Asensio back on the scene

Manuel Asensio, high-profile critic of REFR in years past, came back to the topic after a year's silence, with a release slamming Gene Marical's hype-ridden article from last summer. Asensio makes up for the relative tardiness of his response with some interesting information about the relationship between Marcial and REFR, specifically the fact that Marcial wrote about REFR back in 1995, then hyping licenses Japan Steel Works and Sanyo, and forecasting a buyout by General Electric.

Marcial and his employer Business Week are the focus of the release, but the article is still a good read for anyone looking for insight into stock promotion in the press.

The great debut... again

Never let it be said that Research Frontiers is not a green-conscious company.

In addition to the number of ways in which they attempt to cast their technology as environmentally friendly (as well as nanotechnological, security-enhancing, or whatever the hot trend of the day is), they walk the walk as well, being very heavy into recycling. So much so that it even extends to their licensees' press releases.

Today Isoclima announced they were taking SPD on the trade show circuit. Now, my question to you is, does this sound familiar at all?

It should.

To Isoclima's credit, the new PR doesn't entirely come off as a copy-and-paste of the one from two years ago, even though there are some aspects of it that are very similar: they specify the size of the sample being toured (larger than the one two years ago), and mentioned their future plans for film width (surprisingly, smaller than two years ago). In other news, they seem to have settled on a spelling for their brand name: the no-H version.

One sidelight of interest is the insight into the process this PR provides. Dainippon, though licensed to sell film and emulsion, is only sending Isoclima the raw production chemicals, an activity that doesn't even make use of their license. One might well gather from this that Dainippon is not as committed to the SPD infrastructure as some licensees.

But of course none of this matters a whit as REFR soars to new multi-year highs on this recycled news. That's life in the world of stock promotion for you.

The Beechcraft boondoggle

REFR's stock has made a full recovery from the faceplant of a few weeks back, spurred on at least in part by its appearance on the Nasdaq SHO list, which, in some circles is apparently used as a speculative list of potential short squeeze targets. So we wish the would-be squeezers rotsa ruck with that endeavor.

But in the meantime, on the home front, an interesting new development is coming to light with regard to the after-market SPD shades from Hawker-Beechcraft (then Raytheon Aircraft) whose announcement spurred the stock into the tizzy it has remained in to this day.

It started fairly innocuously with a post by "rikes_of_hell" claiming to have contacted Beechcraft and found that the shades were unavailable. Now, normally this would devolve into a "he said, he said" that proves nothing either way, but a funny thing happened on the way to the denial. Posted "spd_where_you_look", (obviously) a big REFR bull, actually confirmed the shades' unavailability, by way of making the excuse that film was being diverted to other, more important (yet somehow entirely invisible) projects, and that film for the shades would come available sometime this month.

Now, if the diversion excuse rings familiar, it should -- it was used to excuse REFR/Inspectech's failure to win the Boeing 787 business, even though, as we now know, there was no film production at all, much less massive amounts being diverted to projects more important than the 787(!!)

Still, it's a rather amusing state of affairs on a lot of levels. The entire current run in REFR's stock was kicked off by the Raytheon/Beechcraft announcement last February, and was the target of article after article highlighting how this was REFR's big breakthrough into the market. And now we learn that the shades were not, in fact available and have yet to be?

Fortunately for shareholders, with the latest run propelling the stock back near its highs, there's no need to apply for a refund when you can still cash out almost certainly with a healthy profit. Or... you can hold out for the Next Big Thing, a rumor of an announcement at next month's Tokyo Motor Show, which may, or, given even the most recent track record of this company, may very well not happen.

It's your call, shareholders!

Options revisited

I'm sure almost nobody among the few people reading this blog is really into the minutiae of options. I personally find the topic a combination of boring and mystifying, and I consider myself more into things involving numbers than most people. Still, with the alternatives being lapsing back into radio silence or dissecting the message board's collective inability to parse the latest short interest figures properly, there really are no attractive options (pardon the expression) here.

