REFR - NASDAQ

Good afternoon, ladies and gentlemen. Welcome to Research Frontiers Investor Conference Call to discuss the Second Quarter of 2022 Results of Operations and Recent Developments. During today's presentation, all parties will be in a listen-only mode. This conference is being recorded today. A replay of this conference 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 e-mailed 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 e-mail questions prior to this call or will do so afterwards in order to answer more questions of general interest to shareholders on this call. I would now like to turn the conference call over to Joe Harary, President and Chief Executive Officer of Research Frontiers. Please go ahead, sir.

Thank you, Karen. Welcome to our call. It's great to have you, and hello, everyone, and welcome to our second quarter of 2022 investor conference call. Research Frontiers remains in strong financial condition. We continue to have no debt. And as of June 30, 2022, the company had cash and cash equivalents of $1.9 million, working capital of $2.3 million and total shareholders' equity of $2.4 million. The company expects to have sufficient working capital for at least the next 2 years of operations, which would take us into the middle to late 2024. This is based upon our lower quarterly burn rate of $300,000 to $350,000 per quarter with higher projected revenue during that period, mostly from new car models. In our last conference call, we spoke about new car models coming into production in Q3 and Q4 of this year with our SPD-SmartGlass technology in it. This is still on track despite the supply chain and other disruptions around the world. In aircraft last year, there were significant new projects in the aircraft industry, including the ACJ TwoTwenty program by Airbus, Comlux and Vision Systems, has put electronically dimmable windows by Vision Systems in the new Epic aircraft and in the Daher TBM 960 aircraft. A lot of people are worried about the recession and inflation. Some have asked me how these items will affect Research Frontiers business, going forward. Some of you may know that I started my professional career as an economist at the Federal Reserve Bank of New York. That experience taught me to look for broad macroeconomic trends and also to look for and act upon based on leading economic indicators. When I was at the New York Fed, we were experiencing high levels of inflation, like today, that was driven by disruptions in the labor market and international debt crisis, high energy prices and a variety of other factors. So that's helpful, . Ronald Reagan had just become President and my ultimate boss was Paul Volcker. But with some payment focus and applying basic principle of studying economic tools and , we were able to fix things. And even though we went through this 4 decades ago, I never lost the lessons I learned from that period. Research Frontiers has been through 8 recessions, probably the most recent one that had many of us worried other than perhaps the current situation was the world economic crisis in 2008. But if you look back on that period, companies that produce high-end products such as Mercedes, Porsche and Audi and BMW, have reported, in some cases, even record profits. Nothing is totally immune to reduced economic activity such as a recession, but some of the business that we are in are felt to be recession-proof, and history has supported this. I, of course, do not wish high energy prices on anyone, but we're also seeing in the United States gas prices that only existed in Europe historically. If you look at how Europe reacted to that over the last few decades, they tended to be on the forefront of energy efficiency in cars, homes and offices. Our SPD technology makes a major contribution in this area. Our SPD-Smart technology can increase the gas mileage of cars, lower CO2 emissions by 4 grams per kilometer and extend the driving range of electric vehicles by 5.5%. The data also shows that we can lower heat inside a vehicle by 18 degrees Fahrenheit. So we expect that even though there is uncertainty and turmoil in other parts of the market, if history and experience is a guide, Research Frontiers and our well-run licensees will actually do quite well. Am I worried about inflation? Personally, yes, but professionally, no. Our license agreements have built-in inflation hedges. In addition to certain CPI adjustment provisions in our license agreements that benefit us, more importantly, remember that we get paid on the percentage of sales by our licensees. Simply put, the higher those sales, the higher our license royalties. And going back to my experience at the Fed, I mentioned that we look at broad macroeconomic trends. And today, we spoke about some of the bigger ones such as recession and inflation. Now let me talk about leading economic indicators, which is the other thing that I used to focus on as an economist to get a clear look at the future. In our last conference call, I reported on multiple car models that were expected to come out in the near term, using our SPD-SmartGlass technology, starting in the second half of 2022. As I mentioned, that's still on track. Also, the information that we have received is now that even more cars than we originally expected will use SPD near term. My internal estimate is that these near-term automotive introductions can use more than double the amount of SPD films sold by Hitachi in their best year so far. I may be wrong, looking and get at the leading indicators, Gauzy has made substantial additional investments in expanding production capacity. So the area that I may be incorrect about is not whether our business will expand, but by how much. I spoke about a doubling of the levels of SPD film from our best year. Gauzy is almost done with quintupling their production capacity. I think that investment by Gauzy and also the follow-on production capacity increases by other key licensees and the need for a 5x increase in SPD film capacity is the most important leading predictor of economic activity in our industry. And Gauzy has been productive in many other areas on the business side. On the personal side, I want to take this moment to send a special congratulations to Gauzy's CEO, Eyal Peso and his wife on the birth of their new son earlier this week. Yes, nothing made be happier than to see the photo of you holding your new son that you sent me from the hospital that day. and congratulations. So I did that in three languages. With that, I look forward to answering your questions.

