Research Frontiers' (REFR) CEO Joseph Harary on Q1 2014 Results - Earnings Call Transcript

| About: Research Frontiers (REFR)

Research Frontiers, Inc. (NASDAQ:REFR)

Q1 2014 Earnings Conference Call

May 8, 2014 4:30 PM ET

Executives

Joseph M. Harary – President and Chief Executive Officer, General Counsel, Corporate Secretary

Seth Van Voorhees – Chief Financial Officer, Treasurer, Vice President-Business Development

Analysts

Greg W. Palm – Craig-Hallum Capital Group LLC

Jeff Harvey – Private Investor

Michael Kaye – Kaye Associates

Tom Mccarthy – Raymond James Financial, Inc.

Operator

Good afternoon, ladies and gentlemen. Welcome to Research Frontiers Investor Conference Call to discuss results for the First Quarter of 2014. During today’s presentation, all parties will be in a listen-only mode. (Operator Instructions) This conference is being recorded today. A replay of this conference call will be available starting at 12 PM on May 9, 2014 in the Investors Section of the Research Frontiers Web site 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 e-mailed to it prior to this conference call, either in their presentation or as part of the Q&A session at the end (Operator Instructions).

I would now like to turn the conference over to Joseph Harary, President and Chief Executive Officer of Research Frontiers. Please go ahead, sir.

Joseph M. Harary

Thank you, Betty, and good afternoon everyone. Thanks for joining us and thanks also to everyone who already e-mailed us their questions. Joining me today is our CFO and Vice President of Business Development, Seth Van Voorhees. Seth will be resting his voice a bit, as he has been working on the financing that we announced earlier today. But Seth and I will answer any questions that we didn’t already cover in today’s presentations.

We’ve also been asked to shorten these conference calls, so as to focus on questions of general interest to investors to make them more useful and efficient. Also we went through a very comprehensive review of development that our company in our year end conference call, less than two months ago.

What I would thought, I would do in the interest of covering the most topics is to summarize the questions that were asked in advance of this conference call. And thanks to everyone who sent in their questions, because they make the process more efficient and helpful to all shareholders.

We will answer all of these questions today. One, what is going on with SPD-SmartGlass technology on Mercedes. Two, when will other OEMs introduce SPD-SmartGlass technology on their cars. Three, what is happening in other industries for our technology, besides our main one which is automotive.

Four, does Research Frontier expect to have other SPD film makers in production. Five, what is the status of new products by our licensees such as Vision Systems sunvisor. And sixth, could we give me more details about the financing that was announced this morning.

There were some other specific questions and suggestions for new applications for our technology, we welcome these. And if there are specific ideas and suggestions that people have for Research Frontiers and SPD-Smart technology, we’d love to hear about them. But the better way to discuss these is the directly with the Company, rather on this conference call. We keep the Questions@SmartGlass.com email open all year around for this purpose. Should you have a question also about recent developments or other areas of general interest to our investors, there will also be a live Q&A session later on in this call.

First, let’s us talk about Mercedes, I think that some people were concerned by a question by one of the participants in our last conference call, which was more of a statement that he called a dealer and heard that Magic Sky Control was canceled by Mercedes.

Of course this was false information, and I’d indicated that time that I’d just visited Daimler in Germany one week before the last call and there were no plans to cancel Magic Sky Control on the S-Class or any other vehicle. The truth is that, the S-Class Coupe is coming out in a few months and Magic Sky Control will be an option on this car right from its start of production.

Our reported numbers do not yet reflect revenues from this important vehicle. It will have about three times the surface area of glass as the current SLK and SL models. Also, the take rates on both the SLK and SL vehicles continue to be higher than Mercedes original expectations, which is helpful since these cars are now entering their third and fourth model years, when overall production volumes of these roadsters typically is lower than the earlier years closer to the model introduction.

I am happy to say that we will be on all variants of the S-Class Coupe that comes out in 2014 in a few months and in all announced variants of the Sedan, including the long wheelbase version which comes out in early 2015 and the standard wheelbase version which comes out a few months later.

As we’ve mentioned in the past, the S-Class will use about three times more glass than the current SLK and SL models. Also, pricing for our SPD-SmartGlass products is coming down, making it more attractive on a variety of other vehicles, other models both within and outside of Daimler. We get a 10% royalty from our automotive licensees and estimate that we’ll receive between $150 to $250 per car for the S-Class. It will vary with the different S-Class variants.

