid expenses and other current assets                         245,000                240,000
                                                                -------------           ------------

         Total current assets                                       3,358,000              1,910,000

Property and equipment, net                                         1,045,000              1,059,000
Intangible assets, net                                             82,799,000             77,509,000
                                                                -------------           ------------

         Total assets                                           $  87,202,000           $ 80,478,000
                                                                =============           ============

                     LIABILITIES AND
                  STOCKHOLDERS' EQUITY

Current liabilities
    Accounts payable                                            $     139,000           $    147,000
    Accrued expenses and other current liabilities                    697,000                747,000
                                                                -------------           ------------

         Total current liabilities                                    836,000                894,000

Accrued severance pay                                                 224,000                251,000
                                                                -------------           ------------

                                                                    1,060,000              1,145,000

Commitments and contingencies

Stockholders' equity
    Preferred stock, $.01 par value; 10,000 shares
      authorized; none issued
    Common stock, $.01 par value; 25,000,000 shares
      authorized; 16,830,991 issued and outstanding
      at December 31, 2000 and March 31, 2001                         168,000                168,000
    Additional paid-in capital                                    136,819,000            137,059,000
    Accumulated deficit                                           (49,078,000)           (56,646,000)
    Deferred compensation costs                                    (1,767,000)            (1,248,000)
                                                                -------------           -------------

                                                                   86,142,000             79,333,000
                                                                -------------           ------------

         Total liabilities and stockholders' equity             $  87,202,000           $ 80,478,000
                                                                =============           ============

The accompanying notes are an integral part of these statements.

</TABLE>

<PAGE>

                    MEDIS TECHNOLOGIES LTD. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


                                                           THREE MONTHS ENDED
                                                                MARCH 31,
                                                         ----------------------
                                                          2000*          2001
                                                         ---------    ---------


 Sales                                                 --           $     --

 Cost of sales                                         --                 --

            Gross profit                               --                 --

 Operating expenses
     Research and development costs, net               781,000        1,049,000
     Selling, general and administrative expenses      651,000        1,248,000
     Amortization of intangible assets                 628,000        5,290,000
                                                    -----------     -----------

          Total operating expenses                   2,060,000        7,587,000
                                                    -----------     -----------

          Loss from operations                      (2,060,000)      (7,587,000)

 Other income (expenses)
     Interest and other income                          40,000           30,000
     Interest expense                                   (3,000)         (11,000)
                                                    ----------      -----------

                                                        37,000          19,000
                                                    ----------      -----------


          Loss before minority interest             (2,023,000)      (7,568,000)


 Minority interest in loss of subsidiary               482,000                -
                                                    ----------      -----------


          NET LOSS                                 $(1,541,000)     $(7,568,000)

 Basic and diluted net loss per share                   $ (.15)          $ (.45)

 Weighted-average shares used in computing basic
     and diluted net loss per share                 10,429,000       16,830,991
                                                    ==========      ===========

   The accompanying notes are an integral part of these statements.

 * See note B-3

<PAGE>

<TABLE>
<CAPTION>

                    MEDIS TECHNOLOGIES LTD. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                                                                  THREE MONTHS ENDED MARCH 31,
                                                                           --------------------------------------------

                                                                                  2000*                  2001
                                                                                  ----                   ----

<S>                                                                              <C>                <C>
Cash flows from operating activities
   Net loss                                                                      $(1,541,000)       $(7,568,000)
   Adjustments to reconcile net loss to net
     cash used in operating activities
       Depreciation                                                                   92,000            106,000
       Amortization of intangible assets                                             628,000          5,290,000
       Changes in accrued severance payable                                           25,000             27,000
       Losses of minority interest                                                  (482,000)                 -
       Non-cash compensation expense                                                 188,000            759,000
       Write-off of acquired in-process research and
         development                                                                  50,000                  -
   Changes in operating assets and liabilities
       Accounts receivable - other                                                   (16,000)           140,000
       Prepaid expenses and other current assets                                      27,000              5,000
       Accounts payable                                                                1,000              8,000
       Accrued expenses and other current liabilities                                 23,000             50,000
                                                                                  -----------        -----------

         Net cash used in operating activities                                    (1,005,000)        (1,183,000)
                                                                                  -----------        -----------

