Research Frontiers' (REFR) CEO Joseph Harary on Q3 2017 Results - Earnings Call Transcript

Research Frontiers Incorporated (NASDAQ:REFR) Q3 2017 Earnings Conference Call November 2, 2017 4:30 PM ET

Executives

Joseph Harary - President and CEO

Seth Van Voorhees - VP, Business Development, Head, VariGuard Division and CFO

Analysts

Ishfaque Faruk - WestPark Capital

Jared Albert - Private Investor

Jeff Harvey - Private Investor

Michael Kay - Kay Associates

Alan Denzer - Private Investor

John Nelson - Private Investor

Alan Yakuboff - Wells Fargo Advisors

Operator

Good afternoon, ladies and gentlemen. Welcome to Research Frontiers Investor Conference Call to discuss the Third Quarter of 2017 Results and Recent Developments. During today's presentation, all parties will be in a listen-only mode. [Operator Instructions]

This conference is being recorded today. A replay of the 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 afterwards, in order to answer more questions of general interest to shareholders on this call. [Operator Instructions] Also we ask that you keep your question brief in the interest of time.

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 Harary

Thank you, Rocco and good afternoon, everyone. Joining me is Seth Van Voorhees our Chief Financial Officer. In our last conference call for investors in March, May and August we outlined our clear strategy for growing revenues. Continue to develop new licensees, continue to grow each of five markets that our technology is used in, develop new uses for SPD-SmartGlass technology and reduced the cost of our technology to the final customer.

This year we have worked hard to make progress in all of these areas and we will continue to have laser focus on this. The results speak for themselves. It was the second great quarter for us in a row and I'm sure that our shareholders were pleased to read the results that we just reported about 30 minutes ago. In our last conference call we reported a 42% increase in fee income for the second quarter of 2017 as compared to the year before. We also gave guidance that we expected higher fee income in the third quarter of this year. I'm happy to report that we once again showed significantly higher revenue growth in the third quarter of 2017, by all measures it was a good third quarter.

Fee income was up $140,157 or 40% from the second to the third quarter of this year and compared to last year. The increase in fee income was even more dramatic. Fee income was up $183,564 or 60% higher for the three months period ending September 30, 2017 as compared to the third quarter of last year. Year-to-date for the first nine months fee income was up $271,294 or 28% higher than the same period in 2016. The increase in fee income from both the three-month and nine-month periods [ph] was principally the result of higher revenues from licensees in the aircraft, architectural, automotive and marine sectors as well as revenue from a new licensee focused on the transparent display sector.

Let's talk about expenses. For each of those three quarters this year, we reported lower expenses than the prior quarter. Over the first nine months of 2017, we reduced expenses by $857,756 or over 22% reduction from the same period in 2016. And this was already off of lower expenses in 2016 that were $826,000 lower than in 2015.

Let's talk about capital resources. As of September 30, we had cash and cash equivalents of about $2.2 million and working capital of about $2.6 million. Our projected burn rate for the next 12 months is approximately $400,000 per quarter. As we noted in our third quarter financials, we expect to have sufficient working capital for at least the next 12 to 15 months of operations. And this will last us even longer with higher revenues, continued cost reductions and collection of additional receivables. So, we've made good progress of reducing our cash burn without comprising operating results.

I've been asked if we will raise additional capital through the stock option as noted we have sufficient capital to last us for at least the next 12 to 15 months. However, we've never had trouble raising cash when we needed it and we may consider it, it would accelerate our growth or cost reduction initiatives. We also wanted the market to see the positive results of operations especially our strong sequential quarterly revenue growth.

To summarize, expenses have been lowered in each of the first three quarters of 2017 and revenues were up over 40% from the second to the third quarter and over 60% in the most recently reported third quarter compare to the third quarter of last year. So, our business is improving nicely, and we've reduced expenses while growing revenues. Now let's talk about what to expect if we continue to move forward with our plan.

A key strategy for us is to bring cost down and enter into agreements with new licensees and enter into new markets. On October 11, 2017 we've licensed Tel Aviv-based material sciences company Gauzy Ltd. This is a broad license for Gauzy to develop, produce and sell products in components using our SPD-Smart light-control technology. Gauzy is already is the leader in making PDLC or Polymer dispersed liquid crystals film. This is mostly used for privacy and image projection, they make an excellent product. SPD technology now allows Gauzy to expand their already growing revenues with a shading product.

