<PAGE>

                     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
                                  JUNE 30, 2002


                         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)

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

                           YES /X/              NO / /

The number of shares of Common Stock, par value $.01 per share, outstanding as
of August 7, 2002 was 21,098,959.

<PAGE>


                             MEDIS TECHNOLOGIES LTD.

                               INDEX TO FORM 10-Q

                       FOR THE QUARTER ENDED JUNE 30, 2002

<TABLE>
<CAPTION>
                                                                                        PAGE NUMBER
                                                                                        -----------
<S>               <C>                                                                   <C>
PART I. FINANCIAL INFORMATION


Item 1.           Financial Statements


                  Condensed Consolidated Balance Sheets
                  December 31, 2001 and June 30, 2002 (Unaudited)                                3


                  Condensed Consolidated Statements of Operations (Unaudited)
                  Three and six months ended June 30, 2001 and 2002                              4


                  Condensed Consolidated Statements of Cash Flows (Unaudited)
                  Six months ended June 30, 2001 and 2002                                        5


                  Notes to Condensed Consolidated Financial Statements (Unaudited)             6-9


Item 2.           Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                                         9-14


Item 3.           Quantitative and Qualitative Disclosures About Market Risk                    15


PART II. OTHER INFORMATION

Item 4.           Submission of Matters to a Vote of Security Holders                        15-16

Item 6.           Exhibits and Reports on Form 8-K                                              16
</TABLE>


<PAGE>

                                 PART I - FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

                    MEDIS TECHNOLOGIES LTD. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                             DECEMBER 31, 2001        JUNE 30, 2002
                                                             -----------------        --------------
                                                                                       (UNAUDITED)
<S>                                                          <C>                      <C>
                         ASSETS
Current assets
    Cash and cash equivalents                                   $   5,999,000           $  9,770,000
    Accounts receivable - trade                                            --                 30,000
    Accounts receivable - other                                        74,000                 70,000
    Prepaid expenses and other current assets                         403,000                163,000
                                                                -------------          -------------

         Total current assets                                       6,476,000             10,033,000

Property and equipment, net                                         1,228,000              1,225,000
Intangible assets, net                                             61,670,000             60,340,000
Other assets                                                          520,000                520,000
                                                                -------------          -------------

         Total assets                                            $ 69,894,000           $ 72,118,000
                                                                =============          =============

                     LIABILITIES AND
                  STOCKHOLDERS' EQUITY

Current liabilities
    Accounts payable                                             $    165,000           $    259,000
    Accrued expenses and other current liabilities                    822,000                992,000
                                                                -------------          -------------

         Total current liabilities                                    987,000              1,251,000

Accrued severance pay                                                 273,000                385,000
                                                                -------------          -------------

         Total liabilities                                          1,260,000              1,636,000

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*; 17,532,779 and 21,098,959 issued
      and outstanding at December 31, 2001
      and June 30, 2002, respectively                                 175,000                211,000
    Additional paid-in capital                                    152,425,000            159,328,000
    Accumulated deficit                                           (83,844,000)           (89,057,000)
    Deferred compensation costs                                      (122,000)                    --
                                                                -------------          -------------

         Total stockholders' equity                                68,634,000             70,482,000
                                                                -------------          -------------

         Total liabilities and stockholders' equity              $ 69,894,000           $ 72,118,000
                                                                =============          =============
</TABLE>

The accompanying notes are an integral part of these statements.

*  See note B-8


                                       3
<PAGE>


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

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED                  SIX MONTHS ENDED
                                                                    JUNE 30,                          JUNE 30,
                                                          -----------------------------     -----------------------------
                                                              2001             2002             2001             2002
                                                          ------------     ------------     ------------     ------------
<S>                                                       <C>              <C>              <C>              <C>
Sales                                                     $         --     $     36,000     $         --     $    116,000

Cost of sales                                                       --           27,000               --           78,000
                                                          ------------     ------------     ------------     ------------

          Gross profit                                              --            9,000               --           38,000

Operating expenses
    Research and development costs                             909,000          989,000        1,958,000        1,940,000
    Selling, general and
      administrative expenses                                1,274,000          953,000        2,522,000        2,012,000
    Amortization of intangible assets                        5,280,000          663,000       10,570,000        1,330,000
                                                          ------------     ------------     ------------     ------------

