Research Frontiers Incorporated (NASDAQ:REFR) Q4 2022 Earnings Call Transcript

Research Frontiers Incorporated (NASDAQ:REFR) Q4 2022 Earnings Call Transcript March 11, 2023

Operator: Good afternoon, ladies and gentlemen. Welcome to Research Frontiers’ Investor Conference Call to Discuss the Fourth Quarter of 2022 and Year-End Results of Operations and Recent Developments. This conference is being recorded today. A replay of this conference call will be available starting later today in the Investors section of Research Frontiers’ 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, forecasts, and similar expressions are intended to identify forward-looking statements. Statements that are not historical facts are forward-looking statements that are made pursuant to the Safe Harbor provisions that are part of the Securities Litigation Reform Act of 1995.

These statements reflect the company’s current beliefs and a number of important factors could cause actual results for future periods to differ materially from those expressed. Significant factors that could cause results to differ from those anticipated are described in our filings with the SEC. Research 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 e-mailed 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 e-mail questions prior to this call or will do so afterwards in order to answer more questions of general interest to shareholders on this call.

Also, we ask that you keep your question brief in the interest of time. I would now like to turn the conference over to Joe Harary, President and Chief Executive Officer of Research Frontiers. Please go ahead, sir.

Joe Harary : Thank you, Paul, and hello, everyone, and welcome to our fourth quarter of 2022 and year-end investor conference call. I’m going to keep things more informal than usual today because I want to open up the floor to questions and discussion. We built off a number of very positive developments in 2022 and started 2023 off quite strongly. Gauzy had their largest booth ever at CES this past January and moved into the prestigious automotive west hall. major worldwide customers such as Bosch, LG Display, OSG, Talgo, and Continental join them with various products, mostly for automotive, aircraft, trains, and boats, but also showing architectural applications. And that was just the first day of the show. That night, the CEO of BMW had his opening keynote speech at CES, aided by Arnold Schwarzenegger in person and David Hasselhoff remotely, showcased BMW’s i Vision.

The car was equipped with its glass all around being SPD-SmartGlass. Also, highlighted prominently in Oliver Zipse’s keynote and BMW’s press releases was a heads-up display that added vast functionality and readability because of the SPD component. You can read more details in the press releases about this, but I was there at CES from the beginning and some of our shareholders have even visited. You could see SPD at the Galaxy booth as well as other places, and it was impressive and prevalent. Moving to another active licensee. AGP has visibly expanded its operations to now be headquartered in Belgium, close to many of its European customers. They have several SPD car models coming out this year. They also expanded in Flanders, and they also have an amazing, highly automated smart glass factory in Ghent, Belgium.

I visited it and it was really impressive. We also focused on positioning our company well for the past several years. I mentioned in one of the previous calls in response to questions about economic uncertainty how Research Frontiers has positioned itself to be somewhat recession-proof and certainly inflation-proof and that continues, and I guess, it’s been well that we have done that. Because those things seem to be lurking more here. We are also patient. And because of that, we ultimately win over the customer. Many of you that have followed this smart glass industry might be aware that both Mercedes and Ferrari both used another smart glass technology before switching to SPD. And this year, we expect another OEM that originally selected another switchable film technology to switch over to SPD.

Usually, the OEM ultimately understands that not all smart glass technologies or the companies supplying them are created equal. And we foster this by education, continuous improvement, data, having a high-performing technology, focusing on being a profitable business and constant refinement of our business model, as well as good partnerships and cooperation with our licensees, and a drive to reduce costs and to diversify the industries we’re in. We and our licensees are constantly tapping into and fulfilling the need of customers to offer solutions to their customers and enable them to deliver new and improved and innovative projects — products.

A – Joe Harary: And with that brief introduction and recap, I will now turn to some of the questions that we received by email. Tom has asked, last conference call, you said that, quote, all indications are that GM is growing SPD, or will pretty much in those words. Can you give some details on this? And why do you believe this? Do you have any specifics on that that would be important to investors? Well, let me first by saying that General Motors has adopted SPD-SmartGlass in their flagship electric, the Celestiq. They’ve announced continuously now their EV strategy, which is to really introduce a number of much higher volume EV vehicles starting this year. Why am I confident that they’re going to expand into other things? Well, to simply put, they called me.

