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.

If you'd like to ask a question... please press star 1 on your telephone keypad now. You'll 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 Chuck Michaels.

Your line is open.

Yes. Hi, Joe. I just had a question. I wasn't aware of this, but I saw in your press release that you indicated there's a new aircraft model that debuted in early April. Can you give us more information on that?

Yeah, I'm still somewhat limited to what I could say, but this was debuting at the Florida Air Show. And, you know, earlier on in the call, I congratulated Vision Systems on this, another win that they had. It's a really interesting, it's a high-speed turboprop, the Daher TBM-960. So just like the King Air, you know, turboprop, this is a, you know, a very nice-looking plane. I don't know if you've seen pictures of it. And, you know, I think it's going to be a very popular product in that. Okay, thank you.

Thanks a lot. Thank you. And we have a question from Claire Hodden.

Your line is open.

Hi, Joe.

Hey, Claire.

See, I was wondering, you know, at one time you said that research frontiers was being covered by more you know, brokers and that type of thing. Yet the, you know, the volume on our stock on Reefer Research Frontiers is around 29,000 shares a day. And you compare that with Vue, which is, you know, I feel is an inferior product, is getting over 800,000 shares a day. Do you think there's any explanation for that?

Yeah. View started out as a $4 billion market value company, and it has a very, very large number of shares outstanding. Having said all that and having started with a very high valuation, they have lost year-to-date 61% of their value. and that's year to date. So they went from $4 billion before they went public to about $345 million right now in market value. So it's just the number of shares that they have, and unfortunately for them, the volume has been down volume.

Okay. All right. Thank you.

Thanks a lot. Thank you. As a reminder, if you do have a question – please press star one on your telephone keypad now.

We have no further questions in queue at this time.

