NEW YORK, NY -- (MARKET WIRE) -- January 3, 2007 --Medis Technologies Ltd. (
NASDAQ:
MDTL) today
released a letter to the Company's shareholders from Chairman and CEO,
Robert K. Lifton, previewing the Company's plans for 2007. The letter is
included in its entirety below:
Dear Fellow Shareholder,
With the start of the New Year, it seems an appropriate time to look at our
plans and share our goals for the coming period. In past year-end letters
to you, I have reviewed the achievements of the prior year before
discussing future programs. But at this point in our corporate life our
position is much different. We have made the very difficult and important
transition from the process of developing a product to completing
development of our 24/7 Power Pack product, receiving Underwriters
Laboratories (UL) Listing, creating the production capability to make the
product in high volumes and making significant progress in sales and
distribution of the product. To be sure, we should acknowledge the progress
and multiple achievements of the past year, but let us use this opportunity
to present our programs and milestones for the year ahead, with particular
focus on sales and production of our Power Packs. At the end of the letter
I will also address the status of our other energy developments and of Cell
Kinetics.
Power Pack Sales -- the Enterprise Market
As you know, our Power Pack sales programs are aimed at two different
markets. One is the enterprise market -- those companies who equip their
employees with mobile devices carrying advanced software, like Microsoft's
Windows Mobile or Symbion, that affords them computer capabilities on their
devices, including exchanging information with their office computers and
operating their e-mail. We believe that our Power Pack has broad appeal to
this market by supplying the increased power that allows the use of these
devices for longer periods and more conveniently, thereby increasing the
productivity which the companies are seeking. Moreover, in the environment
of business to business sales for this market, with much lower distributor
mark-ups, and tax deductibility, the net cost of the Power Pack will result
in a very strong value proposition. Importantly, we are told that there is
no other satisfactory solution in the form of chargers or other power
sources for powering many of the devices used in this market.
This is a market that is growing very rapidly. As recently reported by IDC,
it is expected to increase at a compound annual growth rate of 23% from
$1.2 billion in 2006 to $3.5 billion in 2010. Already, Symbion claims to
have some 60 million users and Microsoft is planning to have some 100
million users by the end of this year. We have also been told to expect a
high attachment rate in this market -- that is the percentage of device
users who would buy the 24/7 Power Pack and expect multiple use of Power
Packs by each employee.
We have already made significant inroads in that market through existing
distributor relationships with companies that serve the enterprise market
such as Quasar Business Solutions, which is a Microsoft "Gold Certified
Partner" distributing Microsoft Windows Mobile, and Northwest Charging
Systems, which provides power solutions to companies in those markets.
These distributors, through their sales teams, are already connecting with
customers worldwide and we expect their demand to far exceed their initial
orders as they make sales of Power Packs and those sales result in follow
up repeat purchases. In addition, we are looking to expand our relations in
the enterprise market by selling to mobile operators as we anticipate that
they will arrange sales to their enterprise customers, which also enhance
their own revenues. We are also looking to enter into relations with
Original Equipment Manufacturers (OEMs) who sell advanced devices to
enterprise market companies.
Another aspect of this market is the WiFi or WiMax markets, where companies
can save considerably on their phone bills by using dual mode phones that
search for and access cell towers or voice over internet protocol (VOIP),
depending on which is most convenient. Because of their constant searching,
those dual mode phones have very limited battery life and using the Power
Pack in an always ready holster can provide an attractive solution to their
power needs.
We have publicly expressed our expectations of large scale sales in this
enterprise market and now that we are able to demonstrate that we have met
the stringent test for UL certification we would look for such orders. We
believe that the Consumer Electronic Show (CES), which runs in Las Vegas
from January 8th to 11th, will provide the opportunity to meet some of our
targeted customers and move the order process forward on a fast track.
The Retail Markets
Every day brings more evidence of the development and sale of consumer
devices with increasing capabilities which require more power to fully use
and enjoy. The advent of cell phones with music, video content and other
capabilities, as well as the beginning of advertising on the cell phones,
are examples of this wider use. Existing batteries cannot keep up with the
expanded power needs. Particularly, since the massive battery recalls, it
does not appear that battery capabilities will be expanded in the
foreseeable future. At the same time, chargers using even the most advanced
lithium batteries are capable of very limited increase in use time -- the
best of them claiming only a little over three hours. As a result, we and
our distributors believe there is a large demand for our Power Pack capable
of providing from twenty to thirty hours of added use time, depending on
the device. And, of course, we expect that once the consumer has a good
experience with the initial purchase he or she will make multiple
purchases.
We already have substantial orders for the consumer market, such as the
order for 200,000 Power Packs per month from our distributor, ASE
International, and with the responses we have already received from the
announcement of UL certification it is clear that we have the opportunity
to place the Power Pack in a broad array of retail outlets, worldwide,
including mobile operators' cell phone stores.
The timing of this retail program requires thoughtful handling. Our
distributors and customers have advised us that once they start selling the
Power Packs, especially if they sell through as quickly as we expect, they
must have sufficient supply readily available to refill their inventories.
Based on our sales expectations, the capability of our semi-automated line
of up to 30,000 Power Packs a month will not be sufficient assurance of
adequate back up supply. Our plan to assure sufficient product flow is to
ramp up for retail sales by accumulating inventory from our semi-automated
line for the next few months and time the start of retail sales so that our
automated line will be in operation in time to support the expected market
demand for refilling inventories.
The Military and Homeland Security Markets
In parallel with the development of the enterprise and retail markets, we
are working with General Dynamics to develop military markets for the Power
Pack as well as markets with Homeland Security. Sales to these markets will
be subject to the same considerations as the retail market.
