Research Frontiers Incorporated

Good afternoon, ladies and gentlemen. Welcome to Research Frontier's investor conference call to discuss the first quarter of 2022, results of operations and recent developments. During today's presentation, all parties will be in a 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 Research Frontier's 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, plans, forecast, 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 Frontiers 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 afterwards 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 questions 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.

Thank you, Paul. And hello, everyone, and welcome to our first quarter of 2022 investor conference call. We had our last investor call together just eight weeks ago, so this call will be shorter on the presentation side, leaving more time for everyone in the Q&A portion later. I also thank all of you who have emailed in your questions. That allows me to answer many of your questions in my prepared remarks to make these calls more efficient for everyone and to cover more ground. 2021 was the seventh consecutive year that expenses were lower than the year before at Research Frontiers, and this trend continued into the first quarter of this year, with total expenses lower by about 3%, which is something often difficult to achieve, especially in the new 8.5% inflationary environment that we're currently in. We are also in a strong financial condition. We continue to have no debt, and as of March 31st, 2022, the company had cash and cash equivalents of about $2.5 million, working capital of $3 million, and total shareholders' equity of $3.2 million. We took a little bit of a market hit when we moved from investment securities into all cash and cash equivalents during the first quarter. But with world events and the new inflationary environment and market gyrations, We wanted to play things safe, so that's why we did it. The company expects to have sufficient working capital for at least the next 23 months of operations, which should take us into early 2024. This is based upon our lower quarterly burn rate of $300,000 to $325,000, that's per quarter, with higher projected revenues during that period, mostly from new car models. In our last investor call in March, we reviewed the past year together and look forward to some exciting developments that we expect to happen this year. Despite everything else happening in the world, I'm happy to report that everything is still on that positive track. The company's fee income from licensing activities decreased slightly as a result of two factors, lower to flat economic activity in various cities that use the company's SPD smart glass technology, and timing differences due to how revenues are recorded from an accounting standpoint. We expect revenue in all market segments to increase beginning later this year as new car models and other products using the company's SPD smart glass technology are introduced into the market. In our last conference call, we spoke about new car models coming into production in Q3 and Q4 of this year with our SPD smart glass technology in it. This is still on track despite the supply chain and other disruptions around the world. In aircraft, last year there were significant new projects in the aircraft industry, including the ACJ-220 program by Airbus, Comlux, and Vision Systems. In our last call, we also highlighted the SPD electronically dimmable windows by Vision Systems in the new EPIC aircraft. There is yet another aircraft that is now adopting our ADWs. For those that follow the industry or follow us on social media, you may already be aware of this. Let me congratulate Vision Systems once again on the debut in early April at the Florida Air Show of the electronically dimmable windows that have been put in serial production in the Daher TBM960 very fast turboprop aircraft. This joins a growing list of fixed wing and helicopters at visionsystems.com. is now supplying SPD smart electronically with dimmable windows too. There has also been further integration and expansion after the merger announced in February between two of our licensees, Gauzy and Vision Systems. As I mentioned in our last call, this was a transaction that had our full support and one that I personally work with Gauzy and Vision Systems on for the past two years. It created the largest internationally diversified smart glass technologies manufacturing company in the world. As of last year, the combined entity had over 70 certified industrial partners, five dedicated manufacturing sites, 14 global offices, international subsidiaries on six continents, and customers in over 50 countries. They have over 60 patents and 20 unique product categories, and 480 employees globally and had last year approximately $50 million in combined revenues. After having visited both companies multiple times since the merger was announced in the first quarter, I saw firsthand the synergies and expansion of their businesses that had resulted. Both Vision Systems and Gauzy have shown me their expansion plans for their production facilities both here in the U.S. and in Europe and in other areas of the world. Gauzy also took significant steps and made a significant investment to increase the capacity and capabilities of their emulsion production facility in Israel and their SPD film production facility in Germany. Another licensee of ours in automotive, AGP, recently also received $250 million in expansion capital, and they certainly have become quite a bit more active with our technology. I think you'll be seeing their efforts more publicly this year. We took some of the questions previously sent in by shareholders, and here are some additional questions that were emailed to us. From Jared Albert. Hi, Joe. Can you provide a per-unit royalty range for upcoming car models? Well, thanks, Jared. We estimate between $100 and $150 per car in royalty income, depending on the content. Jared also asked, is $40 to $60 per square foot a reasonable range for views electrochromic installed in something similar for the electronics. Jared, I've heard higher costs as well, especially for the wiring and the electronics, but it's hard to tell because their installations are clearly highly subsidized with you paying in some cases up to 82% of the costs. So it's really hard to get an accurate sense as to what things really cost in that world. Another question. Of the vehicles that evaluated SPD and then used PDLC in production, do you have any insight into why the decision was made and any feedback since production began? Well, a lot of the customers have reported that it's just not blocking enough light and heat. And there may be a variety of reasons from using suppliers that the OEM had a separate equity investment in to maybe not understanding fully the limited amount of solar protection compared to SPD that PDLC is able to achieve, but I would just be speculating. But I know that a lot of these customers of these cars are not very happy with the limited level of solar protection that the PDLC is providing. And it's only in small volume, so it's hard to tell really if that's a widely held belief or not, but what's been publicly posted has been somewhat dissatisfaction with the PDLC. Jared also asks, what do you think of the recently published academic SPD study from Saudi Arabia? Do you like the conclusions and was the evaluation process fair and will this be useful in marketing SPD? Well, Jared, to answer your question, yes, I like the conclusions and it's a very useful business development tool for us and our licensees. I also like the fact that the demographics and climate where it was done Saudi Arabia are great for early adoption customers. And here's a sample of some of the conclusions from that study. First, the scope. In this study, the overall energy consumption and visual comfort of a suspended particle device or SPD smart window were investigated as part of the glazing integration of an adaptive building designed to consume less energy in a hot desert climate. So they're building an energy-efficient building and designing it especially for hotter climates. A typical floor of a commercial office building in Riyadh, Saudi Arabia was chosen for the energy and visual comfort simulation. And here are some of the conclusions from the study. The simulation results indicated that switchable SPD smart windows in the off and automated states achieved a promising reduction of net energy by up to 58% against double glazed low E windows. Well, double-glazed low-E windows, as people in the industry know, are pretty much the high end of energy efficiency. So it's 58% better. Another conclusion. The energy required to operate an SPD smart window in the fully powered state, transparent state, is very low at 3.96 kilowatt hours per year per square meter. Think about that. Four kilowatt hours per year per square meter. Divide by 10.79, and you get square footage. When compared to the total energy consumption, it's very low. Another conclusion, the net energy savings associated with integrating an SPD Smart Window with Allspace would reduce the overall energy consumption, making this type of glazing an energy-efficient product. The SPD Smart Window offered a significant reduction in daylight glare probability, and solutions using automated controlled SPD Smart Windows would offer an excellent balance of energy performance, the elimination of discomfort due to glare issues, and the provision of sufficient daylight for office buildings. And then the final conclusion, thus controlled switchable SPD glazing can be a good alternative to standard glazing in a hot desert climate in terms of reducing energy use and providing visual comfort. So to answer your question in a nutshell, yes, I'm very happy with the results of that study, and as I mentioned, this would be a great resource for architects and a very good business development tool. We discussed a lot of exciting topics so far, and today I'd like to ask our operator, Paul, to open up the conference to any additional questions people participating today might have that we haven't already covered. So, Paul, if you wouldn't mind opening up the Q&A queue.

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