Good afternoon, ladies and gentlemen. Welcome to Research Frontiers' Investor Conference Call to discuss the Third Quarter 2021 Results of Operations and Recent Developments. During today's presentation, all parties will be in listen-only mode. This conference is being recorded today. A replay of this conference call will be available starting later today in the Investors section of Research Frontiers' website at www.smartglass.com and will be available for replay for the next 90 days. Please note that some of the comments made today may contain forward-looking information. The words expect, anticipate, plans, forecasts, and similar expressions are intended to identify forward-looking statements. Statements that are not historical facts are forward-looking statements that are made pursuant to the safe harbor provisions that are part of the Securities Litigation Reform Act of 1995. These statements reflect the company's current beliefs, and a number of important factors could cause actual results for future periods to differ materially from those expressed. Significant factors that could cause results to differ from those anticipated are described in our filings with the SEC. Research Frontiers undertakes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties. The company will be answering many of the questions that were emailed to it prior to this conference call, either in their presentation or as part of the Q&A session at the end. In some cases, the company has responded directly to email questions prior to this call or will do so afterward in order to answer more questions of general interest to the shareholders on this call. I would now like to turn the conference over to Joe Harary, President and Chief Executive Officer of Research Frontiers. Please go ahead, sir.

Thanks, Paul, and hello, everyone, and welcome to our third quarter 2021 investor conference call. Last year, we showed our lowest loss in 26 years. I'm sure it did not escape notice that in today's 10-Q filings and the related press release, we were able to use a word that neither we nor any other smart window shading company was ever able to use before. We had earned a profit in the third quarter. As I have said in the past, however, because of the nature of our business, revenues can be choppy depending on the timing of projects, vehicle production volumes, square footage of glass being used in projects, and other factors. We and the other companies in our industry are clearly hunting elephants. Sometimes we land an elephant or two in the quarter, and sometimes we take down a whole herd. I apologize to animal lovers like myself out there, but I thought that the metaphor was instructive. This quarter, we had three major new events; two involved royalties due in the automotive and architectural markets from licensees' past activities. The third was the government contract in the area of specialty automotive. More information about these developments is in our 10-Q, but I can't say more, especially when you deal with certain areas of our government. Besides landing some big elephants, we had some success over the years hunting herds. Examples of this are having our technology go into serial production with Mercedes and McLaren. We kicked off this year in January with a new customer, Cadillac, announced at the prestigious Consumer Electronics Show, or CES, that they were introducing their new all-electric luxury flagship, the Celestiq, with an all SPD-SmartGlass four-quadrant roof. More recently, the prestigious publication GM Authority, with over 3 million readers, highlighted the range-extending benefits of SPD-SmartGlass in this and other electric vehicles with a highly coveted 5.5% increase in driving range. They also noted the significance of the 4 grams per kilometer reduction in CO2 emissions when SPD-SmartGlass is used in internal combustion engine vehicles. But these are not the only benefits. We also make people more comfortable and safer and protect the interiors of cars. And as Bentley has noted in their public presentations about the future of sunroofs within Bentley, there is a greater need for SmartGlass roofs because of the movement towards fixed, non-movable panoramic roofs in cars. Bentley noted that SPD-SmartGlass can also reduce the weight of the roof by 13 pounds and eliminate the need for 54 components. This reduces costs and further increases driving range and reliability while contributing to the stability of the car on the road. These benefits in the automotive industry were also discussed in many other prestigious automotive publications such as Automotive News, Auto Line, the Detroit Free Press, Wards Automotive News, and others. More recently, we appeared on the Automotive News daily news program First Shift and also on their widely followed Daily Drive podcast. I invite you to check some of these articles and videos out on our website and our social media platforms. With our strategic benefits in the areas of electric vehicle range extension and reducing CO2 emissions in ICE vehicles, I expect automotive attention and activity to continue to accelerate, especially when you consider that Hyundai, Sekisui, and others heavily involved in the automotive industry have made substantial investments in our industry through equity investments in our licensee, Gauzy. Let's talk about important developments in other key markets for our SPD-SmartGlass technology. Airbus announced this year that their A220 VIP jet would have SPD-SmartGlass electronically dimmable windows. Airbus has already announced orders for 15 of these transportation category-sized jets. Each of these A220 aircraft will have SPD electronically dimmable windows covering 50 structural windows. This year, aircraft manufacturer EPIC has started delivering jets to customers with SPD-Smart EDWs. These planes are quite popular with a backlog, and our licensee Vision Systems expects a good year ahead. In addition to the Airbus and EPIC, there are a number of other new aircraft models that have not yet been announced by our licensees in the aircraft industry, who are Vision Systems, InspecTech, and Isoclima. In yachts, Hatteras now has SPD-Smart skylights in three different production yachts. They joined my favorite yacht design in the production yard area. Also, mega and custom yacht builders enjoy giving the best to their customers with SPD-SmartGlass, and you can expect other boats and cruise ships as well to deploy us. This year, our shareholders saw Panasonic combine OLED display technology with SPD film to make high-definition displays and televisions that turn into clear windows at the touch of a button. Last month, you also saw LG Display do this for transport vehicle windows at the Munich Auto Show. You also saw BMW introduce at Munich a stunning concept car using SPD-SmartGlass to control the look and output of the car's headlights. And while we're still on the topic of new markets, let's talk about the architectural market. As many of you know from prior conference calls, with the opening of Gauzy's Stuttgart factory in the fourth quarter of 2019 and its ability to SPD Film 1.8 meters wide, this allowed us for the first time to practically address the large potential architectural market. The architectural market uses twice as much of the world's glass as the automotive market. Smart homes and buildings are potentially our largest as evidenced by the high valuations that some of our competitors are sparring for on just this market alone. We also learned in the process of competitive bidding on some very large architectural projects for SPD that we actually have gone from having a size disadvantage—I'm referring to when SPD Film has only coated 1 meter wide—to now having a size advantage over electrochromics, since they can do similar widths to Gauzy's film 1.8 meters, but have limitations on the height of the window. Of course, the bigger an electrochromic window gets overall, the slower it gets with switching, taking tens of minutes, compared to 2 seconds with SPD regardless of the size of the window. In trains, our licensee Gauzy delivered SPD-SmartGlass train glass to their customer Rehau for the Deutsche Bahn Idea train. Rehau is a large supplier to the train and other industries with over 20,000 employees, and I started talking to them in 2019 about using SPD in trains, and I'm really pleased that it has progressed the way it has in that industry. Trains use a lot of glass, and SPD-SmartGlass preserves views on such iconic luxury and sightseeing trains as the Shikishima train in Japan and the Rocky Mountaineer trains in North America. The Deutsche Bahn train opens up SPD to a much larger new market: commuter and regional transport rails. Now that we've talked about the new markets, let's talk about financial stability and why this is important. Our financial strength, low overhead, and operating costs enabled us to survive and even thrive through world events and supply chain disruptions that have affected other industries. These resources have also enabled us to move our firm forward. As of the end of this past third quarter, the company had working capital of $4.2 million, including $3 million in cash. We continue to have no debt and have been debt-free for 35 years. We have very steady, low, and predictable expenses and cash to last for at least the next two years. Now let me take some questions that our shareholders have emailed to me.

