Joseph M. Harary – President and Chief Executive Officer.

Greg W. Palm – Craig-Hallum Capital Group LLC Michael Kay – Kay Associates.

Good afternoon, ladies and gentlemen. Welcome to the Research Frontiers Investor Conference Call to discuss results for the Second Quarter of 2014. During today’s presentation, all parties will be in a listen-only mode. (Operator Instructions) This conference is being recorded today.

A replay of this conference call will be available starting at 12 o’clock PM on August 8, 2014 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 (Operator Instructions).

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

Thank you, Dana, and good afternoon everyone. Joining me today is our CFO and Vice President of Business Development, Seth Van Voorhees. Seth and I will answer any questions that we didn’t already cover in today’s presentation.

The 10-Q that we filed on Monday marks an important step forward and when analyzed contains some welcome news for our shareholders. Today, we will talk specifically about estimated production volumes, vehicle introduction dates, revenue potential and data regarding cost reductions and our technology.

Our shareholders have seen our company go from doing things only in the lab to a first generation SPD-Smartglass product to full commercial production of the second generation SPD product by Hitachi on a dedicated factory line that has the largest production capacity and best performance of any smart window technology in the world.

Then in 2011, we saw the first major commercial milestone on the end product side. The introduction of the newly designed SLK roadster by Mercedes-Benz offering the Magic Sky Control, SPD-Smartglass panoramic roof.

This marked an inflection point for us, because it was the first car in the world to put any SmartGlass technology into high volume serial production.

Equally important I believe is that there is still not even one reported problem from customers with the Magic Sky Control roof, even though many thousands of these cars have been on the road and exposed to extreme weather conditions for years.

This is a tribute to our licensees and Mercedes fine engineering, rigorous long-term durability testing and drive to the best performing SmartGlass technology in the world for their vehicles. I think the MD&A section explains in good detail fee income, operating expenses and our investment in R&D as well.

So, let’s talk about the specifics and what this means for your company going forward. As we note in our discussion of fee income there were some expected items that we’ve been speaking about over the last several quarterly conference calls..

Take rates for the Mercedes SLK and SL roadsters remain much higher than initially expected by Mercedes. So, partially offsetting this lower overall production of SLK and SL is an increase in the take rates of Mercedes cars with Magic Sky Control.

Now let’s take a closer look at what’s underlying our revenue numbers and prospects and discuss what I believe investors should view as some of the most significant events going on. First and foremost, production of the glass roofs for several variants of the S-Class has now started.

We have move from the relatively smaller roadster market to the much larger Sedan market..

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This July Mercedes announced the production of the S-Class during the first half of 2014 has doubled. This implies an annual unit volume for 2014 of over a 130,000 cars. What make us historical number even more remarkable is that this does not even include all of the variants of the S-Class since summer is still coming out this year and next year.

Mercedes has met their scheduled introduction dates for this car and we expect future variants of the S-Class to also be on schedule. So, what is the schedule look like? I can talk about some of the specifics, because this is the information that’s already been released to Mercedes dealers and the public around the world.

I will also share with you for the first time, some of our own internal estimates to better help you see where things are going near-term with their company. From this I expect that many – I expect that many of you will be able to build or refine your own revenue and profitability models for Research Frontiers.

I believe that the net result will be a much clear and enthusiastic view of the company that you own. Around the time as this conference call last August, Mercedes started announcing that several variants of the S-Class will offer the Magic Sky Control Panoramic Roof using Research Frontiers SPD-SmartGlass Technology..

Then in February Mercedes finally announced the production version of the new S-Class Coupe with Magic Sky Control. And in March this car made its world debut at the Geneva Auto Show.

All along Mercedes had indicated that this car, the S-Class Coupe which is the W217 or sometimes referred to as the C217 would be available in the second half of this year, and it looks like it will be in fact available in showrooms in Europe later this quarter and in the U.S. early in the fourth quarter.

So, we’re right on schedule for what we and Mercedes have been saying all along about the timing of this vehicles availability. The S-Class Coupe is a higher manufactures suggested retail price than the current SL roadsters. So we expect even higher take rates than the already high take rates, we are enjoying from the SL roadsters.