Yeah, we got one emailed question. One of our shareholders, David, asked, and a couple of other shareholders had emailed in a question about the other public smart window companies, View and Crown. So, basically, the questions, just to kind of combine them, were, you know, what can I say about their businesses? How do they compare to Research Frontiers? And what about their recent performance? I'm going to go into some detail, I guess, because first of all, it's a broadly asked question. But it's also one that I receive quite often, especially this year. And I'm also going to combine this with another question I get and spend some time on this, too, because as you'll see, these companies have actually helped research frontiers and our licensees in multiple ways beyond just bringing awareness of smart windows to customers. I'm going to start, though, by kind of putting this in context. Last year, we showed our lowest loss in 27 years, and we even had one profitable quarter, which is something that no other smart window company, to my knowledge, has ever achieved. And this quarter, we reported even lower expenses than last year. So I've been asked, why have we mentioned not only revenue, but also lower cost and financial stability in our calls together? And I think when we talk about view and crown, you're going to maybe get a little bit more appreciation for why that's important. And of course, higher revenues and lower costs makes profitability closer. And it's also just a great indication that your company is managing its affairs as efficiently as possible. But there's another reason that this directly relates to operational success. And that's confidence by smart glass customers and the stability of their suppliers. So now let me answer the question we got about you and Crown. Crown has not reported their first quarter numbers yet, but based on all public indications, they continue to have no sales. They have once again pushed back the anticipated date of their product launch from last quarter to now being this summer. And today they announced that their co-president and chief marketing officer resigned and left the company. Their stock's trading a little over a dollar as of the close today. Also, in their last conference call, while they were somewhat optimistic that they would be able to make their inserts wider than six inches, they have not achieved this yet. And their immediate goal is to do six inches and then achieve 12-inch wide inserts and eventually go up to widths that are comparable to what the industry needs to cover a typical commercial window. And we know from our experience over 20 years ago that it is a great distance from a commercialization standpoint going from six inches to 1.8-meter widths. And, you know, that's the width that our licensee, Gauzy, can achieve in their factory in Germany that's dedicated to the production of SPD Smart light control film. So the crowd would have to be times wider than they can achieve now to reach that goal. And I hope they do achieve this because side-by-side comparisons of SPD smart glass to their inserts would be quite favorable to research frontiers and our licensees. That's Crown. Another public smart window company is Vue, and Vue does have sales, but Vue has not filed their financials in quite a while, and this has certainly been a terrible year for them and their investors. VUE originally indicated in early January that they expected to file their restated financials for 2019 and 2020, so going back away, as well as the 2021 financials by this past March. And they reaffirmed this in late February. Then about two days later, two of their directors resigned, including the one that is their board chairman that was appointed to fix their accounting issues. And they stated in their resignation that they resigned because Apparently, they did not think that Vue did what they were supposed to do to adequately fix the accounting mess. In March, their head of R&D, who also developed their Vue's manufacturing process, abruptly resigned. He had been with Vue almost since the beginning. And in early March, Vue withdrew the registration statement with the SEC that they had. And when the end of March rolled around and Vue missed their stated March target date for filing their corrected documents, and new financials, they said they would now file them sometime in May. And if they do in fact file them later this month, it will be interesting to see if their cost of revenue is still $3.75 to about $4 for every dollar of revenue they generate. So they're basically, for every dollar, are paying almost $4 in costs of goods sold. So not a very good economic model. But Just going a little further, and I think this will make a lot of sense as to why this is positive for us. It's not just bad luck by a competitor because I do wish them well, but given the nature of the accounting issue that they claim they had regarding warranty reserves from defective products and their more recent claim that there were no other accounting issues that they had uncovered, it seems to me that that they should have been in a position to file their restated financials a while ago, but for some reason they didn't. And what I believe is really behind this other than the accounting problem and a defective product from the warranty claims is that he was quickly running out of cash. And filing their financials in March would have resulted in them having a dreaded going concern opinion about their ability to remain in business. So my educated opinion, for whatever it's worth, that Vue is currently trying to quickly raise money so that when they eventually do file their financials, it will not have a going concern opinion in them. But apart from kind of the direct reasons for this question about our public smart window competitors, there's been a more direct impact on our business, and it's positive for us. We recently learned from industry sources that Vue's customers are are concerned about the continuing viability of VIEW moving forward. And given their lack of financials and their very large losses that I think last year were about $260 million a year, I guess they were also able to piece together the situation that I outlined above and were concerned about it as well. And because of this, our licensees have been approached by VIEW's existing and prospective customers who are looking for a more financially stable and reliable supplier of smart windows. And these customers will find not only that our licensees are well capitalized and have a very stable businesses and supply some of the largest and most demanding customers in the world, but they'll also see firsthand the superior performance and the liability of SPD Smart Glass. And, you know, it seems now that, you know, the additional factor is not just the cost of the product, but whether the company supplying it will be in business, and customers are beginning to take that into effect. And, you know, don't get me wrong. I really wish Vue and Crown well. I actually wanted them to do well because Vue and Crown actually act as a great reference point for customers of our smart, SPD smart technology, which has superb performance and, has proven durability in tens of thousands of cars, boats, aircrafts, and architectural applications. So it was always good to have that reference point, you know, a window that switches in 40 minutes versus ours that switches in two seconds. Or if you see pictures of competitive technologies, you very rarely see videos because they take so long to switch. But if you see pictures, you'll see that they don't get very dark also, and that's a problem. So... you know, I do wish them well. I'm not sure if we have any other questions in the queue. I think I see one actually.

Yes, we have a question from Leonard Liesow.

Hey, good afternoon, Joe. Hey, Len, how are you? I'm fine, thank you. I wasn't aware of that Saudi report, which I think is absolutely wonderful. As you know, I live down here in Florida where there's a lot of heat and we're looking forward to getting, you know, windows for residential use. And I just wondered if you've had any continued success with PGT or some supplier of windows down here in Florida where that might be a likely event anytime soon.

