As filed
with the Securities and Exchange Commission on July 9, 2009
Registration
No. 333-
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
_____________
FORM
S-1
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
_____________
MEDIS
TECHNOLOGIES LTD.
(Exact
name of registrant as specified in its charter)
_____________
|
Delaware
|
3845
|
13-3669062
|
|
(State
of Incorporation)
|
(Primary
Standard Industrial Classification Code Number)
|
(I.R.S.
Employer
Identification
Number)
|
805
Third Avenue
New
York, New York 10022
(212) 935-8484
(Address
and telephone number of registrant’s principal executive offices)
Jose
A. Mejia
President
and Chief Executive Officer
Medis
Technologies Ltd.
805
Third Avenue
New
York, New York 10022
(212) 935-8484
(Name,
address and telephone number of agent for service)
Copy
to:
Ira
I. Roxland, Esq.
Sonnenschein
Nath & Rosenthal LLP
1221
Avenue of the Americas
New York,
New York 10020
Telephone: (212)
768-6700
Fax: (212)
768-6800
_____________
Approximate date of commencement of
proposed sale to the public: From time to time after the effective date
of this Registration Statement.
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. x
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. o
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. o
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
|
Large
accelerated filer o
|
Accelerated
filer x
|
|
Non-accelerated
filer o
|
Smaller
reporting company o
|
CALCULATION
OF REGISTRATION FEE
|
Title
of
Each
Class of
Securities
To
Be
Registered
|
Amount
To
Be
Registered
|
Proposed
Maximum
Offering
Price
Per
Unit (1)
|
Proposed
Maximum
Aggregate
Offering
Price
|
Amount
of
Registration
Fee
(2)
|
|
Common
stock,
par
value $0.01 per share
|
7,780,603
shares
|
$
0.51
|
$
3,968,108
|
$
221.42
|
(1) Estimated
solely for purposes of calculating the registration fee pursuant to Rule 457(c)
of the Securities Act.
(2) Medis
Technologies Ltd. filed a registration statement on Form S-3 (File No.
333-155574) on November 21, 2008 covering an indeterminate number of securities
up to a proposed maximum aggregate offering price of $55,000,000, of which none
have been issued by Medis Technologies under such prior registration statement
and for which Medis Technologies previously paid a filing fee of $2,161.50.
Pursuant to Rule 457(p) under the Securities Act, Medis Technologies has offset
the $221.42 registration fee due herewith with a portion of the fee paid on
November 21, 2008 covering the aforementioned unissued securities. As a result,
no registration fee is submitted herewith.
The
Registrant hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
The
information in this prospectus is not complete and may be changed. The selling
stockholder may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This prospectus is not
an offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject
to Completion, dated July 9, 2009
Preliminary
Prospectus
MEDIS
TECHNOLOGIES LTD.
7,780,603
shares of Common Stock
_______________________
This
prospectus relates to the offer and sale from time to time of up to 7,780,603
shares of our common stock by the person described in this prospectus, whom we
call the “selling stockholder.” Such shares are issuable upon exercise of a
warrant held by the selling stockholder. We are registering these shares as
required by the terms of a Preferred Stock Purchase Agreement between an
affiliate of the selling stockholder and us. Such registration does not mean
that the selling stockholder will actually offer or sell any of these shares. We
will receive no proceeds from the sale of any of these shares by the selling
stockholder.
Our
common stock is currently traded on The Nasdaq Global Market under the symbol
“MDTL.” The last sale price of our common stock on July 2, 2009 was $0.49 per
share.
This
investment involves risks. You should refer to the discussion of risk factors,
beginning on page 3 of this prospectus.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
_______________________
,
2009
TABLE
of CONTENTS
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Page |
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FORWARD-LOOKING
STATEMENTS
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i
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| PRICE
RANGE OF OUR COMMON STOCK |
19
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SELLING
STOCKHOLDER
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20
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|
DESCRIPTION
OF OUR SECURITIES
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23
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|
WHERE
YOU CAN FIND MORE INFORMATION
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25
|
You
should rely only on the information contained or incorporated by reference in
this prospectus. Neither we nor the selling stockholder have authorized anyone
else to provide you with different information. If anyone provides you with
different information, you should not rely on it. Neither we nor the selling
stockholder are making an offer to sell these securities in any jurisdiction
where the offer or sale is not permitted. You should assume that the information
appearing in this prospectus, or any documents incorporated by reference herein,
is accurate only as of the date on the front cover of the applicable document.
Our business, financial condition, results of operations and prospects may have
changed since that date.
FORWARD-LOOKING STATEMENTS
You
should carefully review the information contained in this prospectus and the
reports incorporated by reference herein. This prospectus and the documents we
incorporate by reference in this prospectus include forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Words such as “will,”
“may,” ‘‘expects,’’ ‘‘anticipates,’’ ‘‘approximates,’’ ‘‘believes,’’
‘‘estimates,’’ ‘‘intends’’ and ‘‘hopes’’ and variations of such words and
similar expressions are intended to identify such forward-looking statements. We
have based these statements on our current expectations and projections about
future events. These forward-looking statements are not guarantees of future
performance and are subject to risks and uncertainties that could cause actual
results to differ materially from those projected in these statements. These
risks and uncertainties include those set forth under ‘‘Risk Factors.’’ The
forward-looking statements include, among others, statements about:
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·
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the
development and commercialization schedule for our fuel cell technology
and products;
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·
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our
financial condition;
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·
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the
expected cost competitiveness of our fuel cell technology and
products;
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·
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rapid
technological change;
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·
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our
intellectual property;
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·
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the
timing and availability of our
products;
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·
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our
business strategy; and
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·
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general
economic conditions.
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Except
for our ongoing obligations to disclose material information under the federal
securities laws, we are not obligated to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this prospectus and the documents we
incorporate by reference in this prospectus, might not occur.
PROSPECTUS
SUMMARY
The
following summary does not contain all the information that may be important to
you in making a decision to acquire our securities. For a more complete
understanding of our company, you should read the entire prospectus, including
the risks described under “Risk Factors,” and the documents incorporated in this
prospectus by reference.
Overview
We
design, develop and market an innovative fuel cell technology that provides
portable electricity for retail, commercial and military applications. A fuel
cell is a device that converts the chemical energy of a fuel directly into
electricity. To our knowledge we are the only company ever to have manufactured
working portable fuel cells in production quantities. Our intellectual property
portfolio consists of 37 United States and international
patents.
Our
technologies provide solutions for remote and off-grid power. Unlike batteries,
our products do not store power; they generate fresh power on the spot as
needed, which we believe makes our technology ideal for military applications.
It also means that we can power devices in the complete absence of electricity
from the grid – during blackouts, in battlefield conditions, in subway
tunnels or mine shafts, or at other remote or unmanned
locations.
Our fuel
cells do not generate significant heat, are DOT approved and UL listed, and are
recyclable. Most other fuel-cell developers that we are aware of use a
methane or hydrogen-based chemistry. Our fuel cells are based on sodium
borohydride, which we believe is a superior and more
stable fuel.
Our first
commercial product is our “24/7 Power Pack,” commercially introduced in late
2008. It is a recyclable hand-held power generator that can power advanced
portable electronic devices, such as mobile handsets, smart phones, MP3 players,
gaming and other devices useful in emergencies such as flashlights, radios and
GPS devices. We
believe that the 24/7 Power Pack is the first commercially available, portable
fuel cell ever sold. Subsequent to the introduction of the 24/7 Power Pack,
we introduced our Xtreme™ Power Pack Emergency Kit, which provides light in any
emergency situations where light is needed for survival or escape. Because
it generates its own power when needed, it can provide instant light as well as
energy to power portable electronic devices on demand.
We also
are majority owners of a separately operated subsidiary that is also traded
publicly: Lod, Israel-based Cell Kinetics Ltd. (OTC BB: CKNTF). Cell
Kinetics is seeking to exploit commercially a unique cell carrier under its
CKChipTM product
line, which can accommodate large quantities of living cells, each in individual
wells, for measuring their reactions while in a static state over
time.
During
the year ended December 31, 2008 and the three months ended March 31, 2009, we
recorded significant impairment charges related to the goodwill and property,
plant and equipment that we carry on our balance sheet, which has significantly
increased our losses for the year. We incurred a net loss of approximately
$148,422,000 during the year ended December 31, 2008 and a net loss of
approximately $16,548,000 during the three months ended March 31, 2009.
We have
limited available cash resources and require additional financing or cash from
the sale of excess inventory, equipment or purchase orders from military
contracts, in order to continue to fund our current operations beyond the third
quarter of 2009, and to pay existing and future liabilities and other
obligations. In order
for us to remain a going concern, we will need to obtain substantial additional
financing to continue our operations and to meet our cash flow needs. In view of
our financial situation and current market and economic conditions, we do not
know if additional financing will be available to us on commercially reasonable
terms, or at all. Any inability to so obtain additional financing will
materially adversely affect us, including requiring us to significantly further
curtail or cease business operations altogether.
We are a
Delaware corporation organized in April 1992. Our executive offices are located
at 805 Third Avenue, New York, New York 10022. Our telephone number is (212)
935-8484. Our website is located at www.medistechnologies.com. The information
on our website is not part of this prospectus.
Recent
Developments
Promissory
Notes
Effective
as of May 20, 2009, we entered into a Secured Promissory Note (the
“Knickerbocker Note”) and Pledge Agreement with Knickerbocker Fine Arts Ltd.
Knickerbocker is an affiliate of Howard Weingrow, a former executive officer and
director of our company. Pursuant to the Knickerbocker Note and Pledge
Agreement, Knickerbocker loaned $50,000 to us at a yearly interest rate of 6%.
The loan is secured by 500,000 ordinary shares of Cell Kinetics Ltd., which we
beneficially own. The maturity date of the loan and all accrued interest is
August 18, 2009, and may be prepaid in whole or in part by us. The Knickerbocker
Note and Pledge Agreement contain other customary provisions found in loans of
this type, including relating to default provisions.
Effective
as of May 17, 2009, we entered into a Promissory Note (the “Finkelshtain Note”)
with Gennadi Finkelshtain, the General Manager of More Energy Ltd., a
wholly-owned subsidiary of our company. Pursuant to the Finkelshtain Note, Mr.
Finkelshtain loaned $50,000 to us at a yearly interest rate of 7%. The maturity
date of the loan and all accrued interest is September 17, 2009, and may be
prepaid in whole or in part by us. The Finkelshtain Note contains other
customary provisions found in loans of this type, including relating to default
provisions.
Series
B Preferred Stock
On June
8, 2009, we entered into a Preferred Stock Purchase Agreement (the “Purchase
Agreement”) with Volation Capital Partners, LLC (the “Investor”), which provides
that, upon the terms and subject to the conditions set forth therein, the
Investor is committed to purchase up to $5,000,000 of our Series B Preferred
Stock. Under the terms of the Purchase Agreement, from time to time until June
7, 2010 and at our sole discretion, we may present the Investor with a notice to
purchase such Series B Preferred Stock (the “Notice”). The Investor is obligated
to purchase such Series B Preferred Stock on the tenth trading day after the
Notice date, subject to satisfaction of certain closing conditions. The Investor
will not be obligated to purchase the Series B Preferred Stock (i) in the event
the closing price of our common stock during the nine trading days following
delivery of a Notice falls below 75% of the closing price on the trading day
prior to the date such Notice is delivered to the Investor, or (ii) to the
extent such purchase would result in the Investor and its affiliates
beneficially owning more than 9.99% of our common stock.
