Chain, chain, chain of foolishness

Almost lost in the non-hubbub over the licensing of GKN yesterday was a glimmer of a notion as to why GKN may have gotten into the licensee club at this time. (Yes, I know, Joe specifically said that GKN approached REFR, but that could mean a lot of things, or nothing at all.)

GKN is, and has been a long-time supplier of glass for passenger windows for Boeing aircraft. This is apparently no different for the 787. But wait, you say, weren't Gentex and PPG supposed to supply the windows? Is there a problem? Have those two quietly gotten the boot as a supplier with GKN, backed by their license of SPD, now replacing them?

That's chain the logic intended to be induced, I think, and such was expressed on the message boards yesterday. But, as just about everyone else on the board simultaneously pointed out... there's just one little problem. GKN's license specifically says -- and, to REFR's credit, the press release does mention this -- they're licensed only to put SPD in armored glass. And I can say without fear of contradiction that the passenger windows on the 787? Not going to be armored glass.

The highly likely truth of the matter is that GKN is and always was supplying the glass for the Boeing 787 windows, but rather than supply it directly to Boeing, they are this time shipping it to Gentex and/or PPG for the application of their electrochromatics. That's simple, straightforward, and therefore certain to be rejected in favor of something far more complex that somehow puts REFR in the driver's seat, by those determined to push that agenda. But that's their problem.

The only question remaining, could it be just a coincidence that REFR would choose to license a company working on a project of which their own technology was recently falsely hyped as being a part? Almost certainly not 100% so, but it's not a lock that this was intended entirely as a subtle ploy. It's at least plausible that they wanted to get SPD somewhere vaguely in the neighborhood of the 787 supply chain, "just in case" the whole Gentex/PPG project blows up, even though there's no evidence of that actually happening.

Bottom line, there now seems to be less here than even I had thought.

GKN

REFR announced the signing of a new licensee last night, GKN Aerospace of Garden Grove, CA. GKN is licensed to sell "armored" SPD glass in various vehicle markets.

No doubt this is about to give the stock another juicing just as last week's effort was in full retreat and on the verge of unraveling entirely. Whether GKN will have any more success in marketing SPD than any other licensee remains highly debatable, of course, but, with the at least theoretical markets GKN may market SPD towards, at least REFR now has something to keep its highly excitable shareholder base enthralled through the annual report and shareholder's meeting.

And so the cycle begins anew.

Update: It looks like the traders in this stock are determined to make a liar out of me, as it didn't take more than a few minutes for the initial enthusiasm to dry up and revert to the recent pattern of downtrending most of the day. Of course, there's the equally patterned final hour surge to come, so shareholder's hopes that they will be able to say something came of this news aren't dead yet. Still, it's a bit telling that even Briefing.com meets with considerable skepticism when it declares REFR "In Play".

Got a match?

REFR st0ck was up 17% today. In news which may or may not be connected, licensee SPD Control Systems announced that it had received a "matching funds contract" from the New York State Energy Research and Development Authority.

I say "may or may not" because this news has thus far received no publicity outside of the Yahoo! message boards. Additionally, it's a little hard to see just how this directly benefits REFR, since whatever money is collected should supposedly be going to SCSC, not REFR.

The spin seems to be that this contract represents some kind of endorsement by the State of New York of SPD as the Energy-Saving Technology of the Future™, but, given that that the projects SCSC is working on don't actually themselves incorporate SPD, nor are they even necessarily dependent upon SPD, that seems more than a little bit of a stretch.

So basically today's action seems to have as its motivation "It Is News And Therefore We Must Buy". We'll see how far that gets today's buyers.

Did I Limbaugh a long?

Arch-conservative talk show host Rush Limbaugh often brags about how he can ruin a journalist's reputation simply by praising and/or agreeing with him. Of course Limbaugh, like him or not, is a highly visible media figure, so it was much to my surprise that my humble and, let's face it, obscure blog may have had much the same effect on a REFR shareholder and message board poster.

In my last post, I reposted uncritically a list of demands from a certain message board poster who, while a loyal shareholder, is rapidly running out of patience with this company's management. This morning, I learned indirectly that a certain blog, whose sole purpose seems to be to "shadow" this blog with rebuttals, has directed some very scathing words at that shareholder.