We have. And Len, you know, thanks for mentioning PGT. one of the premier impact-resistant, hurricane-resistant window suppliers in Florida. They make a great product. A lot of the buildings down here that, you know, they have to comply with the Dade County hurricane standards, and PGP is often the preferred supplier of that here, you know, in Florida where you are. We do have a good relationship with PGT. We also have other very well-respected high impact resistant window manufacturers. Some have considerable experience with our technology and also with just impact resistant windows in general and even retrofit applications so that in large cities like New York where when you want to replace the windows, you have to put up scaffolding and you have to get either co-op or condo board approval and, you know, the building department approvals and things like that. With a retrofit done from the inside, you don't have to do that. So it really changes the game in terms of how smart windows can be introduced into those buildings. And, you know, as you know, I believe you're on the west coast of Florida. There's a lot of economic activity and construction going on in Fort Myers and Naples and just a lot of beautiful, you know, buildings going up. You know, on the east coast of Florida, you know, Miami, Aventura, Sunny Isles have magnificent buildings. And, you know, our licensee, Galsi, actually has an office in Aventura. So that puts them very strategically located and You know, they've been working on some projects for SBD that I think are going to be highly visible when they come out.

That sounds exciting.

It is. You'll be able to drive to some of these projects and see them.

Yeah, well, I don't know anybody that's building more than they are in Sarasota right now at the Bayfront and everything. There's lots of projects going on here as well. So I think it would be a very welcome addition. if we can get it operating here with some of the local manufacturers. So I just wondered if that was something we could look forward to in the next year or so, or is it going to be longer?

Yeah, in the last month or two, I've been in your area at least three or four times. And I apologize for not stopping in, but they were in and out for project discussions.

Okay, no problem.

When you get a chance, let me know. I will. I will. Thank you.

And as a reminder, if you do have a question, please press star 1 on your touchstone keypad. And we have a question from August Berman. Your line is open.

Hey, Joe. How are you?

Hey, Dr. Berman. How are you?

I'm well. Thank you. Just a couple of questions for me. First is, and I'm not sure this is an ask in the past, with the Hyundai investment in Gauzy, does Hyundai have any say in terms of, Gauzy, we don't want you to make any kind of big-time deal with any other OEMs until Hyundai goes first, or is there not a restriction? My thinking is that maybe Hyundai has to go first before the doors open to other OEM customers?

You know, that's an excellent question. Well, I'll answer it first by saying I don't believe there's any restrictions because I know that there's multiple projects going on in the automotive industry, and some may actually come out ahead of Hyundai. So I don't think there's any restrictions. But, you know, one of the things to understand about Hyundai, and we had this experience with Mercedes. I felt like I was asking them if I could date other women in the beginning because they were our launch customer, and, you know, I had a number of car companies that wanted to adopt this. And I approached them, and I, you know, first delicately asked the question. They said, Joe, of course. You know, we want you to work with other companies because the higher the volume, the lower the cost. The lower the cost, the more cars we can put this in. The more cars we can put this in, the more our customers are going to like it. Very simple approach. And I even learned that car companies will also license key innovations to their competitors. So for that very reason, they want to get the volumes up. They want to, you know, strengthen the supply base. They want to get the cost down. I don't believe there's any restrictions in there. You know, of course, you want to be as nice as possible to your best customers, but I don't think that means, you know, turning down others.

Okay. That's perfect. And so I know my second question is, I internally have my set of pipeline in terms of what I think is going to happen with SPD in the future and other OEMs. Does 23 look better than 22 in terms of more adoption? We're talking about 2 and 22, and Do we see an inflection point at that point where we say, okay, now we've got two more and we're going to get four more the following year or any guidance in that area?

Yeah, well, I think it's always going to get better and one of the reasons is that in terms of our revenues, you know, if you think about a typical car project, a car program lasts about eight years. So for eight years, you're in the car and So in year one, you're in, let's say there's two cars that are introduced this year. So there's two new cars that come out this year with our technology. Next year, those two cars are still there. Plus, you know, you have the Cadillac coming out in 2023. You have other, you know, car companies coming out. So it becomes accretive. You're adding layers of revenue on top of existing programs. And then, you know, superimpose on that, you know, the grand scheme, which we'll talk about, which is, Almost every car company in the world has accelerated their electric vehicle program. And remember, we can increase the driving range of electric vehicles by 5.5%. So strategically important is, you know, the quicker the adoption of electric vehicles, the better we're going to do. So all of those are very positive trends.

Okay.

