Good afternoon, ladies and gentlemen. Welcome to Research Frontiers' Investor Conference Call to discuss the Second Quarter of 2020 Results and Recent Development. During today’s presentation, all parties will be in a listen-only mode. And following, the presentation the conference will be opened for question. [Operator Instructions] This conference is being recorded today. A replay of this 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, 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 that 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 entering many of the questions that were e-mailed to it prior to this conference call, either in the 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 the call or will do so afterwards in order to answer more questions of general interest to shareholders on this call. [Operator Instructions] Also, we ask that you keep your questions brief in the interest of time. I'll now turn the call over to Joe Harary, President and Chief Executive Officer of Research Frontiers. Please go ahead, sir.

Thank you, Erika, and good afternoon, everyone, and thanks for being here. Joining me today is Seth Van Voorhees, he's our CFO and we're here in person, which is -- feels good after working remotely for so long. For all of us, the world changed in March. Here in New York we went into self-quarantining mode and all started working remotely the day after our year-end conference call on March 12th. Research Frontiers physical offices reopened in May as did much of the world's automakers and other businesses. But even though we were not able to travel freely and we worked remotely for most of the quarter, our second quarter was still one of a number of visible and significant accomplishments. In April, our licensee Gauzy announced that industrial companies Hyundai and Avery Dennison had made substantial investments in their company. These strategic investments are good for our company and good for our industry and bode well for the use of SPD in future vehicles and architectural applications. Based upon our increase in market value related to other public companies, we were also selected for inclusion in the Russell 2000 Index in May and joined that index in late June. This year so far our stock is up over 35% compared to the Dow, which is down 4%, the S&P, which is up 3.6%, NASDAQ, which is doing well at 23% -- 23.5%; and the Russell 2000, which we're now part of which was down 7.4%. So the NASDAQ is doing well and we're doing very well it seems. Earlier this week, the world's largest sun visor supplier in the automotive industry, Daimei announced a license with us. We're going to talk about that later. And economic activity has certainly restarted both here in the United States, in Europe, and…

[Operator Instructions] Our first question comes from Michael Kay. Please state your question.

Hello.

Hello, Michael. How are you?

Yes. Hi, Joe. I'm glad everyone is safe and sound and that you still will continue to do the great job during the -- this virus situation. What happened I always thought and I think you even once mentioned it several years ago that the Vision Systems was like a model licensee and they built a data plant dedicated to SPD in Florida. So it's been some time. What happened to the aircraft sun visors that were supposed to be also for the retrofit market? And you think now that the Daimei company came aboard this could be good. It would give them some competition and may facilitate the marketing of the product.

Yes. So Vision Systems still has their sun visors product. It's been mostly targeted initially towards the higher-priced market where you need large area sun visors. So think about things like trains, trucks and aircraft cockpits where you're talking about large surface areas. And remember Michael the -- one of the benefits of SPD technology is the fact that as we get larger we don't get slower. So it becomes ideal. And the fact that it's a plastic film also is helpful in all environments where sun visor is being used. And it's a interesting question would the entrant of Daimei into the mix give them some -- a little proud and a healthy competition for the passenger car market. I think it would. Vision Systems though it's primarily been focusing on different transportation vehicles than passenger cars where as Daimei is the largest in the world in that area. So it could be that they kind of each go in their own unique areas. But Daimei also can do trucks. Their license permits them to do fairly large sun visors. So it should be an interesting horse race.

Okay. Thank you. Keep safe and well.

Thank you. And I hope you saw me waving to you when I was driving back from the trade.

Our next question comes from Neil Gottlieb. Please state your question.

Hi, Joe. How are you doing?

Good. How are you?

Doing well. My question comes from looking at the --I guess the financial statements. When do you foresee the company becoming cash flow positive from an operational standpoint and not having to go to the market for a special onetime things like the PPP to fund the business.

Well, we don't believe we're going to have to go to the market for at least the next 34 months which is our cash reserve. So we may never have to go to the market again. And I really hope with all my prayers that we never see anything like COVID-19 again and that vaccine has developed. I mean I had a personal loss. My father-in-law passed away from it suddenly in April.

Sorry to hear that. My condolence.

