Research Frontiers (NASDAQ:REFR) held its second-quarter earnings conference call on Thursday. Below is the complete transcript from the call.
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Summary
Research Frontiers discussed the financial and operational impact of the restructuring of its principal SPD film manufacturer, Gauzy, highlighting that this was not a technology or customer issue but a supply chain disruption.
The company remains optimistic about the future, citing continued customer and licensee support, new license agreements, and ongoing development of new products, such as black SPD technology.
Research Frontiers outlined multiple contingency plans for ensuring SPD film supply, including potential new manufacturers and direct involvement in manufacturing if necessary.
Management addressed accounting conservatism in receivables related to Gauzy and discussed their approach to NASDAQ compliance, focusing on improving business performance rather than a reverse stock split.
The company highlighted the resilience of its technology and customer base, noting new opportunities and commitments despite the challenges faced in recent months.
Full Transcript
OPERATOR
Good afternoon, and welcome to the Research Frontiers investor conference call to discuss the second quarter of 2026 results of operations and recent developments. The company will be answering many of the questions that were emailed to it prior to this conference call and their presentation. In some cases, the company has responded directly to email questions prior to this call or will do so afterwards. There will be a live question-and-answer session after the company’s presentation.
Some statements today may contain forward-looking information identified by words such as “expect,” “anticipate,” and “forecast.” These reflect current beliefs, and actual results may differ materially from those expressed due to various risk factors, including those detailed in our SEC filings. Research Frontiers assumes no obligation to update or revise these statements. The call is being recorded and will be available for replay on Research Frontiers’ website at smartglass.com for the next 90 days.
I would now like to turn the conference over to Joe Harari, President and Chief Executive Officer of Research Frontiers. Please go ahead, sir.
Joseph M. Harary, CEO
Thank you, Paul, and good afternoon everyone. I’d like to welcome all of you to our second quarter 2026 investor conference call. And before I begin discussing the current quarter, I’d like to start by talking about our last conference call. Many of you have noticed that unlike virtually every other conference call we’ve held over the years, we did not have a live question and answer session. Some shareholders criticized that decision, and I understand why.
The reason wasn’t because we were trying to avoid questions. In fact, throughout our history, we’ve devoted an extraordinary amount of time to answering shareholder questions, not only during our conference calls, but also before and after them by email and telephone. And I estimate we’ve probably spent more time in open dialogue with shareholders than many companies our size. But the decision last quarter was driven by timing. At the time of our last conference call, there were significant court proceedings underway involving our principal licensee, Gauzy.
We believe it would have been inappropriate and potentially harmful to speculate publicly while those proceedings were still unfolding. Judges generally prefer that important matters be resolved in their courtroom rather than in the court of public opinion, and we believe the responsible course was to allow that legal process to move forward. Today the situation is much clearer than it was three months ago, and so, rather than simply reading mostly from a prepared script, I’d like this call to be more of a town hall meeting.
I’ll spend a few minutes discussing where we are today, what has happened over the past several quarters, and perhaps more importantly, what has not happened. Then I’d like to devote most of our remaining time to answering your questions. Out of respect to your fellow shareholders and so we can answer as many live questions as we can on this call, I ask that you try to keep your questions to those that are of general interest to shareholders. When I step back and look objectively at the past nine months, I think it’s important not to lose sight of the bigger picture.
We spent the last several quarters dealing with an extraordinary situation. But let’s be clear about what that situation actually was. And understanding this is important because it explains almost everything that has happened over the past nine months. It was not a technology problem. It was not a product problem. It was not a customer acceptance problem. It was not a competitive problem. It was fundamentally a supply chain disruption resulting from the financial restructuring of our principal SPD film manufacturer and licensee, Gauzy.
Everything that followed flowed from that one event. And making that distinction is important because it explains both the challenges we experienced and why we remain optimistic about the future. Sometimes companies and their investors become so focused on what did happen that they lose sight of what didn’t happen. We did not lose confidence in our technology. We did not lose our intellectual property. We did not lose our automotive qualifications.
We did not lose our development pipeline. We did not lose customer interest. And remarkably, we did not lose the major programs already underway. In fact, what impressed me most over the past nine months was the patience shown by our customers and the hard work by our licensees. These are sophisticated global companies with many alternatives available to them. Yet they remain committed to SPD. And that tells me something very important. They understand the unique performance advantages SPD technology provides, and they continue to believe those advantages are worth having and worth waiting for.
I think that patience is perhaps the strongest independent valuation of our technology that we could have asked for. Another proof point came from something that occurred during this very challenging period. We actually entered into a new license agreement with KLIM, a division of New York Stock Exchange listed company Polaris and a globally recognized leader in premium motorcycle equipment, to develop SPD applications for motorcycle helmet visors and sports goggles.
Think about what that says. During one of the most difficult periods in our industry’s recent history, another company carefully evaluated SPD technology, evaluated our intellectual property, evaluated the markets they wanted to serve, and decided that now is the right time to become a Research Frontiers licensee. Companies don’t make long term product development decisions based on technologies they don’t believe in. They do so because they see opportunity.
And that agreement wasn’t just another press release. It was another independent validation of where SPD technology is headed. Many people have asked what has management been doing during these past several quarters and the answer is simple. We haven’t been standing still while Gauzy worked through its restructuring. We continue to support them as well as moving the business forward. Development of black SPD technology continued. Another encouraging validation came from the CEO of LTI or AIT, the company that developed our retrofit product for the architectural market.
