Joseph Harary - President & CEO Seth Van Voorhees - CFO.

Greg Palm - Craig Hallum Capital Group Charles Michaels - Private Investor Jeff Harvey - Private Investor Jared Albert - Private Investor Alan Yakaboff - Wells Fargo Bruce Balding - Retail.

Good afternoon, ladies and gentlemen. Welcome to Research Frontiers' Investor Conference Call to discuss Full Year Results for 2015 and recent developments. During today's presentation all parties will be in a listen-only mode. [Operator Instructions] This conference is being recorded today.

A replay of this conference call will be available starting later today in the Investors Section of Research Frontiers' website at www.SmartGlass.com, and will be available for replay for the next 90 days. Please note that some of the comments made today may contain forward-looking information.

The words expect, anticipate, plans, forecast, 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] Also we ask that you keep your question brief in the interest of time. I would now like to turn the conference over to Joseph Harary, President and Chief Executive Officer of Research Frontiers. Please go ahead, sir..

Thank you, Austin. And good afternoon everyone and thanks for being here today. Joining me today is Seth Van Voorhees, who is our CFO and also heads up our VariGuard division. 2015 was a disappointing year for the markets. The Dow and the S&P were down, and the small cap market was particularly bad and year-to-date all the Russell indices are down.

Even Warren Buffett was down 11.8%. Research Frontiers closed the 2015 year up slightly but since year-end our stock is down. We're all disappointed in this. We're stockholders too. We had a mixed fourth quarter too and we will discuss this in detail.

In some areas like aerospace, we had predicted that revenues would be up because we would have a full quarter’s worth of production of the King Air 250, and the introduction of the high volume King Air 350i. We were right about this and the King Air, which we are standard equipment on, is selling particularly well.

We were disappointed however, that the introduction of the high volume V222 S-Class Sedan with the Magic Sky Control option occurred later than we were originally told.

Originally we were told by Mercedes that these cars would be in dealer showrooms by December but the option for the V222 only started appearing in the Mercedes Dealer Ordering Guide starting November 5, 2015. S-Class V222 Sedans with the Magic Sky Control option are in production now and are expected to be in dealer showrooms in April.

And even though the V222 did not generate the revenues we thought it would in the fourth quarter, the reasons for the delay are not related to SPD. These are production and timing decisions rather than anything relating to demand for the car itself or for the Magic Sky Control roof option.

With the S-Class like other vehicles, often there are year-end production adjustments made by Dimmler and the timing in number of new cars produced depending upon the inventory of last year's cars on dealer lots, participation in year-end incentives, and also on marketing initiatives for the coming year.

These changes were made after the time of our last conference call, so we only recently learned of them when we received the quarterly sales reports from our licensees. The Magic Sky Control option on the vehicles that are out there is very popular with customers and Mercedes and their key dealers love it.

And even with this delayed introduction of the V222, revenues were up over 25% from last year. Now let's take a deeper look at the revenues so you can get a better idea of the underlying sales activities. If we add back in non-recurring revenue from 2014 that did not recur in 2015, the total revenue for the year would have been up almost 43%.

Revenue for the fourth quarter alone would have increased by about 5% compared to the fourth quarter of 2014 and a little more than that compared to the third quarter of 2015.

Now that the V222 Sedans with Magic Sky Control are finally in production and should be in dealer showrooms next month, we are optimistic that customers will love MSC on the S-Class Sedan like they do on the other cars that offer the Magic Sky Control options.

And as we learned from other Daimler car models that introduced the Magic Sky Control option after the cars first came out, this does not prevent this option from being successful. In any event, the production of V222s with Magic Sky Control options has started and the ramp up has begun.

And judging from the production data we are now getting from Mercedes, there are about 50% more cars coming off the dimmer production lines in Bremen and Sindelfingen Germany with Magic Sky Control year-to-date this year than the same period of last year.

Of course, the year is just starting so it is too early to make any meaningful extrapolations but it certainly is a good start. There are other positive factors to expect also with respect to cars with the Magic Sky Control feature in 2016. First, usually there is a bump up in unit volumes whenever a car model is in mid-model refresh. And at the L.A.

Auto Show in November, the new refreshed SL Roadster was introduced for delivery to customers in April. And at the Detroit Auto Show in January, the new refreshed SLK, which is now renamed CSLC was introduced. Both of these refreshes should result in more cars with Magic Sky Control roofs being sold in 2016 as compared to 2015.