On the
date of delivery of each Notice under the Purchase Agreement, we will also issue
to the Investor five-year warrants to purchase our common stock at an exercise
price equal to the closing price of our common stock on the trading day prior to
the delivery date of the Notice. The number of shares issuable upon exercise of
the warrant will be equal in value to 135% of the purchase price of the Series B
Preferred Stock to be issued in respect of the related Notice. Each warrant will
be exercisable on the earlier of (i) the date on which a registration statement
registering for resale the shares of common stock issuable upon exercise of such
warrant becomes effective and (ii) the date that is six months after the
issuance date of such warrant.
The
Series B Preferred Stock is redeemable after the fifth anniversary of the date
of its issuance and is subject to repurchase by us (i) at any time at our
election, or (ii) following the consummation of certain fundamental transactions
by us, at the option of a majority of the holders of the Series B Preferred
Stock.
Holders
of Series B Preferred Stock will be entitled to receive dividends, which will
accrue in shares of Series B Preferred Stock on an annual basis at a rate equal
to 10% per annum from the issuance date. Accrued dividends will be payable upon
redemption of the Series B Preferred Stock. The Series B Preferred Stock ranks,
with respect to dividend rights and rights upon liquidation:
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·
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senior
to our common stock; and
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·
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on
parity with our 7.25% Series A Cumulative Convertible Perpetual Preferred
Stock.
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Bridge
Loan
On June
16, 2009, we entered into a Loan Agreement and Promissory Note with the Investor
pursuant to which, the Investor made a $550,000 short-term loan (the “Loan”) to
us, upon the terms and subject to the conditions set forth therein, to enable us
to meet our immediate liquidity needs. The Loan bore interest at a rate of 6%
per annum until paid in full, was scheduled to mature on June 25, 2009, and
was subject to acceleration in the event we default in our obligations under the
Loan Agreement.
Amendments
to Purchase Agreement
Under the
terms of the Loan Agreement, we and the Investor agreed to amend the terms of
the Purchase Agreement. The agreed amendments applied solely with respect to the
first Notice to purchase Series B Preferred Stock and the related closing of the
first Series B Preferred Stock issuance thereunder (the “Closing”), and related
to the timing for delivery of the Notice and consummation of the related Closing
as well as the method for setting the exercise price for the five-year warrant
to purchase our common stock to be issued by us in connection with the delivery
of the Notice. Pursuant to the terms of the Loan Agreement, we and the Investor
agreed that (i) we would set the exercise price of the Warrant based on the
average of the daily closing prices of our common stock on (A) the date
immediately preceding the date upon which we deliver a Notice to the Investor,
and (B) the date upon which the Notice is so delivered, (ii) this Closing would
be accelerated in contrast to those called for by the Loan Agreement, and (iii)
the gross proceeds that we would derive from this funding would be reduced by
the principal amount of the Loan, and by accrued but unpaid interest thereon.
The Investor’s obligation to accept the Notice and consummate the Closing on the
amended terms described herein would be conditioned upon the Investor’s having
borrowed at least 6,500,000 freely tradable shares of our common stock from our
non-affiliate stockholders.
On June
30, 2009, we and the Investor agreed to further amend the terms of the Purchase
Agreement. The agreed amendments apply solely with respect to the
first Notice and Closing, and relate to the timing for delivery of the Notice
and consummation of the related Closing as well as the method for
setting the exercise price for the Warrant. Pursuant to
the terms of this amendment, we and the Investor agreed that (i) on the date on
which the Investor shall have borrowed at least 6,500,000 freely tradable shares
of our common stock from our non-affiliated stockholders, we would deliver the
first Notice to the Investor, (ii) on the same date, we would also issue to the
Investor or an affiliate of the Investor the Warrant, exercisable for shares of
our common stock at an exercise price of $0.42 per share, and (iii) the Investor
would accelerate the Closing such that it would take place on the date of
delivery of the first Notice.
Delivery
of Notice under Purchase Agreement
On July
1, 2009, pursuant to the terms of a Notice delivered to the Investor under the
Purchase Agreement, we issued 242 shares of Series B Preferred Stock to the
Investor and we received proceeds of $1,619,000 (net of fees payable to the
Investor, including a one-time commitment fee of $250,000, amounts
necessary to repay the Loan and all interest accrued thereon, and other fees and
expenses of the offering). In addition, we issued to the selling stockholder the
Warrant to purchase up to 7,780,603 shares of our common stock at an exercise
price of $0.42 per share.
The
Offering
|
Common
stock offered for sale by the selling stockholder
|
7,780,603
shares (1)
|
|
Common
stock to be outstanding after this offering
|
46,349,555
shares (1)(2)
|
________________
|
(1)
|
Reflects
shares issuable upon the exercise of an outstanding warrant held by the
selling stockholder.
|
|
(2)
|
Based
upon our issued and outstanding shares of common stock as of July 1, 2009.
This number excludes: 1,996,528 shares of common stock issuable upon
conversion of 5,750 shares of 7.25% Series A Cumulative Convertible
Perpetual Preferred Stock; 1,302,625 shares of common stock issuable upon
exercise of outstanding options and rights granted under our employee
equity incentive plans and 11,305,897 shares of common stock issuable upon
exercise of outstanding warrants.
|
RISK
FACTORS
You
should carefully consider the following factors, as well as other information
appearing elsewhere in this prospectus or incorporated in this prospectus by
reference, before you decide whether to purchase any of our common stock offered
in this prospectus.
We
have incurred losses and anticipate continued losses and negative cash flow; our
financial statements are subject to a going concern qualification from the
Independent Registered Public Accounting Firm that performed our
audit.
We have
generated net losses since inception and expect to continue to incur net losses
and generate negative cash flow until we can produce sufficient revenues to
cover our costs through the production and sale of our 24/7 Power Packs and
other anticipated fuel cell products.
We
incurred a net loss of approximately $148,422,000, $38,200,000 and
$33,047,000 during the years ended December 31, 2008, 2007 and 2006,
respectively, and a net loss of approximately $16,548,000 during the three
months ended March 31, 2009. We have recently suspended our production
operations and curtailed our development programs in an effort to cut costs and
preserve cash while we focus on sales and marketing activities. Our inability to
become profitable may force us to further curtail or discontinue our research
and development programs and manufacturing operations and our other day-to-day
operations. Furthermore, there can be no assurance that profitability, if
achieved, can be sustained on an ongoing basis. As of March 31, 2009, we had an
accumulated deficit of approximately $388,151,000. We may continue to generate
net losses for the foreseeable future and cannot predict when we will achieve
profitability, if ever.
In order
for us to remain a going concern, we will need to obtain substantial additional
financing to continue our operations and to meet our cash flow needs. In view of
our financial situation and current market and economic conditions, we do not
know if additional financing will be available to us on commercially reasonable
terms, or at all. Moreover, if we raise additional capital through borrowing or
other debt financing, we would incur substantial interest expense. Sales of
additional equity securities, including upon the exercise of convertible
securities, will dilute on a pro rata basis the percentage ownership of all
holders of common stock. Any inability to obtain additional financing will
materially adversely affect us, including possibly requiring us to significantly
further curtail or cease business operations altogether.
We
require additional funding in order to continue our operations.
We have
limited available cash resources and require additional financing or cash from
the sale of excess inventory, equipment or purchase orders from military
contracts, in order to continue to fund our current operations beyond the third
quarter of 2009, and to pay existing and future liabilities and other
obligations. We are continuing to negotiate with third parties in an attempt to
obtain additional financing and generate internal sources of funds to finance
our operations. The satisfactory completion of these negotiations prior to the
end of the third quarter 2009 is essential to provide sufficient cash flow to
meet current operating requirements.
We can
offer no assurance that we will be able to secure additional funding, or funding
on terms acceptable to us, to meet our financial obligations, or that a third
party will be willing to make such funds available.
Our
failure to raise additional funds will force us to cease business operations
entirely. Additionally, even if we raise funds in the near term, our failure to
successfully develop or market our
fuel cell
products may materially adversely affect our ability to raise additional funds.
In any event, it is not possible to make any reliable estimate of the funds
required to successfully market, produce and sell our fuel cell
products.
Our
vendor and supplier relationships are not certain or are being terminated due to
our cash position and some vendors and suppliers may bring legal action against
us claiming non-payment or breach of contract.
We have
entered into agreements with third party vendors and suppliers to provide
requisite materials and components.
Recently,
primarily due to our cash position, we have ceased payments under, renegotiated
terms of, or terminated many of these existing agreements. In some cases, we
have outstanding invoices or are required to make substantial cash payments. Our
failure to make all such payments could cause some vendors and suppliers to
bring legal action against us under a claim for non-payment or breach of
contract, or cause a bankruptcy event.
While we
believe that we will be able to adequately replace our suppliers or other
partners if and when we recommence production, our inability to do so in a
timely manner and on an cost-effective basis, could adversely affect our ability
to again manufacture our products and, consequently, our ability to bring our
products to market.
Our
relationships with our distributors are not certain or are being
terminated.
Although
we have received purchase orders pursuant to some of our distribution
agreements, we believe various factors have impacted those agreements and
purchase orders. Furthermore, although we have commenced selling our products on
a limited basis, we have temporarily curtailed the marketing and distribution of
our commercial products. We were recently notified by one of our distributors
that it has determined not to proceed with distributing our products.
Furthermore, our remaining distributors may decide not to continue with our
arrangements with them. Generally, we can give no assurance that any of our
distributors or representatives will continue to cooperate with us on the terms
and based on the pricing schedules we believe are appropriate. Any such failure
to cooperate could adversely affect our ability to distribute our 24/7 Power
Pack and emergency kit to the marketplace and, therefore, our business,
prospects, results of operations and financial condition.
A
commercially acceptable market for our fuel cell products may never develop or
may take longer to develop than we anticipate.
Although
we have developed our business plans assuming a consumer demand for our 24/7
Power Pack and future generations of our fuel cell products, as well as military
demand, a commercially acceptable market may never develop for our fuel cell
products or Cell Kinetic’s cell carrier products, or may develop more slowly
than we anticipate. Our fuel cell products represent a new technology and market
category, and we do not know with certainty to what extent, if any, end-users
will want to purchase and use them. The development of a commercially acceptable
market for our fuel cell products may be affected by many factors, some of which
are out of our control, including:
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·
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the
level to which the capabilities of our 24/7 Power Pack, and any other of
our fuel cell products, have advanced in performance, shelf-life, stand-by
time, time of use, size, weight, cost and other factors that determine
consumer acceptance;
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·
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the
emergence of newer, more competitive technologies and
products;
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·
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improvements
to existing technologies, including existing rechargeable battery
technology or the chips used in the electronic devices that allow the
batteries to operate more efficiently or allow the devices to run for
longer periods of time;
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·
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the
future cost of sodium or potassium borohydrides, alkalines, glycerol, or
any other hydrogen-based fuels, the catalysts used in our fuel cell
products which may require costly metals or other chemicals used for
powering our fuel cell products and plastics and nickel used in the
products;
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·
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regulations
that affect or limit the use of the components in our fuel cells or our
fuel cells in general or regulations regarding
recycling;
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consumer
perceptions of the safety of our products;
and
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consumer
reluctance to try a new product.
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If a
market fails to develop or develops more slowly than we anticipate, we may be
unable to recover the losses we will have incurred in the development of our
products and may never achieve profitability or positive cash
flows.
We
may not meet our product development and commercialization milestones and time
tables.
We
establish milestones and time tables based upon our expectations regarding our
technologies, plans and programs at that time, which we use to assess our
progress toward developing and delivering into the market place commercially
acceptable fuel cell products. These milestones relate to technology and design
improvements as well as to dates for achieving production and marketing goals.