I’ll give you a little bit of the background. Initially, I spoke at a conference on switchable — well, on glass in general, automotive glass in general. And the head of GM’s glass and roof systems attended my presentation and then attended the breakout session that I had hosted, and we spoke afterwards. And about a year later, he told me that they had several car models that they had slated SPD for and asked my advice as to how to proceed with that. And of course, I gave it to them. And they have a number of vehicles that are coming out after the Celestiq. But this is their flagship; this is their bespoke model. It’s hand-built and it’s a beautiful car. Another question Tom had asked, please talk more about Hyundai, the magic roof, as this was out on the Internet.

I know you can’t get too specific. And basically, I spent a lot of time on the last conference call speaking about Hyundai as a company and about the Grandeur, GM7, and some other vehicles that they have. What I’d like to do now is just focus on what’s in it for them, what’s in it for Hyundai. First of all, to the extent they put this on internal combustion engine vehicles, they’re going to save 4 grams per kilometer in CO2 emissions, which is very important, especially in Europe where there’s penalties for not hitting CO2 targets. And in general, their fleet will have better gas mileage by using SPD-SmartGlass. If they put it in the electric vehicle area, you’re going to get an estimated 5.5% increase in the driving range. And then, of course, you get the halo effect of having what’s on Mercedes, McLaren, Cadillac, and Ferrari.

So those are reasons that I think Hyundai is on a good path with that. Another question came from Chuck. I will try to just use first names here just to preserve some privacy. With the Dynamic Glass Act passed and other progress happening, when are we going to see a significant number of SPD windows in offices and other buildings? And I will ask you, Chuck, to hold that question because I will answer it in my closing remarks. But then the other question you had is about the Dynamic Glass Act itself. And certainly, that changes the dynamics for the better because it’s offering a 30% to 50% tax credit for adoption of smart windows, such as SPD. So that makes the economic equation that much better for people adopting it. This is from David. Many licensees have patents for various SPD uses.

Do these licensee patents significantly hinder the implementation of SPD by other licensees? Well, one of the things that we wanted to make sure is that it won’t hinder other licensees from using improvements that develop over the years. So every one of our license agreements has — if you look at Section 10.4, usually, of the license agreements, there’s a license pact stating that basically when the license terminates or expires, we get rights and all of the IP related to smart glass and SPD. And another question came from William, says, the CHIPS Act with the focus on Made in America brought about by the CHIPS Act. Are there any ramifications for Research Frontiers? Well, we have a number of US-based manufacturers. So to the extent that there’s economic advantages for manufacturing in the US, our licensees all have operations here.

And also, we have some licensees that are only in America. So that’s them. That’s good. Okay. This comes from Jeff. Several of the EV makers are in financial difficulty and some will not last long. This will limit use to the major automotive companies, which are harder to gain entry as their planning starts years ago. How do you assess the current market? And then View is in financial difficulty, how does that affect you? Okay. Well, let me you kind of take both questions. So one of the advantages of being in the licensing business is that we can afford to be nice to everybody in the electronic vehicle industry. So we really don’t have to pick and choose who we work with. Because quite frankly, nobody knows which EV makers are going to be successful and which ones aren’t.

There was even doubt years ago whether Tesla was going to be able to make more than 10,000 or 20,000 cars a year and they’ve gotten their act together quite nicely. We expect there to be shakeouts; that’s understood in the business history. And you probably — if you think back to the turn of the 20th century, there were so many carmakers. Most didn’t make it. So you want to cast a wide net. But being a licensing company, we can. The other part of your question is about if this starts moving only towards established car companies, how does that affect us? Well, one thing I would say is that our bread and butter has been the established car companies: Mercedes and McLaren, General Motors, Ferrari now. So the fact that we’ve proven ourselves both from a reliability standpoint, which is something that the existing carmakers certainly admire and respect, has been very beneficial to us.

So we have a long track record. And I’d say it’s one that is a prestigious track record. And if the electric vehicle market ends up going to the established carmakers, we’ll do well. If it goes to some newcomers, we’ll also benefit. As far as your question about Vue and their financial difficulty, yeah, they are not doing very well financially. And we’ll probably learn more on March 29 when they have their year-end conference call, which is pretty much the last minute. But they’ve been somewhat of a negative for us for the entire architectural smart glass industry. First, they’ve had financial and accounting issues, plus it’s very hard to figure out what a smart window should costs because they’ve been heavily subsidizing their sales to customers, which is why they ended up losing $260 million last year.