But I do have to say that I find it a little odd that, even though the stock is trading around $11 at the moment, thus making the nearest strike price $10, there is zero activity on current options at the $10 strike, with $12.50 being the "mainstream" price instead.

Now, I'm sure there's a hundred different ways to spin this phenomenon, many of them directly contradictory, so I'm far from suggesting my personal take is the "correct" one. But it seems to me that the stands being taken are kind of a reflection of the contrast in styles of the opposing sides of this stock. The bears are content to sit back and exert whatever influence they have from a distance, accepting that any further decline in this stock is likely to be gradual (the events of the week before last notwithstanding), and that little is to be gained from placing a bet that can be lost by running out the clock.

The bulls, in contrast, are going all out, betting strictly out of the money and willing to lose their bets if the stock doesn't rebound and soon.

And yet, basically, the stock itself meanders.

I think that might say a thing or two about the direction of the path of least resistance right now.

Gagging on something

You don't need me to tell you the stock market's been shaky the past few weeks to say the least. But today REFR got hit particularly hard today, down as much as 22%, and did not entirely rebound with the market, finishing down 13.6%.

Stranger still, the usual message board catcalls that this is all pressure from shortsellers, while not entirely absent, was considerably muted. In its place was this oblique complaint from one poster:

"HAVE YOU SEEN THE CRAP THAT SPD'S COMPETITORS ARE TRYING TO SELL ??? HAVE YOU EVER SEEN A CAR WITH PUKEY WHITE WINDOWS? THEY ARE CALLED GAG MOBILES SINCE YOU WANT TO PUKE WHEN YOU SEE ONE. DON'T WORRY THEY WILL NEVER SELL IN A MILLION YEARS."

No one else on the boards is admitting to having much of an idea what this was about, and this blog has so far struck out as well. But if it's some kind of competition for SPD, that may have even gained traction with an auto maker, that certainly spells trouble for REFR, and might help explain the heightened panic today.

Anyone out there have any idea what these "gag mobiles" are actually called? Support your local blog and give me a heads up!

The latest 10-ZZZZ filing

Or at least that's the form the SEC should require REFR to use, as yet another quarter of complete uneventfulness is officially put on the books, hype regarding production at Hitachi notwithstanding. Income was actually slightly down from the second quarter of last year, although operating expenses were also lower, resulting in a loss of only about $735,000, REFR's narrowest quarterly loss since 2000.

Of course, before any shareholder preens over this success, it bears pointing out that REFR's net margin for the quarter remains at -1285%. Coincidentally, REFR's price/sales ratio is in the same ballpark on the positive side, most recently pegged at 1298.

None of these results come as a surprise to shareholders, at least as far as they will admit, as the "production delays" at Hitachi, which were of course all their fault and furthermore in no way reflect adversely on demand for the film, nosiree, apparently made the realizing of revenues in the mere five months since film production was announced, a virtual impossibility.

It will be interesting to see what the rationalization will be for similar failures in the third quarter. Will the royalty lag time be stretched out to eight months? Will the "technology subscription" payments from Hitachi be used to mask the lack of revenue from product sales?

Will someone, anyone, step forward and offer an SPD-based product for sale to the general market?

I wouldn't bet on it.

Now if you'll excuse me I think I'll go back to bed.

Options update: 11 more lots of calls opened today. 10 March 17.50 calls at the ask (money in the bank to be sure -- but for whom?), and a single December 15 call at the bid. So apparently at least one REFR shareholder is sophisticated enough to be familiar with the concept of writing covered calls.

Weighing the options, finding them lacking

The Chicago Board Options Exchange, which has been phasing options contracts on all manner of listed symbols that previously did not trade options, has added options on REFR starting today.

What seemed at first blush to be an intriguing twist in the trading strategies surrounding this tightly-controlled stock, however, has, at least in the early going, proven to be a complete bust. The spread between bid and ask on all contracts, excepting those with zero bids, is at least 75 cents, and volume is a flat zero across the board.

There had been hopes on both the bullish and bearish side that the listing of options might add some much needed liquidity to this stock, but clearly the verdict today is, not so much.