Another significance about the S-Class is that the take rates are expected to be even higher than the successful results Mercedes has had with the Magic Sky Control option on the SLK and SL roadsters. Also, the total unit volume for the S-Class is far higher than these roadsters.

And new technology used in the S-Class often migrates quickly into the E–Class which has about three times the unit volume of the S-Class. Though I cannot overemphasize the importance of this car to our bottom line, also the fact that we’re slated to be on all variants of the Coupe and the Sedan is very important.

For the S-Class Coupe this means 1.32 square meters or about 14 square feet in each of the following variants of the S-Class Coupe, the S550, the S633, the S65 and Magic Sky Control will be an option as soon as this car is introduced to the market.

For the S-Class Sedan this means about 1.7 square meters on the S-Class long wheelbase version which is the next S-Class Sedan to come out and 1.5 square meters on the S-Class standard wheelbase version a few months later.

All six model variants announced for the Sedan will have Magic Sky Control. These are the S550, the S550 4Matic, the S600, the S63 AMG, the S65 AMG and the S550 Plug-In, and I have only listed the U.S. variants, but all variants of the Sedan and other markets such as Europe will offer Magic Sky Control as well including diesel and other hybrid versions. There is an another importance to this vehicle, its beneficial impact on another OEM.

The S-Class is the first Sedan to use SPD technology and unlike the specialized growth to market, the luxury Sedan market is the bread and butter and most profitable businesses of the premium automakers. These are high volume luxury Sedan they compete with the S-Class, such as the BMW 7 Series and Audi A8, and premium sedans by Lexus, Jaguar, Land Rover, Porsche as well as other higher volume luxury car makers.

In addition to lower volume, but very well known luxury sedan such as the Rolls-Royce, which is owned by BWM and Bentley, which is owned VW. Also we spoke about the E-Class these compete with the BMW 5 and BMW 6 Series, the Audi A6 and other cars.

So let’s talk about what’s happening with SPD-SmartGlass and other automotive manufactures besides Daimler. A majority of these other OEMs in the premium end of the market have completed their development work and are able to pull the trigger as soon as vehicles they select already.

Consider the fact that now at least two of the world’s largest automotive glass suppliers are putting SPD-SmartGlass technology into serial production vehicle for Mercedes. Our SPD-SmartGlass has already been shown by both of these glass manufactures and Mercedes own rigorous testing to meet automotive specs and be reliable as well. Thousands of cars are now on the road for years without one reported problem.

Now that their basic development work is done and the glass is in serial production by at least two large glass suppliers all of this makes it even easier for these other OEMs to introduce, SPD-SmartGlass on their vehicles and for Mercedes to put it on even more models.

These other automotive OEMs are watching the performance of Magic Sky Control on the S-Class very closely, since this is the sedan they compete with their top models right now. And Mercedes Corporate and the automotive press absolutely love Magic Sky Control. When you consider that the top five premium automakers Mercedes, BMW, Volkswagen, Jaguar, Land Rover and Lexus are responsible for over 90% of the premium car volume. This is very significant to the efforts and focus of us and our automotive glass licensees.

Introduction dates for vehicles is up to the manufacturers. Our job is to make sure that SPD-Smart technology is on those vehicles. We spoke about what’s happening in Mercedes and other major automotive OEMs around the world. Now, let’s briefly talk about the other industries for our technology. Within the last month or so we added two new licensees in the architectural field and won an award for the best commercial application of a product for energy harvesting at the Smart Glass conference in Berlin in April were I was also the keynote speaker.

Our licensee Vision System is the finalist for the green interiors category of the coveted Crystal Cabin award at the Hamburg Air Show. We are excited about developments in all our industries and look forward to increasing sales and visibility in all of them. Especially now that increased people, resources and licensees are covering these other industries.

We were also asked prior to this call about new products. Our licensees are great innovators and some of the newer products recently introduced to the market include Energia which is a self powered smart window for the aircraft market by our licensee, Vision Systems. Vision Systems is also currently developing an aftermarket installed sunvisors for truck and other automotive vehicle markets. It’s up to them to reveal the status of this when they’re already, but we all think that it’s a great product with great potential both economically and to bring the benefits of SPD-SmartGlass technology to a new and wider audience of users.

