Research Frontiers Incorporated

Good afternoon, ladies and gentlemen. Welcome to Research Frontiers Investor Conference Call to discuss the second quarter 2021 results of operations and recent developments. During today's presentation, all parties will be in listen-only mode. And following the presentation, the conference will be open for questions by pressing star 1. This conference is being recorded today. A replay of this conference call will be available starting later today in the investor section of the Research Frontiers website at www.smartclass.com and will be available for replay for the next 90 days. Please note that some of the comments made today may contain forward-looking information. The words expect, anticipate, plan, forecasts, and similar expressions are intended to identify forward-looking statements. Statements that are not historical facts are forward-looking statements that are made pursuant to the safe harbor provisions that are part of the Securities Litigation Reform Act of 1995. These statements reflect the company's current beliefs and a number of important factors could cause actual results for future periods to differ materially from those expressed. Significant factors that could cause results to differ from those anticipated are described in our filings with the SEC. Research Frontier undertakes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties. The company will be answering many of the questions that were emailed to it prior to this conference call, either in their presentation or as part of the Q&A session at the end. In some cases, the company has responded directly to email questions prior to this call or will do so afterward in order to answer more questions of general interest to shareholders on this call. If you find that your question has been substantially answered as a courtesy and to allow time for other shareholders to ask their questions, please remove yourself from the queue by pressing star 2. Also, we ask that you keep your question brief in the interest of time. I would now like to turn the conference over to Joe Harari, President and Chief Executive Officer of Research Frontiers, Please go ahead, sir.