         Total operating expenses                            7,463,000        2,605,000       15,050,000        5,282,000
                                                          ------------     ------------     ------------     ------------

         Loss from operations                               (7,463,000)      (2,596,000)     (15,050,000)      (5,244,000)

Other income (expenses)
    Interest income                                             40,000           45,000           70,000           69,000
    Interest and other expense                                 (17,000)         (14,000)         (28,000)         (38,000)
                                                          ------------     ------------     ------------     ------------

                                                                23,000           31,000           42,000           31,000
                                                          ------------     ------------     ------------     ------------

         NET LOSS                                           (7,440,000)      (2,565,000)     (15,008,000)      (5,213,000)

Basic and diluted net loss per share                      $       (.38)*   $       (.12)    $       (.77)*   $       (.25)
                                                          ============     ============     ============     ============

 Weighted-average shares used in
    computing basic and diluted net loss
    per share                                               19,594,657*      21,098,959       19,450,189*      20,689,731
                                                          ============     ============     ============     ============
</TABLE>

The accompanying notes are an integral part of these statements.

*See note B-1


                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                     SIX MONTHS ENDED JUNE 30,
                                                                    ---------------------------
                                                                        2001            2002
                                                                    ------------    -----------
<S>                                                                 <C>             <C>
Cash flows from operating activities
   Net loss                                                         $(15,008,000)   $(5,213,000)
   Adjustments to reconcile net loss to net
     cash used in operating activities
       Depreciation                                                      213,000        112,000
       Amortization of intangible assets                              10,570,000      1,330,000
       Non-cash compensation expense                                   1,172,000        213,000
       Loss from sale of property and equipment                            4,000         11,000

   Changes in operating assets and liabilities
      Accounts receivable - trade                                             --        (30,000)
      Accounts receivable - other                                         96,000          4,000
      Prepaid expenses and other current assets                           20,000         46,000
      Accounts payable                                                   112,000         94,000
      Changes in accrued severance pay                                    38,000        112,000
      Accrued expenses and other current liabilities                     230,000        170,000
                                                                    ------------    -----------

           Net cash used in operating activities                      (2,553,000)    (3,151,000)
                                                                    ------------    -----------

Cash flows from investing activities
   Purchase of property and equipment                                   (323,000)      (145,000)
   Proceeds from sale of property and equipment                           25,000         25,000
   Acquisition of option to acquire shares of a
    majority-owned subsidiary                                           (520,000)            --
                                                                    ------------    -----------

           Net cash used in investing activities                        (818,000)      (120,000)
                                                                    ------------    -----------

Cash flows from financing activities
   Proceeds from issuance of common stock, net                        10,229,000      7,042,000
                                                                    ------------    -----------

           Net cash provided by financing activities                  10,229,000      7,042,000
                                                                    ------------    -----------

           Net increase in cash and cash equivalents                   6,858,000      3,771,000

Cash and cash equivalents at beginning of period                       2,885,000      5,999,000
                                                                    ------------    -----------
Cash and cash equivalents at end of period                          $  9,743,000    $ 9,770,000
                                                                    ============    ===========

Supplemental disclosures of cash flow information:
    Cash paid during the period for
       Interest                                                     $      7,000    $    10,000
       Income taxes                                                 $      4,000    $    21,000
</TABLE>

The accompanying notes are an integral part of these statements.


                                       5
<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") and its majority--owned subsidiary More Energy Ltd. ("More Energy"),
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 ethanol (DLE) fuel
cells and attendant refueling cartridges for use in portable electronic devices
which currently use rechargeable or disposable batteries as their power source.
These devices include cell phones, personal digital assistants (PDAs), 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, the toroidal compressor and internal combustion engine,
the stirling cycle linear compressor and the 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, 2001 and related notes
included in the Company's Annual Report on Form 10-K. The condensed consolidated
financial statements as of June 30, 2002 and for the three and six months ended
June 30, 2001 and 2002 are unaudited and have been prepared in accordance with
accounting principles generally accepted in the United States 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 June 30, 2001 and 2002 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 and
six months ended June 30, 2002 are not necessarily indicative of the results to
be expected for the entire year.