However, we wanted to give our shareholders as much information as possible about this new product. So we asked Vision Systems what we could tell our shareholders about the Sunvisor product. Because this product has great potential, Vision Systems and their partner with the photovoltaic end of the product, have both made process in industrial improvement and expected even newer and improved sunvisor with even greater performance specs to be ready for demonstration and marketing this year.

Regarding the other question we got about the status of a second source of SPD film. As you know we have licensed several companies to make and sell SPD film to our licensees. Hitachi’s film is excellent and in commercial production and used in all of our industries. The other film licensees have also made great progress towards introducing their own films. We have always felt that it is prudent to have both geographic and currency exchange rate diversity in our film suppliers. Things are moving according to the plan in this area.

Finally, let me answer some of the questions we’ve been receiving about the almost $3.5 million additional investment that our largest shareholder, Kevin Douglas, has made in Research Frontiers. First, there are plenty sources of capital for Research Frontiers and was $10.2 million in the bank as of the end of the first quarter. There was no pressing need for additional capital on our part.

But when your larger shareholder tells you that he likes what you are doing and how you are doing it and wants to increase his ownership in the company, you have to be flattered. It attributes to the hard work that everyone here at Research Frontiers and that our licensees and their customers are doing.

Kevin Douglas is also very well known and respected as an investor in the technology product field. Since 2012 when he made his first in a series of investments in Research Frontiers, both directly and in the open market, we got to know him better and appreciate not only his confidence in us, but the doors that he has opened and help that he has given the company. He has also been very gracious with his time. He understands the company that he is invested in very well.

Now, I’d like to – since we cover the basic questions that were email to us, I’d like to open the floor up to additional questions that might be in the queue. So, Betty, if you can do that I’d appreciate that.

Question-and-Answer Session

Operator

Yes. Thank you. We will now begin the question-and-answer session from the floor. (Operator Instructions) And our first question comes from Greg Palm of Craig-Hallum Capital Group. Please go ahead, sir.

Greg W. Palm – Craig-Hallum Capital Group LLC

Hey, guys. This is Greg on for Steve.

Joseph M. Harary

Hi, Greg. How are you?

Greg W. Palm – Craig-Hallum Capital Group LLC

Good. Yourself?

Joseph M. Harary

Very good.

Greg W. Palm – Craig-Hallum Capital Group LLC

First thing, fee income was down quite a bit year-over-year. I kind of understand or believe there was a lack of some one-time kind of items in there. Can you just kind of go through that again and kind of find out the different in those?

Joseph M. Harary

Sure. If the take the delta between quarter one of 2013 and quarter one of 2014, more than a majority of that was from the absence of one-time payment from one licensee. We had other one-time events also, but the bulk of it was from that one.

Also, there was a reduction in automotive fee income from a pre-scheduled shut down for maintenance and other modifications in the factory line for the Mercedes-Benz SLK and SL roadsters. So basically that explains the difference in the revenue numbers.

Greg W. Palm – Craig-Hallum Capital Group LLC

Okay. That’s helpful. And you mentioned sort of the S-Class Coupe, that’s expected to start in a couple of months. Can you kind of go through the cadence of that S-Class launch in general? Just trying to get a feel of how fee income is going to ramp, what the rest of this year looks like and when does that really significant inflection happen?

Joseph M. Harary

Right. Well, there is lot of anticipation about the S-Class Coupe. Mercedes has had multiple launches of the coupe at different of the major automotive trade shows, just to reinforce the significance of it. And I am told that this month the press drive for the S-Class Coupe with Magic Sky Control is going to be happening as well. So I think what you’re going to see also is a lot of the automotive press, once they get their hands on that car, are going to be enjoying its features, including Magic Sky Control.

Earlier this week a colleague and I were at Mercedes-Benz USA and even though the car is not officially out, it was in the parking lot, parked two spaces away from my SLK and it was a beautiful car. I mean it really is stunning. So there is a lot of anticipation and a lot of built-up demand for this vehicle. And it’s not surprising that’s going to be the first S-Class of the new model year that’s coming out. And then shortly thereafter, they’re following it up with the long wheelbase version. This is mostly for China and the United States.