So they are doing what they can now as well. Not too much to say other than I wish all of our competitors well. They create a great reference point for a better-performing technology and a real business. And another one comes from Judy. I recently came across this TechCrunch article claiming that the passengers display portion of the Celestiq megascreen will incorporate SPD privacy blinds to minimize driver distraction. Is this fact or fiction? Well, you can always read what reporters will say. But I will say this: some OEMs are working with SPD to minimize driver distraction. And for now, the only thing I’m sure of is that SPD-SmartGlass will be standard on this Celestiq roof. But we certainly have had broad discussions with GM about the benefits of SPD.

So nothing here would surprise me on that. Okay. I think we answered most of those questions. From John Roberts, is Resonac, previously known as Showa Denko and Hitachi Chemical, an active licensee producing and selling SPD film? Also, with the passing of the IRA, has REFR architectural glass licensees experienced a material increase in inquiries and sales? Bob, thank you for the questions. Yes, the Inflation Reduction Act, as it was titled when it was introduced, the Dynamic Glass Act certainly changes the economics of buying smart glass or putting it into small and large office buildings and residential buildings and also homes. As far as your question about Hitachi Chemical, as we noted in our 10-K, Hitachi Chemical had sold their division that was doing the SPD film to Showa Denko and has now been rebranded as Resonac Corporation.

And they continue to sell film into late 2022. But we think that because this division is part of something that just kind of move from company to company to company, there’s the possibility that they may reduce or wind down that business because of this. However, that shouldn’t affect us because of Gauzy. This film is comparable in performance and in many cases better than the original film, and it’s certainly less expensive, which expands the market. But thank you for that question, Bob. Okay. This is from Claire. I recently saw an ad for an electric BMW that had a sunroof that appeared to be using SPD technology, although the technology was not mentioned in the ad. Do you know if this was SPD technology? Originally, they were using something else, but more often than you could imagine, and I kind of alluded to this before, the OEMs soon realized that other switchable glass technologies like PDLC or electrochromic has problems and, as I mentioned, were selling a new OEM this year for this very reason.

So I think that’s — it’s good that they’re experimenting with things. I think ultimately, when they do the high-volume production and they want the real stuff, they’ll use SPD. And I also just want to thank Matt for his kind words about a dear friend who we lost, Ron Rizzato. Ron was a long-time shareholder and broker and really was an amazing person. And I’ve spoken to Ron many, many times, and I wish his family well and that he rest in peace. I think at this point, we’ve answered most of the questions or are all the questions that were e-mailed to us. So what I’d like to do now is have Paul open up the floor to any live Q&A that people might have that we haven’t touched on already. And then after which I’m going to make some closing remarks here.

Operator: Leonard Leetzow, Wealth Planning and Design.

Leonard Leetzow: A question, I think I was reading that Gauzy was going to be going public with an IPO probably in the first quarter. Number one, is that true, and will it happen?

Q&A Session

Joe Harary: I read the same article you did, Len, and I think ultimately Gauzy’s goal is to go public. I think it has many benefits, one being it gives visibility into their strength as a company and provides expansion capital. And a lot of large OEMs like to know who they’re dealing with, and Gauzy has some very well-heeled investors such as Hyundai and others that I think would welcome a strong supplier like that. I can’t comment on the timing of that. I think that for a long time, I think we all realize that the IPO market has dried up, but — and we’re also seeing that it’s beginning to thaw out. And good companies like Gauzy will do very, very well when they do go public. So I’m going to limit my comments to that. I probably know more about this than anyone outside of Gauzy and maybe even more than some people within Gauzy, so let me just limit my comments to that at this point.

Leonard Leetzow: A second question then. I know that they have increased the amount of emulsion that they have been making that was announced almost a year ago.

Joe Harary: Right. The 5x increase. Yes, the 5x increase in their capacity.

Leonard Leetzow: That has to be going someplace, so isn’t that going to push us towards positive earnings per share relatively soon?

Joe Harary: Yes. I’m delighted that they’re making that investment that’s going to benefit not only their investors but our investors as well. And I can’t say enough nice things about Gauzy. They really are an amazing company that really is doing smart glass the right way. And that’s what originally attracted us to them is that we both share the same vision as to where this market can go if it was done right.

Leonard Leetzow: And are you content with where it’s going and the speed with which it’s getting there?