Most market experts agree that the shading market on the outside of buildings can be an order of magnitude bigger than the privacy glass market for interiors that PDLC is used in. Gauzy is a focused and aggressive company with their PDLC technology used in architectural projects in hotels, buildings and hospitals. Gauzy also has been established in growing network of over 50 certified glass laminators worldwide. This brings additional synergies, infrastructure and growth opportunities for both of us because these companies have already been trained and certified in working with Gauzy's PDLC film product they should have the ability and experience to quickly incorporate SPD-Smart technology which is also a film based technology with similar handling, lamination and other fabrication characteristics.

There are clean and significant synergies not only between our two technologies but also between our two companies, our businesses and our customers. One shareholder asked me how we learned of Gauzy's existence. Well we of course monitor business activity and other developments in our industry, so we knew of Gauzy from many years, but they approached us in December and we liked what we saw. I visited their growing facility in Israel and a number of people from Gauzy have visited our facility here in Woodbury. We're quite pleased to be working together with them. Our work with Gauzy has the ability to benefit the entire SPD industry and help us achieve our stated objectives. I think that these benefits to us and to the entire SPD industry will become apparent in a short period of time.

Now let's move on to the automotive market. In the third quarter, AGC achieved a record number of S-Class sedan roofs since inception. I've had the chance now to sit in the front and back of the new S-Class sedan and I can tell you, it is magnificent to see that much SPD-SmartGlass from the front to the back of the car. And both front and rear passengers can now control their Magic Sky Control Roofs. I've been asked about the status of second automotive OEM to use SPD-SmartGlass. Our licensee involved with this project for the OEM says that it is still active, but can I give us more details on the timing. Often details like which car has smart glasses introduced on when it is announced depends on many factors. Some of these factors are unrelated to us and depend more on when the car itself is being introduced which markets it will be targeted for and what cars it competes with and when they're coming out.

Some things do however depend on us and our licensees. However, it's no longer a question of supply chain logistics or performance. The work we've been doing and the growing business with Mercedes shows that we have a very robust supply chain and that our technology is highly reliable and durability. Often it comes down to a matter of cost to the OEM and the cost to the customer. As I mentioned earlier we've made and continue to make significant progress in the cost reduction area to make our technology on their vehicles even more profitable to auto makers. New car manufacturers are becoming more and more active with our technology and even in the short period of time between our last conference call and this one, both new and existing car companies that we've been working with have also moved things forward. In a few weeks I'll be in Europe presenting the benefits and results of having tens and thousands of cars with SPD-SmartGlass on the road for years to the CTI automotive glazing conference in Dusseldorf.

Of course, I will be talking about the ability of SPD-SmartGlass to reduce the temperate inside the vehicle by 18 degrees according to Mercedes test. This can reduce the size of air conditioning compressors by up to 40%, it could also increase the driving range of electric vehicles by up to 5.5%. I recently read an automotive industry analysis that nine out of the 11 major automakers in the world will not be able to comply with that applicable emission standards and with most of them abandoning diesel engines which was their original approach to compliance with these regulations there was a growing need for alternative ways to comply with these emission standards. When you consider that continental automotives independent calculations indicate that SPD-SmartGlass save four kilogram per kilometers of CO2 emissions.

Under the current regulatory climate, at a €90 per gram penalty to the OEMs by the regulators, this penalty can result in a €360 penalty per car, that's about $420 per car and our glass can avoid those penalties. So, you can be sure I will be talking about that too at the upcoming conference in Germany. Big players such as the three largest glass companies in the world and the fifth largest automotive component supplier as well as Mercedes certainly help develop business for our licensees. Now we're also seeing even large players in other areas besides glass such as electronics and other peripheral areas seeing the potential opportunities to be part of the SPD-SmartGlass industry and getting involved because of us especially in the automotive industry. And when these giant companies come together, magic happens.

Other major players are getting involved in other industries as well. In May, our licensee Vision Systems and PPG join forces to offer SPG-Smart EDWs to the aircraft industry. This is a powerful combination that is already resulted in a new aircraft. The Eclipse 700 jet using SPD. Fee income from Textron's King Air as well as the HondaJet is also up this quarter from last quarter.

Now moving to other markets. Revenue from the train market and marine market are also up this quarter as compared to last quarter. As many of you know, SPD technology is not only being used in custom yachts but in high end production yachts as well, such as the Mercedes Silver Arrow Marine yacht. Other major yacht makers are coming onboard too. In a prior conference call, we spoke about the Shiki-shima luxury train project that Asahi Glass One [ph] for supplying SPD windows. This train is fully in service and is quite popular and is sold out at least through the middle of next year.

I'm pleased to report that since our last conference call in August. The CEO of our licensees announced a new train project for a different customer in Japan that they had just won. It is to supply a large number of SPD-SmartGlass windows for the first and business class sections for a number of special addition bullet trains for the 2020 Tokyo Olympics.