Cash flows from investing activities
   Purchase of property and equipment                                                 (6,000)          (120,000)
   Proceeds from sale of property and equipment                                       22,000                  -
   Acquisition by a subsidiary of additional shares of a
        majority-owned subsidiary                                                    (50,000)                 -
   Acquisition of shares of a majority-owned subsidiary                             (185,000)                 -
                                                                                  -----------        -----------

           Net cash used in investing activities                                    (219,000)          (120,000)
                                                                                  -----------        -----------

Cash flows from financing activities
   Repayment of long-term debt                                                       (49,000)                 -
   Proceeds from exercise of stock options of a majority-owned subsidiary
                                                                                     336,000                  -
   Proceeds from issuance of common stock                                          2,895,000                  -
   Direct costs of exchange of shares                                               (179,000)                 -
                                                                                  -----------        -----------

           Net cash provided by financing activities                               3,003,000                  -
                                                                                  -----------        -----------

           Net increase (decrease) in cash and cash equivalents                    1,779,000         (1,303,000)

Cash and cash equivalents at beginning of period                                   1,842,000          2,885,000
                                                                                  -----------        -----------
Cash and cash equivalents at end of period                                       $ 3,621,000        $ 1,582,000
                                                                                  ===========        ===========

Supplemental disclosures of cash flow information:
    Cash paid during the period for
       Interest                                                                 $      3,700        $     2,000
       Income taxes                                                             $      2,000        $    29,000
    Non-cash investing and financing activities:
       Grant of stock options to employees                                      $  1,430,000        $         -
The accompanying notes are an integral part of these statements

* See note B-3
</TABLE>


<PAGE>



                    MEDIS TECHNOLOGIES LTD. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE A - NATURE OF OPERATIONS AND BASIS OF PRESENTATION


     Medis  Technologies  Ltd. (the  "Company"),  a Delaware  corporation,  is a
holding  company  which,  through  its  wholly-owned  subsidiary,  Medis El Ltd.
("Medis El"),  engages in research and  development  of  technology  products to
license,  sell,  or enter  into joint  ventures  with  large  corporations.  The
Company's  primary  focus is the  development  and  commercialization  of direct
liquid  methanol  (DLM) fuel cells and the  refueling  cartridges  for such fuel
cells,  for use in  portable  electronic  devices  using as their  power  source
rechargeable or disposable  batteries  including cell phones,  personal  digital
assistants,  laptop computers and certain military devices.  The Company's other
technologies,  which  are in  various  stages  of  development,  include  highly
electrically  conductive  polymers,  the  CellScan,  which has been  renamed the
CellMatrix system,  toroidal compressor and internal combustion engine, stirling
cycle linear system and reciprocating electrical machine.

     The accompanying condensed consolidated financial statements should be read
in  conjunction  with the following  notes and with the  consolidated  financial
statements  for the year ended  December 31, 2000 and related notes  included in
the  Company's  Annual  Report on Form  10-K.  Information  in the  accompanying
condensed consolidated financial statements for the three months ended March 31,
2000 and 2001 is unaudited.  The condensed  consolidated financial statements as
of March 31,  2001 and for the three  months  ended March 31, 2000 and 2001 have
been  prepared in  accordance  with  generally  accepted  accounting  principles
applicable  to  interim  financial  information  and the rules  and  regulations
promulgated  by  the  Securities  and  Exchange  Commission.  Accordingly,  such
condensed   consolidated   financial  statements  do  not  include  all  of  the
information and footnote disclosures required in annual financial statements. In
the opinion of the Company's  management,  the March 31, 2000 and 2001 unaudited
condensed  consolidated  interim financial  statements  include all adjustments,
consisting of normal recurring  adjustments necessary for a fair presentation of
such condensed consolidated financial statements.  The results of operations for
the three  months  ended March 31, 2001 are not  necessarily  indicative  of the
results to be expected for the entire year.

     The condensed  consolidated  balance sheet as of December 31, 2000 has been
derived from the audited financial  statements at that date but does not include
all of the  information  and notes  required by  generally  accepted  accounting
principles for complete financial statements.

