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**UNITED      STATES**

**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, 2007**

**Commission      file number: **
**0-30391**

**MEDIS      TECHNOLOGIES LTD.**

| **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**

**(212)      935-8484**

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

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

| **Large                accelerated filer o**  | **Accelerated                filer x**  |  **Non-accelerated                filer o**  |
|----------------------------------------------------|----------------------------------------------|--------------------------------------------------------|

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

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**MEDIS      TECHNOLOGIES LTD.**

**INDEX      TO FORM 10-Q**

**FOR      THE QUARTER ENDED MARCH 31, 2007**

| **PART                  I.**  | **FINANCIAL                  INFORMATION**                                        | Page                  Number |
|-------------------------------|-----------------------------------------------------------------------------------|------------------------------|
|                          |                                                                              |                         |
| Item                  1.      | Financial                  Statements                                             |                         |
|                          |                                                                              |                         |
|                          | Condensed                  Consolidated Balance Sheets                            |                         |
|                          | December                  31, 2006 and March 31, 2007 (Unaudited)                 | 1                            |
|                          |                                                                              |                         |
|                          | Condensed                  Consolidated Statements of Operations (Unaudited)      |                         |
|                          | Three                  months ended March 31, 2006 and 2007                       | 2                            |
|                          |                                                                              |                         |
|                          | Condensed                  Consolidated Statements of Cash Flows (Unaudited)      |                         |
|                          | Three                  months ended March 31, 2006 and 2007                       | 3                            |
|                          |                                                                              |                         |
|                          | Notes                  to Condensed Consolidated Financial Statements (Unaudited) | 4                            |
|                          |                                                                              |                         |
| Item                  2.      | Management’s                  Discussion and Analysis of Financial          |                         |
|                          | Condition                  and Results of Operations                              | 13                           |
|                          |                                                                              |                         |
| Item                  3.      | Quantitative                  and Qualitative Disclosures About Market Risk       | 19                           |
|                          |                                                                              |                         |
| Item                  4.      | Controls                  and Procedures                                          | 20                           |
|                          |                                                                              |                         |
| **PART                  II.** | **OTHER                  INFORMATION**                                            |                         |
|                          |                                                                              |                         |
| Item                  1A.     | Risk                Factors                                                  | 21                           |
|                          |                                                                              |                         |
| Item                  2.      | Unregistered                  Sales of Equity Securities and Use of Proceeds      | 21                           |
|                          |                                                                              |                         |
| Item                  6.      | Exhibits                                                                          | 21                           |

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**PART      I - FINANCIAL INFORMATION**

| **Item                1.** | **Financial                Statements** |
|----------------------------|-----------------------------------------|