Thank you. But we're getting close to breakeven. And the only thing that I think is a speed bump along the way is that nobody knows how fast the automotive market is going to rebound. I've seen some predictions that in two years we may level back hit the pre-COVID levels. Some people are more optimistic some people are less optimistic. But until our business becomes more centric on architectural and other areas, we're going to rise and fall with the automotive market. So your view of automotive is probably a good view of where our revenues will be. And where we -- what we're trying to do to supplement, it is just to have more and more and more and more projects in automotive. So that even if the volume by manufacturer goes down, the total number of products using SPD in automotive will go up just by virtue of the size of the large number of projects and the high volumes from new entrants into there. And costs coming down certainly makes as I mentioned this more feasible and causes to start getting migrated down towards lower-priced cars than the Mercedes and McLaren that we're on.

Joe, if I might add another way of answering that question would be the following. In our Q, we talked about our cash burn -- our quarterly cash burn. Projections at being $450,000 to $500,000 per quarter, which comes down to about $2 million in -- over a 12-month period, and our business is essentially 100% margin business. So that if we had $2 million of additional royalty related activity that would drive $2 million of additional cash for the company which would approximate a breakeven level.

Yes. I mean I applaud all your efforts in getting the technology into diverse products. I'd just like to see a little more, I guess, repayment if you will or as you just pointed out more cash flow which would be shown up here in the statements and such.

Right. Well, one thing that we have done and maybe I could kind of telegraph what I was going to say as part of my closing remarks, is that we've invested $110 million to develop SPD in the markets. We became the best performing most reliable smart glass technology out there. Now our -- so we've proven the technology. We've solidified the performance. We've shown the reliability in probably the most demanding place that you can be which is on a sunroof of a Mercedes because they're very particular about what they put on their cars and the sunroof is the most difficult environment to be in. Now our job is really, really clear turn this into money, turn this into revenues. And that's been the very, very focused sustained effort that we've been doing. And it's with the help of some very talented licensees and their marketing and business development teams as well as ours. And just some good old fashioned hard work and focus. So we know what we have to do and that's our focus now. We don't have to get the technology out of the lab and into the real-world or prove that it's reliable. Now all we have to do is turn it into money.

Yes. Look to guys and – I wish you all the luck and best efforts you can put forward. And let’s hope.

Looking for fruition.

Thanks.

For a while.

Okay.

Good. Thank you. Appreciate the trust.

Yes.

Our next question comes from Allen Ginsberg.

Yes. Hi, Joe.

Hey, Allen. How are you?

Okay. Pretty well. The acquisition of Hitachi Chemical, you haven't talked about that. Could you give us some color on that? So we know whether the acquiring company for example it's going to be a licensee. And how that's going to affect the production of the film if it affects it at all? But that's something...

Yes. Thanks for the question Allen. It shouldn't affect it at all. Hitachi's license allows them to transfer it to the successor of their business interests. So the new owners certainly can continue to do that and they have had a record year last year in terms of SPD film sales and that's a 12-year record so...

But if you’ve been – have you been in touch with the inquiring company to see what their interest is in continuing to produce a film?

No. First of all, the acquisition is not completely consummated. And second of all, we deal directly with the people within the SPD group at Hitachi, which we're still dealing with. So everything is pretty much status quo in terms of post-acquisition compared to pre-acquisition. So thanks for the question. So thanks for the question.

So they're still – they're still producing film.

Yeah. Yeah.

Okay. Thank you.

Thanks a lot.

Our next question comes from James Wilde [ph]. Please state your question.

Hey, Joe.

Hey. How’s is it going, Jamie?

Just a quick question. I've seen a lot of these transactions where you signed with the Daimei transaction. Why not consider getting an upfront royalty payment and some kind of guaranteed income soon as you're signing these deals?

We typically do. We have an upfront fee usually in our license agreements and a minimum royalty every year.

So they are paying kind of minimum royalty. So could you see an increase in revenues from that or –

Usually, the royalties are not so much that they're going to make a huge difference compared to the earned royalties that we get on the sale of products. But they're meant to separate the companies that are interested in being curious about a technology and those that want to develop a product for it. So the real revenue we expect from Daimei is not from the minimum royalties or the upfront fees, it's from them selling a ton of sun visors.