           The condensed consolidated balance sheet as of December 31, 2001 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. RIGHTS OFFERING AND SHAREHOLDER LOYALTY PROGRAM - On March 18, 2002,
           the Company completed a rights offering in which it offered to its
           existing stockholders subscription rights to purchase an aggregate of
           3,500,000 shares of its common stock at a purchase price of $2.00 per
           share. The Company received gross proceeds of $7,000,000 from the


                                       6
<PAGE>

           rights offering, which proceeds, after deducting related expenses of
           approximately $461,000, are being used for working capital, including
           for the continued development of its DLE fuel cell technology, as
           well as for selling, general and administrative expenses.

           Additionally, pursuant to the Company's shareholder loyalty program,
           all stockholders who purchased shares in the rights offering and meet
           other specified requirements, will receive at no cost on or about
           September 18, 2002 one-tenth of a warrant for each share of common
           stock owned by such stockholder on February 13, 2002. Based upon a
           preliminary review of the number of stockholders who participated in
           the rights offering, the Company expects to issue a maximum of
           1,201,632 warrants to eligible stockholders in the shareholder
           loyalty program. Each full warrant will entitle the holder to
           purchase one share of the Company's common stock at a price of 90% to
           110% of the market price of the Company's common stock on specified
           dates.

           In accordance with Statement of Financial Accounting Standards No.
           128, EARNING PER SHARE, the Company has restated its net loss per
           share for the three and six months ended June 30, 2001 to give
           retroactive effect to shares issued in its March 18, 2002 rights
           offering. Accordingly, as a result of such retroactive adjustment,
           for the three and six month periods ended June 30, 2001, the net loss
           per share decreased from $(.44) to $(.38), or $(.06) per share, and
           from $(.89) to $(.77), or $(.12) per share, respectively.

        2. OPTION TO ACQUIRE REMAINING INTEREST IN SUBSIDIARY - The Company,
           through Medis El, owns 93% of the outstanding ordinary shares of More
           Energy. Additionally, the Company has an option expiring in November
           2004 to acquire the remaining 7% of the outstanding shares of More
           Energy, which are held by its general manager, for 120,000 shares of
           the Company's common stock. The purchase price of the option, which
           was paid in full in June 2001, was $520,000. Subject to a termination
           provision, the Company has the right to exercise the option to
           acquire a maximum of 25% of More Energy's shares not yet beneficially
           owned by Medis El 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 until the expiration of the
           option in November 2004. There has been no exercise of such option to
           date.

        3. EXERCISE OF STOCK OPTIONS - In February and March 2002 certain
           officers and employees of the Company exercised options to acquire an
           aggregate of 66,180 shares of the Company's common stock, for an
           aggregate exercise price of approximately $309,000.

        4. POLYMER AGREEMENT - In January 2002, the Company entered into an
           agreement with a U.S. company to develop a new application for the
           use of its highly electrically conductive polymers (HECPs) in a
           proton exchange membrane fuel cell component which could advance the
           development of such fuel cells for automobile, home and stationary
           power uses. The agreement provides for the Company to receive
           payments aggregating $300,000 over time. The Company recognized
           revenue of approximately $62,000 during the six months ended June 30,
           2002 with respect to such agreement.

        5. MILITARY APPLICATION ORDER - In January 2002, the Company received a
           purchase order from an Israeli electronics manufacturer to define a
           specification and carry out the preliminary design of a DLE fuel cell
           for a new energy pack for infantry soldiers. Upon completion of
           the services under such purchase order, the Company recognized
           revenue of approximately


                                       7
<PAGE>

           $54,000 during the six months ended June 30, 2002 with respect to
           such purchase order.

        6. FUEL CELL CHARGER DEVELOPMENT COOPERATION - The Company is
           cooperating with General Dynamics C4 Systems on the development of a
           highly mobile fuel cell battery charger system to meet the battery
           recharging needs of deployed soldiers of the U.S. Army. As part of
           this development effort, in June 2002, the Company received a $75,000
           purchase order from General Dynamics C4 Systems to develop an initial
           prototype of such a fuel cell charger. As of June 30, 2002, the
           Company had not recognized any revenue pursuant to such purchase
           order.