And take rates on these Roadsters and on the sporty S-Class Coupé also continue to exceed Mercedes expectations. We also expect increased take rates on the Maybach which was just introduced in April, and the S550 Sedans which are in production now and should be in showrooms next month in April.

Visibility of the Magic Sky Control option continues, and cars with SPD-SmartGlass have appeared at every major auto show around the world this past year. And SPD-equipped cars are even appearing beyond the traditional auto shows.

For example in January, Continental Automotive showed their Intelligent Glass Control system in a Ford Mondeo at the Consumer Electronics Show in Las Vegas. There is also a growing knowledge in the automotive industry about the wonderful benefits that SPD-SmartGlass brings to automotive design and performance.

Continental’s calculations show that SPD-SmartGlass reduces CO2 emissions by a significant four grams per kilometer, and can increase gas mileage and driving range of electric vehicles by 5.5%. I thank people who emailed in their questions. We were emailed and asked about the new OEMs joining Mercedes.

Of course, there are the traditional premium OEMs that we have spoken about on previous investor conference calls. BMW, and their Rolls-Royce brand, Volkswagen with their Porsche and Audi brands, primarily, Jaguar Land Rover and the premium Japanese brands.

And as mentioned in the past, they have done their development work and are watching to see the success of the Magic Sky Control option on Mercedes S-Class Sedans. I'm also happy to report today that there are additional automotive OEMs who have recently started the process of working with us and our licensees.

We know from experience that this is a multi-year process but one which now has a much greater certainty of success because SPD-SmartGlass has now been validated and is in serial production and meeting all of automotive standards, and produced by the two largest glass companies in the world, Asahi and Pilkington.

I was asked by email to raise the probability of other OEMs adopting SPD-SmartGlass on their vehicles.

Based upon what I saw last week in Europe at my various meetings, and given the many benefits that automotive engineers and car designers get in terms of energy efficiency, heat and glare management, CO2 reduction, extra headroom etcetera, I think you will see other OEMs follow Mercedes with SPD as they often do with other automotive innovations that Mercedes pioneers.

I was also asked via email to what degree different regions of the world at different levels of acceptance of the Magic Sky Control options. Roof glass has always been popular in the United States and if you look at the now five years' worth of data that we have with the SLK and SL Roadsters, their high take rates confirms this.

The Middle East market also has a lot of sun and heat and the ten degrees Centigrade or eighteen degrees Fahrenheit degree cooling from the Magic Sky Control roof certainly it’s welcome there and in other hot climates. To me what was surprising pleasantly is that in Asia typically side-glass and privacy was valued more than roof glass.

However, recent article shows that cars with panoramic roofs are flying off the showroom floors in large markets like China. In fact, a recent Automotive News article noted that take rates for panoramic roofs which are typically 30% to 40% in Europe and North America, rises to close to 100% on some models in China.

Another shareholder asked whether I thought that the recent sun visor built into the windshield of the Continental Automotive SPD-equipped car at the Consumer Electronics Show was likely to be adopted in volume production over the next couple of years. First, thanks for the question.

Yes, but I think that the built-in sun visor in windshields using SPD-Smart technology is one of the next areas of low hanging fruit for us in the automotive industry. First, it's a nice safety feature.

As Continental Automotive noted in their press release, it allows the driver to keep his hands on the wheel and also dynamically reduces sun glare instantly. And also like roofs, it's an area with relatively easy regulatory requirements.

You can pretty much do whatever you want to above the AS line of the windshield where the blue shade band currently is. And one last thing to note in automotive and this is the point that I made last week at my keynote presentation at the Automotive Glazing Summit in Stuttgart.

We all read about three important trends in the automotive industry; electric vehicles, autonomous driving and CO2 emissions. In electric vehicles we already see the data published by Continental Automotive about increasing the driving range of electric vehicles by 5.5% percent using SPD-SmartGlass as part of their Intelligent Glass Control system.

That is important because automotive industry insiders have confided in me that battery technology is not advancing as rapidly as it needs to. So according to them the main focus and thrust on EVs will be conserving how much power from the battery is used. And by reducing the heating and air conditioning used, SPD is a meaningful factor here.

With emissions, we already spoke about Continental’s calculations that SPD-SmartGlass reduces CO2 emissions by a significant four grams per kilometer. And regarding autonomous driving, as cars become more like a train or a plane because of autonomous driving, the connection with the outside of the vehicle becomes more important.