Joe Harary: I’m never content with that. I was born in six months, Len, so for me, waiting is not top of my list of virtues. But on the other hand, I think it was very important that we and Gauzy do things the right way. You don’t want to have either bad start or false starts with a new technology. And I think that has proven to be a good approach for us. When companies haven’t done this, we’ve seen companies like you that really ran into tremendous problems, and some of them could end up killing the company. So I think it’s — you want to do it right. And they’re doing it right, and they’re making the investment to do it right. And they’re hiring people to do it right. And if you look at kind of their patterns, I think you’ll get a real good feel as to not only what they’re doing, but where they’re planning to do it.

Leonard Leetzow: With the Glass Act having passed, I think the credits start hitting in January of ’24. Is that still accurate or if they order, do they get the benefit of the —

Joe Harary: I think you have to put it in service by then, so you won’t miss out if you do it in 2023.

Leonard Leetzow: But that would be very good for us.

Joe Harary: Yes, very much so, very much so.

Leonard Leetzow: Okay. Thank you, Joe.

Operator: Thank you. John Nelson, private investor.

Q €“UnidentifiedAnalyst: I’ve got a couple of questions, but the first one is kind of a broken record question as far as any updates on the visor, the windshield visor?

Joe Harary: Right. So that actually has started to incorporate itself into some vehicles already in a built-in sun visor, and a lot of the test vehicles that we do, the concept vehicles that we do, have that kind of concept already built into it. And in McLaren’s case, they actually put it into the windshield itself. As far as the fold down sun visor, that’s moving forward, but mostly targeting the aftermarket. And until that gets introduced, there’s not much I could say about it other than it’s being worked on by several licensees, and I think it’s a good application.

Q €“UnidentifiedAnalyst: Okay. Great. And then this next one, you may or may not be able to comment on, but it looks like we’re set up at REFR for a significant jump in revenues in 2023. Is that a reasonable assessment?

Joe Harary: I think if you look at — and this is — by the way, I don’t know if anyone noticed, but in prior conference calls, I used the F word without mentioning the name of the car company. But for the first time in our 10-K and in our press release today, I mentioned Ferrari. And I was really pleased that earlier this week, Ferrari started saying their cars are being delivered to customers. And actually, one of the Purosangue customers reached out to me directly to say how excited he was to get this smart glass on his car. It’s between what we have with McLaren and what we have with Cadillac and what we have with Ferrari and what is coming out in Asia. And as I mentioned, it’s not just one carmaker now, it’s two over there that are unrelated to each other.

I think a lot of people have assumed that Hyundai and Kia. I view those kind of is joined at the hip even though they’re separate companies, but I’m talking about yet another company in a different part of Asia that also looks like it’s coming out with an SPD product as well. So, yes, I think we’re going to have a good year. The jump in revenues, because a lot of these cars don’t come out until towards the end of the year, may happen in the third or fourth quarter.

Q €“UnidentifiedAnalyst: Okay. Great.

Joe Harary: But, yes, I think we’re on a positive trajectory here.

Operator: Michael Kay, Kay Associates.

Michael Kay: Hello, Joe. I tell you, I’ve been a shareholder for over — well over 20 years and a very — proselytizing the SPD and the company. But it’s getting a little tired and old because it seems that even though you indicated you’ve reached a sweet spot regarding the cost of SPD film and we have Gauzy, but it seems quarter after quarter, the fee income really is pathetic and given the fact that SPD is the best flight control technology on the market, and that the course has been down to the extent that as the sweet spot, using your words, I still can’t understand why there aren’t architectural firms, other car manufacturers. Many of these car manufacturers — many of them is just like concept cars. What about getting SPD into the lower priced cars that you indicate that could be the case like in the volume?

Joe Harary: Yes. Well, every carmaker I mentioned is not a concept car this year. These are actual serial production cars, and I think people that are following the industry will look at a mid-level car manufacturer like Hyundai as being the potential to vastly increase the volumes. Now if you’re a farmer and you plant crops, you could stare at the ground for a long time, but each crop takes a certain amount of time to grow. And we’ve planted a lot of seeds, and this year, three or four of them have already started to grow, and one or two unexpected ones also came in that I think you’ll hear about, so all good stuff. But I think you’ll hear in my comment, my closing comments, some things that you might find also useful with respect to all of the markets, but also architectural.

