Stop the presses: Harary gives vote of confidence to self

Never let it be said that I never give the public what they want.

Back on April 30th REFR filed an 8-K announcing its new employment contract with Joe Harary, who is now the CEO and pretty much every other position that matters at REFR.

Maybe it's just all the medications I'm on for this cold but this doesn't spark any fresh outrage with me. Harary's salary is pretty much in the ballpark of what it's been, and the options aren't out of line with what he's been given in the past. Sure, there's the whole "the company itself has nothing to show for it" business, but that's been true forever.

Let's face it, this company has become nothing more or less than Joe Harary's little fiefdom. Since the trouncing would-be proxy fighters took a couple of years ago, there's really been no sign of any challenge to his authority.

In a couple of days I expect I will feel better, but for what ails REFR there seems to be no cure.

Oh, and I guess another quarter or something

REFR filed another 10-Q but I can't even muster the interest to even look it up. Something something about a lot of option awards to management but it's really gotten to the point where nobody even seemed interested in defending it. Nothing much else has changed, the glow from the Qantas deal, whatever it was, has faded, and the need for another trip to the secondary market is just a handful of months away.

I honestly don't know how many chapters are left in this story.

Qantas qanundrum

I've been a little slow to blog this one as I'm not entirely sure what to make of it. It started, simply enough, with an article by Paul Goldberger in Travel & Leisure magazine about a new Airbus A380 put into service by Australian airline Qantas. Towards the end, Mr. Goldberger makes reference to a window in the lavatory with a distinct shading system:

The most extravagant detail of all, however, isn’t in the first-class cabin itself, but in its bathrooms. They are large, with an expansive sink and counter, and there’s a window. When you walk in, the window, the surface of which is covered in liquid crystals, appears to be translucent. (Who could look in from the outside to invade your privacy, I’ll never know.) When you lock the door it transforms, as if by magic, into a transparent surface. Where else can you shut yourself in a bathroom and gaze out at the world from 30,000 feet?

This would seem to have little to do with REFR or SPD, apart from being another scrap of evidence showing that technology was passing them by. Yet, some very vocal commentators immediately began to insist that the shade in question was REFR's SPD, in spite of there being no supporting evidence for that assertion.

Fast forward to April 1st, appropriately enough, when REFR's loyal one-man licensee Inspectech puts out a press release talking about their umpteenth trade show appearance in Germany, and, oh by the way, the Qantas Airbus lavatory window mentioned in that Goldberger article? Ours.

Seriously (and it being April 1st I waited awhile to be sure), they treated the Goldberger article as if that was the first they even knew about it. Perhaps even more dodgily, they chopped up the quote above, carefully removing references to liquid crystal technology (even though that is an integral part of the I-Shade product).

It recalls the Jeep Rescue fiasco of 2004, where SPD was apparently built into the sunroof of this showcase vehicle, but almost nobody noticed it. Likewise, the existence of SPD in the lavatory window, assuming it is in fact there, totally escapes Goldberger's notice, yet the fact that the window gets mentioned in the article at all is portrayed as some kind of PR coup for SPD technology.

Meanwhile, REFR stock, which had a rather big run on the article comments, doesn't seem to have reacted at all to the confirming PR. Maybe April Fools is just running long this year.

Into their own hands

It's a strange world we find ourselves in these days. People are having trouble finding solace in much of anything, it seems, and some are being led to measures more desperate than they ever consider under ordinary circumstances.

Case in point: Research Frontiers, the company that has made an artform out of outsourcing every possible aspect of its business plan, has been driven to the point of actually promoting its SPD technology itself.

Lacking any images, it's impossible to judge the effectiveness or impressiveness of the "design center" REFR has set up in its headquarters. But at least it presumably answers one long-running complaint about why, if SPD is this revolutionary technology, REFR used none of it in its own office.

As REFR couches it in terms of "hosting events", it tends to suggest that the "display center" will not be routinely open to the general public. Still, it's a start, a "beginning of the beginning" so to speak. The big question is whether there's any time left.

