Transcript
Good afternoon, ladies and gentlemen. Welcome to Research Frontiers' Investor Conference Call to discuss the Second Quarter of 2020 Results and Recent Development. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. This conference is being recorded today. A replay of this call will be available starting later today in the Investors section of Research Frontiers' website at www.smartglass.com and will be available for replay for the next 90 days. Please note that some of the comments made today may contain forward-looking information. The words expect, anticipate, plans, forecast and similar expressions are intended to identify forward-looking statements. Statements that are not historical facts are forward-looking statements that are made pursuant to the safe harbor provisions that are part of the Securities Litigation Reform Act of 1995. These statements reflect the company's current beliefs, and a number of important factors 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 addressing many of the questions that were emailed to it prior to this conference call, either in the presentation or as part of the Q&A session at the end. In some cases, the company has responded directly to emailed questions prior to the call or will do so afterwards to answer more questions of general interest to shareholders on this call. We ask that you keep your questions brief in the interest of time. I'll now turn the call over to Joe Harary, President and Chief Executive Officer of Research Frontiers. Please go ahead, sir.
Thank you, Erika, and good afternoon, everyone, and thanks for being here. Joining me today is Seth Van Voorhees, he's our CFO, and we're here in person, which feels good after working remotely for so long. For all of us, the world changed in March. Here in New York we went into self-quarantine mode and all started working remotely the day after our year-end conference call on March 12th. Research Frontiers' physical offices reopened in May as did much of the world's automakers and other businesses. But even though we were not able to travel freely and we worked remotely for most of the quarter, our second quarter was still full of visible and significant accomplishments. In April, our licensee Gauzy announced that industrial companies Hyundai and Avery Dennison had made substantial investments in their company. These strategic investments are good for our company and good for our industry and bode well for the use of SPD in future vehicles and architectural applications. Based upon our increase in market value related to other public companies, we were also selected for inclusion in the Russell 2000 Index in May and joined that index in late June. This year, so far, our stock is up over 35% compared to the Dow, which is down 4%, the S&P, which is up 3.6%, NASDAQ, which is performing well at 23.5%; and the Russell 2000, which we're now a part of, which was down 7.4%. So the NASDAQ is doing well and we seem to be doing very well. Earlier this week, the world's largest sun visor supplier in the automotive industry, Daimei, announced a license with us. We'll talk about that later. Economic activity has certainly restarted both here in the United States, in Europe, and in Asia. While the manner of conducting business has certainly changed, the need for innovation certainly has not diminished and has even gotten stronger. We take the health and safety of our employees and the people we do business with quite seriously, but that does not mean that we have slowed down at all. For example, last week I drove to Detroit to meet with various automotive OEMs to discuss multiple projects for SPD. These meetings were conducted in company parking lots and other remote locations. This week I met again at remote locations about other automotive applications for OEMs and for the aftermarket. In-person meetings have picked up but the locations still remain nontraditional. The COVID-19 pandemic has forced all of us, including the large companies that we deal with, to be more results-oriented and efficient in how we conduct business. This has certainly helped Research Frontiers. Make no mistake though, it was a tough quarter for everyone in the automotive industry. If you listen to the replay of our last conference call, we predicted a much lower second quarter for the entire automotive industry. If we look at the major automotive manufacturers and component suppliers, you will see the magnitude of how the industry's numbers were affected. In the premium segment, Mercedes sales were down 22% and BMW's were down 39% in the second quarter where BMW posted their first quarterly loss in 10 years. Car sales in Germany were reportedly down 61% in April due to the coronavirus. Less than two weeks ago, Gentex reported a second quarter net loss and sales down by 51% in total. In their primary markets of North America, Europe, Japan, and Korea, sales were down 59% for the second quarter of 2020. RFI did a bit better than that in terms of our fee income from automotive. However, even with economic activities down throughout the automotive industry, there's every reason to be optimistic. Despite a really bad second quarter with Gentex sales down in their primary market, as I mentioned, by 59%, they do expect a rebound and that light vehicle production in the second half of the year to decline by about 7% and a total of 20% for the full 2020 calendar year. A somewhat firm recovery will make up for the almost nonexistent production in the automotive industry during much of the second quarter. Some companies though are not doing so well in our industry. View announced large losses and large layoffs. I believe that all of this just highlights the wisdom that our founder Bob Saxe instilled in all of us about keeping overhead, expenses, and capital expenditures low while building a scalable business. This aspect of our business model and our corporate culture has helped us weather the storm of the pandemic, and we remain strong fiscally. When we back out nonrecurring charges and noncash accounting effects, 2019 