The phantom car

It's really not in the style of this blog to focus on specific anonymous message board posters. After all, there's rarely any direct proof that these are anything but earnest, if horribly deluded, people who genuinely believe what they're saying.

But every now and then, some of them cross the line, and when one does so in such a grandstanding manner it becomes hard to ignore.

Such is the case with poster "N. Dixon" of Silicon Investor, who is presumably one and the same as "N_Dixon" on the Yahoo boards, and whose writings have been the source for the bulk of this week's entries.

Dixon has been a longtime advocate of REFR on the message boards, dating back to the very early days of the Yahoo boards. Dixon, who claims the "N" stands for "Nancy" (therefore I will use feminine pronouns) claims to be an REFR shareholder dating back to 1992, which, not really surprisingly, featured some of the lowest prices at which REFR stock has traded (on a split-adjusted basis, even lower than this year's lows).

As of late, Dixon has confined herself to Silicon Investor, where she posts away with less voluminous rebuttal than she would encounter on Yahoo. The reason for this "exile" may well be what follows.

It all began with what seemed a joke. Dixon said she planned to ask, at the 2004 REFR annual shareholders meeting, "Which 2005 vehicle with SPD glass do you think is the most attractive?"

She subsequently clarified that she meant the 2005 model year.

Then she went even further: "Already picked out my SPD-Smart equipped vehicle for purchase next year."

And then later: "SPD ALREADY in 2005 production vehicles and in aircraft."

She later added that she believed that the Mercedes GST would include SPD by Spring 2005, but did not specify that this was the car she "ordered".

Dixon went on to take the show to Silicon Investor:

"I'll let you know how I like my 2005 auto with SPD glass."
"I've ordered [my vehicle with SPD]."
"SPD in production vehicles. I've ordered mine!"

Later, with the 2005 model year winding down and no source of SPD film, much less a finished product, in sight, the tale changed:

"I have ordered my car with SPD. I get updates on it. It was scheduled for manufacturing in 2005 so it might be a 2006 model."

Requests for further details, such as make and model of her order, went predictably unanswered.

So apparently we are supposed to believe that Dixon ordered a car without knowing the model year, to be manufactured more than a year later. I'd sure like to know the dealer that would take an order like that.

No, the conclusion is unavoidable that the whole tale of an order of a 2005 model year automobile was quite simply made up out of thin air. And it seems likely than, rather than have to face a derisive mob anytime she attempted to say anything, Dixon retreated to relatively calm waters of SI, where no more than two or three people will be pestering her about it at any given point in time.

Rumors that Dixon has verbally denied being a crook, meanwhile, remain unconfirmed.

A real Hitachi job

Anyway, picking up where we left off, REFR president Joe Harary was telling a theoretically international audience:

"We expect that the next generation film will be available in mass production starting in January 2005."

It is now June, and this has still not happened.

But this is no case of "something went wrong". This is a case of "something was wrong", as in, Harary all but had to have known that the above prediction would not come to pass, and that he in fact had no reason to "expect" any such thing.

Consider this quote from an email dated 1/20/05, more than two months after the Harary Glasstec interview, from Tadao Kurosawa, president and CEO of REFR licensee Hitachi Chemical:

"....Hitachi Chemical Ltd. is one of RFI licensee for SPD emlusion and Film. They have just installed all equipment for SPD coating pilot line in one of our facilities in Japan. And they are trying to coat SPD film as test-run. I do not know exactly how long to take a time for this test -run, two,three months. I hope this test run will be done succesfully not so taking a time. After this completion we will start sampling our SPD film to RFI licensees. This is our current status for SPD project."

Mediocre English notwithstanding, the implication is clear: at the time Harary gave that interview and made the above statement, Hitachi, by all accounts the lead company as far as establishing a source for "next generation" SPD film, did not even have equipment installed for testing purposes(!) Given Kurosawa's additional admission that test runs tend to take months, and it becomes absolutely clear that Harary's January timeframe was entirely unattainable based on information Harary himself had easy access to and quite simply should have known.

You want to get snowed... Ask Joe.

Good questions!

I'll finish up the Glasstec thing hopefully later today (it's short, no worries), but while it's on my mind, I wanted to highlight an excellent post containing some extremely valid questions a REFR shareholder might want to ask at this year's annual meeting, and maybe toss in my two cents on what the answers are or should be.

"Why are we waiting for generation 2 of SPD before licensees are selling product?"

I can answer that one: it's because if someone started selling "1st generation" SPD at this point, it would call into question the whole reason why SPD Inc. folded last year. The current company line is that it was considered foolish to continue selling "gen 1" SPD with the imminent introduction of "gen 2". Of course, "gen 2" proved to be not so imminent after all, but so far REFR has been reasonably succesful in ignoring that fact. A licensee reversing and re-opening the market for "gen 1" film would be a distinct embarassment and might even suggest that there were problems with "gen 2". Definitely not the message REFR wants to send right now.

"Why wasn't a marketplace established with generation 1 in order to a) kick off the market, b) get some maket awareness, c) start people using generation 1 in real world uses, d) start getting feedback from the market on the pros and cons of the product?"

The promoters would argue that precisely this was done, with the various photographed installations supplying the proof. Of course, real shareholders would probably want to see substance in the form of some measure of ubiquity instead of isolated instances that are not too many to individually document on a web page. But I guess "everywhere you look(tm)" means different things to different people.

"Most companies learn from their first generation product and refine it in the next generation. It seems like we have lost years since I heard Robert Saxe say that the next year may be our first profitable year. Why wouldn't the licensees sell what was available to let the world know SPD exists and will be getting better?"

At the company I worked for a little over a decade ago, we had just put the finishing touches on a fine little product that would have served its target market well for years, while we worked on the next-generation product. But then our head of marketing got wind of the new development, and started hyping it to his customers. This, to his shock and surprise, killed sales of the product we had just finished, as customers unanimously elected to hold off until the new product was ready, and turned R&D's life into a living hell for two years as the company struggled to rush the new product through the design and development process.

The point of this sorry little tale being, it's really too late to go back anyway. Who would want to buy film that the company has publicly admitted to be flawed? Particularly at the exorbitant prices being charged.

"We lost all that potential product ramp up time to get potential buyers ready to go. Why won't this happen to the generation 2 product? Why aren't we going to wait until generation 3?"

In short, what's to stop all this from happening all over again? The simple and obvious answer is, "nothing, of course". The promoters' response will be to get all upset that someone dares to look in the "rear-view mirror" for a clue as to what might happen in the future.

"Some of us longs are real loooong loooongs who believe in the product but I am confused why generation 1 hasn't started us up."

And that's a point that's really unanswerable. Early versions of products, especially in the computer industry, may have been pretty weak compared to their present-day forms, but they had sales. People bought the IBM PCjr. People bought 128K Macs. People bought Newtons. Unfortunately, the same simply cannot be said for "gen 1" SPD. How anyone can take that as a good sign for the future is beyond me.

But then again, I'm not a type 3 investor. Nor is our question-asker, I suspect.

Glasstec and the four-month (and counting) gap

Today, another item from the N. Dixon files. (In light of current events, I think maybe I should be calling myself Threep Doat.)

This one is one that I am frankly surprised that REFR's promoters would be willing to still bring up, given what it contains.

The item in question is a videotaped interview Joe Harary gave at the Glasstec industry show last November. This is a direct link to the Windows Media file recording of that interview.

There are three main highlights to the short presentation.

The first is the inevitable demonstration of SPD in action. This, I am certain, has been practiced many times so it is little surprise that it comes off flawlessly. If there is one thing REFR knows how to do, it is demos.

Somewhere near the midpoint of the interview, Harary references a study indicating a growth rate in the demand for "smart glass" over a five-year period. What Harary "forgets" to mention is, the study, and therefore, the beginning of the five-year period, was in 2000, so that in fact the growth he was citing had already occurred. And poor SPD got left out.

The final highlight was towards the end of the interview. The inevitable question of when this fantastic SPD technology would be available arose. Harary, in typical hedging fashion, suggested January as a likely date.

Well, it is now June and next-generation SPD is nowhere to be found. (High hopes remain that a big announcement is being saved for this year's annual shareholder meeting; we'll see.) But worse than that, evidence subsequently arose that indicates that Harary almost certainly knew that a January time frame was an impossibility at the time he gave that interview.

More tomorrow!

Why isn't the (Top)sky blue?

I generally try to limit my postings here to one per weekday so that I don't cross the line into obsession or burnout, but occasionally something will stand out as obnoxious enough that I feel the need to get to it right away. (Besides which, I may not have time for an update tomorrow).

