Medis Technologies Ltd.
Medis Technologies Ltd.
Incorporated: 1992 as Medicell
Stock Exchanges: NASDAQ
Ticker Symbol: MDTL
NAIC: 335999 All Other Miscellaneous Electrical Equipment and Component Manufacturing
Medis Technologies Ltd. is a New York City-based company involved in the development of a number of proprietary technologies. Since its founding in 1992, the company has never turned a profit and has generated negligible sales, but it holds out great promise for its disposable micro-fuel cell product, the Power Pack, which it hopes will find a ready market with users of portable electronic devices, such as cell phones, digital cameras, hand-held video games, and PDAs. Roughly the size of a pack of cigarettes, the Power Pack is intended to be used as a recharger or an auxiliary power source. The device itself can be refueled several times before being disposed. In addition to the consumer market, the Power Pack is aimed at the military, to provide the kind of extended-life battery power required by the devices employed by the modern soldier. Aside from fuel cells, Medis has developed the CellScan, a desktop cytometer used in the early detection of diseases. Other technologies the company has or continues to develop include fuel-efficient engines and environmentally friendly refrigeration and cooling systems.
COFOUNDERS BECOMING BUSINESS PARTNERS IN THE EARLY 1960S
Medis was cofounded in 1992 by CEO and Chairman Robert K. Lifton and Howard Weingrow, president and treasurer of the company. Their partnership, however, stretched back another three decades. Lifton was born in Brooklyn, New York, in 1928. He started out to be an accountant, enrolling at City College in New York, but lacked the necessary mathematical aptitude. Instead, he pursued the law, graduating from Yale Law School in 1951. But he only practiced briefly before turning to real estate, a field in which he succeeded and used as a springboard for other business interests. In 1958 he and Weingrow, who was six years older, first became partners, forming Hechler, Lifton & Weingrow, Inc. Then in 1961 he and Weingrow established Transcontinental Investing Corporation, which they grew into a conglomerate.
Lifton and Weingrow took Transcontinental public in 1969, gaining a listing on the New York Stock Exchange. They then sold the company in 1972. Later ventures included Preferred Health Care, a managed psychiatric care company, and Marcade, an apparel company they ran until 1992 when Medis was launched as a joint venture with Israel Aircraft Industries Ltd.
Originally known as Medicell, the company changed its name to Cell Diagnostics Inc. The initial interest of the company was diagnostic cell scan technology that could detect breast cancer with a simple blood test. This technology had been licensed from Bar Ilan University, where it had been developed, and Israel Aircraft Industries now decided to spin it off as a separate enterprise, Medis El Ltd., which became a joint venture with Lifton and Weingrow's Cell Diagnostics. Lifton had a personal interest in the detection of breast cancer, which had touched his family. As the president of the American Jewish Congress from 1988 to 1994, he also wanted to invest in an Israeli company.
The company's cell scan technology had obvious potential. According to Israel Business Arena, "Capital market veterans remember an impressive presentation by the company in a prestigious Tel Aviv hotel, with graphs showing enormous potential and astounding profit and revenue forecasts. The presentation helped the company obtain $70 million in a share issue. Medis El took its first steps on Wall Street in 1993, raising $8 million at $8 a share." But turning cell scan technology into a commercial product proved elusive, prompting Medis to look for other opportunities.
In the 1990s Israel experienced an influx of Soviet Jews, including a large number of scientists. Medis tapped into this pool of talent and began pursuing a wide range of ideas, including a linear compressor for use in appliance refrigeration and automotive cooling systems, a "reciprocating electric machine" intended for use in electrical vehicles, and an environmentally friendly internal combustion engine. The company also recruited Gennadi Finkelshtain, an expert in the field of energy who headed a small company called More Energy Ltd., along with colleague Mikhail Khidekel, whose expertise was special materials. It was through More Energy that Medis became involved in fuel cells. It began investing in the company in 1998 and acquired More in 2000 when it developed a viable fuel cell technology.