Total estimated annual production volumes for this car is 10,000 to 15,000 units. This car has the largest single piece of SmartGlass ever put into mass production 1.32 square meters for a little over 14 square feet of SPD-Smartglass.

The next variant of the S-Class to come out is the X222, this is the extra-long wheelbase version of the S-Class to replace the Maybach 57 and 62 and the MSRP on this car is around $250,000 or more. So, there are only a limited number of this variants that are produced every year 110,000 units.

With the high take rates and the fact that this car as an ultra-luxury version of the already luxurious S-class Sedan. Take rates on this car for the Magic Sky Control option are also expected to be very high albeit on low volume production for this special car.

It will be available in early 2015, this will have two large sunroofs totaling 1.7 square meters or almost 18.5 square feet, which will be the largest amount of Smart Glass ever put into a production car.

After this also in 2015 around mid year is the highest volume S-Class produced, the V222, which is the four door long wheelbase version of the Sedan. We estimate that there will be about 80,000 to 100,000 units of this model S-Class produced per year.

With an MSRP around the same level as the SL roadster and the fact these cars are often ordered and reordered fully loaded with options. We expect that the Magic Sky Control option on this long wheelbase version will also have very high take rates and be even higher than the current SL.

Judging from some shareholder questions we received there might have been some confusion out there as to whether the standard is a long wheelbase version of the S-class as the highest volume.

It is in fact the long wheelbase variant of the S-Class that has the highest unit volumes and it will likely drive the majority of our revenue for the S-class family. This long wheelbase version of the S-Class in fact is the base model for the S-Class in the United States and in China whereby far most of the S-Classes in the world are sold.

Around the same time, as the highest volume B222 long wheelbase version of the S-Class comes back, the short or standard wheelbase version designated W222 comes out also around the middle of next year.

This is basically a slightly shorter version of the S-Class in places, where the roads are more narrow and the cars tend to be driven by the owner – instead of the owner being driven such as parts of Europe. We estimate production volumes are between 15,000 to 20,000 units per year for the standard wheelbase version or the W222.

Both the long and standard wheelbase versions of the S-Class Sedan will have two large panoramic sunroofs with 1.5 square meters or over 16 square feet of SPD-SmartGlass in them. Branding out the variants of the S-Class produced this year and next year is the XL222, which is the Pullman six door Limousine.

With an MSRP of over $1 million there is expected to be high take rates, but very low production volumes which we estimate at between 50 and 200 cars per year. So, the estimated production range is outlined above for these five variants of the S-Class coming out in 2014 or 2015 is between a 115,000 and 145,000 cars.

So what can this mean for our revenues, first with most of the high volume production starting with the long wheelbase S-class Sedan in mid 2015, some time in the second quarter of 2015 should be when we begin to see the start of a very big ramp up in our revenues.

Of course as we noted revenues from the earlier variants of the S-Class will begin in the current third quarter of this year. We have expressed an estimated range for royalties per car are between a $150 and $250 per car to Research Frontiers.

If there was a 100% take rate then just doing the math this translates into $17 million to over $36 million in royalty revenues from just the S-class, of course the 100% take rate is not realistic because the Magic Sky Control would then be happily extended feature and not an option, but it gives you an idea of what this car can mean to Research Frontiers.

Now adding to this the existing revenues from the SLK and SL roadsters and you’ll see that Mercedes by itself can be an important contributor to our top line revenue.

And with relatively low expenses, because we’re a licensing company in the $6 million to $7 million year range, once the higher volume S-Class variants are out by the middle of next year, this car by itself can make us profitable, how profitable of course depends upon take rates.

So, what are we all doing about take rates we’ve had a very close working relationship with Daimler both directly and through their key dealers. This working relationship extends not only to Germany where they are headquartered, but also North America and China which are the two largest markets for their premium vehicles that use our technology.