Let me take a few that were e-mailed to me, and then we'll open the queue up for additional questions. First, Jared Albert. Can you explain how you are generating the prospective cash burn guidance? What revenue streams are you including and excluding? What is the forecast period? Okay. Well, from an accounting standpoint, we look forward 12 months. That's a typical look-forward period from an accounting standpoint. From having a clear visibility on where our licensees and their customers are, I look forward at least 12 to 18 months. So we're talking about cars that are coming out the second half of this year and next year. Another question from John Nelson. Are carmakers using or planning to use SPD film and heads-up display? Yes. Any provision in the Congressional Inflation Reduction Act that would encourage use of SPD? Yes, actually, the Dynamic Glass Act provisions are still in there, and that would benefit us because it gives us tax credits for smart glass on cars. Is the transparent OLED market led by LG and Panasonic, growing significantly? It's expected to, and they're making substantial moves in that area. And are there any significant rise in costs to make SPD film? No. There aren't. Jeff Harvey asked, when I talk about as a competitor with a competitive technology, I had the opportunity to actually see product at the CES this year. And they, like all the other smart glass companies, were using a variant of an electrochromic technology, where they have an electrochemical reaction inside the glass. And it has the same limitations that all electrochromic devices have, which is it's slow and non-uniform. Now what they do to try to mask that, and you can't see it unless you go up to the window to look through it, but that's where people can actually see the glass is there. And you see little grid lines. What they do is they put micro wires or microgrids inside the glass to trick it into somewhat of a honeycomb pattern to make it think that it's a bunch of small windows. But it's very visible when you come close to it. So I don't think it's going to really have the aesthetic quality that we have in terms of clarity. Jeff Harvey also mentioned, we have not heard about architectural wins, what is holding up adoption of SPD in this market? View has won some large applications and they are in terrible financial condition. Okay. There's a couple of things to unpack from that question. First of all, about architecture, we've had architectural projects use the new Gauzy film. The backlog that we're having, which is why also they're expanding their production capacity, is really focusing where their film is going right now to the automotive market and the train market, in particular, automotive though. And architectural is a great market. It will probably be our biggest market within 3 years. But right now, the most predictable large market is automotive and trains and also aircraft. So we are focusing the efforts there. You asked about View and their financial condition. There's a lot of things going on there. And I think I was probably one of the first people to pick up on the fact that they had a warranty issue. And that ultimately led to a very extended period of time when they had an accounting fraud going on and they couldn't file their financial statements and finally got everything in shape. When they did file their numbers again, though, there's kind of some interesting things. So in the last financial filing, and the next one is the 8th of August, not too far away, they were talking about their revenues being up from $9.7 million to $17 million. It sounds like a nice increase, except that they bought 2 companies that are in facilities management and electronics. Their smart glass revenues actually went down 37%. So a fairly substantial decline in the first quarter of 2022 versus 2021 of 37%. They were kind of saying, "Well, our revenues went up quite a bit and our cost of revenue only went up a little bit." Their cost of revenue went up 12%. And we believe that almost all of that, if not all of it, is in the smart glass area. So what they were doing is, in my opinion, fully subsidizing, even to a larger extent than before, their customers' purchases. And that's good if you can do that and reduce your cost and gain market share and things like that. But with their smart glass sales where they are, we actually and our licensees have higher sales levels historically, and we didn't spend $2 billion to achieve it. By my estimate, unless they raise capital, they will be out of cash by mid-October -- I'm sorry, mid-November. Our other public competitor, Crown Electrokinetics, I believe, by my estimate, will run out of cash, even though they did 2 offerings, including one at a pretty high dividend rate of 12% with a redemption premium of 25%. Even with all of that in 1 million share public offering, they're probably going to run out of cash unless they raise more capital. And when they file their financials, maybe we'll know more by August 25. So they all have pretty short runways there to come out against. Let me see what other questions we had. These might have been most of them that were e-mailed, and I thank everyone that took the opportunity to ask the questions so that we can either incorporate them into our presentation or answer them efficiently. So Karen, if you wouldn't mind opening up the floor to any questions that might exist.