I fear I may have damaged this shareholder's reputation among his peers, and as such hereby give my deepest apologies to him. I'm even considering striking my last post solely because of the extent to which it may have hurt him. It was never my intent to damage innocent parties with my words, and I would like to make amends for that if possible.

Some simple proposals

A shareholder posting under the alias "threespeech" posted a series of requests of REFR management to help shore up its flagging credibility. This blog wholeheartedly endorses the notion that implementing any one of these suggestions would provide a major reputation boost, and as such hereby repeats the requests unedited:

Someone in this company needs to take charge and here is how:

1) That person needs to call an open uncensored conference call to stand up and face all challenges. To address the issues that are presented on the table. And that conference should not end until all questions are answered. I want someone to look me in the eyes and tell me the truth.
2) I want someone that instead of letting the production licensees dictate what they are going to do, stand up and challenge those licensees to achieve what they set out to do, to inspire those people to produce a new technology that may not only improve the energy problem in some small way but also inspire the people that are depending on them, the shareholders.
3) I want someone that will say, "yeah, we screwed up and this is how we are going to fix it." What I don't want, sorry to all the lawyers out there, is someone that is trying to figure out a way around discussing the problem by blaming someone or something else. Hell, if we all took responsibility for our actions not many lawyers would be needed.
4) This person will also need to take five volunteers, I don't care if four of them are shorts as long as I get to go, and tour Hitachi, DIC and Isoclima's production facilities, as well as AGP's, Laminated Technologies and Craftsman's facilities. Asking a lot here? Damn right, this company has a lot of proving to do themselves for all the delays and miscalculations over the years.
5) And finally for now, from all the production and installation talk filtering out from RFI, public reports of revenues from royalties, not the artificial license fees.

A promotion of another sort

REFR began 2008 with the dramatic announcement that Steven M. Slovak, previously Director of Film Development, was now Vice President - Technology. Given that there was no such position previously, and that it wasn't stated whether anyone else was replacing him in his former position, it's a little less than clear what, if anything, this actually means. But, since it was apparently worth a press release and a 8-K filing, one has to presume it means something. We'll be sure keep tabs on this vital development as events warrant.

Out with (some of) the old

As a literally last-minute release for the year 2007, REFR announced the retirement of board member Dr. Al Malvino. Malvino, ironically, despite being 76 according to the release, actually had been REFR's most recent addition to the board until their additions earlier this month. He had also been a heavy advocate of the stock on the message boards up until 2000.

It is of note that Malvino's personal website, which one contained considerable information on SPD technology, has had all those references removal, replacing them with electrical engineering material of the type he used in the various textbooks he wrote over the course of his career.

Malvino did cite health concerns as at least part of his reason for retirement, and although he issued a statement expressing enthusiasm about the company, one is still left to wonder about the fact that, for all the effort he placed into very careful and extensive research into the company, as document on the message boards, none of it actually bore revenue-producing fruit during his tenure there.

With two additions to the board that would seem to imply one more retirement may be in the offing, but apparently that person is not quite ready to take the gold watch just yet. Stay tuned.

The oldest new licensee

REFR stock got another (very) short-lived bounce off a press release this morning, announcing AGC Flat Glass Europe as the newest name among licensees of its SPD technology. Even better, the headline claims a license was "sold", implying that money changed actually changed hands from AGC/FGE to REFR (though just how much is, as ever, "undisclosed").

Of course, as usual, there's a couple of devils in the details. For one thing, AGC Flat Glass Europe is simply the renaming of Glaverbel SA, which originally took a license in 1992, sold REFR what is now a substantial portion of REFR's patent inventory in 1999, and was bought by AGC in 2002. In other words, it's only a slight variation of the British Isles license shuffle of earlier this year.

But hey, anything for news, right?

Or perhaps I should have said relatively new

I've had it pointed out to me that the new directors are not exactly spring chickens, Richard Hermon-Taylor being 67 and Philip Guthrie 63 (give or take a year for each). Not exactly what one would think of as satisfying the request for board members "significantly below 70 years of age" from that shareholder proxy, although it does knock down that median age a little bit anyway. Still, it kind of blunts the notion that these guys are coming in to shake things up a whole lot.