**Medis      Technologies Ltd. and Subsidiaries**

**Condensed      Consolidated Balance Sheets**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | **December                  31,****2006** |         |   | **March                  31,****2007** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------------|--------|----------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                      |         |   | (unaudited)                            |   |
| **ASSETS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                      |         |   |                                   |   |
| Current                assets                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                      |         |   |                                   |   |
| Cash                and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | $                                         | 51,803,000   |   |                                   | $      | 35,661,000 |   |
| Short-term                investments                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                      | 30,504,000   |   |                                   |   | 22,389,000 |   |
| Restricted                cash and deposits                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | * *                                  | *—*    |   |                                   |   | 6,632,000 |   |
| Prepaid                expenses and other current assets                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                      | 4,696,000    |   |                                   |   | 3,912,000 |   |
| Other                accounts and notes receivable                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                      | 3,561,000    |   |                                   |   | 885,000 |   |
| Total                current assets                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                      | 90,564,000   |   |                                   |   | 69,479,000 |   |
| Property,                plant and equipment, net                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                      | 27,318,000   |   |                                   |   | 34,099,000 |   |
| Severance                pay fund                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                      | 1,265,000    |   |                                   |   | 1,366,000 |   |
| Intangible                assets, net                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                      | 256,000      |   |                                   |   | 204,000 |   |
| Goodwill                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                      | 58,205,000   |   |                                   |   | 58,205,000 |   |
| Total                assets                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | $                                         | 177,608,000  |   |                                   | $      | 163,353,000 |   |
| **LIABILITIES                AND****STOCKHOLDERS’                EQUITY**                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                      |         |   |                                   |   |   |   |
| Current                liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                      |         |   |                                   |   |   |   |
| Accounts                payable                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | $                                         | 8,367,000    |   |                                   | $      | 2,385,000 |   |
| Accrued                expenses and other current liabilities                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                      | 3,550,000    |   |                                   |   | 2,693,000 |   |
| Total                current liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                      | 11,917,000   |   |                                   |   | 5,078,000 |   |
| Leasehold                incentive obligations, net                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                      | 839,000      |   |                                   |   | 770,000 |   |
| Accrued                severance pay                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                      | 1,730,000    |   |                                   |   | 1,926,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                      |         |   |                                   |   |   |   |
|        Total                Liabilities                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                      | 14,486,000   |   |                                   |   | 7,774,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                      |         |   |                                   |   |   |   |
| Commitments                and contingent liabilities                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                      |         |   |                                   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                      |         |   |                                   |   |   |   |
| Series                A Preferred Stock, net, $.01 par value; $10,000 liquidation preference                per                share; 10,000 shares authorized; and 5,750 issued and outstanding                at                December 31, 2006 and March 31, 2007                                                                                                                                                                                                              |   |                                      | 52,686,000   |   |                                   |   | 52,686,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                      |         |   |                                   |   |   |   |
| Stockholders’                equity                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                      |         |   |                                   |   |   |   |
| Common                stock, $.01 par value; 41,500,000 shares authorized at December 31,                2006                and March 31, 2007 (unaudited); 34,934,864 and                34,944,364  shares issued and outstanding at December 31, 2006                and March 31, 2007 (unaudited), respectively (including 1,500,000                shares                outstanding at December 31, 2006 and March 31, 2007 loaned to be                returned) |   |                                      | 349,000      |   |                                   |   | 349,000 |   |
| Additional                paid-in capital                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                      | 286,865,000  |   |                                   |   | 288,657,000 |   |
| Accumulated                deficit                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                      | (176,778,000 | )      |                                   |   | (186,113,000 | ) |
| Total                stockholders’ equity                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                      | 110,436,000  |   |                                   |   | 102,893,000 |   |
| Total                liabilities and stockholders’ equity                                                                                                                                                                                                                                                                                                                                                                                                                     |   | $                                         | 177,608,000  |   |                                   | $      | 163,353,000 |   |

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**Medis      Technologies Ltd. and Subsidiaries**

**Condensed      Consolidated Statements of Operations**

**(Unaudited)**

|                                                                                                                                         |   | **Three                  Months Ended March 31,** |       |
|----------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------|------------|
|                                                                                                                                         |   | **2006**                                          |       |   | **2007** |   |
| Operating                expenses                                                                                                            |   |                                              |       |   |   |   |
| Research                and development costs, net                                                                                           |   | $                                                 | 3,969,000  |   |   | $ | 5,947,000 |   |
| Selling,                marketing, general and administrative expenses                                                                       |   |                                              | 1,425,000  |   |   |   | 3,236,000 |   |
| Amortization                of intangible assets                                                                                             |   |                                              | 52,000     |   |   |   | 52,000 |   |
| Total                operating expenses                                                                                                      |   |                                              | 5,446,000  |   |   |   | 9,235,000 |   |
| Loss                from operations                                                                                                          |   |                                              | (5,446,000 | ) |   |   | (9,235,000 | ) |
| Interest                income (expenses)                                                                                                    |   |                                              |       |   |   |   |   |   |
| Interest                income                                                                                                               |   |                                              | 500,000    |   |   |   | 935,000 |   |
| Interest                expense                                                                                                              |   |                                              | (950,000   | ) |   |   | (34,000 | ) |
|                                                                                                                                         |   |                                              | (450,000   | ) |   |   | 901,000 |   |
|                                                                                                                                         |   |                                              |       |   |   |   |   |   |
| NET                LOSS                                                                                                                      |   | $                                                 | (5,896,000 | ) |   | $ | (8,334,000 | ) |
|                                                                                                                                         |   |                                              |       |   |   |   |   |   |
| Dividend                on preferred stock                                                                                                   |   | * *                                          | *—*  |   |   |   | (1,001,000 | ) |
|                                                                                                                                         |   |                                              |       |   |   |   |   |   |
| Net                loss attributable to common stockholders                                                                                  |   | $                                                 | (5,896,000 | ) |   | $ | (9,335,000 | ) |
|                                                                                                                                         |   |                                              |       |   |   |   |   |   |
| Basic                and diluted net loss per share                                                                                          |   | $                                                 | (.21       | ) |   | $ | (.27 | ) |
|                                                                                                                                         |   |                                              |       |   |   |   |   |   |
| Weighted-average                number of common shares used in computing basic and diluted net loss                per                share |   |                                              | 28,229,241 |   |   |   | 34,934,411 |   |