        7. ADOPTION OF SFAS NO. 142 - In June 2001, the Financial Accounting
           Standards Board issued Statement of Financial Accounting Standards
           No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS ("SFAS No. 142"). SFAS
           No. 142 requires goodwill to be subject to at least an annual
           assessment for impairment with amortization over its estimated useful
           life to be discontinued effective January 1, 2002. The Company has
           adopted SFAS No. 142 and has discontinued amortization of its
           goodwill as of January 1, 2002, which resulted in a reduction of
           approximately $4,600,000 and $9,200,000 in amortization expense for
           the three and six months ended June 30, 2002, respectively.

           Furthermore, in accordance with SFAS 142, the Company has evaluated
           its goodwill and other intangible assets as of January 1, 2002 for
           any possible impairment. In performing such evaluation, the Company
           first determined its reporting units. Once the reporting units were
           established and goodwill was allocated to such reporting units, the
           Company compared the estimated fair value of each reporting unit to
           the carrying amount of the units' assets and liabilities, including
           its goodwill. Since the fair value of its reporting units exceeded
           the carrying amount, the second step of the impairment test, in which
           the current fair market value of the units' assets and liabilities
           would determine the current implied fair value of the units'
           goodwill, was not performed. The Company has also reassessed the
           useful lives of its other intangible assets, previously recorded in
           connection with earlier purchase acquisitions.

           The Company's projected annual amortization expense relating to
           intangible asset balances as of January 1, 2002, other than goodwill,
           for the years 2002 through 2006, is approximately as follow:

<TABLE>
                               <S>                <C>
                               2002               $2,612,000
                               2003               $  847,000
                               2004                       --
                               2005                       --
                               2006                       --
</TABLE>


           The following pro forma information is presented to reflect net loss
           and net loss per share to exclude amortization of goodwill for the
           three and six month periods ended June 30, 2001, as if SFAS No. 142
           was implemented effective January 1, 2001:


                                       8
<PAGE>

<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED        SIX MONTHS ENDED
                                               JUNE 30, 2001             JUNE 30, 2001
                                             ------------------        ----------------
           <S>                               <C>                       <C>
           Reported net loss attributable
             to common shareholders             $(7,440,000)             $(15,008,000)
           Goodwill amortization                  4,615,000                 9,214,000
                                                -----------              ------------
           Adjusted net loss                    $(2,825,000)             $ (5,794,000)
                                                ===========              ============

           Net loss per share
             Reported net loss                  $      (.38)*            $       (.77)*
             Goodwill amortization                      .24                       .47
                                                -----------              ------------
             Adjusted net loss                  $      (.14)             $       (.30)
                                                ===========              ============

</TABLE>
           --------------
           *  See note B-1


        8. CHANGE IN AUTHORIZED SHARES - The Company's stockholders approved
           an amendment to its Certificate of Incorporation on June 12, 2002,
           authorizing an increase in the number of authorized shares of the
           Company's common stock to 35,000,000, which amendment became
           effective in July 2002.

NOTE C - 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 and operations. 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.

NOTE D - REVENUE RECOGNITION POLICY

           Revenues relating to development cooperation agreements are
recognized ratably over the term of the agreement. Revenues from products
shall be recognized upon delivery provided there is persuasive evidence of an
agreement, the amount is fixed or determinable and collection of the related
receivable is probable. Amounts billed and/or received where revenue
recognition criteria have not been fully met, and thus the revenue is not yet
earned, are reflected as liabilities and are offset against the related
receivable.

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:

           - discuss our future expectations;
           - contain projections of our future results of operations or of our
             financial condition; or
           - 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, 2001, 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.


                                       9
<PAGE>

INTRODUCTION

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

RESULTS OF OPERATIONS

           From our inception in April 1992 through June 30, 2002 we have
generated a cumulative net loss of approximately $82,882,000, including
approximately $41,087,000 from amortization expense. We expect to incur
additional operating losses during the remainder of 2002 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
$2,750,000 annually to approximately $4,500,000 annually; however, we anticipate
that a 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 substantial 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.

     SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO SIX MONTHS ENDED JUNE 30, 2001
     AND THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THREE MONTHS ENDED JUNE
     30, 2001

           We sustained net losses of $5,213,000 and $2,565,000 during the six
and three months ended June 30, 2002, respectively, compared to $15,008,000 and
$7,440,000 during the six and three months ended June 30, 2001, respectively.
The decrease in the net losses can primarily be attributed to decreases in
amortization of intangible assets pursuant to our adoption of SFAS No. 142 of
approximately $9,200,000 and $4,600,000, and decreases in costs related to
stock options and warrants of $959,000 and $423,000, for the six and three
months ended June 30, 2002, respectively.