I missed – I did miss part of the call.

And this also has the personal interest of the CEO of Daimei. So we're talking about a project that has very high visibility within the Daimei organization.

Okay. I did miss a part, so I'm not sure, if you addressed this. But is it possible to give us a little bit of guidance of revenues over the next one, two and three years?

I think everybody, including Gentex has suspended any guidance past 2020, because of uncertainty about the COVID-19 situation. And I think that, it's probably prudent that they did it. And we've always maintained that, we don't give that kind of guidance because it's very hard to predict the business of 45 different licensees.

Okay. Thank you for that, Joe.

Thanks a lot.

Our next question comes from John Nelson [ph]. Please state your question.

Hi, Joe, I have just a couple.

Hi.

Hi. I have just a couple of questions. The first one is the press release on the day you registered for Daimei read. Product is currently being developed. Do you have kind of a rough guesstimate as to when they'll have a product available for vehicle production? And when potential orders could start?

I have – yes, a good sense as to when both of those things are going to happen, but it's not something that Daimei would want me to share. But yeah.

Okay. And in the first quarter call, you mentioned about some very high – you mentioned the Brazil armored glass licensee and you also said that there were some very high-profile uses of SPD, armored glass products coming. Do you have – are there any examples you can share with us on that?

Yeah. Thanks. I forgot to address that from the question you mailed, and I apologize. So SER in Brazil was very severely affected by COVID-19. The whole country was basically shut down. What I was referring to about a very high-profile use of SPD-SmartGlass in armored product was not related to them, by the way. And it still hasn't been made visible. And due to the nature of what it is, you may see it we may just never be able to talk about it. So, if you see blue glass on something, it's probably us. If it switches it's us. Let me put it in that way.

All right. That's it. Thanks very much.

Thanks a lot, John.

Our next question comes from August Berman [ph]. Please state your question.

Hi, Joe. How are you?

Hey, August. How are you?

Good. And how you doing? Just a couple of questions. Wondering if you could touch on. The AGC Wonderlite Dx product was this something – I know you had mentioned in the previous couple of quarters about maybe seeing some products that weren't as high end as our product coming into other vehicles. Is this something that we can look at saying, hey, this is kind of a step down from our own product with SPD? Is it something, we're going to start to see more often with AGC? Are they continuing to market our SPD traditional Wonderlite product?

Yeah. What – thank you for the question. So what typically happens when you're successful in an industry is everybody wants to be you. And I mentioned a couple of conference calls ago that you're going to start to see some SPD want to be technologies out there, and PDLC is one of those technologies. Now, don't get me wrong. PDLC is really, really good for privacy. It's less expensive than SPD, and it's very effective at privacy because what it does is it diffuses light. But it doesn't block it. So I think what you're going to see when you see vehicles use anything other than SPD on a roof or on a side glass, is that it's going to diffuse the light, but the experience of the automotive industry has been that when you do that with a PDLC product, it creates a greenhouse effect. So not only is it not blocking heat, it's creating heat inside the vehicle. So sometimes, these kind of things become apparent as you get close to series production and the cars introduction, and they've done the – they've gotten the cars out on the road and they've tested it. And they've had people drive them before they're launched. And I don't wish you'll warn anybody. But I think that there's going to be an awakening, if you will, that the PDLC product as it's proposed to be used, not for privacy but for shading is not going to be as effective as people hoped. We've also heard anecdotally from some very, very reliable sources that we have direct connections with that both the PDLC that was tried and other technology that were tried are basically being abandoned, because they just don't have the performance of SPD. So really to boil it down,…

Okay. So the PDLC is cheaper at this point than we are...

Oh yes. Yes. It's cheaper.

Yes. Okay. And just one follow-up here. I know we had kind of just based upon intuition and kind of reading around thinking that we might see some sort of new OEM or vehicle in 2020. I know due to the pandemic everything has been delayed. Are we still thinking everything is on track in terms of maybe things have been just delayed rather than showcased in 2020?