You want to look around more as the car drives itself. And also with more free time there is a desire to see what's on your devices and on your infotainment systems better by reducing light and glare so people can watch videos and do other things. So SPD-SmartGlass becomes more important to allow this.

Now we saw exactly this happen in the aircraft industry where the passenger is a captive audience member, and the OEMs are now focusing with great effort to enhance the passenger experience. So as autonomous driving expands so too shall the use of SPD-SmartGlass in the automotive industry.

We spoke quite a bit so far about the automotive industry, but royalty income in 2015 was up not only in automotive, but also in each of the five main industries our technology serves; automotive, architectural, aircraft, marine and museums. Let's talk about developments in each of these other industries.

The aircraft industry saw some major developments this past year from three of our active licensees in this industry, Vision Systems, Isoclima and InspecTech.

Major after-market installations occurred and in this area I note the recently-announced strategic partnership between our licensee Vision Systems and New York Stock Exchange Company AAR Corp., a major player in the aircraft after-market. And on the OEM side, SPD EDWs had a strong presence at all of the major aircraft industry shows.

And in 2015, we saw the start of deliveries of SPD windows on two of the highest volume models of Textron King Airs, the 250 in the third quarter and the 350i in the fourth quarter. HondaJet also delivered its first of many aircraft to customers starting in December of this past year.

SPD-Smart EDWs are standard equipment on all of these aircrafts and these aircraft are selling very well. We expect continued growth in the aircraft market in terms of sales and visibility of our technology. Relating to this, an investor emailed me to ask about the pipeline of aircraft using SPD-Smart technology.

As we previously noted, contracts have been entered into already for eight different aircraft models, seven of which we are standard equipment on. We also noted that there are 17 other aircraft models where we are under active consideration, although no contracts have yet been signed for these additional 17 aircraft models.

To get into this active consideration category, you have to be pretty far along in the process. We're not just speaking about meeting at a trade show followed by a broader presentation at the OEM headquarters.

To be in this category, they have to be at a much more advanced stage like an RFP or an RFQ or having detailed discussions and sharing test protocols and test results, certification plans, production facility site visits etcetera.

We have 17 of these aircraft, in addition to the eight already under contract, and going back for a moment to answer another shareholder question on the topic of enhancing the passenger experience.

While what it is being called “Gen2” electrochromics have gotten darker than they used to be, SPD not only delivers an impressive range of light transmission from very dark to light, but also better heat blocking in flight and on the ramp, better control, better acoustic insulation, and switching speeds that are at least 30X to 50X faster than electrochromics.

The bottom line in aircraft is that royalty income was up in 2015 in the aircraft market, and we expect significant increases in revenue from this market in 2016, and some additional exciting developments In the Marine market, 2015 saw SPD-SmartGlass used in large quantities on some mega-yachts as well as on production yachts such as the Cheoy Lee Alpha 76 and 76 Flybridge and the Hatteras 100 yachts.

SPD Technology was featured at all the major international yacht shows this past year. Perhaps the most exciting development in the marine industry, starting in 2015 and going forward into 2016 and beyond is the incorporation of SPD-SmartGlass produced by our licensee Vision Systems for the Silver Arrows Marine, Arrow 460 Granturismo yacht.

Deliveries to customers start this year for this production yacht that Silver Arrows Marine produced in conjunction with Mercedes-Benz Style, a design arm of Mercedes-Benz.

An entire room at the Sindelfingen Municipal Gallery was devoted to this yacht when I attended a special exhibition there in October to mark the 100-year Anniversary of the Mercedes-Benz plant in Sindelfingen, and the 25th five-year anniversary of the Municipal Gallery in Sindelfingen.

Knowing Mercedes, this was just the start of the publicity and I expect that this boat will get quite a bit of attention and marketing visibility. As I mentioned, gross income from this marine market was also up in 2015. The museum market, served by our VariGuard division experienced nice growth and visibility in 2015.

The highly-effective ability of our SPD-Smart technology was presented to museum conservators by Seth Van Voorhees and the conservator of the Smithsonian. The Mormon Church museum has an extensive set of display cases using VariGuard SPD-SmartGlass to protect its most important religious documents. And now they recently ordered more.