New blood at last

REFR announced the addition of two new board members last night: M. Philip Guthrie, former CFO at Southwest Airlines and Braniff, and Richard Hermon-Taylor, long-time director at Harley Davidson.

The good news is that, at least ostensibly, these new additions are probably not part of Bob Saxe's immediate circle of friends, and therefore may bring a badly-needed measure of independence to the board. The only obvious downside is, it probably won't be enough: friends of Bob and Joe will still hold control, even if a couple of them (possibly including Bob Saxe himself) retire, an event to which I believe this move is a prelude.

For once, it's a move that I don't immediately see a cynical motivation behind, but rather a response to legitimate shareholder unrest as evidenced by the proxy proposal earlier this year.

Of course, it's not an immediate cure for anything but it will be interesting to watch how our new arrivals react to what they find when they assume their duties in earnest.

Kit to be tied?

An interesting post on Yahoo! today from an alias that had been silent for several months, under the subject header 'Name That Con, Artist':

Catagory: RFI Licensees of the 21st Century

Clue: Letter;

Dear xxxxxxxx,

Please review and sign the Sales Representative Agreement. Keep a copy for yourself and mail back the orginal with your US $995.00 territory fee to us at:

xxxxxxxx xxxxx xxxx
xxxxx xxxx xxxxx
xxxxxx
xxxxxxxxx xx xxxxx

As soon as I get your letter, I will immediately send your Product Demonstration Kit (PDK/Demo window), Salesman's Notebook, and a few business cards to get you started. We will have 500 business cards printed and sent to you within a few weeks. We expect to do a product launch on November, 14th. We will have our web site completed with sourcing information and pricing at that time.

Best regards,

xxxxxx
xxxxxx xxxxx

Two things are obvious: first, if anything happened on November 14th with respect to SPD, we certainly haven't heard about it, and second, the writer, a longtime booster of REFR and SPD, sounds just a wee bit angry. Whoever this is probably wishes they'd listened to what this blog had to say about those PDK's.

Between this and the continued weakness in the share price, now into its sixth straight week, solidarity in a group for whom solidarity is its primary strength, seems to be fracturing a bit. No doubt, if this person continues in this vein the stalwarts will quickly encourage him or her to go away and simmer in silence, so I don't expect this to set off any wide-scale dissent, but once again, these little outbursts are still of interest. One never knows how many others feel the same way.

Update: In a followup, the poster in question indicated that he or she never signed the agreement (and presumably, never forked over the $995). This person also made reference to an "extensive file" that the above letter is a part of. This may not be the last we hear of this after all...

The debate in capsule form

One of the more amazing aspects of the argument over REFR is the degree to which facts can be agreed upon, yet completely opposite conclusions drawn. For example:

Generally agreed-upon premise: "The success of SPD technology is entirely in the hands of REFR's licensees."
Bulls' conclusion: "It's in the hands of big companies, big enough to have the power to make it succeed."
Bears' conclusion: "It's in the hands of big companies, too big to care whether it succeeds."

Happy Thanksgiving, America!

Into the abyss

I don't normally comment on stock price movements without any sort of news trigger, but today's drop, especially in the context of the tumble this stock has taken since the Tokyo auto show, is just breathtaking. It's not an effect you normally see outside the world of unlisted penny stocks whose issuers are flooding the market with shares. Which might be partially the case: REFR did indeed issue quite a large number of options based on the expense they represented, but somehow I think even that is not enough to explain the implosion we're witnessing.

Even some the biggest bulls on the message boards were invoking $6.00 as an average-down point, a level that would have seemed laughable just last week.

In a way, there's a kind of symmetry to this whole mess: up big on non-news, down big on no news.

In other news: Gene Marcial, call your office!

An early morning quarterly

The third quarter 10-Q came out very early this morning, bolstering the notion raised by some cynics that the failure of the company to file on the accelerated schedule deadline of Friday, might have been the result of an administrative snafu. (Monday, the SEC was closed for Veteran's Day, so this morning was the first opportunity to file after the 5:30pm Eastern deadline last Friday.)