Oh, and one other point, just to give you a more complete answer. You know, typically, you know, in the first year, you know, the car programs are starting up and things like that. By year two, they start to market it more and people get more comfortable with the new car models and things like that. So you could also expect, you know, kind of a natural increase in volumes, you know, for the first several years of a car because of that.

Okay.

Perfect.

And then lastly, and maybe that's the most sour question, any talks with Mercedes? Are they still going? Are they still ongoing? It feels like they haven't adopted PDLC. They haven't adopted PDLC, so SPD still has to be out there. It's just like, why? Yeah. Yeah.

Yeah. Well, if you remember, Mercedes first used PDLC before they used SPD. They had it in the Maybach, and it was not very good of a product. It actually created a greenhouse effect inside the car where heat would be trapped and not be able to get out. So instead of blocking heat, it was actually trapping and making it worse. You know, as smart as Mercedes was back then, but remember also when they did do that, we weren't in existence in commercial production yet, so it felt like they had a choice But once they did have a choice, they went with SPD. And we have very good relations with everyone at Mercedes all the way up to the chairman level. I remember Ola Kalanius when he was an up-and-comer but wasn't in the top four executives. And, you know, our consultants who, you know, said, keep an eye on this guy. He's going somewhere. And they were right. But, yeah, we have a good relationship with everyone at Mercedes, and I expect that when they are ready to introduce the car they have targeted, you will see SPD in it.

Very good. Thank you, Sal. Thanks.

Thank you. And we have a question from William Brazel. Your line is up.

Good afternoon. Hi. Yeah, I've been on several of your conference calls. I've been an investor for three years. I've noticed your stock prices range from $1.36 to $5 over those three years that I've been an investor in, and right now it's near the low end of $1.70. Can you comment on why we have that stock price besides a lack of revenue?

I don't know. I don't think you could.

You keep talking about using expenses, but we need some significant revenue. Otherwise, if we end up today in an investment environment, if they don't show a profit, I don't think the stock's going to go anywhere.

Right. Well, of course, our goal is to have higher revenue, and every good company should have that as its goal. If we look at two factors, I think, that are really important. what go into our stock price, you know, one is supply and demand. Our demand hasn't changed. I mean, our supply hasn't changed. We've had, you know, just under 32 million shares outstanding for the last couple of years. So we're very careful about not diluting shareholders with stock offerings, which tend to weaken a stock. But we're also in a market cap that wasn't one that was attracting a lot of money. Most of them flowing into the FANG stocks and you know, that's the supply and demand. You know, small caps for really not participating in most of the market. If you look at our current price today, you know, year to date, we're about flat. You know, year to date, the Russell 2000, which is, I guess, the most comparable index, is down almost 18%. You know, the NASDAQ is down almost 23%. I don't have to tell you, you know.

Oh, I understand that. If you don't have the increased revenues and there's no confidence on the street, there's no confidence in the street on this company because you don't even have the ability to bring it to home plate and increase these revenues significantly.

Oh, I disagree. I think if you've been listening to the calls, you see that there's a lot of things that are in the works and because the nature of our business is not to, you know, our primary business and revenues right now are not selling buildings, okay? It's automotive. These cars come online and, you know, the day before start of production, there's no revenues. The day of start of production, the revenues start and that's the way it works, you know?

And if you have enough of these- I understand that, but as of last quarter, you still don't have the revenues to report. I mean, I know, I keep hearing quarter after quarter that, Things are going to get better, but I'm still waiting for the day when you're profitable.

Okay. So you know what's happened to unit volumes in the automotive industry in the last year and things like that? I mean, if you're dependent on the automotive industry, which is where our primary market is, that's also – you're going to rise and fall somewhat with that tide. And if you follow those industries, you know that it's been a very disrupted year between

Yeah, I understand that, but that's just one segment. I thought the big industry that you could really hit a home run in is in the architectural side.

