Good afternoon, ladies and gentlemen. Welcome to Research Frontiers investor conference call to discuss the first quarter of 2024 results of operations and recent developments. [Operator Instructions] 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 that 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, if you find that your question has been substantially answered as a courtesy and to allow time for other shareholders to ask their questions, please remove yourself from the queue by pressing star 1. Also, we ask that you keep your questions brief in the interest of time. I would now like to turn the conference over to Joe Harary, President and Chief Executive Officer of Research Frontiers. Please go ahead, sir.

Thanks, Morgan, and welcome to the team, and hello, everyone, and welcome to our investor conference call to discuss the first quarter of 2024. Just 9 weeks since our last call, we've already witnessed significant developments in progress, which I'm eager to share with you today. And in the interest of time and covering as much ground as possible, I've taken a number of the questions that we've received by e-mail and have incorporated them into my presentation today. We'll start with the numbers. I'm pleased to report that Research Frontiers continued its revenue growth momentum in the first quarter of 2024. Our royalty revenues in Q1 2024 were up over 26% from the same quarter last year to $313,378, driven by robust double-digit percentage gains in our 2 largest markets, automotive and aircraft. This revenue growth is on top of strong revenue growth from 2023. Fee income during 2023 increased by 69% over 2022 and overall revenue last year was up 109% from the prior year. All of these increases in fee income were primarily the result of higher royalties from the automotive market. And this past quarter, we also had increases in the aircraft royalties. The first quarter of 2023 actually marked the beginning of 5 consecutive quarters so far of revenue growth from the prior quarter -- prior year rather. Looking ahead, although we're not even halfway through the second quarter, we already expect higher royalty income in the second quarter. In fact, we also expect higher royalties primarily in automotive in the third quarter and beyond. This is based upon revenues already booked and expected revenues yet to be reported. How do we know this? Remember, our main market automotive is more predictable than our other markets. And as a former Federal Reserve economist, I always…

First, I'll read and answer some of the questions we received by e-mail, and I encourage people to e-mail in their questions before each conference call, so we can tailor our presentation to cover the most ground for the benefit of all shareholders. Here are some of the additional questions that were e-mailed to us. And in some cases, I'm going to be combining several related questions into one. During only the past 2 months since our last conference call in March, some fairly substantial development in the SmartGlass industry. Our largest competitor view filed for bankruptcy, and they were also de-listed from trading on NASDAQ. I will hardly spend any time on them. This was probably not a surprise to anyone who has listened to our calls over the last couple of years as they have had substantial cash burn problems and limited access to new capital. Another public competitor after years of promises of imminent production has not produced even their first commercial switch able tin product and is resorting to digging ditches and laying cable to pay their bills. These developments and companies are, in my opinion, insignificant. There is another much more positive development for us in our industry. This is something we got a lot of questions about. Our SPD film producing licensee Gauzy filed for their initial public offering. Many people have carefully reviewed their F1 registration statement, which gives a lot more detail to many of the things we've been talking about on these conference calls over the past 18 to 24 months. To answer another shareholder question that I received, we believe that Gauzy's IPO filing will greatly benefit our SPD SmartGlass industry and RFI and our shareholders. And our shareholders incidentally includes Gauzy, they're a strategic investor in us. First, you…

[Operator Instructions] Your first question comes from Michael Kay of Kay Associates.

Okay. I was just wondering, given the synergies and excellent relationship you have with Gauzy, has it ever crossed your mind, probably it has, some type of merger or acquisition by Gauzy Research Frontiers that could be beneficial to the Research Frontiers shareholders since. As you know, many of them have been holding the stock for over 20, 25 years and they purchased it, their average price is much higher. So do you think that would be beneficial or is a potential in the future?

We've discussed it and I'm not sure who would be acquiring who or what the transaction would look like specifically. But there are synergies clearly between our companies and we could benefit. But we're also benefiting because, in essence, our minds are merged together. We have the same view of the smart glass industry and how to do smart glass correctly. And I think that our fortunes are aligned whether they're an owner or we're an owner. Their success will be our success and vice versa.