FUEL CELL ORIGINS DATING TO THE 1800S
The fuel cell was not actually cutting-edge technology. Its origins dated back to 1802 when Sir Humphrey Davy discovered the underlying principle: water decomposed through electrolysis could be reunited with hydrogen and oxygen atoms to produce electricity and water. Although a simple and tantalizing concept, fuel cells proved difficult to harness. It was not until the 1950s that fuel cells began to become a viable power alternative. In the 1960s they appeared to come of age when NASA chose fuel cells over nuclear power to provide electricity and drinking water for the Gemini and Apollo spacecrafts. Most of the research in fuel cells in the ensuing years was in the development of large units, capable of acting as power generators or fuel sources for automobiles. But the economics were not favorable. The combustion engine, a far less elegant device, could produce power far more cheaply than a fuel cell. That equation changed, however, when it came to micro-fuel cells, which faced a different source of competition: batteries, which produced power at a much higher cost per watt and possessed a relatively short life. Given the proliferation of contemporary on-the-go devices and the need for an increasing amount of longer-lasting portable energy supplies, micro-fuel cells were afforded a greater chance to succeed in the marketplace than their much larger companions. "The only hitch," according to Barron's, "is that small fuel cells still face monumental hurdles on the way to commercialization—technical ones, like how to deal with heat and microscopic amounts of water, and regulator ones, like developing sufficiently safe packaging to permit methanol, which is flammable, on airplanes."
Medis took an approach to making micro-fuel cells different from that of the competition, however. Instead of relying on platinum or other precious metals to serve as a fuel cell catalyst, Medis developed a catalyst composed of traces of nonprecious metals and a proprietary superconductive polymer coating, the result of work done by Khidekel. As a result, Medis hoped to reduce the cost of making a fuel cell by 50 percent. In addition, Medis eschewed the use of methanol, the fuel used by the vast majority of fuel cell developers, opting instead for a fuel that combined a borohydricle-alkaline solution with alcohols. It was a somewhat caustic substance, but no more so than a number of household products, according to the company.
Medis Technologies develops and produces highly advanced proprietary technologies and products in response to key worldwide needs in the areas of:
Greater and longer-lasting power through proprietary fuel cell technology for portable electronic devices; Improved cell-based medical diagnostics and research systems.
NAME CHANGE IN 1999
In 1999 Medis announced that its CellScan System was ready for the marketplace and that an entire slate of innovative products were in the pipeline. It was at this point that Cell Diagnostics changed its name to Medis Technologies and traded stock to acquire the rest of Medis El, making it a wholly owned subsidiary. As a result, Israel Aircraft Industries gained a 20 percent stake in Medis Technologies. Although the company held out hope for its other products, it did not have the resources to fund development of them, and as it entered the 2000s it became increasingly committed to the microfuel cell field. Its first endeavor, a direct liquid methanol (DLM) fuel cell module, a building block for future commercial products geared toward portable electronic devices, was demonstrated in the laboratory in 2000. It was from the methanol that the fuel cell found the hydrogen it needed to derive electricity. The module was able to operate for eight straight hours at 60 percent of its normal capacity and 20 hours at 50 percent of its nominal capacity, essentially yielding five times more energy on a single fueling than the longest-lasting lithium-ion battery on the market at the time. Moreover, it could be refueled repeatedly, with the plan calling for refueling to be accomplished by the replacement of a disposable fuel cartridge. The company announced that it would have a product in production in 2002. That time frame, however, would be pushed back regularly.
In June 2001 Lifton appeared on CNNfn's Capital Ideas, and listed the company's partners, which included General Dynamics, with whom Medis was approaching the Department of Defense and other militaries around the world about buying the micro-fuel cells for military applications. He also explained the advantage fuel cells held over batteries: "When you think of the new forthcoming technology, the 3G phones and the new functionality that they're going to have to offer which is color and music and movies and bank accounts … and stock accounts. A, they need much more power and fuel cells can give them much more power. B, if you're frustrated today, when your phone goes off, imagine how frustrated you will be when your phone goes off in the middle of your bank statement or in the middle of your movie. They give you much more lasting power. C, they're much more convenient. It takes you three hours to charge your battery today. You'll be able to use a Medis cartridge in three seconds." Lifton said he hoped to have a commercial product ready for sale in 2003 or 2004, and in the meantime the company was going to demonstrate that the fuel cells were makeable in an effort to convince other companies to manufacture them around the world.