And that’s going to have actually the largest amount of smart glass, SPD-SmartGlass of any car ever. It’s going to have about 1.7 square meters of smart glass in it. And then they’re going to the higher volume standard wheelbase, which has about 1.5 square meters of SPD-SmartGlass a few months after that. So that’s the initial roll out plan for the S-Class, the new model S-Class. And starting with the S-Class Coupe in a couple of months and everything that comes out after that, we’re going to be on all variants of that.

There may be very slight differences in the timing of when this is available both in the U.S, in Europe and in Asia, but pretty much the excitement is going to start fairly soon and roots with the Magic Sky Control have already been produced and are being shipped. So, the fun is beginning to start and we should start to see revenues from that in the second quarter that we’re in.

Greg W. Palm – Craig-Hallum Capital Group LLC

Okay. Perfect. Last one. I’ll hop back in the queue. OpEx was nicely down year-over-year, I mean, is this kind of a good level to think about going forward kind of absent any increase in stock comp?

Joseph M. Harary

We’ve always tried to run a lean and mean shift. One of the benefits of our business model is that we have hundreds and hundreds of people around the world that are actually doing the work of Research Frontiers that are licensees, that are on our payroll. So, by adding new licensees like we did in the last month, we’ve added some substantial manpower to the effort. And as that trend continues, I think that, and also as the licensees hit their strive with their own marketing and production efforts. Research Frontiers would need less and less in terms of operating expenses, but on the other end. We are going to do whatever is necessary to be successful.

So right now, there is some great opportunities coming up with the S-Class coming out and other things that I think are going to be great for everybody and we’ll get a lot of wins in our sales from that.

Seth Van Voorhees

Hey, Greg in terms of year-over-year comparison, in the fourth quarter of this year, we historically have paid out bonuses and incentives in January of the calendar year. But last year, we did it in December.

Greg W. Palm – Craig-Hallum Capital Group LLC

Yes.

Seth Van Voorhees

Which resulted in a heavy year-over-year comparison for the fourth quarter. And on a relatively like comparison for year-over-year for Jan – for the first quarter of this year. So in some way, this is a little bit of a timing element in that. But it’s fair to say that, a little it was a different for the few days. And just where the numbers went into whether it was the fourth quarter or the first quarter.

Joseph M. Harary

But I’d say, Greg and also anticipated that – think about the stock comp.

Greg W. Palm – Craig-Hallum Capital Group LLC

Okay. Perfect. That’s helpful. Thanks. I’ll hop back in the queue.

Joseph M. Harary

Okay. Great. Thanks, Greg.

Operator

And our next question comes from Mr. Jeff Harvey, a private investor. Please go ahead sir.

Joseph M. Harary

Hey Jeff.

Jeff Harvey – Private Investor

Hey Joe.

Joseph M. Harary

Hey, Jeff. How are you?

Jeff Harvey – Private Investor

I came in a little late, but did you give any update on your patent suit?

Joseph M. Harary

We haven’t given an update. Basically our policy is to refer people to the public docket in the patent litigation. I can' say though, we have not yet started discovery that’s not anything that’s unusual with the timing of these cases. This is a kind of a early in the litigation.

But just to summarize where we where, we had filed our complaint. We’ve received an answer. We’ve amended our complaint to add a third patent to it and received an answer to that. And now the usual back and forth, is going to start happening including depositions in discovery and the exchange of information. So as expected, we’re on the timetable that typically occurs with patent litigation.

Jeff Harvey – Private Investor

Hey great. Thanks very much.

Joseph M. Harary

Thanks a lot.

Operator

(Operator Instructions) Our next question comes from Michael Kaye.

Seth Van Voorhees

Hey Mike, hello.

Joseph M. Harary

Hey Michael, how are you?

Michael Kaye – Kaye Associates

Yes, hello Joe. Can I understand you correctly, you mentioned something about the price of SPD film going down.

Joseph M. Harary

Well. Not only the price of film, but also the product in general. And some of this is volume driven. We’re talking about much larger volume vehicles and other efficiencies as well.

So if you look at where things went from the SLK to the SL there was a somewhat of a cost reduction and we said is paid stocking then for the second vehicle versus the first. And with a different licensees supplying the S-Class, you’ve also seen a reduction as well. So all this is good for new model introduction purposes.

Michael Kaye – Kaye Associates

That should be more attractive to potential OEMs and is that a result of Hitachi lowering the cost of the film or is it?

