Q2 2025 Research Frontiers Inc Earnings Call
Speaker #1: In some cases, the company has responded directly to email questions prior this call, or will do so afterwards. In order to answer more questions of general interest, the shareholders on the call.
Speaker #1: Some statements today may contain forward-looking information. Identified by words such as expect, anticipate, and forecast. Please reflect current beliefs and actual results may differ materially from those expressed due to various risk factors, including detailed in our SEC filings.
Speaker #1: Research Frontier assumes no obligation to update or revise these statements. Today's call is in listen-only mode, with a Q&A session to follow. To ask a estion, press star one.
Speaker #1: The call is being recorded and will be available for replay on Research Frontier's website at smartglass.com for the next 90 days. During the question answer portion of today's call, if you find that your question has been substantially answered, as a courtesy and to allow time for other shareholders to ask questions, please remove yourself from the queue by pressing pound one.
Speaker #1: Also, we ask that you keep your questions brief in the interest of time. I will now turn the conference over to Joe Harary, president and chief executive officer of Research Frontiers.
Speaker #1: Please go ahead, sir.
Speaker #2: Thank ou, Erica. Hello, everyone, and welcome to our second quarter of 2025 investor conference call. From an accounting perspective, the second quarter of 2025 results look disappointing.
Speaker #2: But much of this relates to one-time and non-cash charges and expenses that we elected to take in the second quarter. I'll go into this in more detail.
Speaker #2: From an operational perspective, things were actually much better with higher economic activity, and sales of SPD Smart Glass during the half the second half of this year and lower cash expenses.
Speaker #2: But when you back out one-time accounting charges from the bankruptcy and replacement of one of our licensee supplying Ferrari, and non-cash accounting charges from options issued last year that were approved for issuance by our shareholders this year, expenses would be essentially the same or lower than last year, and royalties would be up compared to last year.
Speaker #2: Deliveries of the Cadillac Celestique to GM customers have started. Sales of SPD Smart Glass sunroofs to Cadillac in Q2 2025 were substantial multiples higher than Q4 2024.
Speaker #2: And Q1 2025 combined. Ferrari roof sales were strong in the first quarter 2025. However, because of the bankruptcy filing of the European licensee that was supplying Ferrari, with the bankruptcy coming from this licensee's loss and from other customers not Ferrari, this licensee shut down operations in Q2 2025 so we did not book any royalty income from them for Q2, and wrote off some amounts.
Speaker #2: This is why royalty income was down this quarter. Also, this bankruptcy filing was anticipated by Ferrari, Gaudi, and Research Frontiers, and another existing licensee of ours in Europe was successfully transitioned to supply Ferrari, and additional production for Ferrari has already started by this licensee.
Speaker #2: Now we get into a little bit of the accounting. Because we don't book additional royalty income until a licensee meets its minimum annual royalties, we have not yet seen additional royalty income from this additional supplier to Ferrari yet.
Speaker #2: So we book nothing for the second quarter from the licensee that went bankrupt, and we weren't able to include any royalty income from the replacement licensee.
Speaker #2: Based upon the way our royalties under our license agreement were accounted for, and the ramp-up of sales to Ferrari, we expect to see additional income from this licensee recorded in the third and fourth quarters of 2025, relating to the Ferrari business.
Speaker #2: We also expect additional royalty income from other automotive projects starting in Q3 2025. Continued sales of SPD Smart Glass roofs for Mercedes and McLaren also occurred in the first half of 2025.
Speaker #2: Also, as I mentioned, we elected to make in the second quarter certain accounting charges and treatment relating to the bankruptcy file in the second quarter by one of our licensees.
Speaker #2: Backing out these royalty income would be up compared to last year. Also, I note this comes off of a very strong first quarter of 2025 with 79% revenue growth from Q1 over the prior year, and 214% from the prior quarter.
Speaker #2: This growth and momentum for Research Frontiers was driven by increased demand for SPD Smart Glass, particularly in the automotive sector, and also in the aircraft sector, with growing interest in new projects in the architectural market.
Speaker #2: We continue to expect revenue in all market segments to increase further as new car models and other products using the company's SPD Smart Glass technology are introduced into the market.
Speaker #2: And apart from these blips in accounting treatment, our net loss would have been lower this quarter, and we are moving forward towards being cash flow positive.
Speaker #2: Turning to our financial condition and liquidity, we continue to manage our resources effectively. As of June 30th, 2025, our cash and cash equivalents stood at approximately $1.3 million.
Speaker #2: It's $100,000 less than last quarter. And our working capital was approximately $1.7 million. We continue to be debt-free. We continued also to see progress in significant developments across our markets.
Speaker #2: Our SPD Smart technology is currently licensed or used by many major companies serving five major application areas. Aerospace, architectural, automotive, marine, and display products, in almost every country in the world.
Speaker #2: As I mentioned earlier, we included some questions previously sent in by our shareholders in our presentation today. I'll now answer some questions that have been emailed to us.
Speaker #2: So the first question comes from John Nelson. There's a number of questions here. SPD Black development update. Okay. Well, I'm happy to report, John, that Gaudi may go into more detail on this on their call next week on August 13th.
Speaker #2: But everything is going well and faster than I anticipated. I was recently in Israel visiting their factory and saw the latest SPD film, and it looks really, ally great.
Speaker #2: It looks far better than what I saw in January at CES. And I think even more important than what I think, the key OEMs really like it as well.
Speaker #2: You asked me about how the architectural window product project is going. Has it officially launched? Well, it's launched on the development side. We've submitted samples to testing for energy efficiency.
Speaker #2: We've, you know, worked out all of the, you ow, the details in terms of wiring and installation and production and things like that. And you asked, can you identify the licensee for us?