If our products exhibit technical defects or are unable to meet cost or
performance goals, including levels and stability of power output for our 24/7
Power Pack, useful life and reliability or if our production goals cannot be
achieved in time or the costs exceed our expectations, our commercialization
schedule could be delayed and third parties who are collaborating with us to
manufacture or market our fuel cell products may decline to continue that
collaboration. Furthermore, potential purchasers of our initial commercial
products may lose interest or may opt to purchase alternative
technologies.
We can
give no assurance that our commercialization schedule – including production and
sales time tables – will be met as we further develop, produce and sell our fuel
cell products.
We
may be unsuccessful in developing additional fuel cell products or future
generations of our 24/7 Power Pack or any of our other
technologies.
In tandem
with the commercialization of our first products and subject to available funds,
we are developing other fuel cell products as well as future generations of our
24/7 Power Pack, including a solid fuel, refuelable Power Pack product and
specialized products for military use. Developing any technology into a
marketable product that a consumer will desire to purchase is a risky, time
consuming and expensive process. We may encounter setbacks or discrepancies
requiring time consuming and costly redesigns and changes. There also is the
possibility of outright failure. Furthermore, we contemplate moving forward with
the development of certain of our fuel cell technologies only if we are able to
find strategic investors or other joint venture partners or otherwise obtain
additional financing. Additionally, we continue to seek to improve our 24/7
Power Pack and our fuel cell technologies in general, particularly in the areas
of energy capacity, power density, operating time, shelf life, working life and
flexibility of use, as well as the temperature conditions under which they can
operate. We also seek to reduce the component costs and costs of the final
product, and continue to seek to improve its power management system and each
element of the power management system and to improve the efficiency of our
manufacturing
processes. We can give no assurance that we will be successful in improving our
technologies or reducing costs. Generally, we can give no assurance as to when
or whether we will successfully develop any of our other planned fuel cell
products into commercially successful products.
We
have limited experience manufacturing our products on a large scale commercial
basis.
Prior to
2008, we manufactured a limited number of our fuel cell products on our
semi-automated production line at our facility in Lod, Israel. In 2008, we
shifted our manufacturing efforts to our fully automated production line located
at the facilities of our contract manufacturer, Celestica Ireland Ltd., in
Galway, Ireland. We can offer no assurance that either we, our contract
manufacturer or any other party we have engaged to build a fully automated line
production for volume-production of our products have developed production
processes that are satisfactorily designed and sufficiently efficient to provide
for automated, low-cost manufacturing capabilities and processes to meet the
quality, price, engineering, design and production standards or production
volumes required to successfully mass market our fuel cell products.
Furthermore, our manufacturing process is complicated and we rely on a number of
subcontracts for the production of various subassemblies. Even if we or our
contract manufacturer and our subcontractors are successful in developing such
manufacturing capability and processes, we do not know whether we or they will
be timely in meeting our product commercialization schedule or the product,
production and delivery requirements of potential customers. A failure to
develop such manufacturing processes and capabilities or to timely meet such
requirements could cause us to lose customers and could have a material adverse
effect on our business and financial results.
Customers
will be unlikely to buy our fuel cell or CKChip™ products unless we can
demonstrate that they can be produced for sale to customers and users at
attractive prices.
The
price of our fuel cell products and CKChip products is dependent largely on
material and other manufacturing costs. We are unable to offer any assurance
that either we or a contract manufacturer will be able to reduce costs to a
level which will allow production of a competitive product that the consumer
finds attractive or that any product produced using lower cost materials and
manufacturing processes will not suffer from a reduction in performance,
reliability and longevity. In any event, we can give no assurance that the
pricing schedules for our products will be attractive to any of our
distributors, representatives or customers.
We have
developed an estimated pricing structure for our CKChip™ that we believe would
be commercially acceptable. However, we can give no assurance that potential
CKChip™ customers would respond affirmatively to our pricing
structure.
We
will be unable to market or sell our fuel cell or CKChip™ products if we are
unsuccessful in entering into, amending and maintaining sales agreements,
arrangements, alliances, joint ventures or licensing agreements with third
parties.
Our
ability to market, manufacture and sell our fuel cell technologies or CKChip™
products is wholly dependent on our entry into manufacturing, sales or
distributing arrangements, sales agreements, strategic alliances, joint ventures
or licensing agreements with third parties possessing such capabilities.
Although to date we have been successful in entering into certain of such
arrangements, we can give no assurance that in the future we will be successful
in amending such arrangements to take into account new pricing schedules and
products or other reasons, or in entering into additional arrangements,
alliances, joint ventures or agreements or that the terms of which will be
entirely beneficial to us or that existing agreements will result in substantial
revenue. Failure to enter into, or amend the terms of, such arrangements with
regard to our products could materially and adversely affect our
commercialization plans and, therefore, our business, prospects, results of
operations and financial condition. Furthermore,
even if
we were successful in entering into such arrangements or amending the terms of
any such arrangements, any failure to successfully support our products through
advertising or marketing programs, whether due to the costs involved or
otherwise, or generally any failure by potential end users to purchase our
products, could cause those third parties to decline to extend their
relationship with us or order additional products from us.
We
depend on relationships with strategic partners, and many of the terms of these
relationships are not certain.
We have
entered into agreements with strategic partners for the distribution of our 24/7
Power Pack. The terms and conditions of many of these agreements allow for
immediate termination, in part or in whole, by the partners in their discretion,
or only provide for a commitment on the part of the partners upon the happening
of certain milestone events. We can give no assurance that we will meet any of
these milestones. Our inability to meet any of the aforementioned milestones, or
the termination of any of these agreements by the strategic partner, could
adversely affect our ability to distribute our 24/7 Power Pack to the
marketplace and, therefore, our business, prospects, results of operations and
financial condition. Furthermore, our agreement with Celestica to manage and
operate our high volume production line and fuel production facility may be
terminated by us, by Celestica, or by mutual agreement at the end of its current
term in September 2009, or any consecutive one-year term, by providing the other
party six-months prior notice.
We are
evaluating whether to terminate the agreement with Celestica at the end of the
current term. While we believe that we will be able to adequately replace
Celestica to manage and operate our production, our inability to do so in a
timely manner and on an cost-effective basis, could adversely affect our ability
to manufacture our products and, consequently, our ability to bring our products
to market.
Although
we have received or expect to receive purchase orders pursuant to some of these
distribution agreements, various factors, including that the market for our
products continues to evolve, have impacted those agreements and purchase
orders. Any new product we develop would likely require changes in or additions
to the distribution agreements and purchase orders. Accordingly, we are now
working with our existing distributors and representatives, with whom we
are developing new pricing schedules for our products and introducing
our new and existing products. We can give no assurance that any of our
distributors or representatives will continue to cooperate with us on the
roll-out of our products on the terms and based on the pricing schedules we
believe are appropriate. Any such failure to cooperate could adversely affect
our ability to distribute our 24/7 Power Pack and emergency kit to the
marketplace and, therefore, our business, prospects, results of operations and
financial condition.
We
are and will continue to be dependent on third party suppliers and
subcontractors for the supply of key materials and components for our
products.
We
rely upon third party suppliers and subcontractors to provide requisite
materials and components, including the power management system of our 24/7
Power Pack product. A supplier’s or subcontractor’s failure to supply materials
or components in a timely manner, or to supply materials and components that
meet our quality, quantity or cost requirements, or our inability to obtain
substitute sources for these materials and components in a timely manner or on
terms acceptable to us, could negatively affect our ability to manufacture our
fuel cell products on a timely basis or meet our cost targets or
commercialization schedule. We or our contract manufacturers, manufacturing,
strategic alliance or joint venture partners may be unable to obtain comparable
materials or components from alternative suppliers, and that could adversely
affect our ability to produce viable fuel cells or significantly raise the cost
of producing fuel cells or fuel cell products.
Platinum
is a scarce natural resource and, to the extent it remains a component of the
electrode, we will be dependent upon a sufficient supply of this commodity at a
cost that allows us to meet our cost targets for any future fuel cell products.
Any shortages in the supply of platinum could raise our cost of producing our
fuel cell products beyond our targeted cost, thus lowering our profit margins or
adversely affecting our ability to produce fuel cell products at prices
consumers would be willing to pay.
Problems
or delays in our collaboration efforts with third parties to develop or market
our fuel cell products could hurt our reputation and the reputation of our
products.
We have
entered into agreements with third parties who have agreed to assist us in
developing or marketing our fuel cell products, producing and supplying
components of our fuel cell products or producing the manufacturing line for our
fuel cell products. We are in discussions with other third parties and may enter
into similar agreements with such other parties or others in the future, of
which we can give no assurances of success. Some of these collaboration
agreements contemplate that these third parties will work with our scientists
and employees to test various aspects of, assist in developing components of, or
market, our fuel cells or fuel cell products. Such tests or development efforts
may encounter problems and delays for a number of reasons, including, without
limitation, the failure of our technology, the failure of the technology of
others, the failure to combine these technologies properly and the failure to
maintain and service any test prototypes properly. Many of these potential
problems and delays are beyond our control. In addition, collaborative efforts,
by their nature, often create problems due to miscommunications and disparate
expectations and priorities among the parties involved and may result in
unexpected modifications and delays in developing or marketing our fuel cell
technologies or impact the cost of making and delivering our fuel cell products.
Any such problems or perceived problems with these collaborative efforts could
hurt our reputation and the reputation of our products and
technologies.
Product
liability or defects could negatively impact our results of
operations.
Any
liability for damages resulting from malfunctions or design defects could be
substantial and could materially adversely affect our business, financial
condition, results of operations and prospects. In addition, a well publicized
actual or perceived problem could adversely affect the market’s perception of
our products, resulting in a decline in demand for our products and could divert
the attention of our management, which may materially and adversely affect our
business, financial condition, results of operations and prospects.
Our
business depends on our intellectual property. We may not be successful in
protecting our intellectual property, which could hinder our growth and
success.
We regard
our patents, trade secrets, copyrights and other intellectual property rights as
essential to our growth and success. We rely upon a combination of patent,
copyright and trademark laws, trade secret protection, confidentiality and
non-disclosure agreements and contractual provisions with employees and with
third parties to establish and protect our proprietary rights. We own, directly
or indirectly through subsidiaries, patents for certain technologies and are
currently applying for additional patents. We can offer no assurance that we
will succeed in receiving patent and other proprietary protection in all markets
we enter, or, if successful, that such protection will be sufficient. If we
successfully develop and market our fuel cells or any of our other technologies,
we expect to face efforts by larger companies and other organizations or
authorities to undermine our patents by challenging or copying our intellectual
property. Moreover, intellectual property rights are not protected in certain
parts of the world. We intend to vigorously defend our material intellectual
property against any challenges that may arise. However, any infringement action
initiated by us may be very costly and require the diversion
of
substantial funds from our operations and may require management to expend
efforts that might otherwise be devoted to our operations.
Claims
by third parties that our technology infringes upon their patents may, if
successful, prevent us from further developing or selling our
technologies.
Although
we do not believe our business activities infringe upon the rights of others,
nor are we aware of any pending or contemplated actions to such effect, we can
give no assurance that our business activities will not infringe upon the
proprietary rights of others, or that other parties will not assert infringement
claims against us.
We
currently face and will continue to face significant competition.
We expect
our portable energy sources to compete against other portable fuel cell
developers as well as against other advanced battery technologies. Our primary
competitors are:
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Battery manufacturers who
utilize existing battery technologies (both rechargeable and
non-rechargeable). Existing battery technologies have the
significant advantages of having commercially available products today and
are familiar to most consumers, and are backed by companies who are
continuously investing in marketing and further research and
development.
