These are the slides:
Annual Meeting Presentation
smartglass.com
And here is a participant's overview:
Annual Meeting 1
by: oceanvu2 06/12/03 04:20 pm
Msg: 146436 of 146490
About one hundred thirty persons in attendance: fifteen or so from licensees; twenty-five REFR or so employees and family members; a few from audit firm.
Meeting preceded by automated slideshow on InspecTech and the I-Shade program for aviation and marine markets.
Demonstration models from Hankuk, SPDi, Razor's Edge, Global Mirrors of film, window simulations and product development kits on display for touch and see operation by the public.
Mr. Saxe (RS) opened by introducing the office staff, technical staff, research chemistry personnel; marketing personnel and consultants and the audit firm personnel; and the family members of the late director Mr. Gold.
When the meeting was called to order, Joe Harary reported that outstanding shares entitled to vote at the meeting was 12,251,879 as of the date of record in April and that a quorum was present for the meeting. In addition, he advised that 'forward looking statements' that might be made during the meeting might not necessarily come about but lightheartedly added "they seem a lot more likely to than they used to" which produced a round of laughter from most in the room.
The formal part of the meeting was then conducted.
Election of Director: Nominations were asked for; Al Malvino nominated and Victor Keen seconded the nomination of Joe Harary. Nominations were then closed.
Selection of Audit firm: Robert Budin, Chair of the Audit Committee, moved the selection of KPMG LLC as auditors for the coming year.
Approval of stock option plan: Victor Keen, Chair of the newly created compensation committee composed of the three outside directors of the Board, moved the approval of the stock option plan.
The inspectors of elections were asked to present the tally of the proxies and votes cast to JH who then reported that a highest number of votes of the quorum present had voted for the single nominee; and a majority had approved the selection of KPMG and approved the adoption of the stock option plan.
RS then said he would make a few remarks, which he titled Past, Present, Future.
Past:
He held up a copy of Edwin H Land's (founder of Polaroid Corporation) June 1934 patent where the concept of light valve based upon particle movement was first set forth. Out of that REFR started in the 1960's with that basic formulation to try and make a commercial version of the concept that has now become known as SPD. A recently reported piece of Polaroid Corporate history with light valves received from a Polaroid research scientist disclosed that Polaroid continued to do article research into the 1960's trying to make a successful light valve but were unable to do so and they finally gave up just a REFR was starting and was about to duplicate some of the research paths Polaroid had just abandoned. (RS) drew the moral of the story that this was a very difficult undertaking if you ask why it took 37 years to reach the "favorable position" that REFR was in today.
(RS): He (RS) discovered early when he found the Company that the hardest work was to raise the capital in order to keep the research going. Fortunately his wife Marie had a good job with a steady income on which they came to depend and she showed "infinite patience" with his endeavors during those early years. In 1986 the Company went public. That was where Mr. Saxe first met Joe Harary doing work for the law firm who did the public offering legal work.
There were "thousands of experiments" undertaken and "scores of materials" tested before (1) a durable particle better that Edwin H Land's was achieved (1980's) and (2) film product and technique was developed to replace the liquid suspensions (1991). When those achievements showed the feasibility of SPD film, more years were needed to refine and develop to technology further. Hankuk developed its own method and formulation for film making without cross-link polymer approach that REFR had come to evolve.
Mr. Saxe then introduced S.M. Kim, Vice-President of Hankuk Industries who stood to applause and (RS) described him as a "valiant warrior" and the "driving force" for Hankuk's SPD business. In addition, Jae Kim President of SPD, Inc was then introduced as was Byung C. Lee and Mr. Yu the technology head. (RS) said they operated quietly and diligently to get the business started.
REFR developed the cross-linked polymer approach to film and that is the system used by Hitachi. Takeo Kurosawa, President of Hitachi Chemical of America was then introduced and he bowed to the audience, which applauded his presence. (RS) said HCA was deeply dedicated to the SPD project.
Mario Monice, Business Manager for Optical Coatings of Air Products was then introduced. Razors' Edge corporate leadership was then introduced: Roman Reyes, President, an imposing gentleman looking to be in mid forties; Seth Turner looking of similar generation and Scott Egell, business manager, looking to be late fifties/early sixties. Terry (last name missed) from BRG Group licensed for automotive applications and John Maloney from recent licensee TRACO were also introduced to applause.
The Present:
(RS): We are now well organized with emulsion producers, filmmakers and laminators composed of twenty-five licensees. With several hundred patents and patent applications in many countries around the world we have a "powerful patent position". REFR has the preeminent position in SPD's. It is in the "leading position" in smart window production even when you include electrochromic and liquid crystal technology. Considering this dominant position, it has been done with only $46 million dollar accumulated deficit or about $1.4 million on average per year expenditure over the life of the Company. This points to the frugal operation of the Company.