----

**Medis      Technologies Ltd. and Subsidiaries**

**Condensed      Consolidated Statements of Cash Flows**

**(Unaudited)**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | **Three                  Months Ended March 31,** |        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------|-------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | **2006**                                          |        |   | **2007** |   |
| Cash                flows from operating activities                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                              |        |   |   |   |
| Net                loss                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | $                                                 | (5,896,000  | ) |   | $ | (8,334,000 | ) |
| Adjustments                to reconcile net loss to net cash used in operating                activities                                                                                                                                                                                                                                                                                                                                                     |   |                                              |        |   |   |   |   |   |
| Depreciation                and amortization of property, plant andequipment                                                                                                                                                                                                                                                                                                                                                                                 |   |                                              | 288,000     |   |   |   | 1,019,000 |   |
| Amortization                of intangible assets                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                              | 52,000      |   |   |   | 52,000 |   |
| Amortization                of debt issuance costs                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                              | 146,000     |   |   |   | — |   |
| Amortization                of beneficial conversion feature onConvertible                Senior Notes                                                                                                                                                                                                                                                                                                                                                       |   |                                              | 16,000      |   |   |   | — |   |
| Non-cash                stock based compensation expense                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                              | 91,000      |   |   |   | 1,657,000 |   |
| Changes                in operating assets and liabilities                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                              |        |   |   |   |   |   |
| Other                accounts and notes receivable                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                              | (179,000    | ) |   |   | 1,566,000 |   |
| Prepaid                expenses and other current assets                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                              | (203,000    | ) |   |   | (287,000 | ) |
| Accounts                payable                                                                                                   |   |                                              | (97,000     | ) |   |   | (1,729,000 | ) |
| Accrued                expenses and other current liabilities                                                                                                                                                                                                                                                                                                                                                                                                |   |                                              | 1,545,000   |   |   |   | (831,000 | ) |
| Leasehold                incentive obligations,                net                                                                |   |                                              | (59,000     | ) |   |   | (69,000 | ) |
| Accrued                severance pay,                net                                                                          |   |                                              | (30,000     | ) |   |   | 95,000 |   |
| Net                cash used in operating activities                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                              | (4,326,000  | ) |   |   | (6,861,000 | ) |
| Cash                flows from investing activities                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                              |        |   |   |   |   |   |
| Capital                expenditures                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                              | (1,579,000  | ) |   |   | (10,982,000 | ) |
| Investment                in short-term investments                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                              | (21,217,000 | ) |   |   | (34,138,000 | ) |
| Redemptions                of short-term investments                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                              | 13,500,000  |   |   |   | 42,253,000 |   |
| Restricted                cash and deposits                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                              | —     |   |   |   | (6,632,000 | ) |
| Long-term                note                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                              | (18,000     | ) |   |   | — |   |
| Net                cash used in investing activities                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                              | (9,314,000  | ) |   |   | (9,499,000 | ) |
| Cash                flows from financing activities                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                              |        |   |   |   |   |   |
| Issuance                costs on Series A Preferred Stock                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                              | —     |   |   |   | (26,000 | ) |
| Proceeds                from exercise of stock options                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                              | 3,890,000   |   |   |   | 1,180,000 |   |
| Dividend                on Series A Preferred Stock                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                              | —     |   |   |   | (1,001,000 | ) |
| Proceeds                from exercise of stock warrants                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                              | 54,000      |   |   |   | 65,000 |   |
| Net                cash provided by financing activities                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                              | 3,944,000   |   |   |   | 218,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                              |        |   |   |   |   |   |
| Net                decrease in cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                              | (9,696,000  | ) |   |   | (16,142,000 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                              |        |   |   |   |   |   |
| Cash                and cash equivalents at beginning of period                                                                                                                                                                                                                                                                                                                                                                                              |   |                                              | 35,295,000  |   |   |   | 51,803,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                              |        |   |   |   |   |   |
| Cash                and cash equivalents at end                of period                                                                                                                                                                                                                                                                                                                                                                                     |   | $                                                 | 25,599,000  |   |   | $ | 35,661,000 |   |

| Supplemental                disclosures of cash flow information:                     |   |   |    |   |   |   |
|---------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Cash                paid during the period for:                                       |   |   |    |   |   |   |
| Interest                                                                              |   | $      | 735,000 |   |   |   | — |   |
| Non-cash                investing and financing activities:                           |   |   |    |   |   |   |   |   |
| Capital                expenditure included in accounts payable                       |   | $      | 167,000 |   |   | $      | 532,000 |   |
| Reclassification                of prepaid expenses to property and equipment         |   |   | — |   |   | $      | 1,071,000 |   |
| Option                exercise – cash received subsequent to balance sheet date |   | $      | 816,000 |   |   | $      | 70,000 |   |

