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...

SPD goes YouTube

Just when it looked like nobody was going to have anything to say about this year's annual meeting, xavierducats spotted this:



To SPD Control Systems CEO John Petraglia's credit, his end of the demo seems to be doing what it's supposed to, limited as that may be. (It's just a pity that it's driving such a sorry display.) But what the heck is up with the department store music?

This is the stuff that's supposedly worth $100 million (as of today's market close)?

Land of the spree, home of the knave

It's getting close to Annual Meeting time once again for REFR, and there's two items of note this year around. Firstly, we have our fairly regular token shareholder rebellion, as described by a message board poster going by stanedel, who is urging a "no" vote on the re-election of board members (Bob Saxe and Robert Budin this year), and a "yes" vote on a proposal for more transparency on licensee activity, at least in an aggregate sense.

Both efforts are of course doomed to fail horribly, of course (such tends to be the case at most public companies), but as a certain gumball-machine-like automoton once said, sometimes a lost cause is the only one worth fighting for.

For management's part, they seem to be prepared to counter with the latest iteration of the report on the glass industry from the Freedonia Marketing Group (in case you were wondering about the picture, not to mention the article title, they're both from "Duck Soup", staged in the fictional country of Freedonia. Yes, a bit of a stretch, but work with me here) . Freedonia reports have been cited by REFR as evidence of growth potential for quite a while now, and conveniently just prior to annual meetings.

So, even as we head towards summer, the forecast remains one of a heavy snow job with no satisfaction for shareholders in sight.

No shortage of excuses

One claim that the apologists for REFR keep making (and one I'm surprised that I apparently haven't yet explicitly blogged) is that licensees needs to have massive "stockpiles" of SPD film in place before they can make the first sale. The theory being, that when SPD is finally exposed to public demand, that the response will be so overwhelming that unless the vendor is ready for thousands upon thousands of orders overnight, they won't be able to keep up with demand, and that that would be disastrous. Therefore, the theory concludes, the continued dearth of sales of SPD products is actually a bullish indicator, because the longer the delay, the more film the vendors are obviously accumulating so as to be ready for the demand they're anticipating.

Okay, while 90% of you finish your belly laugh, I'll explain it to the 10% for whom that theory makes perfect sense. The simple truth is that shortages are a problem you, as a supplier, want to have. Look at oil. Look at the iPhone. Look at just about every successful video game console released in the past decade.

It's Economics 101. When demand outstrips supply, you get to raise the price. That would be especially vital to the SPD market, where the number one concern is the ability to find buyers at the price point which production costs dictate.

Of course, I'm probably guilty of taking the argument way too seriously here. Obviously, if a year or more passes after a given claim that "supply concerns" are the reason sales haven't begun, that claim can be dismissed as bogus. Of course, by then, the apologists will retort, such a claim is "past history" and therefore irrelevant to the current state of the company.

And so the cycle continues.

The clock advances

One more item from yesterday's 10-Q has come to light. The 10-K, published not quite two months earlier, contained this statement:

The Company would have to raise additional capital no later than the first quarter of 2010 if operations, including research and development and marketing, are to be maintained at current levels if its revenues do not increase before then.

Yesterday's filing, on the other hand, reads:

Based upon existing levels of cash expenditures, existing cash reserves and budgeted revenues, the Company believes that it would not require additional funding until the end of 2009.

This distinction is somewhat crucial, as it would mean that, if nothing else were to change, in 10 months REFR would have to include the dreaded "going concern" clause in their 10-K filing. That said, it may only require a trivial cut in expenses to push the zero-hour back beyond January 1st, 2010.

Still, one wonders what's changed to bring the threshold closer than previously expected. Did some anticipated source of revenue not come through for them? Was the $75,000 for SCSC not budgeted for? Are they anticipating new direct expenses from the Equity Incentive Plan? Did the rent on meeting room at the Fox Hollow Inn (site of the annual meeting) go up? About the only thing we can be sure of, REFR will not be forthcoming with an answer anytime soon.

Another 10-Q already?

Man, where does the time go. $170k in revenues this quarter, more than half of that coming from the Hitachi deal. That's got to make a company feel good, being the source of more than half another company's revenue, especially if you have yet to see any benefit for your money.

Apart from REFR making good on $75,000 worth of its promise to support SPD Control Systems, and managing to shave quarterly cash burn back to the low $900,000s, the only other standout item was a $3 million investment in US Treasuries.

Not to say that's irresponsible or anything, but... you really know you're dealing with a dynamic, cutting edge technology company when they can't think of anything more productive to do with half of their cash than throw it into T-Bills. Again, I'm sure this is exactly the kind of activity Hitachi had in mind for their yen.

Same time next quarter then?

The biggest shafting yet?

It looks like I may have spoken too soon about us being in a dead spot, as the proxy for the 2008 annual meeting was filed with the SEC today, and boy does it contain a doozy.

It turns out REFR runs its stock options plans on a 10-year cycle, and the last one began in 1998 and thus expired as of the end of 2007. (I'm sure the nearly year-long run in the stock, throughout most of 2007, was just a coincidence.)

The new plan for 2008, as detailed in the proxy, contains quite a few new and innovative features. (If only they put this kind of effort into developing their technology!) In addition to the traditional stock options, there's something called "Stock Appreciation Rights", which bypasses the need to exercise options and sell shares on the market (with all the messy SEC paperwork that goes with that), and just hands out cash and/or stock based on the current share price instead. Then, there's a new class of restricted stock, which the board can (theoretically) control the disposal of, although that has a long history of being abused at other companies.

In other news, a shareholder has taken the initiative to propose that the company be more open in detailing licensee activity. This makes enough sense that it will almost certainly be flatly rejected, or fulfilled in a useless way (see, for example, the plea for hiring of new, younger directors last year, and what investors ultimately got).

Also of note, company founder Robert Saxe is up for re-election to the board, along with fellow septuagenarian Robert Budin. Needlessly to say, they will almost certainly be voted right back in with little or no discussion, but one can dream...

Finally, back on the topic of the stock option, or rather, "Equity Incentive Plan", possibly the biggest insult of all comes in the introduction to the plan:

"The Board of Directors believes that the 2008 Plan is essential to the Company's continued success."

Words, for once, fail me.