And also, was it specified when Gauzy will go public or is that still look to be determined?

So the way the process works is you file a registration statement with the SEC. In U.S. companies, it's called an S1. Foreign companies, it's called an F1. It has very detailed disclosure, very similar to what you've seen in our 10-K over the years and in our registration statements. The SEC comments on that and you respond to those comments. When you've adequately responded to those comments, you can ask the SEC to what's called accelerate the effectiveness of your registration statement, which means you could go public, start road shows and start talking and taking orders for the stock. So that process has been going on. If you go on the SEC's EDGER website and did a redline, you could see maybe some of the changes that were requested by the SEC. I must say they were relatively modest changes requested because Gauzy is a company that has good accounting systems and is in good shape and they're ready to go. So I look forward to that happening soon.

[Operator Instructions] Your next question comes from Leonard Litzau with Wealth Planning and Design.

We have noticed some activity in the stock, finally, in the last few days or weeks.

Did something happen?

Yes. Did something happen? A little bit. Yeah. But it's still way undervalued, so that's good. I just wondered, are you getting any contacts from institutional buyers?

Yeah. I think that's kind of a natural result. If you consider the much larger market valuation that Gauzy is probably going to get in their IPO and their underwriters are some of the finest in the world and I've spoken to them directly. That kind of attention is also going to attract attention to research frontiers by those same institutional owners. Because to some extent, an investment in Gauzy is an investment in a diversified business and in some respects, an investment in Research Frontiers is also an investment in a diversified business because of the many industries that we cover. And we're more of a pure asset light IP play with higher valuations. So if you consider, for example, that a million-dollar increase in revenue for us is a $20 million increase in revenue for Gauzy and you're traded on a multiple of revenue growth and earnings growth, the leverage could be much higher with research frontiers. But you also have a different diversified business with very stable and predictable earnings within Gauzy. So they're both great companies to invest in, and I think what you're going see is what we've been seeing, which is the work that Gauzy is doing in connection with their IPO is having a favorable effect on us as well, and people are paying attention. I don't know if people are paying attention also because the other public smart glass companies are no longer available, nicely. But I think that it's really more of the former. It's the attention that Gauzy is bringing to the smart glass industry is favorable because they have a lot of good things that are underneath the hood there.

Yeah, sort of in response to that previous question of yours, I think it's premature to do something with REFR. We're just getting to the point where the royalty income will start to get better, and as that happens, dividends will be paid, and why give all of that up at the beginning of the explosion?

Right, right. Yeah, I agree. And I don't think anybody on our board would even remotely consider something at the current valuation, so.

Your next question comes from Investor Alan Ginsberg.

Well, just kind of a follow-up to some of the other things that were being talked about with Gauzy. Now that hopefully they're going to become public and it's going to be more visibility for research frontiers, and maybe, hopefully, new investors joining some of us that have been in the stock for a long, long time. Do you think it would be a good thing to go over the benefits of the royalty agreements that research frontiers is able to get from their intellectual property, as you have in the past, but now you're going have new investors, it would be, I think, a smart thing to focus on. What do you think?

And if there are new investors on the call, we license our hundreds of patents to licensees in different industries, and we get a royalty of between 10 and 15% of their revenue and we get minimum royalties from many of those companies, so they're guaranteed minimums. As companies get established, those minimums become irrelevant because the earned royalties are quickly surpassing them. And because of that, we don't have to build factories. We could focus on what we do best, the R&D, the development, the improvement, the care and feeding of the industry, and things like that. And basically, our expenses are essentially fixed for all practical purposes. So it becomes all profit. So we're talking about gross margins approaching 100% in our business. So it's a very good business once it gets started, and I think if you look at the last year, you're starting to see it really get started with five consecutive quarters of growth over the prior years. So we keep plugging away, and as new products come out, as existing customers expand their use of SPD, like you're seeing, for example, within Ferrari, where they've had very nice growth quarter over quarter in terms of the number of units using our technology. It's a very popular item in the car. You start to see that happen, and then as I mentioned earlier, migrating from one car within an automaker to more than one car, like what happened with Mercedes, and then what happened with McLaren. So being a licensing company and not having to change your cost structure, but having your revenue change is very, very significant, I think, and thanks for suggesting that, Alan.

