Good afternoon ladies and gentlemen. Welcome to the Research Frontiers Investor Conference Call to discuss the Second Quarter of 2024 results of operations and recent developments. During today's presentation all parties will be in a listen-only mode. [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, forecast, and similar expressions are intended to identify forward-looking statements. Statements that are not historical facts are forward-looking statements that are made pursuant to the safe harbor provisions that are part of the Securities Litigation Reform Act of 1995. These statements reflect the company's current beliefs and a number of important factors could cause actual results for future periods to differ materially from those expressed. Significant factors that could cause results to differ from those anticipated are described in our filings with the SEC. Research Frontiers undertakes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties. The company will be answering many of the questions that were emailed to it prior to this conference call either in their presentation or as part of the Q&A session at the end. In some cases, the company has responded directly to email questions prior to this call or will do so afterwards in order to answer more questions of general interest to shareholders on this call. If you find that your question has been substantially answered as a courtesy and to allow time for other shareholders to ask their questions, please remove yourself from the queue by pressing star two. 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.

Thank you, Paul, and hello everyone and welcome to our investor conference call to discuss the second quarter of 2024. On our last conference call, we anticipated higher royalty income for the second quarter based on leading indicators. Indeed, compared to the same quarter last year, our royalty income increased by 165%. The first quarter of 2024 was dynamic and the second quarter saw royalty income rise by over 56% from those elevated levels. For the first half of this year, royalty income surged by over 85% compared to the same period last year driven by substantial growth in our two largest markets, automotive and aircraft. This impressive revenue growth builds on the strong performance from 2023 where fee income increased by 69% over 2022 and overall revenue was up by 109% from the prior year. The second quarter of 2024 marked our sixth consecutive quarter of revenue growth compared to the prior year. Looking ahead to the second half of this year, we expect Q3 and Q4 royalty income to surpass last year's levels, further solidifying our growth trajectory. We expect our growth this year will come from growth in our existing markets and from new product introductions. Expenses this quarter were about $105,000 lower, bringing our net loss for the second quarter to just $94,000 or $0.0 per share. Our average cash burn rate has been steadily decreasing. Based on projected revenue growth, I do not anticipate the need to raise additional capital in the foreseeable future unless a strategic reason arises. We continue to be free of debt and are in strong financial shape. And as of June 30th, 2024, the company had over $1.9 million in cash and cash equivalents and our working capital was $2.8 million. We currently expect to have sufficient working capital for…

My pleasure. [Operator Instructions] And our first question comes from Neal Goldman of Goldman Capital Management. Your line is open. Mr. Goldman, please go ahead.

Neal, you may be on mute.

Okay. Is that good?

Oh, there we go. Hi.

Okay.

Now we can. How are you doing?

Good. I'm doing great. First question is Gauzy was up 22%. We were up 56% in royalties. Who are the other key distributors for us?

Well, they're supplying the film and then it depends on the markup. So Ferrari is a substantial portion, McLaren, Cadillac is a small contribution by one of the same licensees that's doing the Ferrari. And then you have the aircraft markets, which is vision systems and inspect that primarily. So, those are the things where you have. The film price is basically the same for all the industries. The end product price can change dramatically, depending on who the customer is, in the bells and whistles, like I talked about before, can contribute also. And it's all good.

Before Gauzy does major expansion with the incremental funds they got from the IPO. If they were operating at capacity today, if demand was there, what kind of incremental revenues would be receiving from Gauzy?

Well, that's a hard question to answer. So if they were at capacity, it would probably be about a million square meters and figure the average Ferrari sunroof is, 1.267 square meters, roughly 1.3 square meters. A typical sunroof may be one meter. And then if you have the front and back panoramic, it could be a meter and a half to 1.8 meters. So that'll give you kind of an idea of the number of sunroofs. But if they're at a million square meters capacity, I imagine that the royalty per car because of the volumes will be lower for us. So, it could be 25, 50, 75, 100, 150 or even $200 per car, depending on the dynamics. If that same film is going to aircraft, a million square meters could produce a couple hundred million dollars in revenue.

And what would be our share?

No, to us.

To us.

Right.

Say that number?

So it really depends on the market it goes to, like the same 1.2 square meter, square foot window, for example, would sell for a lot less if it was put into a sunroof than if it was put into an aircraft window, just because the selling price to the -

And what did you say the price would be if they were all aircraft, the incremental volume to us?