NOTE B - CERTAIN TRANSACTIONS

1.   EXCHANGE OFFER - On April 24, 2000, the Company  commenced an offer for the
     approximately 36% of Medis El it did not already beneficially own, offering
     1.37 of its shares of common stock for each  ordinary  share  tendered (the
     "Exchange  Offer").  At the  expiration  of the  offer  on  June  5,  2000,
     shareholders  of Medis El  tendered  an  aggregate  of  3,643,241  ordinary
     shares,  giving the Company  ownership of  approximately  98% of Medis El's
     outstanding  ordinary  shares.  The remaining  182,669 shares passed to the
     Company by  operation  of Israeli law upon the  expiration  of the Exchange
     Offer.  The Company  accounted for the exchange using the purchase  method.
     The Company  calculated the purchase price of the 3,825,910 shares, as well
     as options to purchase an additional  184,000  shares of Medis El, based on
     the market  price of Medis El  ordinary  shares.  Such  purchase  price was
     $89,393,000.  Based on an independent  appraisal  performed on December 20,
     1999,  the Company  allocated the excess of purchase  price over net assets
     acquired to goodwill ($81,867,000), acquired technology assets ($6,071,000)
     and in-process research and development,  which was charged to research and
     development expense on the acquisition date ($561,000). The Company intends
     to amortize  the acquired  technology  assets over their  remaining  useful
     lives of three years and the  goodwill  over five  years.  During the three
     months  ended March 31, 2001,  the Company  recorded  amortization  expense
     aggregating  approximately  $4,599,000  related  to this  transaction.  The
     following pro-forma information gives effect to the Exchange Offer as if it
     had  occurred at the  beginning  of the three month  period ended March 31,
     2000:

                                                Three Months Ended
                                                  March 31, 2000
                                                           -
                                               ----------------------

        Net loss                                    $(7,183,000)
        Net loss per common share                         $(.46)

2.   OPTION TO ACQUIRE  REMAINING  INTEREST IN  SUBSIDIARY  - The Company has an
     option to acquire the remaining 7% of the outstanding shares of More Energy
     Ltd., a subsidiary  of Medis El, held by its general  manager and director,
     for 120,000 shares of the Company's common stock, payable by November 2004.
     The  purchase  price  of the  option  is  $500,000.  The  Company  paid  an
     additional  $10,000 upon execution of the option agreement as consideration
     for the right to acquire the option  until April 15,  2001.  In April 2001,
     the Company paid an  additional  $10,000 to extend the right to acquire the
     option  until July 31,  2001.  The Company  intends to exercise the option.
     Subject to a termination  provision,  the Company has the right to exercise
     the option to acquire a maximum of 25% of the More  Energy  Ltd.  shares in
     each of the four 12 month  periods  following  the date of the  agreement -
     with any  unexercised  amount being  carried over to the  following  twelve
     month period.


3.   ADJUSTMENT  OF PRIOR  YEAR'S  QUARTERLY  FINANCIAL  STATEMENTS.  -  Certain
     transactions incurred during the year ended December 31, 2000 were adjusted
     at year end. These  adjustments  were made to reflect direct costs incurred
     in connection  with the Exchange Offer as a reduction of equity rather than
     as an  expense  and to  reflect  as  goodwill,  rather  than as a charge to
     stockholders'  equity,  the excess of the purchase price over fair value of
     net assets  acquired  in a  purchase  of stock from Medis El. The effect of
     such adjustments on the Company's financial statements for the three months
     ended  March  31,  2000  is a  decrease  in the net  loss of  approximately
     $164,000.


4.   FUEL CELL TECHNOLOGY  COOPERATION AGREEMENT - In February 2001, the Company
     entered into a Cooperation  Agreement  with Sagem SA  ("Sagem"),  a leading
     European  manufacturer of sophisticated  electronics systems and equipment,
     to  jointly  develop a product  to power  cell  phones  and other  portable
     electronic devices  manufactured by Sagem using the Company's DLM fuel cell
     technologies.



NOTE C - SUBSEQUENT EVENTS


1.   In April  2001,  the  Company  initiated  efforts  to  raise  approximately
     $16,000,000  through  private  placements of its  securities.  As of May 8,
     2001,  the  Company  had  received   commitments   solely  from  accredited
     investors,   including  its  chairman  and  president,   which   aggregated
     approximately $6,020,000.

2.   In 2001,  as  contemplated  as part of the  Medis El  exchange  offer,  the
     Company  commenced  seeking  approval from the Israeli tax  authorities  to
     substitute outstanding Medis El stock options held by employees of Medis El
     for options to  purchase  shares of the  Company's  common  stock.  If such
     approval is obtained, option substitution will be at the exchange ratio. No
     formal application to the Israeli tax authorities has yet been made.