Seeing the light

More information is coming out on the Indiana Medical Center SPD installation, in the form of an article on one of REFR's favorite uncritical mouthpieces, glassonweb.com. The article itself is the usual fluff rehash of Innovative Glass's PR on the installation (only notable in that it links to an "original source" in Belarus of all places), but contained within is a picture which for once backs up an old adage by being worth at least as much as the thousand words of the article. Witness SPD in action:

No, I don't know what the inset in the corner is supposed to be, so let's focus on the main picture. First question: is this SPD in the light state or the dark state? At first glance it seems to be the dark state, but just look at the sunlight pouring in on the left, from a full room away. This is obviously nowhere near as effective as the mechanical blinds the article naturally denigrates, in terms of darkening a room.

So perhaps it is some kind of intermediate state? But if so, why would they choose such a state to show off, one that is neither effectively light blocking nor resembling of ordinary clear glass?

In fact, it might actually be the "clear" state. Some message board posters have asserted that SPD becomes significantly darker when viewed at an angle, perhaps even the relatively mild angle the photo is taken from. But why would they choose to highlight this "feature"?

Of course, the notion that SPD is "good in theory, not so hot in practice" is nothing new to regular readers of this blog. But it rarely hurts to keep verifying that, no matter what tune the share price might be dancing to, at the company itself, little if anything ever changes.

Update: a commenter has pointed out that the image that appears to be "behind" the glass is in fact almost certainly a reflection of the interior of the room itself. That certainly explains the choice of shot, although this means the only effect being illustrated is that SPD makes it hard to see outside of the room. I suppose they can use the room for focus group meetings or something.

Timely news?

We may have finally gotten an idea as to what was behind the strange little run, on no news (apart from Harary's long-anticipated promotion) and very little volume, that REFR has had the past two months, from a close of $1.60 last December 5th to over $4.00 today.

The key appears to be a project that had gotten quite a bit of hype on the message boards and which I thought I had blogged about myself, but apparently not. According to the press release from REFR licensee Innovative Glass (true to form as ever, REFR is not a party to the PR, but gets a nice plug for its ticker symbol) they have finally completed the installation of what is apparently the largest SPD-related project ever, at the Indiana University Health Information and Translational Sciences Building in Indianapolis.

The size of the project seems fairly impressive, involving a total of 68 interior and exterior panels (although the average panel size isn't stated). But what sticks out like the proverbial sore thumb was the length of the project -- three years.

Over those same three years, REFR itself burned about $12 million, so unless Innovative scored $120 million out of the whole deal, this doesn't exactly turn REFR into a money-making operation. REFR is simply not going to get rich off this "one project at a time" business, especially if such projects are going to be that drawn-out.

Note that this isn't the first SPD project Innovative has done, and REFR investors are still waiting for the big fat royalty check (not to mention the wave of publicity) from that.

We'll wait and see where this takes us (not very far for very long, so far today), but with REFR's built-in 90-day lag on royalty payments, it will be August before we get any hard data on how, or even if, this impacts REFR's bottom line. By which time, REFR will almost certainly have priced its next stock offering.

And so the music continues on.

And the award for Best Long-Running Fleecing of Investors goes to...

This one slipped by my radar for a while because our friends at the SEC (Motto: "We Have No Idea What We're Doing") helpfully separated out the insider transaction filings from other filings and put them in a much less obvious location.

But at any rate, as you can see from the link, it was a very happy new year for the gang at Woodbury, as officers and board members alike awarded themselves thousands of free shares for their sterling performance in the collection of back royalties.

25,000 shares went to each member of the board, except for brand-new CEO Joe Harary, who raked in 150,000(!) shares (of which he gifted 36,000 to his children). Non-board members Michael LaPointe and Steven Slovak split just under 10,000 shares.

REFR investors, meanwhile, enjoyed a 78% thrashing of their investment in 2008, with no hope that the profit reported in the third quarter will be repeated in Q4, and the need to issue another secondary at record-low prices in the offing.

Great job guys!

One more step out the door

"The Enterprise is yours."
"...for as long as she lasts."
-- Jean-Luc Picard and Will Riker, Star Trek: The Next Generation, "Contagion"

REFR shares underwent a mini-rally the past couple of days on word that they were getting a new CEO to replace founder Robert Saxe. The not-so-good news: the position is simply being taken over by Joe Harary, the man who's been running the company in all but name up until now, just making it more-or-less official.

Saxe remains onboard, literally, retaining the title of chairman of the board, but basically this amounts to more chair shuffling while giving Saxe more of the semi-retirement he's probably already halfway into already.