Now moving from our core markets and businesses I've been asked to provide in update on our patent litigation. As many of you know we are suing, E Ink, Amazon, Sony and Barnes & Noble for patent infringement. Based upon our confidence in what the case law says, we decided to take an immediate appeal to the federal circuit court for certain interpretations of our patent by the Delaware District Court. Both we and E Ink have filed our breach with the federal circuit formal [ph] arguments in the case before a panel of appellate judges in the federal circuit court are scheduled for December 7 in Washington. We're quite confident in our position and so is our outside legal team which is now handling this case on a fully contingency basis.

We received by email before this call questions from investors and we addressed many of the general topics in the presentation today. I'm going through some of the ones that were emailed though. Jared Albert asked Boeing recently treated that their new 777x will offer customers a variety of options to choose from including dimmable windows or windows shades, can you comment on this? Is it an OEM option or aftermarket? Well Jared nothing official has been mentioned about this by Boeing and that indicates to us that many of the details about this are most probably still being decided including which technology to use and whether it will be an OEM, or an aftermarket installed item. However, if it for the aftermarket SPD is the only technology that can be upgraded in the aftermarket, by the airlines themselves.

Dave Paradiso [ph] asked for an update on the status of our investment in the Zuli Smartplug. Recently some very large well-known companies took an interest in Zuli's patented Presence Check technology however it's too soon to make any predictions and Presence Check maybe a little bit ahead of its time. In the meantime, we've setup systems using our SPD-SmartGlass with other more basic Smartplugs and it also works well with them. Our SPD-SmartGlass also works well with the popular Alexa system from Amazon and if you come to our offices you can now talk to your Smart windows.

We also received the number of questions about Panasonic use of our SPD-Smart technology in their transparent screen system. People have noted the real visual performance advantages that the Panasonic transparent screen has over conventional PDLC projection systems. The performance is clearer brighter with higher contrast and that is indeed why they're using our technology. It also opens up some very large potential markets in the retail environment and for various types of outdoor signage. It also makes interactive museum and industrial exhibits and tours more interesting.

The Panasonic transparent screen product launched in Asia this year and they're gearing up to the North American rollout of this in a few months. Another shareholder asked me if some of the other consumer electronics companies have also expressed an interest in this and the answer is yes. Anyways, I think by the time that the Tokyo Olympics comes around in 2020 people will be traveling to the Olympics on SPD equipped bullet trains and watching content at the Olympics on large screens using SPD-Smart technology.

Another question we got was about a partnership between VINCI Construction and Sunpartner and their Horizon, a smart window. Question is, is this SPD and something actually in the works? Well, Sunpartner has worked with both SPD and Electrochromic Technologies. They're working to scale up the size of the transparent photovoltaic panels at Sunpartner to achieve architectural sizes. The Sunpartner's system works quite well with SPD and it is part of the Vision System's Energia self-powered airplane window that's currently being offered to the industry that window actually generally 20 times more power than the SPD component uses which allows Vision Systems to include a cell phone USB charging plug inside the window. I can't speak for whether it works for Electrochromic as good as it does for SPD. While Electrochromic uses higher current than we do, and I really can't get too excited about a window that can take 40 minutes of switch from clear to dark does it in a blotchy way and is limited range of light transmission. I guess if they ever make a large enough window using Electrochromic glass they will see this for themselves.

I've combined and included many other questions that we received by email prior to this call. If we haven't fully answered any questions either in our presentation today for the live Q&A that's coming up now. Please feel free to call or email us. I'll now ask our operator Rocco to open up the conference to any additional questions. People participating today might have that we haven't already covered.

Question-and-Answer Session

Operator

[Operator Instructions] and it appears today's first question is from Ishfaque Faruk of WestPark Capital. Please go ahead, sir.

Ishfaque Faruk

Good afternoon, Joe. Great quarter.

Joseph Harary

Hi, Ishfaque, how are you?

Ishfaque Faruk

Good.

Joseph Harary

Licensees and we worked hard.

Ishfaque Faruk

Yes. Speaking of licenses. Gauzy, could you give me a sense for like what you planned to do with Gauzy because it says that you've been working with them for the better part of 10 months.