Chuck Michaels asked please provide us with current plans to get to profitability?

I think today’s press release probably was a good example that we were successful, at least in the first quarter, we thought. The secret of this is it has been discussed on numerous of our calls. Basically, we work to increase revenues; we should do that by expanding existing markets and opening up new markets. You could see this year that there have been a number of new markets that have opened up, and we had added new customers like Cadillac and also decreased expenses. I think we’re in our sixth to seventh year of actually low year-over-year expenses. So these two areas— increasing revenues and decreasing expenses—are a constant focus.

Sure that’s helpful. Could you give us your thoughts on dynamic glass tests? As you know, I think, if it passes in its current form, it would ignite a trend in the SmartGlass world, just like balloon installation rooftop solar, replacement windows, and every other technology that got aesthetics. Specifically, can you talk about the combination of Enhanced Lead Credits and GDA credit, given that they are direct? Most importantly, two years after being with Gauzy, we are shipping 1.8 meters of film. Are they able to actually ship film? I know Valentina Hofmann posted that Gauzy is hiring for full-time production line workers in Germany, which I see as confirmation that they have mass production in sight.

Well, thanks for the question, Jared. First of all, the Dynamic Glass Act gives a 30% to 50% tax credit. We clearly stayed within the definition of the Dynamic Glass Act. I do think that it will substantially transform the economics for making smart glass more affordable. The question will then become, what about performance? Because I don’t think that the Dynamic Glass Act will cause major projects to adopt the technology they won’t otherwise use, but I do think that it will make us more affordable, within this tax code subsidy, and that’s where we make the payback to the owner of the property or the facility manager much faster for them. It will also make it less likely that SPD will be cut out of the projects specified in them because of budgetary concerns. So this is always a good thing, and we have been working very diligently and quite successfully to reduce the costs of the technology to the customer. The tax credit will give an additional wind to our sales. Regarding your other questions, Gauzy is indeed shipping film, and we and several licensees actually got rolls recently that look quite beautiful, even in comparison to the Hitachi film, and yet they're wider roles than Hitachi used, 1.4 meters wide. They concurrently coat up to 1 meter, if a project requires it. I believe this also answers another question that was emailed to me. Another question, what is the potential impact on Research Frontiers’ business potential? If the infrastructure bill gets passed by Congress and the President, is SPD product design for Cadillac's electric vehicle going to be standard and independent option or part of an option package? First of all, I think we've discussed the important government legislation, the Dynamic Glass Act, and certainly the infrastructure bill is very oriented towards environmentally friendly improvements in our society’s benefits as well. Regarding your question about Cadillac, right now it’s an all-electric luxury vehicle, but I think our expectation is that it will be standard and it will either be standard or an option on other Cadillac models. Thank you, John, for the call. Next question is about our stock price that suggests that, with regards to the progress and advances that the company has made over, say the past few years, the share price has not provided the company with the vote of confidence. Why is this confidence misplaced, and what would you consider to be the company's most significant advances or events that are not well understood? And that you'd expect to act as a catalyst for the share price? Now I’m going to sound like my prior training as an economist. Stock price most of the time is not a function of fundamentals, although you do need performance during the appropriate times to establish credibility. Stock price in micro-cap and small-cap companies is more of a function of supply and demand for the stock itself. There could be an oversupply. For example, if the company issues a lot of stock in a stock offering or if a shareholder has to sell a major position—let's say, to pay for a wedding or for some other reasons—and then there's demand for the stock. Some sectors become very hard, and sometimes demand for stock comes from investment banking transactions and the power of analyst coverage. Also, money for funds tends to go with the big debt-expunged individual stock. I don't think it's really a reflection on any small-cap company like Research Frontiers in terms of confidence or lack of confidence as much as expanding a supply and demand practice. If you look