REFR shares, having been pummeled all year, needed little excuse for a relief rally. But in the longer haul, REFR is appears to be more and more resigned to having to make their next capital raising effort at record-low prices in a horrible market for such speculation.

At any rate, I remain with only the best holiday wishes for all readers.

...Or Did They?

This one leaves me a bit red in the face, as I normally would have done more thorough research on such a thing, or at least gotten around to it within a reasonable time frame thereafter. But instead, perhaps out more out of apathy than anything else, accepted the profit pronunciation for Q3 at face value and wrote it off as a one-time event.

But in fact that may have given REFR too much credit. Message board poster xavierducats uncovered this language in the 10-Q filing:

"The Company's fee income from licensing activities for the first nine months of 2008 was $1,476,131 as compared to $237,810 for the first nine months of 2007. This difference in fee income was primarily due to the receipt of a one-time payment from a former licensee in full settlement of past due minimum annual royalties for several years."

Xavier went on to hint at what I'll say explicitly -- there is a very real possibility that REFR's Q3 profit may be "restated" out of existence in the months to come.

Rather than being a termination fee, the roughly $1 million paid by NV Baekert was now apparently an accumulation of unpaid "minimum royalties" over time. Now, I am not a CPA, but it certainly seems to me that if REFR was truly owed these royalties they should have recognized them at the time they were earned, whether or not they were in fact paid or not. Thus, that $1 million should be spread across however many quarters Baekert was in arrears, thus flattening Q3's revenue spike and negating the standing of profitability.

We shall see what REFR's auditors have to say about that this winter.

As a parting aside, I'll echo the mirth at Joe Harary's latest effort to put a good face on REFR's sorry state, with his latest "Ask Joe" column pointing out the companies REFR has "outlasted" because of the recent carnage in the financial industry. Apparently being Wall Street's equivalent of a cockroach is the new standard of success in Woodbury.

They did it!

Truly, history was made this week.

I speak, of course, of REFR's first quarterly report in its 43 years of existence to actually shows a profit.

A minor detail, albeit one that may be tempering the excitement somewhat, is that roughly 85% of the revenue for the quarter (the exact figure can't be determined directly) came from the exit fee paid by NV Baekert to discontinue the obligations of their license agreement. Based on year vs. year comparisons the fee appears to have been on the order of $1 million, which rather soundly dwarfs the net income for the quarter of $156,655.

So the irony is, Baekert may have paid more to end their relationship with REFR, than Hitachi Chemical did to make their relationship closer.

It's not known whether there are other such "bombshells" in the offing. For all anyone knows Hitachi might have to pay to not renew their technology sharing agreement, which, to all appearances, has yet to produce a thing.

The practical bottom line is that REFR has been bought roughly another four months of life, which should take the prospect of the dreaded going concern clause for the next 10-K filing off the table.

So I guess we get to stick around another year and see if a new administration means REFR securing some kind of government stimulus grant, or getting slapped around by a less business-friendly SEC. Or, you know, just more meandering.

Never a recession for empty gestures

Even as business in the real world seems to be crumbling, "business" as practiced by REFR is hopping. First of all was Isoclima's perennial return to the trade show spotlight. The wording of that PR, saying that Smart Glass was "featured" in the display is reminiscent of other showcases where a rather substantial number of items were "featured", such as the Smart Garage, the EPCOT Juno exhibit, the Second Skin art exhibit.

Not content with that, however, REFR today announced a new licensee to replace outgoing NV Baekert, this one being Pittsburgh Glass Works. I'm not sure what this says about progress at REFR's other Western Pennsylvania glass manufacturer licensee (probably nothing we all hadn't already guessed), but I guess when a count of licensees is your biggest asset you get them wherever you can.

I just hope PGW read their exit clause before signing on.

Of course the irony is that the market is selling REFR off with the rest of the world, so this press is all wasted effort. Unless, of course, something actually comes of it this time. Ha ha.

Paying to leave

REFR filed a very interesting 8-K last night. Longtime licensee NV Baekert, who inherited their license with REFR via their buyout of Material Science Corp. in 2001, had decided to clean house and terminate their license. The license, which was originally drafted in 1997, never resulted in a developed product, much less a product sale.