He not only remains enthusiastic about the opportunity for SPD retrofit products, but also personally participated in our February 8th friends and family financing. I believe that’s another indication that people who know this technology best and know our industry best continue to have confidence in where it’s all headed. Our retrofit product for the architectural market continued to advance and is well positioned to move forward as film production returns to normal, and we continue supporting automotive OEM programs.
We continue supporting aircraft programs. In fact, two major new programs were won during this period. We continue working with our licensees and customers around the world. We continue strengthening relationships with existing customers while adding new ones. And we continue managing our expenses carefully while preserving the financial flexibility necessary to position the company for future growth. In other words, we didn’t spend nine months waiting, we spent nine months preparing.
We spent nine months navigating through the challenges that Gauzy faced and helped them and their customers and their industries move forward. Some investors have asked why don’t we simply establish another SPD film manufacturer immediately? It’s a reasonable question and historically Research Frontiers has had only one commercial SPD film manufacturer at any given time. First Hitachi, then Gauzy. Producing automotive grade SPD film is not like purchasing an off the shelf commodity.
It requires years of development, substantial capital investment, highly specialized manufacturing expertise, and perhaps most importantly, consistent quality that automotive manufacturers demand. Could there be additional film manufacturers in the future? Certainly. But those decisions have to be made thoughtfully because consistency and quality are absolutely critical in the automotive industry. I’d also like to briefly address two accounting matters that a few shareholders had asked us about right before this call.
First, the reserve and going concern language relating to receivables associated with Gauzy and Vision Systems. Our accounting treatment reflects uncertainty regarding timing, not uncertainty about our expectation of ultimate collectability. And the test is you have to have auditable proof that you’re going to get paid within 12 months to count something. We believe these amounts will ultimately be collected in full. However, because the exact timing depends upon court supervised proceedings outside of our control, our auditors appropriately recommended that we take a conservative accounting approach.
We would not have to do that had the court indicated, for example, that on September 17th or 18th distributions will be made to creditors. In any event, this is prudent financial reporting and it should not be interpreted as a change in management’s confidence regarding ultimate collection. Second, regarding our NASDAQ listing compliance, our board and management are actively monitoring the situation. Our objective remains to regain compliance to improve business performance and improve market valuation.
We believe that’s the appropriate long term solution rather than something like a reverse stock split. And one thing I’ve learned over many years in this business is that technology companies are often tested not when everything is going well, but when unexpected events occur. Over the past nine months, I believe the entire SPD ecosystem has demonstrated remarkable resilience. Mercedes has continued supporting its existing SPD-equipped vehicles. Programs with Ferrari remain intact.
Programs with Cadillac remain intact. Programs with McLaren remain intact. Aircraft opportunities continue moving forward. And as I mentioned earlier, two new ones from a large OEM were won recently. Retrofit development and project acquisition continues. New applications continue to emerge. New licensees continue joining us. Customer enthusiasm has remained strong. And when I look at all these facts together, I don’t see a technology or a company in retreat.
I see a technology whose underlying momentum has continued despite a temporary interruption in its supply chain. Our business model remains exactly what it’s always been. We invent, we innovate, we license, and our licensees manufacture. Our customers incorporate SPD into products that improve the lives of people around the world. That business model has enabled us to build an extraordinary intellectual property portfolio while addressing markets ranging from automotive and aerospace to architecture, marine, transportation, and now premium eyewear.
In addition to what our licensees have invested, Research Frontiers has invested well over $125 million over the years to bring SPD technology from the laboratory and into commercial production. Many companies spend years proving that a technology works in the laboratory but never succeed in commercializing it. Others achieve commercialization but never reach the quality, consistency, reliability and cost structure demanded by industries like automotive and aerospace.
We and our licensees have accomplished all that. SPD today is not an experimental technology. It is a proven, reliable commercial product that has met the demanding standards of some of the world’s leading manufacturers. And we’re the only company that has done that across four different automotive OEMs. Many companies never get that far. They never accomplish that. Many spend considerably more before ultimately abandoning their technologies. We did it.
SPD is proven and reliable commercial technology. And when I step back today and look at where we are today compared with a year ago, I actually see more reasons for optimism than pessimism. The smart glass market continues to expand. Our intellectual property portfolio is strong. Our application pipeline continues to broaden. We’ve added a new licensee, we added two new aircraft programs, and our customers have remained committed. And the restructuring process that has dominated so much of our recent discussion regarding Gauzy is substantially closer to its conclusion than to its beginning and may be concluded as soon as next month.
Nine months ago, some investors wondered whether SPD technology could survive the disruption created by Gauzy’s restructuring. Today, I believe the evidence points to a very different conclusion. SPD didn’t simply survive. It continued attracting customers, it continued attracting new licensees, it continued opening new applications, and it continued earning the confidence of companies making long term commitments to the technology. Our job now is to convert that resilience into renewed growth as production returns to normal.
We have a great deal of work ahead of us and I remain very confident in the long term opportunities for SPD technology and the dedication of the people who work every day to realize that opportunity. With that, rather than continue with prepared remarks, I’d like to turn this town hall discussion over. So let’s open the floor to questions. And as always, if your questions are of general interest to our shareholders, we’ll answer as many as we can during today’s call.