at Research Frontiers’ operations compared to others in the small window industry, where we have Crown Electrokinetics, which once again has reported no revenues and probably our closest competitor View, the smart glass market is if you have lost $441 billion in 2018, a $290 million loss in 2019. There was a $257 million loss in 2020. And 2021 before they were forced to stop reporting a financial because of accounting issues, they lost $55 million in their first quarter. So I guess, I'm a shareholder like you. I certainly watch the stock price and want it to go up as much as everyone else. But I ask who’s shareholders are happier? You had a $4 billion valuation about two to three years ago and at that time stopped investing, and that sounds like a lot. But by March of this year, when they went public in a stock transaction, they lost half of that value or $2 billion. Then in mid-March, they lost another third of their value or another $600 million in shareholder value. So it’s a tough industry. But I think that especially this quarter, you could see that being lean and mean and focused on a profitable business can be the right approach to this. That’s what we did. The next question, can you comment on the general state of the worldwide economy on your business or more specifically the impact of the automotive chip shortage and the COVID-19 pandemic? Keeping in mind my former job as an economist at the Federal Reserve Bank of New York, I do think about factoring economic trends into a lot of the strategic planning for Research Frontiers. As you can see, we are so actively doing business successfully, as our recently reported numbers show. Of course, supply chain disruptions can place them at an inconsistent and ever-changing economic outlook, and those are never good for business or for planning purposes. I hope that as a world economy, we don't have the same impact that happened in the 1970s where you had inflation and when that was combined with certain labor market conditions, it led to a drop in productivity and efficiency that created an inflationary wage spiral that took my former boss, Paul Volker, a lot of effort and campaign to contain reverse. When turning to our business specifically, first of all, let's look at the trends in the automotive and aircraft industry. Suppliers in that industry reported 34% lower revenues this past quarter. Meanwhile, we had increased revenues in the automotive sector. Here are some things about our business that should make us less impacted by things like supply chain disruptions. One example is that we are a home-based technology, so rather than having to coat directly on glass, we can bypass bottlenecks with ocean freight lines and ports. Even before that, we could ship by air, if needed. Our flexibility allows us to navigate economic conditions. We also have the advantage of flexibility and diverse markets. For example, if the construction industry in the Northeast is stalled, we and our licensees can target our efforts in markets where construction is strong, such as Florida, Texas, and elsewhere. As I mentioned, our licensee Gauzy and Vision Systems have offices in Florida and Gauzy has an office in Texas. We have a very strong footprint internationally as well. So that gives us the ability to cover a pretty widespread area of economic activity. Next question. What are the advantages of SPD over PDLC? This is from Ron Edman. What applications could you use PDLC instead of SPD? Great question, and thank you for that. PDLC is good for privacy and for video image projection, and sometimes you will see both of those things combined with SPD to make even better performance. But even by itself, SPD is a drifting technology and not just a privacy and projection tool. It has the ability to flow heat as well, which gives us tactical advantages. Now, I’m going to ask our operator Paul to open up the conference for any additional questions that people participating today might have that we haven’t already covered.

And we have a question from Leonard Letzow. Your line is open.

Hey, Joe.

Hey, Len. How are you?

I’m doing all right there.

How are things in Florida?

Things are wonderful down here in Florida.

I know firsthand, there’s a lot of construction going on.

Oh my gosh, all the time everyplace. We’ve got 22 million people here now. And in the last 50 years, I’ve been here, we’ve gone from 6.5 million to 22 million. So building is everywhere. Roads are interrupted. Everything is happening. And—but the supply chain is definitely slowing things down, but we’ll get there in any event. Several years ago, when we talked about the company and the future of the company, we were kind of thinking about once we achieved profitability, we would probably get better quarter-by-quarter, and that was prior to COVID and supply chain problems and everything else. Do you anticipate that we’ll be continuing in that vein? Or do you think there’s too many disruptions or things are going...