Until Yahoo! add options for REFR to its quote pages (shouldn't be more than a couple of days, based on other recent CBOE option listings), you can check activity on the CBOE site here. For now, at least, there's very little to see. We'll be checking back later to see if a day of greater stock activity has any residual effect in the option exchange.

Update: The first trade in REFR options came just over two hours into the first trading day, a trade (presumably a purchase) of two August 15 calls at 65 cents each. As options represent 100-share blocks, that's a $130 trade. The following two hours have been silent on the options front, presumably to recover from that blistering flurry of activity.

The media blitz continues

Any doubts that REFR is in a deliberate attempt to get noticed and get noticed quickly have now fallen by the wayside with yet another puff-piece article about them, this time by Emily Pickrell in New York Newsday.

This particular article is really quite amazing, as it seems almost carefully written to include as much stock-promotional hoohah as could be fit into the column space.

"It's a thrill," said Saxe. "If you spend 40 years of your life building something and it does not work out, people will say you're a stubborn fool...."

Aw, poor guy. If this doesn't work out, all he'll be left with is a long career during which he made anything up to nearly a half-million dollars a year in just salary alone, and that doesn't even include profits from options.

"SPD glass is the holy grail of glass that architects have been clamoring for for years," said [Steve Abadi].

I guess it does have one thing in common with the legendary vessel, in that few ever even get to look upon it.

Abadi goes on to claim SPD as a "green" technology, whatever they or anyone else means by that anymore, and then, hilariously, the article plugs the Popular Science award from 2002, without mentioning how all that applied to the old, failed, SPD Inc. version of the technology.

At this point, the article moves on into it's "cautionary" section, making a threadbare attempt to not look like the puff piece it is. REFR, per the article, has "annual operating expenses of approximately $3 million", and "operating losses of roughly $4 million per year." That's a heck of a good trick, managing to lose more money on operations than you spend on operations. Summing up: "lack of sales until recently means the company is still waiting to see a profit." Wow, there's some brilliant analysis.

But enough of that, back to the laughable stock promotion cliches! "If SPD glass is were used for even 1 percent of world glass sales..." It's at this point that I suspect Ms. Pickrell must be a highly inexperienced reporter to have not heard that old saw, a suspicion that seems to be the case. Given that my heart goes out to her, being used in such a way so early in her career.

Moving on, the Beechcraft arrangement is of course plugged, minus the fact that Raytheon is no longer associated with that company.

Ms. Pickrell does note that the message board chatter on REFR is "mixed at best", but the only specific criticism she cites is delays in getting product to market, not the myriad misrepresentations the company has made over the years.

Possibly saddest of all is a shareholder she managed to find, who is quoted as saying, "I wish I had more money to buy more stock."

Cashing in again

Once again REFR CEO Joe Harary has collected another sweet paycheck over and above the rather substantial salary he collects for running this nearly operations-free company. This time the score was over $350,000, and could have been more had he not generously gifted 7,000 shares, about another $100,000 worth, to an undisclosed party.

The timing of this option exercise and sale, literally days after a mention in Gene Marical's Inside Wall Street column bounced the stock as much as 15% on the day of its online release, naturally raises a couple of eyebrows, even as the general population on the message boards seems congratulatory if anything. Of more interest is the fact that the AP even found the sale worthy of mention. For a company that has made a living flying under the radar this may prove to be some unwelcome attention, particularly if the current prices fail to hold at some point in the near future.

The Marcial Plan

A lot of focus has been placed on the nature of the column penned by Gene Marcial, such as this week's entry featuring REFR. Now, normally, such analysis smacks of attacking the messenger and doesn't have much of a place in serious discussion, but in Marcial's case the consensus is so clear and uniform it's worth nothing.

Marcial's column, by reputation, is the modern form of the old "tip sheet". It basically gives a "quick hit" on a stock, either as a growth story or an acquisition target. Frequently, the stock, like REFR, has already made a big run, but the suggestion is inevitably made that "it's not too late to get in". And, almost without exception, the featured stock makes a big run on Friday, the day after the article comes out. Again, REFR follows the model to a tee.