(RS): Director Malvino looked up the proxies filings of 18 Companies in a similar position of developing products and never having turned a profit: top executive compensation ranged from $791K to $1.7 million. At $791K, REFR was the lowest top executive compensation of that 18-company peer group. The Board of Directors recently establish a compensation committee composed of the three non management directors and chaired by Victor Keen(VK). Mr. Keen was then invited to present a report on compensation for company employees.
(VK): The Committee provided the Board of Directors with a review of cash and equity based compensation and recommendations thereto including stock options. Al Malvino's review of proxy statements was mentioned once again. The Committee decided upon a 2% across the aboard increase for all Company employees in cash compensation. There were only 23K shares under the old options plan but based upon the assumption that the shareholders would ratify the additional 600K shares for options. The Committee recommended options awards for 12 Company employees totaling 77K shares ranging in award size from 500 to 10K grants. Senior management will not be awarded options at this time looking at recent compensation and option grant history.
(VK): The Company's prospects have never been greater. The leadership has been splendid and he has been around the Company for 17 years. There was not a better captain and co-captain for the Company for the future. The Board of Directors unanimously adopted the Compensation Committee's report.
Robert Saxe then resumed the podium.
(RS): Our goals for the future.
FINANCES
(RS): Some of our shareholders have expressed their desire to see a stronger financial position for the Company. By year's end, we hope to improve the cash and equivalents position. We can not exactly predict when we will earn a profit. We have an excellent relationship with Ailouros with whom we have an extended equity line of credit. Also other parties have indicated interest in investing in REFR.
MARKETING AND MARKETS
(RS): Work with major manufacturers in marketing. You saw the presentation of I-shade earlier from Inspectech for air and marine windows. They are making "excellent progress." We want to generate significant sales for architectural and automotive markets including retrofit. We want to help expand markets by having more emulsion produced. We want to ratchet up sales and royalties from quarter to quarter until we are profitable.
LICENSEES
(RS): We want to have new end user licensees.
STOCK
(RS): Joe Harary will make presentations to institutional investors and money managers in the near future. We have appointed a new investor relations firm.
SHAREHOLDER'S WISH LIST
(RS): From time to time some shareholders give us ideas and comments about the things they would like to see. I call it a shareholder's wish list. We will focus some energy on realizing some o f those wishes.
Mr. Saxe then turned over the meeting to Joe Harary for an update on the licensees.
(JH) with slide show: Slide: BUILDING AN INDUSTRY IS NOT EASY. Then: WE'VE DONE IT. The familiar products application list was then displayed. The statistics on growth in the glass markets was displayed: growth 9.6% a year going forward. Specialty glass products will grow to $2.6 billion. Smart glass is 22% of that according to industry surveys: $445 million by 2006. In addition new security concerns have moved specialty glasses into film laminated products for bullet and bomb resistant glasses and SPD film as a lamination may have some additional appeal in these markets. Several of the licensees are experts in the bullet/bomb resistant glass technologies. Energy efficient windows have become much more popular as indicated by increasing sales of double and triple glazing products. We are aggressive and focused in our research. We are giving marketing support to our licensees.
(JH) with picture of REFR headquarters: We have two laboratories and one testing facility for expedited testing and we have licensee training facility.
The REFR business model has minimum risk and minimum capital needs. It uses world-class producers. It involves a large patent portfolio. It allows the Company to be in a strong financial position it is the dominant technology and outperforms all others. It crosses into diversified industries providing some business stability. All with a $48 million accumulated expenditure.
(JH) with bar chart slide of licensees showing 8 for 1999, 10 for 2000, 13 for 2001, 21 for 2002 and 25 for 2003 YTD.
(SLIDE of the business Model showing REFR as RESEARCH foundation for EMULSION MAKERS who are the foundation for the FILM MAKERS who are the foundation for the END PRODUCT MANUFACTURERS with listing of licensees in under category) .
(JH): Comments on the size of the Companies: Air Products is a $5.6 billion revenue and 17,ooo employees; Dainippon is $8.2 billion and 28,400 employees; Hitachi Chemical is $4.2 billion with 34,000 employees. Obviously not all devoted to SPD production – not yet (laughter). Hitachi Chemical is doing hard and smart work. We appreciate their efforts and vision. We are now attracting the best companies. And we are beginning to see the development of SPD peripherals companies merging for things like power supplies and controllers.
(JH): We will improve the supply chain. This is needed in automotive applications. We have the resource of diversified technical expertise with all the various licensees. We have healthy competition through different licensees. We have geographic diversity, which helps business efficiency.
(JH): There is an established set of activities: SPD emulsion makers, SPD film producers and SPD lamination services. It is of interest that the major window manufacturer Anderson Windows does not laminate its own windows, but uses outside lamination services (implying the availability of SPD lamination services for a major window manufacturer -OV2). Laminated Technologies is not present today because they are meeting with customers and are doing work for customers.