Right, exactly. And that's the one that we said is just coming out now. But if you look at our bread and butter, where the revenues have been coming from, they're mostly coming from automotive. And that's been true for the last 10 years. But look, we always want to do better. I'm a shareholder like you. I've been a shareholder that paid... you know, in some cases in the 20s for the stock. So there's probably nobody on this call as motivated as I to, you know, show positive revenues and things like that. And, you know, what I'm trying to do right now is at least show you where those revenues are likely to come from and, you know, what we have in the works and what the path to that profitability is. And it's hard to see it, but we'll talk about that in a little while. But I thank you, and look, I share your frustration.

Now, hold on. One point that I have is for this company to get into that $100 million, $50 million, $100 million or more in revenues, I would think it would have to be mainly come on the architectural side, wouldn't it?

No, not necessarily. If you look at the market for just premium automobiles, so cars above, let's say, $60,000 in MSRP, hold on. Nowadays, it's probably higher because of the inflationary aspects that are going on in all car segments. But if you just look at that and you look at that being about 3% of the unit volumes, you know, you're talking about, you know, 100% of that market would be about $200 million in revenue through research frontiers. Now, of course, we're not going to get 100% of the market, but you could see a big chunk of that can come and a big significant increase in our revenues could come from just being an automotive sunroof. And, you know, if you've been following, you know, some of the developments in our industry, car makers are not only looking at us for sunroofs but other things as well. So, you know, I expect this to be a good market. But, you know, the good news about being our company is we can be in five different markets. We could be diversified without having to, you know, spend money building factories. Our licensees do that, and they have been. and that should tell you something also.

Well, that's one reason why I invested in the company, because I know you have such a low overhead, and since you run the royalty business and you just take a fee from your vendors, that's one reason I invested in the stock. I thought, man, you could really become a cash cow, and then you would actually even be paying a dividend.

Right, and that's our goal, to be a royalty-collecting, dividend-paying machine.

Can that happen with just most of your revenue, though, coming from the car industry, or...?

Absolutely. Absolutely. One car could do that for us, but we're not stopping at one car.

Because I like the concept.

I guess the idea... I guess what I like to do, and look, everybody has their own things that they look at in making decisions, especially investment decisions. I like to look where the smart money is going. And You know, the smart money in our industry is by our licensees making substantial investments in SPD technology. You have to ask yourself, why are they doing that? And I think the answer is, you know, they see with a better crystal ball than we do even, you know, what their business is going to need.

I just think the market will take a double check on your stock if you could just be – start getting one or two quarters where you're profitable, and then I think that would really open up for us.

And I'm going to talk a little bit about that in my closing remarks, but I agree with you 100%. No, I agree with you 100%, though. Thank you.

Thank you. Okay. And we have a question from John Strobel.

Your line is open.

Hi, Joe. I asked this question at the last conference call, and I'm kind of looking for an update on your thoughts because the world has changed dramatically in these last two months. It looks like Russia is unlikely to be a customer of any SBD products for years. They're essentially out of the business of trade. And in China, which has created catastrophic backups to supply chains worldwide with their shutting down various cities with COVID, do we have enough materials to reach our goals?

Yes. That's an excellent question. And let me also... take the other part of that question. The two big markets for automotive is China, the largest one in the world, and Russia used to be a big market for premium cars especially. So it certainly is not good that two of the major markets for automotive have basically dried up. They will come back. These things happen in cycles and, you know, and maybe China before Russia, but whatever. I don't have a crystal ball in world politics. I focus a little more on the economics. But the other part of your question is actually an excellent one, too, and I'm happy to say that we don't really have a very high dependency on components from China or anywhere else, really. You know, so... Most of the items are manufactured in Europe or the United States, and, you know, the key components of this are in Israel. So, you know, all very stable places for these things. And I don't foresee a supply chain issue with any of this stuff, but it's an excellent question. You know, I focus a little bit more on, you know, what can we do to, you know, maybe focus more on North America, Europe, and the Middle East in terms of their car markets first until, you know, maybe China comes back online because that was a very big market for every premium car company in the world, you know, especially Audi, Mercedes, and BMW.

Okay. Thank you. Thank you. And we have a question from Francis Coterva.

Your line is open.

Hey, Joe. How are you doing? Hey, Francis. How's it going? Pretty good. With one film laminator, Gaussian Germany, is that the only plant that will be producing the laminate?