In early 2004 Medis announced that it planned to release a new fuel cell charger at the end of the year, costing $14.99 and offering 15 hours of talk time for cell phone users. The fuel was now different, switched to borohydride (alkaline solutions mixed with alcohols). Unlike methanol it was not flammable or toxic. But some observers, in particular Barron's writer Rhonda Brammer, began taking a more critical look at Medis. "The cold, hard reality," she wrote in August 2004, "is that, in spite of these supposedly promising technologies—and Lifton says Medis is still pursuing some of them—Medis Technologies, since inception in April 1992, has generated no earnings and virtually no sales. Indeed, pretty much all it has to show for itself—financially speaking, anyway—is an accumulated deficit that now amounts to more than, get this, $110 million. What Medis has sold in quantity—the only thing, really—is stock."
Displeased with the tenor of the Barron's piece, Lifton fired back with a letter to the editor to state his case. He maintained that Medis had much more to show for its efforts than $110 million in debt: "Medis has developed a broadly patented, fuel-cell technology that, in view of its high levels of power, its own cost and safety, suggests it can become an important power source for many portable devices…. The Company has in place a program for bringing those products to high-volume production with companies like Kodak and Flextronics." Lifton also defended the company's CellScan product, which he maintained had "significant business value to Medis." He contended that the company had not spent $110 million in development costs. Rather, "a large part of the accumulated deficit is a result of noncash write-offs of the goodwill accumulated when Medis Technologies acquired part of Medis El, most of whose stock it already owned, as well as other noncash write-offs."
- The company is founded as Medicell.
- The joint venture Medis El goes public.
- The company begins investments in fuel cell technology.
- The name is changed to Medis Technologies.
- A stake in More Energy Ltd. is acquired.
Brammer was not alone in discounting the prospects of Medis bringing a commercially viable fuel cell product to market. The company would also be the target of short-sellers, which Lifton charged were disseminating false information about the company in order to hurt the share price. Nevertheless, Medis still had a lot of interest in its potential. During 2004 it set up distribution arrangements in preparation for the introduction of the Power Pack into the market with companies such as Kensington/Acco Brands, which had access to major office supply and big box retailers; ASE International, with ties to more than 60,000 drugstores, convenience stores, and airport shops; and Superior Communications, which distributed cellular products and controlled branding rights to Cingular/AT&T Wireless, Altel, and T-Mobile USA.
In 2005 Medis made a number of demonstrations of fully operational Power Packs to convince manufacturers to produce the Power Pack as well as drum up future sales. In June 2005 the company announced that it had reached a cooperation agreement with a major, although unnamed, mobile operator to do market testing in preparation for introducing Power Packs as a secondary power source for portable electronic devices. Despite the work of short-sellers, the steps taken by Medis were enough to convince most investors, who bid up the price of the company's stock. As a result, Medis's market cap approached $500 million in 2005. All signs pointed to the company finally fulfilling its promise, but whether that would prove true remained to be seen.
CDS Distributor, Inc.; Medis El Ltd.; Medis Inc. (64%); More Energy Ltd. (44.8%).
Mechanical Technology Incorporated; Motorola, Inc.; Samsung Electronics Co. Ltd.
Brammer, Rhonda, "Sleeper Cell?," Barron's, August 2, 2004, p. 23.
Francis, Bruce, "Medis Technologies CEO," CNNfn: Capital Ideas, June 27, 2001.
Halper, Mark, "More Power to You," Time, December 15, 2003, p. A10.
Manuel, Marlon, "Pocket Power: Battery Industry Surges to Keep Electronic Devices Humming," Atlanta Journal-Constitution, January 2005, p. E1.
Pincas, Gitit, "Fueling a $430m Dream," Israel Business Arena, January 6, 2005.
――――――, "Medis Raising $45-60m," Israel Business Arena, July 14, 2005.
Scott, Alex, "Medis Develops Nonprecious Metal Catalyst," Chemical Week, April 3, 2002, p. 22.
Simou, Alexandra, "Commercializing the 'Next Small Thing,'" New York Sun, January 24, 2005.