In Focus

Risky Business

I would have to say my biggest accomplishment as a Chick has been to develop some real confidence in an area I was completely clueless about not that long ago. But putting a company through a well-researched Chicks' Dozen makes that confidence easy to come by; we're tough on anyone we consider buying. Basically it's our way or the highway. We Chicks don't have the cajones to take big risks (physically or mentally), so we stick with simple, proven leaders. Therefore, I find it intriguing when I meet someone daring enough to be risky. Which happened to be the case a few weeks ago.

I met these two terrific people while doing a series of interviews after the recent release of Head Hen Karin Housley's book, Chicks Laying Nest Eggs. After the interview was over, they handed me a piece of paper with information on a company they knew was probably high-risk, and they wondered what I thought of it. The company is called Medis Technologies, LTD (NASDAQ:MDTL) and it is a holding company that engages in research and development activities through its majority-owned subsidiary, Medis El, LTD. I figured it would be kinda cool to check out an industry I wasn't entirely familiar with, and a company that also happens to have some of the scariest financials this Chick has ever seen. Here is what I dug up.

Established in 1992, Medis began as a joint venture with Israel Aircraft Industries (IAI) to use its strengths (advanced aerospace and military technology) and knowledge to develop new technologies for civilian use. Its main goal: to meet global demand for a cleaner and more efficient energy. Some of their proprietary products include:

• Fuel cells made on the smallest scale to replace batteries and make them longer lasting in the newer 3G (third generation) cell phones
• A "Super Green" AA-sized battery with twice the life
• A smaller, lighter engine that burns more efficiently and is a lot less expensive to manufacture
• Compressors for cooling units that are more innovative, efficient and environmentally friendly
• A Cell Scan System designed to detect diseases in the earliest stages

The whole idea of producing these various items is really very interesting and piques a lot of people's interests. After all, aren't we all looking for ways to keep the environment clean? From establishing Earth Day to the Environmental Protection Agency's policies and numerous companies trying to create products very much like the ones Medis purports to develop, this is a hot topic. So with its good intentions in mind, what are its business strategies?

Well, first and foremost, with Medis' fuel cell batteries being the highest power density per square centimeter (that's ten times better than what's out there now!), their desire to be the primary supplier for 3G phone companies globally is a strong possibility. And that is first on their list. Now stick with me here, this isn't as complicated as it all seems...

Their next step has to do with their Direct Liquid Methanol Fuel Cell, or DLM. According to www.medisel.com, a DLM is "a type of fuel cell that doesn't use a polymer membrane. The electrolyte acts as the membrane allowing for higher fuel concentrations. The catalyst draws the hydrogen from the liquid methanol, eliminating the need for a fuel reformer." Sounds intimidating, huh? All they really want you to remember here is that they are environmentally safe, compared to the regular battery. Anyway, their plan is to either merge, have a joint venture, or license with a company that has the capability to manufacture and distribute these fuel cell assemblies globally.

The potential here is enormous. In fact on the idea alone, I'm practically sold! But then there are those scary financials I was telling you about. Talk about doom and gloom. Their recent Annual Filing (10-K) for Fiscal Year ending 12/31/00 states that Medis has no revenues and a loss of $25.5 million, up from $6 million the prior year. This is basically because, folks, Medis has no revenue generating operations as of yet. All those "ideas" I mentioned are simply that... ideas. Enter: RISK. MDTL's only source of income comes from the proceeds of investor equity financing, long-term bank loans, and a grant they received from the Office of the Chief Scientist of the Ministry of Commerce and Industry of the State of Israel. This $1,800,000 grant was given from the company's inception through 1997 and must be paid back in full using 3% of its sales of products. Unless of course, they don't sell them... which, based on their listed risk factors, is a real possibility.

Risk Factors are listed as: We have not been profitable and cannot predict when we will achieve profitability; We may never complete the development of commercially viable fuel cells; We may encounter problems or delays in our collaboration efforts and could hurt our reputation or the reputation of our product; We can't assure affordable prices; We may not meet our product development and commercialization milestones; and last but not gut-wrenchingly least, A mass market may never develop or will take longer than we anticipate.

Okay, okay, so every cotton-pickin' public company has scary risk factors. Yeah, and did you know that the risk factors of taking Advil include hives, facial swelling, Asthma and shock? My point is, we all know there is a risk in everything we do. But if I had to weigh them out, I'd feel a lot more confident taking a few Advil for my headache than I would investing in something this risky to make a big profit. Because I am quite certain if I did invest in something like Medis and they failed, I'd be experiencing hives, facial swelling, Asthma & shock anyway. There are risks and then there are RISKS.

I hope my new friends make millions on Medis, and I am sure if they do, they'll let me know! But for little ole me and my newfound confidence, I'll take safety first, thank you very much. There is safety in numbers after all... the number of Chicks in your club and the numbers listed under a company's financials!