represented the fifth consecutive year that expenses at Research Frontiers have decreased and the sixth consecutive year of lower operating losses for your company compared to the prior year. This trend of lower expenses and lower losses continued in 2020. Our net loss for the first half of 2020 was less than half of the same period last year. Our net loss per share for the first six months of 2020 was $0.03 per share, which is down from $0.07 per share for the same period last year. As bad as the second quarter was for everyone, we approached break-even in the second quarter with a loss of just $0.01 per share, which is down from five times that amount per share in the second quarter of last year. Expenses during the first half of 2020 were down over $450,000 or over 20% from last year. We have a strong balance sheet. We have over $5.8 million in cash, which represents at least an estimated 34 months of cash reserves moving forward. I've noted consistently in our conference calls that we judge our performance in three main areas: financial stability, operational efficiency, and business growth. We already spoke about the first two areas. Financial stability and operational efficiency not only give us the resources to accomplish our targets, but they are especially important during volatile business and market periods like the current pandemic. Now, let's discuss the thread component and our key initiatives in the areas of business growth that we outlined in prior conference calls. Expanding our business and where SPD smart technology is being used is very important. Moving forward, you could see another hallmark of where we've been driving our business. Growth and diversification, both in terms of diversity geographically and diversity by industry. We spoke about the importance of this as a strategy in our last conference call. I noted earlier a number of new automotive projects and this is also extended to new architectural projects as well. I will talk about later and as I will talk about later, shipments of products using our SPD technology for the consumer electronics display market have also commenced. While in the past, most of our OEM business in the automotive area was in Europe with Mercedes and McLaren, there has been a noticeable increase in activity and projects for SPD in Asia and in North America as well. We are also seeing a diversification in automotive, not only geographically as noted above, but also by segment. As expected, costs have come down in all areas of our supply chain and we are seeing a migration of interest from the premium segment to less expensive cars. So what can we expect in the automotive market? In the last conference call, I noted that some in the automotive industry expected a strong rebound in areas that have begun to reopen. The numbers since then seem to bear this out. Ride-sharing has become less desirable and there's been an increased demand for private ownership of vehicles. Cars are flying off the lots of dealerships, especially in areas most heavily hit by the COVID-19 pandemic. Demand is up for cars, which means that production must increase to supply this demand. In the aircraft market, with airlines in financial trouble canceling flights and less able to permit passengers to practice social distancing, private aircraft may indeed benefit from the current pandemic. One of our strongholds in the aircraft industry is in the general aviation market and the ability of our SPD technology to be retrofitted onto existing planes is a key advantage. Our business in aerospace is particularly focused on the private aircraft market. We saw within the last month one of our licensees add a new private jet to their expanding list of aircraft that they supply to. We are now standard equipment on six private aircraft and an aftermarket upgrade option on over 40 additional aircraft models. Another important and growing market for Research Frontiers and SPD-SmartGlass is the architectural market. One area of particular interest is the use of smart glass in hospitals and another in homes to make working remotely more productive and pleasant. Of course, there's the traditional view preservation and energy efficiency that we've always been known for. The architectural market is important. It uses twice as much of the world's glass as the automotive market. It is potentially our largest market. With the opening of Gauzy's Stuttgart factory in the fourth quarter of 2019 and its ability to make SPD film 1.8 meters wide, this allows us for the first time to practically address the large potential architectural market. One particular area of interest in the architectural market is, as I mentioned, the use of smart glass in hospitals to reduce germs. Our licensees have been quite active in their marketing and business efforts in this area. As the world returns to normal again in the architectural industry, we're also seeing an uptick in interest in the more traditional use of SPD-SmartGlass energy efficiency. Architects, designers, and facility managers are going back to the basic principles. Increased use of glass is good for people and for design, but for the attendant solar heat gain that needs to be managed. This is an area where we do particularly well, as we have the best solar heat gain coefficient of any smart glass in the world. In our last conference call, I noted that another area that may benefit from COVID-19 and this pandemic is the information display market. Many people are setting up their homes for working remotely and realizing they could get work done productively there. They've been spending money in this area. As we discussed in earlier investor conference calls, Research Frontiers' main participation in the display market is the business of licensing a 5G glass that they have for next-generation televisions and other information displays that use SPD technology to improve picture quality. Products in this area began to shift, and we are optimistic that this could also be a new and significant source of revenue for us and our licensees, especially