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**Medis      Technologies Ltd. and Subsidiaries**

**Notes      to Condensed Consolidated Financial Statements**

**(Unaudited)**

**Note        A - Nature Of Operations And Basis Of Presentation**

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**Note      B - Certain Transactions**

| 1.*  * | *Series                A Preferred Stock*- In November and December 2006, the Company issued                5,750 shares of its 7.25% Series A Cumulative Convertible Perpetual                Preferred Stock (“Preferred Stock”) for aggregate gross proceeds of                $57,500,000, less issuance costs aggregating approximately $4,464,000.                The                annual cash dividend on each share of Preferred Stock is $725 and                is                payable quarterly, in arrears, commencing on February 15, 2007. Each                share                of Preferred Stock is convertible at the holder’s option at any time into                347.2222 shares of MTL’s common stock (which is equivalent to an initial                conversion price of $28.80 per share). On or after November 20, 2009,                if                the closing price of the Company’s common stock exceeds 150% of the                conversion price for 20 trading days during any consecutive 30 trading                day                period, the Company may cause the conversion of the Preferred Stock                into                common stock at the prevailing conversion rate. The terms of the                Preferred                Stock preclude the Company from paying dividends or making other                distributions on its common stock if there are any accumulated and                unpaid                dividends on the Preferred Stock. Of the total $57,500,000 of Preferred                Stock issued, $7,500,000 was issued pursuant to the exercise of a                75-day                option that was granted to the initial purchaser (the “Preferred Option”)                in connection with the issuance of the first $50,000,000 of Preferred                Stock. As of March 31, 2007, the Preferred Stock had not been registered                for resale with the SEC. See Note B-2 for discussion of concurrent                offering of common stock in connection with a share lending                agreement. |
|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.*  * | *Share                lend -*On November 15, 2006, concurrent with the Company’s offering                of its Preferred Stock, the Company issued 1.5 million shares of                its                common stock in an offering registered under the Securities Act of                1933.                The shares of common stock issued were loaned to an affiliate of                Citigroup                Global Markets Limited (‘CGML”) under a 5-year share lending                agreement.  The only consideration received by the Company was a                share lending fee of $.01 per share, or an aggregate of $15,000,                which has                been included in Common Stock at December 31, 2006. The loaned shares                were                used by CGML to promote the sale of the Preferred Stock by facilitating                hedging transactions that may be undertaken by purchasers of the                Preferred                Stock. The shares that the Company has lent to the affiliate of CGML                are                reflected as issued and outstanding at December 31, 2006. The Company                has                determined that the share lending agreement is not a derivative instrument                that would require accounting separate from the Preferred Stock and,                accordingly, has recognized the net effect on stockholder’s equity of the                1,500,000 shares issued pursuant to the share lending agreement,                which                includes the requirement that the shares be returned no later than                November 20, 2011, equal to the $15,000 fee received upon lending                of the                shares. |
|------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 3.*  * | *Net                Loss Per Share -*The Company computes net loss per share in                accordance with SFAS No. 128, “Earnings Per Share” (“SFAS                No. 128”). Under the provisions of SFAS No. 128, basic net loss                per share is computed by dividing the net loss for the period by                the                weighted-average number of common shares outstanding during the                period.  Diluted net loss per share is computed by dividing the                net loss for the period by the weighted-average number of common                shares                plus dilutive potential common stock considered outstanding during                the                period.  Since the Company generated net losses in all periods                presented, potentially diluted securities, composed of incremental                common                shares issuable upon the exercise of warrants and stock options,                convertible notes and convertible preferred stock, are not reflected                in                diluted net loss per share because such shares are                antidilutive. |
|------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | For                the three months ended March 31, 2007, the Company applied the two-class                method as required by EITF No. 03-6, “Participating Securities and                the Two-Class Method” under FASB Statement No. 128, Earnings Per                Share” (“EITF No. 03-6”). EITF No. 03-6 requires that the income                per share for each class of stock be calculated assuming that 100%                of the                Company’s earnings are distributed as dividends to each class of stock                based on their contractual rights. In compliance with EITF No. 03-6,                the shares of Preferred Stock do not participate in losses and, therefore,                are not included in the computation of net loss per                share. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                total number of shares excluded from the calculation of diluted net                loss                per share related to financial instruments that potentially can be                converted to or exercised for shares of the Company’s common stock                aggregated approximately 5,462,370 and 4,983,528 as of March 31,                2006 and                2007 respectively. Such excluded shares for the three months ended                March                31, 2007 include shares issued pursuant to a share lending                agreement. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.*  * | *Short-term                  investments*– The Company accounts for investments in marketable                  securities in accordance with SFAS No. 115, “Accounting for Certain                  Investments in Debt and Equity Securities.”  Short-term                  investments at December 31, 2006 and March 31, 2007 were comprised                  of the                  following: |
|------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                   |   | **December                  31,****2006** |       |   | **March                  31,****2007** |   |
|----------------------------------------|--------|-------------------------------------------|------------|--------|----------------------------------------|--------|
|                                   |   |                                      |       |   | (unaudited)                            |   |
| Commercial                paper        |   | $                                         | 16,254,000 |   |                                   | $      | 8,139,000 |   |
| Auction                rate securities |   |                                      | 14,250,000 |   |                                   |   | 14,250,000 |   |
|                                   |   | $                                         | 30,504,000 |   |                                   | $      | 22,389,000 |   |