No. So there's two film producers, Hitachi Chemical, which, you know, was bought by Showa Denko, and there's Gauzy. Gauzy is the only one that can coat film 1.8 meters wide. The production line at Hitachi was one meter wide, which was perfectly fine for a lot of the applications like, you know, sunroofs and trains and things like that. But what we found, and this was a condition to doing business with Gauzy, we said we won't license you unless you you know, build a facility that can coat film at least 1.5 meters wide, but, you know, they might exceed expectations. They did 1.8 and actually can go a little bit wider than that. But, yeah, so they're the only ones doing, let's say, architectural widths.

Is there a large difference between the two films if you were to actually look at them, between Gaussian? No.

No, I mean, I've done side-by-side evaluations of both films. They're both excellent films. If I had to give you my qualitative assessment, and I hope I don't get in trouble with Hitachi by doing this, you know, Hitachi's film has been the workhorse of the industry for over a decade. And it's a great product, and they did a beautiful job with that. And as A nice range of light transmission. You know, it blocks 99.5% of the light in the dark state. It allows about 55% of the light in the clear state, which gives you 110 to 1 contrast ratio, which looks really dramatic and, you know, really does a great job of blocking heat, light, and glare. So it's a great product. As great as it is, when you put the Gauzy film next to it, it looks blacker for the same coating thickness, and it looks clearer. Maybe it's just my eyes. Maybe it's the area of the spectrum that it's operating in is a slightly different one. It might be just, you know, something as simple as a better dispersion of the nanoparticles inside the film. But, you know, they're comparable in terms of they both are using the same materials. One just looks a little bit different. And, you know, my eyes maybe a little bit darker and a little bit wider range of light transmission.

Now, you also, you didn't mention anything about TVs. How's that progressing?

Oh, I'm going to mention that in my closing. I'm going to mention that in my closing remarks, but that's going well. And, you know, if you will hold your question until I can say something about that, I'm happy to talk about it.

But now, as far as architecture goes, the film being installed in sunroofs, it's only for vehicles like 60,000 and above. Right now.

Would it be competitive? Right now. But, you know, if you look at who some of the entrants might be, some may be premium car makers and some may be, you know, higher volume car makers like Hyundai. So, you know, let's see where everything goes together.

Will the price point come down to where it could actually be feasible to use in architecture? Oh, absolutely.

Absolutely. I mean, right now, without subsidizing, I would say we're cost comparable to, you know, what we think of you window really costs. Actually, we think we're better that we're better, we're closer to what their subsidized prices than what their actual costs are. But I don't want to go into detail because I don't set pricing. But yeah, it's definitely feasible for architectural and certainly feasible to get, you know, the costs have already come down a lot with Gauzy entering the scene. And, you know, just having some competition to the show of Danko, you know, Hitachi film that the costs have come down and can make the market cars even, you know, quite feasible.

So now you mentioned subsidies. Do you expect that to happen with possibly the government with green buildings? Yes.

Well, there's a bill in Congress right now, the Dynamic Glass Act, which would give substantial tax breaks for putting switchable glass like ours in buildings. So that's clearly a tax expenditure that is subsidizing the market if it passes. But also, you know, just I never rely on subsidies. You know, what we've been focusing on from day one, is making this technology more affordable. And you do it through picking the right people in the supply chain, designing the technology properly, and, you know, really just, you know, crossing your T's and dotting your I's and, you know, doing things like that. And if you look at the history of things, you know, the costs have come down, but then they went down a lot recently. So, you know, we may not – you know, I'll quote one of my licensees who years ago saw – Sango Van had supplied Ferrari with the electrochromic roof for the Super America. And it was a disaster. I mean, it didn't work well. Cars came with the glass broken, so they couldn't deliver the cars to customers. It wasn't a very positive experience when they were doing this. But on top of all that, they were losing between $2,500 and $5,000 per car. And one of our licensees who ended up doing high-volume business with Mercedes using our technologies, but Joe, we're not in it for a marketing gimmick. There's a total of 600 of those Ferraris that were produced throughout the life of the program. It's a marketing expense for the supplier of that. We're in this to make money, and all of our licenses are in this to make money. So we're not interested in subsidizing, although we certainly welcome that. And like I said, the Dynamic Glass Act would certainly – put a lot of wind in our sails there. But I think you're also seeing, if you will, an indirect subsidy. I mean, this is now the economist in me coming out. But if you look at higher energy costs, and we are, conservation of energy becomes a lot more valuable to people. So something that wasn't affordable when gas was $1.98 a gallon may be a lot more valuable and viable you know, when gas is 450. And Europe has been living with high energy prices for quite a long time. And if you notice, they tend to be on the forefront of energy efficient buildings and installations and incentives and things like that. So, you know, you have that going on too. Of course, I wish that energy prices will come down. I think that, you know, Our role is not to sit there and ride the wave up with higher energy prices, making our technology relatively more affordable. Our real job at Research Renteers is to bring the cost down so that no matter what energy prices are, this is a good thing to put into your buildings or into your cars or into your boats.

Now, you also mentioned it going in a lot of electrical vehicles. Are there any internal combustion engines that are going to be using it?

Yes, and one of the drivers there is the fact that we actually reduce CO2 emissions in ICE vehicles by four grams per kilometer, which is very significant.

Are any of those vehicles going to be announced soon? I think you'll see that, yes.

Look, the industry is waking up to the fact that we could extend the range of electric vehicles and reduce CO2 emissions in cars. It's a good thing. We've been working hard and with that messaging for the last three or four years to just constantly, you know, get that out to the industry. And it works.

You know, they realize it. How close are the sun visors? I think they're very close. I think they're very close.

And I think you'll see sun visors implemented in a lot of different ways in a car. Let me just leave it at that for now.

Okay. Thanks, Joe.

Thanks a lot. Good talking to you.

Thank you. And our final question comes from Alan Denzer.

Your line is open. Yes. Hello, Joe. Hey, Alan. Alan, how are you?

Joe, it's been tough. It's been tough.

I know it's been tough. I think we've been relatively better than other tough investments, but I'm not satisfied with that. I would like, as a shareholder... for our shareholders to show a very nice return on their investment. So we're working hard for that.

Right, right, right. One thing I just wanted to follow up on that no one seems to have asked in the last number of conference calls, and if you could just tell us, whatever happened to the Brazilian armored car contract?

So the SER in Brazil has – run into a lot of difficulties. Brazil was severely, severely, severely hit with, you know, COVID shutdowns and, you know, perhaps they didn't approach things the right way as a country. I don't want to judge anybody on that. But they were very, very severely hit. They also had some successes. SPD was demonstrated on, you know, cars by major manufacturers and they were armored cars. but I think you'll also see our class come out elsewhere. So I don't think it's a vacuum. I mean, I don't think it's – I think it's – I'm sorry, say that again?

Is it dead, that contract?

No, there's still a licensee, but, you know, the company is still climbing up from, you know, some very difficult times, as you'd expect.

So do you expect it to eventually happen or not?

I think so, and I think that some of their competitors are licensees of ours, too. So if they're not the ones supplying armored glass in Brazil, we already have licensees with even more experience with our technology doing that.

Well, feel free to criticize any government you want, including ours. You're still living in a free country, presumably. Thanks a lot, John. Good luck to you.

Thanks a lot, Alan.

