Thermo Breakdown

Thermoview Industries is something of a rarity among REFR's licensees, an actual, established retailer that agreed to sell SPD-based products, specifically, Alterlite-brand variable transparency windows.

The licensing terms were a relative coup for REFR, in that Thermoview committed to paying predetermined minimum royalties even if they never sold an SPD product. Speaking of which...

The "rollout" at at Thermoview was an interesting event in and of itself. The windows were supposed to be on display at various California locations throughout late July and early August of 2002. The official debut on July 15, 2002, was portrayed as a big event. A followup release four days later appeared to confirm that the introduction was a smashing success, with "better-than-expected results" and "accelerated progress".

Oddly, though, on the same day of the followup release, July 19th, the stock of REFR, which had been hovering right at $10, suddenly cratered to $7. The promoters, of course, blamed this on the short sellers, but then again, they blame everything short of rainy days on short sellers.

The truth of the matter came out a short while later, as an SEC filing revealed that none other than REFR chairman and founder Robert Saxe had sold 100,000 shares of stock right into the teeth of that July 19th press release.

Now, one might think that this would raise the ire of even the most loyal of shareholder bases. And, indeed, it does lend a considerable amount of credence to the theory that those posting as longs on the message boards are not, in fact, longs, but simply paid promoters. Oh, but Saxe had an excuse for selling, though. He had a margin call. No, really. The chairman of the board of a public company suffered a margin call on his own personal shares! So he claimed anyway; that contention was never proven. Further clouding the issue is the fact that Saxe never rebought those shares, even at today's prices which are lower than any at which he sold. One might well wonder why.

But all's well if the Thermoview rollout was a smashing success, right? Well, not so much there, as it turned out. Spot visits to Thermoview's California locations revealed no SPD on display. Calls to Thermoview's order line failed to find anyone who knew about SPD or Alterlite. Anticipated royalties in excess of the minimums never materialized. In general, the whole rollout seemed to have been a phantom event and the statements about "better-than-expected results" outright lies.

Over the years that followed, Thermoview's financial state has steadily deteriorated and they have fallen behind even in their minimum royalty payments to REFR. REFR began carrying an allowance for uncollectable receivables reflecting this. Thermoview's recent 10-Q/A filing had further disclosures on their relationship with REFR, which will be covered in part two of this posting.