Our good friend Dixon, whom we just met earlier today, is flogging the cover story in the June 2005 issue of BUSRide magazine, which makes significant mention of the Setra S 417, a bus which, among other features, includes a transparent "panorama" roof under the branding of TopSky.

I mentioned TopSky way back in the early days of this blog as REFR and SPD's closest flirtation with legitimacy in the marketplace. The version shown back then had an automatic dimming feature which employed SPD technology. After a couple of months, the whole business faded away, and the supplier of SPD for Setra, SPD Inc., shut down.

Now, it's well-established that, despite allegedly promising noises that the new generation of SPD suppliers are well into the testing phase of SPD production runs, no company is actually producing SPD film on a commerical basis at this time. So how, one might ask, can Setra be making busses with the TopSky feature, without any SPD film available?

The answer is simple. TopSky is, and always was, about the roof itself, not any dimming capability. And it seems to be turning out that bus passengers are quite happy with the transparent roof even without the ability to vary the tinting.

In short, Setra, and its parent, Daimler-Chrysler, are getting along just fine without the assistance of the SPD "industry", and the BUSRide article, much as Dixon seems to believe otherwise, only helps to prove it.

Better luck next time.

In Search Of: the point

The Yahoo! REFR board, REFR's primary promotional outlet over the past year, did the almost unthinkable and actually took much of the holiday weekend off.

Not everyone was enjoying the three-day respite, however. The person posting as "N. Dixon" on Silicon Investor (a name I can't read without thinking in spoonerism terms) was apparently quite hard at work, compiling a voluminous series of postings, in order to prove... well, a point, I guess. I'm really not sure, maybe this person is trying to amass a volume of positive data to counter this admittedly mostly-negative collection of observations about REFR.

At any rate, it's a fine source of material for me, as one of my goals with this blog is to exhaustively look into every bullish argument that has been hoisted to convince investors this company is something other than what it is, a method of transferring wealth from shareholders to company management.

Some of the items Dixon posted yesterday have been covered already, and several others are just echoes of the company line disguised as independent observations.

A few, though, have me scratching my head and wondering just what possible point Dixon could have in mind.

Consider this post: TWO SPD LICENSES[sic] WORKING TOGETHER!!!!

Now, you can look as hard as you like through that post, but you won't see anything about SPD. I guess the theory is that because DuPont holds an SPD license, and Isoclima holds an SPD license, and because they're working together on something, that must mean... I don't know, that maybe the topic of SPD comes up at lunch? Who knows?

(By the way, for those of you complaining that this blog doesn't accept on-site replies, please note that I do read the Yahoo and SI message boards and you are more than welcome to post your comments there. If someone comes up with a sane explanation of the thought process here, I'll be sure to post it.)

What makes this all the more bizarre is that the post is not, in fact, a single press release at all, but actually an amalgamation of a press release and a case study on the DuPont website. The case study is the part that shows DuPont and Isoclima "working together" (though clearly stating in a subsequent paragraph that the material being used is PVB, not SPD). The only reason I can think of for splashing the segment of the press release at the top is for the headline, New DuPont Technology Gives Auto Safety Glass a New "Look", which, if one never bothered to read past it or look at the pictures, might leave one with the impression that SPD could be involved.

So, the bottom line, Dixon has somehow managed to say absolutely nothing and yet still be transparently dishonest. I have to admit, that takes some talent.

More on this source in the days to come.

Someone stop me before I blog again!

The reviews are in!

"you really need to GET A LIFE!.....you freakin' loser." -- raftman007

"Every blog I have ever seen allows readers to comment. Why doesn't yours? ...That sort of tactic has had a name long before your cowardly effort came along. It is known as yellow journalism." -- kahler_manifold2

This crap is so far outside the range of normal human behavior that you should be under professional care and observation....24 hours per day. You are in danger of doing something really dangerous to yourself or others." -- harvardbillpayer

Oh, yeah, there was some positive feedback as well, but that's not as much fun. I thought the Pulitzer nomination was a bit over the top anyhow.

However, all joking aside, I thought I would address a few serious criticisms brought up, relating to facts I've supposedly gotten wrong.

"REFR "strangely got no share of proceeds" from liquidation of SPDi. Entirely false, just read freely available documents."

The information was correct based upon information I had at the time. Subsequent new information was later noted.

"Victor Keen is on the payroll. At his law firm, not REFR."

Apparently we are supposed to believe Corporate Secretary is an unpaid position. You may believe that if you like, but I don't.

"Management has no profit incentive. What do you call all those shares they own?"

Hmm, the term "chicken feed" comes to mind for some reason. But seriously, they're practially obliged to hold some reasonable number of shares. There would simply be no case for anyone to buy the stock at all without that factor, and then how would they get financing for their next year of salaries?

"Visits to THV spots after intro of alter-lite window found no SPD product on display. Absolute lie. Comments of THV shareholder on the display were posted here."

This appears to be a valid correction, as far as it goes. At the same time, however, it was noted that Thermoview does virtually all of its sales over the phone rather than in-person at their stores, so an in-store display was not especially valuable.

"REFR does nothing to market SPD products. What does this liar think Mike LaPointe does? Write a blog that no one reads?"

Ah, I can feel the love. What Mike LaPointe does is market REFR stock, so if you want to call that a product then you may have a point. He'll also give a spiel (albeit sometimes an outdated one) to anyone who will print it free.

"Joe's motive is his salary. Yeah right. A guy with his Ivy League credentials could make at least a million bucks a year more with less aggravation at a New York law firm."

Yeah, but at the law firm he'd actually have to do things for people. I don't see at all what's "aggravating" about his job at REFR, unless you really don't like travelling around the country and the world at shareholder expense. Certainly the people who are ultimately paying him at REFR are a lot more understanding than your average legal client would be.

Additionally, claiming that these guys can pull down a million a year anytime they feel like it rather bears out my "chicken feed" remark, above.

There is something suspicious about IAS doing the roof for the Jeep Rescue (oooh shades of Soulard).

You're right, what was I thinking? There was nothing at all to worries that SPD Inc. might shut down.

Sjuan2 has no doubt changed his ID and starting posting under a new alias. More BS with no evidence.

The alternative would be that he got fed up with REFR's broken promises and walked away. I'd think you'd prefer my first explanation.

Memo to blogger, if you ever found out who you are trying to portray as a complete idiot, you might actually feel embarrassed.

From what I know of the REFR message board posters, most of them would rather die than let their identities be known. I'll let the reader decide who's actually embarrassed here.

How much is that blue in the window?

Yesterday, I referenced a $150 per square foot figure as the base cost of the "old" SPD. Today I'll fill in the blanks.

The source in question is a licensee called SPD Technologies. This licensee, formerly named Razor's Edge Technologies, is not to be confused with the old name of a division of L-3 Communications. (Which, needless to say, some message board super-sleuths initially did.)

Now the current version of the website does not show any prices, for the very good reason that they have no products to sell, but the friend of all Internet historians, the Wayback Machine, never forgets...

Here we have the most simple form of SPD product, an "SPD shade". The picture appears to be gone, but it is basically a naked sheet of SPD film with as little wiring as is necessary to make it functional. At any rate, that is not so much important as are the price quotes at the bottom. Over $1,000 for a 24"x24" piece of SPD film! Admittedly, that includes the overhead for the wiring and minimal frame, so let's compare prices among the different sizes.

The 36"x36" weighs in at $1789.08 (do they not believe in rounding off prices in Delaware?), or $734.36 more than the 24"x24". So, for an additional five square feet of SPD film, you pay $146.87 per square foot. The additional two square feet of the 24"x36" cost (vs. the 24"x24") cost $304.48, or $152.24 per square foot. So, on aggregate, the upcharge for an additional square foot of SPD film is on the order of $150 per square foot.

Now, why is this significant? Well, for one thing, our friendly REFR board member Dr. Malvino claims on his website that the production cost of SPD film should in fact be between $1 and $4 per square foot, while the generic "EC" film would cost a whopping $25 to $40 per square foot to produce. If the real cost of SPD film is over $100 per square foot, that rather makes a difference I think!

Even more damning is a 2001 trade show report by none other than our friend Michael LaPointe. Among much other material that is quite amusing in retrospect is a comment that their (unnamed) licensee's "projected price point" for SPD windows was supposed to be "$15-$30 per square foot".

Well, gee, only off by a factor of 10. Guess it's only appropriate that REFR stock is down by a similar amount from its highs of that year.

On that note, have a great Memorial Day weekend, but never forget why we observe it.