We and they are devoting resources to promoting an awareness of Magic Sky Control and SPD-SmartGlass throughout the world. Another thing that would positively affect take rate is one of the other significant things highlighted in our 10-Q for this quarter. Costs for products using our technology have come down.

In the case, of even roadsters like the SL with lower production volumes. These cost reductions are in the double-digit percentages. The cost reductions in the S-Class are even much more dramatic.

So how do this affect fee income? A lower cost per unit with the 10% royalty received on – we receive on automotive glass sales by our licensees to the OEMs would result in a correspondingly lower royalty per car. However, higher volumes because of these lower cost to the auto manufactures are expected to result in higher royalty revenues per model.

There are two ways that this can occur. Given a lower cost, the automaker can choose to pass the cost savings on to the customer presumably resulting in a higher percentage of customers choosing the Magic Sky Control option..

This gives Mercedes the incentive to produce more cars with this profitable option, since it increases their profit per car. Under either of these two scenarios regarding pricing of the Magic Sky Control option by Mercedes more cars with Magic Sky Control are produced by Mercedes and Research Frontiers and our shareholders win.

So, what is actually happening in this area? From what we see so far based on public information, it’s a combination of these two strategies. There are cost savings being past on to the customer.

So far the only dealer ordering guy that shows the price of the Magic Sky Control option on the S-Class is one that just came out of few weeks ago for Germany dated July 14, 2014..

Pricing is not yet come out for the Magic Sky Control option for the North American market. However, each market has its own volumes and price sensitivities. We expect Daimler to maximize profit and revenues in each market, this is very good for us.

Remember, we get paid on the selling price of the glass to Mercedes, so we’re less concerned with their profitability and what their mark up is and more concerned about revenues generated with cars with Magic Sky Control.

Also lower cost per square foot or per square meter also as wide ranging benefits for increased revenues for Research Frontiers decides what we just discussed. The newly designed and highly popular Mercedes-Benz E-Class comes out in about two years.

If the S-Class volumes are expected to be 4 times to 5 times higher than the current SLK and SL volumes combined and incidentally use about three times more glass per vehicle. Then the E-Class represents an estimated 2 to 3 times more unit volume than the S-Class for at least 10 times the volume of the current SLK and SL roadsters combined.

At an MSRP of between $60,000 to $80,000, the cost reductions for SPD-SmartGlass seen from the current S-Class and SLK and SL roadsters production makes the Mercedes using Magic Sky Control in this and other vehicles and their product line even more likely.

Also considered the well proven experience that technology offered in the S-Class very often migrates into the higher volume E-Class. I’ve been asked by shareholders about the likelihood of other OEMs besides Mercedes adopting SPD-SmartGlass in their own vehicles.

Mercedes has the largest market share and represents almost 40% of the premium market by unit volume. The other two German OEMs BMW and BW represent another chunk and when you add Jaguar, Land Rover and Lexus you add about 92% of the premium market by volume with just those five automakers. Now, to answer the question.

Given the state of developments among the various automotive OEMs and the work being done with them I think it is highly likely that you’ll all will see at least several of these and other car markers introduced models with SPD over the next few years.

These SPD-Smartglass products will include roofs of course and could also include other areas of the car. The lower cost for SPD and the success that Mercedes expects with the S-Class makes it even more likely that these other premium automakers will adopt SPD in a significant way.

We have gone into great detail as to the introduction dates, estimated production volumes, and the impact of cost reductions on the automotive market and introduction in new car models beside the SLK, SL and S-class and by OEMs other than Mercedes.

In the interested time, and to have an opportunity to answer few additional questions on this conference call. I’ve already included answers to many of the questions that were emailed to us in my report to you today, if I haven’t fully answered your question that you emailed please email me at questions@smartglass.com.

Now to touch on some of the other questions we received and moving from the automotive market to the aircraft market, I was asked which licensee was best position to secure orders from Boeing and Airbus.

Each licensee has strength such as SPD product features offered, strategic partners, pricing, certification history or existing aerospace contracts to leverage. This is one of the advantages of our licensing model it inherently fastest competition and provides end customers with a choice and a solution that best meets their needs.