Thanks, Paul, and good afternoon, everyone, and thanks for being with us today. We have a lot of developments to talk about today, and there'll be a lot of new information discussed today, and also I'll be reviewing some information that our longer-term investors may know, but which will be helpful to new investors who heard about this thing called the smart window industry, perhaps because of you or Crown becoming public companies recently. and want to know how research centers and SPD Smart Glass technology compares. Our financials are fully explained in our 10-Q filing and our press releases, so other than to note that we made significant further reductions in costs, let's dive straight into the new business developments for your company. This year, there have been major developments in each industry that uses SPD Smart Glass. We're going to focus on automotive, architectural, aircraft and trains, and other mass transit. I also want to help give everyone points of reference so that you can better put all of these developments into context. Let's start with automotives. Major trends include a very accelerated push towards electric vehicles. Today, the U.S. government announced their target of 50% of all vehicles sold in the U.S. being zero-emission vehicles by 2030. Since our last conference call, a number of additional automotive OEMs announced that they're going all electric. This is happening now almost weekly. Why is this important to research frontiers? Because our SPD smart glass can increase the driving range of electric vehicles by up to 5.5%. This is quite significant range extension that will come in addition to any advances that occur in battery technology. Companies are announcing carbon neutral targets. We reduce CO2 emissions by up to 4 grams per kilometer. So while the world converts from internal combustion engines to electric vehicles and other zero-emission vehicles, all vehicles can still benefit from using SPD smart glass. This not only gives car makers a longer-term environmental benefit, but in Europe it helps them avoid current regulatory penalties of 95 euros per gram per kilometer that their fleets don't meet the tightening emission standards. So with four grams per kilometer of CO2 savings, That's €380 per car, or about $450 per car in savings, folks. In a few weeks, the IAA Auto Show will be held in Munich. Many of us that have been in the auto industry for a while used to know the IAA as the Frankfurt Auto Show. It was the largest auto show in the world. This year, SPD Smart Glass is expected to be shown in multiple locations there. We'll be sharing whatever details we can about this with all of you as the Munich Auto Show gets closer. I think that by now everyone on this call knows that Cadillac launched their all-electric flagship, the Celestique, at CES this past January. The launch highlighted the four-segment SPD smart glass roof that gives occupants more control over the light entering the car. Use of SPD smart glass in sunroofs has been well proven in serial production. starting in 2011 with Mercedes and then McLaren. Mercedes' test data shows that the use of SB Smart Glass in just the sunroof can reduce cabin temperatures by 18 degrees. Instead of getting in a car and it being 90 degrees inside, it is 72 degrees without using the air conditioning. This allows car makers to reduce the size of the air conditioning compressors by up to 40%, reduce weight, and increase driving range and fuel economy. Bentley then took this idea even further and noted in their public presentations that use of SPD Smart Glass in a full panoramic stationary glass roof can reduce weight in the roof by 13 pounds and eliminate 54 components. It also adds inches of headroom and by reducing the weight in the roof, lowers the center of gravity of the car. So SPD Smart Glass not only saves energy, assembly complexity in time and weight, but it also improves the stability of the car. One of the things I like about our business is that we have about 250 patents on a basic material that has great functionality. Customers are constantly figuring out new ways to use that material to achieve their goals. I expect that at the Munich Auto Show, visitors to the booths of other car makers not yet mentioned today and other automotive suppliers will not only see the more traditional uses for SPD Smart Glass, but some uses never before shown in the industry. Another major trend besides electrification, energy efficiency, and light weighting is the movement towards enhancing the passenger experience. Comfort and safety were always important to car makers, but now as we move more towards self-driven vehicles, it becomes even more essential. And we're not just talking about autonomous cars, but also trains and aircraft, and not just traditional aircraft like the Airbus A220 that we're on, but also rotary aircraft like helicopters and some recently added projects for SPD in BTOL and even electric aircraft. Some of you might have noted an announcement last week by our licensee, Gauzy, about train glass delivered to their customer, Rehau, for the Deutsche Bahn Idea train. Rehau is a large supplier to the train and other industries with over 20,000 employees. I started talking to them in February 2019 about use of SPD in trains, and I'm really pleased to see this important development for the train industry. Trains use a lot of glass, and SPD Smart Glass has preserved use on such iconic luxury and sightseeing trains as the Shikishimi train in Japan and the Rocky Mountaineer trains in North America. The Deutsche Bahn train opens up SPD to a much larger new market, commuter and regional transport trains. I expect that more information about this chain and its use of SPD Smart Glass will be announced shortly. Our licensees go head-to-head with Vue and Sage in bidding on smart glass projects for the architectural industry. However, there are some noted performance differences between electrochromic technology, such as that offered by Vue and Sage, and our SPD Smart Glass technology. First, electrochromic technology in architectural-sized windows can take as much as 40 minutes or more to switch tint, depending on the size of the window. SPD Smart Glass takes two seconds to switch tint and can get much darker than electrochromics. The change in tint with SPD is perfectly uniform throughout the entire window, whereas electrochemical glass has an iris effect, where the window begins to change tint at the outer edges of the window and slowly works the tint change to the rest of the window. Architects are getting smarter and asking to see large samples of electrochemical glass so they can judge for themselves the speed and uniformity of tint. Nothing out there compares to SPD Smart Glass in terms of our speed, range of light transmission, and uniformity of change. And now that our licensee, Gauzy, has a coating facility in Germany dedicated to making SPD light control film that's 1.8 meters wide, we also do not have the same size limitations that electrochemical glass has in its manufacturing process. And because electrochemical glass needs to be sputter coated directly on glass, this not only creates size and handling issues and limitations, but also limits the shapes that the glass can be fabricated. Ascady Smart Glass has appeared in rectangular, square, circular, triangular, and even trapezoidal glass in architectural projects. Sage & View has turned down these types of projects because of the practical manufacturing limitations that exist with their technology and their manufacturing processes. And, of course, there are yield issues that have caused very large losses for them on projects. Last quarter, View lost over $50 million. I believe that they'll be reporting their second quarter results next week or the week after. It should be very interesting. With that said, let me now take some other questions that our shareholders have sent me. John Nelson had emailed me the question, any progress on your film producers bringing down the cost curves? Absolutely, John. The facility in Stuttgart, Germany that Gauzy has, can produce film at a fraction of the cost that the prior film production facility that Itachi Chemical had can do. And it's 11 years newer. And, in fact, this week new equipment was delivered to that facility to further increase the efficiency and the production capacity of that facility. So if you remember on prior conference calls, I discussed that. Galaxy expanded their emulsion production capacity in Israel, and now they've taken steps to increase the coating capacity of their facility in Shlikard. And, you know, for those that, you know, remember the inauguration press release about that factory, it can coat one million square meters of SPD film a year. Chuck Michaels had asked, please clarify where we are in terms of SPD film being used in future cars and when. Well, I mentioned that we're going to have a number of instances at the Munich Auto Show, and I think people should stand by and enjoy some of the announcements coming out of that. And previously we talked about Cadillac, and as many of you know also, Hyundai made a direct investment in our licensee, Gauzy, So while they haven't announced their timetable yet, I think people can draw the proper inferences from that investment that they made. Sam Pinta writes, there have been a lot of mention of PDLC lately in the automotive sector. I could see an advantage of having a combo product with SPD and PDLC combined. However, I cannot wrap my head around how a vehicle can have PDLC alone unless they have a roller shade. Should we expect a combo product with SPD popping up in the automotive sector? And what is your view on vehicles that might plan to have PDLC only? Is that possible without a roller shade? And a related question came from Jared Albert, who said, Am I correct in thinking that once an auto OEM has gone through the expense of putting PDLC into a sunroof, the only additional cost to switch the SPD is the difference in the cost of SPD versus the PDLC? Even the lamination with the need for hermetic seal is the same cost. And then before low E became a spandex coating on sunroof, there were articles criticizing the greenhouse effect in the 57 and 62 MiBox and the concept Cabora with LC roof systems. Aside from the light blocking versus scattering advantage that SPD offers over PDLC, is the greenhouse effect caused by visible light still a quantifiable advantage for SPD over PDLC? These questions are related because I don't believe, Sam, that there will be a combination product. If you think about a sunroof, the main use of PDLC is for privacy, and you really don't need privacy in a sunroof, especially when the existing 90-micron SPG film can block 99.5% of the light. The other, I think, question highlights the fact that when the auto industry has tried PDLC by itself, they run into the greenhouse effect where light will enter the vehicle and create heat and then get trapped inside the vehicle. So it has almost the opposite effect that you're trying to achieve, which is to keep out unwanted heat, light, and glare. But, you know, car companies sometimes will try things. Sometimes they have, you know, incomplete testing or engineering information, and sometimes... You know, the data just doesn't bear out in the real world. Our technology has been proven in serial production in cars since 2011, and Mercedes-Benz test shows that we can reduce the temperature inside the vehicle by 10 degrees here, 18 degrees Fahrenheit. So, you know, very significant reduction in heat inside the vehicle. Mr. Claire Houghton had said, my question for this meeting is, What is the cost differential, if any, between used technology and research centers, SPD? That's a great question. We have not seen unsubsidized pricing in the electrochromic industry. So whatever pricing is being quoted out there is highly subsidized. Now, we can infer from some of the data we see in the public filings from you, for example, that for every dollar of revenue, it's costing them $4. So, you know, there's at least a five-to-one subsidy going on there in terms of how much you're spending for a project versus their revenue. And, you know, unless that relationship changes, it means that they're going to lose a lot of money on every project. And our licensees are able to be cost competitive on the projects that we've been against view on. without having to incur those kind of subsidized expenses and things. And another question from Mr. Shah. What is the role of Gauzy in Research Frontiers? Do Research Frontiers shareholders have a chance to invest in Gauzy? Gauzy is licensed by us primarily to make SPD film, and they've built a state-of-the-art facility in Gauzy. Germany to do that, Mr. Shaw. And they're a licensee. We have a very strong working relationship with them. You know, we collaborate on projects like, for example, the Renow project and others. And that's become a very good working relationship together. As far as direct investments in Gauzy, I believe that most of their investors are, you know, large institutional investors. They're not a public company, so you can't just invest in them directly, you know, unless you're a fund or a money manager of some sort. But, you know, I know that there's been a lot of interest in direct investments in Gaussian. They're an excellent company that does great work. So we handled a number of the questions we got by email. I just want now to... Ask our operator, Paul, to open up the conference to any additional questions people participating today might have that we haven't covered, and then I'm going to make a few closing remarks that I think will be helpful to people.