LaPointe and Just Auto

REFR got its favorite kind of exposure -- the free kind -- in an article posted to just-auto.com yesterday. As usual, the article was completely uncritical and effectively repeated REFR's claims verbatim. This is not really meant to demean Dave Leggett, the editor of just-auto.com, or the publication, or to suggest any kind of collusion was intended. Certain publications have a limited budget for fact checking, and have to rely on the companies they interview being true to their word. It works most of the time, and doesn't automatically make them illegitimate.

However, every so often, they get a company with a self-promotional agenda, and then you get something like the three paragraphs REFR got.

US-based Research Frontiers Inc has developed a light control technology, known as SPD (Suspended Particle Device) for controlling light in vehicles and other applications such as aircraft, architectural and marine. A thin film is sandwiched inside the glass that conducts a low voltage of electricity. As a current passes through it, masses of suspended particles join together or disperse, allowing more or less light to pass through. It means that you can simply turn a dial to block out the light, eliminating the need for a sliding shade panel all together. That’s important for the sunroof makers as they move towards offering panoramic roof designs. Research Frontiers is on the brink of releasing its second generation SPD film.

That's perfectly fine for the first half a paragraph, but unfortunately, it still remains true that SPD in no way eliminates the need for an opaque shade. No matter how dark SPD gets it never becomes opaque, and when you're dealing with the intense light of the sun, true opacity is vital.

The last statement is comical for reasons I'm sure just-auto.com never suspected, that REFR has been "on the brink" of "second generation" film for over a year now, and is almost exactly one year late on its initial projection of film availability following the announcement of SPD Inc. closing.

That's not even getting into the relatively fine point that REFR will never be doing any "releasing" of its own accord -- such matters are strictly relegated to the licensees.

Compared to other transparency control devices – such as electrochromic (EC) or liquid crystal – SPD is cheaper per square foot and reacts faster. It can be totally dark, totally bright or somewhere in between. EC technology can still be tuned but not to the extent that SPD can. Another advantage is that SPD is that it is a film-based technology. That means it can be shipped all over the world. It also means that it can be applied to plastic as well as glass, which can be applied to curved as well as flat surfaces. In the default state, with the power off, the window is dark and would not be able to form the main component of a windscreen. Perhaps the upper band strip but not the entire windscreen. But when a motorist parks their car, SPD would be in the ‘off’ state, an advantage for sunroof applications.

Okay, first sentence. There is in fact no basis for making any favorable claims about the cost of "second generation" SPD. Indeed, other nominally "rubber stamp"-ish article referenced SPD's extraordinarily high costs, pegged around $150 per square foot. (The basis for that figure is the subject of another long-overdue article.) EC has never been quoted at so high a price -- most likely because its purveyors would never think to attempt to market it at such a price point.

The second sentence, we've already covered. SPD cannot go totally dark. It can't really go totally light either, but how much of the "unclarity" is due to the SPD and how much to the window itself is hard to gauge.

The third sentence, again, assumes things about EC not in evidence, and quite possibly long out of date. Not to mention that there's more than one kind of technology coming under the umbrella of "EC" (sometimes, even SPD itself is considered as such!)

The fourth sentence refers to an improvement SPD made back in 1991(!) To read the paragraph you'd think this was something new, and furthermore, something that EC and LC cannot claim! Go ahead and tell the makers of LCD computer displays about the non-shippability of their technology.

The rest of the paragraph calms down and even touches on a disadvantage of SPD, the fact that its default "off" state disqualifies it from consideration as overall windshield tint. If you're wondering about the term "windscreen", it turns out that just-auto.com is a UK-based site. One wonders, then, where Bob Hudson has gone off to.

All right, last paragraph:

Auto applications include sunroofs, sunvisors, rear-view mirrors, instrument panels and navigation systems. “There are numerous studies that show the increase of accidents when driving into the sun,” said Mike LaPointe, Vice President, Marketing, Research Frontiers. “If you had an SPD sun visor fitted to your car, it could be in the down position and you could see clearly through it but if you turned into the sun, it would darken immediately. I think that this is an application that it would be difficult for EC to penetrate because of the slow transition speed. So I certainly think that you will see SPD visors.”

And here is where we learn the source of all this "information", our favorite VP, Mike LaPointe. This paragraph reads kind of oddly, though. Twice LaPointe says "I think", almost as if he's trying to convince himself. Or maybe just cover himself. But once again, this is almost as much a matter bad-mouthing a very loosely-defined general overview of EC which may well be long out of date, as it is of trying to show the upside to SPD.

Just another case of REFR getting something published for the benefit(?) of their shareholders.

LCD vs. SPD

Above, a Dell 20.1-inch flat panel LCD monitor. Below, an SPD prototype computer monitor, as proudly displayed to this day on the REFR website. No further comment appears necessary.



All right, one comment, more in the form of a quote, actually:

"IMO, REFR is better than DELL. It's not a slam-dunk quite yet, but it's as close as you will ever get in the stock market."
-- Dr. Al Malvino, future REFR board member, on the Yahoo! message boards, May 4, 1999

"Hey, I'm buyin' over here!"

It has long been suggested (and, naturally, flatly denied) that many of the REFR insider stock purchases are "for show", as if to say, "we're buying, shouldn't you?" Al Malvino's regular 300-share purchases seems particularly flagrant in this regard, as many metrics for detecting high insider purchasing activity key off the frequency of transactions more than the actual amounts involved. In theory, this works off the fact that most executives consider it proper to limit their transactions to a small annual window to avoid the appearance of trying to game their own stock. REFR insiders, clearly, have no such inhibitions.

Possibly the worst example, though, came when Corporate Secretary and Board of Directors member Victor Keen made a stock purchase in February 2003, and the company issued a press release about it. Yes, really!

Mind you, not long after that purchase and the market bottom a month later, that purchase price actually started to look really good. Alas, it did not quite hold up for the two-year holding period, and in any event Keen did not sell with the stock being held at $6.00 in anticipation of the secondary offering, so ultimately, Keen has taken a bath on those shares along with everyone else.

But then again, that's not news.

Veni, Vidi, Wiki for the shorts

The dream (no pun intended) of SPD being featured on Boeing's new 787 Dreamliner appears to now be completely dead. The source for the latest revelation is, of all places, a Wikipedia article on the new plane. The section of that article detailing the plane's features specifies "liquid crystal display-based auto dimming" on the cabin windows, the same type used on high-end automobile sunroofs such as on the Maybach.

Tough luck for the shareholders. Tune in tomorrow for their next rationalization.

Addendum: More discussion of the LCD window feature can be found here.

Isoclima in isolation

Possibly one of the most telling licensees REFR has in its stable is Isoclima SpA of Italy. They are unique in that they have taken two seperate SPD-related licenses, one to produce film, and the other to sell products containing SPD film.

Given that Isoclima has clearance to work both ends of the process, they are unique in being a potentially independent supplier of SPD products. They can make the film, "sell" it to themselves, and make it into products without having to depend on anyone else to be a supply chain or vendor for them.

Yet, nearly three years after setting all this up, Isoclima has yet to announce any kind of SPD product. Indeed their products page still includes glass with a liquid crystal film (Isolite), as well as a window with a built-in Venetian blind (Luxaclair) -- the very kind of things that the SPDiots claim are the horse-and-buggy to SPD's automobile.

Yet, while Alberto Bertolini seems to do nothing apart from show up at most major REFR events (annual meetings and whatnot), that appears to be good enough for most of the Type 3 crowd to presume he's hard at work making SPD into a major force.

I only wish I could be thought of so highly for taking an overseas vacation.

Past scorecards

A post from 2001 on the Yahoo! REFR board uncovered a similar scorecard to the one posted last Wednesday. For the period from August 2001 through July 2002, the following events were slated to occur (added comments in italics):

August:

• THV surfaces with demos and catalog

(After Saxe's margin call sale four days after the Thermoview rollout began, Thermoview was never heard from again on the sales front, and has subsequently had difficulty making their pre-negotiated minimum royalty payments.)

October:

• Inspectech announces major contract(s) (Boeing, Airbus, or Lockheed)

(Inspectech did actually announce a major contract in October. Unfortunately, there were two catches. First, the announcement was about Bombardier, not any of the big three named above. Second, and more importantly, the announcement was entirely phony.)

• Lang-Mekra demos at truck show create major buzz

(Lang-Mekra has not been heard from on the SPD front in years, and was not in 2001.)

• RFI runs expo for windows and building industry, architects, etc.; causes major excitement in the press & TV

(On their operating budget? Ha!)

By December:

• Hankuk/SPDInc announces new factory up and ready to mass produce

(The announcement was delayed to February. Whether it was ever "ready to mass produce" is something that will remain unknown, but we do know that it only produced a very small amount of film for specific demonstration projects.)