I think most vehicles are still on track. Clearly, everybody is working as fast as they can but, because they're working in a different way. And for some companies that's more difficult than other companies things have slowed down at some of the vehicle manufacturers. But, I think we're still on track. And a couple of things have fallen by the wayside. I mean cars some car models that were supposed to be introduced were abandoned not because of SPD, but just in general. So, because we had so many of these projects in the works some of those vehicles might have fallen off the list. But, I think on balance, a lot more projects have been added to the list since we started talking about it.

Got it. Thank you.

Thanks.

[Operator Instructions] Our next question comes from Neil Levin. Please state your question.

Hi Joe, how are you?

Hi, Neil. Hope you’re doing well.

Well, we are surviving like everybody else.

Yeah. Glad to hear it.

I just had one question. Well, maybe I have two. I have one question about something I saw down on Dallas Road at Waterfront last week. There's a building that's going up right on the water that has a lot of blue glass. And I was wondering if you could comment on whether that might be SPD or not.

I don't believe it is. I'm not aware of a project specifically in Sarasota, Florida that was recently constructed that uses this. But it is possible. It depends on when the glass was installed and sold to them really. But I would doubt that it's SPD. I think it's just good tinted blue glass.

Okay. That was it for me then thank you.

Okay. Thanks a lot.

Our next question comes from Thomas McCarthy. Please state your question.

Hi, there Joe. How feasible is it to add a colored filter to the glass to make it appear to be different colors other than blue? And has anybody tried it? And is anybody doing it?

Yeah. There's been a number of approaches like that that have been done. Basically, if you're familiar with BluBlocker Sunglasses. BluBlocker Sunglasses block blue light, because they're ambered in color. So, a slightly amber filter will make it appear less blue. The other way to do it is, as I mentioned to reduce the amount of light that's coming through in the dark state from 0.5% to something less. Because it appears blue, because that's what's being transmitted and there's blue light in day-lighting. And then there's also the third approach, which has changed the inherent nature of the particles, which right now block every area of the visible spectrum other than dark blue to be another material. So those are the things. And then, you could play with the glass or the interlayers. So, in any kind of glass laminations, there's usually a hot melt adhesive sheet that's put in there. And if that was colored you can adjust that. You could adjust the outer tint of the glass by traditional coatings, so that you could do that. So you could color match the outside glass to whatever building or vehicle or other glasses in the building quite easily. So, there's a lot of different methods of doing that.

So different colors are definitely fusible? Is there anybody...

Definitely fusible and definitely on our radar stream.

Okay. Is anybody doing it? Is there a final product available anywhere?

We've done projects for automotive manufacturers that would color code the color cubic glass to a certain desire by the designers. That's all I could say.

Okay. Well, thanks. Keep up the good work.

Thanks, Tom.

Our next question comes from Neil Gottlieb. Please state your question.

Hi Joe it's me again. I have one further question.

Hi Joe.

How is it going? This year my cell phone has overheated more than once. And I was just wondering if this technology can be used to help cell phones to prevent that state from happening?

Usually, it depends on what's causing the overheating. If it's sunlight hitting the glass, the answer is yes. Often though the reason your cell phone overheats is because your battery has an electrochemical reaction in it. And it's that electrochemical reaction that become exothermic and is creating the heat. Now, I mentioned that for two reasons. Number one, I'm trying to explain why your cell phone may be heating up other than being exposed to heat. But the other thing is electrochromic technology is very similar in nature to the electrochemical reactions that are going on inside that battery. And there has been reported in some instances electrochromic windows that have gotten so hot that they've melted the surrounding sidewalls. So, what you're experiencing on your phone may experience -- be experienced with some other technologies like electrochromic in certain cases. So, I mentioned that because you asked the question.

It will. I'm presuming it's I think the sunlight because it happened poolside more than once where I left my phone on the table and I come back and it's tell me the phone is overheated. I have to get it out of the sun. So, I was wondering is this something that the company is pursuing or it's not feasible at the moment or we may just have to--

We work with various cell phone manufacturers not specifically for that. I mean I think where we're going to make a meaningful difference in the display market is -- we already talked about Panasonic and the transparent display product that they have the transparent screen. But also just enhancing the contrast of displays that's probably going to be our main contribution to cell phones, but you'd never know. Just one thing we found Neil is that it took a while for the automotive industry to really wake up and understand that when they use glass in vehicles, it creates a solar heat gain problem that needs to be managed. But we get approached weekly from auto companies that are specifically trying to deal with that situation. And we've been talking about this for years. I wouldn't roll out in the cell phone industry somebody saying, hey why don't we look at the switchable technology to see if we can produce -- reduce the chance of Neil's phone overheating at the pool.