Your next question comes from investor Thomas McCarthy.

I'm a retired financial advisor now, but committed to Research Frontiers even more than before. Question about Gauzy.

By the way, we're noticing that, that many of our long-time shareholders have substantially increased their positions over time, and it must be that we're doing a better job than we have in the past of communicating some of the successes and the growth, and where it's coming from. So thank you for the increased participation there.

And I believe all my old clients for also adding to their positions. Question about Gauzy. Do they plan on being listed in Israeli and European stock exchanges?

I don't know the details of that. Right now, our discussions have really focused on the US, and they were considering the NASDAQ and the New York Stock Exchange, and I think they're focusing on NASDAQ like most tech companies and material science companies should.

But they do have Israeli. They do have, yeah, and they do have investors throughout the world, so I wouldn't be surprised if they had co-listings on some of the other exchanges as well. Great. Keep up the good work, Joe.

At this time, there are no further questions. Well, it looks like we have a question from August Berman.

Good. Hey, couple questions for me, and I might've missed the initial comments. You mentioned that we're expecting some increase in revenues in Q2 and Q3?

Yes, I did. So Q1 was up over Q4. Q4 was, you know, every quarter so far in the last five quarters have been up compared to the prior quarter, the same quarter of the prior year. And what I did say is, even though we're not even halfway through the second quarter, we already know that royalty income and automotive income is going to be higher.

Are you able to say if that's from a new OEM or not?

I'm not allowed to say where it's coming from. You know, one of the things is that the automotive industry is somewhat predictable. We get production call-outs and things like that, so we know what is going to happen. But also, the leading indicator usually is film sales, and we've seen some dramatic increases in film purchases by our licensees, and they don't do that to keep it in the garage or the basement.

Perfect. And then just two other real quick—

And I think, I don't know if you're on the, I'm sorry, maybe to indirectly answer your question, I did mention that with the Asian automaker, we've successfully passed through the product development process with them, so we expect good things to start happening there, yeah.

That's great news. Okay, and then a while back, back when the Vision Systems Galaxy merger occurred, there was talk of some sort of implementation with their ADAS, the ADAS, and our Smart Glass. Is work still being done on that, or is that not a big market, as we thought?

Yeah, sure, sure. I mean, one of the things I said earlier, which maybe was an indirect way of answering the question, was that some people think of these as distinct markets, you know, cameras, for example, on the outside of vehicles, but they're providing data for the Smart Glass as well, so it makes the Glass system much more intelligent if you could combine that. And also, it's just a great way to hone your skills in the electronics and controller area, so there is a synergy there. And then, usually, the companies that are doing very high-end ADAS systems and things like that are also the prime candidates for energy-efficient, switchable Glass like ours that's, you know, the good stuff, not the white stuff.

Yeah, and it sounds like they have a pretty large installed base, too, just looking at all the buses they've been installed on, so that's really exciting to see. Okay, and then this last thing here, you know, I know we're not talking much about Vue, but with Vue's demise to an extent, are we still talking to their customers about potentially taking on their projects or replacing their projects? I know that was something that they had mentioned a while back, that they're talking to you or reaching out to our licenses.

Yeah. And also, what it does also is it creates, I think, a more rational bidding process for projects because that's subsidizing seven-eighths of the cost of a project. It's very hard to compete against that until they run out of money. Well, they did, so now you're going to get actual economics happening. And at the same time, it's happening when two other very important developments are happening. Number one, the cost of the SPD technology is coming down considerably, as you can see from the fact that we're working with a mid-level car on this. But also, you have the economic drivers of the Dynamic Glass Act, which gives a 30 to 50% tax credit. So you have costs coming down in general, you have tax credits, you know, coming up to subsidize it, and then you have also the cost of installation and the ancillary costs plummeting because of the retrofitability. So a lot of good things are converging at the same time this year.

All good, all good news, and good to see, good to see a little bit of horse sense into our stock as well, so that's exciting.