----

| 5.*  * | *Restricted                cash and deposits -*As of March 31, 2007, the Company’s consolidated                balance sheet included restricted cash and deposits aggregating                approximately $6,632,000, which represents amounts held on deposit                with                banks as security for letters of credit and guarantees issued by                such                banks primarily to Company suppliers. Included in such amount is                a one                year time deposit in the amount of $4,560,000, which was issued in                January                2007 as security for a stand by letter of credit provided by the                bank to a                supplier of components, equipment and services  in order to guaranty                recovery of certain investments by the supplier - principally in                equipment                to be used exclusively in the manufacture of components for the Company                24/7 Power Pack.  Under the terms of a purchase agreement, title to                the equipment covered by the stand by letter of credit will automatically                pass to the Company upon full recovery of the cost of such equipment                through purchases of components or draws against the letter of credit,                based on formulas set forth in the purchase agreement.  Such letter                of credit expires in March 2012.   As of March 31, 2007, such                supplier had neither placed any equipment subject to the letter of                credit                into service nor had it received delivery of any equipment, and orders                under such purchase agreement had not yet                commenced. |
|------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6.*  * | *Property,                Plant and Equipment, net* |
|------------------|-----------------------------------------------------|

|  | a. | Property,                plant and equipment is stated at cost, net of accumulated depreciation                and                amortization. |
|--|----|-------------------------------------------------------------------------------------------------------------------------------------------------|

|  | b. | Payroll                and other costs that are direct incremental costs necessary to bring                an                asset to the condition of its intended use incurred during the                construction and validation period of the property, plan and equipment                are                capitalized to the cost of such                assets. |
|--|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | c. | Interest                costs are capitalized in accordance with Financial Accounting Standards                Board Statement of Financial Accounting Standards No. 34, “Capitalization                of Interest Cost” (“SFAS 34”). |
|--|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | d. | Depreciation                is provided on property, plant and equipment on the straight-line                basis                over the estimated useful lives of such assets.  Payments on                account of new plant facility were not subject to depreciation. Annual                rates of depreciation are as                follows: |
|--|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                          | **Useful                Lives In Years**                                                         |
|-----------------------------------------------|--------------------------------------------------------------------------------------------------|
|                                          |                                                                                             |
| Machinery                and equipment        | 7                                                                                                |
| Computers                                     | 3                                                                                                |
| Furniture                and office equipment | 15                                                                                               |
| Vehicles                                      | 7                                                                                                |
| Leasehold                improvements         | Over                the shorter of the term of the lease or the life of the                asset |

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|                                                          |   | **December                  31,****2006** |       |   | **March                  31,****2007** |       |
|---------------------------------------------------------------|--------|-------------------------------------------|------------|--------|----------------------------------------|------------|
|                                                          |   |                                      |       |   | **(unaudited)**                        |       |
| Machinery                and equipment                        |   | $                                         | 25,901,000 |   |                                   | **$**      | **33,370,000** |   |
| Computers                                                     |   |                                      | 1,739,000  |   |                                   | ** ** | **1,329,000** |   |
| Furniture                and office equipment                 |   |                                      | 432,000    |   |                                   | ** ** | **447,000** |   |
| Vehicles                                                      |   |                                      | 20,000     |   |                                   | ** ** | **20,000** |   |
| Leasehold                improvements                         |   |                                      | 3,570,000  |   |                                   | ** ** | **3,754,000** |   |
|                                                          |   |                                      | 31,662,000 |   |                                   | ** ** | **38,920,000** |   |
| Less                accumulated depreciation and amortization |   |                                      | 4,344,000  |   |                                   | ** ** | **4,821,000** |   |
| Property                and equipment, net                    |   | $                                         | 27,318,000 |   |                                   | **$**      | **34,099,000** |   |