My assistant told me throw a towel over it. If I could remember that I would.

Yes. So, the other thing that may be happening is whenever heat is introduced into any chemical reaction it happens faster. And it could be that the electrochemical reactions inside the battery are being triggered by the heat from the sunlight also even though it's not directly striking it. It's just creating a heat that creates the catalyst.

Okay. Thank you.

Thanks.

Our next question comes from Seth Nicholson [ph]. Please state your question.

Hi Joe.

How is going?

I was wondering if -- you mentioned early on about NSG shipping television and information displays. I wonder if you could give us a little color on it. Is that like Xiaomi or--

Their customer -- the publicly disclosed customer was Panasonic and it's a transparent screen product that Panasonic is -- if you go on the Internet, you'll see some amazing TVs that turn into clear windows and that's us. And you may even see a lot of commentators in the consumer electronics industry were marking on how black the blacks finally look because of this additional film that's added to the display to allow them to achieve it. But it's typically an OLED display with an SPD backplane.

That's all the way on the back, so it doesn't reflect onto the world behind it. It's not in front to an--

Yes, usually it's being used not for your traditional, TVs but ones that will turn into a completely clear window. Think of how cool it would be if you looked out your window on to patio and you see whatever view you have and then all of a sudden that becomes a high-definition TV. That's what we can do.

So, you prevent it from projecting that high-definition TV onto the trees outside basically?

No, no the other way round. It prevents light from bleeding through from the back from let's say the outside to prevent you from seeing a highly vibrant image on your TV.

Look, well -- all right. So, it's basically the same. It's both. It's substance coming in and going out the back.

Yes. Although nobody really cares about light leaking out through the back. It's more than a light strike they eye. Yes, it's more the light striking the eye is why Panasonic does that.

One last question. I know they have a lot of turtle codes. I'm down in Florida. And they have turtle codes about light reflecting out when the turtles are laying eggs and it confuses them and stuff. And I really thought that would be a great market that would take off and I haven't seen -- yes I--

It will. It will. Remember Seth that up until really this year, we haven't had film wide enough to address the architectural market. But I grew up in Florida also where any house within a certain distance of the beach had to had glass that was at least 40% tinted I believe or 40% transmission because what would happen is the sea turtles were mistaken the light from your home for the moon. And what they would do is they go up on the beach lay their eggs and then follow the full moon back into the ocean. What they were doing is following the light from your house and getting run over by cars. So, they implemented the turtle codes, which you referred to. And now that we have wider film, that's certainly an area we could address.

Thanks, Joe. Good luck.

Thanks.

At this time, we have no further questions.

Okay. Well, if we haven't fully answered anyone's questions, please feel free to call or email us. And now I'd just like to make a closing remark or two. Continental Automotive noted that the second quarter of 2020 was the weakest quarter for the automotive industry in 75 years that's since 1945. But the industry seems to be rebounding from this low watermark with some firmness. It may take a while for the automotive industry to fully recover, but we are on our way, and we're seeing a noticeable increase in smart glass projects in automotive. Last year, we spent building and strengthening Research Frontiers. It's a good thing we did. No one could have predicted a worldwide pandemic, but Research Frontiers was certainly prepared for it. What did we do to prepare? We focused on strengthening our business and our company. We now have multiple producers of SPD film. We have wider SPD films, so we can pursue the architectural glass market. We reduced the cost of SPD technology to the customer. We strengthened our balance sheet. We have enough cash for the next three years and a very modest quarterly burn rate and we expect to continue to be debt-free. We're in our sixth consecutive year of cost reductions. We approached breakeven again even in a bad second quarter for the world economy, with a loss of just $0.01 per share which is one-fifth of what it was in the second quarter of last year. Our net loss for the first half of this year is less than half of what it was last year. And let's not lose sight of the fact that we have the most reliable and highest performing smart glass in the entire industry. And also let's never lose sight about why customers use…

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