And we will take our first question from Alan Ginsberg.

Just one question. Just to clarify, you said that Gauzy has increased their capacity, but they also make PDLC. So could you talk about that?

Yes. I apologize. That's right. That's a very good question. It's -- they quintupled their production capacity for SPD.

And our next question comes from August Berman, an investor.

Just one question, I was walking my dogs off and I was listening to a Bloomberg podcast talking about the potential oil crisis or natural gas crisis in Europe in the winter time. What are we -- how do we think about that? With Gauzy's SPD factory out there, would that be an issue that they have addback of generators in case it gets too cold? I know it's not exactly the warmest placement. I would imply -- how do...

No, no. Stuttgart, Germany -- I've been to Stuttgart, Germany many times in the winter time, and you have to be careful. Gauzy is a very resourceful company. They do have all of the normal precautions you would see. But remember, they also scaled up their new film production facility in the middle of COVID when people couldn't even come in and out of Germany. So they figured out how to do it. And this is not something that they have expressed to me as anything they are concerned about. And if there's an issue, they could always shift things over to Israel, but obviously, the production facility in Stuttgart is much higher capacity, much more efficient and optimized for SPD.

Got it. Okay. And then actually, just one other question I had. I was looking at Gauzy's website, and they talked kind of a promotional about us with the new integration between Gauzy and Vision Systems. And they talked about in their fiscal press release, there were 5 manufacturing sites and on Gauzy's information, it says 4 manufacturing sites. Are there 4 or are there 5?

We have to -- I guess we have to be a little cautious. They're a company that is expanding in relevant areas of the world. So I don't know what I can actually say or not say. But suffice it to say they're growing. And most of that growth is coming from SPD. . When I was there for their -- when I was there for their -- they actually had their company-wide meeting in the middle of COVID and I happened to be there and the people in Israel were there physically, the people from different parts of the world were dialing in and -- on

Yes. I've seen that and a couple of other shareholders have seen that, too, with hiring and then enroll for specifically, so that was great to see.

And our next question comes from Leonard , an investor.

I guess, in your comments today, you were talking about the near-term markets would be mostly automotive, transportation, trains, et cetera, planes. The -- and that there were several companies going to be using SPD now in the third and fourth quarters. The only one that I've seen publicly announced was the Cadillac towards peak, which is like, I don't know, not that many cars. So are there...

That's coming out in 2023. So the ones for this year were other ones.

Okay. And nobody has announced what that is? Can you give us any idea of magnitude of sales?

I think when I -- earlier on, when I said that these near-term introductions can double our best year in SPD use. And remember, in the introduction, sometimes there for -- what some of these companies would consider test markets, test regions of the world and things like that. Even with it just being test regions, you're talking about a substantial increase over our best year. So that's about all I could say. I'm in an industry where you got to let the automakers speak for us, the Tier 1 suppliers speak second and then Research Frontiers quickly speak third to draw the connection. But I think that in the past, you've heard us talk about who some of the strategic investors in Gauzy were, and you could probably get a good sense from that.