           We recognized revenues of approximately $116,000 and $36,000 and
gross profit of approximately $38,000 and $9,000 during the six and three month
periods ended June 30, 2002, respectively, compared to none during the same
periods in 2001. An aggregate of $62,000 and $36,000 of such revenues recognized
during the six and three month periods ended June 30, 2002, respectively, are
attributable to a January 2002 agreement to develop for a third party an
application for the use of our HECPs in its fuel cell products. The remaining
$54,000 of revenues recognized in the six month period ended June 30, 2002 are
attributable to work performed under a completed January 2002 purchase order in
which we designed a DLE fuel cell for use in a new energy pack for infantry
soldiers.

           Research and development costs amounted to $1,940,000 and $989,000
during the six and three month periods ended June 30, 2002, respectively,
compared to $1,958,000 and $909,000 during the six and three month periods ended
June 30, 2001, respectively. Although total research and development costs
incurred during the six months ended June 30, 2002 did not change significantly
compared to the same period in 2001, costs relating to our fuel cell
technologies increased by approximately $357,000 during the six months ended
June 30, 2002 compared to the six months ended June 30, 2001. This increase in
costs related to our fuel cell technologies was offset by reductions in costs
primarily related to our CellScan of approximately $264,000 and our toroidal
technologies and stirling cycle system of approximately $83,000. Research and
development costs during the three months ended June 30, 2002 increased compared
to the same period in 2001 primarily due to an increase of approximately
$218,000 in costs relating to our fuel cell technologies, partially offset by a
decreases of approximately $53,000


                                       10
<PAGE>

relating to our CellScan and a decrease of approximately $74,000 relating to our
toroidal technologies and stirling cycle system. The research and development
activities for the periods presented include:

           - FUEL CELL TECHNOLOGIES. We incurred costs relating to our fuel cell
             technologies of approximately $1,015,000 and $574,000 during the
             six and three month periods ended June 30, 2002, respectively,
             compared to costs of approximately $658,000 and $356,000 during the
             six and three month periods ended June 30, 2001, respectively. As
             mentioned above, we increased our research and development expenses
             relating to our fuel cell technologies by approximately $357,000
             and $218,000 during the six and three month periods ended June 30,
             2002, respectively, which reflects management's decision to
             continue to devote substantial resources to the development of our
             fuel cell technologies.

           - CELLSCAN. We incurred costs relating to the refinement of the next
             generation CellScan system and on various CellScan research
             activities of approximately $634,000 and $285,000 during the six
             and three month periods ended June 30, 2002, respectively, compared
             to costs of approximately $898,000 and $338,000 during the six and
             three month periods ended June 30, 2001, respectively. The decrease
             can be primarily attributed to lower labor, depreciation and other
             costs.

           - TOROIDAL TECHNOLOGIES AND STIRLING CYCLE SYSTEM. We incurred costs
             relating to our toroidal engine and compressor and the stirling
             cycle linear system of approximately $280,000 and $125,000 during
             the six and three month periods ended June 30, 2002 respectively,
             compared to costs of approximately $363,000 and $199,000 during the
             six and three month periods ended June 30, 2001, respectively. The
             decrease can be primarily attributed to a decrease in costs
             incurred from the use of consultants and subcontractors with
             respect to such technologies.

           Selling, general and administrative expenses during the six and three
month periods ended June 30, 2002 amounted to approximately $2,012,000 and
$953,000, respectively, compared to approximately $2,522,000 and $1,274,000
during the six and three month periods ended June 30, 2001, respectively. The
decrease of $510,000 for the six months ended June 30, 2002 is primarily
attributed to non-cash charges of approximately $88,000 relating to stock
options and warrants during the six months ended June 30, 2002 compared to
approximately $997,000 during the six months ended June 30, 2001, partially
offset by increases in salary and related costs. The decrease of $321,000 for
the three months ended June 30, 2002 is primarily related to a credit of
approximately $10,000 relating to stock options and warrants during the three
months ended June 30, 2002 compared to non-cash charges of approximately
$448,000 relating to such options and warrants during the three months ended
June 30, 2001, partially offset by increases in salary and related costs.