Possibly by December:

• Hankuk or OEMs announce contracts for moon roofs, visors, mirrors (Daimler; Hyundai? Kia? Other?)

(E. None of the above)

• GE, AP Technoglass, Bekaert announce that they will produce/market film

(GE hasn't been heard from since 1995, Bekaert much the same, and a representative from AP Technoglass was quote as saying, "nothing much ever came" of their SPD license.)

January:

• Lang-Mekra announces major contract(s) for truck mirors(sic)

(Again, Lang-Mekra had put SPD far behind it by this time.)

Possibly by February:

• THV announces growing level of orders for windows, skylights, etc.

(Thermoview was by this point starting to worry about staying in business at all.)

March through June:

• RFI announces several additional licensees

(This one came true. AGP Group was added as a licensee in June, and Isoclima in July. Give REFR this, they know how to play to their strengths!)

• Analysts begin following RFI, publishing; institutions start buying aggressively

(There actually was some buying as REFR entered its third (and final) year on the Russell 2000, but strangely, analyst coverage did not follow. Well, unless you count R. J. Falkner.)

• RFI earnings announced

(Hilariously, they never even "announce" losses even to this day.)

• Stock (now above 50) splits

(REFR dropped below $20 for the last time in August 2001, and was below $9 by the end of July 2002. I suppose you could call that a 2-for-1 split "the hard way")

• Black and faster particles announced

(Nope.)

• RFI begins to license companies in flat panel and PDA market

(Ha!)

• Vision Ease produces/sells spd sun glasses

(Vision-Ease was already gone by this time and, shockingly, did not come back.)

• Dividends declared

(Bwah!)

July:

• RFI breaks 100, unadjested(sic) for split

(Very ad-"jest"-ed, if you ask me.)

After July:

• Further run-up and second split by end of 2002

(Mercifully for shareholders, REFR's share price stabilized for the latter half of 2002. Otherwise the market bottom in 2003 might have been much more painful.)

• Many articles appear profiling Saxe's achievement.

(Yes, but none that the shareholders much liked. At least it wasn't going to be a biography.)

Of course, today, shareholders are carefully instructed to ignore the failings to meet past expectations as irrelevant to the glorious future REFR has ahead of it.

Sometimes you wonder if there's no punishment too great for this kind of stuff.

The case of the planted article

All the furor over the false story in Newsweek over the disposition of religious materials recalls a (fortunately) much less eventful, though not really less egregious, case of press tampering that took place in the fall of 2003 involving REFR and SPD Inc.

According to those who claim to be able to read Korean, the Korean Business Herald published a story stating that BMW had ordered, and been shipped, 1000 square meter pieces of SPD film from SPD Inc. at $1000 each, a tidy million dollar order and a very promising development for the joint venture between REFR and Hankuk.

The problem was, the story was completely phony. There was no order, there was no shipment, and SPD Inc. itself was in fact in the process of going out of business.

But of course, since the publication is way off in Korea, there seems no practical way to figure out who planted the story and how it was that the very much English-speaking promoters on the REFR boards came to find out about it.

But I guess, in light of this week's events, we should just be glad nobody died because of that story.

REFR Announcement Scorecard

You have to hand it to the promoters, they never, ever seem to be at a loss for optimism. They've even crafted a scorecard by which to track their future failures. I thought it only fitting to keep track appropriately here on the REFR Madness blog.

I decided to omit the best-selling biography of Robert Saxe. That one was a bit over the top even by these guys' standards.

REFR Announcement Scorecard

Announcement	Happened? (date if so)

Commercial film production by one or more film licensees (currently, Hitachi, Dainippon, Isoclima, Air Products)	Yes, Feb '07
Subsequent announcements by wholesale and end-product licensees (subject?)	NO
SPD as an option for skylights, visors, glass roofs, side windows or rearview mirrors, by an automotive OEM	NO
SPD use on new jumbo jets, by Boeing or Airbus	NO
"Rapidly burgeoning demand" for SPD aircraft retrofitting, by Inspectech	NO
G2 film that is wider and faster than initially announced(?)	Maybe, initial announcement was unclear
Major planned marine application	NO
Product incorporation by any of: Pilkington, Isoclima, Asahi, Nippon Sheet Glass, or GE.	NO
Cost reductions in G2 film from volume production and competition	NO
Gen 3 film offered by Dupont or Hitachi	NO
SPD retrofit license given to window treatment company	NO
Major architectural project embodying G2 SPD	NO

The "Quality Four" coming to light?

Recent updates to the Nasdaq website are revealing the identities of large acquirers of REFR stock -- almost certainly the four "quality investors" that bought $5 million of the stock last February and have been choking on it ever since. As of this writing two such names have appeared.

The first one is a name familiar one to REFR message board denizens and not in a good way. Botti Brown has long been decried as one of the "fake longs" whose positions in actual fact represent a covering of a short position. This upsets them because it indicates, in theory anyway, potential ammunition to drive the share price down even further. The fact that no sane financial entity uses its own selling to drive down a share price (without a death-spiral convert to hedge against) never seems to register with them.

The second one is less familiar, and, predictably, has the longs considerably more excited. Stark Offshore Management, LLC, one of a small group of similarly named hedge funds (the only other one of significance being the creatively-named Stark Onshore Managment, LLC) operating out of the Milwaukee area by Brian Stark and Michael Roth. These two are relative veterans of the hedge fund industry, which makes their choices in recent events a bit peculiar, such as bankruptcy candidates Delta Air Lines and Calpine. There is surely some hedging involved with those positions, of course, but going long the common stock is nevertheless an unusual way to play those companies regardless of what tricks you might have.

A couple of trouble signs for Stark: One of "onshore"'s largest holdings is the GM debt that was recently downgraded to "junk" -- an event that has proven lethal to several hedge funds already. More telling is a 2002 newspaper article that lists them as controlling $2.2 billion in customer assets. Today that figure has dwindled to $1.5 billion: never a good sign.

Not that investing over $2.5 million in REFR, without anything apparent to hedge against, is a raging positive either.

Quarterly report time

As per standard procedure, REFR released its quarterly figures via its SEC 10-Q filing, with no fanfare whatsoever.

A glance at the balance sheet reveals that the cash position has indeed pulled back from the brink, up to $6.2 million, meaning that the company has bought themselves almost exactly five more quarters with their latest shelf offering. The quarterly loss was down as well, due mostly to the lack of a partially-owned subsidiary being shut down and written off this year.

That leads in to what was basically the only other item of interest in the filing, a lengthy paragraph detailing the whole sorry story of REFR's investment in SPD Inc. The bottom line, REFR invested about $825,000 in SPD inc., and in the end received a liquidation payment of $44,203, for a return of -94.6% on their investment.

Compared to that, an investment in REFR stock was actually relatively good.

In living color?

One of the facts of life that continuously dogs REFR shareholders can be summed up by a semi-famous line by Bret Spiner on Star Trek: "It is blue."

To be sure, they often try to pretend otherwise, calling the blue "cool", "soothing", or perhaps "futuristic". But all of that is shown up for the bluff it is by the rush of unbridled excitement that happens whenever the the latest rumor floats about the holy grail of SPD: the black particle.

The black particle dates back to at least 1998, when REFR issued a press release (what else?) announcing the invention of the black SPD particle. Needless to say, this got a lot of people excited. Now SPD would be able to shed the "blue stigma" and look just like other electrochromic technology. Better yet, if they could make the particles black, perhaps they could make them other colors as well. The dream of SPD computer displays might not be dead after all.

And so the vigil for the black SPD particle began. And continued. And went on some more. And so on. After all, it might take a little while to go from "invention" to practical application, but surely that transition was inevitable, right?

Perhaps not. Five years later, at the 2003 annual meeting, Robert Saxe admitted that the black particle was "not ready". And that was basically the first, and last, official word on the black particle since the "invention" announcement.

So there we have another case of "it never really panned out" from the company that seems to specialize in failing to pan out.

Coming to a screen near you?

Hard as it may be to believe, but a decade ago, shareholders in REFR were being told (while happily lapping up every word) that laptop and other flat-panel displays of the future would be powered by SPD technology.

No, really.

SPD, which to this day has a switching time measured in seconds, was being touted has having the potential to become the standard for what was at the time a very hot technological development field -- the ability to make affordable flat screens that weren't dim and flickering.

Never mind that SPD came (and still comes) exclusively in a monocolor blue. (Attempts at other colors are an overdue topic for another post.) Never mind that switching times were atrocious. Never mind that they weren't even close to even a VGA (640x480) resolution. No, SPD was going to be a bona fide flat-panel display technology, because Bob and Joe said so, and that was the end of it.