We’re also protecting Canada's Proclamation of Rights, and even the most valuable postage stamp in the world at the Smithsonian's National Postal Museum. Awareness of the benefits of SPD-Smart VariGuard panels is expanding and customers love the product. This was also an exciting year for the architectural market for SPD-SmartGlass.

SPD-SmartGlass was selected over other technologies, most importantly, over electrochromic technology, to be the official SmartGlass of the U.S. Pavilion at Expo Milano 2015- the World's Fair.

This glass roof is the largest SmartGlass roof in the world and featured over 10,000 square feet of SPD-SmartGlass in 312 individually addressable one-by-three meter panels.

These SPD-SmartGlass panels protected people during the brutal heat wave in Milan in July, and kept the roof cool without air conditioning, all using at most of the power of several light bulbs.

The World's Fair was opened from May 1 to October 31 and over six million people visited the USA Pavilion and had the opportunity to operate our SPD-SmartGlass from a touch panel. It was the most-visited pavilion in the entire World's Fair Heads of state, government delegations and prominent architects all came to see it.

Later in May, USA Pavilion architect, James Biber and Research Frontiers had the pleasure of speaking about the USA Pavilion and ringing the closing bell on NASDAQ. Millions of more people in Times Square and on screens around the world saw the SPD-SmartGlass roof because of this. And in August, Zuli, Inc.

launched their SmartPlug product, optimized for use with SPD-SmartGlass at the World's Fair. The Zuli CEO and I presented the green building benefits of this powerful combination of smart technologies as part of a Terrace Talk at the USA Pavilion.

The Zuli smart plug is selling well at Loews home improvement stores and online at Amazon and other retailers. And in October, we hosted our SPD industry licensee conference at the USA Pavilion with licensees attending from Asia, Europe, and North America.

The World's Fair has been a great selling tool, and now it seems like any new major architectural project where the design started after mid-2015 when the World's Fair opened, calls us.

We especially like it when our colleagues in the electrochromic industry first contact these projects since there is a clear performance advantage of SPD over electrochromic and people are beginning to understand this immediately.

We answered quite a large number of questions that were emailed to us as part of our presentation today but before we open it up to live questions, I'd thought I answer some more of the other questions that we received via email.

One common question is, can I comment on the status of the Markman Hearing that was held in early November in the Delaware District Court. This of course refers to our patent infringement lawsuit that we brought against EInk, Amazon, Sony and Barnes & Noble.

And as many of you know who follow patent litigation, the Markman Hearing is often a key event in a patent litigation because where the court interprets what the words in a patent claim means. Originally we expected the Judge's decision for the Markman Hearing sometime in January because that's what he told us he expected at the hearing.

But because there were some additional motions initiated by Research Frontiers in the case, since the hearing, and also the Delaware District Court's docket has been quite busy with many other cases, we're patiently awaiting the Judge's decision. Our team did a great job at the Markman Hearing and we look forward to receiving the Judge's ruling.

And I'm very optimistic about our case, and about the eventual outcome of this litigation. I'll now ask the operator to open up the conference to any additional questions people participating in today might have..

Thank you. [Operator Instructions].

Has Hitachi shown SPD film in architecture or Green Building Trade Shows in the past. This refers to a recent trade show last week that Hitachi Chemical did in Vancouver, and this I believe was their first major exhibition. So I think it bodes well but they are beginning to also increase their marketing efforts.

So with that we'll take some questions from the participants on today’s call..

Sure. Our first quarter comes from Greg Palm with Craig Hallum Capital Group. Please go ahead..

Good afternoon guys, thanks for taking the questions..

Hi, Greg, how are you?.

Thanks. Maybe start with the SL and the SLK, given the refreshes there.

Have you already seeing any negative impacts there from a production or sales standpoint as they start to introduces these newer models in the spring?.

No, no. Basically what we're seeing is pretty historically steady - at least historically steady for the number of cars with Magic Sky Control. The overall vehicle numbers has gone down since the car was introduced in 2012 but that's typical. What they typically do it start high, move down and then when you have a refresh of the model, they bump up.

So what we've seen is the amount of SPD-SmartGlass on the SL and the SLK has remained very strong regardless. So we're very happy with those results..

I know that makes sense, I was looking for more - obviously, they have a refreshed vehicle coming out usually. Before that you start to see lower production numbers as they ramp up production of the new ones..

Yes, I mean typically you see that in the total volumes. We haven't seen that on the number we look at, which is the amount of car that come off the production line with the Magic Sky Control panoramic roofs..