Joseph Harary

Yes, we started the discussions in December with them. I visited their facility I wanted to get a sense of their capabilities especially whether their current PDLC technology would translate well over to our SPD and spoke to a number of their technical people and sure enough there is a very close match between our technologies which is very good because it should allow them to hit them the ground running and generate some near-term revenues. They're an aggressive company as I mentioned. They refer to themselves as a start-up, but they've been in business about eight or nine years. They have about 50 people working for them very talented group. Like I said earlier, there's a lot of synergies between our companies. I mean if you just take a look at they're certified laminators, they're strong in the architectural market. We're particularly strong in the automotive and the aircraft industries. So, our business is somewhat dovetail with each other in a nice way. And some of our licensees actually combined PDLC and SPD technology together for various product. So that's also a good thing for both of our businesses.

Ishfaque Faruk

Okay, following up on that. So, if they are a strong player in the architectural market. Do you expect more revenues from that vertical going forward?

Joseph Harary

Absolutely. I think that one of the nice things about this, it helps us achieve our objective in better penetration in the architectural market.

Ishfaque Faruk

What are your sense for the transparent display market right now?

Joseph Harary

So, it's a growing market. They've rolled it out successfully in Asia prior to even announcing it. We allowed Panasonic to do a market test in certain areas of Asia and that was well received. So that was the first proof point that the market was good. Then they've had a strong presence at the last Consumer Electronics Show with all sorts of outdoor display applications at Panasonic. You could see that it's clearly the focus of the company because virtually the entire and quite expensive CES Exhibition that Panasonic did surrounded outdoor displays and when you consider that Panasonic is a Japanese company that probably is going to have an extremely strong presence in the 2020 Tokyo Olympics I wouldn't be surprised if you didn't see the market grow nicely between now and 2020, then have these transparent screens all over the place during the Olympics. So, over the next couple of years I expect really, really good growth in that market and as I mentioned earlier. They're not the only consumer electronics company that is recognized that marrying PDLC and SPD technology can result in a much better projection system.

Ishfaque Faruk

Okay, great. Okay and my last question. In terms of the additional OEM announcement. Do you have some additional visibility in terms of when you can reveal that company?

Joseph Harary

No like - as I mentioned earlier. The project is still alive of course, but we get very little details from the licensee at this point. We gave our support early on for that project. Now the ball is really in their court and anything we can do to help reduce cost in the automotive market. We'll certainly not only increase penetration on the existing models that are targeting our technology but also speed up the introduction of new models. So, the take rate should be higher, the lower the cost because the product becomes more profitable to the OEM and as we get into that profitable sweet spot, more and more OEMs would be adopting this. In the past I've used the analogy of aluminum alloy wheels and why they're on every car as an option, whether you order them or not it's because the car makers make quite a bit money on that and our goal is to be as profitable as they aluminum alloy wheels.

Ishfaque Faruk

All right, thank you. Congrats Joe once again for a wonderful quarter.

Joseph Harary

Thanks a lot, Ishfaque.

Operator

And ladies and gentlemen, our next question comes from Jared Albert, Private Investor. Please go ahead.

Jared Albert

Hi, Joe?

Joseph Harary

Hi, Jared. How are you? Thanks for the questions you sent in.

Jared Albert

Yes, thanks for getting [ph] so many of them. I'm looking at the fee income and I'm thinking back to those heavy days when you just started, and the numbers were a little bit better. Obviously, the spread was worse in the sense it was kind of one contributor. Are these numbers - these numbers are actually cleaner after the internal controls you guys institute. I'm wondering how these numbers can fair to those days thing about like 1Q '13 was a little over $700,000 clean reserves if you go little under $500,000 but maybe the numbers are just that much cleaner because there was a $1.5 million bad debt that accrued.

Joseph Harary

Well I think also the thing that you have to keep in mind, it's not the matter of the numbers being cleaner as much as the nature of our businesses from time-to-time there's going to be non-recurring revenues, for example the World's Fair project was a big architectural project that led to hire numbers in that year. So, when you back out things and we've now start. I guess when you say cleaner we're talking more about economic activity by our license fees that is recurring. Yes, I think we're at a lot more steady state right now. So yes, I agree.

Jared Albert

Do you expect next quarter without the refresh in the - you said the AGC needed more bus windows.

Joseph Harary

Yes, this was a record quarter for them and what they've told us qualitatively not quantitatively is that they expect growing revenues in this market going forward. So, while I don't know exactly what they're going to report, they're expecting higher revenues in the fourth quarter and beyond.

Jared Albert

Okay. Is there any update on the cruise ship? I remember they've testing those windows, is it a cost issue or something like that?

Joseph Harary

Not so much a cost issue, I think that the initial tests that were done on the high seas went very well and the reaction was very, very good and now it's a matter of deciding how you're going to deploy it and which cruise ships you're going to put it in. and Vision System is the licensee in that area.