Yes, I think—and that’s a great question. So if our main business was in automotive when we had that discussion, you typically have an eight-year program with an automaker. We ended up going from vehicle to vehicle within Daimler, and then we added McLaren and went from vehicle to vehicle. We’re in five different models in McLaren. Each one of those adds additional revenue. It becomes accretive and builds on itself. Now that we’re going into a market where our revenues are also going to come from things that are less predictable and less steady, like architectural markets, potentially much bigger in dollar value but less—you don’t know if a building is going to have 10,000 square feet or 100,000 square feet of smart glass in Naples. There are some buildings going up that could do either that we’re working with. Predictability goes down, but the sheer volume goes up when you move into the architectural market. So I think that you’re going to see some choppiness. Intermediate term trends, that choppiness gets smoothed out and becomes kind of a steady positive trend. Yes, I think that the same thing will happen, although you may not see one quarter to the next steady increase. You may see some ups and downs depending on when projects come in and the size of the glass in the projects. But over time, you get enough irons in the fire where that smooths itself out.

Yes. Well, that’s good. I’m really happy to see this in architectural, because I just came from an investment conference last week, and I see some of the predictions when we get to the new AI in the automotive market where things are going to change as far as the number of units expected to be produced in that market, and things like parking lots are not going to be needed, etc. The number of automobiles over the longer trend, the numbers are going to be going down, not up in numbers of cars, because it will be used more than 5% of the day or whatever it is. So being in these other markets with trains and buses and architectural, I think, are really the key for what’s going to happen with Research Frontier here going forward.

Right. The changing world diversity in terms of your business markets is really a very important thing to have. That’s one thing that we have that our competitors like View and Crown don’t have, is that they’re in one market. They’re an architectural, and they’re in architectural in five markets, maybe six now when you start looking at some of the new things coming out. So it’s good to have that diversity, and that also allows us to weather ups and downs in each of the individual markets, as I said before.

Yes. Okay. Thank you very much for your comments, Joe.

Thank you. We have a question from Art Brady. Your line is open.

Hi, Joe. Art Brady here.

Hey, Art. How are you?

Good. Can you comment on the Korean company that's working on some kind of glare protection?

Licensee Glatic. They're an excellent company that has some pretty good connections within the Korean industrial base. They came out of some pretty top companies. I like those guys, and they're young, aggressive, and connected. It's a good combination.

But any product development at this point in time?

I'm not going to pre-announce what they're doing. They will do that.

Can you comment on Lippert? I think they're working with Gauzy.

Lippert, yes, and they also worked with other licensees like Vision Systems. They're a very good company. They're in many, many different industries. RVs is one of them that we know them very well for. They bought a lot of companies, so their business keeps expanding into new and more industries.

One more question is, do you have any perspective as to—last year, you commented you might be going into a second production factory. Has that been put on hold, or is there some projections as to when that might start up again?

Well, I think that you saw part of it start to happen. For example, Gauzy has quadrupled their production capacity for emulsion in Israel. What they do is they make the chemistry in Israel, they ship it to their Stuttgart facility where it's coated. In the Stuttgart facility, it's very efficient. It was designed only for SPD and to be super efficient so we can get the costs down like we have and get them down even further with more volume. They built in the ability to either build a replicated line right next to the current one if they wanted to keep everything in Germany, or build it somewhere else in the world where the customer needs one. Considering the fact that Hyundai has made a major investment in Gauzy, my guess is if you're going to see a factory, it would be somewhere in Asia.

Is anything happening with South America or Mexico?

Yes, there's activity in all of those areas. South America really got hit hard, though, with COVID. So we hope and pray that the countries where SERis start getting back on their feet. All of North America is active for us, too.

And what's with Mexico? Anything happening down there? Does that send in the automotive capabilities?

They are, and there's some major glass there like Vitro that we're very familiar with.

Okay, thank you.

Thanks a lot, Art.

Thank you. Our next question comes from Jared Albert. Your line is open.

Hi, Joe. How are you?

Good.

Thanks for taking my questions. I appreciate the assurance you shared. But it's 30% to 50% of the installed costs, right? It's like solar panels that were the same kind of credit.

I'm being a little reserved. I'm being reserved a little bit, Jared, because we never know what's going to be in the final bill. But yes, 30% to 50% is a huge credit. It takes any cost disadvantage that SPD may still have away. We're not sure there is a cost disadvantage, by the way, because we're operating on a non-subsidized basis and winning business. Companies like View and Sage are subsidizing heavily their bids. So I don't know what their real costs are. But it definitely makes it a very significant game changer when you get kind of tax credits. This kind of what they call tax expenditure, you're trying to promote a certain result by encouraging people to deploy energy-efficient dynamic glass. It’s great for our industry and great for us. I mean, no question. I'm just being reserved because you never know what's going to be signed into law.

Appreciate it. Hopefully the Congress passes it tonight. The Senate will see and part of it see. I know I understand, and also…

I'll make a few phone calls.