Amazingly, even to this day, REFR still lists computer displays as a feasible use for SPD, even as OLED technology is poised to make SPD even more thoroughly obsolete.

Technology may be in constant advance, but some hype never changes.

A stock even a wunderkind could hate

Possibly the seminal event of the depths of the bear market in early 2003, was when none other than Jonathan Lebed, the teen who rose to fame as a bubble-era stock guru before getting in all kinds of hot water with the SEC, starting putting out sell calls on his new site. If ever there was a moment in recent memory to say, this shorting business has gotten too easy, time to switch back to the long side, that was it.

The stock Lebed put out his first short call on? REFR.

Mind you, ever since, the sins of Lebed have been transferred to all of REFR's critics by the promoters, but as usual that misses the point. Which is, when you're the first short idea from someone known up until that point (and, for all anyone knows, ever since) as a permabull, man, you know you're on the bottom of the barrel.

Yet still the suckers buy more and more.

Pure contempt

One thing I have to give props to for the REFR shareholder corps. They never let the fact that their company shows pure contempt for them by going all but completely silent on important company matters, like the specific status of any of the major production licensees as to their state of "SPD-readiness", get them down. (Yes, they did just give a general overview in the Letter to Shareholders last week, but I sure couldn't glean anything resembling a time frame from what they had to say.)

Lacking for information from the company, our intrepid longs go out and find their own news. Today, for example, the "hot" news item is the discovery of an article from an edition of some publication called Pure Contemporary from January, which references, among several other "futuristic" home decorating ideas, SPD windows. And specifically, the SPD windows that were barely mentioned in the Extreme Makeover show from May 2004.

Yes, they're fawning over a rehash of a year-old SPD publicity attempt that was a complete failure even then, an mentioned in an article obscure enough that they didn't find it themselves until four months after its publishing.

And this is supposed to scare the shorts? Really?

Architect of nothing

Yes, REFR has recovered some of its losses today, and of course the longs are dancing in the streets. Never mind that they're celebrating prices that, until a week ago, they were saying REFR could never possibly fall to.

I'll give them this, they're a happy lot when they want to be. The stock rises, and they're delighted; it falls and they're ecstatic, because it's another excuse to do their favorite thing in the world, and that's claiming to be buying more REFR stock. I say "claiming" because I doubt more than 10% of the claimed buys are actually real. But hey, you call the bottom enough times, eventually one will stick. For a while.

Anyway on to today's PR retrospective. This one is a PR and photo gallery in one, and is a summation of all of SPD Inc. exploits outside of their final appearances in the DaimlerChrysler vehicles.

You can review this for yourself, of course, but for posterity's sake I'll run down the list. First, we have an office in Jakarta, Indonesia. You'll note throughout that these installations are scattered in out-of-the-way, or otherwise unspecified locations. Almost as if they didn't want anyone checking up on any of them. Anyway, the office contains two chairs and a table too small for any practical use, even as an interview room. Furthermore, we don't actually see photos of the SPD turned on (clear), so it might as well be just a bunch of darkened glass. The doors built in to the walls than form a complete circle are snazzier than anything SPD could hope to be, anyhow.

Then we have a few glass panels in a Singapore office building. Once again, we only see photos of the dark state. This time the SPD isn't upstaged by any cool architectural features, but as a result the whole thing looks kind of dumpy. It's a glass door. And a glass wall. Whoop de doo.

Finally, we come to the big finish, a pool in an unidentified location in Greece. This one, at least, seems to show panels in both light and dark states, though it seems clear (har!) that regardless of the film's state it's not difficult to see straight through the panels. So much for privacy! More curiously, those panels don't even seem to be hooked up to anything. This may be just as well, as having household current that close to a swimming pool would certainly make me wary. Oh, and in a nice piece of photographic mastery, the photographer's legs are clearly visible in the second pane from the left. Nice work!

Amazingly, despite all these lovely installations (no mention is made as to whether they were actually paid for), SPD Inc. was even then in the process of being written down by its joint owners and was less than a year away from disappearing. Such a pity.

It's also worth a reminder that it has now been a full year since SPD Inc.'s shutdown, and the "competition" which supposedly drove them out of business has yet to actually materialize. I wonder how long before any of the promoters admit that competition might not have been the reason after all.

Keen and Krekorian

A strange little bit of parallelism yesterday arose between Victor Keen of REFR and Kirk Kerkorian of GM. Both are associated with troubled companies, and both made "statement buys" of their company into the teeth of the selling. Kerkorian put out a tender offer for 9% of GM, while Keen contented himself with a modest 10,000 shares (less than 0.1%) of REFR. Both stocks rallied throughout the day on the offer.

Then the new day dawned and realization set in. In the case of GM, it was that their financial situation was still dire, a fact puncutated by Standard & Poor cutting their bond rating to junk status. In the case of REFR, well, it was that it was REFR.

And so today both are giving back. In fact, it's starting to look like a horse race as to which one will go under first. Right now REFR looks to last a bit longer, as they, in theory anyway, still have the "debt" card to play, and could buy themselves another year with that. Then again, GM probably has some tricks left in their bag, if there's anyone left there will the brains to use them.

One thing for sure, I don't expect to see any SPD-equipped GM cars anytime soon.

The Annual Distort

REFR also published its annual report yesterday. As with much of what REFR says, it's great comedy if you take it the right way.

"The SPD industry came of age in 2004", the letter to the shareholders begins. So apparently "coming of age" involves taking in even less revenue than the pathetic year before. But then they talk about "momentum building to the rebirth of the new SPD industry". Aren't those kind of contradictory concepts?

In the next paragraph, the letter describes the state of production of the major production licensees. Some are said to be in "advanced testing", others "even in fine-tuning". I guess we have to take as given the implication that fine-tuning is a later stage than advanced testing.

After some hand-waving about how much work they're doing to help the licensees get to a mass production stage, they reference the Setra and Rescue displays from DaimlerChrysler, and how they are "typical" of automotive interest in SPD. Indeed, so great a "success" were those two installations that the product supplier folded within a year. Except that the letter to the shareholders doesn't mention that part. Ever.

But they do mention InspecTech, and how they have "either installed or engineered" windows for various aircraft models. Of course, not only is a breakdown of "installed" vs. "just engineered" unavailable, and not only is there no indication as to just what "engineered" entails (figuring out the size of the window might well qualify), but the claim and list of model has been on the Inspectech website for years.

Oh, and the trade shows. Yes, SPD is always getting taken to trade shows. From the press releases it seems the SPD "industry" spend as much on travel as it does anything else. Las Vegas, Florida, Germany, Switzerland... these guys really get around. With all the worldwide exposure SPD was getting you might think there'd be some pretty good demand for the stuff built up, but of course you'd be wrong.

They run down the Licensee Class of 2004, thank the shareholders for their continued patience (your money is very important to us, please stay on the hook), talk about their ever-present optimism, and that's about it.

They're working hard, they're losing money, but they're optimistic. That's the gist of the shareholder letter in one line. Wow, sure makes me want to buy their stock.

Can't wait for next year's excuses. If they're still around to make them, that is.

Kittanning Kapers

Today's spotlight licensee is a bit of an anomaly in many respects. It is a product-side licensee, yet clearly independent of the SPD "in-group", and not at all involved in any promotional efforts for REFR.

Meet Custom Glass Corporation.

Located in sleepy Kittanning, Pennsylania, it's not entirely clear what the state of the company's financial health is, what with it being a private company and all. Though given what information there is on Kittanning (the proudest photo the city has is the bridge leading out of town), it can't be the biggest growth area ever. Most likely, they do what they do and make a decent living off of it, and there's not a whole lot else to say. Except for that one day when those guys from NYC came to town...

Truth be told, any comments about the circumstances of how Custom Glass came to be an SPD licensee would be just speculation. Most likely, Custom put nothing into it and got nothing out of it, and is just going on with business just as before, with the license all but forgotten. REFR, for its part, however, did get something out of it -- the ability to claim "up to" 15% royalties on SPD products produced, as Custom's license happens to contain the highest royalty rate of any licensee. In a sense, you could say Custom got ripped off, but in another, they really got ripped off of nothing.

GE: Even We Can't Bring SPD to Life

Today I'm going to go back to near the beginning of what is considered "recorded history" for REFR. Since no PR's exist on the REFR website prior to their 1991 production of SPD into a film form, conventional shareholder "wisdom" is that the first quarter-century of the company's existence consisted of Saxe and company "working hard" to perfect SPD, sometime during which somebody took them public. Yes, you'd swear that company management had practically nothing to do with the company going public, and certainly didn't make any indications about their state of progress to investors in their IPO, to listen to the current party line of the promoters.