If we don’t get to your question, or if it’s specific to your individual circumstances, please contact us after the call and we’ll do our best to respond as promptly as possible. We usually respond to email questions within 24 hours. Thank you and let’s begin. And as we wait for people to join the Q and A queue, let me answer a question received from several shareholders about the status of current production of SPD emulsion and film and possible scenarios that Research Frontiers might be considering.
This is probably the most asked question I have received, so I know it’s on many people’s minds right now. As Gauzy has publicly disclosed, its financial restructuring substantially affected its operations over the past several months. Like many companies undergoing court supervised restructurings, there were periods when liquidity constraints affected its ability to operate at normal production levels. Also, workers were unpaid and some left and some were laid off.
As a result, production of SPD emulsion and film slowed significantly and at some point essentially stopped while those issues were being addressed. Then things started to flow again. Gauzy has continued supplying customers using existing inventories of SPD emulsion and film while working through the restructuring process. That inventory, together with careful prioritization of customer requirements, has allowed important programs to continue even though production has not yet been at the level any of us would like.
You can see this reflected in lower royalties that we had this quarter. Looking forward, there are several possible paths by which the supply of SPD film can continue and they all ultimately support the same long term objective, restoring and expanding production capacity. The first plan, Plan A, is what we believe to be the most likely outcome. Gauzy successfully completes its restructuring and resumes full scale production of both SPD emulsion and SPD film.
This would be the least disruptive to our supply chain and the timing of product deliveries. Another possible outcome, Plan B, would be for Gauzy to continue manufacturing SPD emulsion while another qualified company coats that emulsion into finished SPD film. Plan C would be for another qualified manufacturer to produce both SPD emulsion and SPD film under license from us. And finally, depending on circumstances and opportunities that may arise, Plan D is that Research Frontiers itself could participate more directly in preserving or acquiring certain SPD manufacturing assets, if doing so were determined to be in the best interest of our shareholders.
The important point is that none of these scenarios changes the long term opportunity for SPD technology. They simply represent different paths forward towards restoring and expanding manufacturing capacity. Some may be more disruptive to our supply chain than others, so we are also factoring that in. Variants of these contingency plans are all underway. But once again, our expectation is that Gauzy will successfully emerge from bankruptcy shortly under Plan A. And our objective remains exactly what it has always been, to ensure that the market has a reliable, high quality supply of SPD film capable of supporting the growing demand we continue to see across automotive, aerospace, architectural and other markets. Paul, if we have any questions in the queue, let’s try them.
OPERATOR
If you would like to ask a question, please press star one on your telephone keypad now. You will be placed into the queue in the order received. Please be prepared to ask your question when prompted. Once again, if you would like to ask a question, please press star one on your phone now. And our first question comes from Jeff Harvey, an investor.
Joseph M. Harary, CEO
Hi, Jeff. How are you?
Jeff Harvey, Investor
Good. Couple of questions. First of all, given the financial difficulty that Gauzy is in, I’m very concerned they’re not going to be able to get funding to the level that they would need to really be able to ramp up film production for your customers. The second thing is, as you mentioned to me, it was announced that Clans bought Vision Systems, and then you told me that they never got approval for aerospace applications. I wondered if you could talk a little bit about that.
And today Gauzy traded 230,000,000 shares, which is a highly unusual number.
Joseph M. Harary, CEO
Yes, it is.
Jeff Harvey, Investor
And ended up at 40 cents. And now 38 cents after hours. I don’t know if there’s something today at the French court.
Joseph M. Harary, CEO
Okay, great questions, Jeff, and thank you for asking them. Let me start with the first question you had, which is about the financial ability of Gauzy moving forward. And I’m going to throw out some numbers, and it’s my best understanding of the situation in France, in Germany and in Israel. So in France, there was a bankruptcy proceeding, an involuntary bankruptcy proceeding, or what they call a rehabilitation proceeding filed. And as part of that process, Gauzy presents a plan of continuation, and they’re presenting a revised plan on September 7th.
So, coming up. But the plan of continuation that they presented actually had major funding coming from the sale of a division that doesn’t involve SPD technology. And my understanding was that it was an American company that was well capitalized in the industry that offered $125 million for some reason, and that was for a sliver of the Vision Systems company business. For some reason, I’m not sure what it was, the court instead directed that the entire Vision Systems company, including that division that could have been sold for $125 million, be sold to a company called Clans, which is a local company not too far from where Vision Systems is in France. We may never know what happened there. And the lawyer representing France committed suicide at some point right before the hearing. But it just seems odd that they would reach that result where they would accept 9 million euros, or roughly $10 million for the entire company, compared to a signed agreement for $125 million for part of it. So that’s one of the things that I think in September will work itself through. Now, what I’m told is one of the rules of tendering like Clans did, is that if you lose an appeal, you lose the money you put down.
So they put down 9 million euros, and it’s being held in escrow by the court. And regardless of whether Gauzy wins or loses that appeal, that 9 million euros is released to pay Vision Systems debt, which pays us in full. If they win the appeal, they still get the 9 million euros, but they also get 125 million. So that alone can be a substantial benefit to Gauzy. But they’re not just relying on that. In Israel, they’ve got a court approval on June 18, July 18, rather, so very recently for a debt restructuring plan.