Selling Strategies
One final point about our sales strategy warrants mention. We are accessing
the different markets described above in so many parts of the world with
only a very few marketing personnel of our own and minimal selling costs.
We are able to do this through our distribution system because we are
offering a unique product that only we can make in a pricing structure that
allows the distributor to make an attractive profit. Already, at this point
in time, our distributors have about two hundred sales personnel and sales
representatives available to sell our Power Packs and we expect these
numbers to increase substantially as we add more distribution.
Production
The fully automated line capable of producing up to 1.5 million Power Packs
per month is now being validated in Ismeca's plant in Switzerland by teams
from Ismeca and Celestica together with our own team. As validation is
completed, the line will be dismantled and sent to Celestica's plant in
Galway, Ireland where it will be reassembled and begin the process of being
put into production. At the same time, we plan that our fuel facility and
our electrode assembly facility in Ireland will become operable. Our plan
is to start building production from that automated line in Ireland during
the second quarter and reach the capability of full production during the
third quarter.
Additional Production Lines
As we have said before, as soon as we are satisfied that the first fully
automated line will be sold out, we will begin the process of building
additional line(s). We have already developed a cost program with our
various suppliers for additional lines which will be substantially less
than the cost of the first line, particularly since we have already paid
for fuel production and electrode framing and other facilities which will
be used for additional lines.
Other Sales -- Production Programs -- Russia
Progress has been made in our program for sales and ultimately production
of the Power Pack in Russia. Based on their market testing, the Russian
companies we are dealing with have recently advised us of their desire to
build a semi-automated line to produce Power Packs as a prelude to
developing a fully automated line in Russia to service that market.
Contracts are now being prepared to carry out that program.
More Powerful Products for Laptops, Home and Military Use
During this past year, we announced plans to create more powerful second
generation fuel cell products based on the core platform technology
reflected in the Power Pack product. These new products are designed to be
refuelable using fuel cartridges. One such program involves an 800 watt
power source being developed with funding from Israel Aircraft Industries
(IAI) for Unmanned Air Vehicles (UAVs). Funding has begun on that project
and our technical team is moving forward to develop a program for IAI, upon
which IAI will decide whether to go forward with development. With respect
to development of power sources for laptops and one to two kilowatt power
for homes and offices, we have met with companies interested in each of
those projects to show them our program and are waiting for responses that
would provide funding and business support, reflecting their serious
commitment to the project to encourage us to move forward.
Financial Condition
Our company has never been as financially strong as it is today. As of the
end of 2006 we expect our cash, cash equivalents and short term investments
to total over $80 million, reflecting our successful sale of $57.5 million
of Series A 7.25% Convertible, Perpetual Preferred Stock and including over
$8 million received from our Deputy Chairman and COO, Howard Weingrow and
from me as a result of our exercise of stock options. We also have no
long-term debt. We believe these funds are sufficient to carry out our
plans and bring us to the point of cash flow so that we would require no
further external investments.
CellScan and Cell Kinetics
After a number of months of studying the available opportunities for Cell
Kinetics, including meetings with major scientists in US and Israeli
institutions, its CEO Dr. Asaf Ben-Arye has recommended that Cell Kinetics
focus its initial efforts on the manufacture and sale of grids that can be
used, not only in the CellScan but also by other instruments presently in
laboratories. This will expand the potential market for our grids, which
offer unique capabilities particularly with respect to the study and
stimulation of rare cells like those that appear in cancer stem cells. Dr.
Ben-Arye also has plans to expand the activities of Cell Kinetics in
related areas dealing with cancer testing and drug development. We continue
our plans to separate Cell Kinetics through a program which can be
attractive to our shareholders and have now completed the necessary
corporate and tax planning that was required under American and Israeli
law. We hope to present such a program to our shareholders in the coming
months.
As you can see we have an exciting and demanding year ahead of us -- one in
which performance can bring substantial rewards to our shareholders as well
as our employees and suppliers.
On behalf of all of us at Medis Technologies, please accept our best wishes
for a happy, healthy and prosperous New Year.
Sincerely,
Robert K. Lifton
Chairman & CEO
Medis Technologies' primary focus is on direct liquid fuel cell technology.
Its business strategy is to sell its products to end users through retail
outlets, service providers and to the military and other markets. Medis has
also developed the CellScan with many potential applications relating to
disease diagnostics and chemo sensitivity. Additionally, Medis' product
pipeline includes other technologies, in varying stages of development.
This press release may contain forward-looking statements, which are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. In some cases you can identify those so-called
"forward-looking statements" by words such as "may," "will," "should,"
"expects," "plans," "targets," "believes," "anticipates," "estimates,"
"predicts," "potential," or "continue" or the negative of those words and
other comparable words. These forward-looking statements are subject to
risks and uncertainties, product tests, commercialization risks,
availability of financing and results of financing efforts that could cause
actual results to differ materially from historical results or those
anticipated. Further information regarding these and other risks is
described from time to time in the Company's filings with the SEC. We
assume no obligation to update or alter our forward-looking statements made
in this release or in any periodic report filed by us under the Securities
Exchange Act of 1934 or any other document, whether as a result of new
information, future events or otherwise, except as otherwise required by
applicable federal securities laws.
This press release is available on Medis' web site at
www.medistechnologies.com.
Contact Information: CONTACT:
Medis Technologies Ltd.
Robert K. Lifton
Chairman & CEO
(212) 935-8484
OR
INVESTOR RELATIONS COUNSEL:
The Equity Group Inc.
Adam Prior
(212) 836-9606
Devin Sullivan
(212) 836-9608