Subsequently, the performance of the stock is, sadly but not surprisingly, not so hot. To be sure, Marcial does pick the occasional true winner (blind squirrels and all that), but on the whole, one day after a Marcial column has the reputation of being one of the worst times to buy a given stock.

So far, as I said, REFR is acting little different, running up big on the Marcial article and then subsequently going nowhere. We'll of course be watching to see how things unfold.

I've had it suggested to me that Bob Saxe arranged for last week's article, but the fact that Marcial managed to find a portfolio manager willing to sound enthusiastic about REFR suggests to me that the article is at least partially not his doing. Others have suggested that this might be a cynical ploy on Robin Manners West's part to get out of an ill-thought-out position in one piece. That would be rather blatantly unethical if true, to the point where the SEC might even notice, so I tend to doubt it, but it should be noted that other fund managers have done exactly that in the past, so the possibility can't be completely discounted.

Comment lines are now open!

What with REFR now breaking into the "big time", at least for the moment, I figure it's about time to let the world have its say. Try to keep the comments thoughtful; I don't need this turning into a clone of the Yahoo! board where the standard response to everything is to claim to know everything but say nothing.

Apart from that, have at me!

Getting down to Business Week

Just as the momentum behind REFR's precipitous rise was flagging, out comes a very timely article in Business Week by Gene Marcial in his "Inside Wall Street" segment. The article appears to be essentially the result of an interview with Robin Manners West, portfolio manager of the New Mexico State Investment Council, and a frequent subject of his column.

Marcial's article cites nothing that has not already been noted in this blog, which already drove the stock from $5 to $15, yet forecasts a $35 price target and profitability by the January 2009 on expectations that licensees Air Products and DuPont will "sign up", whatever that means. The best that this blogger can guess is that West expects to fund itself solely from licensing out subscriptions to its technology. The cited 18-month time frame is also an interesting one, in that it is one favored by long-time REFR promoter R. J. Falkner.

The article does admit that there remains no analyst following for REFR, although it does list Fidelity among "early" investors, even though their position does not as yet appear on the Nasdaq website.

Looks like it game on, as far as the war over the stock goes. As for the company itself, that remains to be seen.

Hitachi on the hook, stock price off the hook

REFR actually managed to come out with some moderately surprising news this morning, announcing that they had, effectively, sold a subscription to Hitachi Chemical for two years' worth of upgrades to SPD technology.

Never a company to ever play it completely straight, the deal was announced as being valued at "96 million yen", forcing the reader to go find a conversion table and discover that that comes to a bit under $800,000.

While this is by no means REFR's ticket to profitability in and of itself, it does show that REFR has managed to gain Hitachi's trust to the point where they are willing to give them an advance on future technology upgrades.

It's frankly a little mystifying that a company like Hitachi could view the rate of progress REFR has dragged through over the course of over 40 years, and expect the next two years to produce advances worth paying for, but then again REFR's having lasted this long in such a way is no minor miracle in itself.

At any rate, the stock is reacting as you might expect, attaching as much as $20 million in value to REFR for an $800,000 deal. But such things are liable to happen when you are in your own private market bubble, as REFR seems to be.

Notes from the Fox Hollow Inn

Long-time message board poster "ed_wesnofske" posted his report today on last Thursday's REFR annual meeting. The full text of his notes can be found here and here.

In addition to John Petraglia's presentation, there was a slide show presentation by Steve Abadi of Innovative Glass. Essentially, this consisted of a visual tour of that company's facilities, as well as two SPD projects it has reportedly completed.

Now, granted, two projects is better than none, but we've seen projects from this company before (viz. the Extreme Makeover link above) which have utterly failed to even show up in REFR's income statements, so we'll remain skeptical of the significance of this one as well, until proven otherwise.

Since Jim Lang of Inspectech apparently couldn't make it, it fell to Joe Harary to deliver the report on the aerospace market. Apparently the reason shades are only available on King Air is because SPD is not certified for any other models at present.