Jared Albert

Okay and does Fokker have a launch customer. I see that you've put the option for the 737 in this and A320 on there, I guess I would call it web store but it's obviously B2B. It's a large thing they've got there.

Joseph Harary

They run this online marketplace Jared, what you're referring to is I think there's 31 different aircraft now that are being listed on that website as offering SPD, is actually Fokker element which is their name for their SPD-EGW and that's mostly for the aftermarket. As far as the launch customers I can't really comment on that until they do it.

Jared Albert

Okay. All right. One last question?

Joseph Harary

It's quite exciting to see such a large list of aircraft there.

Jared Albert

No, its point to having mechanical seats lifted for the 787.

Joseph Harary

Some people don't like the 787 windows that exist right now, which is an opportunity.

Jared Albert

I've read lot bad reviews about just getting very hot and the sun looks like - whole that kind of thing, but.

Joseph Harary

By the way next time you're on one, looks for what I call the doughnut hole effect. Because electrochromic technology switches unevenly what you see happening is, the outer part of the window is darker than the inner part for a couple of minutes, so it creates these doughnut holes that appear in every one of the windows. Maybe it's a great advertisement for Dunkin' Donuts but not for the Dreamliner.

Jared Albert

Hopefully the 777x goes with SPD or will be shame to see Gentech's [ph] get that one too. One last question which is, if you get TFT size pixel, not necessarily an IPS but a TFC. Is SPD addressable at a TFC level?

Joseph Harary

Yes. We've actually developed display at TFC size resolution.

Jared Albert

If you wanted to achieve extremely dark blacks, you could do it with let's say a pair of IPS cleans and then an SPD layer at the back of it. Is it fast enough for that kind of thing or?

Joseph Harary

It's not fast enough for video speed yet. The particles themselves inherently switch fast enough, but the polymers they're suspended in will slow them down. That's why it takes roughly two seconds to switch in a film. The particles themselves will switch in nanoseconds.

Jared Albert

Those [indiscernible] or can they do it with the PDLC equipment?

Joseph Harary

Well they've a whole series of resources available to them.

Jared Albert

None of their stores need anything special, they can just count on [indiscernible] these people ask.

Joseph Harary

Yes, that we could determine. One of the nice things also that they've done for their certified laminators which I think will help our product is they've developed testing stations and when their customers, when their laminators laminate the product and sell it themselves they can get a warranty from Gauzy because if it passes the testing station certification that data is broadcasted into the cloud and helps Gauzy and they can track things and provide warranties and stuff like that. So, it's really, I think well thought out system that they've developed for the architectural market and they're certified laminators which are lot like our licensees are very well trained.

Operator

And our next question today comes from Jeff Harvey, a Private Investor please go ahead.

Jeff Harvey

Just a couple of questions. I guess I was under the impression in the last conference that you did expect to announce the second OEM before the end of this year, has that changed or did I just misunderstand that?

Joseph Harary

I think you misunderstood. What we've said consistently is we don't know when the automaker is going announce this. So, we know some details about the project like production and stuff like that, we don't know all of the details about it and we don't know what the marketing guys are going to do with the vehicle and when they're going to launch it. That's basically the situation with that.

Jeff Harvey

And then regarding the cost reduction. A lot of the cost reduction you're not in control of, it's obviously related to film manufacturers, realistically do you have a number in mind that percentage wise that you can reduce the cost more and is that number then, is there a certain reduction that hopefully then would bring on more automotive manufacturers that because they would see that makes sense then.

Joseph Harary

Yes, so that's an excellent question. We know the specific target that Mercedes has given us which I believe is quite feasible to achieve, some of it comes from the filming, some of it comes from the fabrication end. And licensees like AGC have been working hard to get their cost down as well. So, there is number we know what it is, and we think it's seasonable.

Jeff Harvey

Okay and if you got that number, do you think the other manufacturers then wouldn't come on board faster I mean, I would presume that would be very helpful.

Joseph Harary

Right, that number puts us in that sweet spot that similar to the aluminum alloy wheels that I've been talking about.

Jeff Harvey

Okay, great. Thanks very much.

Joseph Harary

Thanks a lot.

Operator

And our next question today comes from Jonathan Blum of WestPark Capital. Please go ahead. I do apologize listeners. We're getting some feedback from Mr. Blum's line. So, I'm going to next questioners. And our next question today is Michael Kay of Kay Associates. Please go ahead.

Michael Kay

Hello, gentlemen, it's nice to see you. Much better numbers compared to previous quarter.

Joseph Harary

Yes 40% quarter-over-quarter and 60% year-over-year, ain't bad.