           Amortization of intangible assets amounted to $1,330,000 and $663,000
during the six and three month periods ended June 30, 2002, respectively,
compared to $10,570,000 and $5,280,000 during the six and three month periods
ended June 30, 2002, respectively. The decrease during the six and three month
periods ended June 30, 2002 compared to the same periods in 2001 was primarily
due to our adoption of Statement of Financial Accounting Standards No.142,
GOODWILL AND OTHER INTANGIBLE ASSETS. In accordance with SFAS No. 142, we
discontinued amortization of our goodwill as of January 1, 2002, which resulted
in decreases in amortization expense of approximately $9,200,000 and $4,600,000
for the six and three months ended June 30, 2002, compared to the same periods
last year.

                                       11
<PAGE>

           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 computations of EBITDA for the six and three months ended June
30, 2002 and 2001 are set forth in the table below:

<TABLE>
<CAPTION>
                                       Six Months Ended             Three Months Ended
                                           June 30,                      June 30,
                                 ---------------------------    --------------------------
                                      2001           2002           2001           2002
                                 ------------    -----------    -----------    -----------
<S>                              <C>             <C>            <C>            <C>
Net Loss                         $(15,008,000)   $(5,213,000)   $(7,440,000)   $(2,565,000)
Add: interest expense                  24,000         27,000         13,000         14,000
Less: interest income                 (70,000)       (69,000)       (40,000)       (45,000)
Add: amortization                  10,570,000      1,330,000      5,280,000        663,000
Add: depreciation                     213,000        112,000        107,000         59,000
                                 ------------    -----------    -----------    -----------
     EBITDA                      $ (4,271,000)   $(3,813,000)   $(2,080,000)   $(1,874,000)
                                 ============    ===========    ===========    ===========
</TABLE>

           EBITDA includes as an expense non-cash compensation related to the
issuance of stock options and stock purchase warrants charges of approximately
$213,000 and a credit of $10,000 for the six and three months ended June 30,
2002, respectively, and charges of $1,172,000 and $413,000 for the six and three
months ended June 30, 2001, respectively.

           The decrease in loss before interest, taxes, depreciation and
amortization for the six and three months ended June 30, 2002 as compared to
the six and three month periods ended June 30, 2001 occurred primarily due to
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.

           On March 18, 2002, we completed a rights offering in which we offered
to our existing stockholders subscription rights to purchase an aggregate of
3,500,000 shares of our common stock at a purchase price of $2.00 per share. We
received gross proceeds of $7,000,000 from the rights offering, which proceeds,
after deducting related expenses of approximately $461,000, are being used for
working capital, including for the continued development of our DLE fuel cell
technology, as well as for selling, general and administrative expenses.

           For the six months ended June 30, 2002, net cash used in operating
activities was $3,151,000, as compared to $2,553,000 for the six months ended
June 30, 2001. The increase was primarily attributable to increases in levels of
spending on research and development and selling, general and administrative
expenses, during the six months ended June 30, 2002 compared to the same period
in 2001, for the reasons discussed above.

                                       12
<PAGE>

           For the six months ended June 30, 2002, net cash used in investing
activities was $120,000, which represented purchases of property and equipment
of $145,000, offset by proceeds from disposals of property and equipment of
$25,000. This is compared to $818,000 for the six months ended June 30, 2001,
which represented $520,000 used to acquire an option to purchase the remaining
7% of More Energy we do not own and $323,000 for the purchase of property and
equipment, offset by proceeds of $25,000 from the disposal of property and
equipment.

           For the six months ended June 30, 2002, cash aggregating $7,042,000
was provided by financing activities, compared to $10,229,000 for the six months
ended June 30, 2001. The cash provided by financing activities during the six
months ended June 30, 2002 was primarily provided by the completion on March 18,
2002 of our rights offering, which generated gross proceeds of $7,000,000, as
discussed above, less costs of such offering incurred during the six months
ended June 30, 2002 of $267,000, and proceeds of approximately $309,000 from the
exercise of options to purchase our common stock. The cash provided by financing
activities during the six months ended June 30, 2001 was provided by our sale in
private placements of 660,688 shares of our common stock and warrants to
purchase 660,688 shares of our common stock, for aggregate proceeds of
$10,571,000, less issuance costs of approximately $342,000.