as a result of the growing demand for more efficient homework spaces. We received by e-mail before this call questions from investors, and we addressed many of the general topics in our presentation today. Here are some of the additional questions that were emailed to us. The first involves Kevin Douglas. Kevin Douglas filed his intention to sell 20% of his position in June, of which he has almost completed. Since he has been the largest shareholder and supporter for so many years, many are concerned that his view has changed regarding Research Frontiers' prospects so that he will make another filing to continue to sell. Is there any feedback from him that you'd be able to comment on regarding the sale or confidence in the company? This was from Sam Penta, another shareholder. Mr. Claire Houghton says about Kevin Douglas, is he concerned about the future of Research? Is he selling for personal reasons? Will he be selling more shares? I got a courtesy call from Kevin Douglas before he started selling. He told me that it was for personal reasons. There are various reasons why someone would have to sell stock. He did make a point to let me know that he was quite pleased with our company. Certainly, we were one of the better, if not the best investment in his portfolio. He did have to file because he owned more than 10% of the company, so anytime you sell you have to file what's called a Form 144. He filed a Form 144, representing about 20% of his holdings. He has sold about two-thirds of that amount already or maybe a little bit more. It wasn't for lack of confidence, it was for other reasons, and the market seems to have absorbed that quite well. That answers the question I believe about Kevin Douglas. Sam Penta was also very excited to hear about the new sun visors licensee, Daimei. How quickly can an automaker implement an SPD visor versus what's in McLaren's windshield? We could have both markets covered here with the flip-down smart visor and visors built into the windshield as seen on the McLaren's C12. Sam Penta also asked about loving the new Mercedes jeep and if it is going to be available for the aftermarket. Let me take a couple of those questions about Daimei. First of all, Daimei, for those who don't know, is the largest sun visor manufacturer in the world. They've bought in addition to growing their business, they bought Johnson Controls' sun visor business, and they're pretty much in every vehicle around the world. They're in my Mercedes, because when the CEO was sitting in it, he was pointing out all of the different components from the sun visor to even the mirrors that Daimei makes. It is different than what's in the McLaren. McLaren built the sun visor in the windshield by putting the SPD film there. In Daimei's case, it's a flip-down sun visor, and it's both for the OEM market and for the aftermarket. Someone else asked about how quickly OEMs can adopt this or if this is just going to be for the aftermarket. What you typically find in the automotive industry is that things start in the OEM market. It's usually because of a specific requirement by an OEM manufacturer. One of the carmakers has an interest in something, they ask their suppliers to try to provide it for them. Typically, when the product development people start getting together, they think of ways of not only making it better than what was requested but also supplying it to a broader range of original equipment and aftermarket customers. Another shareholder asked, what's the latest on the CO2 emissions for European car manufacturers? As we mentioned, this would be a big win for Research Frontiers. That's very true. In Europe, there's a penalty for not meeting the CO2 emissions, and it's a penalty of 95 grams per kilometer that you don't meet the standards. We can save four grams per kilometer. That's €380, a bit over $400 a car in avoided penalties from that. It was initially going to be addressed by the diesel market, but with the diesel gate scandal and people moving away from diesel to more electric and gasoline internal combustion engine cars, diesel became a non-solution, and they had to find something else. That's very helpful for us. Rod Erdman asks, how much of the electromagnetic spectrum does SPD block? In the visible light, we're blocking pretty much throughout the visible light spectrum, which is from about 400 to about 720 nanometers. That's the visible spectrum controlled with the SPD film. We also block UV at 405 nanometers. Most UV blockers will only go to 350 to 385. We go up to 400. In the infrared, which is the other area of the spectrum above 720, we block over 99% of the infrared. When you break it down, we're basically controlling the entire visible light spectrum and effectively blocking almost all of the IR and most of the UV that can damage people. Jeff Nicholson asked, I was hoping you could comment on the release by Volkswagen. It's about their camper, the Caddy Camper. They talk about a dimmable roof panel in the roof. Until an automaker makes a connection between what technology they're using and us, we can't say anything. We were fortunate in the case of Mercedes and McLaren to be able to do so. We've also been asked about the BMW Vision iNEXT concept car and if anything is confirmed yet for the 2020 production model. We also have the same restriction that we can't say anything about specific manufacturers until they do. But we have a long-standing relationship with BMW. What they have shown publicly is the roof of the Active Tourer concept, as well as some other vehicles. The same thing with Audi; they've had a number of vehicles. Elsewhere in the Volkswagen roof, there are definitely SPD-centric projects going on there as well. We're quite excited about the fact that it seems like almost every automaker is now waking up to the reality that glass is beneficial. However, the solar heat gain from the glass needs to be managed. What I'd like to do is ask Erika, our operator, to open up the conference call to any additional questions that people may have that we haven't already covered.
