They're really in a jam(co) now

Some days just show why doing this is all worth it.

For many months, the promotional contention was that Boeing was going to buy SPD windows from Inspectech Aero Servies to fulfill their specification of electronically dimming cabin windows. In response to the reasonable observation that Inspectech is in fact nothing more than a broker for the technology with no manufacturing capabilities of its own, promoters demanded, in effect, "well, if it isn't Inspectech and SPD, then who? Who dammit???"

That came to a crashing end yesterday on the forums. The trigger was a post by our friend Ed Wesnofske. In clarification of the most recent challenge, Ed posted a quote from Klaus Brauer, the head of interior design for the 787 project, wherein he stated that the mystery technology for the cabin windows "is in use on some business jets today and, in fact, in some lavatory windows on commercial airplanes."

While Wesnofske's source on the quote is unclear (it was described only as an "online chat"), this proved to be a vital clue. Forum poster xavierducats seized upon the new information and very quickly researched up what very much appears to be the answer to the long-standing riddle.

Meet the JAMCO luxury lavatory. It's certainly not like anything you'll find on your typical domestic flight, that's for certain. But scroll down to the bottom and -- what's this? -- a liquid crystal window that goes clear and dark at the touch of a button. Just as Brauer said.

And if that weren't enough, xavierducats followed that up by referencing the JAMCO news page, wherein JAMCO reveals a long-standing supplier relationship with Boeing, including a significant upgrade in standing for the 787 project.

So there's hardly any room for doubt at all that this is the technology Brauer had in mind with the lavatory comment. Mind you, a handful will remain in denial, as JAMCO has not yet explicitly stated that they are doing the cabin windows, but for all intents and purposes, this particular storyline is over.

But stay tuned. They'll come up with something else soon. They have to.

Stockholder wrongs

I'm going to go slightly off-topic today in that while REFR is a participant in this particular fraud upon the investment community, they are far from alone.

It is about these so-called Stockholder Rights plans. In most cases, to be fair, the most misleading part of the whole business is the name. This is nothing about protecting the shareholders and everything about protecting the company itself, and especially, the company management.

Back in the wild and wooly days of the 1980's, corporate raids grabbed the headlines, as the likes of Carl Icahn, Irwin L. Jacobs and Henry Kravis would make "hostile takovers" of companies, effectively seizing control by buying 51% of the company, then either making wholesale changes to the company, or in some cases simply liquidating it.

The rightness or wrongness of the practice can be debated endlessly, but it all became moot with the advent of the "poison pill". Without going into details, what it amounts to is an emergency clause that permits the board of directors to issue new shares to dilute any attempt at consolidation of a 51% position, long before anyone can get close to such a level. Of course, the board can waive the clause at will, thus still permitting "friendly" buyouts.

The bottom line for all of this, as far as REFR shareholders are concerned, is that the "shareholder rights" plan gives them the right to be stuck with the same management, which has ripped them off for four decades, for as long as they can continue to raise new funds to keep it going.

And that's just wrong.

More from the annual meeting

The boards' traditional source of information on the annual meeting, a very earnest fellow named Ed Wesnofske, has finally checked in and substantially backed up the initial reports.

In addition he reported some other details:

• Attendance at the meeting was down from previous years. That squares with the marked decline in message board activity over the past few years.
• Those members of the board of directors up for renewal were duly elected. No surprise there; their hold of power on the company is solid.
• The range for the new SPD (presumably "gen 2") is 0.5%-60% transmittance. This range is actually something that has been previously claimed, only apparently this time it is a single film capable of going the entire range, rather than it being the total range covered by various formulations of the film.
• REFR is purchasing the emulsion-making equipment for its licensees to try to get some of them "over the hump". Where exactly they are getting the money to do this, was not detailed.
• Robert Saxe's cash salary did indeed decline, but this in fact was offset by an increase in stock option compensation.

Apart from that, however, the meeting seemed very long on general observations with vague connections to REFR, and short on material events and forecasts. Which, if you think about it, is pretty accurately reflective of the company itself.

THIS JUST IN: Reports are coming in that Tadao Kurosawa retired from his post as president of Hitachi Chemical USA last February. If so, presumably it was not him at last week's meeting. Whether this means anything with respect to Hitachi's status as an SPD film producer, remains to be seen.

On the wrong Traco

With some REFR licensees there's really little to say. Such is the case with TRACO, a fine manufacturer of replacement windows, doors and other exterior glass products, who became licensed to sell SPD just a little over two years ago.

TRACO got their obligatory big sell as a power player in the SPD industry in the subsequent Ask Joe column, and... that was pretty much the last we ever heard from the Pennsylvania company regarding SPD. Yet today they are counted about the mighty 35, the licensees which are all actively working to make REFR a huge success, whether they themselves get anything out of it or not.

Or not.

Same time next year?

A report on the secret annual shareholders' meeting has finally made its way public. It comes from a new alias to the boards, and is even self-described as "sketchy", so no warranties here, but it's something to go on.

• Hitachi was present, in the form of Tadao Kurosawa, president and CEO of Hitachi Chemical USA (really, a very small subsubdivision of the famous Japanese corporation).
• Steve Abadi from Innovative glass, he of the Extreme Makeover PR attempt, was also present, and suggesting he had large orders awaiting the availability of the Gen 2 film, in a way that typically left him an out to say he never meant that.
• Hotel Technologies was also represented, most likely by Steve Belmonte.
• Both the new and old auditors showed up, presmably to reassure everyone that there was no suggestion of accounting issues. One would hope not, there being so little to actually account for here.
  
• Then again, who needs accounting shenanigans, when the company proceeds to announce that Joe Harary is giving himself a $50,000 bonus for raising the $5 million last winter, and the shareholders don't even bat an eye. That said, this was apparently offset by someone else's salary decreasing. It wasn't clear who was taking the cut, though most likely it would be founder Bob Saxe, who is no doubt winding down towards retirement.
• In a refreshing bow to reality, the company confessed that commercialization was taking "too long". It went on to admit that mass production was still "at least several more months, maybe much longer" away (emphasis added). But then they added a small carrot in the form of a successful test run, but subsequent reports revealed that the results were not repeatable. In a way, unrepeatable success is actually worse that consistent failure, because that makes it a lot harder to figure out what's going wrong. That's where ISO 9000 and that whole business came from.
• In the interest of completeness, I'll add that other reports later claimed the licensees were much more optimistic in private. (Funny how that works!) Some even claimed that the licensees somehow knew each others' positions relative to achieving mass production and thus who was "ahead". Of course, that begs the question of why the licensees would share that kind of information with direct competitors but not the public.
  
• Then in a moment that showed that some of these shareholders are just naturally unhinged, someone asked about a buyout by General Electric that would amount to over $700 million. Management, to its credit, gently dismissed the suggestion.
• The report wrapped up by mentioning some technical discussion which was not reported in detail, and a reference to an upcoming SPD display at the following week's (now this week's) Paris Air Show.

Management's inability to suggest a date for commercialization, or even give the ubiquitous "soon" (although by now that term had reached running- joke status), can't be sitting well with shareholders, and probably goes a long way towards explaining the stock's weakness last week. Of course, the inability to give guidance is a direct result of the company's passive business model.

So, lacking any assurance that any chance for royalty revenue is forthcoming anytime soon, management will have no choice but to start the fundraising process all over again this summer. And with that, another increase in the authorized shares seems inevitable, as a mere million shares at a useful discount to current prices isn't going to go very far at all.

Interesting times for REFR shareholders. But I wouldn't want to live in them.