Got it. Moving on to the S-Class, I guess my first question is how much, or did you recognize, any fee income from the high volume variant in Q4? And then can you just sort of remind us how you do recognize fee income there, whether it's on a production or sales standpoint? And maybe you can talk about how you think that ramps throughout the year..

Right.

First of all, we started to see the beginning of production start at the very end, like the last week or couple of days of the third quarter of 2015.So in the fourth quarter we did have production of S-Class roofs, but looking at the total number of cars that were produced in the fourth quarter there weren't that many, not just of us, but in general.

To answer your other question, we get paid on two events. The first event is when, in the case of the SL and the SLK, Pilking to sells the roof glass to Mercedes. And in the case of the S-Class vehicles, which are the Coupe, Maybach, and now the V222 Sedan, we get paid when Asahi (AGC) sells the roof glass to Mercedes.

So we get paid that event when the glass itself is sold to Daimler. And then we also get paid by Daimler, a smaller royalty, but one that can add up over the tens of thousands of cars they are producing, on the electronics part of the car as well, powering the smartglass. So we get two royalty streams from Mercedes based on that.

And that's a good way to have pretty meaningful data. We get almost daily production reports from Mercedes on the number of cars coming off the production line with the Magic Sky Control feature, and we get monthly or quarterly, depending on the license, reports on the glass side for production reports. So we're able to match things.

To answer your question about what do we expect for 2016. Obviously we're disappointed because we we're originally told that cars would be in showrooms in December.

And that implies a certain ramp up rate when that was moved to April, and we have a pretty high level of confidence in this because not only do we see the glass reports that we're getting from AGC but we also see the production reports from Mercedes and what's on their computer systems.

We see that the S-class cars, the V222s are being produced now and based on the three week delivery time to get them from Germany to here; we expect that these cars will be here in April.

So starting in April, I think you’ll start to see a more firmer ramp up in the Magic Sky Control feature and, based on a lot of data, a lot of which I can't go into because it steps MBUSA and Daimler in Germany has confided in me, in terms of market conditions and what's going on in one certain set of programs come in place.

I think that you'll see the second half of the year to be a lot more significant for us some of the first half. But the ramp up has started and I'll have more to say about that a little later on in the call..

Okay, thanks. I guess just last one for us, you mentioned other OEMs you were talking with was just curious, how you feel those talks are progressing. Are some of these OEMs, ones in the past or some of them, any color there would be helpful. Thanks..

Yes, I got them. That's an important question about other OEMs adopting the technology and there is a couple of things going on there Greg. Number one, you have the tradition premium OEMs like BMW and Volkswagen and Jaguar Land Rover, and Lexus, besides Mercedes that basically comprised the bulk of the premium car unit volumes about $50,000 MSRP.

Those companies have been working with SPD, they're pretty mature in their stage. To them it's not a matter of how do I put this on a car, they already understand, they understand the supply chain. To supply chain is already validated, the production processes and of reliability of this in the real world and production.

So, for those OEMs, it's really a matter of watching the take rate on the S-class and the visibility on the S-Class. They say the definition of a pioneer; one definition is the visionary that sees into the future and does things. And the other is the guy with arrows in his back.

And I think these other OEMs that want to be the one with arrows in the back, so they're letting Mercedes go first as they often do. And if you look at history of the automotive industry which is something that you’re more familiar with than I am - you see that often when Mercedes adopt something, the other car makers become fast followers.

So that takes care of let's say the traditional premium OEMs. There has been a number of new ones that, now that their business is kind of improved and they get - I guess the firmer feet on the ground, somebody of the other premium automakers are also now thinking about the benefits of SPD.

So I wouldn't be surprised if several of them, both existing and kind of new entrants into this, adopted SPD. But as we know, it's a multi-year process and some started early, some are starting now..

Our next question comes from Alan Yakaboff with Wells Fargo. Please go ahead..

Hi, Joe, how are you?.

Hi Alan, how are you?.

I'm good, I'm good. The gentlemen pronounced my name perfectly, I give him a lot of kudos.

Regarding the law suit, how much revenue is in play, can you get into that? What you're looking at and what percentages you're looking at of those revenues if obviously if the best case scenario came to fruition?.

Let me first kind of give the caveat, on a conference call it's not the place to discuss a litigation, Judges don't like that. They like the cases tried in their court room and not outside of it. The amount of sales is substantial, measured in quite substantial amount.