Michael Kay

Well the thing is, if it could be sustained and also if there could be sustainable increases in the percentage of increase I think that's the key to profitability. Just a few short.

Joseph Harary

Agreed.

Michael Kay

When do you think the sun visors would come out on the market that Vision System has been developing is that at a near term?

Joseph Harary

Well some of the sun visor products are currently being offered like the ones for aircraft industry and I think because that's their main focus, that's what they're cutting their teeth on, but it's not a big stretch to get into the automotive market from there and they do have a presence in the transit market as well, so all that bodes well. A lot of times though the sun visors are being built inside the windshield itself which obviates the need for the aftermarket item.

Michael Kay

And looking at Gauzy's website I'm very enthused perceiving that they're not a household name it seems that I [indiscernible] is it possible they could actually have the wearable to make some film or to laminate because it seems they're heavy in terms of the equipment and manufacturing aspect, so is that possible. And that would result in what competition with current film makers or laminators?

Joseph Harary

Well I have to very honest with you. Their equipment is very well suited for our technology and every one of our license agreements whether it's Gauzy or any of the other companies allows the licensee to make their own film if they wanted to. So, if there was, so the fact that they have the equipment is certainly helpful, if they wanted to do that.

Michael Kay

And it will be easier working with them because being a much smaller company, there's less of hierarchy that would have to - one would have to go through for decisions to be made, would that be true because they're kind of [indiscernible] company.

Joseph Harary

There's a lot of benefits to working with them and like I said near term I think the industry will begin to see that.

Michael Kay

Okay. Hopefully the longer waited inflection point that's been reached.

Joseph Harary

Yes. Thank you.

Operator

And ladies and gentlemen, our next question comes from Alan Denzer, Private Investor. Please go ahead.

Alan Denzer

My question is for Seth. I would like to know, if there was any claw back in this most recent quarter's earnings or whether you expect any if there was or wasn't in the ensuing quarter, claw back from back debt collection, please?

Seth Van Voorhees

Sure. We talked about several times this year. We've instituted an aggressive receivable monetization policy and that includes approaching licensees that have all this money historically. As far as in this past quarter there was one licensee actually was a former licensee that we had a monetary recovery from them, that has the effect of not increasing revenue but reducing the bad debt or charge associated with previously booked revenues. We have had some recoveries from existing licensees in which we amend their license agreement on a going forward basis and those were included in our current fee income for this. So, it really would depend on the specific licensee, but I would say most of the fee income that you're seeing today that we reported today are from existing licensees that have no receivable history associated with them.

Alan Denzer

And our next question today comes from George Hanko [ph], Private Investor. Please go ahead.

Unidentified Analyst

Well my question has been answered. I thought I cancelled the request.

Joseph Harary

It's nice hearing from you anyway, George.

Unidentified Analyst

Okay it was on the second supplier area. Does Avery Dennison also meet the qualifications of being a potential producer?

Joseph Harary

Avery Dennison is a licensee of ours for the display application and as I mentioned any licensee can make their own film if they want to under their license agreements. You may be referring to the fact that Avery Dennison also invested in Gauzy and that's through their acquisition of Hanita Coatings which is a very well respected high-tech Israeli coating company.

Unidentified Analyst

Okay, that's - and it's basically covered. Thank you very much.

Joseph Harary

Thanks a lot. Thank you.

Operator

And our next question today comes from Art Brady [ph], Private Investor please go ahead.

Unidentified Analyst

Hi, Joe. I'm wondering if there's any indication on Fisker if they like the shipping products, assuming their units maybe this year or early next year.

Joseph Harary

I think they're going to start doing that very soon. You're talking about the EMotion vehicle that use SPD [ph] in the roof and the side glass.

Unidentified Analyst

Right. Any indications on the timeline?

Joseph Harary

It's not out yet and they have a kind of ramp up plan for that, so I think we have to just let them kind of speak to when their car is coming out.

Unidentified Analyst

Do you know also about Gauzy, if they're coming out with a comparable electronic signage similar to what Panasonic has been producing?

Joseph Harary

They're very strong in the projection system market. They've developed kind of unique formulations for PDLC that improves the visual appearance of it, when its projected. Certainly, this is a natural for them to combine the two just like Panasonic did because the optics speaks for themselves.

Unidentified Analyst

Okay thank you.

Operator

And our next question comes from John Nelson, a Private Investor. Please go ahead.

John Nelson

Congratulations on a great quarter as far as [indiscernible] some excellent progress on moving the products forward.

Joseph Harary

Thanks.

John Nelson

Couple questions. Are there any initiatives that you have regarding the RV camper, luxury bus markets?