Harary's "speculation" on the royalty rates for different applications is of interest. Apparently the outsized expenses in developing an aircraft window would translate into outsized royalties for REFR. This is a double-edged sword, of course: it makes the aerospace market quite potentially lucrative should it catch on, but at the same time, the huge royalty upcharge will hamper that market's viability.

On to the questions from the shareholders. First, someone wants to see another SPD Industry Conference. Given that the last one was hastily put together in order to start things from square one in the wake of the collapse of SPD Inc., I'm not sure why.

The second one inquired about the architectural market. The posted Ed posted doesn't seem to actually answer the question, but whether that's a transcription glitch or a company evasion can't really be determined.

The last one invoked accountability for last year's projections, and was met with the predictable "it's not our fault" response. And with the the formal portion of the meeting concluded.

The trailing (informal) notes were of passing interest. Hitachi's samples have been used for testing; nothing new there. Isoclima currently plans to get back in the game later this year -- what, exactly, have they been waiting for? And Dainippon is using "toll coaters", a fancy way of saying they're outsourcing all SPD production work. To whom, exactly, wasn't specified.

Now, granted, this is a rather cynical summary of Ed's postings, but experience has shown the cynical view to be an excellent starting point in parsing the comments made by this company's management. That said, the stock market has taken a decidedly non-cynical view since the meeting, but that is what it is.

Private equity shutout

I've already made plenty hay over SPD Control Systems's scrambles for operating capital, but I wanted to share this presentation I came across from last year. The link is to an HTML representation of a Powerpoint slideshow presented by SCSC at "Private Equity XVI", a dog-and-pony show for venture capitalists and their would-be fundees, which took place back on June 22, 2006. So if nothing else, this shows that the licensee with the brightest spotlight in the REFR universe has been on the fund-raising trail for quite some time, without much success.

And you will note that this presentation, like the one from the annual meeting, is easily available for public view despite being labeled "confidential". That doesn't seem to speak too well of their security policy.

Mum's the word

The shareholders came back from yesterday's annual meeting and the reviews are... rather few and far between actually. The only thing of substance reported is the presentation by the man we can only presume was the keynote speaker, John Petraglia of SPD Control Systems. You can actually find what is apparently a transcript of his speech (along with select "confidential" Powerpoint slides) from yesterday on SCSC's website (PDF format).

Yes, that's the same SPD Control Systems that recently completed a round of financing from "close friends, family, and colleagues" , with another $150K to come from REFR pending the fulfillment of certain milestones. One can't help but wonder if the speech wasn't one of the milestones.

No word yet on the fate of the shareholder proposal to get fresh blood on the board of directors, although presumably it went down to massive defeat. After all, who in their right mind could possibly be dissatisfied with company performance like this?

REFR's latest great investment

So REFR files another quarterly report, and, surprise surprise, for all the hype about production and products, the revenue meter remains planted firmly on "minimum license fees only" mark. On this occasion, the number happens to be $29,792. Interestingly, the company also recorded "investment income" of $56,834, meaning, it would seem, that the company's money is bearing more fruit elsewhere than at the company itself. There's a lesson for investors, I think.

But REFR's successful investment streak probably won't last much longer. Buried on page 10 of the quarterly report (yet somehow pinpointed almost instantly by supposedly casual, unconnected investors), REFR mentions an investment of "up to" $150,000 in one of its licensees, SPD Control Systems.

SPD Control Systems is a rather unusual licensee in a lot of ways. For one thing, there's no obvious reason why they would need a license. Their devices appear to be of their own making, and certainly not connected to any SPD patent. So it's not at all clear what SPD Control Systems is licensing here.

Another oddity is the company's location, in the "Long Island High Technology Incubator" on the campus of SUNY-Stony Brook. Is this a corporation or an academic research project?

Despite these obviously humble digs, SPD Control Systems makes some very weird claims in an edition of the company newsletter, seemingly not coincidentally published to coincide exactly with REFR's quarterly filing. So much so that they actually reference the filing in mentioning the investment from REFR. Way to keep up a pretense of independence, there.

Among the claims are "facilities in over 22 countries and 50+ locations, any of which can be utilized as a manufacturing site for product delivery in regional markets." Really, now. If SPD Control Systems has facilities in "over 22" (so, 23?) countries, you'd think that they could use one of them for office space, rather than having to mooch off a local university.