Michael Kay: Don’t most companies want there to be more than one source of film? And as you said that Hitachi basically — most of the film production would be from Gauzy, which is fine. Previously you said you were looking for a US-based company that could manufacture the film. So is that still —

Joe Harary: I never said US-based. What I said in the past is that you’re looking for a second source, and it’s probably going to be co-located near their major customers. So that may be in Asia, may be in South Korea, may be in Europe, may be in United States, depending on where the volumes are. But the licensees make those kinds of decisions about where to put their production facilities. And I think that part of this also is that if you have competition among the glass laminators, which we do, we have pretty much the who’s who of the glass industry, then you’ll satisfy the diversity requirement that a lot of people in the automotive industry feel comfortable with.

Michael Kay: Why is that is there any progress regarding displays and their use of SPD?

Joe Harary: Yes, I think when you look at Panasonic, you should really look at who’s supplying Panasonic, and that’s LG Display. And we’ve spoken about that. They’ve had a very strong presence with SPD and their transparent OLED which is a remarkable technology. I mean, if you see this in action, it’s mind-boggling how good it is. And it certainly isn’t an attention getter. And typically, LG makes the displays for Panasonic and a number of other display manufacturers as well. So being there is very helpful for us.

Michael Kay: Going with the market in planes and trains that seem to be on the upbeat, but there hasn’t been —

Joe Harary: All going well. All going very well. I mean, if you look at CES, for example, Talgo, the Spanish train operator, had SPD. We’re in the Deutsche Bahn train. We’re in a number of things. We’re in Japanese trains. So pretty much around the world, you’re seeing SPD adopted for trains and other transit. And I must say that having Vision Systems as a licensee in that area has been extremely helpful because they’re focused — from day one has been on trains and transit and buses and all of their other ancillary businesses, whether it’s the safety tech business or their electronics business, they all focus on providing high-end solutions to those industries. So it’s really good to have someone that is that knowledgeable about trains and mass transit vehicles involved.

Michael Kay: Okay. I hope that we wouldn’t have to wait another 20 years before around the stock performs in a way that correlates with people’s confidence in the technology and your management.

Joe Harary: Okay. Thank you. And I — it could be worse. You could be involved with either Vue or Crown and lose 95% of your value in the last year. But we’re holding steady in a market that’s very difficult. And we’re in an industry that we seem to be the dominant player now. So whether we have competition or not, we’re going to continue to do things the right way.

Operator: Jarrod Sherman, Strategic Planning Group.

Jarrod Sherman: Hey, Joe. Thanks for taking my call. The question for you is just surrounding the revenues. I was hoping you could kind of help me understand, not necessarily from a guidance standpoint, but what it’s going to look like going forward being at — if we’re in some planes and trains and yachts and a few high-end cars that are produced by very low numbers and reported $130,000 in revenue, what does it look like if we get somebody that moves 50,000 cars a year, 100,000 cars a year from like a price point? What does that look like from revenue wise for us?

Joe Harary: Okay, great. So first of all, let me just kind of back into the question a little bit. So revenue this year when you exclude one-time and special events and things like that was roughly the same as the prior year. And all of the cars that are coming out haven’t been reflected yet in our revenue for 2023 yet because they’re all coming out in 2023. They weren’t in series production in 2022. If we took the original kind of estimates that we had when Mercedes was doing this, we were getting between $150 and $225 per car in revenue and royalties for that. Since then, fortunately, the price of the technology has come down quite a bit. And I’m thinking that probably a good estimate to use for your back-of-the-envelope calculations would be anywhere from $75 to $150 per car now in terms of royalty per car. So if you multiply that by someone putting in 50,000 cars, you’ll see that that can make us profitable, clearly very profitable.

Jarrod Sherman: Now, isn’t the size of glass — I mean, the original ones, we’re just looking at a standard sunroof. Now the entire roof is glass. That doesn’t improve the numbers for us?

Joe Harary: It could in that you’re dealing with a larger piece of glass. But on the other hand, a lot of the cost that goes into any kind of glass product whether it’s switchable or not is the fabrication, so the interlayers and things that go into it. So if you’re spending labor dollars to lay up a laminate piece of film whether it’s smart or not, that’s going to cost you money. And it won’t be as much on a larger piece of glass as a smaller one, but there’ll be some difference. But, yes, it’s certainly a benefit that sunroofs are becoming bigger and bigger. So you get the panoramic roofs or the ones that go from the windshields all the way to the back of the car like you see on the Model Y and some other vehicles. And what’s good about those panoramic sunroofs that are basically all glass roofs is that the carmakers have realized sometimes after the car goes into production, which is another opportunity for us, that that you can’t shade something that big with the traditional mechanical shade that pulls across like you see on a typical sunroof.