I can say all of our licensees are now well positioned to secure additional aircraft orders. Also the transport category aircraft OEMs such as Boeing, Airbus, Bombardier, Embraer are all considering SPD technology for their cabin windows and working directly with us our licensees and our licensees strategic partners.

The SPD aerospace industry infrastructure is robust do in part to strategic partnerships. Vision Systems is partnered with Vaupell a Tier 1 supplier of interior components including window assemblies and manual pull down shades to transport category or commercial airliner OEM such as Boeing.

In fact they were one of the original suppliers to Boeing, when Boeing got started. InspecTech Aero Service also has several strategic partners that our Tier 1 suppliers – aerospace OEMs in both the transport category and in general aviation.

GKN Aerospace is the largest supplier of structural aircraft passenger windows in the world with all of the major transport category OEMs as customers. GKN has over 2 million aircraft windows and service world wide. We believe that the automotive market will be the largest source of our royalty income over the next several years.

However, the aerospace market is emerging and the mid and long range royalty income potential is substantial. Here is the snapshot of some of the key developments in SPD, aircraft EDWs and EDWs is the term that’s now but adopted by the aerospace industry that refer to Smart Glass, it stands for Electronically Dimmable Window.

First as in the case with SPD windows in the automotive market, so our contracts now in place with aerospace OEMs to offer SPD, EDWs. SPD as standard equipment on the first class glass of all Qantas Airbus A380 aircraft and that’s every plane that’s been delivered since October 2008.

SPD has been selected a standard equipment for passenger windows on the new HondaJet with first delivery is expected early next year. SPD has been selected a standard equipment for Skylights and the new Dassault Falcon 5X and first deliveries are expected in mid 2017..

There have also been an increasing number of public statements made by aircraft OEMs about their considerations for EDWs on their aircraft. Public statements have been made by Eurocopter, Airbus, Embraer, Bombardier and others.

Clearly industry momentum is building, but I think also if you look at the comments you will get a sense of while we are very well positioned for this market. One issue that presents an opportunity is the industry’s experience with the Electrochromic EDW on the Boeing 787.

While this product helped build industry awareness of the benefits of aircraft EDWs. It has received negative publicity and negative airline comments about several performance aspects, perhaps most notably the fact that for some, it does not provide enough darkening.

You can see this performance characteristics talk about – talked about by OEM’s when discussing EDM’s for their aircraft publically. SPD, EDWs have the ability to provide far greater levels of cabin darkening than Electrochromic EDWs, which has contributed to the recent OEM contracts awarded to SPD, EDW.

We are confident that additional OEM’s are also finding that SPD Electronically Dimmable Window can now meet the very stringent and darkness requirements, which should speed introduction.

And then of course that’s the issue of the speed, do you really want to wait two minutes to block the glare coming in from the sun or would you rather do in two seconds.

The other question we’ve received from several shareholders with the status of the aftermarket Sun Visor product originally shown by Vision Systems at Busworld in Belgium this past October. First, Vision Systems had worked with the major OEM truck manufacturer on developing this initial product.

At the time it was an aftermarket Sun Visor that could be installed in a truck in about 20 minutes.

This was the fine product concept, but at our suggestion and the perhaps the suggestion of others, we are determined that installation of – installation and the possibility of success in the aftermarket for a much higher volume passenger car market would be greater.

If Vision Systems could combine the ease of installation of the Sun Visor with their successful development of a self powered SPD-Smart Window.

And for those that follow the aircraft industry, this was the Energia aircraft window that was the finalist for the Crystal Cabin Award at the Hamburg Air show earlier this year that Vision Systems had developed. It generates about 20 times as much power as it uses, so it’s a very nice thing to when put on a plane or in a car.

Self-powered Sun Visor would also speed up installation considerably making it easier, since hiding the wiring behind, the roof panel are inside the A pillar would not be necessary. It would also be a much cooler product and we create a very good first impression, to a much wider audience and potential users of SPD- Technology.