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Companies developing small
fuel cells or other alternative power sources for the portable electronics
market. We compete with companies such as Mechanical Technology
Inc., Poly Fuel, Inc., Angstrom Power, Tekion Inc., Lilliputian Systems,
Inc., Neah Power Systems, Inc, iGo, and others. We believe other large
cell phone and portable electronic device companies are also developing
fuel cells for the portable electronics
market.
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Companies competing in the
emergency kit market, which can provide portable light sources such as
flashlights, emergency warnings lights, etc. In the emergency kit
end market we compete with companies that offer flashlights, portable
lighting and electronics solutions to consumers that value emergency
preparedness. The emergency kit market has different products which
package radios, flashlights and cell phone chargers that can be powered
through solar, self-powered and hand-crank
mechanisms.
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We expect
competition to intensify greatly as the need for new energy alternatives becomes
more apparent and continues to increase. Many of our competitors are well
established and have substantially greater managerial, technical, financial,
marketing and product development resources. We cannot give any assurance that
current and future competitors will not be more successful in the markets in
which we compete, or that we will be successful in such a competitive
environment.
Our
business depends on key members of our management. If we were to lose our senior
technical talent or members of senior management, our business could be
adversely affected.
The
success of our fuel cell program depends to a significant extent upon Gennadi
Finkelshtain, our Chief Technical Officer, and other scientists, engineers and
technicians on our staff. Our success further depends on our highly skilled and
experienced management, including Jose Mejia, our President and Chief Executive
Officer, as well as certain other officers and employees that develop and market
our products and technologies. The loss of the services of Mr. Finkelshtain, or
certain of our other technical talent, or of Mr. Mejia could have a material
adverse effect on our ability to develop our fuel cell products into successful
commercial products or any of our other technologies into commercial products.
We possess key-person life insurance of $3,000,000 on Mr. Finkelshtain. Although
to date we have been
successful
in recruiting executive, managerial and technical personnel, and with limited
exceptions we have been able to retain key personnel, we may not be able to
continue to attract and retain the qualified personnel needed for our business.
The failure to attract or retain qualified personnel could have a material
adverse effect on our business.
We do not
believe that the transition from our former management team to our recently
appointed management team has caused any material adverse effect on our
business.
During
the year ended December 31, 2008 and the three months ended March 31, 2009, we
have recorded significant impairment charges related to the goodwill and
property, plant and equipment that we carry on our balance sheet, which has
significantly increased our losses for the year.
In
accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,”
goodwill is subject to at least an annual assessment for impairment. In general,
a write down is required if the carrying value exceeds the fair value of the
reporting unit. Upon completion of such assessment for the year ended December
31, 2008, we determined that the entire goodwill balance of $55,993,000
allocated to our fuel cell reporting unit is impaired, and,
accordingly, recorded a charge in the amount of $55,993,000, which is
included within impairment charges on goodwill and property and equipment
in the statement of operations, for the year ended December 31,
2008.
In
accordance with SFAS No. 144, “Accounting for Impairment and Disposal of
Long-Lived Assets, in the event that any one or combination of factors indicate
that there is an impairment of an entity’s long-lived assets, such long lived
assets are to be reviewed to determined if their carrying value exceed their
fair value. For the year ended December 31, 2008, we reviewed our long-lived
assets for impairment and determined that the carrying value of our fuel
cell property and equipment exceeded its fair value by
approximately $30,508,000 and, accordingly, we recorded a charge in such amount
to impairment charges on goodwill and property and equipment in the statement of
operations, for the year ended December 31, 2008. During
the three months ended March 31, 2009, we fully impaired the net book value, and
recorded an impairment charge, in the approximate amount of $2,224,000 on
certain production equipment. Such impairment charge was recorded in
connection with our agreement to pay cash and transfer title to equipment to a
supplier that it had sold to us, in settlement of outstanding invoices and
commitments.
Furthermore,
we can give no assurance that we will not be required to record additional
impairment charges on our assets in the future, especially considering the stage
of commercialization of our
products and current economic and market conditions.
We
may be affected by environmental and other governmental
regulations.
Our
business is subject to numerous federal, state and local laws and regulations
that govern environmental protection and human health and safety. These laws and
regulations have changed frequently in the past and it is reasonable to expect
additional and more stringent changes in the future. Our operations may not be
in compliance with any such future changes in laws and regulations, which could
require us to make significant unanticipated capital and operating expenditures.
If we fail to comply with any such changes, we may be subject to fines and
penalties or we may have existing permits revoked or not subject to renewal.
Furthermore, private parties in such circumstances could seek damages from us.
Under any of those circumstances, we might be required to curtail or cease
operations, conduct site remediation or other corrective action or pay
substantial damage claims.
As we
begin to commercialize our 24/7 Power Pack, we and our suppliers expect to be
subject to an increasing number of environmental regulations in Israel, Ireland
and other jurisdictions where we develop, produce and assemble our products.
Some of these regulations may require us and/or our suppliers to apply for and
obtain permits prior to any such development, production or assembly, of which
we can give no assurance we or they can obtain at minimal cost or at all. In
addition, it is possible that industry specific laws and regulations will be
adopted in any of these or other jurisdictions covering
matters
relating to our fuel cell products or our other products. Such laws or
regulations could limit the growth of our products or increase our
commercialization, manufacturing or distribution costs and, therefore, the price
of our products so affected. Accordingly, compliance with existing or future
laws and regulations as we begin our commercialization efforts could have a
material adverse effect on our business, prospects, results of operations and
financial condition.
We
could be liable for damages resulting from the storage and use of large
quantities of chemicals during the manufacturing process of our fuel cell
products.
The
storage and use of large quantities of chemicals used as components of our fuel
cells could expose us to the risk that such chemicals may escape into the
environment, resulting in damage to natural resources or property, or injury or
loss of life. Depending on the nature of the claim, our current insurance
policies may not adequately, if at all, reimburse us for costs incurred to
litigate or settle any such claims.
Our
results of operations and capital costs have been and may continue to be
negatively affected by potential fluctuations in foreign currency exchange
rates.
A portion
of our costs and expenses are denominated in foreign currencies. The principal
foreign currencies applicable to our business are the New Israeli Shekel, the
Euro and the Swiss Franc. As a result, we have exposure to foreign currency
exchange fluctuations. Recently, the U.S. dollar has been volatile and has
declined in relation to these foreign currencies, when compared to historical
levels. Foreign currency fluctuations, including a weaker U.S. dollar, have
adversely affected our costs, including the costs of the raw materials that make
up our fuel cells, and have caused us to reevaluate our pricing structure and
seek to increase the prices for our products to maintain projected
profitability. Any such increase could negatively impact our sales to
distributors or potential customers. Conversely, maintaining our current pricing
structure could significantly harm our cash flow and results of operations, as
well as our ability to achieve and maintain profitability as we continue to grow
our business.
We
are likely to continue to incur costs related to depreciation, production and
facility capacity, including costs related to excess production
capacity.
During
the year ended December 31, 2008, we incurred costs aggregating approximately
$28,223,000 with respect to depreciation, production and facility costs,
including costs related to capacity in excess of that which we have utilized and
materials and components. Unless and until such time as we are able to more
fully and efficiently utilize our production facilities through the production
and sale of our fuel cell products, we will continue to incur such
charges.
Risks
associated with conducting operations in Israel could materially adversely
affect our ability to complete the development of our fuel cell technology or
our cell carrier technology.
Our
research and development facilities, certain manufacturing and semi-automated
assembly facility for our 24/7 Power Pack, as well as some of our executive
offices and back-office functions, are located in the State of Israel and we
have key personnel and their families residing in Israel. We are, therefore,
directly affected by the political, economic and military conditions in Israel.
Any major hostilities involving Israel or the interruption or curtailment of
trade between Israel and any other country, whether due to the
Israeli-Palestinian conflict, conflicts with Iran, or America’s war against
terrorism, among others, could have a material adverse effect on our ability to
complete the development of any of our fuel cell products, our technologies or
our ability to supply our technology to contract manufacturers, development
partners, customers or vendors. Furthermore, any interruption or curtailment of
trade between Israel and any other country in which we have strategic
relationships could similarly adversely affect such relationships. In addition,
currently all adult permanent residents of Israel under the age of 45
to 50,
depending on military rank, unless exempt, are obligated to perform up to an
average of 18-28 days, depending on the military rank, of military reserve duty
annually and are subject to being called to active duty at any time under
emergency circumstances. Some of our employees are currently obligated to
perform annual reserve duty. We are unable to assess what impact, if any, these
factors may have upon our future operations.
In
addition, historically, Israel has suffered from high inflation and the
devaluation of its currency, the New Israeli Shekel, or NIS, compared to the
U.S. dollar. Future inflation or further devaluations of the NIS may have a
negative impact on our NIS-based obligations over time upon substantial price
increases caused by inflation. Similarly, a further weakening of the U.S. dollar
as against the NIS could continue to raise certain of our costs of operating in
Israel.
It
may be difficult to serve process on or enforce a judgment against our Israeli
officers and directors, making it difficult to bring a successful lawsuit
against us, or our officers and directors, individually or in the
aggregate.
Service
of process upon our directors and officers, many of whom reside outside the
United States, may be difficult to obtain within the United States. Furthermore,
any judgment obtained in the United States against us may not be collectible
within the United States to the extent our assets are located outside the United
States. This could limit the ability of our stockholders to sue us based upon an
alleged breach of duty or other cause of action. We have been informed by our
Israeli legal counsel that it may be difficult to assert U.S. Securities law
claims in original actions instituted in Israel. However, subject to limitation,
Israeli courts may enforce United States final executory judgments for
liquidated amounts in civil matters, obtained after a trial before a court of
competent jurisdiction, according to the rules of private international law
currently prevailing in Israel, which enforce similar Israeli judgments,
provided that:
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due
service of process has been effected and the defendant was given a
reasonable opportunity to defend;
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the
obligation imposed by the judgment is enforceable according to the rules
relating to the enforceability of judgments in Israel and the substance of
the judgment is not contrary to public
policy;
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such
judgments were not obtained by fraud and do not conflict with any other
valid judgments in the same manner between the same parties;
and
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an
action between the same parties in the same matter is not pending in any
Israeli court at the time the lawsuit is instituted in the foreign
court.
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Foreign
judgments enforced by Israeli courts generally will be payable in Israeli
currency, which can then be converted into United States dollars and transferred
out of Israel. The judgment debtor may also pay in dollars. Judgment creditors
must bear the risk of unfavorable exchange rates.
The
declining value of stocks, bonds and other investments during the current world
economic downturn could require us to write-down the value of our severance pay
fund, which could have a material adverse effect on our results of
operations.
Under
Israeli law, we must provide severance for all our employees in Israel. We fund
the severance through monthly deposits in externally managed funds, invested
mostly in conservative investments such as government and corporate bonds. In
the current capital markets downturn, the value
of these
assets has declined, and they may lose additional value in the future. These
funds are recorded at fair value on our balance sheet. The magnitude of the
future potential loss is unpredictable, as it is based on the market value of
investments at a future date. If the value of the investments falls, we would be
required to write down the value of the severance pay fund asset on our balance
sheet. Such a write-down could result in a significant expense on our income
statement, materially adversely affecting our results of
operations.
We
do not expect to pay dividends to holders of our common stock and recently have
not declared dividends on our preferred stock.
We have
not paid any dividends on our common stock to date and do not anticipate
declaring any dividends on our common stock in the foreseeable future. We are
required under the certificate of designation relating to our Series A Preferred
Stock to accumulate dividends to holders of our Series A Preferred Stock at a
rate initially equivalent to $725 per share annually. We did not declare the
dividend on our Series A Preferred Stock for the first and second quarters of
2009 and do not expect to declare the dividend on our Series A Preferred Stock
for the third quarter of 2009. No dividends may be paid upon our common stock
unless all accumulated and unpaid dividends have been paid on the Series A
Preferred Stock. Our board presently intends to retain all earnings, if any, for
use in our business operations.