[Operator Instructions] Our first question comes from Michael Kay. Please state your question.
Hello.
Hello, Michael. How are you?
Yes. Hi, Joe. I'm glad everyone is safe and sound and that you still will continue to do the great job during this virus situation. What happened? I always thought and I think you even once mentioned it several years ago that the Vision Systems was like a model licensee, and they built a data plant dedicated to SPD in Florida. So it's been some time. What happened to the aircraft sun visors that were supposed to be also for the retrofit market? Do you think now that the Daimei company came aboard this could be good? It would give them some competition and may facilitate the marketing of the product.
Yes. So Vision Systems still has their sun visors product. It's been mostly targeted initially towards the higher-priced market where you need large area sun visors. Think about things like trains, trucks, and aircraft cockpits where you're talking about large surface areas. Remember, Michael, one of the benefits of SPD technology is the fact that as we get larger we don't get slower. So it becomes ideal. The fact that it's a plastic film also is helpful in all environments where sun visor is being used. It's an interesting question: would the entrance of Daimei into the mix give them some healthy competition for the passenger car market? I think it would. Vision Systems, though, has primarily been focusing on different transportation vehicles than passenger cars, whereas Daimei is the largest in the world in that area. So it could be that they kind of each go in their unique areas. Daimei also can do trucks, and their license permits them to do fairly large sun visors. It should be an interesting horse race.
Okay. Thank you. Keep safe and well.
Thank you. And I hope you saw me waving to you when I was driving back from the trade.
Our next question comes from Neil Gottlieb. Please state your question.
Hi, Joe. How are you doing?
Good. How are you?
Doing well. My question comes from looking at, I guess, the financial statements. When do you foresee the company becoming cash flow positive from an operational standpoint and not having to go to the market for a special one-time thing like the PPP to fund the business?
Well, we don't believe we're going to have to go to the market for at least the next 34 months, which is our cash reserve. We may never have to go to the market again, and I really hope with all my prayers that we never see anything like COVID-19 again and that a vaccine is developed. I had a personal loss: my father-in-law passed away from it suddenly in April.
Sorry to hear that. My condolences.
Thank you. We're getting close to break-even. The only thing that I think is a speed bump along the way is that nobody knows how fast the automotive market is going to rebound. I've seen some predictions that in two years we may level back to pre-COVID levels. Some people are more optimistic, and some are less optimistic. Until our business becomes more integrated into architectural and other areas, we're going to rise and fall with the automotive market. Your view of automotive is probably a good view of where our revenues will be. What we're trying to do is supplement it by having more and more projects in automotive. So that even if the volume by manufacturer goes down, the total number of products using SPD in automotive will go up just by virtue of the size of the large number of projects and the high volumes from new entrants. Costs coming down certainly makes this more feasible, and causes to start getting migrated down towards lower-priced cars than the Mercedes and McLaren that we're on.
Joe, if I might add, another way of answering that question would be the following. In our Q, we talked about our cash burn -- our quarterly cash burn. Projections are being $450,000 to $500,000 per quarter, which comes down to about $2 million over a 12-month period. Our business is essentially a 100% margin business. If we had $2 million of additional royalty related activity, that would drive $2 million of additional cash for the company, which would approximate a break-even level.
Yes. I applaud all your efforts in getting the technology into diverse products. I'd just like to see a little more, I guess, repayment, if you will, or as you just pointed out, more cash flow, which would show up in the statements and such.