So, in conjunction with Vision Systems and their transparent, photovoltaic panel. supplier Sun Partners in France. We have involved in a three way collaboration on this improved next generation Sun Visor. We’re all together on this and we’re moving forward with great enthusiasm at the highest levels of all three companies.

I was also asked by another shareholder about using SPD to reduce glare from the sun on smartphones. This is a very creative idea and we’ve been approach by several companies who also makes smartphones about various ways that – they could apply our technology to the products to make them better.

Finally, I was asked by another shareholder to report on results of operations from our VariGuard Museum glass unit which Seth Van Voorhees is the President of. While we do not breakout revenues separately for this division, sales this year are higher than last year and we expect the third quarter to be an even better one for VariGuard..

Now, Dan if you don’t mind I’d like to open the floor up to any additional questions..

Now, Dan if you don’t mind I’d like to open the floor up to any additional questions..

(Operator Instructions) Our first question comes from Mr. Greg Palm with Craig-Hallum Capital Group..

Hi, good afternoon, guys its Greg on for Steve..

Hi, Greg.

How are you?.

Good thanks.

Can you just maybe give us an idea of current production expectations for S-Class Coupe and kind of how that’s compares to current production levels of the SL and SLK?.

Sure. Right now, the total estimated production of the SL and SLK combined on the Bremen line is about 30,000 vehicles per year. The S-Class Coupe is estimated to have between 10,000 to 15,000 units a year produced. .

Okay.

So given the higher take rate expectations and higher amount of glass do you think its sort of an equal opportunity?.

At least in equal opportunity to both combined and that’s a good point, because that’s one of the lowest volume variance of the S-Class yet, it gives you an idea of how big the higher volume ones could be when they are introduced in the middle of next year. Because we expect both a higher take rate and the higher royalty per car. .

Perfect. One more for us you talked about sort of the production for the higher volume S-Class Sedan starting in mid-year 2015.

When do you think that you’ll see sort of the full effect of that hitting royalty recognition, or it will be just a big acceleration in Q2 or just kind of more of a steady increase throughout 2015, kind of how should we think about that ramp?.

Well typically, with the car coming out, I believe in July of next year, we could start to see increased revenues from the long wheelbase and standard wheelbase variance of the S-Class in the second quarter.

I think that given the dramatically larger number of vehicles you’re talking about 80,000 to 100,000 of just the long wheelbase and another 15,000 to 20,000 I believe of the standard wheelbase. You’re talking about just the vastly larger number of cars.

So yes, I think you’ll start to see things really start to move, starting or beginning in the second quarter of next year from the long wheelbase and the standard wheelbase and then really just move up from there. And of course yes, the other variants that come out before than that will also contribute to revenue.

One thing also is, as early as the third quarter, which is our current quarter, based on what we’ve seen, we expect that Asahi will have exceeded their minimum royalties to us. So any revenue from the S-Class starting in the third quarter will be accretive. .

Perfect, thanks for all the color guys. .

Thanks.

Our next question is from (indiscernible) with Victoria Group. .

(Inaudible).

We are having a little trouble hearing you..

Can you hear me now?.

Much better, thank you..

Thank you I’m sorry about that. I have two questions for you. Number one, per car you since 14, just about 14 square foot per car..

It varies depending on the Coupe it’s about 14 square feet and its over 18 square feet for the long wheelbase..

Okay, per square foot what is your cost?.

We don’t disclose that, because that’s the price that Mercedes pays Asahi. But what we’ve done and maybe this can help you kind of back into that number is we’ve given a range of between $150 and $250 per car as the estimated royalty and we get 10% royalty from our automotive glass licensees.

So while we can’t describe an exact number, I can give you a range and part of that range is I had question so that were not revealing the exact number that Mercedes pays, but also the range is because you have such a large amount of glass and a large variation from 14 square feet to 18 square feet. So that’s why the royalty is also a range..

And that’s a per foot number you just gave me?.

That’s per car, per car..

Per car?.

$150 to $250 per car in royalty income. So what that implies is that the Daimler is buying the sunroofs between $1,500 and $2,500 at the B2B level, which is what we get a royalty on..