But at any rate, 1994 came along and REFR hooked its biggest fish ever, as no less a company than General Electric became a licensee. Needless to say, the stock took off on this obvious validation. Then, just as some started asking the right questions, such as, what exactly has GE committed to, REFR followed up with a beaut of a PR: "Research Frontiers Denies Knowledge of Possible General Electric Buyout" . Shockingly (I know!) this only served to feed rumors of such a buyout, and shoot the stock higher, if only momentarily.

Soon, cooler heads prevailed, and as investigations went on, it soon came out that GE's role was strictly as a contract manufacturer. In other words, GE would make SPD film to REFR's specifications, when, and only when, one of REFR's licensees put in an order.

This never happened, of course, and REFR never brought up GE ever again, except when publishing an enumeration of its licensees.

Today's promoters of REFR completely hate it when GE is brought up. GE is still officially listed as a licensee (though some sources say the license will finally expire later this year), so in theory, there's no reason why REFR shouldn't be able to turn to them to alleviate the problem of "supply capacity" they keep complaining about.

Of course, that is because the truth is, the problem is not, and has never been, the ability to produce in quantities large enough to meet demand. That whole business is a red herring to distract from the fact that, at the price at which SPD film products can be sold, demand for them is negligible.

Worse, it gives the company's critics easy ammunition, in the form of the argument, "well if GE couldn't do anything with it, why should we think anyone else can?"

Finally, it leads one to the easy conclusion that current "big-name" licensees, such as Hitachi, DuPont and Air Products, have essentially the same kind of relationship with REFR, and will do nothing of their own accord with SPD until prompted to do so by REFR. This is not diminished in any way by the fact that Hitachi (actually Hitachi Chemical, a very small subsidiary of the giant conglomerate), a licensee since 1999, has, so far, proven to have been at least one year from picking up the SPD film production "slack" when SPD Inc. went under.

What, exactly, was Hitachi doing with their license from 1999-2004? That's a question that only ever seems to get answered with a question, such as, "who's paying you to ask these questions?"

And so it goes at the stock circles the drain...

The 1% Solution

Have you ever heard any variation of this line from someone talking about their favorite stock?

"If we can just capture 1% of the market, why, that's millions and millions of dollars! We'll be rich!!"

Where "the market" is something ludicrously huge for a tiny company to be taking on, like the number of households in the United States, or, in REFR's case, the worldwide market for glass, which runs around 20 billion square feet per year.

It's an easy trick for the uninitiated to fall for, as the promoter makes some huge undertaking seem trivial by placing it aside something even larger. Still, it's a trick that gets recycled so often (and always with the "1%" figure), that it becomes harder and harder to understand how that keeps its "freshness" as a promotional tool.

Think about how ludicrous it would be for me to expect 1% of the world's web surfers on a given day to view my site. That'd be millions of hits. I'd be one of the most famous bloggers out there (instead of my current state of being one of the most anonymous).

The reality is, just like there are too many blogs out there for anyone to get that "1%", there is too much competition in the overall "market" the one-percenters claim to target, for any but the extremely powerful companies of the world to be able to attain them. Certainly a tiny company, like REFR, cannot aspire to such levels at this point. And yet that's just what their shareholders have been led to do...

A new low, literally.

Something to think about: the last time REFR stock traded lower than this morning's low of $4.168, the current second-term US President's father was in office.

Yes, not since the waning days of the George H. Bush administration, January 13, 1993, when REFR touched $7 3/4, factoring to $4.1333 after the 1994 stock splits, has REFR traded as low as it has did this morning. That comes to a twelve-year low.

Yet, even at $4.168, that represents a valuation of 286 times trailing revenues, and a price-to-book of 22.3.

It should be painfully obvious by now that hedge fund buyers of February are now resigned to getting whatever they can for their shares. Which means the thought probably hasn't even occurred to the Type 3 group.

SPD windows, STAT!

In an unusual case a couple of years ago, REFR actually got one of their theoretical customers to put out a PR more or less on their behalf.

Road Rescue, an ambulance manufacturer out of South Carolina, agreed to offer SPD windows as an option on their ambulances, and kicked off the rollout with a press release announcing the new feature.

Bully for REFR and SPD, but, um, what does variable transparency glass do for an ambulance, exactly? Ambulances don't have a lot of windows, and those in the patient compartment are already darkened for privacy and glare reduction. And in general the patients tend to have more things to worry about than the view out the window. Are there really any situations where they'd want those windows to not be shaded?

It appears that ambulance companies can't think of any, either, as the trend towards SPD windows in ambulances, like so many other things related to REFR's progress, has totally failed to occur. Instead, it was only the shareholders' portfolios that got sicker as a result.

Juno how smart garages are?

There seems to be no form of publicity for SPD that REFR won't pursue -- at least so long as it doesn't cost them anything apart from having to supply the demo film. Maybe, in a pinch, they'll install it, too.

An example of this was from the Popular Science Smart Garage exhibit in the summer of 2003. The exhibit's pages are long-gone from the Popular Science website (so proud of it are they), but the REFR press release proudly announcing their participation remains. Strangely, the NASCAR crowd to which the Smart Garage was shown wasn't wowed by SPD, at least not enough for it to stand out from the dozens of other pieces of gadgetry and whatnot on display in the exhibit. All in all a terribly disappointing comedown for the technology that won the coveted Best of "What's New" award from PopSci the year before.

But never mind that, let's go to Disneyworld! In April 2004, the Innoventions exhibit at EPCOT introduced the General Motors-sponsored Juno exhibit. And wouldn't you know it, it had SPD! Along with about a hundred other gadgets and doodads. (Amazing how that keeps happening.) One observer suggested Juno was put up to literally show off as many different technologies as possible. It was too overstuffed with gadgetry to even be plausible as a concept car. The people running the exhibit were said to have mentioned about how the windows could change tint, but again, the SPD name never came up. Such a pity, because I'm sure that couples on vacation with the kids are really in a mood to do some serious car shopping.

Just as well, of course, because SPD Inc. was just shutting down that month, with a successor yet to arise. How embarassing it would have been to actually get demand and be unable to fulfill it.

But I doubt that was a worry.

The vindictive approach to investing

Message board quote of the day:

"I suggest that these new [investors in REFR] would not sell here and may get angry enough at you shorts to buy more on the open market and teach you a lesson! LOL!"

Yes, buying out of anger, to "teach a lesson" to sellers. There's a classic investment strategy if I ever heard one.

BWAH!

Extreme Makeover: Stock Promotion Edition

While it's fun to watch the price of REFR collapse, it only presses the urgency to tell the many tales of REFR while time remains to do so. With that in mind...

Last spring, right about the same time as the SPD Inc. closure, REFR scored what appeared to be a promotional coup. A licensee, Steve Abadi (who seems to run several businesses out of his house, including Innovative Glass Corp.), arranged to have SPD featured on a special "live" edition of ABC's Extreme Makeover: Home Edition. The show, as per its format, selected a couple of deserving souls -- in this case, a couple of NYC firemen/roommmates who were present for the 9/11 attacks -- had their apparently completely refurbished and remodeled with updated appliances, seperate bedrooms, an "eternal flame" memorial to their fallen comrades, etc.

One feature that got a certain amount of pre-publicity was, if you haven't guessed, a number of SPD windows that were installed as part of the project. Think of it! SPD being shown off live in front of an audience of millions! Demand was sure to skyrocket from the publicity!

So much for the theory. The practice wasn't nearly so hot. In two excruciatingly boring hours mixing live and taped footage, which even an appearance by Regis Philbin couldn't save, the SPD windows got referred to about twice the entire show, and even then the term "SPD" was never mentioned. Furthermore, the SPD windows were installed on top of an internal room partition, basically out of the limelight. For whatever reason, the variable shading feature of the SPD glass was never demonstrated (possibly because they weren't able to get it working -- a callback to the Jeep Rescue debacle, perhaps?), and, almost as a final insult to REFR, the big finish of the reveal was motorized physical shades on the external windows -- exactly the sort of thing supposedly made obsolete by SPD.

The whole thing was unanimously considered a major disappointment (and given the rabidness of the company's defenders, that's saying something), but it did have the effect of distracting everyone from the implications of SPD Inc.'s shutdown, so perhaps it wasn't a total loss.

All the same, it was the beginning of a very cold year for REFR.

The dreaded auditor change

REFR filed an 8-K yesterday that, just a few years ago, would have put fear into the heart of even the most jaded investor -- the dreaded change of auditing firms, from KPMG to BDO Seidman.