If you would like to ask a question, please press star 1 on your telephone keypad now. You will be placed into the queue in the order received. Please be prepared to ask your question when prompted. Once again, if you have a question, please press star 1 on your phone now. And we have a question from Jared Albert.

Your line is open. Hi, Jared. Hey, Jared. How are you? Good, good. I'm not sure if you answered my question.

If car companies go to PDLC, is it You're right, and I didn't mean to ignore that part of the question. I was caught up in the heat benefits of PDLC or the detriment of PDLC from your question. If you have a car pre-wired, the electronics are essentially the same between PDLC and SPD. They both use AC voltage that's stepped up from the 12-volt car batteries. So really it's just replacing the glass. We use actually less power, sometimes as much as one-seventh the power of PDLC. But excess power doesn't hurt our system, so you can just substitute it in. One thing I want to mention also, I was discussing earlier in the context of bidding on projects, the cost differences between electrochemical glass, such as views, and SPDs. from research frontiers. And one of the things that we keep hearing now from architects is that while the glass may cost X, and it's a highly subsidized price, the electronics and things cost about as much as the glass in the case of electrochromic technology. In SPD, we could use off-the-shelf control systems, pretty basic electronics. We don't have to condition the power the same way that electrochromics do because They tend to have very high sensitivities and can even get fried out from minor voltage spikes, which is why they have to, you know, in these installations, have to really pay attention to the wiring and the electronics. We don't have that. I mean, you know, I've seen an SPD plugged directly into a wall socket, you know. Yeah, mine is 20 years old and plugged right in the wall socket. We were just a read-a-stat as far as I know. There's a lot of stuff down there for taking over as a controller. But just going back to the PDLC, am I right in thinking that that is a laminated system where there's bashed glass and, you know, the PET ITO, obviously. And I think there's probably more things. Yeah, it is a laminated system like SPD. So it's a film laminated between glass. So those things should be relatively equal with PDLC because you don't have the inherent heat blocking capabilities if you wanted to make it somewhat energy efficient. you would have to put either special coatings on the glass or you'd have to put special interlayers inside the glass that you may not need with SPT. So it could be that it may be simpler in some cases and harder in others. I mean, 10 years ago, it was when you would find a limited system, right? And now it's almost standard. You know, if you can't fight for safety, the tempered systems are exploding, but the limited systems aren't. Am I correct at this? I mean, the setup for the industry at this point is laminated panoramic roofs with multiple interlayers for UV and IR. I mean, the tight end has seven. The tight end has seven laminated interlayers. Right. And that is the direction of the industry. And, you know, one reason is, as you mentioned, that some of the tempered glass, some roofs, you know, would just spontaneously shatter and things like that, which, you know, is a problem in the driving, obviously. but had a problem for the car makers. The other issue that's happening now, which is a little more subtle, is that as you move away from internal combustion engines and more towards electric vehicles, road noise at higher frequencies becomes more of an issue. It used to be that the engine would drown out some of the higher frequency road noises, but now you hear higher pitch frequencies because the engine is quieter. And because of that also, just generally in cars, they're moving more towards laminated glass because you have the acoustical benefits of blocking road noise. And, you know, they'll get maybe even better acoustical benefits with SPD because the SPD light control layer actually has some, you know, pretty effective noise deadening characteristics as well, you know, due to the nature of the chemistry. So having a film with this stuff in it, you know, actually helps a lot with the noise. as well. Final question. I'm sorry. Final question, same category. Can you give a sense of the price difference between SPD and PDLC, just the film, the actual film? I mean, is it a magnitude? Is it just a single-digit tractor? Are we within range? I'm thinking about the Venza, and I'm thinking about the BMW iX, and how easy it would be, once they're discovered, to just switch them. It's not an order of magnitude. It's a single-digit and probably a low single-digit factor. And some of the pricing I've seen come out of Gauzy's factory, you know, makes the price comparable, you know, in high volume. That's incredible because PDLC is a true commodity at this point. I mean, it's about as commoditized as it gets. So that's incredible. Yeah, and, you know, we just have to get to the volume to achieve that, you know, price parity with CDLC, but that's part of the business plan that Galaxy has.

Is Galaxy at this point, I know I said the last question, but you brought it up, is Galaxy at this point more in the position of constant process improvement rather than sort of oops?