Joseph M. Harary

There is a combination of factors and I can’t go into all the different components because that’s our licensees business, but it’s not only to attract new OEMs because, but it’s not only to attract new OEMs because every OEM has vehicles in the platform category that could sustain our existing or our initial pricing.

But as the price comes down volumes go up and getting into higher volume cars that at each OEMs becomes more and more likely as the price comes down. So, all of those are good factors that also a fairly typical, when you look at most new technologies that are introduced into the automotive industry.

Michael Kaye – Kaye Associates

And as things are going due and said to anticipate a significant increase in the museum market and the museum products.

Seth Van Voorhees

We’re continuing to educate the market and it is a daunting task, it is a lot of different players in the market, but we think we have a product that is truly unique and offering a lot of value to them.

We are working on a couple of projects currently that are world renowned projects from leading institutions that we hope to announce shortly. So I think it’s a market that’s attractive and we’re continuing to expand it and it’s – the biggest challenge is our learning curve.

Joseph M. Harary

Right, the message is getting out because as Seth alluded to some very high profile institutions have seen the benefits of using SPD-SmartGlass in the VariGuard product and we’re happy about that. Anything we can do by the way to increase visibility is a good thing for every market not just the market that is the visibility is in. And we’re finding that there is a lot of cross fertilization among the markets. So this is all very good.

Michael Kaye – Kaye Associates

Okay. Thank you very much.

Joseph M. Harary

Thanks, Michael

Operator

And our next question comes from [Jeffrey Klement] (ph) an Investor. Please go ahead sir.

Unidentified Analyst

Thank you. Hi, Joe.

Joseph M. Harary

Hi, Jeff.

Unidentified Analyst

Can you tell us the new Magic Sky in the S-Class variants will be variant built-in or merely on/off like they’ve already introduced?

Joseph M. Harary

It depends on where the OEM deploys it and the roofs they seem to prefer just on/off and that’s really just a matter of simplicity and having driven in a number of cars both with variable, tent roofs using our technology in on/off.

I’m finding that very few users in the roof are using the variable tent function on that. But as you move to side and rearglass sort of or the sunvisor part of the car variable tent may become a lot more meaningful. And in areas aircraft, the variable tent is important. So you’ll see that being controllable whether something is simpler than knob or from your iPhone or iPad.

Unidentified Analyst

Okay. Interesting. Well. Thank you.

Joseph M. Harary

Thanks a lot, Jeff.

Operator

And our next question comes from Tom Mccarthy of Raymond James. Please go ahead sir.

Tom Mccarthy – Raymond James Financial, Inc.

Hi, there Joe. In addition to Vision Systems selling the sunvisor through aftermarket channels, what is the plan for OEMs? Are they going to try to sell it directly to car companies or will they be supplying it to companies like Pilkington and the other big class companies that are already suppliers?

Joseph M. Harary

There is a lot of different iterations that they are, it’s a great question. And the answer is, this is both for OEM and aftermarket. I think the innovation with the aftermarket is the fact that you can install it in a vehicle that doesn’t currently have the wiring or the design to accommodate in SPD sunvisor. And that’s something that – there’s some very innovative thought that has gone into that.

And it’s a good product in that respect. On the OEM side, there is two different variants, of course you can put it in place of the fall down sunvisors that is currently in a car. And that’s a perfectly good and relatively easy way of doing this. But, we’ve done test cars both internally and for other OEMs that have had the SPD Incorporated right into the windshield. And it’s a very cool effect and very sleek and elegant. So I can see that there is a lot of different ways to get this into the automotive OEM markets.

Tom Mccarthy – Raymond James Financial, Inc.

So, you’re not really answering the question. Do you perceive Vision Systems trying to sell it directly to the car companies, when they go through?

Joseph M. Harary

No I think in some cases, there will be other people involved with the direct sale to the OEM, and in some cases they will be selling it directly. Like right now, the test that they did was with an OEM manufacturer. So they obviously can go straight to the OEMs, but remember their business is not passenger cars. Their business is trucks, specialty vehicles, transit vehicles, aircraft, trains things like that.

So for them, going into the passenger car market they may want to partner with someone. And I must say that they are very amenable to the right kind of partnerships to deploy whatever product they have. They have entered into some partnerships in the marine market, they have entered into partnerships in the aircraft market, and I‘m sure this would be no exception that they would be entering into partnerships to increase the speed to market and the passenger car market.