Speaking very generically, typically in a patent litigation, you have to determine infringement of a valid patent and the second thing is what are the damages if there is infringement.

And that in the damages phase, if you're the court you're trying to approximate what a hypothetical licensor would charge a hypothetical licensee for the technology that's being infringed.

Our position - and this is clearly in our papers, so I'm revealing anything other than summarizing it maybe, is that we're not hypothetical licensor, we're an actual licensee with 40 plus arm's length negotiated license agreements all charging during the relevant period 10% to 15% percent royalty rates.

So that would be a very good scenario in terms of damages and would result in a substantial recovery for Research Frontiers and maybe to anticipate some of the questions we get, what we do it that money. I think special dividends is something that I as a board member would certainly vote for and I think others would too.

So I think that we all have a meaningful stake in this litigation and at success..

And you mentioned - I was wondering if you could give some color on why the additional information was put forth by your company by first Research Frontiers in early January.

Can you disclose any specifics to that or what happened if the judge was about to make a decision in January or February?.

There were some material things that had occurred and that we learned after the hearing and I think the court also wanted a full record in front of him. So that's basically what happened.

I can't really comment beyond what was filed in the litigation papers but I'm sure like most of you we have Pacer in our bookmarks on our computers and are updating it frequently to wait for that decision. We're very optimistic as I said..

And regarding the V222, is it going to be revenue recognition the first quarter?.

Yes, there will be. Now that thing has ramped up, now the cars are being produced with Magic Sky Control. You will start to see more and more cars coming in with it. And we look at the experience we've had with the other cars that have Magic Sky Control.

Once people realize it's there, and I'll talk about that maybe in my closing remarks, once they’ve realized it's there, they want it. Our experience has been SL, the SLK, the Maybach and the Coupe.

And I'm sure we're going to have a similar experience with the V222 Sedan that is going to be nicely taken option and people are going to continue to enjoy it..

Just one last question, regarding the E-Class, any thoughts on that or any movement on that, any possibility that that's going to incorporate the magic roof?.

The E-Class is great car. I would be surprised if Daimler put Magic Sky Control on the E-Class so soon after just putting it on V222 because I think you want to make the S-Class customers feel very special and a little bit exclusive, at least for a little bit of time before you open it up to a broader market.

And that's typically been the tradition with E-Class. So we'll see what happens there..

Thank you, Joe..

Our next question comes from Charles Michaels, Private Investor. Please go ahead..

Hi, Joe. I just had one question with regard to the last quarter, it looks like there was a bad debt expense for almost a third of $1 million.

Just wondering if you could explain what that was about?.

Sure. First of all, one of the questions we get is, is it anybody really significant to our revenues. Like Pilkington or Asahi or Mercedes, and the answer is no. When you see receivables for example on their balance sheet, a lot of those are just timing issues and they're paid usually right after invoiced, it goes out quarterly.

In terms of the bad debt expense, we just thought it was prudent given - maybe this is the economist in me but I look at all events, I look at certain regions of the world and I say you know something, let’s take a [reserce]. Historically, where we've taken a reserve, we've actually had recoveries of those amount.

So maybe it's just overabundance of caution..

Okay, thank you. That's all I have..

Our next question is from Jeff Harvey, Private Investor..

Can you propose a reason why Lincoln didn't go forward further with their concept car?.

Okay. I'll repeat the question in case people didn't hear Jeff's question. Do I have a reason why Lincoln has not adopted SPD technology yet. Because the car that was introduced at the Detroit Auto Show did not have SPD in the roof like the concept car that was there was at the New York and the Shanghai Auto Shows in 2015.

What I was told by Lincoln was the following, It typically takes them at least three years to validate a glass technology. And between the time when they decided to put SPD in the car and when the car was coming, there wasn't just enough runway for them to complete that process.

We are discussing whether there would be a mid-model introduction of SPD like Mercedes has done, and stay tuned, we'll see what happens there..

And just quickly, can you give us some feel about how much longer these other automotive OEMS want to see the uptake in the S-Class? Are we talking a year, year and a half or what's your best guess?.

Automakers are a lot like investors, everybody has their own comfort point about when they adopt something. Typically Mercedes has been an early adopter of new technology and they've been very successful with that model. Other car makers tend to wait for more proof points and some wait for even more proof points.