Right. One thing that we have done and maybe I could kind of telegraph what I was going to say as part of my closing remarks is that we've invested $110 million to develop SPD in the markets. We became the best performing, most reliable smart glass technology out there. We've proven the technology, solidified the performance, and shown the reliability in probably the most demanding place that you can be, which is on a sunroof of a Mercedes, because they are very particular about what they put on their cars, and the sunroof is the most difficult environment to be in. Now our job is really clear: turn this into money, turn this into revenues. That's been the very, very focused and sustained effort that we've been doing. It's with the help of some very talented licensees and their marketing and business development teams, as well as ours, and just some good old-fashioned hard work and focus. We know what we have to do, and that's our focus now. We don’t have to get the technology out of the lab and into the real world or prove that it's reliable. Now all we have to do is turn it into money.
Yes. Look, guys, I wish you all the luck and the best efforts you can put forward. Let's hope.
Looking for fruition.
Thanks.
Good. Thank you. Appreciate the trust.
Our next question comes from Allen Ginsberg.
Yes. Hi, Joe.
Hey, Allen. How are you?
Okay. Pretty well. The acquisition of Hitachi Chemical, you haven't talked about that. Could you give us some color on that? So we know whether the acquiring company, for example, is going to be a licensee. How is that going to affect the production of the film, if it affects it at all?
Yes. Thanks for the question, Allen. It shouldn't affect it at all. Hitachi's license allows them to transfer it to the successor of their business interests. The new owners certainly can continue to do that, and they had a record year last year in terms of SPD film sales, and that's a 12-year record.
But have you been in touch with the inquiring company to see what their interest is in continuing to produce film?
No. First of all, the acquisition is not completely consummated. Second of all, we deal directly with the people within the SPD group at Hitachi, which we're still dealing with. Everything is pretty much status quo in terms of post-acquisition compared to pre-acquisition. So thanks for the question.
So they're still producing film.
Yeah. Yeah.
Okay. Thank you.
Thanks a lot.
Our next question comes from James Wilde. Please state your question.
Hey, Joe.
Hey. How's it going, Jamie?
Just a quick question. I've seen a lot of these transactions where you signed with the Daimei transaction. Why not consider getting an upfront royalty payment and some kind of guaranteed income as soon as you're signing these deals?
We typically do. We have an upfront fee usually in our license agreements and a minimum royalty every year.
So they are paying a kind of minimum royalty. So could you see an increase in revenues from that or…?
Usually, the royalties are not so much that they're going to make a huge difference compared to the earned royalties that we get on the sale of products. They're meant to separate the companies that are interested in merely being curious about the technology from those that want to develop a product for it. The real revenue we expect from Daimei is not from the minimum royalties or the upfront fees; it's from them selling a ton of sun visors.
I missed part of the call.
This also has the personal interest of the CEO of Daimei, so we're talking about a project that has very high visibility within the Daimei organization.
Okay. I did miss a part, so I'm not sure if you addressed this. But is it possible to give us a little bit of guidance on revenues over the next one, two and three years?
I think everybody, including Gentex, has suspended any guidance past 2020, because of uncertainty about the COVID-19 situation. I think that it's probably prudent that they did it. We've always maintained that we don't give that kind of guidance because it's very hard to predict the business of 45 different licensees.
Okay. Thank you for that, Joe.
Thanks a lot.
Our next question comes from John Nelson. Please state your question.
Hi, Joe, I have just a couple.
Hi.
I have just a couple of questions. The first one is the press release on the day you registered for Daimei read. The product is currently being developed. Do you have a rough estimate on when they'll have a product available for vehicle production? When could potential orders start?
I have a good sense of when both of those things are going to happen, but it's not something that Daimei would want me to share. But yeah.
Okay. In the first quarter call, you mentioned about some very high-profile uses of SPD armored glass products coming. Do you have any examples you can share with us on that?
Thanks. I forgot to address that from the question you mailed, and I apologize. SER in Brazil was very severely affected by COVID-19. The whole country was basically shut down. What I was referring to as a very high-profile use of SPD-SmartGlass in armored products was not related to them, by the way. It still hasn't been made visible. Due to the nature of what it is, you may see it; we may just never be able to talk about it. If you see blue glass on something, it's probably us. If it switches, it's us. Let me put it that way.