| 7.*  * | *Stock-based                Compensation –*On July 18, 2006, the Company issued options to                purchase an aggregate of 706,500 shares of its common stock to employees,                officers and directors of the Company. Such options are exercisable                at                $20.98 (the market price of the Company’s common stock on the grant date),                vest after one year and expire after four years. The Company accounted                for                those options issued to employees, officers and directors in accordance                with SFAS 123(R). In accordance with SFAS 123(R), compensation costs                are                based on the grant-date fair value estimate and are recognized over                the                vesting term of such options, net of an estimated forfeiture rate.                The                Company estimated the fair value of those options, as well as 16,000                options granted during the three months ended March 31, 2007,using                the                Black-Scholes option pricing model, to be approximately $6,647,000,                less                estimated forfeitures of $29,000. During the year ended December                31, 2006                and the  three months ended March 31, 2007,  the                company recorded compensation costs related to the issuance                of  such options of $2,900,000 and $1,657,000,                respectively. |
|------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8.*  * | *Accounting                for Uncertainty in Income Taxes  -*In July 2006, the                FASB issued FASB Interpretation 48, “Accounting for Uncertainty in Income                Taxes” (“FIN 48”). FIN 48 defines the threshold for recognizing                the benefits of tax return positions in the financial statements                as                “more-likely-than-not” to be sustained by the taxing authority. The                recently issued literature also provides guidance on derecognition,                measurement and classification of income tax uncertainties, along                with any                related |
|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | interest                  and penalties. FIN 48 also includes guidance concerning accounting                  for income tax uncertainties in interim periods and increases the                  level of                  disclosures associated with any income tax uncertainties. Pursuant                  to the                  provisions of FIN 48, the differences between the amounts recognized                  in                  the statements of financial position prior to the adoption of FIN 48                  and the amounts reported after adoption would be accounted for                  as a                  cumulative-effect adjustment recorded to the beginning balance                  of retained                  earnings. FIN 48 is effective for fiscal years beginning after                  December 15, 2006. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Effective                January 1, 2007, the Company adopted the provisions of FIN 48. FIN 48                clarifies the accounting for uncertainty in income taxes by prescribing                a                minimum recognition threshold for a tax position taken or expected                to be                taken in a tax return that is required to be met before being recognized                in the financial statements. FIN 48 also provides guidance on                derecognition, measurement, classification, interest and penalties,                accounting in interim periods, disclosure and                transition. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                Company files U.S. federal income tax returns and Israeli income                tax                returns, as well as income tax returns for New York State and New                York City. The Company may be subject to examination by the U.S.                Internal                Revenue Service and the New York State and New York City revenue                authorities from inception of operations due to net operation loss                carry                forwards generated in past years. The Company may also be subject                to                examination by the Israeli tax authorities for the years 2002 through                2006. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                adoption of FIN 48 did not have a material impact on the Company’s                consolidated financial statements. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| 9.*  * | *Use                of Estimates -* The preparation of financial statements in accordance                with U.S. GAAP requires management to make estimates and assumptions                that                affect the amounts reported in the financial statements and accompanying                notes. Actual results could differ from those                estimates. |
|------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.*  * | *Fuel                Cell Technology Cooperation Agreements*– In October 2006, the Company                entered into an agreement with Israel Aerospace Industries Ltd. (formerly                know as Israel Aircraft Industries) (“IAI”), a principal stockholder of                the Company, to develop an 800 watt fuel cell to electrically power                Unmanned Air Vehicle systems (UAVs). The contract provides for two                phases                of activity.  The first phase, which covers a six month period,                provides for the Company to develop a demonstration system which                would                pass functionality tests and which can be demonstrated to be redesignable                to achieve the weight (6 kilograms) goals of the final system. The                first                phase is funded by IAI paying the Company $400,000. Upon the successful                completion of the first phase, the second phase would require IAI                to pay                the Company approximately $1,500,000 to complete the development                and would                have an 18 month schedule. During the first phase of the contract                and                conditioned on minimum purchase requirements thereafter, IAI will                be                granted exclusivity with respect to large fuel cells for unmanned                vehicles. The contract with IAI will be carried out by the Company                as the                prime contractor together with its strategic partner, Oy Hydrocell                of                Finland, as the main subcontractor. Since the Company expects the                payments                to exceed related costs, the Company account for the order using                contract                accounting on a completed contract basis.  As of March 31, 2007,                the Company has billed and received approximately $200,000 under                the                agreement and has incurred costs aggregating approximately $89,000,                such                amounts have been deferred as of March 31,                2007. |
|-------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In                April 2001, the Company entered into a mutually exclusive agreement                with General Dynamics C-4 Systems, Inc., a unit of General Dynamics                Corporation (“GD”), to develop fuel cells and fuel cell-powered portable                electronic devices and to market such products to the United States |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | Department                  of Defense (the “DOD”). In July 2006, the Company completed an October                  2005 order from GD, for further research and analysis of Company’s fuel                  cell Power Packs, in the amount of $150,000. The Company accounted                  for the                  order using contract accounting on a completed contract basis and                  has                  recorded revenues of $150,000, cost of revenues of $98,000 and                  gross                  profit of $52,000 during the year ended December 31, 2006. From                  the                  inception on April 21, 2001 through March 31, 2007, the Company                  has                  completed four orders with GD. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 11.   | Distribution                Agreements - On March 9, 2004, the Company entered into a distribution                agreement with Kensington Technology Group, a leading maker of computer                accessories and a division of ACCO Brands, Inc.  Pursuant to the                distribution agreement, among other things, the Company has granted                Kensington the limited, exclusive right to market and distribute                its Power                Pack and other products using its fuel cell technology under the                Kensington and Medis brand names. As of March 31, 2007, the Company                did                not record any revenue or expense related to this                agreement. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 12.*  * | *Cooperation                Agreements with Mobile Operators -*On June 7, 2005, the Company                announced that it had entered into a Cooperation Agreement with one                of the                largest mobile operators in the United States, for the purposes of                market                testing and introduction to the market of the Company’s fuel cell Power                Packs as a secondary power source for portable electronic devices                offered                by the mobile operator. |
|-------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | On                July 5, 2005, the Company announced that it had entered into a Cooperation                Agreement with a broadly-affiliated United Kingdom mobile telephone                operator for the purposes of market testing and introduction to the                market                of Medis’ fuel cell Power Packs as a secondary power source for portable                electronic devices offered by the mobile operator. This agreement                is                similar to the one described above with the U.S. mobile                operator*.* |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                above agreements had no impact on the Company’s consolidated financial                statements as of March 31, 2007. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.*  * | *Automated                Line Production Agreement*- In September 2005, the Company entered                into a Capital Equipment Purchase Agreement with Ismeca Europe Automation                SA (“Ismeca”). The Ismeca, agreement calls for Ismeca to build an                automated assembly line capable of producing up to 45 units per minute                of                operation, or 1.5 million units per month net output, of Company’s fuel                cell Power Pack products. The Agreement, as amended, provides for                the                Company to pay Ismeca an aggregate of approximately 19,045,000 Swiss                Francs (approximately $15,617,000 at the currency exchange rate in                effect                on March 31, 2007) for constructing the line, which is to be operated                at                the Galway, Ireland facility of Celestica. This amount may increase                if the                Company requests additional capabilities in the line. From the inception                of the agreement through March 31, 2007, the Company paid an aggregate                of                approximately $8,728,000 (10,913,000 Swiss Francs).  All such                amounts are included in property, plant and equipment as of March                31,                2007. |
|-------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Note        C - Liquidity**