I mean, they hired an outside senior process engineer who has an interesting close on LinkedIn. And so I wonder if this is just in the category of constant process improvement or if this is more in the category of, okay, to get it this wide, we still have to do a few things. Can you characterize? Yeah, no, it's more constant process improvement. And obviously, you know, there are things that are driving that. Some of the projects that they're working on can greatly benefit from, you know, even slight reductions in cost and things like that because you're talking about pretty high volumes.

Well, fingers crossed. Thank you very much. Yes. Thanks a lot. Thank you. Our next question comes from Francis Cotrero. Your line is open. Good afternoon, Joe. Hi, how are you? Pretty good.

I was wondering, can you tell me how far along Gauzy is in developing a dark particle? They had announced their R&D on that when they initiated the factory because there was a number of people from the automotive industry in attendance. And there is a timeline that we're approaching now. I can't give you more of an update than what they've said, you know, in the past, which is they're working on it and, you know, it's on their radar.

Okay.

And by the way, Research Frontiers also, you know, has a number of existing techniques to, you know, you know, work on the color and, um, and also new materials and development. But, you know, one of the things that we won't do is, um, is talk about vaporware. So when we have it, uh, you'll know. But it's a priority for us as well. Well, once it is developed, will it need to go through testing phase?

Everything should, um,

You know, some of the choices you make in the development process can minimize the differences between existing materials and new materials, and that's something that we certainly have kept in mind in the work we've been doing at Research Frontiers. So once it is developed, it might be several years before it's rolled out, or... Or it could be that it's so comparable to the existing materials that you only need to kind of put it through some quick phases to make sure that there's nothing unanticipated going on. It may not take that long for validation, is what I'm saying, based on the nature of what we're working on. And Hyundai, very Russian in Gauzy, how would they actually benefit from that? Well, you know, that's an important question. Why would you make an investment in a supplier unless you were trying to strengthen that supplier because you had a strategic need for the material it's making? And that's kind of how I see the Hyundai investment is it's a strategic investment in a strategic material for them.

And I'm still waiting for the royalty collecting...

This is an engaging machine. Exactly. Very much in our plans. Very much in our plans, my friend. Is it getting closer? Well, if you look at the fact that we've reduced costs continuously for the past six or seven years, last year was our lowest loss in 26 years. And, you know, we've had, you know, further cost reductions this year versus last year. Um, you know, we're definitely driving the company towards being as efficient as possible so that we can pay out more in dividends. Yeah, because one of the nice things about our company is that, unlike other types of business models, we're a licensing company with very, very predictable expenses. So, you know, for us to look at what our cash needs are and predict them quite accurately is much easier for us than other companies. And because of that, you know, the ability to pay dividends, I think, will be a lot clearer, you know, to a lot. Now, it's a decision for the board of directors, but all of our directors are long-term shareholders of the company, and I think we all see eye to eye that it would be nice for us to be able to, you know, keep our stock and monetize it as well through dividends. On a tax, you know, you have to do a tax balance plan. You can't pay everything out in dividends. But on the other hand, it would be nice to be able to do that. Yeah, but that only comes after revenues. Sure. And, you know, we're, you know, with the things in the pipeline, you know, we're well on our way towards that. So, you know, we pay attention to the cost and we pay attention to the revenues both.

Patience is still better than patents, right?

Determination is better than patents, and we're very determined to become a very, very successful company and not make some of the mistakes that others in our industry are making.

Thanks, Joe. Thanks a lot. Thank you.

Our next question comes from Art Brady.

Hi, Joe. Art Brady here. Hey, Art. How are you? Okay.

I was wondering about Nippon Glass. We thought that around the time of the Olympics that possibly Nippon Glass would talk about some of the things they're doing, and I was wondering what the status of that is. Sure. Excellent question. So Panasonic, who's their customer, has usually a very, very, very, very strong relationship with the Olympics. historically going back decades um as everyone knows this year the olympics were a storied event to say the least um and i think that um a lot of that had um an impact also on on you know the publicity surrounding launch plans and things like that my understanding though is that product is coming out and you'll be seeing it you know quite soon but i don't think that is that this this This year or early next year or what? I know the answer. I'm just not allowed to say. You know, look, it's Panasonic that does their marketing, not Joe Harari. Another question is Dubai. A lot of companies in Israel have gone to Dubai, and there's a lot of excitement there. of Israeli technology can you give us some kind of inference of what your or what Gauzy relations might be with Dubai I can tell you what my relationship is I was in Dubai in December it's an amazing place the civil engineers there are doing incredibly interesting projects and the economic activity and development there is ripe for SPD, and the glass companies are also quite capable of handling anything high-tech like this. So, I know from first-hand experience that Dubai is a very, very good market with three companies that, you know, we're already working with, and Galaxy also has very, very strong relationships in Dubai. So, you know, when you have enough people pushing something forward, it usually happens.

Another question I have is as follows.

There's a company in Israel, it's called ReAutomotive, and they were just taken over by a SPAC, and they got quite an amount of funding.

And basically what this company does, it's an electric vehicle, base they just build the base and anyone who wants to develop an electric vehicle they build on top of that base right they call that the skateboard they call it the skateboard yeah exactly exactly are you are you doing anything with them because it seems like it would be terrific if you could develop a kind of uh

a model that you just put on top of that board as an enclosure. We're working with many, many electric vehicle companies. I can't, you know, comment on individual ones, obviously, because of, you know, we need to keep business relationships private.

Are you working with the skateboard company?