All right. That's it. Thanks very much.
Thanks a lot, John.
Our next question comes from August Berman. Please state your question.
Hi, Joe. How are you?
Hey, August. How are you?
Good. Just a couple of questions. Wondering if you could touch on the AGC Wonderlite Dx product. Was this something -- I know you had mentioned in the previous couple of quarters about maybe seeing some products that weren't as high-end as our product coming into other vehicles. Is this something that we can look at as, hey, this is kind of a step down from our own product with SPD? Is it something we're going to start to see more often with AGC? Are they continuing to market our SPD traditional Wonderlite product?
What typically happens when you're successful in an industry is everybody wants to be you. I mentioned a couple of conference calls ago that you're going to start to see some SPD-wanna-be technologies out there, and PDLC is one of those technologies. Now, don't get me wrong, PDLC is really, really good for privacy. It's less expensive than SPD, and it's very effective at privacy because what it does is diffuse light. It doesn’t block it. What you're going to see when you see vehicles using anything other than SPD on a roof or side glass is that it's going to diffuse the light, but the experience of the automotive industry has been that when you do that with a PDLC product, it creates a greenhouse effect. Not only is it not blocking heat, it's creating heat inside the vehicle. These things become apparent as you get close to series production and the cars' introduction, and they've sent the cars out on the road for testing before launch. I don't wish to warn anybody, but I think that there's going to be an awakening that the PDLC product, as it's proposed to be used for shading, won't be as effective as people hoped. We've also heard anecdotally from very reliable sources that we have direct connections with, that both PDLC that was tried and other technologies are basically being abandoned because they don't have the performance of SPD. The two issues you have with SPD are cost and color. Blue is okay for roofs because people look up and they see blue in the sky and they like it. It's good for the top of windshields or sun visors, because of the blue shade band that has been very popular for the last couple of decades. For side glass and rear glass, we probably want to see something that’s a little less blue. Making the film darker would make it less blue. The reason the glass looks blue is because you're transmitting blue light. The less light that comes through, the less blue it's going to look. We are blocking 99.5% of the light, but that 0.5% that we're transmitting is blue. We got it darker, it looks black or gray. The cost we talked about is something that is being addressed now through multiple sources of supply, and our supply chain sharpening their pencils and dealing with the automakers to get the cost down so that we can move from the premium market down to less expensive cars.
Okay. So the PDLC is cheaper at this point than we are?
Oh yes. Yes. It's cheaper.
Okay. And just one follow-up. I know we had kinda just based upon intuition and reading around, thinking that we might see some sort of new OEM or vehicle in 2020. I know due to the pandemic everything has been delayed. Are we still thinking everything is on track in terms of maybe things have been just delayed rather than showcased in 2020?
I think most vehicles are still on track. Clearly, everybody is working as fast as they can, but they are working in a different way. For some companies, that's more difficult than for others. Things have slowed down at some of the vehicle manufacturers. I think we're still on track. A couple of things have fallen by the wayside. Some car models that were supposed to be introduced were abandoned, not because of SPD, but just in general. We've had so many projects in the works; some of those vehicles might have fallen off the list. But on balance, a lot more projects have been added to the list since we started talking about it.
Got it. Thank you.
Thanks.
[Operator Instructions] Our next question comes from Neil Levin. Please state your question.
Hi Joe, how are you?
Hi, Neil. Hope you’re doing well.
Well, we are surviving like everybody else.
Yeah. Glad to hear it.
I just had one question. Well, maybe I have two. One is about something I saw down on Dallas Road at Waterfront last week. There's a building going up right on the water that has a lot of blue glass. I was wondering if you could comment on whether that might be SPD or not.
I don't believe it is. I'm not aware of a project specifically in Sarasota, Florida, that was recently constructed that uses this. It is possible. It depends on when the glass was installed and sold to them, really. But I would doubt that it's SPD. I think it's just good tinted blue glass.
Okay. That was it for me then, thank you.
Okay. Thanks a lot.
Our next question comes from Thomas McCarthy. Please state your question.
Hi there, Joe. How feasible is it to add a colored filter to the glass to make it appear to be different colors other than blue? Has anybody tried it? Is anybody doing it?