Okay. So the next few quarters, and we should see that appear?

Yes.

And our next question comes from John Nelson, an investor.

Thank you for the questions you sent in before.

I have to ask, I've but just because it's such a ginormous market for sun visors, one either -- I mean, how is Daimay progressing sun visor development? And are any of your other licensees working on sun visor because it seems like it's going to...

Yes. Well, that's one of the holy grails. Let me say yes to your questions, and I can't go into more detail about it. But by the way, just to the , it's always been one of my favorite applications. And maybe rest in peace, Bob Saxe, I used to drive back west from Research Frontiers every evening into the bright sun. And every time the sun was at our eyes, Bob would say, "We got to get those sun visors as soon as we can." So it's a pet project for him, and I hope I can honor his legacy by getting that out in a big way.

Second question. Can you explain or just kind of give us a general explanation of what the R&D spend is going to -- it's listed in the different things.

Yes, different things. So part of it is going towards new materials that might have different off-state colors. I think that's always been an important focus for the company to give our customers a broader range of colors besides the sapphire blue that we're currently having. And we've made good progress, but I don't want to promise anything until it's commercial on that and other areas as well, including supporting our licensees with their efforts as well. So helping them do it better, faster and improving the technology consistently.

And our next question comes from Art Brady, an investor.

I wanted to know December 5, Russia is supposed to stop gas to the Germany. And a lot of the companies are looking for backup plans. Is that part of the endeavors that you're involved in?

I'm not directly involved in that, but our licensees are pretty good planners for contingencies. Earlier on, August Berman asked a similar question about natural gas shortages expected for Germany, and I don't see that as being a problem.

Also, any comments on Nippon Glass, we were told a couple of years ago that around this time that they would be very active in developing some applications on some of their cars, and we don't hear anything at all from Nippon?

Nippon Glass for cars? You may be referring to NSG for some of the things they're doing with the display market.

No, it was a Japanese glass company, Nippon.

AGC, probably, and Pilkington. I also talked about AGP becoming more active. So a number of companies. NSG has been -- other than their ownership of Pilkington, which maybe what I was referring to, Pilkington is the British glass company that they bought many years ago. Other than that, they're focusing on the display market. So they are in both.

How is that developing? Is it commercializing yet? Or they're going to release some...

has had a very strong push in this area. And all of the market research that I've seen from them and from third parties indicate that it could be a very large market.

When are they going to launch that?

We are talking about later this year or early next year, is what the last report I saw, 55-inch TV.

And our next question comes from Bill Berg, an investor.

In the near term, Joe, auto is the area to look to for revenue. But I thought that you said that architectural is to be the biggest market within 3 years?

Yes, that's what I said earlier. I believe -- yes, yes. And I think one of the drivers, and that's a great question, Bill. One of the drivers on that is that for the first time, we have a film that's wide enough for architectural applications for both commercial and residential. And also, some of the things that I can't talk about are different ways of delivering that product to the customer much more efficiently and making it much more usable for all types of architectural applications, whether it's new construction or otherwise. So that could become the killer app very shortly.

So if that's the case, is Gauzy ramping up for that to happen now?

Of course. Of course, it's -- that and automotive are keeping them busy. I don't know if people remember, but when we had the factory launch for Gauzy, it was in Stuttgart, Germany, I might have mentioned on a call either before or after that, that they built in the space to replicate their existing SPD film , which is their only business out there, right on that same site. Although I imagine that now that they know what they need to build and where to get it and the normal things that you go through when you're commissioning a new film line, they may build the second one in South Korea or somewhere else that's closer to the customer, but they have the capacity to do a lot. And God bless them, they make the investment as do our other licensees, when this business is supporting it. So it's great to work with them.

Our next question comes from with .

I was surprised to see $154,000 charge-off in bad debt. Could you put any color on that?