Well, also, stressed to show the, I mean, I did it for decades. So for the electronics, the framing, all of that is in the credit, right? I mean it's not just in equations solutions, the entire…

It's kind of like when you do your taxes and you get a credit for the wall. You're not getting credit for the energy-efficient motor or something in the water; you're getting it on the system. I imagine that this will extend to the entire system within reason. You always have to figure out where the system ends, and where the building begins. But obviously, the more the better because it makes these more sophisticated systems much easier to implement because you're amortizing it over many different functions besides the straight dynamic glass. I’m very excited that they’re doing that and that they’re recognizing dynamic glass.

So I had one more unrelated question, which is the S5 box are coming standard now, it looks like, with Magic Sky on the front sunroof but not on the back. Is that correct?

It depends on the market. Mercedes has a very interesting way of deploying.

But if we look at past history, my memory is not as good on the 560s, or on the two TTs. So my memories have started the cooped both on those options then finally gotten to Sudan. This is kind of the first build of the box in the hoods.

I know that on the S450, which is where we have Research Frontiers for demo purposes, it’s on both the front and back windows, the sunroofs.

I remember though that, I mean maybe I’m wrong. But in some markets, you started on the front as an option, the back was fixed, then it became an option on both pieces of glass on the sedans. Now it looks like it’s built in the price on the box. So hopefully, it will just migrate as it did the last time. Okay. Thank you very much.

Thank you.

Thank you. We have a question from Alan Ginsberg.

Yes. Hi, Joe. How are you?

Hey, Alan. How are you?

Okay. I was just wondering if you could give us any update on whether there’s been any progress on the color of the film of whether you could to—from blue to gray or a dark blue or whatever. Are you working on that? Is Gauzy working on that?

Okay. Yes, we are working on that. Gauzy has been informed that we’re working on it, but it’s not ready yet. They’re working on their own approaches. One thing that I think is very important to note, and I’ll say that the film we’re getting now out of Gauzy looks, if I could use the term, blacker than the Hitachi film. If you put two of these films next to each other—they're both the same coating thickness in any microns. You put these two films next to each other, the Gauzy film looks more neutral in color. If you permit me a 2-minute explanation of films, I think it will make sense. Why does an SPD window look blue? It looks blue because the particles inside the SPD material are very efficient at blocking every area of the color spectrum except dark blue, the sapphire blue color. That’s why when you look at, let’s say, a Mercedes sunroof, it looks blue. However, if—and remember, there’s blue light in daylighting. That’s why blue light comes through in an outdoor environment with an SPD window. In an indoor environment, it doesn’t really take blue at all; it looks black because there’s not much blue light in most Kansas lighting. We’re blocking everything except the dark blue, and that’s what’s being transmitted through the SPD material. That’s why it looks blue—we’re blocking 99.5% of the light with a Hitachi film, which means 0.5% of the light is coming through. And some of that is blue, and that’s why it looks blue. For whatever reason, the Gauzy film with particles, and obviously, they do their own chemistries so they have their own secret sauces, looks much darker. Side by side, you put a Gauzy film next to a Hitachi film, and you’re going to see that the Gauzy film looks a little bit more grayish or blackish because you’re blocking that there’s less than 0.5% of light coming through. So it looks blackish. But we’re working on other things where the particles themselves or the materials that the particles are in will also block in more of the neutral spectrum. So block a little bit of blue so that it becomes black or gray.

Do you find that there’s resistance?

Sorry about the—by the way, sorry about the science lesson, but I think it’s important to understand what we’re doing on it. I don’t think that the blue is a showstopper. There were reports that one carmaker had advertised a switchable glass, and it was using a dyed liquid crystal, which has its own issues in terms of not really blocking white and not having the durability you need in the automotive environment, especially on a sunroof. Customers started complaining because they were hoping that it would be a blue glass. When you look up, you want to see the sky. It actually looked a little bit black. I think it’s going to be customer choice and not a showstopper in terms of what the color is, but we would like to give customers more choices. We’re all working on different colors.

One last question. Has there been any progress in the car industry as far as other windows besides the sunroof?

Yes, a lot of the things that are under development right now are talking about other areas besides just the sunroofs.

Okay, thanks very much. I appreciate it.

Thanks, Alan. Good talking to you.

Thank you. We have a question from John Nelson. Your line is open.

Hey Joe, how are you doing?

Hey, John, how are you?

Hey I’m pretty good. Just has there been any—just one question. Has there been any new developments as far as Daimay on the Car visor?

Yes. They continue to work on their development, and they—if you remember, they have an OEM partner that they're working with on it. So they're coordinating on that end.

Okay, thanks. That’s it.

Thanks a lot, John.

Thank you. We have our next question from Ronald Rosato.

Hello, Joe. How are you doing?

Hey Ron, how are you doing?

I’m pretty good. Listen, somebody may have asked this question. I don't know I got in a little late. So if they did, I apologize. I believe there's a couple of car shows coming up. I believe there's one in L.A. And I believe...

Yes, L.A. is this month.