The points that stand out from an initial reading:

• Revenues were up, pretty much as expected, almost entirely as a result of the Hitachi "guaranteed access" deal. There had been a few questions as to whether the payments were truly guaranteed, but they seem to be at least being recorded on schedule. Although, given the rather similar bulge in receivables, it appears Hitachi had not, as of September, actually gotten around to cutting REFR a check as yet.
• Losses for the quarter, however, were way up, mostly due to the company seemingly giving out stock options like candy to its employees. No less than $1.78 million worth of options expenses were recorded under operating and R&D expenses in the quarter, actually dwarfing all other expenses under those categories. One might well ask if a factor in the sharp decline of the past few weeks wasn't the result of employees cashing out some of these options!
• On the licensee front, we learned that AGP has renegotiated some terms of its license. The only change spelled out in the filing was that REFR's royalty cut tripled from 5% to 15%. Why AGP would agree to such an arrangement, which would only hamper its competitiveness if there is to be a marketplace for SPD products, is something of a mystery. One gets the feeling the answer lies in the "other things" the filing did not specify.
• Finally, were there product sales? This blogger has read through the filing twice and didn't find any definitive language one way or the other on the subject.

In summary, while not 100% business as usual this past quarter, the bottom line is that REFR remains nowhere near a profit. Better luck next quarter!

Update: A poster on Yahoo! came up with a theory on AGP that rings so true I'm surprised I didn't think of it. It makes perfect sense that each end-product licensee would be able to "buy" a lower royalty rate by agreeing to a minimum royalty payment. So, the increase in the rate strongly suggests that AGP is greatly lowering, or very likely, eliminating, its "minimum". Draw your own conclusions about AGP's confidence in the market for SPD products from that.

Has the cap come off?

In the early part of this decade, when REFR roared as high as $40 a share and hung around in the $15-$30 zone for quite a long time before the end of the SPD Inc. era flushed the stock, a rather hefty amount of focus was placed on the size of the short interest. Even though the total shares outstanding were well over 10 million even in 2000, the short interest seemed to hit a hard cap right around 2 million shares. A lot of comments about how "the shorts were out of ammo" could be read, and predictions of a massive short squeeze were made almost daily.

Actually, in that last bit, little has changed since that time, but one relatively new development is that short interest has broken through the barrier that had been just over 2 million shares, and has reached 2.5 million and is still climbing.

So how is that happening? Well, for lack of a better theory, the diagnosis of "what's changed" points a finger at the listing of options on REFR a few months back. The basic idea seems to be that, by purchasing put options, you buy the right to sell REFR at a given price and time, and this right seems to circumvent the borrowing restrictions that kick in whenever the availability of shares to short runs low. Thus, short interest is allowed to increase more freely, with brokers now having to extract borrows after the fact rather than preventing the trades up front.

Now, for all I know that could be all hooey, but it's really the only working theory either side of the debate seems to have come up with. All we know for sure is that the short interest is reaching records highs, and in the meantime the stock, ever since the Hino show announcement, has been in free fall, and those two items are probably not 100% coincidence.

In other news, REFR, which for the past few years has been filing quarterly reports 40 days after the end, did not do so this quarter. This might be because the status of accelerated filer no longer applies to it for whatever reason. Assuming that is so, the filing will most likely come on Wednesday instead. Because goodness knows, REFR is such a complex organization that those extra five days are vital to putting out a proper report on the company's finances.

Marketing worldwide, but not to you

You might think that with the amount of self-marketing REFR does, that they would one day they or one of their licensees would come out with a release that didn't contain a clear howler in it somewhere.

Today, with the release by licensee American Glass Products, is not that day.

To be sure, it starts out promisingly enough, talking about the launching of a new product line, complete with a global marketing campaign. It certainly sounds like REFR has finally gotten a licensee to step up and take the lead in presenting SPD to the world.

But then you get into the details. The campaign kickoff, which one might expect to be a big, splashy affair to really get things going... is in fact a trade show. Yes, another one.

But all right, you might say, a campaign has to start somewhere. At least they're getting out there in front of the public and... oh, wait:

The SEMA Show is for automotive industry professionals and is not open to the public.