Joseph Harary

I'm sorry can you repeat that?

John Nelson

Are there any initiatives on for the RV camper or luxury bus market.

Joseph Harary

Yes absolutely. Vision Systems is the current licensee that I would say the strongest in that market. Also, we have other industry interest as well and there you know it's a natural because RVs aren't cheap, it's very cumbersome to put shades, venetian blinds and things in them because they rattle, and they get dusty and certainly the seller control issue is a very important as well.

John Nelson

Okay and then I think it kind of might be useful for all the shareholders me included too. Just for a view in general the scope of the lawsuits against Amazon and others.

Joseph Harary

Right. I've touched on it briefly we've all [ph] arguments coming up on December 7. Basically, there's quite a bit we believe of infringing product sales that have occurred over the last number of years and it's up to a court to decide whether what they did it infringes on the claims in our patents and what the damages are, but we're very confident about that and it could be a significant number.

John Nelson

And have you had any in the past, you've had any companies have infringed on your law suits settled with you before going to court?

Joseph Harary

No. well we've never sued anyone for patent infringement.

John Nelson

You haven't okay. All right.

Joseph Harary

No this is the one and only patent infringement suit and we didn't take it lightly, it's a big step to bring this kind of suit but we're pretty confident that we have something there.

John Nelson

Okay, very good and then are there any military possibilities, whether it's [indiscernible] vehicle ground forces for SPD that is, have you had any initiatives in that area?

Joseph Harary

Well actually two of our licensees are pretty strong in the bullet resistant glass market [indiscernible] and AGP and to the extent and they also do military aircraft and other kind of things like cockpit canopies. So, there is a number of things that can carry in that market. It's not a market we specifically target. Our licensees usually have a presence in those areas and that's kind of where the licenses broad enough to cover both civilian and military. Add a note on that point, is VariGuard has sold panels to an entity of the Canadian Government to protect one of their founding documents in which they were concerned about light damage as VariGuard focuses on, but they also were concerned about impact and the protection of the document from theft. So, in fact they combined both SPD film with bullet resistant or impact resistant glass to achieve both ends.

John Nelson

Okay, thank you very much.

Operator

And our next question today comes from Elliot Foyer [ph] another Private Investor. Please go ahead.

Unidentified Analyst

Seth, this is for you. Can you put a number on revenues recognized this quarter that were associated with receivables from prior quarters?

Seth Van Voorhees

Well no you couldn't break it out that way, the revenues that we recorded in the third quarter were strictly from the existing license agreements that are active today. So, they are fully active license agreements there was no fee income from former licensees that we had a monetary recovery from.

Unidentified Analyst

Okay, you made it sound like you may have created a new arrangement with these existing licensees and that you recognized some revenue that was due to you in the past in this quarter. Is that the right way to look at it though.

Seth Van Voorhees

Well from time to time, licensees are going to approach us to amend their license agreement so that they expand from a regional focus to a global focus or from a specific industry to broader set of industries and when that happens of course we change terms of those license agreements and that would be reflected on a going forward basis on the fee income, that's what I was trying to suggest.

Unidentified Analyst

Okay, thank you.

Operator

And our next question today comes from [indiscernible] a Private Investor, please go ahead.

Unidentified Analyst

And the patent litigation that's going on. Are the defendants contesting the validity of the patents they had issued?

Joseph Harary

They're trying every defense out there from validity to non-infringement to lack of damages. The validity of the patents though were upheld by the Patent trademark and Appeals Board so I'm not all that concerned about that. where the rub is coming down Ralph [ph] what did the words in the patents mean, not whether the patents [indiscernible] and because we're pretty confident that our interpretation is the correct one of what the patent claims are, that's what we're focusing on. I'm not really at all concerned about things like validity or the other defences it's really just did what they do, squarely fall within the claims of our patents and if they did, what are the damages?

Unidentified Analyst

Yes, okay that was it. Thank you.

Operator

And our next question today comes from Alan Yakuboff of Wells Fargo. Please go ahead.

Alan Yakuboff

Just regarding the cash burn and the potential cap rates, if it comes to that. How dependent is on a second OEM coming on board?

Joseph Harary

We don't have that projections factored into our 12 to 15-month number.

Alan Yakuboff

Okay.

Joseph Harary

What I said is, that's not assuming things like royalty collections and increased revenues, that's just kind of what's our burn rate which is about $400,000 per quarter and how much cash we have on hand which is $2.2 million as of the end of September.

Alan Yakuboff

And is there a timeframe for that second OEM. I mean a mid-max kind of timeframe. I mean can we expect something by the second quarter, next year. First quarter any time before now and then or is it.