The
issuance of our common stock upon a fundamental change of our Series A
Preferred Stock would have a dilutive effect on the then holders of our common
stock.
Upon the
occurrence of a fundamental change (as defined in the certificate of designation
of our Series A Preferred Stock) holders of our Series A Preferred Stock will
have the right to require us to purchase all of their respective shares of our
Series A Preferred Stock. We will have the option to pay for those shares either
in cash or in our common stock valued at a discount of 5% from the market price
of our common stock. The issuance of our common stock at a discount to the
market price of our common stock would have a dilutive effect on the then
holders of our common stock.
The right
of holders to cause us to repurchase shares of our Series A Preferred Stock upon
a fundamental change may be subject to our obligation to repay or repurchase any
future indebtedness, such as credit facilities or debt securities.
Future
sales of substantial amounts of our common stock could affect the market price
of our common stock.
Future
sales of substantial amounts of our common stock, or securities convertible or
exchangeable into shares of our common stock, into the public market, including
shares of common stock issued upon exercise of options or warrants or conversion
of the Series A Preferred Stock, or perceptions that those sales and/or
conversions could occur, could adversely affect the prevailing market price of
our common stock and our ability to raise capital in the future. At the present
time, we expect that we will require substantial amounts of outside funding to
finance our operations.
We
may be delisted from trading on The Nasdaq Global Market.
On April
2, 2009, we received a letter from the Nasdaq Stock Market informing us that
based on our stockholders’ deficit, we did not comply with the minimum $10
million stockholders’ equity requirement for continued listing on the Nasdaq
Global Market. In addition, we did not meet the $2.5 million stockholders’
equity requirement for listing on the Nasdaq Capital Market. On April 17, 2009
and May 13, 2009, we responded to Nasdaq with certain actions that may allow us
to achieve the $2.5 million shareholders’ equity retirements for inclusion on
the Nasdaq Capital Market. On June 17, 2009, we
received
a letter from Nasdaq informing us that Nasdaq has determined to grant us an
extension to regain compliance with its listing requirements. Under the terms of
the extension, we have until July 16, 2009 to achieve compliance with its
listing requirements and we must provide evidence of such compliance to the
Securities and Exchange Commission and Nasdaq prior to filing our Quarterly
Report on Form 10-Q for the quarter ending September 30, 2009. If we fail to
satisfy either of the foregoing obligations, we may be subject to delisting from
Nasdaq. The delisting of our common stock from Nasdaq could further adversely
effect the liquidity and trading of our common stock, which would result in our
stock price to continue to decline.
Our
issuance of additional common stock or preferred stock may cause our common
stock price to decline, which may negatively impact your
investment.
Issuances
of a substantial number of additional shares of our common or preferred stock,
or the perception that such issuances could occur, may cause prevailing market
prices for our common stock to decline. In addition, our board of directors is
authorized to issue additional series of shares of preferred stock without any
action on the part of our stockholders. Our board of directors also has the
power, without stockholder approval, to set the terms of any such series of
shares of preferred stock that may be issued, including voting rights,
conversion rights, dividend rights, preferences over our common stock or our
Series A and Series B Preferred Stock with respect to dividends or if we
liquidate, dissolve or wind up our business and other terms. If we issue
cumulative preferred stock in the future that has preference over our common
stock with respect to the payment of dividends or upon our liquidation,
dissolution or winding up, or if we issue preferred stock with voting rights
that dilute the voting power of our common stock, the market price of our common
stock could decrease.
Our
stock price has been and could remain volatile and has recently declined
substantially.
The
market price for our common stock has been and may continue to be volatile and
subject to extreme price and volume limitations in response to market and other
factors. As the price of our common stock on The Nasdaq Global Market constantly
changes, it is impossible to predict whether the price of our common stock or
interest rates will rise or fall. Trading prices of our common stock will be
influenced by our operating results and prospects and by economic, financial and
other factors. In addition, general market conditions, including the level of,
and fluctuations in, the trading prices of stocks generally, and sales of
substantial amounts of common stock by us in the market, or the perception that
such sales could occur, could affect the price of shares of our common
stock.
Our
investment in Cell Kinetics, our majority owned indirect subsidiary, has a
number of risks associated with it.
Our
investment in Cell Kinetics, our majority owned indirect subsidiary, has a
number of risks associated with it, including, among others, the
following:
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a
history of operating losses, with no assurance of future revenues or
operating profits;
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very
limited manufacturing, marketing, distribution and sales
capabilities;
|
|
·
|
competition
from both public and private companies and academic collaborators, many of
which have significantly greater experience and financial
resources;
|
|
·
|
acceptance
by the life sciences research and diagnostic communities is not
assured;
|
|
·
|
commercial
development of its CKChip™ technology and proposed product lines is not
assured;
|
|
·
|
an
inability to manufacture, market or sell its proposed products if it is
unsuccessful in entering into strategic alliances or joint ventures with
third parties; and
|
|
·
|
reliance
on the activities of non-employee consultants and research institutions,
whose activities are not wholly within its control, may lead to delays in
development of its proposed
products.
|
Further,
Cell Kinetics’ efforts to source, vet and invest in early stage Israeli-based
medical device companies give rise to additional risks including, among
others:
|
·
|
insufficient
cash resources to fund its partner companies or to acquire interests in
more than a limited number of partner
companies;
|
|
·
|
management
may fail to identify early stage medical device companies in which to
acquire interests or to complete these acquisition
transactions;
|
|
·
|
limited
experience in actively managing, operating or promoting medical device
companies;
|
|
·
|
partner
companies could make business decisions that are not in its best interests
or that it does not agree with, which could impair the value of its
partner company interests; and
|
|
·
|
its
business strategy may not be successful if valuations in the market
sectors in which its partner companies participate
decline.
|
PRICE
RANGE OF OUR COMMON STOCK
Our
common stock has traded on The Nasdaq Global Market (formerly known as the
Nasdaq National Market) under the symbol “MDTL” since October 3, 2000. The
closing high and low sales prices of our common stock, as reported by The Nasdaq
Global Market, for the quarters indicated are as follows:
|
|
|
High
|
|
|
Low
|
|
|
2007:
|
|
|
|
|
|
|
|
First
Quarter
|
|
$ |
18.52 |
|
|
$ |
12.89 |
|
|
Second
Quarter
|
|
|
20.32 |
|
|
|
11.80 |
|
|
Third
Quarter
|
|
|
14.97 |
|
|
|
9.60 |
|
|
Fourth
Quarter
|
|
|
15.96 |
|
|
|
11.58 |
|
|
2008:
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
$ |
15.15 |
|
|
$ |
8.73 |
|
|
Second
Quarter
|
|
|
10.29 |
|
|
|
2.72 |
|
|
Third
Quarter
|
|
|
3.69 |
|
|
|
1.80 |
|
|
Fourth
Quarter
|
|
|
1.84 |
|
|
|
0.29 |
|
|
2009:
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
$ |
0.92 |
|
|
$ |
0.40 |
|
|
Second
Quarter
|
|
|
0.78 |
|
|
|
0.25 |
|
As of
July 2, 2009, there were approximately 356 stockholders of record of our common
stock. Such number does not include beneficial owners holding shares through
nominee names.
We have
never declared or paid any dividends on our common stock. Dividends on our 7.25%
Series A Cumulative Convertible Perpetual Preferred Stock are payable when,
as and if declared by our board of directors, out of legally available funds.
The annual cash dividend on each share of our Series A Preferred Stock is
$725 and is payable quarterly, in arrears, commencing on February 15, 2007. On
February 10, 2009, as part of our capital management initiatives and to preserve
capital, our Board of Directors did not declare the quarterly dividend on our
Preferred Stock for the quarterly dividend period ended February 15, 2009 and
the quarterly period ended May 15, 2009. Dividends on the Series A Preferred
Stock are cumulative, and holders of the shares of Series A Preferred Stock will
be entitled to receive, when, as and if declared by the Board, dividends at an
increased rate per annum as described in our Certificate of Designation relating
to the Series A Preferred Stock for each subsequent quarterly dividend period
until we have paid or provided for the payment of all dividends on the Series A
Preferred Stock for all dividend periods up to an including the dividend payment
date on which the accumulated and unpaid dividends are paid in full. As of June
30, 2009, there were 5,750 shares of Series A Preferred Stock outstanding. Other
than any future payment of dividends on our Series A Preferred Stock, we
currently anticipate that we will retain all of our future earnings for use in
the expansion and operation of our business. Thus, we do not anticipate paying
any cash dividends on our common stock in the foreseeable future. Our future
dividend policy, including declaring dividends on our Series A Preferred Stock,
will be determined by our board of directors and will depend on various factors,
including our results of operations, financial condition, capital requirements
and investment opportunities. In addition, the terms of our Series A
Preferred Stock restrict our ability to pay dividends on our common stock if
there are any accumulated and unpaid dividends on our Series A Preferred
Stock, which is currently the situation as described above.
SELLING
STOCKHOLDER
This
prospectus relates to our registration, for the account of the selling
stockholder indicated below, of an aggregate of 7,780,603 shares of our common
stock, which shares are issuable upon exercise of an outstanding common stock
purchase warrant. We are registering these shares as required by the terms of a
Preferred Stock Purchase Agreement between an affiliate of the selling
stockholder and us. We have agreed to pay all expenses and costs to comply with
our obligation to register the selling stockholder’s shares of common stock. We
have also agreed to indemnify and hold harmless the selling stockholder against
certain losses, claims, damages or liabilities, joint or several, arising under
the Securities Act of 1933.
The
following table sets forth the name of the selling stockholder and the number of
shares of common stock being offered for resale by such selling stockholder
pursuant to this prospectus. The last column of this table assumes the sale of
all of such shares of common stock. The registration of the offered shares does
not mean that the selling stockholder will offer or sell any of these shares.
Except as set forth in the notes to this table, there is not nor has there been
a material relationship between us and the selling stockholder within the past
three years.
Name
of Selling Stockholder
|
Number
of Shares
Beneficially
Owned
(1)
|
Common
Stock Offered by Selling Stockholder
|
Shares
Beneficially Owned After Offering
|
|
|
|
|
Ovation
Alpha Capital, Ltd.
|
534,797
(3)
|
7,780,603
(4)
|
534,797
|
0.9%
|
__________
|
(1)
|
The
amounts and percentages of common stock beneficially owned are reported on
the basis of regulations of the SEC governing the determination of
beneficial ownership of Securities. Under the rules of the SEC, a person
is deemed to be a “beneficial owner” of a security if that person has or
shares “voting power,” which includes the power to vote or to direct the
voting of such security, or “investment power”, which includes the power
to dispose of or direct the disposition of such security. A person is also
deemed to be a beneficial owner of any securities of which that person has
the right to acquire beneficial ownership within 60 days of July 7, 2009.
Under these rules more than one person may be deemed a beneficial owner of
the same securities and a person maybe deemed to be a beneficial owner of
securities as to which such person has no economic
interest.
|
|
(2)
|
As
of the close of business on July 2, 2009, there were 46,349,555 shares of
our common stock outstanding.
|
|
(3)
|
Does
not reflect 7,780,603 shares issuable upon exercise of an outstanding
warrant to purchase our common stock, which will become exercisable upon
effectiveness of this Registration
Statement.
|
|
(4)
|
Reflects
shares issuable upon exercise of an outstanding warrant to purchase our
common stock, subject to increase for anti-dilution adjustments as
provided in the warrant.
|
PLAN
OF DISTRIBUTION
We are
registering the shares on behalf of the selling stockholder, as well as on
behalf of its donees, pledgees, transferees or other successors-in-interest, if
any, who may sell shares received as gifts, pledges, partnership distributions
or other non-sale related transfers. All costs, expenses and fees in connection
with the registration of the shares offered hereby will be borne by us.