Well, the skateboard is an interesting concept, but that's the drivetrain, and usually you want to work with the people that are putting the body on it because that's where the glass is going. But it doesn't hurt to be friendly to everybody, and because of the nature of our business art, we can be friendly to everybody even if they're not a direct customer. It doesn't cost us a lot of money to do that. Because it sounds like it would be perfect if you set up a module that you just plug into it as a standard product that Galaxy would develop. Well, certainly, you know, the electric vehicle market is very much on our radar screen.

I just can't, you know, I can't give you more specifics.

Another question I have is, how would your product benefit a hydrogen car? Would hydrogen cars... Yeah, the same way that an electric vehicle would. By reducing the air conditioning loads that are required, you know, we're increasing the driving range of every zero emission vehicle as well as, you know, internal combustion. So we're somewhat agnostic as to, you know, what the car is. We, you know, you can use our glass to benefit from, you know, the heat load benefits without regard to what kind of drive train it has. I see.

Okay, thank you.

Thanks a lot, Art.

Thank you. As a reminder, if you do have a question, please press star 1 on your touch-tone keypad now. And our next question comes from Chuck Michaels. Hi, Joe.

How are you doing?

Hey, Chuck. How are you?

Good. I have two areas of questions here. One is, and your press release mentions that the Mercedes models that you've had STD in are being phased out. Is there anything you can tell us as to Daimler's plans to include STD in new models?

Well, we have a good relationship with Daimler, and You know, right now they're in this period where they're, you know, almost oversimplifying their vehicles in terms of product offerings and, you know, entrance. And, you know, there's some reasons underlying that are totally unrelated to SPD, but I'm pretty confident that, you know, because of the benefits that SPD has and their familiarity with the reliability and performance of SPD that, you know, we'll be on future vehicles there.

Okay. And then the second area was I don't think there's been any discussion on this call as to SBD and buildings. Will you tell us what's going on in that area?

Yeah, I kind of backed into it with a discussion of our licensees going head-to-head with view and stage on architectural projects. I'll give you a little more detail and color, though. You know, one of the things that I'm pleased to see out there is that architects are getting a lot more sophisticated in how they view smart glass. It used to be something that they thought they knew about, but they were kind of lumping in, you know, PDLC and SPD and electrochromic and thermochromic and, you know, photochromic and everything into the same kind of patch. And judging from the questions that we get when we talk to architects, it's a much more sophisticated understanding of the differences between smart glass that's out there. You know, and one of the things I was toying with today is actually giving a primer on the different types of smart glass and the relative advantages and disadvantages, I chose just to kind of focus on electrochromic because, you know, it's the closest in terms of appearance to us, but not in terms of performance. But, you know, the projects that we're working on are projects that, you know, are nice poster children for SPD, you know, really cool designs, very hard to shade types of glass that, you know, if the glass did the shading, it would solve a lot of problems. So, You know, those are the kind of things that are the lower hanging fruit in that industry, you know. Mm-hmm.

Okay. Thank you. Thanks. Thank you. And we have a question from Bruce Denny. Your line is open. Hi, Darrell. How are you? Hey, Dr. Denny. How are you?

Very good. Thanks. Hey, a couple more questions about the architectural market. I think it was last conference call you said we had already been specked into some architectural projects. And that's about as far as we got with the conversation. And my question is, can you give us an idea of the scale of some of these markets or these projects that we're in? And when or have they already started the construction? And I'm not interested in interested in fine detail, just whether something's been started. And are we looking at a skyscraper or a storefront?

You know, what are we talking about in terms of... We're talking mostly skyscraper-type projects, corporate headquarters, things like that. You know, there are storefront and retail uses for SPD that are pretty cool, but, you know, the things that you know, are on my direct radar is, you know, it's the bigger projects. And, you know, glass tends to get put in later in the construction phase. So, you know, I don't want to say anything prematurely, but, you know, being specced in is really, really nice, you know, especially when the architect has a good understanding of, you know, what it is they're speccing in and, you know, and the attention to things that have to be done to the system. In our case, not much has to be done to the electrical system, whereas in electrocomics, you have to sometimes really, you know, spend a lot of time and money, you know, to put in something that's compatible on the electronic side. So, you know, those things are moving forward. They're always going to be flipped between the cup and the list, and, you know, I think what you found out, perhaps painfully, is that you know, just because you have a letter of intent on something and you, you know, categorize it as backlog, you know, typically the first thing to get thrown out is, you know, the expense of glass. And I think they found that out the hard way. So, you know, on their last conference call, you know, somebody asked them about backlog and, you know, they kind of backpedaled on the backlog issue and said, well, we don't think it's a good predictor of, you know, future revenues. I think they're beginning to realize that You don't count your chickens just because you spec'd in.

Right. So have any of these projects started already? Uh, there's, you know, they're still, you know, getting into the, um, the shovel space. Okay. You know, fortunately, fortunately, yeah, but some, some are, some could be near a term because, excuse me, um, you know, glass could go in at any time. Right. Okay, then. All right. Thank you, Joe. Thanks a lot. Thank you. And we have a question from Dennis LaValle. Your line is open. Well, thank you so much, Joe. Hi, Dennis. How are you? I'm well. Perfect. Thank you for your call earlier today.

I didn't know I'd be having a call today, but I am. Okay, I've got three different areas. One area is in Brazil. You mentioned a year ago or so that you had armored plating glass. They were going to use your technology. Has anything become of that, or has the pandemic kind of squelched that opportunity down in Brazil?

Well, the pandemic certainly has affected Brazil pretty hard. But even post-pandemic, I saw some demo vehicles that were for a major OEM, you know, with armored glass, you know, armored SPD glass. So, you know, it's hard to say unless you're, you know, feet on the ground in Brazil and it's very hard to do that right now. But, you know, what I've seen was very encouraging.