Okay, this month. And I believe there's one in China also, if I'm not mistaken. I don't know which, but do you think we're going to see any representation there from any of our OEMs?

If we get confirmation, and I've been working to do that and usually get it a little closer to the car shows themselves because sometimes the automakers will make a last-minute decision to include something or exclude something. We’ll certainly try to get that word out so that people know.

Okay, superb. That’s really the only thing I had Joe. Thank you so much.

Also, the same goes for things like the Consumer Electronics Show where you have that in January. That's become— even though it says consumer electronics, that's become a car show. If you go to Las Vegas for the CES, an entire exhibit hall in Vegas is as big as any car shown in the world with full-blown cars, so it's always good. They tend to be very tech-oriented there, which we like.

Good. Good something to look forward to. Okay, Joe, I appreciate it. Thank you very much. Thanks a lot.

Thanks a lot.

Our next question comes from Bruce Denny. Your line is open.

Hi Joe, how are you?

Hey Dr. Denny, how are you?

Very good. Thank you. A couple of quick questions. We've heard a lot about the display market with SPD as the backlight or light blocker for see-through displays. Has any of this stuff really hit the market yet? Is the market visibly expanding already? What's the status of that?

So there's been—when we say hit the market, there are a couple of different markets that they're targeting both with Panasonic and at LG. One of the markets is what you saw at the Munich Auto Show, where they're targeting vehicles and putting information systems into the windows on vehicles. That's not the only market. When I was at CES, I saw some amazing LG displays that were targeted towards other markets. Panasonic, the same thing. But if I had to kind of break it up, I would say that Panasonic is more focusing on the consumer in certain aspects of the B2B market, and LG is going after other B2B markets, as well as the vehicle market. There are also things like museums, exhibitions, and other venues where they have deployed this commercially as well.

So is it beginning to generate any significant revenue for us?

Well, our revenue in the display market was up this year compared to last year. With both Panasonic and LG Display out there, these are two huge marketing and consumer electronics powerhouses. I think it can be significant. Remember, Panasonic, basically, their marketing focus has always been centered around the Tokyo Olympics, and this year, we know what happened there. It was somewhat disappointing that the Tokyo Olympics got delayed and then kind of had so many false starts. But it wasn't the way they were hoping to launch new products, which probably is why you don't see more of this out there publicly yet until they have their own marketing push on it. To quote what's probably happening with the economy, all this stuff got delayed by the pandemic but not derailed.

Right. All right. Okay. Another question is about the automobile sun visors. My understanding is that at least in the past, until the very near past, the possibility of using SPD for sun visor was out of the question because it couldn't default to dark according to the government regulations?

Yes, well, yes, the SPD wasn't dealing with that and some of the other things, but you can do whatever you want above the AS line. If you look at how this has been developed by, for example, McLaren, where they have this built into the windshield, you're allowed to put it in the windshield as long as you go above the AS line, which is often that blue shade band that you see on cars. Next time anyone's in their car, take a close look at the field, and you'll see a letter A/S. Anything above that, you can make as dark as you want. You could even paint it black with black paint. That really wasn't the showstopper. A lot of it was the cost and engineering. McLaren can put this in the window. I think Daimay is focusing more on the fold-down more traditional sun visor but adding the functionality of having it automatically readjust.

I see. Final question is, on the last conference call, I asked you about skyscrapers and major architectural installations. You said there are a few of them that have been specked in. And I realized that I forgot to ask a very pertinent question; whereas they would be specked-in, are these specked-in for like an entire wall of the building or maybe the lobby or some small installations like that?

Usually, the way it gets deployed in skyscrapers, and this is true of every smart glass, is that they'll pick one area first that they think is either the most in need of controlling heat, light, and glare. So let’s say a lobby or something like that. Then what they do is they make it available to the residents or to the offices on a case-by-case basis. Once you have this in the lobby, you could also have it in the penthouse. You could also have it where tenants decide whether they want it or not. Eventually, we’re not there yet, but eventually, this can be something that just gets deployed, the standard shading, hooked into the whole building control system. That’s obviously our goal and dream, and with costs, it can happen, so cost reductions will allow us to get there.

Right. Is Europe subsidizing any of these green projects like in the U.S.? We're now discussing the progress of whether or not we're going to subsidize SPD Glass in Europe.

Yes. Europe, I don't know if there are specific discussions about Dynamic Glass. There are certainly penalties. If you look at what's in the automotive industry, for example, there's a penalty of €95 per gram per kilometer that your fleet, if you're an automaker, get multiplied by the number of cars you sell in Europe; that's the penalty. That's a big number. In some cases, it was $1.5 billion on fleet for some automakers. In some cases, like Mercedes, it was only $100 million. I'd say only $100 million but facetiously. Initially, they chose to legislate energy efficiency through penalties instead of incentives. But Europe has always been on the forefront of energy efficiency because of the high energy prices. Usually, they're well ahead of us on all these things. I don't know specifically; however, I imagine Germany and France probably have strong incentives for this and maybe some of the other countries.