Your next question comes from investor Dave Paradiso.

I'm doing good. I have a question. Have you ever considered using artificial intelligence to see if you can better maximize the SPD technology, like, you know, for particles or whatever?

Oh, yeah, we use AI in different aspects of our business, both internally and also how we interact with the glass. So, yeah, it's something that works.

Yeah, it's so new, but it's pretty good, so.

Yes, yeah, you just have to know how to talk to it. It's prompt engineering.

Your next question comes from private investor Sam Finta.

I think this is the first time I'm calling in on a conference call. I usually email questions.

I think it is, Sam.

I have two questions. In the past, you mentioned a range of what we collect per vehicle as far as royalty. So with the costs coming down, has that range been lowered or because of increased glass use for the larger roofs, et cetera, et cetera, we're still around the same range. Can you give any color on that?

Yeah, in some cases, it's actually gone up. You know, because the fact that we're using larger areas of glass has increased, obviously, the selling price per vehicle, the unit price, and the movement towards panoramic roofs or these, you know, all glass roofs that you see now like on the Ferrari. They're very large pieces of glass and there are also a lot of functionality added to that glass as well. So, we get paid a nice royalty on that. You know, we've invested $125 million to develop SPD technology over the years and we're getting paid back.

Right, right. And then my second question was about the Asian automaker. You made some comments about it a few minutes ago. That development has, is, we passed through the development. So in a prior call, you mentioned this year. So do you have any more visibility on that? Could we see that before the fourth quarter or could that be at the end of the year?

I don't, the truth of the matter is I don't know if it's going to happen.

As far as when we can have news on it?

No, I don't know. It's up to the automaker, but it could be the third quarter. It could be the fourth quarter. It could be the first quarter of next year. I'm probably guessing that they're going to want to say something about it earlier in the process than later, so.

Right, okay. Well, thank you.

I think everybody will get the confirmation. I think we've all are expecting.

Great, great.

And one other thing. We are working on the website.

Great, great. Because, yeah, I see it as, especially as we saw today, the stock sets a new 52-week high. So there were 56 stocks on the NASDAQ today setting a 52-week high. That brings attention to the company, and they don't even know what this is. So the first thing they're going to go is go to the website. So I appreciate you.

It's our director of first impression. I get it.

Okay, great. And I'll wait patiently. I'll stop blowing the trumpet on that.

You could always blow the trumpet at some time. We do listen. We do listen. Okay.

At this time, I would like to turn the call back to Mr. Harary for any further remarks.

Okay, thanks. I'm going to make a few closing remarks. The outlook for the smart glass industry remains extremely positive, bolstered by growing revenues in automotive and aircraft and increasing regulatory support like the Dynamic Glass Act providing substantial tax credits for adoption. The foundations are firmly in place for research frontiers to capitalize on the multi-billion dollar smart glass opportunity emerging globally. We are the proven leader with an innovative, high-performing and reliable solution and are seeing increasing demand from respected iconic brands worldwide. Our close strategic relationship with Gauzy continues to create opportunities in multiple sectors as we work together on business development and product innovation. Gauzy's upcoming IPO will bring greater transparency and resources to the industry and their marketing will further highlight the immense potential of SPD technology. In Q1 2024, we continued our strong growth trajectory, increasing royalty revenues by 26% over Q1 2023, driven by significant gains in the automotive and aircraft sectors. This builds on a robust performance for full year 2023 where total revenues surged by 109% and royalty income jumped 69% over the prior year. This past quarter marked the fifth consecutive quarter where revenues were higher than the same quarter of the prior year. Looking ahead, we expect automotive and aircraft revenues to continue rising in the coming quarters, driven by new product introductions, the introduction of new automakers offering SPD smart glass on their new car models and increasing penetration at existing customers. The retrofit market for buildings also represents a significant new growth catalyst as we work to enable smarter, more sustainable infrastructure worldwide. This coming year, we expect you to see even better results. I think in the coming year, you'll also begin to see more and more details becoming public about what is happening in our…

This concludes today's Research Frontiers investment call. Thank you for attending. Have a wonderful rest of your day.