It’s not through a bankruptcy proceeding. It’s through a negotiated process under Israeli law. And what that process does, and I’m not an expert in Israeli reorganization law, but what it does basically is it pays all of the employees 100 cents on the dollar immediately. That’s great because we got to get people back to work and making film and emulsion. It also takes some of the institutional creditors, like the Israeli equivalent of the IRS and their pension fund, you know, pension regulatory agency, and it pays them off over five years after a six month payment break before they start paying.
So five years they get pushed out interest-free and they pay that off. Larger creditors—we don’t qualify for that, is my understanding—get paid after a six month hiatus over three years. And then companies like us owed less amounts of money, and we get paid immediately from that. But in order to do that, Gauzy has to show that they have the money to execute on that plan. So they’ve arranged for, and I know two of the participants are former directors of Gauzy that have invested substantial amounts of money—and, you know, I think they’re each billionaires—in Gauzy over the years to supply a $7 million financing.
That financing allows them to pay off the employees and the smaller creditors, get production started again in Germany. And I’m told as of this morning when I spoke to the CEO of Gauzy, that money has started to flow towards Germany now as a result of that financing. So things are starting to restart because of all this. And I think ultimately what’s going to happen is Gauzy is going to emerge from this as a leaner, better capitalized and, you know, I think more focused company and that’ll be good for us.
Your second question was why would the court sell plans to a company that didn’t have the necessary operating permits to run an aerospace company? It’s very hard to get an answer on that, so I can’t opine. But my understanding was that the equivalent of the French FAA actually weighed in to confirm that Clans did not have the permits necessary to run an aerospace business. So we’ll see what happens in September on that. And your third question, I’m trying to remember, I’m sorry.
Jeff Harvey, Investor
Well, as I mentioned, their stock traded 230 million shares today. So was there something that—
Joseph M. Harary, CEO
There was no news that either I nor the CEO of Gauzy was aware of that would account for that kind of price movement and volume. I think at one point it went up to 94 cents. It was crazy. We were actually on the phone when it was happening. So around 10:30 this morning, the volume and the stock was going nuts.
Jeff Harvey, Investor
So how, you know, in looking back, Joe, what would have been the process of switching to another manufacturer. I mean, I’m just concerned this is going to drag on a long time. Your revenue is going to be down for the next few quarters as a result of this. Why not go to plan B and switch to somebody else?
Joseph M. Harary, CEO
Yeah, well, that takes time. And given the fact that there would be two entrants in the market sharing a market, it becomes a little more difficult than if there’s one entrant in the market. But it’s one of the plans that we’re pursuing, Jeff, is to talk to a third party manufacturer that can do everything. But it also takes time for them to gear up. I mean, if you look at Hitachi, they, you know, they had this as the special project of the president with all the resources and best engineers and any money they needed.
And they were licensed in 1999. And it wasn’t until 2010 that after five years of testing at Mercedes, that a commercial product came out. So the situation is different. You have an established market now. You don’t have an emerging market with no customers like existed back then. But, you know, if you just do the math, it took them four or five years to get SPD film up to automotive quality. And this is Hitachi Chemical, which has, you know, excellent, you know, precision coating capabilities.
Now Gauzy took less time to do it and, you know, because the technology has matured and technology has advanced, you know, such as coating and curing technology, it probably is not going to take as long to get a new person up and running. And, you know, in our discussions, a lot of the companies already have the necessary equipment and capabilities. So that’s kind of the things we’re pursuing in parallel here.
Jeff Harvey, Investor
Okay, thank you.
Joseph M. Harary, CEO
Thanks a lot.
OPERATOR
Thank you. Our next question comes from John Nelson, an investor.
Joseph M. Harary, CEO
Hey, John.
John Nelson, Investor
Thanks for supplying a lot of useful information on updates for the company and the Gauzy situation and the options provided are available.
The questions I have are more related to the product line. You had mentioned the German plant was not producing film, but I’m assuming the Israeli plant is still producing.
Joseph M. Harary, CEO
Well, it’s not really a matter of producing film. A lot of the people weren’t allowed to return to work until there was actually a plan in place to pay them. I mean, remember, these are countries that protect workers quite strongly. So once things started flowing back towards Germany and in Israel, with the recent developments, you know, including the July 18 court hearing where the court approved the debt restructuring plan, it still has to go to creditors, but where they approved that, that started the flow of money towards getting people back to work.
So, you know, we don’t have to wait for every T to be crossed and I to be dotted for that to happen. And in the meantime, you know, I think, you know, Gauzy doesn’t want to deplete their inventory completely because they need to replenish it for some of the bigger orders that are waiting.
John Nelson, Investor
So are you, or I should say, is Gauzy currently shipping products to some or all of your current customer list?
Joseph M. Harary, CEO
They have been. And as of today, I don’t know if they have to wait to make more film, but everybody has been pretty much kept in the information loop and were able to plan around this disruption, which is something that Research Frontiers took a very active role in in terms of helping these customers as well as Gauzy. So we want to keep the customers happy.
John Nelson, Investor
Okay, good. And do you think you’ll be able to name the two new major aircraft programs that you said?
Joseph M. Harary, CEO
You know, this morning I went on the manufacturer’s website and for whatever reason, they just said smart windows. They didn’t name it yet. But I think, like everything with the passage of time, we’re able to reveal more and more. So let’s let the customer have a little bit of time and then after that you may hear their name on the conference call, a future conference call, similar to what we did with Ferrari, where we announced it a couple years before we formally, or Gauzy formally, got permission, but we were able to do it.