Speaker #2: Yes, it's LTI Smart Glass, which is in Massachusetts and AIT, which is their affiliate in Largo, Florida. And you asked about some of the projects they're definitely in works.
Speaker #2: And you asked the last question, any effects on your business from ongoing US trade and tariff policy? No effect that we could see. Basically, the general automotive industry, for example, was shaken up quite a bit.
Speaker #2: By tariffs, but they seem to have settled in now and have stabilized. The areas that we're in, we're unaffected at all, but the general market in automotive was affected.
Speaker #2: Okay. Next question is from Steve A. With world opinion turning against Israel, how is Gaudi managing this situation and are they losing business opportunities from this situation?
Speaker #2: And is it affecting Reefer? Well, first of all, Steve, I disagree that world opinion is turned against Israel and neither we nor they have seen any business loss from this.
Speaker #2: So, you know, thankfully, everything is in good shape there and, you know, now that the markets that we're in are starting to stabilize as people get used to things like, you know, the tariff regime and the negotiations there are pretty much done in most major markets, I think everything is approaching back to normal again.
Speaker #2: They weren't affected directly because they have worldwide operations. Your second question, Steve, was with the stock market broadening out, small caps, you have a at opportunity to present good news to get the stock price moving and much higher.
Speaker #2: This opportunity should not be lost. We have been stuck in this pattern for so many years. We need to get out of this present cycle.
Speaker #2: Well, first of all, let me say amen to that. I'm sure that I would say that the stock market is broadening out to include small caps.
Speaker #2: If you look at, for example, a comparison of the Russell 2000 relative to the NASDAQ 100, that relationship hit an all-time low last week.
Speaker #2: So, small caps still continue to lag behind the Magnificent Seven and are not participating. So, small caps haven't really rebounded yet from that.
Speaker #2: And as far as being stuck in this pattern for so many years, I looked at that same chart and this decline in the Russell 2000 compared the Russell 100 really has been in a downturn for the past five years.
Speaker #2: Hopefully, that will turn itself around. However, in our case, you know, our plan is to become so big that they can't ignore us. No matter where we are in that market.
Speaker #2: Rick Sorrell's asks, is the Chevrolet Corvette using SPD in their tinting roof system? And you also ask a question about the architectural retrofit market, which I've already answered.
Speaker #2: Getting to the Corvette, it's somewhat of a mystery. I've heard mixed things around the industry. About whether it's going to appear. I haven't seen in any of our licensee royalty reports any report of supplying that market.
Speaker #2: And I can't say much about it other than regardless of what put in there, we may have other business within GM outside of the Cadillac that we're currently in.
Speaker #2: That I know of already. But it's not something I could talk about on this call. But hopefully, more details later. Kerry Christie asks, what happened the VW i7 and other PDLC roof wind for a major player not Reefer?
Speaker #2: Why is SPD used in multiple prototypes, and production is given to another competitor? SPD is supposed to be a superior product at a competitive price.
Speaker #2: Well, let's take one part of that first. And I think this explains a lot. The competitive price. While our prices have come down quite a bit based on, you know, increased volumes.
Speaker #2: And they could come down quite a bit more within, you know, additional projects coming online. Right now, PDLC is much cheaper than SPD. So my guess is if somebody puts it in a car, it's because they're comparing apples to oranges, not understanding that they taste different.
Speaker #2: And the VW i7 was talked about three to five years ago, but you know, it doesn't change the nature of what I'm saying, which is, you know, VW has been focused on PDLC and all of their cars and even it's spilled over to Rivian because they invested VW invested about $10 billion in Rivian.
Speaker #2: So I imagine they're trying to use the same platforms and other products. That'll change. I sat in a Rivian the other day and the car is beautiful.
Speaker #2: The roof really left a lot to be desired. You can clearly see whether the roof was in the clear or the frosted state. That a lot of light was coming through.
Speaker #2: You could clearly see things like light bulbs in showroom ceiling and things like that that were coming through. So it's not really doing much at all to block the heat light and glare that's coming in.
Speaker #2: And that's really the reason you put this in there. Maybe turning to something else, which is future projects for SPD. We're going to see more and more of those come on board.
Speaker #2: So while some projects may go to PDLC due to momentum within an automaker, I think a lot of companies are waking up to the fact and now they're actually even telling us explicitly that they know that SPD has better performance than PDLC.
Speaker #2: So that kind of confirms once again that the price is still being offered at a lower price. It could be that they're being subsidized to get market share.
Speaker #2: Whatever the reason, subsidizing to get market share only works to a small extent and eventually they're going to need to have economic pricing. Another one question from Elliot.
Speaker #2: How should we think about royalties for the retrofit windows? On sunroofs, you mentioned royalties of about $100 per sunroof depending on size. What do you hope to collect on architectural window replacements?
Speaker #2: Our licensee in this area is actually projecting sales in first year in the high tens of millions of dollars. And if we have a 10 or 15%, right now it's a 15% royalty, but I imagine in high volume they're going to ask me to reduce royalty to 10% and depending on the volumes, I certainly would consider it.
Speaker #2: You're talking royalty levels that can make us clearly profitable even in the first year of the retrofit being on the market. After that, we expect multiples of that.
Speaker #2: When I say we, the licensee that is producing and marketing this. And if you want their marketing materials, you can see it on the LTI AIT website.
Speaker #2: Okay. We answered the email questions. You know, now I'd like to maybe open up the questions and answer session, Erica. To additional questions, people may have that haven't been answered already.
Speaker #2: And we ask that you keep your estions limited to questions of general interest. If there's something specific that you want to k about, a project for our home or something like , let's talk offline.
Speaker #2: But if it's of general interest to shareholders, please ask. And also, we can certainly answer any questions by email or calls afterwards.