Tom Mccarthy – Raymond James Financial, Inc.

If someone, besides Vision Systems was working on a sunvisor, would you be able to comment– would you be able to tell us.

Joseph M. Harary

There are more than just one licensee and one customer involved with the sunvisor product. So yes, there are others. It’s a natural use of the technology, I mean I’ve always – when I drive and I drive quite a lot, you turn into the sun and it would be great if something would block the sun instantly from blinding you. It would be safer and more comfortable and as I get older I value that more and more.

Tom Mccarthy – Raymond James Financial, Inc.

Are some of the developers of sunvisor that you are mentioning, are they among the leading suppliers of glass to the automotive industry?

Joseph M. Harary

I don’t want to comment specifically, because we have kind of a number of licensees racing to a finish line. So I’ve to leave that one as an unanswered question. I’m, sorry.

Tom Mccarthy – Raymond James Financial, Inc.

Okay. Thanks, Joe.

Joseph M. Harary

Thank you.

Operator

(Operator Instructions) Our next question comes from [Gerrard Albert] (ph), a private investor.

Please go ahead, Sir.

Unidentified Analyst

Hi Joe.

Joseph M. Harary

Hi, [Gerrard] (ph).

Unidentified Analyst

Hi, Joe. I know you can’t confirm anything about particular model. It’s more of a magnitude question, but in March there was reputable press about the E-Class using Magic Sky in the greenhouse and I am not asking you about the E-Class. What I’m going to ask you that is, if we were looking in about two years to be able to go into a car price it about the level of an E-Class or not much glass, would the price point at that point open it up to sort of mass application or architecture.

Joseph M. Harary

It depends on a couple of factors, but I mean the answer is it could. So we don’t roll that out at all. Part of it is, to have that much glass as you, I think I assume from your question would require lower pricing for car at the price point of the E-Class than exist for the SL and the SLK. We are already starting to see that with the S-Class coming out. And remember the only – the S-Class is not going to be only driver of price reduction or cost reduction in the automotive industry.

Matter of fact, Mercedes themselves welcomes competition coming involve now, they have their bragging rights about being the first with SPD-SmartGlass in serial production but they would love to put this in everything they could. So if the other automakers help them get to that point by putting it on their large volume production vehicles in a Mercedes has expressed to me specifically that there would be very pleased. One of the factors is what’s the take rate in S-Class and what are the introduction dates for some of the other OEMs.

Seth Van Voorhees

Joe, the only thing I would add is that as evidenced by the S-Class the number one factor, that we’ll enable the overall cost to go down is volume. And we are seeing that with the S-Class which has substantially more volume potential than both the SLK and SL combined, and the E-Class would be three times the volume of the S-Class. So it would be talking about substantially more volume than the all three car platforms today combined.

So that would greatly create the opportunity to reduce cost to enable you to be at a price point that you could have a larger glass system on a price point with the E-Class. So I definitely see that is being a possible and a likely scenario.

Unidentified Analyst

Thank you.

Joseph M. Harary

Thanks a lot.

Operator

And our next question comes from [Mr. Steven Almarker] (ph) a private investor. Please go ahead, sir.

Unidentified Analyst

Good afternoon, Joe.

Joseph M. Harary

Hi, how are you?

Unidentified Analyst

Good. How are you?

Joseph M. Harary

I’m great.

Unidentified Analyst

I’m sitting here in 82 degrees and just loving it, so a good day for the call?

Joseph M. Harary

You need Magic Sky Control in your car.

Unidentified Analyst

Absolutely. My question is, a while back the Saleen Mustang unveiled their Rough and it appears to be not our product?

Joseph M. Harary

It’s a liquid crystal product. What they are going to find is probably a greenhouse effect, where it builds up heat inside the vehicle, but it is what it is.

Unidentified Analyst

I guess my question would be was that choice made by Steve Saleen or was it something to do with Ford?

Joseph M. Harary

I don’t think, it had anything to do with Ford.

Unidentified Analyst

Okay, great.

Joseph M. Harary

It could that there were just trying to get a product out with what they thought would be a good technology. We’ve seen liquid crystal in cars before even Mercedes added in the Maybach years-ago. I don’t really understand why you would put in the roof of a car, because it doesn’t block light and it doesn’t block heat and it creates a greenhouse effect which is probably the reason whey Mercedes went from liquid crystal to SPD. Everybody is developing a product and some people learn faster than others.