So you need something else that can shade it. Now, in the beginning, they used heavily tinted glass to do that. But if you’re putting such a heavy tint to manage the solar heat gain inside of a car, you might as well just have a metal roof. So they’re beginning to realize that they need a switchable. And the switchable also has the added advantage in that you’re actually reducing weight. So even with a normal Bentley that did these calculations years ago, a typical roof, if it went from a moving roof to a stationary roof that had SPD-SmartGlass, and that’s the example they used at their presentation, it would save about 56 components and about 13 pounds of weight in the roof. And saving the components is actually a significant cost saving because it’s really the cost of assembly that’s the cost of a car, not necessarily the cost of the components.

So we are not only more reliable because there’s no moving parts in SPD sunroof, but we should also help save them money for the carmaker. And then, of course, you get the other benefits: increased headroom, reducing the cabin temperature by 18 degrees Fahrenheit, and other things like that.

Jarrod Sherman: So the slow adoption of it, you don’t think has anything to do with it being too costly of an item because of savings elsewhere a good product and taken forever to be adopted, and Tesla — how did Tesla not use it. It’s stuck to these high-end cars. It’s like, wow, I mean no one’s going to touch it. That’s in the 50,000, 60,000 range?

Joe Harary: If you look back at the transcript of this conference call, you’ll see that I said earlier on that eventually everybody adopts SVD. It’s just a matter of us having the determination to make sure. And I wouldn’t be surprised if Tesla was one of those OEMs that also did that.

Operator: Art Brady, private investor.

Q €“UnidentifiedAnalyst: Hi, Joe. Art Brady here.

Joe Harary: Hi, Art.

Q €“UnidentifiedAnalyst: Can you comment on the AGP of factories that would establish — was this built on exactly the same specs of the that was built by Gauzy or it’s their own configuration?

Joe Harary: It’s a different type of factory, but it’s a good question, Art. So they do share one thing. They’re both highly automated factories so very low labor costs. The Ghent factory in Belgium that AGP has is highly automated. I’m going to walk through this thing, and we saw three engineers that were just looking at some monitors to make sure that everything was working okay. It was — and if you think, what does that mean? It means that all of a sudden now you could approach Chinese labor cost because you don’t have labor and also the consistency and the reliability of an automated system once you make the investment of automation is quite good payback because you’re making a very expensive piece of glass, you want it to be good each time it comes out.

And if you look at some of the videos on AGPs website, you’ll see some amazing things that they’ve been able to do with our technology in their glass. The Gauzy factory makes film which is a totally different process. It’s a roll-to-roll web where you’re coating an emulsion on a moving web of ITO-coated PET and then curing it with UV. So it’s a different process than what AGP is doing, which is taking that film that they would buy from Gauzy and putting it between two sheets of glass and using a hot melt adhesive like EVA or PVB or polyurethane to laminate that stack together into a laminated piece of glass.

Q €“UnidentifiedAnalyst: About two years ago, you were in with some of the Gauzy people, and I’m wondering what the status is if there’s any movement there, and when we might expect to see some revenue from that experience that you had in the Middle East?

Joe Harary: I think you’re going to see revenue from them from all over the world. They have a very strong presence in the Middle East. They have a very strong presence in Asia, all parts of Asia actually. They have a strong presence in North America, and they’re expanding all of these. I mean, I’m privy to what their plans are. And I don’t think they’re doing this because they like to climb it. I think they’re doing it because they like the customers where they are. So, yes, we all expect a very good payback from this investment that they’re making all over the world.

Q €“UnidentifiedAnalyst: When do you think we could actually start seeing some revenue in that regard —

Joe Harary: Well, if you look at where — they have the factory in Stuttgart that is making the film. It has the capacity to do 1 million square meters of film. And if they needed to replicate that elsewhere in the world, they can. And they’ve quintupled their emulsion production. So those are probably the best leading indicators I could give you as to where I think their business is going. And if they are in fact going public, they’re not doing it based on having a me-too PDLC product, they’re doing it based on a SPD product, and that’s the strategy for growth at Gauzy, too.

Q €“UnidentifiedAnalyst: Joe, I wanted to ask you about these train accidents. Does Gauzy or any of your groups have any types of products that they could sell to enhance the safety of trains instead of them falling off the tracks as they’ve been occurring frequently.