Speaker #1: If you would like to ask a estion, please press star one on your telephone keypad now. You'll be placed into the queue in the order received.
Speaker #1: Please be prepared to ask your question when prompted. Once again, to ask a question, please press star one on your phone now. Our first question comes from Bill Denny.
Speaker #1: Please state your question.
Speaker #2: Hello, sir. Thanks for taking the call. I think you may have answered it a little bit ago. I recently drove the new Audi S5.
Speaker #2: And they have the tinting technology in their sunroof. I assume that is not from REFR? No, since Audi's part of VW, they tend to consistently have been trying to introduce PDLC.
Speaker #2: It's not getting a very good reaction, but you know, I ink that'll change over time. Thank you. I was not impressed with it. And I kind of figured it wasn't from your company.
Speaker #2: So thank ou. I really appreciate you clearing that up. Sure. Thank ou.
Speaker #1: Our next question comes from Bruce Denny. Please state your estion.
Speaker #3: Hi, Joe. On a recent conference
Speaker #2: call, you said that we have a future project that will dwarf all our previous revenues. And I was wondering if you could at least give us what categories in architectural or whatever.
Speaker #2: Domestic and automotive. Great. Okay. Thank you. Thanks a lot.
Speaker #1: Our next question comes from John Nelson. Please say your estion.
Speaker #2: Hi, Joe. My
Speaker #3: Hey, John.
Speaker #2: question is, a replay of
Speaker #3: prior quarters. The auto sun visor update built-in and aftermarket.
Speaker #2: Sure. We I sent you an email about this last night, which you might have missed. But basically, the licensee in that has been somewhat distracted by other events in the automotive industry, including general tariffs and moving their factories from overseas to North America.
Speaker #2: So I don't have much to report on that yet. But you know, there's a ittle more detail in what I had sent you last night.
Speaker #3: Okay. Thank ou.
Speaker #2: Thanks a lot.
Speaker #1: Our next question comes from Chuck Michaels. Please say your estion.
Speaker #3: Yes. Hi, Joe.
Speaker #2: Hey, Chuck.
Speaker #3: Two questions, really. One was as to the architectural office windows. I hadn't mentioned anything about that today. And you know, I thought we were going to make some progress due to that domestic of a lot of this past on that.
Speaker #3: And so I en't heard anything. So if you could ment on that, first of all.
Speaker #2: Okay. I just wanted to understand about the architectural I spoke a bit about it in terms of the retrofit being moving forward and that's being spearheaded by LTI AIT or our licensee and Massachusetts and Florida.
Speaker #3: Oh, that's the architectural? Okay.
Speaker #2: Right. That's the architectural, yeah.
Speaker #3: Okay. I guess I didn't pick that up.
Speaker #2: Just for everyone's benefit, for everyone's benefit, we think the reason that the retrofit application is going to be a game changer, first of all, no one else uld do it.
Speaker #2: It's been one of the holy grails. The other being the black SPD, which you know we talked also is being close to fruition here.
Speaker #2: But the retrofit we believe will substantially change the way people introduce smart glass into their homes and offices. What we mean by that is you can actually install an SPD window from the inside of a building.
Speaker #2: So you don't have to put up scaffolding. You don't have to get landlord approval. It's a lot more like a window shade, but it's not a window shade.
Speaker #2: It's a sturdy piece of glass that actually adds an extra layer of insulation to the building. And not having to do that means that you can measure and produce windows for any building or home and come in over the weekend.
Speaker #2: So ou're not disrupting tenants. And you know, installing these in the building. And that's in the private sector. And that's somewhat driven by the dynamic glass act because you also get a tax credit.
Speaker #2: In the government market, it's even bigger. Because the GSA has a mandate to upgrade the energy efficiency of their windows, right? Right now, most government buildings have monolithic glass, not insulated glass even.
Speaker #2: And this is a great way to upgrade that to be much more energy efficient. And we've ally in the past done types of retrofits in government buildings.
Speaker #2: And they like it. So it kind of proved out that this is not a disruptive process.
Speaker #3: Okay. And the second one, and I think it's different from what ou've described before. Today. But in several conference calls recently, you've mentioned or you've hinted at, I guess you can't say too much, but about a new manufacturer coming out with a vehicle soon.
Speaker #3: And do you have an update?
Speaker #2: Well, have a number. Yeah, we have a number. So the Asian automaker is still on track to come out. The car hasn't come out.
Speaker #2: So you ow that really is related to when the car comes out. But it's very much on track. And there's activity between us and them and Gaudi as well.
Speaker #2: So that's moving. I mentioned some new other projects in Europe and in North America. And those also are moving forward. So you know we continue to move forward in all fronts with everything.
Speaker #2: Sometimes the customer gets delayed for other reasons, including moving factories or adjusting to the reality of constantly shifting tariffs and now have settled in.
Speaker #2: I think things are stabilizing there, and we'll start to see things start to move.
Speaker #3: Okay. Thank you very much.
Speaker #2: Thanks.
Speaker #1: Our next question comes from Art Brady. Please state your estion.
Speaker #4: Hi, Joe. Art Brady, here. I know in the past, you used to do a lot of work with Lincoln. And as a matter of fact, you used to have a car, a Lincoln car, where we had the annual meetings.
Speaker #4: And now we hear Zills from them. What's appening with the Lincoln?
Speaker #2: Well, I don't know if you remember, but even the CEO of Ford got on CNBC and said that the SPD Smart Glass roof was definitely going to be in the continental.
Speaker #2: And then it wasn't. So you ow I don't want to go into too much details, but it didn't have anything to do with us or the supply chain.
Speaker #2: I think it had more to do with the car itself. And you don't see the continental on the road anymore. But we do have relationships with Ford.