Yeah. There have been a number of approaches that have been done. If you're familiar with BluBlocker Sunglasses, they block blue light, because they are ambered in color. A slightly amber filter will make it appear less blue. The other way to do it is, as I mentioned, to reduce the amount of light that’s coming through in the dark state from 0.5% to something less. It appears blue because that’s what’s being transmitted, and there’s blue light in daylight. And then, there’s also the construction of the particles which currently block every area of the visible spectrum other than dark blue; that could be changed to another material. You could also play with the glass or the interlayers. In any kind of glass laminations, there’s usually a hot melt adhesive sheet that’s put in there, and if that were colored, you could adjust that. You could adjust the outer tint of the glass by traditional coatings, so you could do that. There are many different methods to achieve that.
So different colors are definitely feasible? Is there anybody?
Definitely feasible and definitely on our radar.
Is anybody doing it? Is there a final product available anywhere?
We've done projects for automotive manufacturers that would color-code the cubic glass to a certain designer's desire. That's all I could say.
Okay. Well, thanks. Keep up the good work.
Thanks, Tom.
Our next question comes from Neil Gottlieb. Please state your question.
Hi Joe, it's me again. I have one further question.
Hi, Joe.
How is it going? This year my cell phone has overheated more than once, and I was just wondering if this technology can be used to help cell phones to prevent that state from happening?
Usually, it depends on what's causing the overheating. If it's sunlight hitting the glass, the answer is yes. Often, though, the reason your cell phone overheats is because of an electrochemical reaction in the battery. It's that electrochemical reaction that becomes exothermic and creates the heat. I'm mentioning that for two reasons. I’m trying to explain why your cell phone may be heating up other than being exposed to heat. The other thing, electrochromic technology is very similar in nature to the electrochemical reactions going on in the battery. There have been reports of some instances of electrochromic windows that have gotten so hot that they've melted the surrounding sidewalls. So, what you're experiencing on your phone may be experienced with some other technologies like electrochromic in certain cases. I mention that because you asked the question.
It will. I'm presuming it's sunlight, because it happened poolside where I left my phone on the table, and I come back, and it tells me the phone is overheated. I have to get it out of the sun. Is this something that the company is pursuing or is it not feasible at the moment?
We work with various cell phone manufacturers. Not specifically for that. I think our main contribution to the display market is -- we've talked about Panasonic and the transparent display product they have. But, we are enhancing the contrast of displays; that’s probably going to be our main contribution to cell phones. You never know. We found that it took a while for the automotive industry to really wake up and understand when they use glass in vehicles. It creates a solar heat gain problem that needs to be managed. We get approached weekly from auto companies that are specifically trying to deal with that situation. We've been talking about it for years. I wouldn't rule out the cell phone industry having interest in switchable technology to see if we can reduce the chance of Neil's phone overheating at the pool.
My assistant told me to throw a towel over it. If I could remember that I would.
Yes. The other thing that may be happening is whenever heat is introduced into any chemical reaction, it happens faster. It could be that the electrochemical reactions inside the battery are being triggered by the heat from the sunlight, even though it's not directly striking it. It’s just creating a heat that creates the catalyst.
Okay. Thank you.
Thanks.
Our next question comes from Seth Nicholson. Hi Joe.
How is it going?
I was wondering if you mentioned early on about NSG shipping televisions and information displays. I wonder if you could give us a little color on it. Is that like Xiaomi or...
Their customer—the publicly disclosed customer—was Panasonic, and it's a transparent screen product that Panasonic is—if you go on the Internet, you'll see some amazing TVs that turn into clear windows and that's us. You may even see a lot of commentators in the consumer electronics industry remarking on how black the blacks finally look because of this additional film that's added to the display to allow them to achieve it. But it's typically an OLED display with an SPD backplane.
That's all the way on the back, so it doesn't reflect onto the world behind it. It's not in front to an...
Yes, usually it's used not for your traditional TVs but ones that will turn into a completely clear window. Think of how cool it would be if you looked out your window onto the patio and you see whatever view you have, and then that becomes a high-definition TV. That's what we can do.
So, you prevent it from projecting that high-definition TV onto the trees outside basically?
No, no, the other way round. It prevents light from bleeding through from the back from, let's say, the outside to prevent you from seeing a highly vibrant image on your TV.
Okay, well -- all right. So it's basically the same. It's both. It's substance coming in and going out the back.