I think that ultimately, that is going to be collectible. I think that there are some pockets of the world where people need a little help to get started and I'm not giving up on it, and I probably -- it's probably more of an accounting issue than anything else, not an operational or a collection issue as far as I'm concerned. But what somebody hasn't paid for a while, put into -- dictates that you take some kind of reserve. And if we didn't take that reserve, our costs for this quarter would have been lower than for the first half, would have been lower.

I would call you View, that okay?

You mean if I spend that kind of -- I don't spend that kind of money.

No. Would acknowledge this.

$270 million, what I could do with $270 million, which is what they burned last year, would certainly be a lot better than what they did with it.

But I listened to the conference call right before, just one -- and they did say that in the next 2 months, they are going to beef up their balance sheet. So I wish them luck. Hopefully, that...

Yes. Well, as an institutional investor, you probably know that it's probably not going to be available on such good terms for them. So...

Yes, absolutely. But if I remember right, they went through $80 million in the last quarter?

Yes. I think last year, they went through -- they burned through $270 million in cash.

That would be about right from that. So back to the bad debt, is that a royalty that you're owed? Or is that a an upfront license fee that you hope to collect at some point in time?

It's a royalty. It's a royalty that I am owed that quite frankly, my accountants and I would probably disagree, I believe it's fully collectible. But we have policies in place that say that after a certain period of time, you take an appropriate reserve and that's fine.

In theory, that's like $1.5 million worth of revenues to somebody.

And you want to know something? We've taken reserves in the past, and we've penultimately collected it. And we've ultimately collected it. So maybe it's good that the CEO is also an attorney.

Okay. I don't want to spend a whole lot of time on that. But anyway, I look -- as the guys said, we're on the cusp. I hope he's right.

I think we're a lot closer to the cusp than people think.

Well, back in the old late 1800s, that could have been a cliff.

That's right.

Our next question comes from Francis , an investor.

You had mentioned earlier about different colors of film. Would that affect the overall price?

We don't think so. We don't think so. The most expensive component of this is not so much the materials that are inside the emulsion, although they're specialty materials, so they have to be produced precisely. But believe it or not, the conductive coated plastic that we coat on is a pretty expensive component, and that will be the same, no matter what kind of film you're working with, whether it's PDLC or SPD. So volumes, that can come down significantly, which is why Gauzy has been able to project out fairly substantial price reductions in the price of their film, based on volume.

So the price itself was actually due to volume or difficulties laminating the product?

Mostly, it's volume. And just one of the materials is the conductive coated plastic. And for every square meter of film, you need 2 square meters of conductive coated plastic, one on each side of the emulsion, to activate the nano particles inside the film.

Okay. Now you also mentioned, Gauzy might build another facility in South Korea, so it could be closer to...

I was speculating that it might be in Asia, but they already have a very good one in Stuttgart. And the reason they put it there is it's 10 minutes away from Porsche, 20 minutes away from Mercedes, an hour and minutes away from BMW and an hour and minutes away from Audi. Yes. You cover the waterfront in terms of high-end automotive by being there. But that's not the only place where high-end cars are produced. So Asia might be another good place to put it.

You have been in the past several months, if not 6 months. None of those car manufacturers were ever mentioned. Audi, Mercedes, BMW, nothing was ever mentioned about any products being used there in those cars. Is that...

Well, that's because they haven't gone into serial production with the product there. That's not something I could -- I can talk about.

Mercedes isn't using it anymore.

There's a story unrelated to the SPD glass that goes into that, and that's their business, and I know.

Our next question comes from Alan Ginsberg, an investor.

Just one more question. Is there any chance that any of these new automotive companies might have the SPD as original equipment and not as an option?

Yes, there's certainly that. And we often don't know the exact way they're going to deploy this. If I took McLaren, for example, the take rates are so high, it could very well be a standard equipment if they want it, but the economics on how you sell cars and how you price it off. And it benefits, having it as an option. So that's their decision. As long as the volumes are there, I'm happy.

Our next question is from an investor.