Speaker #2: Some are, you know, there's projects going on there. And also, I may say that Gaudi has publicly stated that they have good relations with Ford and projects going on.
Speaker #2: So you know, so I think it's just these things have to percolate into cars on the road.
Speaker #4: You think that'll happen in the next 12 to 18 months?
Speaker #2: I don't want to put a time frame. It could happen sooner. It could take longer. You know, I would have thought when they announced that when the CEO announced that we were going to be in the car, that it would have happened in the next week.
Speaker #2: But it didn't. So and this was their CEO, not me.
Speaker #4: Can you also talk a little bit about the whole concept of when you have direct sunlight and you don't have SPD, you really can't use it when there's like sunlight very strong glare and six feet away.
Speaker #4: You cannot read the time.
Speaker #2: I think we'll talk about that offline. Art, it sounds like a very specific idea or application you have. And I'm appy to talk to you about it.
Speaker #2: Offline. But yeah, controlling heat line glare is at we do best. So I'm sure that we can be of benefit to what you're inking .
Speaker #4: And you ow.
Speaker #2: And we got to make room for more questions. Art, I'm sorry. Why don't we continue, Art, discussion at another time?
Speaker #1: Our next question comes from Leonard Lezzo. Please state your estion.
Speaker #5: Good afternoon, Joe. I was just reading.
Speaker #2: Hey, i.
Speaker #5: At the last conference call, you said you had a couple of new things coming out this year. New OEMs. And several more right behind you.
Speaker #5: For next year.
Speaker #2: Right.
Speaker #5: So you ow.
Speaker #2: Still moving forward. And I'll be, yeah, we're still moving forward. I think that since that call, 've had other models introduced as well. To the mix.
Speaker #2: So you know it's you, O, it's something that we and Gaudi aggressively have been pursuing as the automotive market together.
Speaker #5: Oh, I'm sure you're ursuing it. Yeah. Do you think we'll see that in the next six to nine months?
Speaker #2: I'm hopeful. Yeah.
Speaker #5: We are too.
Speaker #2: Okay.
Speaker #1: Our next question comes from Francis Coturba. Please state your estion.
Speaker #6: Good afternoon, Joe. How's it going?
Speaker #2: Good. How are you doing?
Speaker #6: Pretty good. The Asian car that hasn't been released yet, was that the reason why the prediction for 2023 was going to be good for the shareholders collapsed?
Speaker #6: And we didn't see that come forward?
Speaker #2: Yeah, we expected the car to come out. We were told Gaudi was told. The R&D people within the Asian car maker were told. And it just didn't appen.
Speaker #6: Well, they're ing to.
Speaker #2: No, I think it had something to do with other things in the car.
Speaker #6: Are they going with a different technology or that's still? Not that.
Speaker #2: No, we're having active discussions about not only the our current SPD, but the new SPD as well.
Speaker #6: Okay. In the architectural market, what's going to be the main driving force for someone to install it? Savings? Energy savings? You know.
Speaker #2: One thing I must say, our website has now become really effective at bringing in large projects. I've noticed the new updated website has attracted very, very large companies and projects and things like that.
Speaker #2: And on those, it's energy efficiency. On the smaller ones, you ow high-end homes and ings like that, a lot of times it's view preservation.
Speaker #2: Heat management. Privacy. There's a lot of different things that are driving why people have been asking us to retrofit their windows with SPD.
Speaker #6: For a large application?
Speaker #2: Large and small. Large and small. But for the large ones, it's mostly you ow crunching the numbers, nuts and bolts, energy efficiency, you ow ease of facility management, there's a lot of different things that have gone into the decision-making on that.
Speaker #2: For example, if you don't, if you don't have to, for ample, you ow put window shades in a building, or if you can replace motorized window shades, which are very, very prone to jamming and error and things like that with something that's very reliable, like SPD, and give centralized control to the facility manager, these buildings become you know much easier to optimize for energy efficiency.
Speaker #2: And if you look at some of the studies that were done, there was a Saudi Arabian study that talked about the optimal place and tint for SPD windows in different parts of different types of buildings and ings.
Speaker #2: And there were other studies as well. You know you're starting to see architects really drill down now into what call the nuts and bolts of why you would use it.
Speaker #2: And that's good because the data is very favorable to us.
Speaker #6: Are there reductions in temperatures?
Speaker #2: Yes. Some of the studies that have been done show a 20% reduction in electrical usage in zones that use SPD. In cars, we can reduce the temperature by 18 degrees Fahrenheit.
Speaker #2: So instead of getting in a car and it being 90 degrees at 72, and you haven't used your air conditioning, each application kind of has its own footprint, if you will, and benefit.
Speaker #2: And then it also depends on where the building is and at it's used for.
Speaker #6: And being that there are no competitors in that market, price really might not be that much of an issue?
Speaker #2: Well, everything competes with everything. I mean, you ow we may not have smart glass competitors in the architectural market with view and halo going bankrupt.
Speaker #2: But you know we still compete with window shades and vertical blinds and curtains and you know the more traditional ways of controlling light and shading.
Speaker #2: So everything has a competitor. We can't go crazy. But on the other hand, you know there's really demonstrable benefits to use this.
Speaker #6: What type of voltage is needed to switch?
Speaker #2: In the architectural applications, we're ing it maximizes transparency at around 80 volts. So you actually reduce AC and then you. AC. And
Speaker #6: AC.
Speaker #2: then what you're doing is using milliamps per square foot. So the power draw is negligible. Even at 80 to 90 volts, you know from a home application.
Speaker #2: In cars, we're running off to 12-volt battery.
Speaker #6: Which probably goes through a converter to AC because you're switching to AC.
Speaker #2: Okay. Exactly. Yep. You got it.
Speaker #6: Okay. Thanks. Thanks.
Speaker #2: Thanks a lot.