John Nelson, Investor
Okay, and then you mentioned Ferrari, they have a new model that they’ve introduced. Is there any indication that your product will be offered on the new model as an option?
Joseph M. Harary, CEO
I don’t see on their configurator a lot of information about it. And that doesn’t mean that it’s not an option or not. But, you know, I think at some point, you know, we’ll be able to perhaps say something. You know, it’s a weird world that these automotive companies live in, you know, and I can understand it. I mean, they want you thinking about their name, not Research Frontiers or anyone else’s name. So they’re very reluctant to name who the suppliers are.
John Nelson, Investor
Understood. And then you had mentioned that the SPD black development program was still moving forward.
Joseph M. Harary, CEO
Yes, yes. Yeah. So this is the idea with the black SPD, obviously, is to get something that’s not the sapphire blue, but more of a black. And, you know, I’ve seen samples of the product. It looks amazing. I saw it when I was in Israel. I saw it in the back room at CES, you know, much cruder form than when I saw it in Israel. So basically, it’s advanced a lot. And really, it’s just a matter of resource and people. They have the emulsion. They need people and the ability to put that through.
But it’s certainly—it’s an exciting product.
John Nelson, Investor
Okay, good. Then on the retrofit product, has that been officially introduced or marketed? And if not, do you have any sense of when—the timing—when that product will be available for customers?
Joseph M. Harary, CEO
Let me share with you a conversation, and I think it’ll probably answer your question indirectly, if I could, John. So the CEO of LTI, he owed money from Gauzy. We had a conversation maybe about a week ago, and I gave him an update as to everything that I knew was going on at Gauzy based on kind of my own analysis and my conversations almost on a daily basis with Gauzy. And he said, that’s all really good, Joe, but the main thing I’m interested in is getting film production restarted again because there is huge business in the retrofit that dwarfs anything I’m owed.
So, yeah, he’s already started and is ready to hit the ground running with that. And what I like about that is, and what I like about the architectural retrofit, is the lead times are much more within everyone’s control. You know, it’s really a sales and marketing and spec job. You speak to the project, you get it specced in, and then you deliver the glass, as opposed to automotive, where it could take three or four years. This is a lot quicker. And especially when it’s a retrofit where there’s not a lot of prep you have to do.
You could just go in over a weekend and upgrade an existing building.
John Nelson, Investor
Okay, good. Looking forward to seeing some product sales out of that category. Thank you.
Joseph M. Harary, CEO
Thanks.
Yeah.
OPERATOR
And our next question comes from Bruce Denny, an investor. Mr. Denny, your line is open. Mr. Denny, can you hear us?
Joseph M. Harary, CEO
Can we come back to him? He may not. Otherwise he’s on mute. Okay.
OPERATOR
All right.
And just as a reminder, if you would like to ask a question, please press Star one on your phone now. And our next question comes from Michael K. of K Associates.
Michael K., Investor
Thank you. I may have to leave in the middle because someone will be coming. It was a conflict in terms of time. Could you hear me?
Joseph M. Harary, CEO
Sure, we hear you. And by the way, congratulations. Congratulations, professor, on the award that the university gave you. Very nice recognition.
Michael K., Investor
Thank you. I appreciate it. Several things. During many conference calls, you indicated two things more than two, that SPD was superior to all other types of light control technologies on the market. And also that in terms of cost cutting, the sweet spot had been reached. And given that, I mean, even before the Gauzy travesty or whatever you want to call it, it seems that I
Joseph M. Harary, CEO
call it hitting a brick wall, which is, you know, it’s true. I mean, the performance and the cost were all coming in line nicely. And then around that same time, I think that was in September and by November they hit the brick wall. So.
Michael K., Investor
But I wanted to ask that. I would think that given those two attributes, lower cost and superiority of the technology, that there would have been many more contracts and, you know, deals being made with OEMs. And I would think also that given the price of the shares, I mean, just pennies, that some companies simply wouldn’t, you know, acquire Research Frontiers unless there’s a poison pill or something like that that would make it difficult.
Joseph M. Harary, CEO
There is a poison pill in place and other shark repellents to make sure that when we do get an offer, our shareholders are getting a fair offer. But as far as deals, you know, the way this works is you don’t see an announcement of a deal between us and, let’s say, a car company, you see a supply agreement being granted to a glass company. And that’s, you know, that’s usually the extent of the visibility and usually that happens well after the contract has been awarded.
I mean, I remember with Mercedes I once asked the head of the project, I said, Hans, why don’t you announce that Pilkington and Asahi haven’t won the business because we keep everybody off balance a little bit in our supply chain. So we wait until the last minute.
Michael K., Investor
The other thing is, you know, one of the positives, I’ve been a very, very, very long time shareholder, as you had mentioned several times, that it was important to have another company, you know, that could do the film and the emulsion. And that was extremely prescient, so to speak, because now that would have come in handy to have a backup company that could do it given the mishakas, if you pardon the expression, that happened with Gauzy. So you didn’t follow through on your, you know, on your feeling about the importance maybe even having a company in the United States, you know, that could be film and emulsion and such.