Okay. And then you spent a lot of questions answering architectural sheet glass. And my question is, you said you're bidding a lot of projects. Views announced, you know, they have a steady stream of projects they announce.

Yeah, usually it's the week before their conference call.

Well, you know, if I were them, I'd do the same thing. Absolutely. Absolutely.

Absolutely.

Their current River North project, 235,000 square feet, Class A office building. Is that the square footage that they're going to get paid rent on, or is that the glass

area of that building do you have any idea yeah yeah it's not the glass um and the fact that they're quoting these projects in terms of how much rentable feet makes me think that the amount of glasses does not have to do with anything i agree i could say i'm in 10 billion dollars worth of mercedes cars okay but my glass content is not that you know

You know, I've done something nobody's done on a conference call. But anyway, let's go on. You said you're bidding a lot of the architectural sheet glass market.

Our licensees are, yes.

Okay. And what's the primary reason why you're losing? Because if I understand correctly... We're not losing.

We're not losing. That's, you know, we're just not giving it away. I mean, I think if you look at... Well, I don't want you to give stuff away, okay?

But maybe you got an idea. You know, that's Gazi's fault, how they want to price their product. But at the end of the day, you're bidding on these projects, or Gazi's bidding on these projects, and you're not getting, but I also heard you say at one point, Apple is your damn fault. You're only out by, you know.

What was the striking distance, and with, I think, a product that has better performance, I mean, you know, one of the things that I didn't do, because I don't think I should be doing it, but a research analyst that came out with a report on Vue had actually interviewed former executives of Vue and confirmed that, you know, they were giving black away on some of the earlier projects. So, you know, if you wonder where, you know, the hundreds of millions of dollars they lost each quarter, you know, or each year, a lot of it goes to things like that. And, you know, there is in any industry that's, you know, that's emerging a need to prime the pump a little bit. But, you know, there are limits to, I think, you know, what's prudent.

And, you know, I'll just leave it at that. Okay. So you're within striking distance as far as price.

But at the end of the day, your mom is the word, but there's percolating in the percolator, for the sake.

Yeah, yeah. And, you know, historically in every industry that we've been in, there have been entrants, mostly in the electrochromic field, that have lost money on each piece of glass. You know, Sango Band lost reportedly between $2,500 and $5,000 per roof when they were in the Ferrari Super America. But there's only 600 of those cars made, so, you know, it's a marketing expense. You know, if you do it on a larger scale... You know, you're talking about real money. And, you know, our licensees prefer to, you know, to make money, you know, on the projects they're on.

Is there any need for this technology in the truck market?

Yeah, there's a couple. You know, number one, there's truckers' arms. Usually the left arm of truckers have a higher incidence of skin cancer because their arm is hanging out the window and there's a lot of UV. So, you know, using SPD with UV blockers in the side window would certainly alleviate that. And then you have the sun visors. You know, remember, these are professional drivers that are doing long-haul trucking. And, you know, things like load glare and stuff that, you know, you and I may think is an annoyance on our, you know, one- or two-hour commute every day becomes a real problem on a, you know, eight- or ten-hour, you know, shift. So, you know, using this in the sun visors and in the windshield is important. And then the third use in trucks would be in sleeper cabs where, you know, sometimes you're sleeping during the day and you want to just flip a switch and have privacy and complete darkness so you can go to sleep. And this would be a great way to do that as well.

Okay, final question. GenTech did some work on it, I believe, the Dreamliner many years ago, which ultimately they had an issue with it. But could you give us a lay of the land with the airplane market today as far as what you have, what the other people have, and what technologies the other manufacturers are using if you have time or care about it?

Sure. So up until this year, we were mostly in – we were actually the first commercially flying switchable window. We were put in the Airbus A380 planes that were cost-fitted and used by Qantas Air Lines. since 2008, I believe. So we were the first kind of flying and longest flying switchable. Most of what we have been in, though, has been general aviation. So the King Airs and the Honda jets and things like that. And then recently, again, we got into the A220, you know, Airbus A220, you know, which is becoming a workhorse in the transport industry as well, you know, airlines and things. So That's what we have. You know, Gentex is on the Dreamliner. You know, as you mentioned, they had some issues with the Dreamliner, and I believe they're starting to restart production of the Dreamliner again, or slow it down a little bit until they figure out what was going on there. But, you know, and then they're an option on the 7777. I don't think it's being used.

Okay. Okay. final I promise what question if you were me would I ask you to portray my intelligence um you know I think I think that what I would say is that I wish that um the things that are bubbling to the surface um

if people would understand that they are bubbling to the surface and coming out, and that there's going to be a period of time between when, you know, some of the Mercedes came offline at the end of their product lifecycle and when the new cars come on. But, you know, we're out there, you know, with a lot of irons in the fire, working with a lot of different OEMs, you know, both electric and internal combustion engine vehicles. And, you know, some of these things are pretty, exciting vehicles, and I always want to drive a car with SBD smart lights in it, so I think I'll have some choices as to different OEMs.

Well, thank you very much. Thanks, Dennis. Good luck in the future to all of us. To all of us. Thank you.

And for those who have recently joined the call, just a quick reminder, if you do have a question, please press star one on your touchstone keypad. And we have a question from August Berman. Your line is open.

Hey, Joe, how are you? I'm good, August. How are you doing? Oh, well, thank you.