So one factor is really kind of the corporate culture at the different OEMs and the other thing is really just a matter of – the cars that SPD is being slotted for. If a car is coming out in two years, even if they are ready today it's going to come out in two years and the marketing will start a year from now.

It also depends on what's in the new product pipeline at these car companies. And then there is also some other considerations that often come into play.

For example; if you have a car that's not going to be refreshed for three or four years but you're trying to boost up sales, you might come in with an introduction of something new and innovative in between when the model is introduced and in the refresh state which is typically three and a half years out, so you could see mid-year or mid-model introductions even before the refresh date.

It's going to depend upon a variety of factors and I can't really comment on what's in play at each specific automaker, because that's their business..

Okay, thank you..

Our next question comes from Georgia Wahankah [ph], also a private investor. Please go ahead..

I think you answered my question in that you've put such emphasis on April and I was wondering whether the first quarter would not show the royalties which you mentioned that accrued, once the glass is shipped to Mercedes. So you really answered that. It's been a great call, I thought I took myself out of the queue I guess, I didn't..

Anyways, thank you for the questions you compiled which I incorporated into my presentation also. I think they are helpful for all the shareholders..

Obviously disappointed with earnings but I think you explained that quite well. Looks good for the future. Take care..

Thanks..

Our next question comes from Neil Leaven [ph] with NCL Financial..

I have three quick questions. One is on the way the licensing deals work where payments in most cases I believe is 45 days after the end of the quarter..

Right..

But some deals are monthly.

Do you have any plans or are you in the process of renegotiating old deals so that they all become monthly instead of this 45 day delay after the end of a quarter?.

To answer your question, simply yes. We try our best to get monthly reporting when we can. We've been much more successful at it with the newer licensees. Some of the licenses like Asahi though which is a significant source of revenue, they've been a licensee of ours since 1992, so it's very hard to get them to change but we're working on it..

You've mentioned are at least once that back in previous calls that you thought that if the S-550 performed on a take rate the same way that the SLK and SL did, that the company could possibly be profitable but you didn't specify any period of time.

Based on this delay that took place by Mercedes, can you comment on profitability for 2016?.

We don't have a data on how quickly the ramp up is going to occur. We know the general plan and our licensees that are producing the glass know the general plan, but even they are getting constantly adjusted numbers from Daimler.

They could produce whatever Daimler asked but they get these readjusted numbers pretty much every month on what they are being asked to produce. So even they don't know. And when we conclude the call, I think you will have a better idea of some of the things that may improve the take rates..

Okay.

You must have had some information or data that you based your comment on, I'm just wondering, my question was really if based on the delay that took place, would that have like thrown a monkey wrench into those comments?.

The delay was not related to SPD at all. The start of the race starts in April instead of December..

Right but that's what I'm asking you, the fact that it's starting in April does that change your previous outlook as far as profitability for this year?.

Since I've never given an answer in terms of what the probability would be for 2016 other than to say as you've correctly paraphrased, if we get similar take rates that we're getting and experiencing with the other cars, the V222 can make us profitable. That's certainly something that still remains..

Okay. And then my last question is sort of - a house-keeping kind of thing. Based on when you release your information, the next time you release you information for the first quarter it's going to be in May.

And I've asked you a question privately a few times, do you have any - I know that you have a lot of issues where you can't talk about things as other companies can -- but do you have any plans based on providing information to investors and potential investors and institutions about releasing any information about the first quarter or your comments about the first quarter prior to May?.

First of all, every shareholder is equal in terms of disclosure so if we release it, it would be to institutional owners as well as individual shareholders at the same time and in the same manner.

But if you look back at where our key revenues are coming from, a lot of these license agreements provide for reporting 45 days after the end of the quarter and because these are very large companies that have to get their act together in terms of what they reported to us, often we don't find out about the sales until really almost the last minute.

I mean it always makes the last week before a SEC filing, a lot of fun for Seth as we try to get all the data together from different licenses around the world.

But you also know that if we can say something we try to say something and if we try to be creative in how to get that information out in a way that is not going to jeopardize our relationship with the customers. So if we can we will but chances are if history is any guide, we're not going to have that data until right before the filing anyway.

So we'll do what we can..

So I guess it would help to twist some arms if you can and change that 45 days to monthly? Thank you, Joe..

Our next question comes from Bruce Balding in Retail..

Thank you for taking the call, Joe.

I guess what is the soonest you could expect to see SPD going into an architectural project?.