Joseph M. Harary, CEO
I addressed it a bit earlier. I’m not sure if you were on the call back then, but we talked about that specific question about why do you have one film supplier and not multiple ones? So anyway, the other thing, the last
Michael K., Investor
one, what I don’t understand. Do you have contacts with the SEC or something? Because given the share price of the company, the fact that it did not meet, you know, it’s not profitable, but especially that it’s been trading well under a dollar. How come it’s not forced to be? It’s not. Has not been delisted. Delicate. Now, I don’t want such to occur, of course, but how?
Joseph M. Harary, CEO
Well, it’s not the SEC. Well, it’s not a matter of circumvention, so. So we received a notice from Nasdaq. It wouldn’t be the SEC. The SEC basically deals with the registration of securities and making sure that in that process there’s proper disclosure of everything to investors. That’s the extent of, you know, what the SEC really does. And, you know, they also prosecute insider trading and all this other stuff, but basically they don’t get involved with listing. That’s under the umbrella of Nasdaq or the New York Stock Exchange, who sets the listing standards.
We did receive a notice when our stock went below $1 for a certain period of time that we had 180 days, which puts us until the end of November, basically, to come back in compliance. And that also puts us in compliance with the market value requirement as well. So what I said earlier was, you know, we plan on addressing that by good old-fashioned operational excellence and, you know, and results of operation. If it doesn’t happen, we’ll reevaluate that as we get closer to November.
And usually they give you another 180 days, although it’s not guaranteed if you don’t meet the first one.
Michael K., Investor
So basically you have until November or even later to comply with the right.
Joseph M. Harary, CEO
And what I believe is going to happen, Michael, is that once the cloud is lifted over Gauzy, because all this happened really, you know, as a result of Gauzy hitting that brick wall that they did, you know, once that’s lifted. Thank you. Good talking to you. Good talking to you. We’ll catch up after the call if you want.
OPERATOR
All right. And at this time, we have no further questions in queue. I’ll turn the call back over, actually. Sorry, we did just get a question. As a reminder, if you do have a question, make sure that you press Star one on your telephone keypad. And our next question comes from Gerard Sherman, an investor.
Gerard Sherman, Investor
Hi, Joe.
Question for you on the cash situation. What are we looking at for the next raise and how do you plan on doing it?
Joseph M. Harary, CEO
Not sure we’re going to have to if we collect what we’re owed, and that’s kind of part of the balancing. And also if we go to Plan D, okay, which is us maybe acquiring some of the production assets of Gauzy, we would need more than if we didn’t. If we did Plan A, B, or C. So, you know, it’s probably too early to figure out if we need to raise money and how much. But if we do need to raise for a Plan D, us acquiring the production assets, then it would be more than if it’s just for working capital and things like that.
And as of the quarter, we had over a million.
Gerard Sherman, Investor
Yeah, that makes sense.
But what are our options? Do we have any ability to take on debt?
Does it always have to be an equity raise?
Joseph M. Harary, CEO
What?
Do you have more than one option? All options are available. I mean, we’ve avoided debt since 1986, but, you know, under the right circumstances, that may be, you know, appropriate. You know, and as a board, we’ll discuss that, you know, if it becomes a discussion topic. But if we collect what we’re owed and, you know, the market restarts the way we think it will, we may not have to raise capital.
Gerard Sherman, Investor
Okay.
All right.
Thank you.
OPERATOR
And our next question comes from Bruce Denny, an investor.
Joseph M. Harary, CEO
Hey, Dr. Denny.
Bruce Denny, Investor
How are you?
Very good.
Sorry about the snafu earlier.
Joseph M. Harary, CEO
Good. How are you?
Glad you’re okay.
Bruce Denny, Investor
Yeah, I wanted to ask about a new contract you’re talking about with an airline or manufacturer. When will we start to see revenues from that? And what scale? Are we talking about Boeing or.
Joseph M. Harary, CEO
Well, we already have Boeing. We already have Boeing and Airbus. So this would be some new programs. This manufacturer was so interested and enthusiastic about SPD that it actually wrote a letter to the French court explaining why SPD is strategically important to it, which was nice to see. I happen to be in Melbourne, Florida, at the Vision Systems North America facility when that person was there. So we had an opportunity also to chat about it, and he’s very excited about it.
So that’s all I can say at this point. I do think that it’s nice when customers support you like that, and they definitely stepped up to the plate for Gauzy.
Bruce Denny, Investor
Oh, very good. Are the major manufacturers.
Joseph M. Harary, CEO
Yes, you would have heard of them. You would have heard of them.
Bruce Denny, Investor
Yeah.
But are they employing the SPD technology in greater numbers, or is it still very low volume that they’re doing, or what do you see happening?
Joseph M. Harary, CEO
Well, when you say very low volume, it depends on what you’re comparing it to. I mean, for example, the transport category aircraft market is one tenth of the size of the sunroof market for cars. So. But it’s still $25 million revenue opportunity for Research Frontiers. So, you know, so relatively speaking, you know, it’s not the volume that you would get from architectural or automotive in terms of the dollar values, but it’s still very significant.
And the good thing about our business is it doesn’t cost us anything to be diversified across all these different industries because we don’t have the manufacturing costs. We collect our royalty. And the royalty per window is much higher there. I mean, one window in aircraft is like 10 windows in L’s automotive.
Bruce Denny, Investor
Oh, I see. Are you aware of any.