So once again we have an example of SPD "marketing" seemingly designed to be as obscure as possible to the general consumer, while showing up prominently on the radar of what seems to be their true customer base, that of the speculative investor.

Welcome asensio.com readers

This blog is honored to have been mentioned in an asensio.com release on REFR today. As the author of this blog I have attempted to provide as much insight into this, well, unique company, and am proud to see my efforts recognized.

The entry referenced in the release regarding the Setra demonstration may be found here. But I encourage you to browse this site at your leisure for all kinds of little nuggets on Woodbury's longest-running profitless public company.

Is SPD a "concept" technology?

Is REFR getting typecast?

Between the Jeep Rescue, the Juno, let's throw in the Kabura even though it was never established as SPD, and now the Hino S'elega Premium, SPD is establishing a considerable track record as a demonstration technology. But, with its subsequent failures to cross the gap into the real market, one has to wonder if it can ever do so.

Certainly, anyone considering SPD technology and researching it would have to be well aware of both SPD's proliferate demonstrations and dearth of market applications. Just as certainly, they could not be blamed for thinking to themselves, "SPD gets evaluated a lot, but never makes it into the market. Does that mean people are finding something wrong with it?"

That actually might partially explain the almost immediate reversal of the news that SPD is in yet another concept vehicle. Is there not a growing risk that prospective customers going to start thinking that maybe demonstrations and concepts are all SPD is actually good for?

Maybe SPD has reached that point and maybe it hasn't. But that's a concept Joe Harary and company really ought to consider carefully, before hauling SPD off to the next trade show demonstration.

Bus-ness as usual

Relentless rumormongering that REFR and SPD were going to make a big splash at the Tokyo Motor Show this month proved accurate... sort of.

According to a REFR press release, SPD glass was a feature in one of four concept vehicles unveiled by Hino Motors, a subsidiary of Toyota.

For Hino's part, their announcement of the display does eventually get around to mentioning glass with variable transparency, though for some reason it is referred to as "photochromatic", which SPD definitely is not.

Perhaps something was lost in translation, but what is most emphatically not lost, is the uncanny resemblance to the Setra rollout of four years ago, with the primary difference being that the Hino bus is a clearly labeled a concept vehicle, while Setra's bus supposedly had a small production run. (Although if so, REFR is still waiting for its royalty check from that.)

The market in REFR being what it is, of course, the stock instantly soared more than 10% to multi-year highs on the release. But a funny thing happened on the way to the $20 level that seemed inevitable early on this morning. Very quickly, the sell-the-news reaction kicked in. Rather startlingly, the stock gave back the whole rise inside of two hours, and actually finished in the red for the day. Maybe the investors with longer memories recalled that right after the Setra announcement, REFR stock hit a peak that it would go on to crash 75% from, and not recover for years.

One thing seems certain, the actual event paled in comparison to the months of endless message board hype that preceded it.

The newest licensee

Apparently Joe Harary's two-day swing through Texas had a purpose after all. What appeared to be a complete non-event (and was reported as such by attendees from the message boards) had a bit of a sting in the tail in the form of a new licensee in the Houston area, Craftsman Fabricated Glass.

A quick browse of the company site shows that Craftsman isn't so hot in terms of web presence. Their website, dated with a 2005 copyright, still has many "under construction" page stubs. This of course does not automatically mean they're not competent at their core business, but it definitely suggests they're not exactly a big time player, more like on the order of a Custom Glass, only in a larger local market.

Of course, the market, as is its wont these days, has just gone nuts on the news, running back up near the highs after a fairly steep pullback over the prior few days.

What must surely frustrate the shorts in this stock is how the stock just gaily runs up to the moon with no apparent expectations of the company actually producing any kind of revenues, much less profits. BUT... there may be a end to this tunnel vision in sight. At the Dallas luncheon Wednesday, Harary is reported to have announced a "small amount" of royalty income for the third quarter of this year, a "large amount" for the fourth quarter, and big-time growth through next year. So it's basically on the fourth-quarter report in February or early March to show something, or REFR will have finally, officially disappointed.

The blog plans to be here to see it happen. How about you?