I had a couple of questions. First, I think you had intimated earlier that we're not likely to see a combination of SPD EDLC roofs?

Not in automotive. You see it in yachts and you see it in planes because there, there's times when you want to bring daylighting into a, let's say your, you know, your main cabin. You know, you want to bring daylighting in, but, you know, you don't want, or sometimes you want privacy, you know, only, but bring daylighting in. So, you know, you're changing your clothes, but you don't want people outside to be able to look in the main, you know, headroom of your yacht or something like that. And, you know, planes on the tarmac, sometimes you want to bring daylighting in while it's sitting on the tarmac, but you want the privacy. So we've seen that. And, you know, I mean, if you come visit us at Research Frontiers, I got aircraft and yacht windows. The yacht window is from Dyson, the vacuum cleaner guy's yacht, and aircraft windows that have combination products. And, you know, they're cool, you know. But I don't see it on the roof of a car, though, because, you know, for the most part, you don't need privacy there, and you really want to reject as much heat and light as possible.

I only say that because Continental and their engineering website had their really fantastic video of a combination of PD and PDLC, which made, I think, us all think, well, maybe we're going to start seeing a combination of that, but it sounds like more of a kind of a side glass Not a sunroof feature, but we would see that in the future.

Right. Side glass, I could see it as being a privacy feature if you wanted it.

Got it. Secondly, some of the message board track kind of goes over, you know, we saw this really amazing YouTube video from Doug DeMuro, big auto guy. And he highlighted the McLaren Speedtail, like 1.7 million views. he has so much passion. And I was just thinking, is there any way to not show bias, to show a good comparison, here's SPD, here's PDLC, here's PC, and show the performance benefits to get more of the word out. Because honestly, I don't know how much, like, you know, for instance, when I would visit a Mercedes dealer years ago and ask them about the quality, they didn't all know it. Whereas, you know, somebody in the industry who can really spread the word I'm not sure, maybe there's no answer to this, but, I mean, have thoughts of marketing this technology, you know, been put out that way, or reaching out to somebody who has a pretty wide footprint in terms of audience? Yeah. In terms of these technologies?

Yeah, so we, you know, at one point we had a, you know, an effort going with the dealers to educate them on the option and the benefits and things like that. The way that Mercedes prices options, the dealers are relatively agnostic so the only thing it becomes and this is what we heard from a number of dealers it's a very cool option you know if we get a car in that doesn't have it and the guy's neighbor has it with the magic sky can go future and this guy doesn't then the customer comes back to us all pissed off that he wasn't told about it but for the most part the dealers are selling what they have on their lot and you know if that's a orange car with pink polka dots that's what they're going to try to sell you And, you know, what we found is trying to get Mercedes and others to change the make rate was a more productive approach there. And McLaren has had huge success with the, you know, the SPD booth. Their customers have very, very high take rates, and, you know, they loved it. So I think you're seeing that when you mentioned kind of that, you know, McLaren enthusiasts, you know, really becoming very vocal and passionate about it and it translating into other McLaren owners buying it. Whereas on a Mercedes, you know, you have kind of a whole mixed bag of demographics buying a Mercedes. It could be, you know, an older person that doesn't show on social media and it could be a young guy that, you know, that does. And often that may be where they're, you know, climbing at.

Well, and also, too, just to kind of differentiate, again, the common quote is, oh, that's really cool, like, electrochromic glass, when, you know, an investor who's invested in research, for instance, knows that certainly not, you know, EC or it is STD or whatever it is. So, just from a performance breakdown, so I thought that would be interesting.

Right, yeah, and we try to get the industry to use the terms correctly. You know, a lot of times we're referred to as electrochromatic glass, and, you know, we try to get reporters to, you know, refer to us as a suspended particle device or SPD, you know, so that, because there is a difference, obviously.

Well, Cadillac did it, which was great.

Yeah. Yeah. He spent some time making sure they would. Okay.

And then the last question, I think the best will ask, any ways to say whether, yes or no, that next month at IAA we're talking about demonstrations in terms of showing off the technology or are we talking about series production? We'll see you next month.

I'm not allowed to say but I think you're going to see a number of demonstrations that are going to be very cool and feasible near term and I think you know what you don't see usually until it's ready to be launched is the actual series production one. When they're going to put it in series production, you'll see the car with the SPD in it, you know. And, you know, I think that given the time frames and the marketing plans that the automakers have, it won't be at IAA that you'll see series production. But what I've been wrong before, I've showed up at, you know, other car shows and seen launches when nobody, including, you know, our contacts within the automaker thought there would be. So, yeah.

Perfect. Okay, thank you, Joe. Thanks a lot. Thank you.

And our final question comes from Michael K. Your line is open.

Hello, Joe.

Hey, Michael.

How are you? I want to ask, in the past you said the main barrier to getting SBD and major architectural projects was cost, but now that costs are down,

No, the major barrier wasn't cost, it was risk. Architectural, you need, you know, 1.2, 1.5 or 1.8 meter wide film, and Hitachi was only making one meter wide film. So that was the barrier. The thing that is breaking open that market is not the cost, although cost is certainly, you know, easier to deal with when it's lower and calcium is certainly lower you know per square meter than than Hitachi was um but uh it's the width that was the issue there and you know that's why I'm excited about the architecture you got both of these things nailed you got both of these things nailed yeah and you do you think the sweet spot in terms of cost for all of the uh you know, different markets has been achieved or do you think, you know... You're never going to achieve a sweet spot because no matter what the price is, someone wants it lower. What happens is price goes down. It's just a typical, you know, supply and demand curve. Your price, your cost matches the projects that can benefit from your product at that cost. You know, Bentley is not selling cars for $20,000. That's not their market. And we're not selling glass for, you know, $10 a square foot like, you know, like regular glass goes for or you sell there that, you know, because that's not our market.

