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.