Joseph Harary

Like I said I can't tell you when they're going to announce. But we do have a number of auto makers in the mix, so I will be surprised if we didn't have a lot of different things that are happening in that industry happened.

Alan Yakuboff

All right, well thank you very much have a good day and good luck in the future.

Joseph Harary

Thanks a lot, appreciated.

Operator

And our next question comes from Ronald [indiscernible] of Capital Securities. Please go ahead.

Unidentified Analyst

Really nice to see the improvement, congratulations.

Joseph Harary

Thank you, we all worked hard.

Unidentified Analyst

I know you have. I really just have one question and I know that you had mentioned that Mercedes had given you a number that would make them extremely happy. So, did they give you any.

Joseph Harary

And me extremely happy too. Ron, it made me extremely happy to do. So, it will be multiple of the current revenues, if we achieve this or when we achieve this.

Unidentified Analyst

So, I guess my question is this, did they give you any indications that they would expand into other models if you were able to make those numbers?

Joseph Harary

The plan always is that you increase the take rates on the existing models and you migrate into other models that are less expensive than the S-Class.

Unidentified Analyst

Okay, that's great. That's really the only question I had Joe. Thank you so much and congratulations.

Joseph Harary

Thanks a lot, Ron. I appreciate it.

Operator

And ladies and gentlemen, this concludes the question-and-answer session. I would turn the conference back over to Mr. Harary for any closing remarks.

Joseph Harary

All right. Thank you so much, Rocco. Well we try to outline kind of where we came from, what our strategy was to get there and where we're going. Our path to success is quite straightforward and the numbers that we just reported show that we're well on our way. There are three things that need to continue for us to be highly profitable and successful company. First and foremost is revenue growth. This quarter we had over 40% increase in revenues from the prior quarter and over 60% increase from last year. This increase came from all of our existing major markets. You should also see revenue growth from the emerging markets such as the Panasonic transparent screen product and other new markets that are being developed. So, revenue growth is certainly very important to our success going.

Internal cost reductions, why is this important? The lower our internal expenses the quicker we become cash flow positive and profitable and then the third key to success is cost reductions to the customer. Working with Gauzy and other initiatives that we have internally and with other licensees are major step towards achieving a more affordable technology product and this should allow us to expand into many new markets and new programs in automotive and architecture especially and these are the two largest uses of glass in the world.

This quarter shows a great start and we're moving in the right direction in all of these three areas. I thought I maybe cap it off by maybe responding to a question I often get about, why should I remain invested in Research Frontiers and I'm sure many of us wake up in the morning or sometimes in the middle of night asking that same question. And here's my personal answer and there's a number of reasons and I'll just list a number of them.

First, the investment in developing the technology is largely already been made. Now this is sunk cost. We've invested over $100 million to develop the market and to make SPD the most reliable and best performance smart window technology in the world. That's one factor. Another reason, our SPD-SmartGlass technology has already established its reliability, durability, performance and use by some of the major customers in the world such as Mercedes and many of you know, it's a very big deal to go from the lab and into the real world. We've done that, so lot of the risk is out, out of the stock.

We've licensed our technology to some of the best companies in the world, in their fields. Most of the world's auto glass production is already licensed by us. So, a robust and active supply chain exists for our SPD technology. It's not something that we have to develop moving forward. We have giant [indiscernible] rowing the boat with us. Mercedes, Continent Automotive, Panasonic, the top three glass companies in the world and many such as PPG they used to be firmly in our competitors' camp have switched over to us and many of their customers have too. So, I think that shows a very positive trend towards SPD technology.

All of the major markets have begun to show a good growth as this past quarters numbers illustrate. We've also reduced our internal cost significantly which along with our revenue growth brings us closer to profitability something we're all waiting for. Another reason, our initiative to expand into other major market such as architectural and our efforts to reduce the cost of the technology to the customer have made great progress not only are we out there, but we're out there and improving our technology. And we were showing results in all areas and doing much better in terms of sales and financial results than any other smart window company in the world. We're hunting elephants and we're succeeding.

We outline what it takes to be successful and this quarter you've seen the results of a lot of hard work and focus by us and by our licensees and that hard work and focus will continue and we look forward to what the future will bring to all of us. I thank you all for participating in today's call. If you're in a State where there is an election coming up on Tuesday, please vote. My wife is actually running for New York City Council and I'm going to be going home to watch her on a debate tonight on NY1. So, if anyone is in the New York area please tune in to see Rebecca Harary tonight.

Once again thanks everyone for your participation in today's call and look forward to continuing to deliver good news.

Operator

And thank you sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.