And would you say that Gowsey is now the major producer of SBB film and emotion, or would you say that Issa Kroma and Itachi still are...

you know significance of producers or is Gauzy basically well Isaclima Isaclima is an end product manufacturer not a filmmaker so your two filmmakers are Hitachi Chemical and Gauzy and you know I can't comment on who's bigger than who because that wouldn't be fair to either of them but Isaclima is not a filmmaker but they make end products okay thank you very much thanks Michael I think we have one more question I see that popped into the queue

And our final question comes from William Berg. Your line is open. Thank you. Thank you very much. Hello, Joe. Hey, how are you? Okay, thanks for taking my question.

Of course. Now, first as an investor, Joe, the adoption of SPD in the auto industry hasn't been as hoped. But in regards... Well, we're in between vehicles, so I think that's something that is frustrating, but it's something we have to understand is that there are development timelines, and the car comes out when it comes out, even if you're on it.

Okay, thanks for saying that.

But with regards to the architectural side, with these energy calcs as a requirement on the building industry, glass is a very important... part of the code in the light and ventilation and energy. That's right. So it's not an insignificant part of the building envelope.

So can you comment on whether or not our technology in the glass has been specced in to any plans so we can clearly know yes or no?

Are you talking about building codes or are you talking about projects? Yeah, projects.

Oh, we're specced in. What I was trying to say before, though, is just because you're specced in doesn't mean that you make it in at the final cut. Usually the first thing to go is the bells and whistles. When someone does a building and they realize that You know, they're over budget because of X, Y, and Z once they put the shovel in the ground. You know, often, you know, the trim and the glass and things like that are things that can suffer. And that's something that, you know, I think we learn the hard way. Well, you know, my point is because it's such an integral part of the building envelope. Once you spec in, it's very hard to redo it. Because that takes a lot of time. So you're saying that the architect or the owner is willing to take more of the time to resubmit with another bells and whistles, as you say? Well, it's not a perfect substitution back. I mean, you know, you take out the smart glass and you put in regular glass with shades, you know, and that's, you know, sometimes easier, sometimes harder, you know. Yeah, obviously you don't want it to happen, but I think that it happens a lot where, you know, where there's a slippy dream that comes to the lip, you know. Somebody, you know, puts their shovel in the ground and they realize that, you know, maybe the ground wasn't as firm and needs, you know, more money for the foundations and they have to take it out from somewhere else.

And, you know, it happens.

It's totally unpredictable is what I'm saying. So, you know, while you don't, you know, you don't know if it's going to happen and you hope it doesn't happen. It happens sometimes. And I think, like I said, that, you know, I think you, now that they've sort of backed off on kind of the definition of backlog, realize that there's always slips between the cup and the lip and you can't count something until it's, you know, firmly in there. But you know when it's firmly in there. I mean, you know, and, you know, when the order is placed, you know, that's when the glass is produced. And, you know, one of the nice things about our business is

that's a less risky way to deal with a customer than what's being done now. Okay. Thanks for your answer. Sure. Thank you.

And we have no further questions in queue.

Okay. I'd like to maybe make a couple closing remarks briefly. I think today new investors getting into the smart window industry and it is something that's getting a lot of attention now because of the public offerings from you and maybe to some extent Crown. They probably know a lot more today about the performance cost and also the manufacturing and other limitations of other technologies such as the electrochemical or electrochromic bios. You know, SPD is a roll-to-roll film-based process and that allows SPD Smart might control rolls of film to be shipped where they're needed, cut and laminated to size with a minimum of weight. So that really helps, I think, ultimately with the logistics and the cost, you know, roll to roll and, you know, being able to cut it to size and to do a lot more with it. The technology itself also has the best performance in terms of switching speed and range and manufacturing yields and logistics. So you have all these things that are kind of coming together nicely for us now that the size issue has been dealt with. It's also a proven technology. You know, it's been put into some of the most demanding locations on a car and other uses with over a decade of real life testing in probably some of the harshest environments in the world. And it's been used without one reported problem in tens of thousands of cars that have been on the road for years. So, you know, we have this technology that may appear to be cutting edge and magic, but it's cutting edge, not bleeding edge. And, you know, it's also nice to see that even though some of the original core models, because we've been around for, you know, over a decade, that used at first were coming off their product lifecycle, new cars are coming back online with SPD Smart Glass. And we talked about some of these today or alluded to them. And some of the other uses are expected to be shown in a few weeks at the Munich Auto Show. And, you know, You know, even more core models are expected to be announced after that. New aircraft will also be announced, new train applications, and now that Gauzy can quote film that's 1.8 meters wide, new uses in architectural projects. So things are moving forward. One of the things I also want to highlight is, you know, maybe a sign of times to come is our licensees have expanded production capacity in all areas of the supply chain. from the chemistry production to the film coating to the fabrication of the end products for all industries, including the architectural, automotive, aircraft, marine, transit, and even consumer electronics industries. And as today's announcements in this call has shown, more and more uses for SPD smart glass are becoming public. I want to take this time to appreciate the hard work that our team at Research Frontiers and other licensees have been doing and I really want to thank the loyal support of our investors as we continue to lead our industry and move it forward. Thank you all for being such an important part of that effort, and thank you for participating on today's call.

This concludes today's conference call. Thank you for attending.