Speaker #6: Bye.
Speaker #1: Our next question comes from Jared Sherman. Please state your estion.
Speaker #7: Who is the licensee that went bankrupt?
Speaker #2: We're not naming the name, but it was a European licensee that was supplying Ferrari. And.
Speaker #7: What's the secrecy? Like why is it so top secret? I don't understand.
Speaker #2: Well, I think if you do a search, you'll see which glass companies have gone bankrupt. I just don't feel comfortable revealing private information. That you know I've been given.
Speaker #2: And you know to the ent it's been public, you'll find it. It doesn't really matter, though, because we've moved that over to another European licensee, as I said earlier on.
Speaker #2: So it's not.
Speaker #7: But how do you guys have a licensee go bankrupt? How do you don't vet them? Like now it's just you don't think it's a big deal, but now we're out a quarter.
Speaker #7: And made a $100,000 revenue. It's disaster. An absolute disaster. It should be back.
Speaker #2: All right. Well, excuse me. Okay. And I understand your frustration. And I'm as frustrated as you because on June 30th, they filed their bankruptcy, that's when we had to take the accounting action we did.
Speaker #2: We did get paid, by the way. Now, we do vet them. They're well-established company. And unfortunately, they overextended themselves with other customers. The Ferrari business was a good business.
Speaker #2: The rest of the business they had wasn't so good. And customers left them. And if you know what's happening in the automotive industry, there's always changes in suppliers.
Speaker #2: This was something that you ow with their overextension, they weren't able to handle. Has nothing to do with SPD. The SPD business was probably the crown jewel of what they had.
Speaker #2: But you know given the size of the company and the weight of these other you ow the loss of these other customers, they weren't le to sustain it.
Speaker #7: Just it's just not a good look. It's just not. So it's one more thing that goes wrong with you guys over you know 30 years of the same thing.
Speaker #2: Sure. And let me ask you. Let me ask you if you have a well-established company that's been in the glass business for decades, that goes bankrupt, what do you ect?
Speaker #7: Well, they're not that established then. How well established are they if they went bankrupt? They're not that established. And whatever the Gaudi, how's Gaudi?
Speaker #7: Whatever the Gaudi goes belly up, at do we do then?
Speaker #2: You could start chasing shadows. You could start chasing shadows. But you should understand that one of the benefits of our business model is when somebody goes bankrupt, we were le to move the business with you know seamlessly to another supplier.
Speaker #2: We didn't lose the Ferrari business. And that's, I think, the important thing. Okay? One licensee, because of activities unrelated to SPD, went bankrupt. I don't run their business.
Speaker #2: Okay?
Speaker #7: I get it. I get you don't run their business. But it just seems like we we can't move forward at all. You know we make a no progress.
Speaker #7: I mean, it sounds like you always say we something next quarter. We're doing well. But it doesn't there's never any revenue to associate with it, Joe.
Speaker #7: It's ridiculous.
Speaker #2: Okay. Look, if you're not happy with the state of affairs, then nobody's forcing you to be a shareholder. But I'm telling you, that we got paid in full.
Speaker #2: We got paid in full. For what we were owed. Okay? They went bankrupt. And we weren't able to book additional revenue for the second quarter.
Speaker #2: And the way that our accounting systems are set up, under ASE 606, is that the new licensee that took over that business in the second quarter, you ow didn't exceed their minimum royalties because of the timing.
Speaker #2: So we didn't book additional revenue from them. And we lost the revenue from one. It's just an accounting issue. Okay? a cash flow standpoint, we're basically whole.
Speaker #7: So can we expect any guidance for the third quarter that ou're going to show that you're going to have a bump in guidance from you know the original third quarter?
Speaker #2: Well, I can't I can't tell you until I get the royalty reports what it is. But I ink, yeah, we're definitely going to be up from the second quarter.
Speaker #7: Yeah, yeah. I would hope so. All right. Well, thanks for
Speaker #2: Yeah.
Speaker #7: our time.
Speaker #2: Okay. I appreciate it. No, o. Look, I share your frustration. Nobody likes to you know to pick up pick up an email and see that this happens.
Speaker #2: You know.
Speaker #7: Yeah.
Speaker #2: Unfortunately, we're but fortunately, we're able plan for it.
Speaker #7: Okay. All right. Thank ou.
Speaker #1: Our next question comes from Alan Ginsburg. Please state your estion.
Speaker #8: Yeah. Hi.
Speaker #2: Hi, Alan.
Speaker #8: I'm the same on the same topic. You know that the previous caller just talked to you .
Speaker #2: Yeah, about the bankruptcy.
Speaker #8: Well, not really. It's more like multiple suppliers. Isn't there for example, in this promising area in architectural, where you have retrofits, do you just have one supplier?
Speaker #8: I mean, what would happen if they had a problem? Why wouldn't you have multiple suppliers?
Speaker #2: We do. And that's exactly why we were able to transition the business with Ferrari seamlessly. Because of that.
Speaker #8: So are you telling me you have multiple?
Speaker #2: I mean, I ink I think one of the I think one the things and I'll talk this more in my closing remarks. But I think one of the things that we were very successfully able to do is minimize risk to investors in our company.
Speaker #2: Okay? If ou if this happened to one of our if this happened to one of our competitors, View or Sage or Haleo, where they lost a major, major either source of supply or customer, that's it.
Speaker #2: It's game over. Nothing happens. They go bankrupt. And they did. Last year, two of them went bankrupt. Okay?
Speaker #8: That doesn't have anything to do with research frontiers. You always bring that up. And.
Speaker #2: No, but I'm ing that our business companies but Alan, but our business model model and the fact that we do have a diversified group of licensees, allows us to adjust to these things that would kill other companies.
Speaker #8: That I understand.