Brokerage commissions and similar selling expenses, if any, attributable to the
sale of the shares will be borne by the selling stockholder.
Sales of
the shares may be effected by the selling stockholder from time to time in one
or more types of transactions (which may include block transactions) on any
securities exchange, in the over-the-counter market, in negotiated transactions,
through put or call option transactions relating to the shares, through short
sales of shares, short sales versus the box, or a combination of such methods of
sale, at fixed prices, market prices prevailing at the time of sale, prices
related to market prices, varying prices determined at the time of sale or at
negotiated prices. Such transactions may or may not involve brokers or dealers.
The selling stockholder has advised us that it has not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of its securities, nor is there an underwriter
or coordinating broker acting in connection with the proposed sale of the shares
by the selling stockholder.
The
selling stockholder may effect such transactions by selling the shares directly
to purchasers or to or through broker-dealers, which may act as agents or
principals. Such broker-dealers may receive compensation in the form of
discounts, concessions, or commissions from the selling stockholder and/or the
purchasers of the shares for whom such broker-dealers may act as agents or to
whom they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). In effecting sales,
broker-dealers engaged by the selling stockholder may arrange for other
broker-dealers to participate.
The
selling stockholder and any broker-dealers that act in connection with the sale
of the shares might be deemed to be “underwriters” within the meaning of
Section 2(11) of the Securities Act of 1933, and any commissions received
by such broker-dealers and any profit on the resale of the shares sold by them
while acting as principals might be deemed to be underwriting discounts or
commissions under the Securities Act. The selling stockholder may agree to
indemnify any agent, dealer or broker-dealer that participates in transactions
involving sales of the shares against certain liabilities, including liabilities
arising under the Securities Act.
If the
selling stockholder is deemed to be an “underwriter” within the meaning of
Section 2(11) of the Securities Act, the selling stockholder will be
subject to the prospectus delivery requirements of the Securities Act. We have
informed the selling stockholder that the anti-manipulative provisions of
Regulation M promulgated under the Securities Exchange Act of 1934 may apply to
its sales in the market.
The
selling stockholder also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act,
provided it meets the criteria and conforms to the requirements of such
Rule.
Sales of
any shares of common stock by the selling stockholder may depress the price of
the common stock in any market that may develop for the common
stock.
If we are
notified by a selling stockholder that any material arrangement has been entered
into with a broker-dealer for the sale of the shares through a block trade,
special offering, exchange
distribution
or secondary distribution or a purchase by a broker or dealer, we will, if
required, file a supplement to this prospectus or a post-effective amendment to
the registration statement of which this prospectus is a part under the
Securities Act, disclosing:
|
·
|
the
name of each such selling stockholder and of the participating
broker-dealer(s);
|
|
·
|
the
number of shares involved;
|
|
·
|
the
price at which such shares were
sold;
|
|
·
|
the
commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
|
|
·
|
that
such broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus;
and
|
|
·
|
other
facts material to the transaction.
|
We have agreed to indemnify the selling stockholder against
certain liabilities, including liabilities under the Securities Act of
1933.
We will
not receive any of the proceeds received by the selling stockholder in
connection with any of its sales of our common stock. However, we will receive
proceeds of up to $3,267,853 if the warrant relating to the common stock being
offered by the selling stockholder is fully exercised. We intend to use such
proceeds, if any, for working capital and general corporate
purposes.
DESCRIPTION
OF OUR SECURITIES
Our
authorized capital stock consists of 75,500,000 shares of common stock, par
value $.01 per share, of which 46,349,555 shares were issued and outstanding on
July 1, 2009, and 10,000 shares of preferred stock, par value $.01 per share,
issuable in one or more series designated by our board of directors, of which
5,750 shares of 7.25% Series A Cumulative Convertible Perpetual Preferred
Stock and 242 shares of Series B Preferred Stock were issued and
outstanding on July 1, 2009. In addition, as of July 1, 2009, there were
outstanding options to purchase 1,302,625 shares of common stock and warrants to
purchase 11,305,897 shares of common stock.
The
following summary describes the material terms of our common stock. The
description of common stock is qualified by reference to our restated
certificate of incorporation, as amended, our restated by-laws, the certificate
of designation for our Series A Preferred Stock and the certificate of
designation for our Series B Preferred Stock, which are incorporated by
reference as exhibits into the registration statement of which this prospectus
is a part.
Common
Stock
Voting
Rights
The
holders of our common stock have one vote per share. Holders of our common stock
are not entitled to vote cumulatively for the election of directors. Generally,
all matters to be voted on by shareholders must be approved by a majority, or,
in the case of the election of directors, by a plurality, of the votes entitled
to be cast at a meeting at which a quorum is present by all shares of our common
stock present in person or represented by proxy, voting together as a single
class, subject to any voting rights granted to holders of any then outstanding
preferred stock.
Dividends
Holders
of common stock will share ratably in any dividends declared by the board of
directors, subject to the preferential rights of any of our preferred stock then
outstanding. Dividends consisting of shares of our common stock may be paid to
holders of shares of common stock.
Other
Rights
In the
event of our liquidation, dissolution or winding up, after payment of
liabilities and liquidation preferences on any of our preferred stock then
outstanding, the holders of shares of our common stock are entitled to share
ratably in all assets available for distribution. Holders of shares of our
common stock have no preemptive rights or rights to convert their shares of our
common stock into any other securities. There are no redemption or sinking fund
provisions applicable to the common stock.
Limitation
of Liability
As
permitted by the General Corporation Law of the State of Delaware, our restated
certificate of incorporation provides that our directors shall not be personally
liable to us or our stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability:
|
·
|
for
any breach of the director’s duty of loyalty to us or our
stockholders;
|
|
·
|
for
acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of
law;
|
|
·
|
under
section 174 of the Delaware law, relating to unlawful payment of dividends
or unlawful stock purchases or redemption of stock;
and
|
|
·
|
for
any transaction from which the director derives an improper personal
benefit.
|
|
·
|
As
a result of this provision, we and our stockholders may be unable to
obtain monetary damages from a director for breach of his or her duty of
care.
|
Our
restated certificate of incorporation provides for the indemnification of our
directors and officers, and, to the extent authorized by our board in its sole
and absolute discretion, employees and agents, to the full extent authorized by,
and subject to the conditions set forth in the Delaware law.
Delaware
Anti-Takeover Law
We are
subject to the provisions of section 203 of the Delaware law. Section 203
prohibits publicly held Delaware corporations from engaging in a “business
combination” with an “interested stockholder” for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
A “business combination” includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Subject to
certain exceptions, an “interested stockholder” is a person who, together with
affiliates and associates, owns, or within three years did own, 15% or more of
the corporation’s voting stock. These provisions could have the effect of
delaying, deferring or preventing a change of control of us or reducing the
price that certain investors might be willing to pay in the future for shares of
our common stock.
Transfer
Agent
The
transfer agent for our common stock is American Stock Transfer & Trust
Company, New York, New York.
LEGAL
MATTERS
The
validity of the securities offered pursuant to this prospectus will be passed
upon for us by Sonnenschein Nath & Rosenthal LLP, New York, New
York.
EXPERTS
The
consolidated financial statements of Medis Technologies Ltd. appearing in Medis
Technologies Ltd.’s Annual Report (Form 10-K) for the year ended December 31,
2008, and the effectiveness of Medis Technologies Ltd.’s internal control over
financial reporting as of December 31, 2008 have been audited by Kost Forer
Gabbay & Kasierer, a Member of Ernst & Young Global, independent
registered public accounting firm, as set forth in their reports thereon (which
contains an explanatory paragraph describing conditions that raise substantial
doubt about our ability to continue as a going concern as described in Note A to
the consolidated financial statements), included therein, and incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such reports given on the authority of such
firm as experts in accounting and auditing.
WHERE
YOU CAN FIND MORE INFORMATION
We are
subject to the informational requirements of the Securities Exchange Act of 1934
and, therefore, we file annual, quarterly and current reports, proxy statements
and other information with the Securities and Exchange Commission. Copies of
such periodic reports, proxy statements and other information are available for
inspection without charge at the public reference room maintained by the SEC,
located at 100 F Street, N.E., Washington, D.C. 20549, and copies of all or
any part of these filings may be obtained from such offices upon the payment of
the fees prescribed by the SEC. Please call the SEC at 1-800-SEC-0330 for
further information about the public reference room. The SEC also maintains an
Internet web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
The address of the site is http://www.sec.gov.
The SEC
allows us to incorporate by reference the information we have filed with it,
which means that we can disclose important information to you by referring you
to those documents. Our SEC File Number is 0-30391. The information incorporated
by reference is considered to be part of this prospectus. The documents we are
incorporating by reference are as follows:
|
·
|
our
Annual Report on Form 10-K for the year ended December 31,
2008;
|
|
·
|
Amendment
No. 1 to our Annual Report on Form 10-K for the year ended December
31, 2008;
|
|
·
|
our
Quarterly Report on Form 10-Q for the quarterly period ended March 31,
2009;
|
|
·
|
our
Current Report on Form 8-K, dated January 7, 2009, filed with the SEC
on January 7, 2009;
|
|
·
|
our
Current Report on Form 8-K, dated January 9, 2009, filed with the SEC
on January 12, 2009;
|
|
·
|
our
Current Report on Form 8-K, dated January 9, 2009, filed with the SEC
on January 15, 2009;
|
|
·
|
our
Current Report on Form 8-K, dated February 10, 2009, filed with the
SEC on February 17, 2009;
|
|
·
|
our
Current Report on Form 8-K, dated March 3, 2009, filed with the SEC
on March 9, 2009;
|
|
·
|
our
Current Report on Form 8-K, dated March 10, 2009, filed with the SEC
on March 13, 2009;
|
|
·
|
Item
5.02 in our Current Report on Form 8-K, dated March 25, 2009, filed
with the SEC on March 31, 2009;
|
|
·
|
our
Current Report on Form 8-K, dated March 27, 2009, filed with the SEC
on April 2, 2009;
|
|
·
|
our
Current Report on Form 8-K, dated March 30, 2009, filed with the SEC
on April 2, 2009;
|
|
·
|
our
Current Report on Form 8-K, dated April 2, 2009, filed with the SEC
on April 8, 2009;
|
|
·
|
our
Current Report on Form 8-K, dated April 10, 2009, filed with the SEC
on April 16, 2009;
|
|
·
|
our
Current Report on Form 8-K, dated April 23, 2009, filed with the SEC
on May 18, 2009;
|
|
·
|
our
Current Report on Form 8-K, dated May 17, 2009, filed with the SEC on
May 21, 2009;
|
|
·
|
our
Current Report on Form 8-K, dated June 8, 2009, filed with the SEC on
June 9, 2009;
|
|
·
|
our
Current Report on Form 8-K, dated June 16, 2009, filed with the SEC
on June 22, 2009;
|
|
·
|
our
Current Report on Form 8-K, dated June 19, 2009, filed with the SEC
on June 26, 2009;
|
|
·
|
our
Current Report on Form 8-K, dated June 30, 2009, filed with the SEC
on July 7, 2009; and
|
| |
|
|
·
|
the
description of our common stock contained in our registration statement on
Form 8-A, including any amendments or reports filed for the purpose
of updating that description.
|
We will
provide without charge to each person, including any beneficial owner, to whom a
copy of this prospectus is delivered, upon written or oral request, a copy of
any or all of the foregoing documents which we incorporate by reference in this
prospectus (not including exhibits to such documents unless such exhibits are
specifically incorporated by reference to such documents). Requests should be
directed to: Medis Technologies Ltd., 805 Third Avenue, New York, New York
10022; (212) 935-8484.