3.   On April 5, 2001, the Company entered into a mutually  exclusive  agreement
     with General Dynamics  Government  Systems  Corporation,  a unit of General
     Dynamics  Corporation  ("GD"),  to develop  and market  fuel cells and fuel
     cell-powered  portable  electronic devices for the United States Department
     of Defense (the "DOD").  As part of such agreement,  among other things, GD
     agreed to market the Company's DLM fuel cell products to the DOD.

NOTE D - LIQUIDITY

     Since  inception,  the Company has incurred  operating  losses and has used
cash in its  operations.  Accordingly,  the  Company  has  relied  on  financing
activities,  principally  the  sale of its  stock,  to  fund  its  research  and
development  activities.  The Company  believes  this  dependence  will continue
unless it is able to successfully develop and market its technologies.  However,
there can be no  assurance  that the Company  will be able to continue to obtain
financing or successfully develop and market its technologies.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

FORWARD LOOKING STATEMENTS

     Some of the information in this quarterly  report contains  forward-looking
statements that involve  substantial risks and  uncertainties.  You can identify
these  statements  by  forward-looking  words such as "may,"  "will,"  "expect,"
"anticipate," "believe," "estimate," and "continue" or similar words. You should
read statements that contain these words carefully because they:

o    discuss our future expectations;
o    contain projections of our future results of operations or of our financial
     condition; or
o    state other "forward-looking" information.

We believe it is important to  communicate  our  expectations  to our investors.
However,  there may be events in the future  that we are not able to  accurately
predict or over which we have no control.  The risk factors listed in our Annual
Report on Form 10-K for the fiscal year ended  December 31, 2000, as well as any
cautionary  language  in this  quarterly  report,  provide  examples  of  risks,
uncertainties  and events that may cause our actual results to differ materially
from the expectations we describe in our forward-looking  statements. You should
be aware that the  occurrence of the events  described in these risk factors and
elsewhere in this quarterly  report could have a material  adverse effect on our
business, operating results and financial condition.

INTRODUCTION

     This presentation  includes the operations of our wholly and majority owned
subsidiaries, including Medis El, unless we tell you otherwise.

RESULTS OF OPERATIONS


     From our inception in April 1992 through March 31, 2001 we have generated a
cumulative net loss of approximately $53,675,000,  including approximately $23.9
million  from  amortization  expense.  We expect to incur  additional  operating
losses during the remainder of 2001 and possibly  thereafter,  principally  as a
result  of  our  continuing   anticipated   research  and   development   costs,
amortization expense and the uncertainty of bringing our fuel cell technology or
any of our other  technologies  to  commercial  success.  We have  increased our
research  and  development  budget  since 1999 from  approximately  $2.7 million
annually to approximately $4.5 million annually; however, we anticipate that our
failure to successfully  commercially develop our fuel cell technology or any of
our other  technologies  will force us to curtail our spending levels until such
time,  if ever,  as we generate  revenues or otherwise  receive funds from third
party sources.  If we begin to market and sell any of our technologies,  we will
increase such expenses to the extent  necessary,  which we expect to fund out of
revenues.

QUARTER ENDED MARCH 31, 2001 COMPARED TO QUARTER ENDED MARCH 31, 2000

     We sustained a net loss of  $7,568,000  during the quarter  ended March 31,
2001,  compared to  $1,541,000  during the quarter  ended  March 31,  2000.  The
increase  in the  net  losses  can  primarily  be  attributed  to  increases  in
amortization of intangible assets acquired in connection with the acquisition of
shares in the Medis El exchange offer,  research and development costs, selling,
general and administrative expenses, including costs related to the issuances of
stock options and warrants.

     Research and  development  costs  increased to  $1,049,000  for the quarter
ended March 31, 2001, as compared to $781,000 during the quarter ended March 31,
2000.  The  increases  can be  largely  attributed  to  increased  research  and
development activity pertaining to:

     o    Development  of our DLM fuel  cells,  in which  we  incurred  costs of
          approximately  $320,000  during  the  quarter  ended  March 31,  2001,
          compared to costs of  approximately  $143,000 during the quarter ended
          March 31, 2000.

     o    The refinement of the next generation  CellMatrix  system, in which we
          incurred  costs of  approximately  $560,000  during the quarter  ended
          March 31, 2001, compared to costs of approximately $485,000 during the
          quarter ended March 31, 2000.

     o    Development  of the toroidal  engine and  compressor  and the stirling
          cycle  linear  system,  in which we  incurred  costs of  approximately
          $164,000 during the quarter ended March 31, 2001, compared to costs of
          approximately $131,000 during the quarter ended March 31, 2000.