Probably about $100 million. I'm not predicting that because, there's wide planes. But that'd be the high end of the market.

Okay. But that would be –

Yes, that would be probably the highest price per square foot we were getting.

Yes. $3 a share just from that.

Right.

Okay. Right. Thank you, Joe

Thanks, Neal. Bye.

And our next question comes from Michael Kay of Kay Associates. Your line is open.

Hello, Joe.

Hey, Michael. How are you?

Okay. Let me just. Okay. Just a dissenting voice about something. One of the reasons I'm still in Research Frontiers, never sold a share for the last 25, 50 years is because your conference calls are so detailed, you entertain questions, and you don't put any time limits compared to some other companies where I'm a shareholder, where I can't even get on the line. Of course, they have very strict timeframes. And so, I think that's a tremendous plus. I don't even care.

Thank you. And it's a self-serving plus, because sometimes the only way to really get information when you see the noise of a stock price that fluctuates is to actually listen to what's going on. And when you have a company that happens to be in industries where you can't always talk about everything, sometimes these conference calls are the best venue for doing it. So it's our pleasure to do that. Thank you.

Yes. And I really appreciate the fact that you don't put time limits, take email questions, and give everyone a chance regardless of how many shares they own to answer questions. I think now, we have now a consistent earnings the last few quarters, uptrend, things with Gauzy. The fact that any technology, given the climate change, which now I think even the most ignorant individuals who thought it was a Chinese hoax must agree just by reading the newspapers or listening to the news, that any technology that could show to decrease interior temperatures certainly is a major plus. And I'm wondering, what is the company doing to inform institutions, money managers? There are mutual funds, micro-cap funds about the existence of research frontiers, because even if they buy a car with SPD, they may not realize that that has been developed by Research Frontiers. So will you be initiating any systemic program to inform money managers about the existence and prospects of the company?

Okay. Excellent question, Michael. So first of all, let me say that regardless of whether climate change exists or doesn't, it's always good to be energy efficient and increase comfort and security and all of the things that SPD does. Back in 1965, I'm not really sure that the world was thinking so much about those things and now they are, fortunately, but it's always a good thing. So we would be doing it whether there was climate change or not, because conserving resources is always a good thing. In terms of making this known, I'll tell you what we won't do and what we will do if I could do that. Yes, there's been a number of companies that what the SEC refers to as ESG washing where they basically just tout ESG and they've gotten into big trouble because there's nothing underlying that. We're probably the opposite. We've been a green company since day one before the term green was even coined and that's fine. What are we going to do to bring this to the attention of money managers? Well, the message is very, very consistent, okay? And now it's being amplified by another licensee that is even dealing with larger money managers and that's Gauzy is you talk about the benefits of the technology and what you're doing. Electric vehicles, we're increasing the range of the driving range. Cars were increasing fuel economy. Buildings, we're increasing energy efficiency. Planes, we're doing, we talked a lot about the energy efficiency aspects and the comfort aspects and there's the security aspects as well. So you talk about the messages consistently. And we were talking about CO2 reduction in vehicles before it became fashionable to do that, because it's the right thing to do. So we'll continue to do…

Thank you. One more brief question. Is Gauzy basically the only company or the major one that does the production of the film? Or is it like, is it Hitachi or some other company, is it Isoclima?

Well remember, they bought Hitachi's SPD business from them. So yes, that was in their registration statements. That's a very positive development, because now they've expanded capacity through acquisition and they've also expanded expertise through that process because, Hitachi was a very smart company, I could tell you. And they developed a lot of good know-how around SPD technology, which now is residing with Gauzy and allows them to really accelerate what they're doing even further.

Does Isoclima make a film?

They don't make a film. They buy it. They buy it from Gauzy.

Thank you and continued success to you and the company, Joe.

Thanks, Michael. Hope to see you soon.

[Operator Instructions] And our next question comes from Jeff Harvey of Private Investor. Your line is open.

Hi, Joe.

Hey, Jeff. How are you?

A couple of things. First of all, I have to say, I think the Gauzy IPO was one of the worst IPOs I've ever seen in my 35 years in business. I don't know what happened there, but the underwriters are supposed to support the market after the initial offering and they certainly didn't do that very well.

No, judging from the stock price, they didn't. But Gauzy did get its target price and the $75 million they were looking for. So they have the resources they expected. But it would be nice if you would see price appreciation. And look, they had a very good first quarter compared to last year and they had an excellent second quarter. And we'll see what the market does when the actual numbers are released.