I just wanted to clarify, if things materialize the way you expect them for the second half of the year, are we at the profitability?

Well, I think that it's going to depend on how many of those cars are delivered in the -- between now and the end of the year and how many go into the next year. But we've shown that we could become profitable with a little bit of help. So we had one profitable quarter last year. And because we have been working very actively to keep our expenses and our burn rate as low as possible. The idea is to become profitable and cash flow positive.

And our next question comes from John Stroble, an Investor.

I'd like to follow up on the architectural comments. You said that in 3 years, architectural will be the main focus of SPD use. Does that mean SPD will be available for new projects in 3 years? Or are there actually projects on the books now and waiting for the glass?

There's projects on the books. What I said is, in 3 years, it could be a very big part of our business. I didn't say that we're going to deliver in 3 years. I think that like any market, it has to grow. It starts, people get used to it. They expand its use and -- that's all I'm saying. I'm not saying that we're going to deliver in 3 years for architectural by any stretch. I think by 3 years, it probably will be a much bigger market for us. 60% of the world's glass is architectural. It's double the automotive, right?

And our next question is from Leonard Litzau, an investor.

Joe, listening to the comments, the other thing that I thought about was with the decrease in temperature in the sunroofs, are there any of the manufacturers that are looking right now to use it in like the back window, in the side windows as well, which would certainly increase -- or I should say, decrease the cabin temperature even further?

Yes. Yes. The 18 degrees is just putting it in a half square meter sunroof. And now if you look at the size of the Cadillac, it's much bigger than that and the other cars coming out are much bigger than that. And yes, there are other areas of the car, which I'll talk a little bit about -- or I'll mention at least in my closing remarks.

Our next question is from Thomas McCarthy, an investor.

You mentioned that there's a bill in Congress that might likely get passed that would benefit our sales because it would give incentives to people.

Right. Tax credits.

Right. Right. Are you aware of somewhat similar legislation in other countries or countries are coming?

Right. Every major area of the world has what we call tax expenditures. We use the tax code to actually promote certain social behavior that you want, like energy efficiency. And we've had this in our tax code for a long time. And if you -- on your personal taxes, I'll ask you if you put in solar water heater or some other things, and they'll give you some credits for that. Usually, it's limited. The Dynamic Glass Act potentially can be a major reduction in costs, based on the tax benefits. But I don't count anything as being done until it's done, especially in this environment of politics. So we're delighted that people are focusing on Dynamic Glass. When we started Research Frontiers and even into the year 2000, 2005, if you Google smart glass, you got 5 hits. Now, we are the industry. So I'm glad that we're getting that visibility.

Are you aware of tax incentives for smart glass in other countries?

Yes. But I don't know if those are going to pass, just like I don't know if they're going to pass here.

All right. So they're potential but not current. Okay?

Right. I mean, sometimes, you come in through a side door, not a back door in terms of energy-efficient improvements and things like that and are encouraged. And sometimes it's from the utilities. They have what they call demand management programs, where -- because the marginal cost of a kilowatt of electricity is pretty high. They want you to, especially during peak times, dial it back. And they give you incentives to do that, too. There's a lot of things out there. We just focus on having the best possible product, and our licensees focus on selling it.

Our next question comes from Seth Nickerson with Research Frontiers.

It's Seth here from Research Frontiers, but this is a clarification. Seth has been a long time shareholder of Research Frontiers. He doesn't work here. Otherwise, I'd be accused of having a plant on the call, I guess. Anyway. No, that's okay. It’s just, I'm going to get a kick out of seeing it.

You had said something about architectural for new and existing?

Yes.

I believe that was Mr. Berg you were talking to. So how would that work that it had to be laminated? Is it -- are you coming up with the peel and stick kind of thing?