           As of June 30, 2002, we had approximately $9,770,000 in cash and cash
equivalents, as well as an unused $5,000,000 revolving credit line which
terminates in accordance with its terms on December 28, 2002. We are currently
evaluating whether we shall seek to extend such credit line. Our working capital
and capital requirements at any given time depend upon numerous factors,
including, but not limited to:

           - the progress of research and development programs;
           - the status of our technologies; and
           - 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 and
companies participating in the development of our technologies. Since January
2002, we have entered into three collaborative arrangements with third parties,
in which we realized revenues of $116,000 on costs of sales of $78,000. There
can be no assurance that we will realize additional revenue from such
collaborative arrangements or that we will enter into additional collaborative
arrangements in the future.

           As of June 30, 2002, we believe that our cash resources will be
sufficient to support our operating and developmental activities for at least
the next 16 months. Beyond such time, we may require capital infusions of cash
to continue our operations, whether through debt financing, issuance of shares
or from companies or other organizations participating in the development of our
technologies. However, to the extent we are unable to 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.

CRITICAL ACCOUNTING POLICIES

           The following represents our critical accounting policies which
reflect significant judgments and uncertainties and could possibly result in
materially different results under different conditions and assumptions.

                                       13
<PAGE>

     GOODWILL AND OTHER INTANGIBLE ASSETS

           We consider accounting policies related to our goodwill and other
intangible assets to be critical due to the estimation processes involved and
their materiality to our financial statements. As of June 30, 2002, the net book
value of our goodwill and other intangible assets totaled $60,340,000. Our
goodwill and other intangible assets arose primarily as a result of two purchase
accounting transactions: our acquisition of the minority interest in Medis Inc.
in 1997 and our exchange of our shares for the minority interest in Medis El in
2000. In amortizing our goodwill through December 31, 2001 and our other
intangible assets through June 30, 2002, we made estimates and assumptions
regarding the useful lives of such assets. If our estimates and assumptions
change, the useful lives and resulting charges to operations for amortization of
such assets would also change.

           Additionally, with respect to our goodwill and intangible assets, as
of January 1, 2002, we adopted Statement of Financial Accounting Standards No.
142, GOODWILL AND OTHER INTANGIBLE ASSETS, which was issued by the Financial
Accounting Standards Board in June 2001. SFAS No. 142 requires goodwill be
subject to at least an annual assessment for impairment with amortization over
its estimated useful life to be discontinued effective January 1, 2002. As part
of our evaluation of our goodwill and other intangible assets for any possible
impairment, as of January 1, 2002, we were required to use estimates and
assumptions with respect to future cash flows, discount rates and timing of
commercialization of our technologies. If these estimates and/or assumptions
change, we may, in the future, be required to record charges to operations for
impairment of our goodwill and/or other intangible assets. Additionally, should
our stock price drop substantially to a price where our total market
capitalization was less than or close to the net book value of our goodwill and
other intangible assets, we may, in the future, be required to record charges to
operations for impairment of our goodwill and/or other intangible assets.

     STOCK OPTIONS AND WARRANTS

           We also consider accounting policies related to stock options and
warrants to be critical due to the estimation process involved. We utilize stock
options as an important means of compensation for employees, directors and
consultants and warrants as an instrument in our fundraising process. Accounting
for such options and warrants, in some circumstances, results in significant
non-cash charges to operations or accumulated loss. There are assumptions and
estimates involved in determining the value of such stock options and warrants
and the timing of related charges to our operations or accumulated loss. These
estimates and assumptions include the expected term of the option, volatility of
our stock and interest rates. The market price of our stock also has a
significant impact on charges we incur from period to period related to stock
options and warrants. If these estimates and assumptions change or if our stock
price changes, the charges to operations and/or accumulated loss would also
change.

     DEFERRED INCOME TAXES

           We record a valuation allowance to reduce our deferred tax assets to
zero. In the event that we were to determine that we would be able to realize
all or part of our deferred tax assets in the future, an adjustment to the
deferred tax assets would be credited to operations in the period such
determination was made.