Okay. All right. Very good. Thanks very much, Joe.

Thanks.

Thank you. We have a question from John Strobel. Your line is open.

Hey, Joe.

Hi, John.

So quick follow-up questions on your opening remarks. You talked about Research Frontier's earning a profit in the third quarter. If I'm reading this correctly, it’s $17,000. Not much, but still a first.

Yes, 2020 with some other things, but right. It’s a start. I don't want people to get ahead of their skews on that because we are, like other companies, probably going to see choppiness until we hit a steady state. As you add more irons in the fire, it becomes less choppy. But it's certainly a very welcome development, I think, for everybody to see that. We're the only smart window company in the world that's achieved that. It's all pat ourselves briefly on the back and then get back to work.

My question would be, do you expect profitability to continue into the fourth quarter? I'm not saying for the fourth quarter, but is there momentum going in that direction?

Since some of the stuff were special situations, special government projects, and other things, it's hard to say whether that continues or not into the next quarter or skips a quarter, but I'm going to address that a little bit more in my closing remarks.

Okay. You mentioned that there are three big contracts Research Frontiers landed, including one with the U.S. government. Economists are saying that there is going to be a coalescing of forces sometime around the spring, where the pandemic will be under control. When that happens, the economy will start heading back up. When that happens, the supply chain crisis will be a thing of the past. Given all that, when—let’s say, hypothetically, that happens sometime over the next six months to nine months—when do you expect these big contracts to start rolling out?

I think—and first of all, let's keep our fingers and toes crossed, John, that those things happen, and things do return more to normal because we were on a good path before the pandemic and before some of the things that have happened that have caused this supply chain disruption. A lot of times, things don't happen in a straight line. With COVID, we saw a temporary evening, and then it resurrected. In some places, it's now back well under control. We need to hope we're able to lick this like polio and not have to worry about it ever again. But assuming that it does happen, the pandemic is good and bad for us. I hate to say that there's anything good about a pandemic, but it did cause some projects to actually get accelerated. People were able to focus on the things that were more intermediate-term because if you can't make cars today, you still can develop cars for the future. If you can’t get a car off the assembly line because you don't have the chips, it doesn't mean that your development plans for the next-generation X, Y, or Z car is getting put on hold. As a matter of fact, you may have more resources deployed toward that because you have the luxury of doing that. On balance, obviously, as I said earlier, nobody wants this supply chain disruption—it’s no good for business. In my own personal opinion, if we can have something and the recovery and the return to normalcy are going to happen, things will really accelerate. There have been so many false starts that I think we really need to see the industry demonstrate a return to sustainability, and that’s likely to be sustained.

Okay. Last question. Chinese President, Xi Jinping, is amassing all power within his hands, especially economic power. Do we have to worry about that?

That's a much broader question than I think I can't answer on this conference call. I do watch the Chinese government and the Chinese market very carefully versus the auto market in the world, but it's not some place where I would ever see the secret sauce or teach them how to do it. I’ve been there. I know what the markets are. We just need to have a strategy for the Chinese market, but it doesn't involve teaching them how to do anything.

Good. Okay. Thank you. That answers my question.

Great. I appreciate you asking that question.

That's it for me.

Okay. I have one more question, Paul.

And we have our last question from August Berman. Your line is open.

Hey Joe, how are you doing?

Hey, August. So I will be calling you Dr. Berman?

Yes, in the near future. That’s funny you said that.

Okay. I thought I saw somewhere that there was a doctor—I thought I saw in the beginning of your name, there was a doctor. My apologies if I mis-addressed you in the past.

No. That's okay. That's okay. Working on that.

Good luck.

Thank you. A couple of questions Joe, front and center. Gauzy, you mentioned at Mesa in September something about series production in 2023. Do we know if they're referring to specifically autos with SPD or autos using LG combination in SPD products?

You're talking about LG at the auto show?

Yes.

Yes. We don't know specifically. Unfortunately, even if we did, we wouldn't be able to put a finer point on it, just because we like LG and we want them to like us.

Okay. And then they had also mentioned that there was interest in the headlight technology and that all cars would eventually be using that technology. Do you get a sense that's a highly-sought technology for the headlights?

Yes. Since that BMW video came out, which was a gorgeous car—such a stunning use of our glass in the headlights. If you haven’t seen it, go on our website and watch it. Since that video came out, there’s been a lot of inquiries and interest from headlight suppliers about this. If you think about it, LG, which is where headlights are, are notoriously hard to dim. It’s not like an incandescent bulb where you bury the voltage, and you’re done. Being able to vary the light output of a headlight is very important because you want adaptive headlights and not blind oncoming traffic. The other thing is, if you look at how BMW deployed this, it was a very interesting shaped headlight that can change its shape from like an oral to think of like an iris of an eye and things like that. To do this with a conventional non-SPD system means you have a bunch of individual incandescent or LED lights that are individually controlled and separated. Think about the labor of assembling a five-segment headlight that can change the way it looks. With SPD film, you have this continuous piece of SPD film where you can laser etch it to have infinite variability. So now you reduce the labor costs to make a multi-segmented headlight. You could dim it. You could vary the output, which is very hard to do with an LED. And you're reducing costs because of the assembly costs and things like that, so you have one component if you can use a headlight lens as opposed to something else. Yes, there are some real practical benefits to that.