Speaker #2: We moved we were able to shift this you know over so that there was no supply disruptions. They may have an accounting blip. And not a cash flow blip.
Speaker #2: For us. But we were able to do it. And I think that's one of the hallmarks of our technology and our company is that it's a low-risk way of investing in the smart glass market.
Speaker #2: And if you look at the history, look at the last 30, 40 years, okay, all of these companies that have tried to do what View and Sage and Haleo did, are roadkill on the side of the road.
Speaker #2: Okay? They don't have the same you know risk management approach that we do. We're very good at this. But we're very fortunate.
Speaker #8: But you only have one supplier of film, Gaudi. Why wouldn't you get another one to mitigate what you're talking in that area?
Speaker #2: If I thought there was a need for it, just like when I thought there was a need to find the replacement for the licensee that went bankrupt, we would act on it.
Speaker #8: Okay. Thank you.
Speaker #2: Yeah. Thank you.
Speaker #1: Our next question comes from Bruce Denny. Please state your estion.
Speaker #3: Hi, Joe.
Speaker #2: Hey, Bruce.
Speaker #3: How are ou?
Speaker #2: Saudi Arabia, as you probably know, is
Speaker #3: has a gigantic project called the Thousand Mile City.
Speaker #2: I would love to get into that. And we've tried. And we are trying. It's a cool project. It would be very esting to see that.
Speaker #2: I think it's going to be one of the Seven Wonders of the World at some point.
Speaker #3: Well, they're saying they want it done by 2030. So.
Speaker #2: If you throw enough money at it, you can do that. And if we have a retrofit, you can make it smart.
Speaker #3: Well, I ink you should try and get in on the ground floor.
Speaker #2: Absolutely. And the top floor.
Speaker #3: Yeah.
Speaker #2: Well, yeah.
Speaker #3: The ground. Let's see some shit.
Speaker #2: Yeah. We have a presence in Saudi Arabia.
Speaker #3: Okay. Very good. Thanks, Joe.
Speaker #2: Thanks a lot.
Speaker #1: Our next question comes from Neil Goldsmith. Please state your estion.
Speaker #8: A couple of questions, Joe. First of . Will the
Speaker #2: I know.
Speaker #8: third quarter have a bump up because of the new licensee? Since you didn't lose any sales, but they didn't meet the minimum number.
Speaker #2: Yeah. To the extent that they exceed their MAR for the year and they have a pretty high MAR. So I'm not sure you know how much of a bump it would be because they still have to exceed it.
Speaker #2: But if they exceed it, it'll definitely bump it up there. And then we have other projects too that you know we've ready been some licensees report early.
Speaker #2: We know that there's Q3 revenue coming from automotive too.
Speaker #8: Okay. And in terms of the architecture, when you're dealing large commercial buildings, and you 't have to use the scaffolding, is there a major even cost-saving separate from the heat issue and?
Speaker #2: Sure. You know, sure. So yeah. So anybody that's lived in a major city and Neil is you know alluding to the scaffolding that you have to put up anytime you work above the sidewalk, so that you ow windows, bricks, and other things and tools don't fall on pedestrians.
Speaker #2: It's expensive to put that up. know, first of all, there's materials. And there's labor unions. And there's disruption to the business. If you're a retail outlet on ground floor of one of these buildings, your business suffers.
Speaker #2: The only people that like these scaffolding is me when it's raining because I could take my dog outside and he doesn't get wet. But other than that, haven't figured out any benefit to it.
Speaker #2: And it's very disruptive. So being able to avoid it by being able to put the smart glass from the inside you know is a huge, huge benefit.
Speaker #2: You don't ed.
Speaker #8: In the past, you've indicated that the second half, you'll start seeing revenues from architectural?
Speaker #2: Right. From the retrofit specifically. Yeah.
Speaker #8: Yeah. And you're ing to see that?
Speaker #2: Yeah. And you know what we what we're eing, Neil, is that there are like like just like investors have a different entry point into anything, architects and designers and facility managers also have different entry points.
Speaker #2: Some going to ant you ow full energy data and things like that. And some are saying, intuitively, I think this is going to make a big difference.
Speaker #2: And I'm ing to put it in now without that. And you'll start to see those are the early adopters. And I ink the government also will see it as a as an early adoption thing.
Speaker #2: And that could be a huge customer. I mean, the GSA is, I think, the largest customer in the world.
Speaker #8: And the capacity of your supplier and of that. And in dollars.
Speaker #2: They can do you know their projection is high tens of millions in year one. And in sales. And I know they have expansion room to to do more if they needed to.
Speaker #2: And you know the profit on this is high enough where they can easily replicate what they're ing.
Speaker #8: Okay. So you're saying you're saying that it starts it's starting now. You're getting some orders. And this is the first year. So let's say the second half of '25 is the first half of the first year.
Speaker #8: So you're saying tens of millions between now and and June of of '26. And then it ramps from there significantly.
Speaker #2: Yeah. Although I wouldn't count now as the starting gate. because we still, like I said, there's a continuum of invest of adopters that are going to want my energy data in, which takes several months get and things like that.
Speaker #2: So you'll start to see you know early adopters come in probably now. But I think when we when we look at that you know high tens of millions in sales that are being projected by the licensee, you know he's talking about when when they have everything kind of wrapped up in a bow.
Speaker #2: So you'll see you'll see revenues this year, I believe. But you'll see the big revenues start when we have it all tied up. And that may be several months before that starting gun happens.
Speaker #8: Okay. because that'll you know I I assume you'll announce the first you ow you know meaningful architectural wins and using the retrofit.
Speaker #2: Yeah. And I think that unlike automotive, where they're very secretive, I think an architectural, they'd be very proud to to talk about smart windows because it becomes a building feature that helps them sell or rent space.