But what makes this an item of interest is the disclosure that Baekert was required to pay a "substantial" royalty as a condition of the termination. The actual amount was not disclosed (naturally), and, given the scale of REFR's revenue stream, anything from six figures upward might well be considered "substantial".

But if this termination clause is common among license agreements, and the exit fee is many times the annual mininums the licensees are committed to, that would certainly go a long way towards explaining why companies remain licensees for such a long time after they have clearly lost interest in the technology, and why REFR has managed to maintain a trickle of revenue even in years where it was literally impossible for them to have had business activity.

Grim jokes are already being posted to the effect that REFR might finally attain profitability on this new "license cancellation" business model. Of course, pretty much every stock's shareholders have something of a gallows mood these days. It's a strange world we live in, and stranger still that REFR still manages to exist in it.

And the winner is...

So apparently SmartGlass International won that award, making it apparently two years out of three they've taken that award at that show. One wonders who they must know. Anyway, the exhibition website describes this as a "product launch" for SPD-SmartGlass ("100% new", har har). Of course, we've been there before, not to mention how it's a bit odd that these guys have apparently just been sitting on their SPD license for as long as they have and are just now getting around to "launching".

Still waiting to believe it when I see it.

You woke me up for this?

Just when I thought this blog -- and the company it follows -- might simply drift off into that good night, along comes an event so monumental it actually triggered a "material event" SEC filing from the company.

So you can imagine my disappointment when the hubbub was over -- brace yourself -- yet another trade show display. And not even one sponsored directly by REFR itself, but by REFR's licensee in the British Isles, SPD International.

Even more disappointingly, it's not merely another trade show, but the same trade show that SPD International's very own Technical Director, Bob Hudson, showed SPD off at five years earlier. And not even in the form of a garishly painted automobile this time, but simply four large SPD panels, for all we know the same panels Isoclima showed off in Italy the last time we heard from that licensee.

Still, the SPD display is reported as being on the "short list" for some kind of "innovation" award, which I guess only goes to show that either the show's organizers have poor memories, or the 2003 showing of SPD was just that unmemorable. The latter seems unlikely though; who could forget the paint job on that car?















All of which brings me back to REFR's communication priorities. A trade show overseas that REFR has nothing, directly, to do with, that rates an official communication. Any sort of detail on actual product sales, even in aggregate, on the other hand, was explicitly decided at the last annual meeting as something not to be communicated.

Now back to our regularly scheduled doldrums.

The votes are tallied, and Saxe wins again, but...

REFR filed its 10-Q for Q2 2008 this morning. No real surprises in the results; Hitachi's payments now comprise about 75% of REFR's revenues (and they're probably more embarrassed about it every day). Oh, and the zero-cash point scooted back to the other side of January 1, 2010.

What looks to be most notable is the results of the proxy battle. To nobody's surprise, Robert Saxe and Robert Budin were easily re-elected, but the number of shares withheld surprisingly (to me anyway) exceeded 10% of the shares outstanding. The auditor, BDO Seligman, came off relatively unscathed, only getting a little under 5% withholding.

But it was the proxy initiatives, the Equity Incentive Plan and the sales disclosures, that were in fact quite surprisingly contentious. Make no mistake; managment was never in danger of not getting its way on both votes, but the final numbers were nonetheless a surprise. For some reason, only 6.6 million shares, less than half of the outstanding and number recorded for the board elections, were recorded for the proxy items. And of those, the results were roughly identical: about a 5-to-2 margin backing management's recommendations both times. Still, that's over a quarter of the voting shares participating in the "revolt", far more than I thought we'd see.

Perhaps that might explain the eerie near-silence on the REFR message boards these days, if the meeting was as contentious as the voting suggests, there may be a lot harder feelings over this than are visible on the surface. And management may well have been shaken up by this after all, even as the leader of the insurgency looks to have trudged away in despair. If nothing else, it looks like they've been given notice that loyalty among the shareholders has eroded quite dramatically, and that next time they might actually be in some danger of not getting their way.

Exuent the indices

Finally post #200. It took a lot longer than I thought it would, given the pace at which I was going when I started. But when there's really nothing more to say on a subject, there's not a whole lot you can do about it.

Anyway, the news this time is that one of REFR's two largest institutional holders, Vanguard Group, has liquidated nearly all of its REFR holdings. This has significance because Vanguard, along with Barclay's Global Investments, are the two biggest managers of index funds, funds that are supposed to hold positions in everything, irrespective of investment worthiness.