I don't want to give the details, but we're talking about a retrofittable application that makes it easier. And just for people who live in New York or Boston or Chicago or places like that, you'll know what I'm talking about. Whenever you replace glass on a, let's say, an apartment building or an office building, that is scaffolding up so you don't drop the glass on people that are walking by them. And that's -- and if you live in those cities and you live in a co-op, you have to get co-op board approval, anytime you make a structural change to the outside of a building with a retrofit. It's a lot more like putting up new shades or blinds, where you don't need approval of the co-op board. And you certainly don't need to go through the expense and the disruption of having scaffolding and things like that. So it could be a very significant benefit to people to be able to get smart windows in their homes or offices much easier, especially in large cities.

So you have to replace the glass. It's not something you could like stick on top of , right?

I don't want to go into the details. There's ways where you don't have to replace the glass.

And at this time, there are no further questions. I would like to turn the call back over to Joe.

Okay. I'm going to make a few closing remarks, and I thank everyone for their questions. If we haven't fully addressed your questions, as always, just feel free to e-mail us, we're here 24/7. So we'll try to answer them. Research Frontiers enters the second half of this year, very well positioned for success. Our customers and our markets tend to be more recession-proof than others. And when you consider the fact that Research Frontiers as an asset-light intellectual property licensing company with very little expenses, inflation is not expected to have much an effect on the cost side for us. On the revenue side, because we get paid as a percentage of our licensee sales, with 10% in automotive and 15% in other markets, inflation, well, undesirable in general, could actually have a positive effect on our revenues. We have no debt. So a higher interest rate environment is not going to adversely affect us directly either. And the leading indicators of economic activity are all positive for us. Our licensees have expanded their production capacity, major customers such as Hyundai have invested in them and our projected product pipeline for the next 6 to 18 months is quite strong. In fact, the number of new car models and new cars that are expected to come out with our SPD-SmartGlass technology over this 6- to 18-month period has never been higher. And we expect it, just in the initial period of these cars introduction, to at least double our best year in terms of SPD film usage. Our licensees that are closer to the frontline, have almost completed their steps to actually quintuple production capacity. And going back to the macroeconomic trends, electric vehicle adoption is accelerating at a much higher rate than any of us originally anticipated just 5 years ago. It was reported earlier this week that electric vehicle sales spiked in June and almost every major car company in the world has now announced that they're going all-electric. So now ask yourself. What would these car companies do to get a 5.5% increase in driving range without having to increase the size and weight of their batteries or need major breakthroughs in battery technology? And even if they did put larger batteries or had better battery technology, we still would help them increase the driving range of their vehicles further because of the 18-degree Farenheit reduction in cabin temperature through use of our SPD-SmartGlass in just the sunroof. In some areas, we're also slated for other areas of the car as well. That will be a first. We have other firsts coming as well in the automotive area and the architectural areas. And not all cars will be electric and certainly in the next 15 years. So during that time, we will also be helping internal combustion engine vehicles reduce CO2 emissions by as much as 4 grams per kilometer. Glass is a highly desirable building material, making homes and offices more functional and livable. With our technology, we also bring beneficial daylighting in when people want it, keep unwanted UV, heat, light and glare out and save energy in the process. In vehicles such as aircraft, trains and of course, cars, we get passengers a better connection with their outside world and block harmful UV heat and light and glare while enhancing security and privacy and road stability. And with no moving parts other than our highly efficient nanoparticles, we offer greater reliability than traditional shades or blinds recurrence and are much easier to clean and sanitize, thereby reducing germs and allergens. By eliminating weight in the roofs of cars, and Daimay estimates this to be about 13 pounds of weight savings and also that our SPD-SmartGlass allows them to remove 56 components from the car, and increasing the headroom without raising the center of gravity, we make vehicles more stable, whether they're cars, trucks, boats or trains. So smart glass certainly has an important and meaningful place in the future as well as the present. While my wife and children saw the hard work it took us to get the smart glass industry established, our 13, I'm happy to say, growing number of grandchildren, and now Peso has a new son, and many of your own children and grandchildren never lived in a world without our SPD-SmartGlass. All of us should be proud of the work that we have done together to accomplish this and bring this strategically important and high-performing technology to the world. I thank our loyal shareholders for being an essential part of that and look forward to sharing updates with you throughout the year. Thank you.