                                       14
<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, such as the New Israeli Shekel (NIS) with respect to
our Israeli-based operations, as are most of our other operating expenses.
Consideration for our sales is either in dollars or dollar-linked currency or in
the local currency of our subsidiaries. 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, we currently invest our liquid funds in both
dollar-based 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:

<TABLE>
                  <S>                          <C>
                  1997                          8.8%
                  1998                         17.6
                  1999                         (0.17)
                  2000                         (2.7)
                  2001                          9.2
</TABLE>

           In 1999 and 2000, the rate of inflation in Israel exceeded the rate
of devaluation of the NIS against the dollar, but in 1997, 1998 and 2001 the
rate of devaluation of the NIS against the dollar exceeded the rate of inflation
in Israel. In 2001, the rate of inflation in Israel was 1.4% and the rate of
devaluation of the NIS was 9.2% against the dollar. Additionally, in 2002,
through June 30, the rate of inflation in Israel was 6.3% and the rate of
devaluation of the NIS was 8.0% 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

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         (a) Our Annual Meeting of Stockholders was held on June 12, 2002.

         (b) At that meeting, all of our then-current directors were re-elected.
             The vote was as follows:

<TABLE>
<CAPTION>
                                            FOR                           WITHHOLD AUTHORITY
                                         ----------                       ------------------
<S>                                      <C>                              <C>
Robert K. Lifton                         17,048,379                             33,928
Howard Weingrow                          17,048,379                             33,928
Jacob S. Weiss                           17,048,379                             33,928
</TABLE>

                                       15
<PAGE>

<TABLE>
<S>                                      <C>                              <C>
Amos Eiran                               17,052,379                             29,928
Jacob E. Goldman                         17,052,379                             29,928
Seymour Heinberg                         17,052,079                             30,228
Shmuel Peretz                            17,052,079                             30,228
Zeev Nahmoni                             17,052,079                             30,228
</TABLE>

         (c) At that meeting, our shareholders ratified the amendment of our
1999 Stock Option Plan to increase the number of shares of our common stock
available thereunder from 2,000,000 to 3,000,000. The vote was as follows:

<TABLE>
<S>                                             <C>
For                                             16,775,075
Against                                            292,596
Abstain                                             14,636
</TABLE>

         (d) At that meeting, our shareholders approved an amendment to our
Certificate of Incorporation to increase the number of authorized shares of
common stock from 25,000,000 to 35,000,000. The vote was as follows:

<TABLE>
<S>                                             <C>
For                                             16,997,784
Against                                             74,902
Abstain                                              9,621
</TABLE>

         (e) At that meeting, our shareholders ratified the issuance and sale of
3,125 shares of our common stock, at a price per share of $16.00, as well as
warrants to purchase 15,625 shares of our common stock at an exercise price of
$18.00 per share, to each of our Chairman and Chief Executive Officer and our
President. The vote was as follows:

<TABLE>
<S>                                             <C>
For                                             15,141,296
Against                                            162,571
Abstain                                             20,463
Withheld                                         1,757,977
</TABLE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         (a)  Exhibits.

<TABLE>
<CAPTION>
EXHIBIT NUMBER               EXHIBIT DESCRIPTION
--------------               -------------------
<S>                          <C>
3.(i)                        Certificate of Incorporation, as Amended, of the Registrant
</TABLE>


         (b) Reports on Form 8-K. The Company filed the following report on
Form 8-K during the second quarter of the year ending December 31, 2002.

                            DATE REPORT
DATE OF REPORT             FILED WITH SEC       ITEMS REPORTED
--------------             --------------       --------------

June 25, 2002               June 26, 2002       Item 4.  Changes in Registrant's
                                                         Certifying Accountant.
                                                Item 7.  Financial Statements
                                                         and Exhibits.


                                       16
<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


                                          MEDIS TECHNOLOGIES LTD.

                                          By:  /s/ Robert K. Lifton
                                               -------------------------
                                                   Robert K. Lifton
                                                   Chairman and Chief
                                                   Executive Officer


                                          By:  /s/ Israel Fisher
                                               --------------------------
                                                   Israel Fisher
                                                   Vice President-Finance
                                                   (Principal Financial and
                                                   Accounting Officer)
Date: August 7, 2002


                                       17