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
|
Item
13.
|
Other
Expenses of Issuance and
Distribution
|
The
following table sets forth the various fees and expenses payable by the
Registrant in connection with the issuance and distribution of the securities
registered under this registration statement, other than any underwriting
discounts and commissions, all of which shall be borne by the Registrant. All of
such fees and expenses, except for the SEC registration fee, are estimated. The
actual amounts of such fees and expenses will be determined from time to
time.
|
SEC
Registration Fee
|
|
$
|
|
|
|
Legal
Fees and Expenses
|
|
|
|
|
|
Accounting
Fees and Expenses
|
|
|
|
|
|
Printing
Expenses
|
|
|
|
|
|
Miscellaneous
Expenses
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
|
|
|
|
|
____________________
|
Item
14.
|
Indemnification
of Directors and Officers
|
Section 145
of the Delaware General Corporation Law provides that a corporation may
indemnify directors and officers as well as other employees and individuals
against expenses (including attorneys’ fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
any threatened, pending or completed actions, suits or proceedings in which such
person is made a party by reason of such person being or having been a director,
officer, employee of or agent to the Registrant. The statute provides that it is
not exclusive of other rights to which those seeking indemnification may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors or otherwise.
The
Registrant’s by-laws provide for indemnification by the Registrant of any of its
directors or officers, or, at the request of the Registrant, any other person
who is or was serving as a director or officer of, or in any other capacity for,
any other enterprise, to the fullest extent permitted by law. The by-laws also
provide that the Registrant shall advance expenses to a director or officer and,
if reimbursement of such expenses is demanded in advance of the final
disposition of the matter with respect to which such demand is being made, upon
receipt of an undertaking by or on behalf of such director or officer to repay
such amount if it is ultimately determined that the director or officer is not
entitled to be indemnified by the Registrant. To the extent authorized from time
to time by the board of directors of the Registrant, the Registrant may provide
to any one or more employees of the Registrant, one or more officers, employees
and other agents of any subsidiary or one or more directors, officers, employees
and other agents of any other enterprise, rights of indemnification and to
receive payment or reimbursement of expenses, including attorneys’ fees, that
are similar to the rights conferred in the by-laws of the Registrant on
directors and officers of the Registrant or any subsidiary or other enterprise.
The by-laws do not limit the power of the Registrant or its board of directors
to provide other indemnification and expense reimbursement rights to directors,
officers, employees, agents and other persons otherwise than pursuant to the
by-laws.
Section 102(b)(7)
of the Delaware General Corporation Law permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director’s duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for payments of
unlawful dividends or unlawful stock repurchases or redemptions, or
(iv) for any transaction from which the director derived an improper
personal benefit. The Registrant’s certificate of incorporation provides for
such limitation of liability.
|
Item
15.
|
Recent
Sales of Unregistered Securities
|
(1)
Compensatory Options and Warrants
During
the three years ended July 7, 2009, the Registrant issued compensatory options
and warrants to purchase 2,385,500 shares of its common stock, at exercise
prices ranging from $2.38 to $20.98 per share to various employees and directors
pursuant to its various employee benefit plans. The granting of such stock
options to the Registrant’s employees and directors was not registered under the
Securities Act of 1933 (the “Securities Act”) because the stock options were
offered and sold in transactions not involving a public offering, exempt from
registration under the Securities Act pursuant to Section 4(2).
(2)
Other Privately Issued Securities
During
the three years ended July 7, 2009, the following securities were not registered
under the Securities Act:
|
·
|
On
July 1, 2009, the Registrant issued 242 shares of Series B Preferred Stock
and warrants to purchase 7,780,603 shares of common stock for an aggregate
consideration of $2,420,632. The warrants are exercisable at $0.42 per
share on the earlier of (i) the date on which a registration statement
registering for resale the shares of common stock issuable upon exercise
of such warrant becomes effective and (ii) the date that is six months
after the issuance date of such warrant. The Registrant paid the investor
a one-time commitment fee of
$250,000.
|
|
·
|
In November and December 2006, the Registrant issued
5,750 shares of its 7.25% Series A Cumulative Convertible Perpetual
Preferred Stock for aggregate gross proceeds of $57,500,000, less issuance
costs aggregating approximately $3,910,000. Each share of
Series A Preferred Stock is convertible at the holder’s option at any time
into 347.2222 shares of the Registrant’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 Registrant’s common
stock exceeds 150% of the conversion price for 20 trading days during any
consecutive 30 trading day period, the Registrant may cause the conversion
of the Series A Preferred Stock into common stock at the prevailing
conversion rate.
|
These
securities were not registered under the Securities Act because such securities
were offered and sold in transactions not involving a public offering,
exempt from registration under the Securities Act pursuant to Section 4(2) and
Regulation D promulgated thereunder.
The
following is a list of exhibits filed herewith as part of the registration
statement:
|
|
|
|
3.1
|
Restated
Certificate of Incorporation of Medis Technologies Ltd.
(1)
|
|
3.2
|
Restated
By-Laws of Medis Technologies Ltd., as amended (2)
|
|
4.1
|
Form
of certificate evidencing shares of common stock (2)
|
|
4.2
|
Form
of certificate evidencing shares of Series B Preferred Stock
+
|
|
4.3
|
Certificate
of Designation of 7.25% Series A Cumulative Convertible Perpetual
Preferred Stock (3)
|
|
4.4
|
Certificate
of Designation of Series B Preferred Stock +
|
|
5.1
|
Opinion
of Sonnenschein Nath & Rosenthal LLP
+
|
|
10.1
|
Medis
Technologies Ltd.’s 1999 Stock Option Plan, as amended
(4)
|
|
10.2
|
Medis
Technologies Ltd.’s 2007 Equity Incentive Plan (5)
|
|
10.3
|
Consulting
Agreement dated December 15, 2008 between Israel Fisher and Medis
Technologies Ltd. (15)
|
|
10.4
|
Letter
Agreement dated June 1, 1993 between Medis El Ltd. and The Industrial
Research and Development Institute of the Chief Scientist’s Office of the
State of Israel (6)
|
|
10.5
|
Agreement
dated October 17, 1991 between Bar-Ilan University and Israel Aircraft
Industries Ltd. (6)
|
|
10.6
|
Amendment
of License dated August 8, 1992 between Bar-Ilan University and Israel
Aircraft Industries Ltd. and Medis El (6)
|
|
10.7
|
Assignment
of License Agreement between Israel Aircraft Industries between Israel
Aircraft Industries Ltd. and Bar-Ilan University dated August 13, 1992
between Israel Aircraft Industries Ltd. and Medis Israel Ltd.
(6)
|
|
10.8
|
Letter
Agreement dated July 18, 1996 between Medis El Ltd. and Bar-Ilan
University (6)
|
|
10.9
|
Consulting
Agreement dated as of February 16, 2009 between Medis Technologies Ltd.
and Robert K. Lifton (7)
|
|
10.10
|
Consulting
Agreement dated as of February 16, 2009 between Medis Technologies Ltd.
and Howard Weingrow (7)
|
|
10.11
|
Severance
Agreement dated as of February 16, 2009 between Medis Technologies Ltd.
and Robert K. Lifton (7)
|
|
10.12
|
Severance
Agreement dated as of February 16, 2009 between Medis Technologies Ltd.
and Howard Weingrow (7)
|
|
10.13
|
Summary
of Material Lease Terms to Lod, Israel Facility (8)
|
|
10.14*
|
Capital
Equipment Purchase Agreement, dated as of September 15, 2005, between
Medis Technologies Ltd. and Ismeca Europe Automation S.A.
(9)
|
|
10.15*
|
Agreement
for Manufacture, dated as of September 27, 2005, between More Energy Ltd.
and Celestica Ireland Limited and guaranty by Medis Technologies Ltd.
(9)
|
|
10.16
|
Registration
Rights Agreement, dated November 15, 2006, by and between the Registrant
and Citigroup Global Markets Inc. (10)
|
|
10.17
|
Securities
Purchase Agreement, dated February 13, 2009 between Medis Technologies
Ltd. and Ascendiant Capital Group, LLC (11)
|
|
10.18
|
Employment
Agreement, dated September 19, 2008, by and between Jose Mejia and Medis
Technologies Ltd. (12)
|
|
10.19
|
Warrant
Agreement, dated September 19, 2008, by and between Jose Mejia and Medis
Technologies Ltd. (12)
|
|
10.20*
|
Distribution
Agreement, dated as of August 10, 2004, between ASE International Inc. and
Medis Technologies Ltd. (13)
|
|
10.21
|
Form
of stock option agreement (employee) (14)
|
|
10.22
|
Form
of stock option agreement (non-employee) (14)
|
|
10.23
|
Form
of restricted stock agreement (employee) (14)
|
|
10.24
|
Form
of restricted stock agreement (non-employee) (14)
|
|
10.25
|
Warrant
to Purchase Common Stock, dated July 1, 2009, issued to Ovation Alpha
Capital, Ltd. +
|
|
21.1
|
Subsidiaries
of the Registrant (15)
|
|
23.1
|
Consent
of Kost Forer Gabbay & Kasierer, a Member of Ernst & Young
Global
|
|
23.2
|
Consent
of Sonnenschein Nath & Rosenthal LLP (contained in their
opinion
included
under Exhibit 5.1) +
|
_________________________
|
+
|
To
be filed by amendment to this registration
statement
|
|
*
|
Portions
of this document have been omitted and submitted separately with the
Securities and Exchange Commission pursuant to a request for “Confidential
Treatment.”
|
|
(1)
|
Filed
as an exhibit to the Quarterly Report on Form 10-Q dated June 30,
2006 of Medis Technologies Ltd. and incorporated herein by
reference.
|
|
(2)
|
Filed
as an exhibit to the Current Report on Form 8-K dated December 18, 2007 of
Medis Technologies Ltd. and incorporated herein by
reference.
|
|
(3)
|
Filed
as an exhibit to the Current Report on Form 8-K dated November 9,
2006 of Medis Technologies Ltd. and incorporated herein by
reference.
|
|
(4)
|
Filed
as an exhibit to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 2004 of Medis Technologies Ltd. and incorporated
herein by reference.
|
|
(5)
|
Filed
as Annex B to the Definitive Proxy Statement on Schedule 14A for the 2007
Annual Meeting of Stockholders of Medis Technologies Ltd. and incorporated
herein by reference.
|
|
(6)
|
Filed
as an exhibit to the Registration Statement on Form S-1, as amended
(File No. 333-73276), of Medis Technologies Ltd. and incorporated herein
by reference.
|
|
(7)
|
Filed
as an exhibit to the Annual Report on Form 10-K for the year ended
December 31, 2008 of Medis Technologies Ltd. and incorporated herein by
reference.
|
|
(8)
|
Filed
as an exhibit to the Annual Report on Form 10-K for the year ended
December 31, 2004 of Medis Technologies Ltd. and incorporated herein by
reference.
|
|
(9)
|
Filed
as an exhibit to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 2005 of Medis Technologies Ltd. and incorporated
herein by reference.
|
|
(10)
|
Filed
as an exhibit to the Registration Statement on Form S-3 (File No.