It was embarassing enough that these two far-and-away topped the list of institutional holders, meaning that few if any funds were interesting in a position in REFR on its merits. But with Vanguard giving way (single-handedly reducing institutional investment in REFR by nearly 30%), Barclay's is set to become the lone institution with a position in REFR greater than 40,000 shares (unless some other institution picked up an outsized portion of Vanguard's position).

And so the end comes one step closer. I'm seriously doubting this blog will ever see post 300.

Update: It was pointed out on the message boards that the "mffais" site has Vanguard Group drastically reducing positions in just about every stock it holds. With a lack of news to confirm such action it seems this may not be what it seems after all. Sorry!

Marking time

It's not that I've not wanted to update this blog in the past month; it's just that there's been nothing worth noting. Sure there's the odd post saying how big next month will be, but it's not as if we haven't heard that one about a hundred times, followed 98 times out of the hundred with a "who cares, so maybe we were a little early". Then there was the brief boost in the stock triggered by... um... let me get back to you on that.

But anyway, the sense of wonderment and excitement, the way shareholders would spend all kinds of time dreaming up theoretical uses for SPD, or searching for companies whose representatives might have had occasion to bump into Joe Harary, or scouring Google for anything that even might be a new reference to their pet company, all of that is just gone. Worse still, some of the formerly regular posters on REFR's board can now be seen posting to other stocks, meaning they've not given up on the stock market, but rather just given up on REFR.

The bullish contingent is as weak as it has ever been (even more so than the depths of the no-supplier era) and the bears seem bored if anything.

Even this blog's "answer" blog hasn't been kept up in nearly three months; admittedly partly because it necessarily can't be more active than this one, but even then, this post makes the ninth post since the last response from my shadow.

Anyway, I'll check back in another month if -- despite the confident predictions to the contrary -- nothing happens before then.

The end of the insignificant rebellion

We may never know exactly what went down with message board poster stanedel's attempt at registering dissent against REFR management, but based on a post from yesterday one can only presume it did not go well at all.

It's not clear what Stan means by his conclusion that REFR is admitting there won't be sales until at least 2012 (which would be uncharacteristically candid on their part), unless perhaps he's reaching a sort of extended conclusion from the Freedonia survey's five-year projections for the "smart glass" industry in general.

His fellow shareholders, ever the empathetic group (give or take an "em") were quick to give this longtime loyal shareholder a "don't let the door hit you on the way out" sendoff.

And thus, apparently, is the end of the sad, sad tale of a disillusioned shareholder. For the rest, of course, the story has more sequels to come.

Buying and selling

A quick rundown of the insider transactions that took place this week:

• Victor Keen, bought 5,000 shares
• Richard Hermon-Taylor, bought 6,525 shares
• Marion Philip Guthrie, bought 2,500 shares
• Robert Saxe, bought 5,700 shares... from Robert Budin

Not quite Malvino-esque in terms of nickel-and-dime trading, but well within the domain of "token" transactions nonetheless, particularly since, in the case of the newcomers to the board, this represents their initial positions in the stock. But the most interesting one is, obviously, the last one. It speaks to the lack of liquidity in the stock these days that Budin decided he needed to arrange a private transaction to dispose of $35,000 worth of stock, rather than attempt to sell it into the market.

And Joe Harary? No purchase at all. Hunh.

Annual meeting? What annual meeting?

It seems a practical certainty by now that a substantial number of long-time REFR shareholders bailed into last year's run-up in the stock. No one is more notable by his absence than message board poster "ed_wesnofske", who, while not a frequent contributor to the boards in recent years, still had proven reliable with his summaries of annual meetings in the past. But now Ed has been away from the board for over ten months, and with a week gone by since the meeting the hopes of seeing one of his detailed reports on the annual meeting are fading.

On a related note, we have no word from "stanedel" on how his proposals for management shake-up were received. I have to confess to not holding out a lot of hope for him, and his silence after the fact isn't doing anything to dispel that inclination.

Mind you, a few familiar aliases have resurfaced on the message boards, apparently reinvigorated by something (unspecified) they heard at the meeting, but so far nothing particularly focused has emerged as any kind of selling point.

Apart, that is, from a round of stock transactions, but that's material for another post...