Okay. I guess it would be of great interest to you, if you could get the glass for about $8 or $9 a square foot? I ….

That would be lower than regular glass, so..

Why not..

But you know you touch on an interesting point, which is there have been like it’s typical with many technology base products actually a substantial reduction in the cost of the glass per square foot.

And as I mentioned earlier in the call, even in the SL and SLK which are half a square meter only and have relatively lower volumes, you’re talking about double-digit decreases in cost percentage decrease..

We have a technology available it of might be of interest you..

(Indiscernible).

And I plan on it this evening. One other question….

Offline, but I think we need to move on to the next call. So thank you very much..

Sure, sure..

Thank you..

Our next question is from Michael Kay with Kay Associates..

Hello, Joe. You were quite specific regarding estimates of our production of the various versions of the Mercedes-Benz cars. Given that those actually come to fruition, does Hitachi have the capacity to be able to deal into the deal with the estimates that you indicated..

Yes..

And related to that since we know a major goal of the company has been to get the licensee fee that space in the United States that will may have to do as the film, what progress of any has been made on that since doing so would may be more attractive to potential OEMs..

Okay, I will answer your second question first. It’s always been part of our plan and I just can’t reveal the specifics yet to have both geographic and exchange rate diversity among our filmmakers and also to have a second source of supply. And I’m very optimistic that our initial plans in that area will be very successful.

Regarding your second question about does Hitachi have the production capacity to handle these numbers, absolutely their current factory line can produced 400,000 square meters of SPD film a year. And they tell me that if they needed to build another factory line, they probably need only about 10 months advance notice to get that up and running.

So that’s not going to be an issue..

And is volume increases do you anticipate further cost reductions in SPD to ask which they would result in more companies and consumers being amenable to having that installed?.

Absolutely, absolutely and you know one of the things that we benefit from that I must say no other smart glass company out there benefits from. Is the fact that we do have the high volume automotive production pretty much to our self.

And that really can drive down cost has been shown times and time again about the introduction of new technology based product. So we’re very fortunate that we don’t have to rely like some of our competitors on 1Gs and 2Gs in their backyard to in the architecture market alone.

But that we can actually generate substantial volumes that bring down the cost and achieve economies of scale..

And this should be very positive for the architectural market too because I know they are very price sensitive of the effective model?.

This is good for all of the markets, which should why were so excited. And I think our shareholder should be excited about the content of the current 10-Q..

Thank you, Joe..

Thanks a lot..

This concludes our question-and-answer session. I will like to turn the conference back over to Mr. Harary for any closing remarks. Mr.

Harary?.

Thanks. First I want to thank everyone for taking their time to participate on today’s conference call. Research Frontiers was founded with the belief that are focused in determine group of individuals have the ability to change the world.

We believe that we can help the world save energy ,and make the world to better place, to make people safer, more comfortable and more secure. We believe that people should have greater control over their surroundings, how they live, how they drive and the quality of their life.

And we believe that providing people with the best performing technology to do all of this, is the best way to be successful. Along the way we have attracted licensees that share this vision. We have attracted customers such as Mercedes and others that believe in the same thing.

The automakers we spoke about today, Mercedes, Jaguar, Land Rover, BMW including their Rolls-Royce division, Volkswagen with their Porsche, Audi, Bentley and other brands, Lexus and others have all shown that they not only share this vision, but have build successful and enduring businesses doing just this.

We are truly fortunate that over the years we have had the resources, dedication, focus and support of partners both at our licensees and their customers, as well as with our shareholders to make the world a better place. Our technology is the unchallenged performance leader and the most widely used smart window technology in the world.

We have resources to continue and increase our efforts with strong and liquid capital resources, no debt, a strong patent portfolio and balance sheet and about a $100 investment already under our belt.

We look forward with great anticipation to the start of revenue this quarter from the S-Class on the successful flagship of the Mercedes Empire and the continued expansion of our business as products using our technology become more affordable for a wider group of customers in all industries. Thank you all very much for listening in today..

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect..