Research Frontiers Incorporated

Good afternoon, ladies and gentlemen. Welcome to Research Frontiers Investor Conference Call to discuss the second 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 will be available starting later today in the Investors section of Research Frontier's website at www.smartglass.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 question, 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 call over to Joe Harari, President and Chief Executive Officer of Research Frontiers. Please go ahead, sir.

Thank you, Caitlin. Welcome to our call. It's great to have you. And hello, everyone, and welcome to our second quarter of 2022 investor conference call. Research Frontiers remains in strong financial condition. We continue to have no debt, and as of June 30, 2022, the company had cash and cash equivalents of $1.9 million, working capital of $2.3 million, and total shareholders' equity of $2.4 million. The company expects to have sufficient working capital for at least the next two years of operations, which would take us into the middle to late 2024. This is based upon our lower quarterly burn rate of $300,000 to $350,000 per quarter, with higher projected revenues during that period, mostly from new car models. 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. That's pretty electronically dimmable windows by Vision Systems in the new Epic aircraft and in the Daher TBM-960 aircraft. You know, a lot of people are worried about the recession and inflation. Some have asked me how these items will affect Research Frontier's business going forward. Some of you may know that I started my professional career as an economist at the Federal Reserve Bank of New York. That experience taught me to look for broad macroeconomic trends and also to look for and act upon based on leading economic indicators. When I was at the New York Fed, we were experiencing high levels of inflation, like today's That was driven by disruptions in the labor market and international debt crisis, high energy prices, and a variety of other factors. Does that sound familiar? Ronald Reagan had just become president, and my ultimate boss was Paul Volcker. But with some pain and focus and applying basic principles I learned studying economic tools and history, we were able to fix things. And even though we went through this four decades ago, I never lost the lessons I learned from that period. Research frontiers has been through eight recessions. Probably the most recent one that had many of us worried, other than perhaps the current situation, was the world economic crisis in 2008. But if you look back on that period, companies that produced high-end products, such as Mercedes, Porsche, and Audi, and BMW, have reported in some cases even record profits. Nothing is totally immune to reduced economic activity, such as a recession, But some of the businesses we are in are felt to be recession-proof, and history has supported this. I, of course, do not wish high energy prices on anyone, but we're also seeing in the United States gas prices that only existed in Europe historically. If you look at how Europe reacted to that over the last few decades, they tended to be on the forefront of energy efficiency in cars, homes, and offices. Our SPD technology makes a major contribution in this area. Our SPD smart technology can increase the gas mileage of cars, lower CO2 emissions by four grams per kilometer, and extend the driving range of electric vehicles by 5.5%. The data also shows that we can lower heat inside a vehicle by 18 degrees Fahrenheit. So we expect that even though there is uncertainty and turmoil in other parts of the market, If history and experience is a guide, research frontiers and our well-run licensees will actually do quite well. Am I worried about inflation? Well, personally, yes, but professionally, no. Our license agreements have built-in inflation hedges. In addition to certain CPI adjustment provisions in our license agreements that benefit us, more importantly, remember that we get paid on the percentage of sales by our licensees. Simply put, the higher those sales, the higher our license royalties. And going back to my experience at the Fed, I mentioned that we look at broad macroeconomic trends, and today we spoke about some of the bigger ones, such as recession and inflation. Now let me talk about leading economic indicators, which is the other thing that I used to focus on as an economist to get a clear look at the future. In our last conference call, I reported on multiple car models that were expected to come out in the near term using our SPD smart glass technology starting in the second half of 2022. As I mentioned, that's still on track. Also, the information that we have received is now that even more cars than originally expected will use SPD near term. My internal estimate is that these near term automotive introductions can use more than double the amount of SPD film sold by Hitachi in their best year so far. I may be wrong, looking again at the leading indicators. Gauzy has made substantial additional investments in expanding production capacity. So the area that I may be incorrect about is not whether our business will expand, but by how much. I spoke about a doubling of the levels of SPD film from our best year. Gauzy is almost done with quintupling their production capacity. I think that investment by Gauzy and also the follow-on production capacity increases by other key licensees and the need for a 5X increase in SPD film capacity is the most important leading predictor of economic activity in our industry. And Gauzy has been productive in many other areas on the business side. On the personal side, I want to take this moment to send a special congratulations to GALZI CEO Eyal Paitho and his wife, Sapir, on the birth of their new son earlier this week. Eyal, nothing made me happier than to see the photo of you holding your new son that you sent me from the hospital that day. Mabrouk, mazultav, and congratulations. See, I did that in three languages. With that, I look forward to answering your questions. Kayla, let me take a few that were emailed to me, and then we'll open the queue up for additional questions. First, Jared Albert. Can you explain how you are generating the prospective cash burn guidance? What revenue streams are you including and excluding? What is the forecast period? Okay. Well, from an accounting standpoint, we look forward 12 months. That's a typical look forward period from an accounting standpoint. from having a clear visibility on where our licensees and their customers are, you know, I look forward at least 12 to 18 months. So we're talking about cars that are coming out the second half of this year and next year. Another question from John Nelson. Are car makers using or planning to use SPD film and heads-up displays? Yes. Any provisions in the Congressional Inflation Reduction Act that would encourage use of SPD? Yes, actually, the Dynamic Glass Act provisions are still in there, and that would benefit us because it gives us tax credits for smart glass by cars. Is the transparent OLED market led by LG and Panasonic growing significantly? It's expected to, and they're making substantial moves in that area. And are there any significant rise in cost to make SPD film? No, there aren't. Jeff Harvey asked, did I talk about Haleo as a competitor with a competitive technology? I had the opportunity to actually see Haleo's product at the CES this year. And, you know, they, like all the other smart glass companies, are using a variant of an electrochromic technology where they have an electrochemical reaction inside the glass. And it has the same limitations that all electrochromic devices have, which is it's slow and non-uniform. Now, what they do to try to mask that, and you can't see it unless you go up to the window to look through it, but that's where people can actually see the glass is there. And you see little grid lines. What they do is they put microwires or microgrids inside the glass to trick it into somewhat of a honeycomb pattern to make it think that it's a bunch of small windows. But it's, you know, very visible when you come close to it, so I don't think it's going to really have the aesthetic quality that, you know, we have in terms of clarity. Jeff Harvey also mentions, we have not heard about architectural wins. What is holding up adoption of SPD in this market? View has won some large applications, and they are in terrible financial condition. Okay, there's a couple things to unpack from that question. First of all, about architecture, we've had architectural projects use the new Gauzy film. The backlog that we're having, which is why also they're expanding their production capacity, is really focusing where their film is going right now to the automotive market and the train market, you know, in particular automotive, though. And architectural is a great market. It'll probably be our biggest market within three years. But right now, the most predictable large market is automotive and trains and also aircraft. So we are focusing the efforts there. You asked about VUE and their financial condition. There's a lot of things going on there, and, you know, I think I was probably one of the first people to pick up on the fact that they had a warranty issue, and that ultimately led to a very extended period of time when they had an accounting fraud going on and they couldn't file their financial statements and finally got everything in shape. When they did file their numbers again, though, they found some interesting things. So in their last financial filing, and the next one is on the 8th of August, so not too far away, they were talking about their revenues being up, from $9.7 million to $17 million. Sounds like a nice increase, except that they bought two companies that are in facilities management and electronics. Their smart class revenues actually went down 37%. So a fairly substantial decline in the first quarter of 2022 versus 2021 of 37%. they were kind of saying, well, our revenues went up quite a bit and our cost of revenue only went up a little bit. Their cost of revenue went up 12%, and we believe that almost all of that, if not all of it, is in the smart glass area. So what they were doing is, in my opinion, fully subsidizing, even to a larger extent than before, their customers' purchases. And that's good if you can do that and reduce your costs and gain market share and things like that. But, you know, with their smart glass sails where they are, we actually in our licensees have higher sales levels historically, and we didn't spend $2 billion to achieve it. By my estimate, unless they raise capital, VUE will be out of cash by mid-November. Our other public competitor, Crown Electric Kinetics, I believe by my estimate will run out of cash even though they did two offerings including one at a pretty high dividend rate of 12% with a redemption premium of 25%. Even with all of that and a million share public offering, they're probably going to run out of cash unless they raise more capital and when they file their financials, maybe we'll know more. by August 25th, so they all have pretty short runways there to come out against. Let me see what other questions we had. I believe that might have been most of them that were emailed, and I thank everyone that took the opportunity to email us the questions so that we can either incorporate them into our presentation or answer them efficiently. So, Kayla, if you wouldn't mind opening up the floor to any questions that might exist.

Absolutely. 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 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 will take our first question from Alan Jimsburg. Your line is open.

Yeah, hi. Hi, Alan. How are you? I'm fine, thanks. Just one question. Just to clarify, you said that Gauzy has increased their capacity, but they also make PDLC. So could you qualify that?

I'm talking about SPD.

Yeah, yeah. I apologize.

Right, right. That's a very good question. They quintupled their production capacity for SPD.

Okay, good. Thank you. That's all I have.

Thanks, Alan.

And our next question comes from August Berman, an investor. Your line is open.

Hi, Joe. Good afternoon. Hey, Dr. Berman. How are you?

I'm good. I'm good. Hey, just one question. I was walking my dog last night. I was listening to a Bloomberg podcast talking about the potential oil crisis, or not oil, natural gas crisis in Europe. and the wintertime, what do we, how do we think about that with Gauzy's SPD factory out there? Would that be an issue? Do they have backup generators in case, you know, it gets too cold? I know it's not exactly the warmest place in the wintertime.

No, no, Stuttgart, Germany, I've been to Stuttgart, Germany many times in the wintertime, and you have to be careful. You know, Gauzy is a very resourceful company. They do have, you know, all of the normal precautions you would see. But remember, they also scaled up their new film production facility in the middle of COVID when people couldn't even come in and out of Germany. So they figured out how to do it, you know, and this is not something that they've expressed to me as anything they're concerned about. Got it. Okay. And if – there's an issue they could always shift things over to Israel, but obviously the production facility in Stuttgart is, you know, much higher capacity, much more efficient, and they optimize for SPD.

Got it. Okay, and actually just one other question that I had. I was looking at Gauzy's website, and they talked kind of a promotional about us with the new integration between Gauzy and Vision Systems, and they talked about In their official press release, there were five manufacturing sites, but on Dowsey's informational, it says four manufacturing sites. Are there four or are there five?

We have to – I guess we have to be a little cautious. They're a company that is expanding in relevant areas of the world, so I don't know what I can actually say or not say. But suffice it to say, they're growing and growing. you know, most of that growth is coming from SPD. You know, when I was there for their, when I was there for their, they actually had their company-wide meeting in the middle of COVID, and I happened to be there, and the people in Israel were, you know, were there physically. The people from different parts of the world were dialing in on Zoom, and they were introducing all of the new people they hired and it just was one engineer after another, one production person after another for the SPD project. And this was way back, you know, in December, 2019, uh, 2020. So, uh, and since then, you know, you, if you go on their website, you'll see their advertising for more and more people. So, you know, once again, a leading indicator that I like to look at is hiring.

Yeah. I, I have seen that in a couple of other shareholders and noticed that too with, uh, determining hiring and then enroll for SB specifically. So that was great to see, Joe. Okay. Well, that's all I have. Thanks, Joe.

Thanks a lot.

Great. And our next question comes from Leonard Litzow, an investor. Your line is open.

Good afternoon, Joe.

Hey, Len. How are you?

Doing fine. Thank you, sir. I guess in your comments today, you were talking about the The near-term markets would be mostly automotive, transportation, trains, et cetera, planes. And that there were several companies going to be using SPD now in the third and fourth quarters. The only one that I've seen publicly announced was the Cadillac Celestique, you know, which is like, I don't know, not that many cars. Right. So are there...

That's coming out in 2023. So, you know, the ones for this year were other ones.

Okay, and nobody's announced what that is. Do you give us any idea of the magnitude of sales?

I think earlier on when I said that these near-term introductions can double our best year in SBD use, And remember, in the introduction, sometimes they're for what some of these companies would consider test markets, you know, test regions of the world and things like that. Even with it just being test regions, you're talking about a substantial increase over our best year. So that's about all I could say. You know, I'm in an industry where you've got to let the automakers speak first, the tier one suppliers speak second, and then research frontiers quickly speak third to draw the connection. But I think that in the past you've heard us talk about, you know, who some of the strategic investors in GALSY were, and you could probably get a good sense from that.

Okay. So the next two quarters, then, we should see that appear.

Yes.

Very good. That's it. That's good news. Thank you very much, sir.

It's great news.

Thank you.

And our next question comes from John Nelson, an investor. Your line is open.

Hi, Joel. How are you doing? Hey, John. I'm doing well. How are you doing, John? Thank you for the questions you sent in before.

Pretty good. You're welcome. I have to ask, I've noticed him, but just because it's such a ginormous market for sun visors – One either, I mean, how is DIME progressing on SunVisor development, and are any of your other licensees working on SunVisor? Because it seems like it's kind of the Holy Grail.

Yeah, well, that's one of the Holy Grails. Let me say yes to your questions, and I can't go into more detail about it. Okay. All right. Thank you. But by the way, just if it's any comfort, it's always been one of my favorite applications. And may he rest in peace, Bob Sachs and I used to drive back west from research frontiers every evening into the bright sun, and every time the sun would hit our eyes, Bob would say, we've got to get this in visors as soon as we can. So it's a pet project for him, and I hope I can honor his legacy by getting that out in a big way.

Amen. Second question, can you explain or just kind of give us a general explanation of what the R&D spend is going to? It's listed in the... Different things.

Yeah, different things. So part of it is going towards new materials that might have different off-state colors. I think that's always been... an important focus for the company to give our customers a broader range of colors besides the sapphire blue that we're currently at. And we've made good progress, but I don't want to promise anything until it's commercial on that. And, you know, other areas as well, including supporting our licensees, you know, with their efforts as well. So helping them do it better, faster, and, you know, and improving the technology consistently.

Great. Okay. Thanks very much. It sounds like we're on the cusp.

Yeah. Thank you, John.

And our next question comes from Art Brady, an investor. Your line is open.

Hi, Joe. Art Brady here.

Hey, Art. How are you?

Good. I wanted to know, December 5th, Russia is supposed to stop oil or gas production. to Germany, and a lot of companies are looking for backup plans. Is that part of the endeavors that you're involved in?

I'm not directly involved in that, but our licensees are pretty good planners for contingencies. Earlier on, August Berman had asked a similar question about natural gas shortages expected for Germany. I don't see that as being a problem.

Also, any comments on Nippon Glass? We were told a couple of years ago that around this time that they would be very active in developing some applications on some of their cars, and we don't hear anything at all from Nippon.

Nippon Glass, of course.

You may be referring to NSG for some of the things they're doing with the display market.

No, it was a Japanese glass company, Nippon.

That's AGC, probably, and Pilkington. I also talked about AGP becoming more active, so a number of companies. NSG has been – other than their ownership of Polkington, which may be what I was referring to, you know, Polkington is the British-class company that they bought many years ago. Other than that, they're focusing on the display market, so they're in both.

How is that developing? Is it commercialized as yet, or – They're going to release some more.

LG has had a very strong push in this area, and all of the market research that I've seen from them and from third parties indicate that it could be a very large market.

When are they going to launch that?

They're talking about later this year or early next year is what the last reports I saw, 55-inch TV.

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

And our next question comes from Bill Berg, an investor. Your line is open.

Thank you. In the near term, Joe, auto is the area to look to for revenue. But I thought that you said that architectural is to be the biggest market within three years.

Yeah, that's what I said earlier, I believe. Yeah, yeah. And I think one of the drivers, and that's a great question, Bill, one of the drivers on that is that for the first time, We have a film that's wide enough for architectural applications, you know, for both commercial and residential. And also some of the things that I can't talk about are different ways of delivering that product to the customer much more efficiently and making it much more usable for, you know, all types of architectural applications, whether it's new construction or otherwise. So, you know, that could become the killer app. Very shortly. Okay.

So if that's the case, is Gauzy ramping up for that to happen now?

Of course. Of course. That and automotive are keeping them busy. And I don't know if people remember, but when we had the factory launch for Gauzy, it was in Stuttgart, Germany, I might have mentioned on a call either before or after that that they built in the space to replicate their existing – SPD Film Coater, which is their only business out there, right on that same site. Although I imagine that, you know, now that they know what they need to build and where to get it and, you know, the normal things that you go through when you're commissioning a new, you know, film line, they may build the second one in South Korea or somewhere else that's closer to the customer, but they have the capacity to do a lot. And, you know, and, you know, God bless them. They... They make the investment, as do our other licensees, when there's business supporting it. So it's great to work with them.

Okay. Thank you very much, Joe.

Thanks a lot.

And our next question comes from Dennis LaValle with Lander. Your line is open.

Hey, Joe.

Hey, Dennis.

How are you? Oh, perfect. Living the dream. Living the dream. Hi. I was surprised to see 154 million – $154,000 charge-off in bad debt, could you put any color onto that?

I think that ultimately that is going to be collectible. I think that there are some pockets of the world where people need a little help to get started, and I'm not giving up on it. It's probably more of an accounting issue than anything else, not an operational or a collection issue as far as I'm concerned. You know, once somebody hasn't, you know, paid for a while, you know, prudence dictates that you take some kind of reserve. And if we didn't take that reserve, if we didn't take that reserve, our costs for this quarter would have been lower and for the first half would have been lower. I would call you view them, okay? Oh, you mean if I spend that kind of money? I don't spend that kind of money.

No, no, no. He would acknowledge it.

$270 million. What I could do with $270 million, which is what they burned last year, It would certainly be a lot better than what they did with it, but that's their problem.

I listened to their conference call right before this one, and they did say that in the next two months they're going to beef up their balance sheet. So I wish them luck. Hopefully they can do that.

Yeah. Well, as an institutional investor, you know, you probably know that it's probably not going to be available on such good terms for them, so...

Well, absolutely, but if I remember right, they went through $80 million in the last quarter.

Yeah, and I think last year they burned through $270 million in cash.

Well, that would be about right from that. So back to the bad debt, is that a royalty that you're owed, or is that an upfront license fee that you hope to collect at some point in time?

It's a royalty that I'm owed that, you know, quite frankly, you know, my accountants and I would probably disagree. I believe it's fully collectible, but, you know, we have policies in place that say that, you know, after a certain period of time, you take an appropriate reserve and that's fine.

In theory, that's like $1.5 million of the revenues to somebody.

And you want to know something? We've taken reserves in the past. And we've ultimately collected it. And we've ultimately collected it. So, you know, maybe, you know, maybe it's good that the CEO is also an attorney.

Okay. I didn't want to spend a whole lot of time on that. But anyway, as the guy said, we're on the cusp. I hope he's right.

I think we're a lot closer to the cusp than people think.

Well, you know, back in the old late 1800s, that could have been a cliff. That's right. Buffalo going over. We'll talk to you later. Thanks. Bye.

Take care, Dennis.

And as a reminder, if you would like to ask a question, please press star 1 on your phone. Our next question comes from Francis Coteva, an investor. Your line is open.

Hey, Joe. How's it going? Hey, Francis. How's it going? Pretty good. You had mentioned earlier about different colors of film. Would that affect the overall price?

We don't think so. We don't think so.

The most expensive component of this is not so much the materials that are inside the emulsion, you know, although they're specialty materials, so they have to be produced, you know, precisely. But, you know, believe it or not, the conductive-coated plastic that we coat on is, you know, a pretty expensive component, and that'll be the same no matter what kind of electrified film you're working with, whether it's PDLC or SPD. Okay. Volumes that can come down significantly, which is why Gauzy has been able to project out fairly substantial price reductions in the price of their film based on volume.

So the price itself was actually due to volume or difficulties laminating the product?

Mostly it's... volume and just one of the materials is the conductive coated plastic and for every square meter of film you need two square meters of conductive coated plastic, one on each side of the emulsion to activate the nanoparticles inside the film.

Okay, now you also mentioned Gaussian might build another facility in South Korea so it could be closer to

I was speculating that it might be in Asia, but they already have a very good one in Stuttgart, and the reason they put it there is it's 10 minutes away from Porsche, 20 minutes away from Mercedes, an hour and 50 minutes away from BMW, and an hour and 50 minutes away from Audi. You're covering the waterfront in terms of high-end automotive by being there, but that's not the only place where high-end cars are produced. Asia might be another good place to put it.

Yeah, but in the past several months, if not six months, none of those car manufacturers were ever mentioned. Audi, Mercedes, BMW. Nothing was ever mentioned about any products being used there in those cars.

Well, that's because they haven't gone into serial production with the product yet. That's not something I could...

I could talk about. I'm just wondering why Mercedes isn't using it anymore.

Oh, I think they will. There's a story unrelated to the SPD glass that goes into that, and, you know, that's their business, and I know it.

Okay.

Yeah.

Okay. Thanks for answering the question. My pleasure.

And our next question comes from Alan Ginsberg, an investor. Your line is open.

Yeah, just one more question. Is there any chance that any of these new automotive companies might have the SPD as original equipment and not as an option?

Yes, there's certainly that.

And we often don't know the exact way they're going to deploy this. You know, if I take McLaren, for example, the take rates are so high, it could very well be a standard equipment if they wanted. But the economics on how you sell cars and how you price it often benefits having it as an option. So, you know, that's their decision. As long as the volumes are there, I'm happy. Okay. Thank you. Thanks.

And our next question is from Vazlos Menosalkous, an investor. Your line is open.

Hi, Joe. Hi, how are you?

I'm doing well. How are you?

You're great.

I just wanted to clarify if things materialize the way you expect them to for the second half of the year, are we at the verge of profitability?

Well, I think that it's going to depend on how many of those cars are delivered between now and the end of the year and how many go into the next year. But we've shown that we can become profitable with a little bit of help. So we had one profitable quarter last year. And because we have been working very actively to keep our expenses and our burn rate as low as possible, you know, The idea is to become profitable and cash flow positive.

Great. Nice to hear. Congrats. Thank you so much.

And our next question comes from John Strobel, an investor. Your line is open.

Hey, Joe.

Hey, John.

I'd like to follow up on the architectural comments you made. You said that in three years, architecture will be the main focus of SPD use. Does that mean SPD will be available for new projects in three years, or are there actually projects on the books now and waiting for the glass?

There's projects on the books. What I said is in three years it could be a very big part of our business. I didn't say that we're going to deliver it in three years. I think that, like any market, it has to grow. It starts, people get used to it, they expand its use, you know, and – That's all I'm saying. I'm not saying that we're waiting three years for architectural by any stretch. I think by three years, it probably will be a much bigger market for us. Sixty percent of the world's glass is architectural.

Okay, thanks very much. Which is double the automotive rate.

Tim, as a reminder, if you would like to ask a question, please press star 1 on your phone now. And our next question is from Leonard Lipsow, an investor. Your line is open.

Hey, Joe. Listening to the comments, the other thing that I thought about was with the decrease in temperature in the sunroofs, are there any of the manufacturers that are looking right now to use it in, like, the back window and the side windows as well, which would certainly increase the – or I should say decrease the cabin temperature even further.

Yeah. Yeah, the 18 degrees is just putting it in a half a square meter sunroof. And, you know, now if you look at the size of the Cadillac, it's much bigger than that, and the other cars coming out are much bigger than that. And, yes, there are, you know, other areas of the car, which I'll talk a little bit about or I'll mention at least in my closing remarks.

Okay. Thank you.

Thanks a lot, Len.

Our next question is from Thomas McCarthy, an investor. Your line is open.

Hi, Joe. Hey, Thomas. You mentioned that there's a bill in Congress that might likely get passed that would benefit our sales because it would give incentives to people.

Right, tax credits. Right.

Are you aware of somewhat similar legislation in other countries or countries?

Yeah, these are active or forthcoming.

Right. Every major area of the world has, you know, what we call tax expenditures where you use the tax code to actually promote certain social behavior that you want, like energy efficiency. And we've had this in our tax code for a long time. And if you have any personal taxes, they'll ask you if you put in a solar water heater or some other things, and they'll give you some credits for that. Usually it's limited. The Dynamic Glass Act potentially can be a, you know, major reduction in costs, you know, based on the tax benefits. But I don't count anything as being done until it's done, especially in this environment of politics. So, you know, we're delighted that people are focusing on dynamic glass. You know, when we started Research Frontiers and, you know, even into, you know – The year 2000, 2005, if you Googled smart glass, you got five heads. Now, you know, we're the industry. So I'm glad that we're getting that visibility.

Are you aware of tax incentives for smart glass in other countries?

Yes, but I don't know if those are going to pass, just like I don't know if they're going to pass here.

All right, so they're potential but not current incentives.

Right. I mean, sometimes you come in, you know, through a side door, not a back door, in terms of, you know, energy efficient improvements and things like that are encouraged. And sometimes it's from the utilities. You know, they have what they call demand management programs where, you know, because the marginal cost of a kilowatt of electricity is pretty high, they want you to, you know, especially during peak times, dial it back. And, you know, they give you incentives to do that, too. There's a lot of things out there. We just focus on having the best possible products, and our licensees focus on selling it.

Right. Very good. Thank you, Joe.

Thanks a lot.

And our next question comes from Seth Nickerson with Research Frontiers. Our line is open.

Hi, Joe. Hi. It says you're from Research Frontiers, but this is a clarification. Seth has been a longtime shareholder of Research Frontiers. He doesn't work here. Otherwise, I'd be accused of having a plant on the call, I guess. Sorry about that. Anyway, no, it's okay. I'm getting a kick out of seeing it.

You had said something about architectural for a new end existing? Yes. I believe that was Mr. Berg you were talking to. So how would that work? I thought it had to be laminated. Are you coming up with a pill and stick kind of thing?

I don't want to give the details, but we're talking about a retrofittable application that makes it easier. And just for people who live in New York or Boston or Chicago or places like that, you'll know what I'm talking about. Whenever you replace glass on, let's say, an apartment building or an office building, they put scaffolding up so you don't drop the glass on people that are walking by. And if you live in those cities and you live in a co-op, you have to get co-op board approval any time you make a structural change to the outside of a building. With a retrofit, it's a lot more like putting up new shades or blinds where you don't need approval of the co-op board, and you certainly don't need to go through the expense and the disruption of having scaffolding and things like that. So it could be a very significant benefit to people to be able to get smart windows in their homes or offices much easier, especially in large cities.

Yes, but you'd have to replace the glass. It's not something you could, like, stick on top and put down, right?

I don't want to go into the details. Okay. There's ways where you don't have to replace the glass.

Okay. As long as there are details. Thank you, Joe. Okay.

And at this time, there are no further questions. I would like to turn the call back over to Joe.

Okay, thanks. I'm going to make a few closing remarks, and I thank everyone for their questions. If we haven't fully addressed your questions, as always, just feel free to e-mail us. We're here 24-7, so we'll try to answer them. Research Frontiers enters the second half of this year very well positioned for success. Our customers and our markets tend to be more recession-proof than others. And when you consider the fact that Research Frontiers, as an asset-light intellectual property licensing company with very little expenses, inflation is not expected to have much of an effect on the cost side for us. On the revenue side, because we get paid as a percentage of our licensee sales, with 10% in automotive and 15% in other markets, inflation, well, undesirable in general, could actually have a positive effect on our revenues. We have no debt, so a higher interest rate environment is not going to adversely affect us directly either. And the leading indicators of economic activity are all positive for us. Our licensees have expanded their production capacity. Major customers such as Hyundai have invested in them, and our projected product pipeline for the next six to 18 months is quite strong. In fact, the number of new car models and new cars that are expected to come out with our SPD Smart Glass technology over this six to 18-month period has never been higher. And we expect it... just in the initial periods of these cars' introduction to at least double our best year in terms of SPD film usage. Our licensees that are closer to the front line have almost completed their steps to actually quintuple production capacity. And going back to the macroeconomic trends, electric vehicle adoption is accelerating at a much higher rate than any of us originally anticipated just five years ago. It was reported earlier this week that electric vehicle sales spiked in June, and almost every major car company in the world has now announced that they're going all electric. So now ask yourself, what would these car companies do to get a 5.5% increase in driving range without having to increase the size and weight of their batteries or need major breakthroughs in battery technology? And even if they did put larger batteries or had better battery technology, We still would help them increase the driving range of their vehicles further because of the 18 degree Fahrenheit reduction in cabin temperature through use of our SPD smart glass and just the sunroof.

In some areas, we're also slated for other areas of the car as well. That'll be in first. We have other firsts coming as well in the automotive area and the architectural areas.

And not all cars will be electric, and certainly in the next 15 years. So during that time, we will also be helping internal combustion engine vehicles reduce CO2 emissions by as much as 4 grams per kilometer.

Glass is a highly desirable building material, making homes and offices more functional and livable.

With our technology, we also bring beneficial daylighting in when people want it. keep unwanted UV heat, light, and glare out, and save energy in the process. In vehicles such as aircraft, trains, and, of course, cars, we give passengers a better connection with their outside world and block harmful UV heat and light and glare while enhancing security and privacy and road stability. And with no moving parts other than our highly efficient nanoparticles, we offer greater reliability than traditional shades or blinds or curtains. and are much easier to clean and sanitize, thereby reducing germs and allergens. By eliminating weight in the roofs of cars, and Bentley estimates this to be about 13 pounds of weight savings, and also that our SPD Smart Glass allows them to remove 56 components from the car, and increasing the headroom without raising the center of gravity, we make vehicles more stable, whether they're cars, trucks, boats, or trains. So smart glass certainly has an important and meaningful place in the future as well as the present. While my wife and children saw the hard work it took us to get the smart glass industry established, our 13, I'm happy to say growing number of grandchildren, the Alpeso's new son, and many of your own children and grandchildren never lived in a world without our SPD smart glass. All of us should be proud of the work that we have done together to accomplish this and bring this strategically important and high-performing technology to the world. I thank our loyal shareholders for being an essential part of that and look forward to sharing updates with you throughout the year. Thank you.

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