333-140508) of Medis Technologies Ltd. and incorporated herein by
reference.
|
|
(11)
|
Filed
as an exhibit to the Current Report on Form 8-K dated February 10, 2009 of
Medis Technologies Ltd. and incorporated herein by
reference.
|
|
(12)
|
Filed
as an exhibit to the Current Report on Form 8-K dated September 25, 2008
of Medis Technologies Ltd. and incorporated herein by
reference.
|
|
(13)
|
Filed
as an exhibit to the Current Report on Form 8-K dated August 10, 2004
of Medis Technologies Ltd. and incorporated herein by
reference.
|
|
(14)
|
Filed
as an exhibit to the Quarterly Report on Form 10-Q dated June 30, 2007 of
Medis Technologies Ltd. and incorporated herein by
reference.
|
|
(15)
|
Filed
as an exhibit to the Annual Report on Form 10-K for the year ended
December 31, 2006 of Medis Technologies Ltd. and incorporated herein by
reference.
|
The
undersigned registrant hereby undertakes:
(1) That
for purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) That
for the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
|
|
(a)
|
To
include any prospectus required by Section 10(a)(3) of the Securities
Act;
|
|
|
(b)
|
To
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum aggregate offering
price set forth in “Calculation of Registration Fee” table in the
effective registration statement;
|
|
|
(c)
|
To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration
statement.
|
(4) That
for the purpose of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(5) To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of Registrant as
described in Item 14 of this Part II to the registration statement, or
otherwise, Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act, and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a director, officer
or
controlling person of Registrant in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
SIGNATURES
In
accordance with the requirements of the Securities Act of 1933, Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements of filing on Form S-1 and authorized this registration statement to
be signed on its behalf by the undersigned in New York, New York, on the 6th day of
July, 2009.
|
|
MEDIS
TECHNOLOGIES LTD.
|
|
|
|
|
|
|
|
|
|
By:
|
/s/
Jose Mejia
|
|
|
|
Jose
Mejia
|
|
|
|
President
and Chief Executive Officer
|
|
|
|
|
POWER
OF ATTORNEY
KNOW ALL
MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Jose Mejia and Stephen Crea, and each or either of
them, as his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities to approve, sign and file with the U.S. Securities and
Exchange Commission and any other appropriate authorities the original of any
and all amendments (including post-effective amendments) to this Registration
Statement and any other documents in connection therewith, granting unto each
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or any of them, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
_______________
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
|
SIGNATURE
|
|
TITLE
|
|
DATE
|
|
|
|
|
|
|
|
/s/
Jose Mejia
|
|
Chairman
of the Board, President and Chief Executive Officer (Principal Executive
Officer)
|
|
July
6, 2009
|
|
Jose
Mejia
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Stephen Crea
|
|
Chief
Financial Officer (Principal Financial Officer and Principal Accounting
Officer)
|
|
July
6, 2009
|
|
Stephen
Crea
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Zeev Nahmoni
|
|
Director
|
|
July
7, 2009
|
|
Zeev
Nahmoni
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Mitchell H. Freeman
|
|
Director
|
|
July
6, 2009
|
|
Mitchell
H. Freeman
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Steve M. Barnett
|
|
Director
|
|
July
6, 2009
|
|
Steve
M. Barnett
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Daniel
A. Luchansky
|
|
Director
|
|
|
|
Daniel
A. Luchansky
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Andrew A. Levy
|
|
Director
|
|
July
6, 2009
|
|
Andrew
A. Levy
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Barry Newman
|
|
Director
|
|
July
6, 2009
|
|
Barry
Newman
|
|
|
|
|
EXHIBIT
INDEX
|
|
|
|
3.1
|
Restated
Certificate of Incorporation of Medis Technologies Ltd.
(1)
|
|
3.2
|
Restated
By-Laws of Medis Technologies Ltd., as amended (2)
|
|
4.1
|
Form
of certificate evidencing shares of common stock (2)
|
|
4.2
|
Form
of certificate evidencing shares of Series B Preferred Stock
+
|
|
4.3
|
Certificate
of Designation of 7.25% Series A Cumulative Convertible Perpetual
Preferred Stock (3)
|
|
4.4
|
Certificate
of Designation of Series B Preferred Stock +
|
|
5.1
|
Opinion
of Sonnenschein Nath & Rosenthal LLP +
|
|
10.1
|
Medis
Technologies Ltd.’s 1999 Stock Option Plan, as amended
(4)
|
|
10.2
|
Medis
Technologies Ltd.’s 2007 Equity Incentive Plan (5)
|
|
10.3
|
Consulting
Agreement dated December 15, 2008 between Israel Fisher and Medis
Technologies Ltd. (15)
|
|
10.4
|
Letter
Agreement dated June 1, 1993 between Medis El Ltd. and The Industrial
Research and Development Institute of the Chief Scientist’s Office of the
State of Israel (6)
|
|
10.5
|
Agreement
dated October 17, 1991 between Bar-Ilan University and Israel Aircraft
Industries Ltd. (6)
|
|
10.6
|
Amendment
of License dated August 8, 1992 between Bar-Ilan University and Israel
Aircraft Industries Ltd. and Medis El (6)
|
|
10.7
|
Assignment
of License Agreement between Israel Aircraft Industries between Israel
Aircraft Industries Ltd. and Bar-Ilan University dated August 13, 1992
between Israel Aircraft Industries Ltd. and Medis Israel Ltd.
(6)
|
|
10.8
|
Letter
Agreement dated July 18, 1996 between Medis El Ltd. and Bar-Ilan
University (6)
|
|
10.9
|
Consulting
Agreement dated as of February 16, 2009 between Medis Technologies Ltd.
and Robert K. Lifton (7)
|
|
10.10
|
Consulting
Agreement dated as of February 16, 2009 between Medis Technologies Ltd.
and Howard Weingrow (7)
|
|
10.11
|
Severance
Agreement dated as of February 16, 2009 between Medis Technologies Ltd.
and Robert K. Lifton (7)
|
|
10.12
|
Severance
Agreement dated as of February 16, 2009 between Medis Technologies Ltd.
and Howard Weingrow (7)
|
|
10.13
|
Summary
of Material Lease Terms to Lod, Israel Facility (8)
|
|
10.14*
|
Capital
Equipment Purchase Agreement, dated as of September 15, 2005, between
Medis Technologies Ltd. and Ismeca Europe Automation S.A.
(9)
|
|
10.15*
|
Agreement
for Manufacture, dated as of September 27, 2005, between More Energy Ltd.
and Celestica Ireland Limited and guaranty by Medis Technologies Ltd.
(9)
|
|
10.16
|
Registration
Rights Agreement, dated November 15, 2006, by and between the Registrant
and Citigroup Global Markets Inc. (10)
|
|
10.17
|
Securities
Purchase Agreement, dated February 13, 2009 between Medis Technologies
Ltd. and Ascendiant Capital Group, LLC (11)
|
|
10.18
|
Employment
Agreement, dated September 19, 2008, by and between Jose Mejia and Medis
Technologies Ltd. (12)
|
|
10.19
|
Warrant
Agreement, dated September 19, 2008, by and between Jose Mejia and Medis
Technologies Ltd. (12)
|
|
10.20*
|
Distribution
Agreement, dated as of August 10, 2004, between ASE International Inc. and
Medis Technologies Ltd. (13)
|
|
10.21
|
Form
of stock option agreement (employee) (14)
|
|
10.22
|
Form
of stock option agreement (non-employee) (14)
|
|
10.23
|
Form
of restricted stock agreement (employee) (14)
|
|
10.24
|
Form
of restricted stock agreement (non-employee) (14)
|
|
10.25
|
Warrant
to Purchase Common Stock, dated July 1, 2009, issued to Ovation Alpha
Capital, Ltd. +
|
|
21.1
|
Subsidiaries
of the Registrant (15)
|
|
23.1
|
Consent
of Kost Forer Gabbay & Kasierer, a Member of Ernst & Young
Global
|
|
23.2
|
Consent
of Sonnenschein Nath & Rosenthal LLP (contained in their
opinion
included
under Exhibit 5.1) +
|
___________________
|
+
|
To
be filed by amendment to this registration
statement
|
|
*
|
Portions
of this document have been omitted and submitted separately with the
Securities and Exchange Commission pursuant to a request for “Confidential
Treatment.”
|
|
(1)
|
Filed
as an exhibit to the Quarterly Report on Form 10-Q dated June 30,
2006 of Medis Technologies Ltd. and incorporated herein by
reference.
|
|
(2)
|
Filed
as an exhibit to the Current Report on Form 8-K dated December 18, 2007 of
Medis Technologies Ltd. and incorporated herein by
reference.
|
|
(3)
|
Filed
as an exhibit to the Current Report on Form 8-K dated November 9,
2006 of Medis Technologies Ltd. and incorporated herein by
reference.
|
|
(4)
|
Filed
as an exhibit to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 2004 of Medis Technologies Ltd. and incorporated
herein by reference.
|
|
(5)
|
Filed
as Annex B to the Definitive Proxy Statement on Schedule 14A for the 2007
Annual Meeting of Stockholders of Medis Technologies Ltd. and incorporated
herein by reference.
|
|
(6)
|
Filed
as an exhibit to the Registration Statement on Form S-1, as amended
(File No. 333-73276), of Medis Technologies Ltd. and incorporated herein
by reference.
|
|
(7)
|
Filed
as an exhibit to the Annual Report on Form 10-K for the year ended
December 31, 2008 of Medis Technologies Ltd. and incorporated herein by
reference.
|
|
(8)
|
Filed
as an exhibit to the Annual Report on Form 10-K for the year ended
December 31, 2004 of Medis Technologies Ltd. and incorporated herein by
reference.
|
|
(9)
|
Filed
as an exhibit to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 2005 of Medis Technologies Ltd. and incorporated
herein by reference.
|
|
(10)
|
Filed
as an exhibit to the Registration Statement on Form S-3 (File No.
333-140508) of Medis Technologies Ltd. and incorporated herein by
reference.
|
|
(11)
|
Filed
as an exhibit to the Current Report on Form 8-K dated February 10, 2009 of
Medis Technologies Ltd. and incorporated herein by
reference.
|
|
(12)
|
Filed
as an exhibit to the Current Report on Form 8-K dated September 25, 2008
of Medis Technologies Ltd. and incorporated herein by
reference.
|
|
(13)
|
Filed
as an exhibit to the Current Report on Form 8-K dated August 10, 2004
of Medis Technologies Ltd. and incorporated herein by
reference.
|
|
(14)
|
Filed
as an exhibit to the Quarterly Report on Form 10-Q dated June 30, 2007 of
Medis Technologies Ltd. and incorporated herein by
reference.
|
|
(15)
|
Filed
as an exhibit to the Annual Report on Form 10-K for the year ended
December 31, 2006 of Medis Technologies Ltd. and incorporated herein by
reference.
|
EXHIBIT
23.1
Consent
of Independent Registered Public Accounting Firm
We
consent to the reference to our firm under the caption “Experts” in the
Registration Statement (Form S-1) and related Prospectus of Medis Technologies
Ltd. for the registration of 7,780,603 shares of its common stock and to the use
of our report dated March 31, 2009 with respect to the consolidated financial
statements included therein and to the incorporation by reference therein of our
report dated March 31, 2009 with respect to the effectiveness of internal
control over financial reporting of Medis Technologies Ltd. included in its
Annual Report (Form 10-K) for the year ended December 31, 2008, filed with the
Securities and Exchange Commission.
|
|
/s/
Kost Forer Gabbay & Kasierer
|
|
|
|
|
Tel
Aviv, Israel
|
KOST
FORER GABBAY& KASIERER
|
|
July
7, 2009
|
A
MEMBER OF ERNST & YOUNG GLOBAL
|