**Note        D – Recently Issued Accounting Pronouncements**

**Note        E – Subsequent Events**

----

| **Item                2.** | **Management’s                Discussion And Analysis Of Financial Condition And Results Of                Operations** |
|----------------------------|-------------------------------------------------------------------------------------------------------------------------------|

**Forward        Looking Statements**

**Introduction**

**Results        Of Operations**

----

***Three      Months Ended March 31, 2007 Compared To Three Months Ended March 31,      2006***

*Fuel      Cell Technologies*

*Cell      Kinetics – CellScan.*

----

*Other      R&D Activities*

|   | **Liquidity                And Capital Resources** |
|--------|----------------------------------------------------|

----

| ·   | 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. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                amount of resources required to complete our production facilities                and                product launch. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Our                anticipation, based on our current expectation that we will sell                out the                production capacity of our first fully automated production line,                that we                will undertake to build a second fully                automated. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

347.2222 shares of our common stock (which      is      equivalent to an initial conversion price of $28.80 per share). On or after      November 20, 2009, if the closing price of our common stock exceeds 150% of      the      conversion price for 20 trading days during any consecutive 30 trading day      period, we may cause the conversion of our Series A preferred stock into      common stock at the then prevailing conversion rate. Of the total $57,500,000      of      our Series A preferred stock issued, $7,500,000 was issued pursuant to the      exercise of a 75-day option that was 