Joe Harary: Well, both Gauzy and Vision Systems have very sophisticated sensor systems, and I wouldn’t be surprised if some of those things could be deployed. But if you think about the tragedy that happened in East Austin, it was ball bearings that heated up. It’s not anything to do with heat coming into the cabin or anything like that. But they do have electronic sensors that might have been helpful. But if you look at the tracks in the United States, they were a mess. So I think you have to fix the roads that these trains go on before you fix the trains.

Q €“UnidentifiedAnalyst: Yes, I understand. Have you heard of a company called SolarWindow Tech? Are you familiar with them?

Joe Harary: Not very familiar. There’s a lot of companies out there that are trying to do things in energy efficiency and generating power through transparent photovoltaics. We like them. They’re complementary technologies because if you look at what, for example, Vision Systems did years ago, they were partnering with a French company that had a transparent photovoltaic material that they were able to make a self-contained aircraft window where you would just pop it into the side of the window. You didn’t have to wire anything, and it would generate 20 times more power than it needed to operate the smart windows. You could charge your cell phone or other devices using solar energy. But there’s a lot of companies like that or trying.

Some are homegrown in the United States that we’ve spoken to, and they have promising technologies. And we keep track of them because we don’t need a lot of power to run a smart window, so any of these photovoltaics, especially the transparent ones that don’t typically generate a lot of energy still can generate enough energy to power a smart window. And then the real benefit there is you could pop this into a building or a home or a vehicle without having to wire it up. And that eliminates the need for electricians to be on site, et cetera.

Operator: Michael Forster, private investor.

Q €“ Unidentified Analyst: Joe, thanks for answering all the other questions. And since I’m last in line, I think I’ve got enough information now.

Joe Harary: Okay, great. Thanks, Michael. I think we have one more in the queue at this time.

Operator: Tom D’Javo, private investor.

Q €“ Unidentified Analyst: Yes. Hi, Joe. First of all, I’d like to thank you for your efforts. I think you are really working hard towards the right things. It’s tough. It’s a new product. It’s got to get into the market. But anyway, the EV9 and the Grandeur, as you know, were mentioned with the magic roof. It has not been mentioned lately, but it sounds like Hyundai Kia is a possibility. The EV9 has been noted that it’s going to come up with some info on 15 and perhaps more by 30. I know you mentioned Kia SUV stuff. Without getting too specific, it’s coming out soon, some info on it. Do you see this as a car that looks like it could very well likely have SPD?

Joe Harary: I think that it’s a prime candidate for SPD, but I don’t think it’s going to be first, and I’ll tell you why. I think that if I was Hyundai, I would probably reserve to myself first the good stuff before I give it to my sister company, Kia. But you never know what the internal politics are between them, but they’re basically joined at the hip. And I think that the work that Hyundai is doing with SPD, and they’re a direct investor in Gauzy, which I think is important to know, I think will benefit Kia as well.

Q €“ Unidentified Analyst: Okay, that sounds —

Joe Harary: I just don’t think the EV9 will be first. Look, I could be wrong. I’ve been wrong about other vehicles that — in trying to handicap which ones were going to come out first.

Q €“ Unidentified Analyst: So something as soon as this month, you wouldn’t be well aware of by this point?

Joe Harary: I would think that if — it would be — I don’t think it’s going to come out this month.

Q €“ Unidentified Analyst: Yes. No problem. Thanks for the answer. As far as the Grandeur, you know —

Joe Harary: That doesn’t mean — by the way, Tom, that doesn’t mean that it won’t come out on EV9. It just may not be a — it may be like a mid-model introduction or something like that.

Q €“ Unidentified Analyst: Got you, got you. Are you able to say if VOS was working on the Grandeur sunroof in a roundabout way because they were working with Gauzy David and not necessarily.

Joe Harary: You’re talking about a different company that we’re very familiar with that is working on that project with

Operator:

Joe Harary: I think we have one more on the queue I see.

Operator: Yes, sir. Tom McCarthy, Raymond James Financial.

Tom McCarthy: Hi, Joe. My question has already been answered, so I’ll pass it on.

Joe Harary: Okay. Thanks, Tom. Good talking anyway.

Operator: Jeff Harvey, private investor.

Q €“ Unidentified Analyst: I joined late, but my question is related to GM, Ford, and Stellantis? I mean, I know it takes a long time to get in their queue for their electric vehicles. I was just wondering if you can give us an update and progress with those big companies?