Perfect. Another question: just going over the company, I think BOE and Fuyao seem to be getting a bunch of these lower-priced vehicles with their technology. It looks like the PDLC product but really further into it, looks like they also won a contract. Is it just talks cost at this point? Or is—in terms of it, it looks like it's maybe the headquarters might be in China, so maybe they're getting some of those contracts versus looking at us?

I wouldn't rule out SPD on anything that Fuyao has. I wouldn't rule out SPD on anything that Fuyao has. That's all I could say. I think that you'll see it on different things.

Perfect. And then one last question. You mentioned Hitachi earlier today. Showa Denko, I guess, has been the new...

Right, they bought their company—Hitachi Chemical, right?

Are they—I just hear nothing about them. I know we hear Gauzy and Gauzy, they are just—but I wish we would have heard many, many years before. But if so, are you making any strides? Are they still fighting for contracts? Are they working on the technology to compete with SPD or with Gauzy's SPD?

Yes. They are public about what they do for two reasons. Number one is cultural, and number two is in the overall scheme of things, Showa Denko is a much bigger company than Hitachi Chemical even. This is a route, perhaps in terms of their business. In contrast, with Gauzy, this is the bread and butter, the meat of it. You want both a company with substantial resources doing this. Gauzy, however, has garnered together substantial resources based on pretty large investments that have been made. They have the strength and the firmness to get the job done too. They do have—this is not a rounding error for Gauzy. This is essential. We like that.

Perfect. All right, thank you gentlemen and congrats to us for our first quarterly profit. That's great.

Thank you. I think we've answered most questions. If your questions haven't fully been answered, just e-mail me, and we’ll do what we can to answer them. I'm just going to make some relatively short closing remarks. You look around, buildings and cars are getting smarter. They’re loaded with technology to do more, and every major car company has announced an all-electric strategy. Energy efficiency and the reduction of CO2 and other emissions is an important topic that the government is also pushing, and we should always remember that SPD technology and Research Frontiers can help in all these areas. New aircraft have been announced this year and will be announced as well as new train applications. Now that Gauzy can coat SPD film 1.8 meters wide, new uses and architectural projects are starting. Innovative other uses are starting to spring up in the consumer electronics and vehicle electronics, such as what you've seen with Panasonic and LG Display. Our licensees have expanded production capacity in all areas of this chain from the chemistry production to the film for the coating to the fabrication of the end products for all industries in architecture, aircraft, marine, transit, and construction industries. Pretty much across the board, significant increases in the footprint that we see in these industries. You have things like the Dynamic Glass Act, which is winding its way through Congress and seems likely to be enacted. Right now, it's offering a 30% to 50% tax credit. It makes it very similar to other things in the energy efficiency area that have been promoted by the government. One aside, I just thought of this. Low-e Glass, low-emissivity glass was invented by Asahi, who had the Glaverbel subsidiary, which has been a licensee since I joined the company in 1992. They invented Low-e glass. For a long time, it was very hard to sell until government regulation and legislation made it so that almost all glass is energy-efficient Low-e glass. So let's not underestimate that government mandates in proper areas, and not in every area, but in proper areas, can have a meaningful impact and change the way people behave. The Dynamic Glass Act can be a game changer in terms of the relative cost and performance of SPD-SmartGlass in the architectural markets. A frustrating part of the architectural business is that everybody puts a shovel in the ground thinking that they're going to build what they plan on building. All along the way, there are delays and cost overruns. Sometimes you have to make a decision: What do I cut in terms of what bells and whistles I don’t absolutely need? Can I delay, or can I find a substitute for? Sometimes it's glass, not even smart glass, but regular glass. Things like the Dynamic Glass Act make it less likely that we’re going to be on the chopping block for those kinds of decisions, which I think is helpful. I just want to say one final word. Tesla was one of the first electric vehicle companies to show a quarterly profit, and their revenues are choppy until they clearly started to show consistent, consecutive profitable quarters. We were the first smart shading company to show a quarterly profit, and our revenues will undoubtedly be choppy at first. As more and more projects come along for automotive or aircraft or boats, for homes and buildings, smart consumer electronics that give a window the ability to turn into a TV, or increase the headroom of a car by eliminating shade, or allowing Cadillac to give individual controls to four quadrants of the roof or put information on the side of the glass like LG, these things will cause our revenues to become less choppy and our profitability more consistent. I look forward to our shareholders enjoying that ride together with us and whose hard-working employees and licensees and their innovative customers. We really begin to reap the benefits of their patience, hard work, and investment. To all of you, thank you for your participation. I am so glad that we were able to achieve a profitable quarter and share it with you all, and I look forward to future discussions and good events as well. Thank you.

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