thank you and we have no further questions in queue okay in that case i'd like to um you know first of all if we haven't fully answered anyone's questions you know either ever emailed to us or during a live q a today um feel free to email us we'll do our best to answer what we can and i just want to make a few closing remarks I mentioned last year we showed our lowest loss in 27 years, and I explained why that's important. And we even showed a small profit one of the quarters last year. And I think that's significant because it's something, first of all, that no other smart window company has ever done, to my knowledge. And I think even more significant is we expect to do it again. And as I mentioned in the past, as a company approaches profitability, and you've seen this with companies even like Tesla where they had a profitable quarter and then a couple of quarters of losses, and then they became sustainably profitable. Revenues are often choppy, but then they usually smooth out. And we expect consistent profitability once the SPD smart glass industry hits its stride. And today you heard more about what that path to sustained profitability looks like and the progress that we and our licensees and our customers have made along that path. 2021 began a year of great accomplishments for your company in that area, and these continued into 2022. These accomplishments included new cars announced by Cadillac, more cars by McLaren, and even a new government contract in the area of specialty vehicles. Also, innovative projects by other automakers showed new uses for SPD, such as BMW showed at the Munich Auto Show. Prestigious publications with millions of readers each have highlighted the range-extending benefits of SPD smart glass in internal combustion engine and electric vehicles, and that highly coveted 5.5% increase in driving range. They also noted the significance of the 4 grams per kilometer reduction in CO2 emissions when SPD smart glass is used. And the industry has also recognized other benefits. SPD technology makes people more comfortable and safer, and it protects the interiors of homes, and cars. It reduces noise. It strengthens glass and makes it safer. Bentley noted that a fixed non-movable panoramic roof in cars can also reduce the weight by using SPD Smart Glass by up to 13 pounds and eliminate the need for about 54 components. So this reduces costs and further increases driving range and reliability while contributing to the stability of the car on the road. Hyundai, Sekisui, and others invested heavily that are heavily involved in the automotive industry have made substantial investments in our industry through equity investments in our licensee, Gauzy, who recently raised even more expansion capital. And when I was at CES this year, the chairman of Hyundai Motors himself, along with his CTO and, believe it or not, the Korean Economic Ministry, visited us at Gauzy's booth where the SPD sunroofs were on display. In aircraft, planes manufactured by Airbus, Epic, and last month, Daer, with their TBM 960, joined the other aircraft, such as the King Air and the Honda Jet, and a host of helicopters that bet from our SPD technology. And also, now that Galaxy is shipping wider SPD film, we saw the beginning of shipments of SPD smart glass for the architectural industry and more train projects. And I mentioned there's activity going on that could even make those windows retrofittable in the architectural market. You also saw industry giants like LG Display of South Korea combine their transparent OLED display technology with SPD film to make vibrant high definition displays and televisions that turn into a clear window at the touch of a button. And these were exhibited at the Munich Auto Show and at the January CES in Las Vegas. And one recent report indicates that LG has moved forward with their plans for this new TV with a 55-inch transparent OLED SPD screen intended for the home entertainment market slated for release in 2023. You mentioned two new car models in Q3 and Q4 and additional aircraft such as the Epic and the Dayer. During the year, more and more car companies increased their investment in electric vehicles and accelerated their timetables. All these are very positive. Every major car company has announced an electric strategy. Energy efficiency and reduction of CO2 and other emissions is an important topic in this world. And this year, we also demonstrated a new concept in solar protection for a major automotive OEM on one of their new electric vehicles. And I'm pleased to announce today But now a second vehicle also is being targeted by them. As noted, we expect revenues from these new automotive programs to start coming into the start of production of these vehicles beginning in Q3 and Q4 of this year and with the Cadillac Celestique in 2023. Plans by key licensees of ours to further expand production here in the US and in Europe are in the works. And the merger between our licensees, Gaussian Vision Systems, created a powerhouse in the smart glass industry, focusing on our SPD's technology. And unlike competitors View, Stage, and Crown in the architectural space, we not only have a proven technology and one with demonstrably better performance, but we also have wide coverage and much better economics and logistics for a film-based technology. We're excited about all areas of growth for our technology. And today we spoke about more cars, more yachts, more trains, architectural projects, and new applications such as consumer electronics and adaptive headlights such as the one that BMW has shown. We and our licensees continue to work hard to continue and build upon these successes and have made substantial investments to expand their resources and their production capacity. I hope to see some of you in person at our upcoming annual meeting of stockholders on June 9th that's being held at our company headquarters in Woodbury. That meeting will mostly be administrative, re-electing directors and approving our accountants, but it's always good to meet in person our shareholders who have put their trust and their money and their faith behind their efforts. I want to thank you all for being part of that excitement and for your continued support and trust as together we move our company and our industry forward. Thank you very much, and those celebrating, have a great Mother's Day this weekend.

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