Joe Harary: Sure, and I actually read your question earlier and answered it. But I will say this that, in a nutshell, because of the track record we have with Mercedes and McLaren, being in the other established automakers is actually a positive thing because they respect reliability more than anything else. And that’s certainly what we’ve had in our DNA since 2010 with the other auto —

Q €“ Unidentified Analyst: What about cost, though? I mean, is cost a factor for this mid-range, inexpensive cars? Does that what’s holding up —

Joe Harary: No, I wouldn’t say that now because if you think about — the expectation is that Hyundai is going to have this, and those are not very expensive cars. So I don’t think cost is going to be the issue now. I think you have the benefits that become cost effective when you don’t have to — when you can eliminate 56 components and reduce the weight in the group to increase the stability and increase the headroom and things like that. So there’s a lot of things that go into cost, but also the basic cost of this smart glass is far lower now with the Gauzy film than it was with the Hitachi film. So that has also enabled a lot of things to happen. I will say this just because I gave some time to your question earlier.

Q €“ Unidentified Analyst: Okay.

Joe Harary: Once you hear the replay, if you still have any questions, feel free to call me on my cellphone. I’m happy to those.

Q €“ Unidentified Analyst: Yes, sir. Okay. Thank you.

Joe Harary: You’re always. You’re a long-term friend, so I appreciate it.

Operator: We have no further questions in queue. I’ll turn the call back over to our host.

Joe Harary : Okay. Thank you. So I’m just going to make a few closing remarks. Every day, we all probably wake up, and we ask the same question, why would you invest in Research Frontiers? And if you want to invest in the smart glass industry in a proven technology that’s used across diversified industries, then we think the best place and actually the only place to get all of those benefits is Research Frontiers. If you think of Research Frontiers as a materials company that has worked to develop an extensive patent portfolio with hundreds of patents on a basic material, it’s as if we have a patent on stainless steel or titanium. Smart people out there then figure out how to use our materials as a solution to everyday problems, basic human needs: heat control, light control, glare control, safety, security, privacy, comfort, enhancing product performance.

These are the things that our technology has allowed these companies to do. And we invite you to check the box of things that we’ve thought about and taken care of already. We have a strong and growing product pipeline, mostly automotive, but also trains, planes, boats, consumer electronics, and architectural. Expanding out what we’ve — upon that, we’ve become known in the industry as the best performing technology in this area and the most reliable. Our competitors have lost 95% or more of their market value, another reason to think about where you want to deploy your investment if you’re investing in smart glass. So I think they’re also helping us become known as the most financially viable player in the smart glass industry as well. And we also have the who’s who of the glass automotive, yachting, and aircraft industries involved with us as customers.

So it’s not just our competitors that make us look good, we worked hard over the years to build and maintain credibility and establish ourselves as the industry leader. And as I mentioned, we did this by paying attention to a lot of things. And we’ve done this through financial stability. We have cash for at least the next five years and no debt. This gives us plenty of the necessary resources, but we’re smart enough to know that we want to spend these resources efficiently. We have diversification of industries, have proven reliability for 12 years in the automotive industry. And in our industry, that is quite a long time and very compelling data that everybody respects. Research Frontiers is well positioned for a recessionary and inflationary environment.

And we talked about that, I think, two conference calls ago. I was drawing upon my background as an economist at the Federal Reserve Bank in New York. And having gone through both recession and high inflation when I was there, you saw what happens in the world and what you can do to navigate through that. And I think that has been helpful for our company to have that perspective. We also have a healthy mix of business in government and commercial customers, and experience and respect and credibility and longevity as a company, which I think is good as far as how suppliers view us or as customers view us rather. We have good partnerships at a good business model with high rewards, predictable expenses, and low CapEx requirements. And we’re expanding our use into new applications like TVs, headlights, adaptive grills, heads up displays.

You’ve seen all of these happen very tangibly in the past year by some very well-respected companies. And this year, I think you’ll see more of this but in different areas that can also address very large markets like architectural glass. Wait for us later this year to talk about exciting developments in areas such as impact-resistant, hurricane-resistant windows for the architectural market. And even the ability to retrofit existing buildings with SPD-SmartGlass. So that installation is quick with minimal disruption to building owners and tenants and with lower costs. So with that, I want to thank everybody for participating on today’s call, and I look forward to sharing more good news this year with all of you.

Operator: This concludes today’s conference call. Thank you for attending and have a pleasant day.