No, much more likely this claim is akin to the completion centers claimed by Inspectech as a way of making themselves seem a lot larger than they actually were. Inspectech, as we know, was a two-man operation that soon after became one-man, yet still boasted "hundreds of completion centers" as if the company had any kind of ownership relationship to any of them.

Also of note is the headline of the funding announcement: "SCSC Receives RFI and Angel Venture Capital". One might be led to think that "Angel" refers to some kind of institutional name. Because otherwise, why capitalize it, right? But in fact, the paragraph below defines the "angels" in questions as "close friends, family, and colleagues". Sounds like they learned their fund-raising techniques from Woodbury.

A proxy upon thee

A sidelight of note in the notice for this year's annual meeting is a proposal made by a shareholder, to have the board of directors expand to add two new members, preferably ones significantly below the board's median age of 71. The proposal, admittedly a bit naively written in some ways, is opposed by the board, and as such is almost surely doomed.

That said, the language in both the proposal and the company's response do provide some interesting insight into the mindsets of both parties.

The shareholder proposal, at times, reads like something crafted by stock promoter R. J. Falkner, stating, "It is expected that the licensing revenues generated over the next year and beyond will grow significantly," a statement far bolder than the company has produced in recent years. Still, the overall sentiment of the proposal is a reasonable enough one, a demand that the board, for once, get off the dime and get some fresh blood that will be able to manage the "expected" growth.

The company's response primarily takes issue with the six-month time frame suggested for the board augmentation, as well as the vague guideline of "significantly below 70 years of age" for the new board members. The company complains of the "increased difficulty in finding qualified people", saying they have been searching for two years for new directors without success, and that six more months is simply not enough time to guarantee locate two suitable candidates. (Then again, the way this company moves, six months may not be enough time to make coffee.) And I would additionally point out that, what with the state of EEOC regulations these days, it may not even be legitimate to screen new directors by age.

On the other hand, a seemingly overlooked aspect of the proposal is that its language is distinctly non-binding, merely "advising" the board augmentation and that the new directors "should" be relatively younger than most of the current ones. Then again, this company doesn't seem to have much of a track record of being amenable to advice anyway, given how little about this company has changed over the past couple of decades.

Bottom line, we have the overly optimistic shareholder, still on board with the notion that good times are right around the corner for the company, but simply wanting a little accountability, and the company board and management, quite satisfied with the status quo and not particularly interested in input from the shareholders.

To be continued at the annual meeting.

Another year in the books

...and yet another year of nothing notable in terms of results. For all the excitement generated by the Hitachi and Dainippon presentations back in June, results have, to put it kindly, completely failed to reflect any change from the status quo established over the past four decades. The only thing different is the share price, and that's different every year anyway.

But not to worry, REFR fans! This year is the year! Again.

The newest old licensee

REFR stock got another juice Monday on the news of a new licensee: SmartGlass International. That is, except for the "new" part.

Perusing past the main text of the release, under the heading "About SmartGlass International, Ltd.", wherein one normally finds a bland boilerplate company description, one here find this interesting note:

"The company was founded after meeting at the first Research Frontiers Licensees' Conference in 2004 when the Directors of Vision (Environmental Innovation) Ltd., based in the UK, and Smart Glass Ireland decided to join forces to launch a global SmartGlass product range for the end-user architectural market."

If one of those names seem familiar to dedicated readers of this blog, they should. Relative newcomers can simply follow the link embedded in the above paragraph. And needless to say, SmartGlass Ireland was, like Vision, already an SPD licensee prior to the merger.

So, in fact, this event is nothing more or less than the consolidation of two licenses into one. And for that the market rewarded REFR with a 15% share price boost. Which certainly makes one wonder about the intelligence of the market currently in this stock.

As an addendum, the licensee list on REFR's website was shortened by another entry sometime in the not-too-distant past. General Electric, a ballyhooed licensee from the mid-90's, which has been dormant for a full decade, no longer appears on the list.