Speaker #8: Right. Okay. All right. Thank ou.
Speaker #2: Thanks, Neil.
Speaker #1: Our next question comes from Bill Denny. Please state your estion.
Speaker #9: Hey, Joe. It's my second question today. I'm a I'm a building shareholder. Hello. And I I did hold shares about 26 years ago for some time.
Speaker #9: so I'm I'm back. And.
Speaker #2: Welcome back.
Speaker #9: Thank ou. my quick question is regarding the automotive industry. I hear a lot about the sunroofs. Is the SPD technology also being used in like windows in the doors and around the car?
Speaker #2: Yeah. So that's a great estion, Bill. The primary market up until now has been sunroofs because you have a really demonstrable benefit. You know 18-degree difference in temperature just by putting it in the sunroof.
Speaker #2: And getting a couple extra inches of headroom so that you know by avoiding the pull across shade and all these other things that you ow increase the comfort, stability, and energy efficiency of the car because of just the sunroof.
Speaker #2: Now, Mercedes this quarter, this past quarter, introduced a combination SPD PDLC in their luxury van. And that's on the side windows. And some of the things that we haven't developed at other automakers you ow are in different areas of the car than even that.
Speaker #2: So it'll be interesting. I mean, I I I've I've the analogy in the past. But it's maybe becoming a ittle bit more close to reality.
Speaker #2: That I view what we have almost as like ing 250 patents on stainless steel. You haven't figured out all the things that stainless steel is going to be used in.
Speaker #2: But having the patents on the material is very, very valuable. And I see SPD smart glasses just like stainless steel. It's a material that enables people to do things.
Speaker #2: And and that becomes a very valuable you ow asset to have as a company.
I think they started long before that. Um, you know, we've been talking to them for quite a while a while about what the contingency plans would be if something like that happened.
Got you because I think we we keep our we keep our ears to the ground with with everybody that's important to. Um,
You know, to try to make sure that there aren't disruptions and I think up until a week before the bankruptcy, they thought they were going to reorganize and sell the company. So, um, right, you know, it just with the customers pulling out, it became um, you know, something that wasn't practical for them. So were the current Automotive mix kind of Setters paribus in terms of architecture somewhere between 4 and 1/2 is kind of the study state run rate for fee income. That's kind of where we're at now.
I don't know if you could say there's a study State. Um,
You know, uh, fourth quarter is always low for automotive because you're trying to clear things out of the showroom. I don't think Ferrari had that problem, by the way, I think they sold anything that they put out there and it wasn't an issue and um you know some car makers, I don't think Ferrari had to do this but some car makers stopped production. Um you know Jaguar for example wasn't selling into the us for a while until the Tariff situation stabilized but we're not it didn't affect us. Um right but Ferrari, you know, they
They were merely selling this roof and making a good profit on it.
Okay. Um in terms of uh the Corvette, I was glad you were willing to mention it. It has an intermediate State. Uh I noticed a Toyota Crown now has an intermediate pdlc state, but it looks like it just varies the haze. Is it? Yeah, it sounds from what you're saying that you're guiding against the Corvette even though it's a General Motors product. Is that is that the takeaway that we should not expect the Corvette to be using SPD you'd already? You know? That I would think I, like I said, like I said, it's like I said, it's a mystery. Um I'm hearing different things out in the industry about it. Um the um,
GM Authority had a had an article and they said it's a technology similar to what's in the Cadillac, which can mean it's the same thing, or it can mean it's a different 1. But
787 SPD. It's it's hard to know.
Right. And then the um I guess the other part of it is, um,
Probably I would have seen in our royalty reports. Some mention of this
Um, you know, unless it's such a small amount that it didn't hit the reporting thresholds.
But, you know, I don't think it's us.
I think that will be another cars outside of Cadillac within GM.
But I don't think that's us.
And as far as the intermediate States. Yeah. Just to go back. The other question that that you can do intermediate states with with pdlc too. Um, it doesn't look good at all because what you're doing with pdlc is increasing the haze levels and the light scatters. So an intermediate state would look like
A dirty window and right, you know what I mean those pictures? Yeah, I understand, yeah, but moving on to LTI AIT retro wall.
Oh, should I be concerned that their website is still down in terms of putting in orders for this stuff?
No, I think, I think the link the link in the pr is dead and the link from the LTI so it doesn't really go anywhere. Um, yeah, uh, I don't think you should read anything into that, I I don't know. Um, but I but I think that, um,
Uh the initial projects are going to be direct sales from people. They know and like the government, they already Supply, you know, the US government. So I think that, you know, when they when they have everything, ready with the data and everything's tied up in a bow, they probably will reactivate that
Okay, last question, Joe, very last question, like the other Jared, you know, we're all disappointed, he called in. But my question is, at this point
Not, not your, not your insights, from being the seal, but your personal opinion.
My personal thing is SPD is not yet good enough.
To be pdlc is good enough to get into these models.
But we have the that's not my personal opinion.
No, that's not my personal opinion. Yeah. Okay, let let me, let me finish and and I will get off the phone to let the big guys have their time but the um,
I lost my train of thought. My my basic point is that with the sole supplier again as you talked about themselves, as a social supplier, and they have to protect our margins. But you look at a project, like the CLA shooting brake, and you think there's probably a good better best upsell down, so kind of model internal to them.
and so yeah let me tell you, let me
Yeah, I'm glad you mentioned that because I think it may I I think no, no, no, no. I think I I'd like to actually and maybe is where you were going with your question. If not I apologize for adding more information to the mix but I think in more information is always good. So with the CLA shooting brake, we've actually had specific discussions with Mercedes.
And they were trying to get that in at a particular price point.
Which wasn't going to happen with SPD.