(JH): What does this lamination system division of labor offer? [1]special expertise in laminations to make ‘super windows'; [2]companies with established connections to the window industry; [3]a system of inventories SPD film which allows [a]quicker delivery deadlines, more predictable deliveries, [c]custom sizing of window or product sizes, [d]the ability to combine and create crossover products for the high end window market, and [e]less shipping costs, less packaging costs and minimized customs duty for film only for international use of SPD technology.
(JH) with pictures of Hankuk's SPDi factory in Incheon, S.Korea: Hankuk factory capacity is 4.4 million sq feet with two shifts 6.6 million sq.ft. with three shifts; full factory expansion possible to 10 million sq.ft.. In addition, factories like the Hankuk factory can now be replicated. (Pictures of web coating machines and rolls of SPD film). Different character films can be produced for whatever customer use desired.
(JH) with slide of awards: SPD was recognized as the top technology award by Popular Science and also by the SAE for top aviation technology with Inspectech's windows..
(JH) with slide on marketing program: SPD-Smart and Research Frontiers are now well known. When we had a display at the Dusseldorf glass trade show in 2002 everyone knew about the technology and did not have to ask. This was not true of the previous Dusseldorf trade show in 2000. The issue is consumer awareness. The Chairman of SONY said that the selling of the Walkman was a matter of consumer awareness – the consumer had to be made aware that it was possible to have a small, personal, portable, stereophonic with quality fidelity sound device even though they never had such an experience with it in order to imagine buying it. That is Research Frontiers issue as well. The new website was put up in November to receive inquiries and direct customers to licensees. In November 2002, television commercials were run in large and high income markets about SPD window technology.
(JH) with slide of 2002 trade show appearances: SPD technology had twelve shows in various trades and disciplines in 2002 in Beijing, Hamburg, Dallas, San Francisco, Orlando, Dusseldorf, Essen Security Show, Seoul and an invitation by the NREL to its 5th Intl. Meeting on energy technologies at their site in Golden, Colorado. Though we were not electrochromic, which is the technology they back, we were there because we were the player in the market. For 2003 trade show exhibitions were for Hamburg, Fort Lauderdale, Miami; in April Fire Department FDIC show where two producers of SPD ambulance windows sought public display, and the Aircraft Interiors show in Ft. Lauderdale. In May there was an appearance at the Environs 7 conference. There is a cruise ferry show of SPD technology in London and the Society for Information Display in Baltimore coming.
(JH) with reprise of slides of Jakarta accounting firm installation of privacy glass, Singapore installation and Swimming pool privacy fence in Greece: in February 2002 when visiting SPDi and its factory for the first time I was provided with the architects walk-through by SPDi for the Jakarta project. These type projects are just the tip of the iceberg. For example, a home theater project using the .05% transmission film. Other projects use 5000 sq.ft of film A slide was shown of Thermoview's domestic installation at their headquarters; a slide was shown of a courier service whose office windows were fitted to reduce glare for the employees who complained of the glare before SPD. The new Cricursa slides were also shown. (JH): Cricursa wanted to be here but they are having their 75th Anniversary Celebration in business and we wanted to be there but the schedule conflict allowed neither.
(JH) with Razor's Edge slide: They are working with Precision Millworks for the custom ordered wood frame versions of SPD windows; with Rebco for the custom ordered aluminum frame versions of SPD windows; With Thermo-Vu Sunlite Industries Inc.(no relation to Thermoview or oceanvu2) for the custom ordered business and residential versions of SPD skylights. They operate in both the new and retrofit installations with sizes of up to 4'X5'. They are established in sales efforts in the US and in 14 countries.. Their sales outlets are provided with the PDK's, technical manuals and instruction of SPD technology. They are working with high-end electronics for SPD technology control. They have other projects under development but cannot be presently talked about.
BRG/Reid was illustrated by a slide of office glass installation. (JH): Reid is notable for its close Detroit location for the automotive market and the fact that it had established connections to Tier 1 automotive suppliers.
A slide of Road Rescue's SPD Ambulance installation was shown. A slide of Airbus 380 was shown. (JH): the specifications for the A380 call for smart windows. (JH): Inspectech is working with manufacturers for both current production aircraft and future production models. Work on particular fitting and engineering would not be done unless they had customers for those models of windows. The famous Inspectech first, Lear jet N22NJ was pictured. (JH): The pilots report aircabin temperatures 25 degrees lower on the ground in the sun with SPD windows; Inspectech offers a 5 year warranty while most aviation windows of any kind offer only a two year warranty; and these aircraft are exposed to high levels of UV light at high flight altitudes. Inspectech has 9 engineering projects currently. Both aftermarket and OEM installations. The Aircabin exhibition slide was shown with Inspectech windows. A slide of a King Air craft that uses rotating polarizing lenses was displayed because Inspectech engineered the windows for that aircraft. (JH): Working with Penta Aviation, engineering is being done for the Hawker aircraft. SPD is everywhere you look. (END OF PRESENTATION) |