Joseph M. Harary, CEO
Actually, it’s 15 because we get a higher royalty also in aircraft.
Bruce Denny, Investor
Okay, well, that’s encouraging. And how about General Motors? I know they’re getting their toe in the water with the Celestiq, but have you been in discussions with them about introducing it in private?
Joseph M. Harary, CEO
Yeah, we’ve had multiple discussions. I mean, one is just high-volume cars within GM and, you know, because of, I think, the benefits that SPD has that they’re demonstrating in the Celestiq, they can, you know, they could easily translate that experience into other cars. But also they had a. They shot them. Well, they didn’t shoot themselves in the foot. Their supplier shot themselves in the foot with the Corvette roof. It was a competitor of ours and it didn’t go well.
They weren’t able to mass produce it and they had to pull it from production. So that hurt the supplier, the other supplier. But it helps us because I think it makes the fact that we’ve been in four different car model manufacturers and multiple car models even more remarkable that we were able to operate in the rigors of the automotive environment.
Bruce Denny, Investor
How about the Asian market? Asian manufacturers interfacing
Joseph M. Harary, CEO
still moving forward on all fronts. Like I said earlier, the most remarkable thing about this process is that the technology is so strong and beneficial that people, I think, understand the value and, you know, it’s remarkable that they’ve stayed with us.
Bruce Denny, Investor
So.
Okay.
You know, it’s a trick. It’s a tribute to our licensees and to our technology.
Joseph M. Harary, CEO
Okay, very good. Thank you, Jeff.
Bruce Denny, Investor
Thank you.
OPERATOR
Thank you. And our next question comes from Leonard Litsang, an investor.
Leonard Litsang, Investor
Afternoon, Joe. I appreciate your call and the information you’re giving us. I think with new people like that.
Joseph M. Harary, CEO
Glenn, I think we lost you for a minute there. Could you repeat that?
Leonard Litsang, Investor
Yes. He keeps telling me my line is on hold.
Joseph M. Harary, CEO
Yeah, I believe yes to both questions. You know, there’s been a pent up demand because of the supply issue that needs to be filled. But there’s also new product that has to be, you know, new projects are out there. Right. And also just in general, just, you know, new tradition, you know, new products for SPD and new customers that need it. So, you know, there’s a lot of different things that will be restarted almost immediately when film restarts.
And that’s why I was so happy to hear this morning that they’ve started to direct money towards rehiring their people and things like that so that everyone can get back to the job they do so well when they do it. Thank you.
OPERATOR
And our next question comes from Carrie Christie, an investor.
Carrie Christie, Investor
Yeah.
Hi, Joe.
Joseph M. Harary, CEO
Hi, Terry.
Carrie Christie, Investor
How you doing?
We’ve been going back and forth a
little bit the last couple days. Yeah, yeah. One of the companies that you mentioned in there as competitor is Ambilite. And I’ve been doing the good old fashioned let’s get on AI and see what’s going on. And not all of that’s accurate, but according to them, BYD and some of their subs as well as Audi are using the Ambilite products. They’re using, I guess, multiple film layers in order to get the various effects they want to get. Do you know what the basic performance difference is between their product and the SPD products?
Joseph M. Harary, CEO
Sure. So it’s an electrochromic product, which means as it gets bigger, it gets slower. I actually sat at CES in one of their cars with their CTO and we had a nice chat about everything, you know, it has the same inherent limitations of other electrochromics. You know, the iris effect, it gets slower as it gets bigger. Those types of things. They do have one advantage, kind of in China at least. And that’s why maybe you see BYD. There is, as you can imagine, in China, when the CCP says to do something, you do something.
So I imagine, and this is not just imagination, this was directly confirmed by somebody else, not the CTO, but somebody else. They were directed. They were directed. BYD was directed to do business with them, and they were directed to do business with BYD. And you don’t say no when that happens in China. So we don’t have that kind of situation where, you know, Xi Jinping is going to tell someone to use Research Frontiers product. But, you know, for the rest of the world, we’re good.
Carrie Christie, Investor
Yeah. The thing that I was. That caught my attention was the laminating. And obviously that’s something that’s been working on or being worked on here.
Joseph M. Harary, CEO
Yeah, yeah. All these companies, you know, have something that switches. The question is, what are the warts? You know, years ago, Merck had a thing that looked black, but it was a liquid that had to get poured between two pieces of glass. So the wart was you couldn’t put it on anything that was curved, remotely curved or not, you know, not flat and horizontal or vertical. So it became. The warts become apparent when you try to move it from an idea into the real world.
And it doesn’t mean there’s not a market for it. I mean, even slow switching electrochromic has. Where you don’t need speed, like on a warehouse glass or something like that, maybe you can get away with it, but for things like homes or offices, electrochromic’s not going to cut it. And in automotive, they tend to not want to use electrochromics because the car usually arrives at its destination before the glass switches. So.
Carrie Christie, Investor
Well, they were talking about using PDLC laminate to.
Joseph M. Harary, CEO
PDLC doesn’t have. Yeah, PDLC doesn’t have a switching problem, but electrochromic does in terms of speed.
Carrie Christie, Investor
Yeah, they’re talking layering them together.