Fortunately, or unfortunately, depending on your point of view, the whole deal is probably nothing much. An article in the New York Times from a couple of months ago presaged this change, by highlighting companies, that, despite doing nothing in particular wrong, are being discontinued as clients by the Big Four firms, including KPMG. It all stems from the complexities and red tape introduced by the Sarbanes-Oxley act, filtering down through to the smaller companies, and making the task of their compliance too much for the major firms to handle.

So REFR moves to a "second-tier" accounting firm, and all is well on that score. REFR may be a chronic overpromiser and non-deliverer, but it has never been a book-cooker. Assuredly, if management were to partake of invented numbers, they would invent better ones than the ones they currently report.

Messing with the wrong people

So the debate on the board today seems to be about fears of repercussion from companies being criticized. Right now it isn't an issue with me, since I seem to be essentially writing to an audience of one at the moment, but nevertheless I doubt this blog will get Joe Harary seeking me out so he can put me on his Christmas card list.

It's interesting that there's much debate at all on this issue. I mean, haven't we seen the rise of "anti-SLAPP" legislation because companies were making trouble for critics in order to shut them up? Hasn't the company admitted hiring "former prosecutors" to investigate certain of its critics awhile back? (Either "too long ago to matter", or "due for some results anytime now", depending on which story the promoters are trying to sell.)

Maybe not the most fascinating topic ever, but the sight of the stock price setting in the west is speaking pretty well for everything else at the moment.

BRG, the loose-lipped licensee

Today's licensee spotlight is BRG Group, a licensee that, unlike Vision-Environmental and Leminur, at least lays claim to a website, if little else.

The quoted location for the company, within the light industrial buffer zone between the city of Detroit and the suburban residential areas, actually belongs to Reid Glass, a glass and mirror vendor. While there would seem to be some kind of natural synergy present, the actual relationship between Reid Glass and BRG is somewhat murky. BRG may be made up of current/former Reid Glass employees, or there may be some other kind of relationship entirely.

Never an outfit to avoid milking something for more than it is worth, REFR went on to make something out of BRG's proximity to Detroit, suggesting in its press release announcing the new licensee, that it would be in a great position to interface with the automakers. The fact that BRG and Reid were not at all in that line of business was apparently not important.

All of that would make BRG kind of a "ho-hum" licensee, and certainly not one of the first ones I would profile. But then...

In November 2003, Forbes magazine published an article discussing REFR's recent history. It was not a particularly complimentary article (as if any self-respecting journalist could look themselves in the mirror after writing a puff piece on these jokers), but one quote in particular stood out:

Not everyone is impressed with SmartGlass. "I don't think the quality's good enough for me to be able to sell it," says Joel Cothery, president of Reid Glass, a Southfield, Mich. glass fabricator and installer.

In a word, ouch. Burned, in effect, by one of its own licensees. Until that time promoters would make hay about how nobody involved with SPD had anything critical to say about it in public, but no more.

Amazingly, the BRG website is still up, though one of the primary contacts has subsequently moved to Las Vegas. Needless to say, the bloom was off the rose with respect to this particular business relationship.

That Forbes article, by the way, is a great source of info on the real story at REFR, and well worth reading all the way through. I will most likely reference it again at some future date.

Provided, of course, that REFR's stock price tailspin doesn't become terminal too quickly. Going down?

The disadvantages of isolation

Just six days after I wrote about how REFR sometimes benefitted from its relative isolation from the markets, we're treated to a stark example of the flip side of that argument. Today, the market is rallying broadly (though momentum is fading as I'm writing this), while REFR has dropped to a new 52 week low, at least temporarily taking out the vital $5.00 price level that is the difference between its hedge fund investors being able to sell at a profit and having to sell at a loss.

If this doesn't turn around pretty soon (say by the close tomorrow), this could get really ugly.

Buying for show

Today, REFR chairman Robert Saxe stepped up and purchased shares of stock as a show of confidence in his company's prospects.

The fact that he purchased all of 500 shares, at a net price of $2,575, gives one a pretty good idea of the amount of confidence he actually has.

It's curious that Saxe managed to pay $5.15 per share on a day where the trading high was $5.11, but be that as it may, the question bears asking, what is the point of making such a tiny purchase of stock?

The answer is found in the promotional rhetoric derived from said purchases. By making relatively large numbers of tiny purchases, insiders, and in particular, board member Dr. Al Malvino, paint a picture of steady insider accumulation, with which they hope to attract institutional interest.

Put another way, it's the one promotable aspect of the company they can control, having outsourced every possible operational aspect to various licensees. So they make certain to keep it as unblemished as possible.

The sad part of it is, that all of these purchases are fully funded by purchases of other sharedholders, so while the insiders take on the appearance of putting their own money up, they really aren't.

After all, they weren't exactly in line to take in any of that million share offering back in February, now were they?

When is a buyback not a buyback?

If you review REFR's archive of press releases, and go back to 20oo and earlier, you'll find a couple of releases announcing that REFR was buying back shares of its common stock. Besides those explicit releases, other reminders of the ongoing buyback were put out from time to time.

Now, a stock buyback is something a company normally does when it has large amounts of idle cash and wishes to use it to the benefit of its shareholders by permitting those who wish to sell to do so all in one shot, thus absorbing some of the supply of stock and allowing whatever demand there is to subsequently drive the stock price higher.

This is all well and good for large corporations with billions of dollars. But what is one to make of it when REFR, a company with just a handful of millions to its name and no net income, announces they are doing it?

The obvious question is, where is REFR getting the money to do such a buyback? Many shareholders jumped to the conclusion that REFR must suddenly be awash in cash as a result of some kind of as-yet unannounced deal.

The truth, however, was quite insidious, and only available to those who scanned REFR's SEC filings. REFR's stock buybacks were being funded... by sales of stock! Yes, REFR was buying back and "retiring" stock and making a big deal out of it, but at the exact same time issuing new shares of stock and not highlighting that fact at all. Worse yet, the total share count not only increased, but REFR was at the same time losing money with its share transactions. It was lose-lose for everyone involved and the only reason nobody cared was because the market was in a rampant bull phase and the share price was soaring regardless of anything else.

The fact that such obvious fraud was never met with so much as a public reprimand from the SEC, just goes to show how low REFR is in the food chain of targets regulators are going after. Mind you, it's not necessarily the case that the powers that be don't care. REFR did, after all, cease the buyback nonsense in 2001. But whether that was because of market conditions, or because someone from on high has them in their crosshairs, is something we don't know at present.

Regardless, whether anyone is watching or not, the fleecing of naive investors continues.

A great call

Bill Wexler is back, citing a great short call made on the message boards on July 1, 2001:

"My advice to YOU is to quickly sell/cover on all OTHER stock, take out a maximal mortgage on your house (if applicable) cash in all life insurance policies and so on. Get as many credit cards as you can and take out advances against them all and then short every share of REFR you can leverage."

REFR had closed that weekend at $27 a share, and three weeks later would peak at $29 before going into a tailspin from which it has never truly recovered.

Oh, I should add that the call was not made by Bill, but by someone posting as "B_IN_K" (a reference to a character from Piers Anthony's Xanth novels).

And I should also add that Bink's call was made entirely out of sarcasm, as he is, in fact, one of the loudest proponents of REFR on the message boards. He continued in that very posting: "Then, if I am right, please tell us each time you get margin calls or your car is reposessed."

It's really the sweetest kind of irony when someone who sets out to deliberately give the worst possible advice ends up making a home run call. You'd think the experience might be a bit humbling to Bink, but on that score you'd be wrong. Bink is back on the boards and posting like there's no tomorrow. Which makes one wonder if, for REFR, there is.

Vision-Ease: the one that got away

Time to tell another tale of a brief flirtation with legitimacy for REFR.

For this we go back to August 1997, when REFR caught a big fish on their licensee hook in the form of Orcolite, a division of Monsanto which was sold about seven months later to Vision-Ease, Inc.

The terms of said agreement would be enough to make any current REFR shareholder's eyes pop. In exchange for an exclusivity clause to the making of SPD eyewear, Orcolite agreed to pay minimum royalties which were scheduled to total $2,000,000 a year by 2004. To put that into perspective, REFR actual revenues over the entire period from 1997-2004 was about $1.45 million.

One might well wonder just who thought the whole idea of SPD eyewear was such a great idea. To remain in its clear state, SPD requires a small but steady source of electricity. That requires installing some kind of power source -- in the best possible case, a AAA battery -- inside the eyewear. That alone figures to make them kind of heavy. Then there's the issue of where the eyewear would be used. One popularly discussed application was ski goggles. The question of the interaction between melted snow and the electrical components of the SPD shading never really seemed to spark debate among shareholders.

