Yes something IS different with REFR. As you may know the dialogue on the company has moved to the private email boards. We now have almost 100 long term shareholders and our total holdings are approximately 1/3 to 1/2 of the float. Here is a synopsis of REFR that I wrote for some new investors. It may help some people to better understand why REFR has such a strong and loyal following despite the length of time it has taken for the technology to make its way to the market place.
<<I'd like to take this opportunity to recap for our newest members a little of the history of REFR. As you have probably surmised from looking at the SI and Yahoo message boards, the story of REFR has become buried in an avalanche of postings that do nothing to help new investors understand exactly what is involved in this unique situation. The story is a simple one and I will make it as short as possible (and of course any one who knows me knows that that's an impossibility).
In 1965 or thereabouts Robert Saxe obtained the rights to the Land patent for suspended particle devices. It took him until the early 1990s to get the first workable SPD film. Recognizing the enormous amount of R&D that would have to be done on EACH specific application of SPD (each product would require different manufacturing needs, durability testing, industry acceptance) he embarked on a brilliant plan, which was to give a license for a nominal upfront fee to the top companies in the industries in which he saw SPD as having the most likelihood of being produced and allowing these companies to have access to the proprietary technology and explore the possibility of making SPD products. At the time he was going on blind faith. No one was knocking on RFI's door and it was sheer force of will that enabled him to sign the companies that he did.
Some of these licensees came from specific divisions of companies looking at SPD for a potential project, if that project was dropped so was the activity on SPD. Some licensees never did much at all. Case in point was Japan Steel Works. I called them when I was in Tokyo and learned very quickly that nothing was being done. REFR had told me they were “inert” so I was not surprised by this.
The first sign of any movement toward commercialization came from Glaverbel in Belgium. They were ready to proceed with rear-view mirrors and had even looked into ordering some of the manufacturing equipment. (Some of us were in touch with Jean Francois-Thomas who was involved with the SPD project [a side note: in my last email from him he spoke of his great excitement regarding the recent activities of REFR licensees]). It was a blow to the team at Glaverbel when their corporate management pulled the plug. It had nothing to do with SPD or its viability but more to do with financial situation and business plan. What also occurred at this same time was the signing of GE as a film-making licensee. This caused the stock to soar tremendously and gave credibility to SPD as an alternative to liquid crystal and electrochromic technology. But within two weeks the individuals who had lobbied for SPD left the company or were promoted out of that division. GE also wanted certain improvements to the technology before they would consider becoming active again. Those improvements are now complete.
During this period of activity in 1995 the stock soared to its all time high of 16-7/8 and investors were expecting products in a year or two. When Glaverbel pulled back their license was renegotiated to take away exclusivity and they agreed to sell back the mirror patents to REFR at or below cost when REFR determined they would need them. This paved the way for Hankuk, a licensee since 1990 that had quietly been working on SPD. They surprised REFR in the spring of 1997 by announcing to the Korean press their intent to have SPD commercial products on the market the following year. They attended SPIE conference (at the suggestion of Carl Lampert who has done consulting for them) to determine if there would be a demand for these products. The response from the show was overwhelmingly positive. In fact they were featured on the local evening news in San Diego and on a radio interview. The line to their booth was the longest at the show (I sent a friend down there to observe). At one point a competitor had the president of Hankuk take the sunroof outside so he could see for himself how well it worked. This competitor mentioned an order for 40,000 sunroofs that he would be unable to fill because his technology (ec) did not pass the standards required. Hankuk left this show determined to go full throttle with the development and production of several SPD products.
Meanwhile the stock price came under attack from some disgruntled stockbrokers who felt they had been misled as to the imminence of product. They were vitrolic and attacked REFR management accusing them of lining their own pockets and lying to investors. Nothing could be further from the truth. All the principals involved in this company would have made much larger salaries pursuing other professions but it has been their belief in the enormity of the impact that this technology will have that has kept them faithful to the end goal—SPD products on the market.
What many who invested failed to realize was that there was no precedent for bringing a new technology like this to market. Because of the unique structure of the agreements (they are not joint ventures and often nonexclusive causing the licensee to not want to show all their cards to REFR) it has been sometimes frustrating for shareholders who would like to have updates on the progress of the commercialization efforts. The short sellers have preyed on this frustration to constantly tell investors that they are being “hyped” and that the company “always promises but never delivers.” They take statements out of context and taunt investors by showing how easy it is to manipulate the price. Some shareholders have sold out because they just got frustrated watching the stock move in channels after each announcement.
The mistake they made was to not focus on what the company is doing. At the June 1999 meeting we were provided with a road map that would help us see the final steps that needed to be in place before a product was on the market. Almost every step has been completed. The last two agreements are licenses to produce. The emulsion suppliers already attended training (side note: Hitachi Chemical doubled the size of the team they had originally decided to send and the new team included the President of their US subsidiary and the head of Business Development for Japan). With two multibillion dollar companies like Dainippon and Hitachi already through with training and ordering the equipment and chemicals we know that the infrastructure is falling into place. One 55gal drum makes enough film to cover over 40,000 sq. ft of glass or to make 1 million pair of eye wear. I doubt that these two companies entered into this agreement in order to sell 1 or 2 barrels per year.
But even with all these events that have occurred in 1998-9 the stock price has not reflected the imminence of product nor the enormity of the impact that these products will have on our lives and on REFR's coffers. Why? Because the short position in this stock has successfully kept the stock down after each announcement. Since there is no institutional following, no analyst following and no sector following, this stock survives by the grace of people like us who tell friends and accumulate for our own accounts. This stock would often trade less than 10,000 shares. The MMs and the shorts knew they could slam the bid with 5,000 shares and knock the stock down. Most investors in REFR have no clue as to how the market works and would actually think “well there must be something to the short's case --- look at the stock price.” The frustration and anger gets directed toward the company and people fail to see what is right before their very eyes --- commercialization is here! And with NO debt, small float, a burn rate that should remain less than $5Million per year (currently $2-3million) and revenues that even the most conservative estimate wouldn't be less than $100 million per year and will more than likely be 5-10 times that in the next 5 years we will see an astronomical growth in our stock price.
Unfortunately most of the people who started with this early will sell out way before then. I think that is the experience with most investors. If you waited 3 years for a stock to move and then it triples within a month you are very likely to take your profit for fear that it will escape you yet again. But the YICs and I intend to stay the course. We know that these first products are just the tip of the iceberg. This next year should see the largest % growth of the stock as SPD enters the market, not to mention Madison Avenue with ads for SPD products further bringing awareness of REFR to the population at large.
There is no company with such a perfect story. Where the market potential is so enormous and yet the company does not need to spend one red cent more to capture it. Where the balance sheet has no debt and the company has more cash on hand than will be needed since products will be generating earnings before that cash runs out. The next few announcements will be hard to spin as “same old REFR press release.” In fact I think any one who has read the last two releases can see immediately that the negotiations that are now ongoing are about production quotas and rights and not research and development.>> |