I think I missed what you talked about the middle level car that's going to be introduced from Asia. When do you expect that to happen now?

As I said, there's a meeting at the end of this month about the launch. So we'll know more about it probably than us and Gauzy.

Okay, great. Thank you very much.

Thanks.

And our next question comes from Allen Ginsberg of Private Investor. Your line is open.

Yes. Hi, Joe. How are you?

Hey, Allen. How are you?

Okay. Is there going to be a breakdown at some point between what Gauzy does with PDLC as opposed to SPD, because that would be helpful to see what Gauzy is doing with both technologies?

I doubt it because the SEC rules kind of require companies to lump things into what they call business units. So, Gauzy, if you look at their business units, they have ADAS and they have other things like that and they have smart film. So I think this would be probably combined with smart film.

Okay. Because that would be helpful, if that would be possible, but --

Sure. But remember, they also have a much higher margins on the SPD business. So they and we have a vested interest in more of their business being that if their interest is revenue growth and profitability, and I read you the quote from the OpEx [ph], so I think you can see the same thing.

Just as a follow-up to a question that was just asked about getting the word out to various stock people. Wouldn't it be a good idea to hire a financial public relations firm at this point since you have so much going on and not just Gauzy?

We've been interviewing, yes.

Okay. Good. I hope you do. Thank you.

Thanks. Thank you.

And we have a question from Leonard Lietzow of Private Investor. Your line is open, sir.

Joe, since they raised their $75 million and since in their notes in their S1 where they had contracts on all of the SPD film for this year that they could make. I would assume that they're expanding their line. I think they could put a second line right next to the one they got right now.

That's exactly right. They've laid out the second line if they wanted it to be in Germany right next to the first one in the Stuttgart area. Or they may decide they're going to do it in Asia near the other customer or the U.S. depending on where the need is logistically, but film is pretty easy to ship wherever it needs to be in the world. So if it was all done in Germany and shipped worldwide, there's plenty of companies that successfully do that with even harder things to ship and film is relatively light and easy to ship. So it could be anywhere, but they have the ability to do that.

With architects and that coming on and with autos and airplanes using everything that they can make right now, I would think that they have to get something up and running pretty good if they're going to be sell, that's a big number?

We saw this --we've seen this now twice, where large capable companies develop SPD production lines, first Hitachi and now Gauzy. And once you know what to build, and that's part of the know-how, and how to configure it, which is another part of it, because there's a whole system of rollers and other things and tension that you put on the film and things like that that becomes very important in keeping yields up. Once you know how to do all that stuff, it's not hard to replicate it. And assuming you had the building permits or the factory line or the warehouse was already there, it doesn't take more than I would say six to eight months to get another line up.

Okay. Because that's the only way we can continue to grow revenue is to be able to sell more film.

Right. And as long as Gauzy is making money on that film, they have every incentive to keep making more and more factories.

Okay. Thank you.

Yes. Thanks.

Okay. I am seeing no further questions in the queue. I'll turn the call back over to our host.

Okay. Well, look, as a reminder, if we haven't fully answered any questions, or either email to us or in our presentation today or in the live Q&A, please feel free to call or email us. And now I'm just going to make a few closing remarks. The outlook for the SmartGlass industry remains extremely promising, bolstered by growing revenues in automotive and aircraft and increasing regulatory support like the Dynamic Glass Act providing substantial tax credits for adoption that should bring other markets like the architectural market more mainstream for us as well. Research Frontiers is a recognized leader with an innovative, high-performing and reliable solution. And we and our licensees are seeing increasing demand from respected, iconic brands worldwide and from their customers. And in some industries where the customer can choose, they are selecting SPD as shown by the new Airbus and Boeing programs. And our close strategic partnership with Gauzy continues to create opportunities in multiple sectors as we continuously work together on business development and product innovation. As a matter of fact, we have a meeting on Monday coming up together. Gauzy's recent IPO also has brought greater transparency and resources to the industry and their expanded production and marketing will further reduce cost of using SPD-SmartGlass and highlight the immense potential of SPD technology to an ever-widening audience of customers and investors. And in our last conference call, we predicted higher royalty income for the second quarter based on the leading indicators that we saw at that time, and we were right. We achieved this and saw a 165% increase compared to the same quarter last year, and we had a great first quarter this year, and our second quarter royalty income rose over 56% from those elevated levels from the first quarter. And…

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