Whatever may have occurred behind the scenes, REFR got a nice revenue boost in 2000, quite possibly largely coming from Vision-Ease, then a sharp decline in 2001. Then, on New Years' Eve 2001, REFR quietly filed an 8-K form with the SEC, announcing that the licensing agreement with Vision-Ease was terminated "for non-payment of royalties". Even then they wanted to phrase it in a way that made it sound like it was Vision-Ease screwing up. Regardless, REFR promised to look into finding a new patsy, er, licensee for their SPD eyewear application.

Frankly, though, I just can't see it.

The advantages of isolation

So the market's getting killed again today, and yet there's REFR just puttering along, not going anywhere, actually up a few pennies.

Time was when the promoters would try to make a big deal of that. By now, however, even they have abandoned that tack, as it is simply too easy to point out that REFR's non-decline is simply a result of its from the greater market.

Institutions want to sell five million shares of IBM, and they want to do it yesterday. Same with Apple a day earlier, and they actually had good earnings.

No one's selling REFR, because no one owns REFR. The only people in it, as I've stated before, are the ignorant, the naive, and the indoctrinated. And those four anonymous hedge funds, all of whom have a vested interest in not crashing the price.

So REFR goes nowhere, and will continue to go nowhere until the hedge funds finally give up, or somehow manage to dispose of their holdings, or a year passes and a new set of funds get cut a deal on the next million shares that screws over the original four.

Still, on days like this, that almost sounds good.

The moving billboard

The rather flashy vehicle above is the sum total contribution of REFR's UK licensee, Vision-Environmental Ltd. to the SPD promotional cause.

Vision-Environmental is another one-man shop, though at least this one has some notable credentials in the architecture field. The proprietor's name is Bob Hudson, and he has a solid brace of projects such as malls and office buildings to his credit.

For SPD, Hudson took a Lotus Elise, gave it a spray-paint job to make it into the world's first (and, to date, last) "moving billboard" for SPD. And if you had happened to be in the right place at the right time in late 2003, you just might have caught a glimpse of this vehicle being driven from Hudson's home office in Waterlooville to the inaugural 100% Detail Exhibition in London.

How the "head-turned" viewer was supposed to know that SPD referred to the tinting of the windows, and in particular the fact that the tinting could change, one can only speculate.

At any rate, the car made it to London without incident and was shown off as promised, and, despite the "hundreds of serious inquiries" received, that was the last time anyone saw the car, heard of Vision-Environmental, or connected Mr. Hudson with REFR and SPD.

But Mr. Hudson did write a nice letter back reporting on the exhibition, so I guess it wasn't a total loss.

Ir-ratio-nality

Promoters and shareholders in REFR may vilify Motley Fool for their dogged sticking to the facts in their reporting on the company, but that doesn't mean they won't take cues from them when they think it to their advantage.

Back in the day, when the Fool ran model portfolios and dared to dip its toe in the waters of short selling and brave the backlash from the shareholders of the stock in question, they set guidelines for isolating short-sell candidates, as they do for all investment strategies.

One of the items in the Fool checklist for determining short candidates was called the short-interest ratio. The short-interest ratio is calculated by dividing the total short interest, a figure reported monthly by the exchanges, by the average daily volume. A high short interest ratio, anything above 10 or so, indicates a "crowded" short, which may be prone to a short squeeze, wherein too many short sellers attempt to cover on a downturn in the stock, thus turning it into an upturn. In some cases this can feed upon itself and turn into a huge gain for longs and a disaster for shorts. Short squeezes were everywhere one looked in the late 1990's, but have become quite rare since the peak of the bubble.

Now, I don't claim the Fool invented the metric or anything, but they certainly went a long way to popularizing it. Many investors, however, chose to use the metric the other way, deliberately looking for high-ratio stock as candidates for short squeezes. Again, this strategy worked fine from 1998 through early 2000 (then again, what long strategy didn't?), but after that, not so much.

Now, it's one thing for investors to get into the short interest ratio calculations. However, when a company explicitly start taking an interest in such a figure, warning sirens should be going off at maximum decibels. But what company would do something like that?

Guess.

Yes, the focus of that press release might have been Asensio, but there it is in all its glory, REFR commenting on its own short interest ratio. Cooler heads presumably prevailed soon after, as the logical followup press release, "Research Frontiers Issues Strong Buy Recommendation on Itself", never appeared.

A funny thing about ratios, though. Because they're a function of two other figures, there are two ways to change them. In the case of the short interest ratio, it can go up under two circumstances: a) short interest goes higher, or b) average daily volume goes lower.

I emphasized (b) above because the current short interest ratio in REFR, still a fairly lofty 27 at last report, has been skewed by a marked decrease in average daily volume in REFR over the past couple of years. (I should note that this was not the case in the press release referenced above.) In fact, short interest has declined by more than half from its peak. (There may be reasons for that which do not relate directly to normal short selling, but that is a topic for another post.)

Nevertheless, the drumbeat that REFR is ripe for some kind of short squeeze never seems to cease. 27 days to cover! Never mind that the ratio peaked near 100 at one point. One might practically expect the shorts to spontaneously combust at that level, yet that did not happen. Furthermore, the whole "days to cover" business assumes, freakishly, that if some event were to occur to prompt short-covering, that the average volume in REFR would nevertheless remain at its current level, under 25,000 shares per day. A short squeeze in slow-motion, if you will. Quite an amusing concept.

Finally, of course, they ignore the four elephants in the room, the hedge funds that bought 1,000,000 shares of REFR at a fleeting discount, who would be more than happy, at this point, to grab profits by selling to the covering shorts, and exercising and cashing out the $7.50 warrants in the event the stock got that high.

Mr. Whipple need not fret. There will be no squeezing going on here anytime soon.

In descent

Not a whole lot of time for company-related stuff today, so I just thought I'd note the chart pattern of the last six weeks is forming what the chartists call a descending triangle, with successively lower highs coming off a flat bottom. The first run hit $6.50, the second petered out at $5.75, and the little spike to $5.40 today might just be all there is to the current rally. Of course, every little spike is greeted with the predictable "*gasp* someone must know something!" by some dimwit on the boards, but what can you do.

One other item: Just to prove that even the dryest of haystacks have their needles of useful information, the person who posts as numerous variations of "Bink" on the boards let on that Saint-Gobain Glass, a major proponent of electrochromic glass whose licensing was taken by the promoters as a repudiation of that technology in favor of EC, had instead dumped SPD. This was the same alias that called SPD Inc.'s closure a month in advance (as with Saint-Gobain, couching it in terms of "too bad for them") so it looks very much like another setback for Woodbury.

SPD the energy-saving wonder

Another tack used by REFR promoters, particularly of late with crude oil hovering over $50 a barrel, is to tout the incredible energy-saving properties of SPD film.

That's incredible, of course, in the sense of "not credible".

There is doubtless a certain amount of heat blockage inherent in the light-blocking capability of SPD. And the thickness of the glass is marginally increased by the inclusion of an SPD film layer, thus adding a nominal insulation value.

But the claims made (not independently tested, of course) by REFR and its promoters for energy savings using SPD film go far beyond that. A figure from 1998 (source unknown) suggests a 20% savings on energy costs from SPD. Later, a study came out that buildings lose 25% of their energy through the windows, so that became the standard value quoted -- as if SPD could magically prevent all energy lossage through windows on which it was installed.

One of the more humorous examples of the 25% figure apparently came from our good friends at InspecTech. The story was, that a pilot (for National Jets, presumably) reported that the cabin of his plane was "25% cooler" with SPD window shades installed.

When it was pointed out that it made no sense to use percents on temperature, since both common scales go negative, the story quickly changed to "25 degrees cooler". But even that strains credulity. Even assuming the Farenheit scale, does that mean the plane's cabin is routinely near 100 degrees? Or perhaps that SPD has some magical refrigeration property that takes that cabin down into the crisp upper 40's? All of this meanwhile, overlooks the fact that airplane windows, by the necessities brought on by high altitudes, are generally insulated roughly as well as the entire rest of the fusilage.

Finally, there's never, to my knowledge, been a comparison between the energy savings of windows with SPD, and windows affixed with a futuristic technology known as a windowshade. This, I strongly suspect, is because the results of such a comparison would be, at best, uncomfortably similar.

None of this, of course, keeps the promotional machine from its incessant claims that SPD is the miracle energy-saving technology that the world so desperately needs.

I just hope the world likes blue.