Unidentified Analyst

Okay, I was just wondering if we were, that we missed the boat on matter or we didn’t even get asked?

Seth Van Voorhees

Yes, I mean it’s not a high volume boat to go after when what we are doing, I think is a lot more main stream, but it’s always nice even with Saleen, but known as a good innovator. There are the ones that came up with the all glass roof on the Mustang, Ford liked it so much that they adapted it in original production.

Unidentified Analyst

Okay, well, let’s hope they get enough complaints where they start looking at us so?

Joseph M. Harary

Yes, it’s just a matter of time I think.

Unidentified Analyst

Okay, that’s all thanks a lot. Have a good day.

Seth Van Voorhees

Have fun.

Joseph M. Harary

Okay I thought, what I do is maybe – since I don’t think there is anymore questions in the queue. I just wanted to conclude with a couple of remarks. When someone makes a large investment in a company like ours, I think that this give us a reason to reflect upon why we all too have invested in Research Frontiers.

Speaking personally, I think we all believe in the technology and its benefits. For me personally, there is also because we are creating a new and growing industry for SmartGlass products something that didn’t exist before. And these products also have a lot of benefits.

They make people safer and more comfortable and save energy. They preserve views and they are really cool. And they are transforming the product SKUs in these various industries that are so diverse such as automotive, aircraft, marine, architectural and now even museums, and you are seeing this happening before you. One way perhaps to understand the value of the company that you own is to look at the investments being made by others.

First, let’s look at the investments being made by third parties and competitive companies. Hundreds of millions of dollars are being spend, which is far in excess of our market value in these other companies. And these investments are being made in companies and technologies that are only addressing a fraction of the market that Research Frontiers and our licenses are addressing.

Also, keep in mind these are not public companies, so valuation is not exactly a science but more of an art, and what’s somebody is willing to pay and what they are believing is going to happen.

Unlike our competitors however, we don’t need large amounts of money being invested in us because of our licensing business model. And the capital expenditures that are being made by our licensees such as Vision Systems with their new factory in Melbourne, Florida, or Hitachi’s dedicated us SPD film product line in Ibaraki, Japan and other licensees that are making substantial investments in their SPD related businesses.

Also, to understand the value of what you have invested in, it’s also I think, useful to look at direct investments being made by sophisticated investors such as Kevin Douglas and Goldman Capital and others. Our institutional ownership has drawn as our company and our technology has matured. And increased institutional ownership is just one bellwether to look at. And they usually before deploying their capital and making their investment, institutional investors already understand what they are investing in and what the time periods are for success.

So if you’ve seen increased ownership by those institutional investors and Kevin Douglas has increased investment in our company is one example of this. He should have a pretty good idea that things are going well, and we are on course towards great success. Our pace is accelerating.

The S-Class is hitting showrooms in the next few months. This is the significant call for us in terms of direct revenues and these revenues are permitted or not yet even included in our results of operations. And it also significant in terms of visibility and also business development for other car models both within Mercedes and with other OEMs.

Our licensees SPD products are being very well received in the various industries that they are being used in. Mercedes corporate loves Magic Sky Control, their customers love it, the automotive press loves it. And there are no reported complaints from Mercedes, even with thousands and thousands of vehicles on the road for years with Magic Sky Control. Because of this we’re quite optimistic about the deployment of our technology in the future in other areas as well.

We’re also standard equipment on the new HondaJet and also on the Falcon 5X skylight by Dassault. There are other major developments in aircraft that we’re expecting to be coming as well.

Our licensee base is expanding. This growing number of licensees indicates that there is a growing interest that is broadening in SPD technology throughout various industries, and as I mentioned before, growing resources being devoted towards the production, sale and marketing of SPD-Smart products.

The number of automotive and aircraft OEMs adopting our technology is growing. And as our business grows with the support of our licensees, our investors and the many people around the world that are licensees and are customers that are working everyday to produce and sell SPD-SmartGlass products, the value of your investment in Research Frontiers should also grow.

I want to take this opportunity to thank everyone for their support and for participating in today’s conference call. And I look forward to seeing many of you at our June 12 Annual Meeting of Stockholders. Thank you very much.

Operator

The conference has now concluded. Thank you for attending today’s presentation.

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