     Selling, general and administrative expenses during the quarter ended March
31,  2001  amounted  to  approximately  $1,248,000,  compared  to  approximately
$651,000  during the quarter ended March 31, 2000. The increase can be primarily
attributed  to  non-cash  charges of  approximately  $549,000  relating to stock
options and warrants  issued to officers,  employees,  consultants  and advisory
board members,  compared to charges of approximately $144,000 during the quarter
ended March 31,  2000,  as well as  increases  in salary and other  compensation
costs.

     Amortization of intangible assets amounted to $5,290,000 during the quarter
ended March 31, 2001,  compared to $628,000  during the quarter  ended March 31,
2000. This increase was primarily due to amortization  expense of  approximately
$4,599,000  during the three months  ended March 31, 2001,  relating to goodwill
and  acquired  technology  assets  approximating   $81,867,000  and  $6,071,000,
respectively,  acquired upon the completion of the Medis El exchange  offer,  in
June 2000.

     Management  believes  that,  as  an  additional  operational   measurement,
earnings  (loss) before  interest,  taxes,  depreciation  and  amortization,  or
EBITDA,   is  useful  and  meaningful  to  an  understanding  of  our  operating
performance.  EBITDA should not be considered in isolation or as a  substitution
for net income (loss) or cash flow data or as a measure of our  profitability or
liquidity.  Items excluded from EBITDA,  such as depreciation and  amortization,
are  significant   components  in  understanding  and  assessing  our  financial
performance. All companies do not calculate EBITDA the same way.

     The computation of EBITDA for the years ended December 31, 2000 and 1999 is
set forth in the table below:

                                            Three Months Ended
                                                March 31,
                                        -----------------------------
                                             2000            2001
                                        -------------  --------------
          Net Loss                      $(1,541,000)     $(7,568,000)
          Add: interest expense               3,000           11,000
          Less: interest income             (40,000)         (30,000)
          Add: amortization                 628,000        5,290,000
          Add: depreciation                  92,000          106,000
                                        -------------  --------------
               EBITDA                    $ (858,000)     $(2,191,000)
                                        =============  ==============

     EBITDA includes as an expense non-cash compensation related to the issuance
of stock  options and stock  purchase  warrants of  approximately  $759,000  and
$188,000  for the three  months  ended  March 31,  2001 and 2000,  respectively.

     The increase in loss before interest,  taxes, depreciation and amortization
for the quarter  ended March 31, 2001 as compared to the quarter ended March 31,
2000 occurred  primarily due to increases in research and development  costs and
selling,  general and administrative  expenses for the reasons discussed earlier
in this section.

LIQUIDITY AND CAPITAL RESOURCES

     We have historically financed our operations primarily through the proceeds
of investor equity  financing,  long-term bank loans and grants to Medis El from
the Chief  Scientist  of the  Ministry of Industry  and  Commerce of Israel with
respect  to the  CellScan,  initial  sales of our  products  and  fees  from the
granting of exclusive distribution rights.

     In April 2001,  we  initiated  efforts to raise  approximately  $16,000,000
through the private sale of equity  securities to  accredited  investors to fund
construction  of  the  pilot  plants  for  the  development  of  our  fuel  cell
technologies  as well as for working  capital.  As of May 15, 2001,  we received
commitments  solely  from  accredited  investors,  including  our  chairman  and
president, which aggregated approximately $6,500,000.

     For the quarter ended March 31, 2001, net cash used in operating activities
was $1,183,000,  as compared to $1,005,000 for the quarter ended March 31, 2000.
The increase was primarily attributable to increases in research and development
and  selling  general and  administrative  expenses  during the period,  for the
reasons  discussed  above,  offset by changes in operating  asset and  liability
balances.

     For the quarter ended March 31, 2001, net cash used in investing activities
was $120,000, which represented purchases of property and equipment, compared to
$219,000 during the quarter ended March 31, 2000, which represented purchases of
shares of Medis El and More  Energy  not owned by us  aggregating  $235,000  and
purchases of property and equipment of $6,000, offset by proceeds from disposals
of fixed assets of $22,000.

