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Strategies & Market Trends : Floorless Preferred Stock/Debenture -- Ignore unavailable to you. Want to Upgrade?

To: Roger A. Babb who wrote (122)	10/10/1998 1:24:00 PM
From: N. Dixon	Read Replies (1) \| Respond to of 1438

Roger, Your description of these funds would eliminate REFR on several counts 1. REFR does not need to raise capital. They have 8 million in cash and marketable securities (mostly treasuries). They have 3 licensees ramping up for commercialization. Hankuk Glass, MSC and Vision-Ease. The terms of the agreement clearly indicate that REFR determines everything from the minimum price it will sell stock to how much stock it will choose to issue. REFR's ONLY obligation is that they HAVE to issue 65,500 shares to Ailouros under the Class B warrant for a premium price of $8.25 and since REFR has already bought back more than this on the open market below $6 even this will have 0% effect on dilution. 2. This argument is contingent on the company's NEED for the cash. The SEC filings are very strict in this respect. Shareholders MUST be told if a company is in desperate need and REFR's filing CLEARLY indicates that their cash position allows them to operate for 3 years without further capital. Add to that the fact that 2 of their 3 licensees have publicly announced they will be ramping up for commercialization of SPD products which will generate royalty income for REFR perhaps as early as 1999. 3. As for respectability the Ailouros fund is not a disreputable fund. Perhaps you are refering to some erroneous facts that were printed on the Yahoo thread by a short seller trying to discredit this deal. They pointed to Ailouros's litigation with Harvard Scientific. Here are the facts in that case as I posted them on Yahoo: <<I called the REFR and asked them about Ailouros's litigation with HVSF. Joe Harary told me that because of their close relationship with Ailouros from the 1996 private placement, Ailouros asked Joe Harary for the name of an attorney in the U.S. that could help them, since Ailouros said that they never had to litigate with an issuer they invested in before. Joe Harary referred Ailouros to a local attorney who handled the case for Ailouros, and won the case for them. Apparently, Ailouros had invested in a convertible note with HVSF, but they refused to honor a conversion. Shortly thereafter, HVSF's stock price went down and the value of Ailouros' investment plummeted. When HVSF still refused to honor the conversion, Ailouros sued to get them to honor the conversion and to recover their damages. HVSF's SEC reports indicate that 450,000 shares of HVSF stock was issued to settle this lawsuit, but, contrary to what Oceanvu2 said in his "report" of this, this stock was not worth $9 million because HVSF had a subsequent 10 for 1 reverse stock split. Joe Harary also told me that Ailouros had invested in HVSF along with some major North American bank who had also loaned money to them on a similar basis, and who also had to sue HVSF to recover their damages.>> 4. Our stock price is declining because last weekend there was a call for shorts to hit the stock. REFR shareholders are savvy enough to know that if you stay and wait at the bid, shorts will have to come to you continually lowering the offer price(traders like to help out too and hit the bid because they play off this as day trades) and you can just keep going lower and lower as long as they keep coming. The volume is very light and there is usually a big spurt of shares (10-20,000) dropped in a couple of minutes and most REFR shareholders who are still accumulating just wait for that time. If you check with Pat Bryant at REFR she does a calculation of investor turnover every month and it is negligible. There are only 10.9 Million shares outstanding (20% controlled by management) and only 8,000 shareholders many of whom know one another and this story very well. I think for these reasons REFR does not apply to your model. I have only written things that can be verified and tried purposely NOT to include any speculations on my part. Any of what I have written regarding this financing can be found in public statements filed with the SEC or verified with the company, as I thought you yourself had already done. Evidently there were still some misconceptions and I hope I have resolved those. ND