----

----

|                                           |   |      |       |   | **Payment                  Due By Period** |   |
|------------------------------------------------|--------|-----------|------------|--------|--------------------------------------------|--------|
| **Contractual                  Obligations**   |   | **Total** |       |   | **2007(1)**                                |   |   | **2008** |   |   | **2009** |   |   | **2010** |   |   | **2011                  and****thereafter** |   |
| Operating                Lease Obligations     |   | $         | 959,000    |   |                                       | $      | 388,000 |   |   | $ | 438,000 |   |   | $ | 131,000 |   |   | $ | 2,000 |   |   | *$* | *—* |   |
| Purchase                Obligations            |   |      | 39,256,000 |   |                                       |   | 37,570,000 |   |   |   | 1,092,000 |   |   |   | 578,000 |   |   |   | 16,000 |   |   | * * | *—* |   |
| Other                Long-Term Liabilities (2) |   |      | 1,926,000  |   |                                       |   | 193,000 |   |   |   | 193,000 |   |   |   | 193,000 |   |   |   | 193,000 |   |   |   | 1,154,000 |   |
|                                           |   |      |       |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                          |   | $         | 42,141,000 |   |                                       | $      | 38,151                  ,000 |   |   | $ | 1,723,000 |   |   | $ | 902,000 |   |   | $ | 211,000 |   |   | $ | 1,154,000 |   |

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| (1) | Contractual                obligation amounts for 2007 are for the period from April 1, 2007                through                December 31, 2007. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Other                Long-Term Liabilities represents our accrued severance for our employees                in Israel, as of March 31, 2007.  Since we do not expect a high                level of employee turnover giving rise to the payment of significant                amounts of severance obligations, we have included approximately                10% of                the total liability in each of the years 2007 through 2011 and the                remainder in 2011 and thereafter. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **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***

|   | **Rate                  of****Inflation                  or****(Deflation)** |   | **Rate                  of****Devaluation                  or****(Appreciation)                  of****the                  NIS against****the                  Dollar** |
|--------|------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2002   | 6.5                                                                          |   | 7.3                                                                                                                                                                      |
| 2003   | (1.9)                                                                        |   | (7.6)                                                                                                                                                                    |
| 2004   | 1.2                                                                          |   | (1.6)                                                                                                                                                                    |
| 2005   | 2.4                                                                          |   | 6.9                                                                                                                                                                      |
| 2006   | (0.1)                                                                        |   | (8.2)                                                                                                                                                                    |

***Currency      Risk Management***

----

**Impact        Of Political And Economic Conditions**

| **Item                4.** | **Controls                and Procedures** |
|----------------------------|--------------------------------------------|

**Changes        in Internal Control Over Financial Reporting**

----

**PART      II - OTHER INFORMATION**

| **Item                  1.** | **Legal                  Proceedings** |
|------------------------------|----------------------------------------|

| **Item                  1A.** | **Risk                  Factors** |
|-------------------------------|-----------------------------------|

| **Item                  2.** | **Unregistered                  Sales of Equity Securities and Use of                  Proceeds.** |
|------------------------------|----------------------------------------------------------------------------------------------------|

| **Item                6.** | **Exhibits** |
|----------------------------|--------------|

| **Exhibit                Number** |   | **Exhibit                Description**                |
|-----------------------------------|--------|-------------------------------------------------------|
|                              |   |                                                  |
| 31.1                              |   | Rule                13a-14(a)/15d-14(a) Certification |
| 31.2                              |   | Rule                13a-14(a)/15d-14(a) Certification |
| 32                                |   | Section                1350 Certifications            |

**__________**

----

**SIGNATURES**

|   | MEDIS              TECHNOLOGIES LTD. |                                                |
|--------|--------------------------------------|-----------------------------------------------------|
|   |                                 |                                                |   |
|   | By:                                  | /s/ Robert              K. Lifton              |   |
|   |                                 | Robert                K. Lifton                     |   |
|   |                                 | Chairman                and Chief Executive Officer |   |
|   |                                 |                                                |   |

|   |   |                                                                         |
|--------|--------|------------------------------------------------------------------------------|
|   |   |                                                                         |   |
|   | By:    | /s/ Israel                Fisher                                        |   |
|   |   | Israel                    Fisher                                             |   |
|   |   | Senior                    Vice President-Finance and Chief Financial Officer |   |
|   |   | (Principal                  Financial Officer)                          |   |

|   |   |                                                      |
|--------|--------|-----------------------------------------------------------|
|   |   |                                                      |   |
|   | By:    | /s/ Michael                  S. Resnick              |   |
|   |   | Michael                      S. Resnick                   |   |
|   |   | Senior                      Vice President and Controller |   |
|   |   | (Principal                    Accounting Officer)    |   |

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