     For the quarter  ended March 31,  2001,  no cash was  provided by financing
activities,  compared to $3,003,000  being  provided for the quarter ended March
31, 2000.  The cash  provided by financing  activities  during the quarter ended
March 31, 2000 was primarily due to funds raised from private  placements of our
securities and the exercise of Medis El options for an aggregate  exercise price
of $3,231,000,  offset by direct cost of the Medis El exchange offer of $179,000
and the repayment of long term debt of $49,000.

     As of March 31,  2001,  we had  approximately  $1,582,000  in cash and cash
equivalents,  as well as an unused $5,000,000 revolving credit line. Our working
capital and capital requirements at any given time depend upon numerous factors,
including, but not limited to:

     o the progress of research and development programs;

     o the status of our technologies; and

     o the  level  of  resources  that  we  devote  to  the  development  of our
       technologies, patents, marketing and sales capabilities.

     Another  contributing  factor is the status of  collaborative  arrangements
with businesses and institutes for research and development.


     We estimate that we will need  approximately  $8,000,000 to  $10,000,000 to
construct the pilot plants for our fuel cell technologies, which funds we expect
to obtain from the proceeds of the sale of our securities.

     Management  expects  that,  as of March  31,  2001,  our  available  funds,
including  our  unused  $5,000,000  revolving  credit  line,  and the  aggregate
proceeds of our planned private sale of equity  securities  described above, are
sufficient  to fund the  construction  of our fuel cell pilot plants and support
our  operating  activities  for at least 24 months.  Beyond  such time,  we will
require capital  infusions of cash to continue our  operations,  whether through
debt  financing,  issuance of shares or from  companies  or other  organizations
assisting in the development of our technologies.  However, to the extent we are
unable to raise sufficient funds from the planned private sale of our securities
or raise or  acquire  additional  other  funds,  we will  curtail  research  and
development of one or more technologies until such time as we acquire additional
funds.

<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

DISCLOSURE ABOUT MARKET RISK

IMPACT OF INFLATION AND DEVALUATION ON RESULTS OF OPERATIONS, LIABILITIES AND
     ASSETS


     In  connection  with our currency  use, we operate in a mixed  environment.
Payroll  is paid in our local  currency  and the local  currency  of each of our
subsidiaries.  Consideration  for virtually all sales and Medis El's bank loans,
which have been  repaid in full as of March 31,  2001,  are either in dollars or
dollar-linked  currency.  As a result,  not all monetary assets and all monetary
liabilities  are  linked  to the same base in the same  amount at all  points in
time,  which may cause currency  fluctuation  related  losses.  In order to help
minimize  such  losses,  Medis El  currently  invests  its liquid  funds in both
dollar-linked and NIS-based assets.

     For many years prior to 1986, the Israeli economy was characterized by high
rates of inflation and  devaluation of the Israeli  currency  against the United
States  dollar  and other  currencies.  Since  the  institution  of the  Israeli
Economic Program in 1985,  inflation,  while continuing,  has been significantly
reduced and the rate of devaluation has been substantially diminished.  However,
Israel effected devaluations of the NIS against the dollar as follows:

                               1996      3.7%
                               1997      8.8
                               1998     17.6
                               1999    (0.17)
                               2000     (2.7)


     In 1996,  1999 and 2000, the rate of inflation in Israel  exceeded the rate
of devaluation  of the NIS against the dollar,  but in 1998 and 1997 the rate of
devaluation  of the NIS against the dollar  exceeded  the rate of  inflation  in
Israel.  In 2000,  there was no inflation in Israel and the NIS  appreciated  by
2.7% against the dollar.

IMPACT OF POLITICAL AND ECONOMIC CONDITIONS

     The state of hostility which has existed in varying degrees in Israel since
1948,  its  unfavorable  balance of payments  and its history of  inflation  and
currency devaluation, all represent uncertainties which may adversely affect our
business.

PART II - OTHER INFORMATION

Not applicable.

<PAGE>

                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  Report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized




                                                /s/ ROBERT K. LIFTON
                                                -------------------------
                                                Robert K. Lifton
                                                Chairman and Chief
                                                Executive Officer


                                                /s/ ISRAEL FISHER
                                                --------------------------
                                                Israel Fisher
                                                Vice President-Finance
                                                (Principal Financial and
                                                Accounting Officer)

Date: May 15, 2001