Yes. Although nobody really cares about light leaking out through the back. It's more than a light strike they eye. Yes, it's more the light striking the eye is why Panasonic does that.
One last question. I know they have a lot of turtle codes. I'm down in Florida. And they have turtle codes about light reflecting out when the turtles are laying eggs and it confuses them and stuff. I really thought that would be a great market that would take off, and I haven't seen...
It will. It will. Remember, Seth, that up until really this year, we haven't had film wide enough to address the architectural market. I grew up in Florida also where any house within a certain distance of the beach had to have glass that was at least 40% tinted, I believe, or 40% transmission because what would happen is the sea turtles were mistaking the light from your home for the moon. They go up on the beach, lay their eggs, and then follow the full moon back into the ocean. What they were doing was following the light from your house, getting run over by cars. Implementing turtle codes is something you're referring to. Now that we have wider film, that's certainly an area we could address.
Thanks, Joe. Good luck.
Thanks.
At this time, we have no further questions.
Okay. Well, if we haven't fully answered anyone's questions, please feel free to call or email us. Now I'd just like to make a closing remark or two. Continental Automotive noted that the second quarter of 2020 was the weakest quarter for the automotive industry in 75 years, that's since 1945. The industry seems to be rebounding from this low watermark with some firmness. It may take a while for the automotive industry to fully recover, but we are on our way. We're seeing a noticeable increase in smart glass projects in automotive. Last year, we focused on building and strengthening Research Frontiers. It's a good thing we did. No one could have predicted a worldwide pandemic, but Research Frontiers was certainly prepared for it. What did we do to prepare? We focused on strengthening our business and our company. Now we have multiple producers of SPD film. We have wider SPD films so we can pursue the architectural glass market. We reduced the cost of SPD technology to the customer. We strengthened our balance sheet. We have enough cash for the next three years and a very modest quarterly burn rate, and we expect to continue to be debt-free. We're in our sixth consecutive year of cost reductions. We approached break-even again even in a bad second quarter for the world economy, with a loss of just $0.01 per share, which is one-fifth of what it was in the second quarter of last year. Our net loss for the first half of this year is less than half of what it was last year. And let's not lose sight of the fact that we have the most reliable and highest performing smart glass in the entire industry. Also, let's never lose sight about why customers use our SPD-SmartGlass technology. In automotive, we make cars more energy-efficient. We reduce CO2 emissions by four grams per kilometer and increase the driving range of electric vehicles by up to 5.5%. We also make people more comfortable and safer and protect the interior of their cars. In architectural applications, we make buildings more comfortable, energy-efficient, and functional. We preserve nice views. As we've seen from the hospital market that certain shades can collect allergens, dust, and germs, we protect against that. A stronger, more efficient supply chain and lower production costs and higher production capacity all make it easier for companies to use our technology. We've had good results in our core markets and new projects in all industries. These industries have a better understanding of the benefits of using our smart glass technology. We and our licensees are opening up new markets like the large architectural smart glass market. Our competitors are losing ground, and our licensees are pushing hard in this market. We can also benefit from the more than 50 certified laminators that Gauzy already has in this market, as well as our own licensees. On a more general sense, we are tough, tenacious, and nimble. Through our licensing business model, we've built the company with the resources of an aircraft carrier and the maneuverability of a speed boat. We have weathered past economic crises, and we weathered the current pandemic storm. A large part of this survival and even the ability to thrive during difficult times comes from some of our core principles that have helped us lead the growing smart glass industry. We built a strong and enduring company through focus, hard work, and determination. We raised money on favorable terms when we did not need it, so it would be available when we do. We maintain a constant focus on keeping a lean operation with minimal capital expenditures and requirements. We kept a strategic focus on key markets and industries. We built a business that is well diversified across industries as well as within industries, and one that is well-diversified geographically. We did this while at the same time building a world-class and reliable light control technology that has brought benefits to many people and companies around the world. More of these companies are coming to us each week to help solve challenges and add new features to their products. Those are the reasons that we work so hard for. These are also the reasons that I think you've been seeing every insider acquire more and more stock whenever we can and hold on to it. So we're all fellow investors just like you. As always, I want to thank you, our strong and loyal investors for your support while we built these qualities into our business. Thank you.
This concludes today's conference call. Thank you for attending.