Joseph M. Harary, CEO
Yeah, PDLC really is good for privacy only. And it may look like the glass is switching, but it’s not doing any thermal benefit, which is really why you put it on the sunroof. Anyway, I don’t want to get into too many specifics about Ambilite. They are a competitor in some markets and I think they wish they were us in most of them.
Carrie Christie, Investor
Okay, well, that’s good news. Okay, so you think we’re going to be up and running this year?
Joseph M. Harary, CEO
Yeah, yeah, I think that, you know, as soon as—well, since money is starting to flow to restart Germany, I think that helps a lot. And then also just in general, getting out of the bankruptcy will allow Gauzy management to focus on what they do best. And then we’ll go back to normal and then we’ll also do better. So that’s where we’re at. Okay, thank you.
OPERATOR
And at this time, we have no further questions in queue. I will now turn the call back over to Mr. Harary for any closing remarks.
Joseph M. Harary, CEO
Okay, thank you very much. I appreciate it, Paul. And thank you everybody for your patience as we kind of went through a lot of detailed information. But I think everyone deserves to know what’s going on. And if I haven’t fully answered anyone’s questions, please feel free to call or email. But perhaps the most important point I’d like everyone to remember today is this. Nothing has happened over the past nine months that’s changed our view of the long term opportunity of SPD.
If anything, the continued commitment of our customers, our licensees, and now a new licensee like Climb and a direct investment by a licensee has reinforced that confidence. And we also have four contingency plans for moving forward. In the past nine months have undoubtedly been some of the most challenging periods our company has experienced in recent years. And we’ve never tried to minimize that. We’ve just tried to work through it. Our principal supplier went through a major financial restructuring and certainly production slowed and stopped for a while and programs were delayed.
Our financial statements reflected an appropriate accounting conservatism while these proceedings worked their way through the courts. And these are simply the facts. But those facts only tell part of the story. The other part of the story is what? Our technology didn’t stop working and our patents didn’t lose their value and our customers didn’t abandon us and our licensees didn’t walk away. And the markets we served certainly didn’t disappear, they actually expanded.
In fact, despite all the uncertainty, we continue adding new opportunities, continuing advancing new applications, continuing strengthening our intellectual property, and continued earning the confidence of companies willing to make long term commitments. Amendments to SPD Technology. The new license agreement with Climb is very exciting. It’s just one example of that confidence. The volumes can be very, very large and I like the fact that it’s a consumer application because it has visibility to a lot more people and a lot different people than those that drive McLarens and Ferraris.
The continued commitment we’ve seen from our automotive, aerospace and other partners is another thing that I take great pride in. And to me, those are the powerful indicators of where the technology is ultimately headed. But you can make your own judgment on this. And over the long history of Research Frontiers, we’ve seen economic recessions, financial crises, supply chain disruptions, industry changes and downturns, and global events no one could have predicted.
And every one of those periods seemed enormously important at the time. Yet through all of them, we continued improving our technology, expanding our intellectual property portfolio, adding new licensees, entering into new markets, and moving steadily towards broader commercialization. I believe this period will ultimately be viewed much in the same way. Not as a change in the long term direction of our company, but but as a temporary interruption and a much steadier journey upwards.
Today, I believe we’re much closer to the end of this difficult chapter than to its beginning. And as Gauzy completes its restructuring and resumes full production, I believe the conversation will shift away from court proceedings and supply constraints and back to what has always driven this company. Innovation, commercialization and growth. And as Gauzy completes its restructuring, I believe it will also emerge as a leaner, more focused and more appropriately capitalized company.
And that should ultimately benefit Gauzy and their customers, Research Frontiers and the entire SPD Smart Glass ecosystem. And we’re ready. Our technology is ready, our customers are ready, our licensees are ready, new applications are ready, and our management teams are ready. And to our long term shareholders, I’d like to sincerely thank you for your patience, your thoughtful questions, and your continued confidence during what has unquestionably been a very difficult period.
And many of you have been with us for years and some, including a number of our board members, for decades. We never take that support for granted. And for those that have joined us more recently, we welcome you. And we hope today’s discussion has helped provide greater context for where we are, how we got here, and why we remain optimistic about the future. We don’t control every event that affects our business, but we do control how we respond.
And over the past nine months, we’ve stayed focused, we’ve stayed disciplined, we’ve continued investing in our future, and we’ve continued building value for the long term. And perhaps the strongest endorsement of SPD over the past nine months is that didn’t come from us at all. It came from our customers. Despite every delay, despite every headline, despite every challenge, they stayed with the technology. In business, actions speak louder than words.
And I think that’s one of the strongest votes of confidence SPD can receive from our customers. Many times the mark of a good captain is a steady, watchful and experienced hand at the pillar, especially in rough seas. Our mission today is the same as it has always been to make SPD Smart Glass a standard feature in products around the world that improve comfort, safety, energy efficiency and the user experience. I remain as excited about that opportunity today as I have ever been.
I thank you for your continued support of Research Frontiers and we look forward to updating you again next quarter. With Gauzy continuing to execute on their plans in Israel, Germany and France, and the final appeal in France scheduled for mid September, that could bring substantial additional capital to the company and also Gauzy spending in the United States, I’m very confident that we will be able to once again focus where our attention belongs on the steady and growing adoption of SPD technology across the automotive, aerospace, architectural and consumer markets that we serve.
Thank you again.
OPERATOR
This concludes today’s conference call.
Thank you for attending.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.
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