The car itself had to be at a certain price point because of who they were competing against it's also was very strategically important because the high-end electric vehicles within Mercedes and I'm not sharing anything that hasn't been talked about in automotive news or anything like that. Um, the high-end electric vehicles, that Mercedes the cues, you know, the replacement for the S-Class on the electric bassist wasn't very successful. And, and, and and and they've said that and what Mercedes told us is, you know, Joe's going to be disappointed.
But we know that SPD is a better technology. We know that it performs much better and it's going to do what we need it to do. But it's not going to come in at the price point that is going to allow us to achieve our strategic objectives with the shooting brake.
Because of the price. And you know, I was told that pdlc for that and maybe it was a subsidized price because someone is trying to get either volume business or something, or get their foot in the door at Mercedes. Um was 75% less than the SPD.
So I mean it's so. So going back to your question about it. Yeah. Is at at that price, differential, if it's sustained. Yeah, it's going to be it's going to be tough for somebody to put SPD and when they don't know if the pdlc will kind of perform what it's supposed to do.
In a general way, if I could be very vague.
Because they're very wishy-washy about why they put pdlc in these cars. You know, rivian put it in. If you sat in 1, you'd be unimpressed. Um, Dr. Denny I think mentioned before he sat in and Audi and he was unimpressed with the pdlc I sat in and you know the ID 4 and the id7 and it didn't look very good. Um it's not something that I've been in.
what my my point is and this I I know I said the last question, but I'm going to leave you with this thought because
The issue is not price. The issue is the Zen diagram of that leads to value.
And at this point SPD is too expensive. It doesn't offer enough performance advantage over PLC or it's just too difficult to source for a variety of reasons to not difficult to Source. Not not difficult to source and and the price put out. Yeah. Yeah the price I think is the issue here.
But like for example ghazis put out a a prelim stack but I assume reduces some of the issues around refraction and makes this cheaper. So you kind of keep chipping away at the various issues, maybe you'll get there and that was really what I was going to ask you about that. That was actually the trust of my question.
That.
But that that's so that's your answer is if there's an incremental Improvement to get down to a price where this thing can actually go into stuff. I, I don't think it's that, I don't think it's that rationale. I think that there every time you land a high-end car, you get your cost Down On The Low End cars. So I think that's just we just keep approaching that. Um, that point where the performance um,
Differential between SPD and pdlc becomes um much more important, favoring SPD as we get the price down. So okay, something we're all working on. Yeah, well I mean we're the same stable, of course all these years but okay. Thanks Joe. Okay bye bye. Okay bye bye.
Our next question comes from John Nelson, please.
Hi, Joe. I again um I might have missed this but is the retrofit expected to launch in the third quarter or the second half of this year, second second, half. And when I say launch, you know you'll probably have a soft launch with some key customers. And then, you know, a bigger launch when you have the data all tied up in a bow.
Okay great. Um, thanks a lot. That's it. Thank you.
Thank you.
At this time, we have no further questions.
Just want it back over to our
Okay, thanks and uh, thanks again if if we haven't fully answered any questions.
That we either emailed to us or in our presentation, or in the Q&A, just call or email us. We're happy to talk to you. Uh, I'm going to make a few closing remarks, um, I think it's pretty clear not only from us, but, um, but from the history of what's happened to our competitors,
We're in a tough industry. But also, as history has shown, we're tougher
uh, we know that there's never a straight line to success and because of this
We built our business model to reduce risk to our shareholders, as new projects, for our technology, come online and generate more Revenue.
We have the staying power. We buttressed this by invest uh by investing and having a robust and high performing technology that controls light. And that has been proven itself in tens of thousands of cars, aircraft boats and buildings.
We Face competition from the Chinese market mostly from pdlc, which has inferior performance characteristics. When used for anything other than privacy or projection applications,
We Face competition from Electric, Chrome, mix and small surface application areas such as rearview mirrors, and to some extent aircraft windows. Although, you know, we're in Boeing and Airbus now. So I think we're starting to do very well there.
Uh, but we also have Superior performance head-to-head in every high, volume area. Such as sunroofs panoramic glass roofs windows for homes offices, apartment buildings yachts, and cruise ships and museums high volume high surface area where electrochromics are just going to get too slow to work. Work. Well,
We're not the low-cost alternative to these other Technologies. We're the high performance alternative. We don't have to be the low-cost alternative although lower the cost, the better for everybody.
And if you look at many Technology based products, there are low performance low-cost Alternatives that exist, I'll give you some examples, you know, near and dear to my heart. The automotive industry, take tires, brakes headlights, infotainment systems, or in the Consumer Electronics, smartphones,
History and all these categories show that the high-end is the most profitable, and also the most enduring because High Performance Products or might more likely to withstand inevitable competition from new entrance.
Build factories, establish sales, networks employ, people and cast a wide footprint worldwide.
Through their efforts, we benefit from these activities.
And this quarter showed the importance of diversification.
We have a number of licenses, sometimes they overextend themselves, sometimes the industries, they serve go up through ups and downs that they cannot weather and sometimes they lose key customers.
When this has happened to our competitors, such as View and Halo they went bankrupt.
When this happens to 1 of our licenses such as the 1 in Europe, supplying Ferrari, we simply diverted this business to another 1 of our many fine licenses and production continued.
And with a 10 to 15% royalty, based on revenues from spd's smart, glass products by our licenses and diverse Industries. We're able to capture profitable business, and whether the cyclical nature of the industry's we're in
Research Frontiers created the smart glass industry.
And our leadership role has helped shape it and we'll and we will continue to do so.
We appreciate everyone's support as we move forward and continue to expand the use of products using our spd's light control technology to make the world better. More energy, efficient safer and enjoyable. Thank you all very much.
This concludes today's conference call. Thank you for attending.