So what we're noticing Bruce, it's a great question. What we're noticing is ever since the World's Fair, every major project that is considering a SmartGlass seems to be finding us.

I can't say the same to some of the reporters that are out there but in terms of the people who are really doing the research, a typical scenario is we'll get a call or an email or we'll develop a project ourselves.

But typically what happens is that Sage and View which are the primary competitors in the architectural market will have pretty extensive sales forces that are out there beating the bushes and presenting the benefits of SmartGlass technology to these projects.

Usually when they leave, I get a call saying how does your product compared to Page and View. And I love those calls because all you got to do is show up with a full size piece of glass and say, this is something no one else in the industry will do.

I'm going to show you a full size piece of glass switching and you're going to see the difference immediately in terms of range of light transmission, uniformity of change, heat control, and of course switching speeds, and they say “What do you mean switching speed?” And I respond that, well you know, the smartglass panels that you're looking to put in your project are going to take 30 to 45 minutes to switch if they were electrochomics.

Did they tell you that? And they said, no, they didn't tell me that, they've neglected to mention that. So often that's a good start when you show the performance benefits..

Okay.

Any timeline wags at all?.

There are things that are fairly well along in the architectural market, and they are potentially highly visible significant projects. Our licensees and we are working very hard on that..

And to segway into my other question, one of the things I've noticed you don't push, at least publicly, is reliability.

And I guess I'll ask my typical question, have we got enough vehicles running after several years of the SL and SLK that we have very good reliability/failure numbers?.

Yes, the failure number is zero. And the reliability numbers are 100%. I got to tell you, there is not many things on the car that could brag that, except us. Out of tens of thousands of vehicles that have been on the road, some for five years or more, no one reported a problem by anybody. So we're very happy.

And we do talk about reliability by the way at industry conferences, automotive engineers and architects, the reliability becomes something that's very, very well presented. I'd like to take the last question and then make some closing remarks..

Sir, the last question comes from Jared Albert, a Private Investor..

I want to actually follow-up on Bruce's comments about architecture. It's something I don't understand because if you look at all the SLs and all the SLKs you ever meet with Magic Sky Control, its maybe on the order of 120 thousand square feet of glass.

But if you look at some of projects, it sure seems like an easy way to just get the price down which is the ultimate goal. And maybe a lot easier than automotive as it turns out since this is taking forever and hangs on one company. So we've seen kind of architecture....

Let me first just say that we're not just focusing on one industry, the nice thing about having licenses in all five major industries is that, they're focusing on these industries, they're doing the same kind of marketing that Sage and View are doing..

So you suggest that the phone rings and you pick it up in your glass or the big piece of glass. You have huge resources to beat the bushes for these projects. It seems like this is moving - they actually exist, these are smart glass installations that go over the world..

What I'd like to do just as an exercise, I'm not - I don't mean to give you homework but I think it will be instructive. Take a look at when these projects started and take a look at geographically where they are.

And I think you make some assumptions that a lot of these are highly subsidized or what I'll call backyard projects, a lot of them are in Minnesota for SAGE, a lot of them are in California for View where these companies are headquartered, a lot of them are highly subsidized.

But also look at the disclosure about the projects, they talked about a stadium, so much square footage. But if you look at what was really smart, it wasn't that much. The Kimmel Center in Philadelphia, they talked about this huge glass atrium but this is actually is a little spot that has SmartGlass on it.

So I think if you really look at the data that they are disclosing, you really have to kind of dig deep to compare apples to apples.

And that's one of the things that I've been advocating to the SmartGlass industry for the last five years, let's do some real side-by-side comparison, let's talk in all of our press releases about the size of the panels, the switching speed, the range of light transmission, and the total number of square footage in uniform terms so that people can actually compare.

And not surprisingly, our competitors have not taken us up on that. So with that I'd like to make a closing remark if I could.

And this really focuses on marketing because I think now we're at a stage where - we're definitely at a stage where from a technology standpoint everything is really robust and solidified and mature in terms of that and certainly in terms of reliability. So really the thing to talk about it is marketing.

All of these events that we've talked about, tradeshows, the World’s Fair, the use of SmartGlass and tens of thousands of cars on the road, have enabled many millions of people, especially in this past year, to experience the magic of SPD-SmartGlass.

And the benefits extend to all markets, as architects, project developers, automotive aircraft and naval engineers can now understand and experience the benefits of SPD-SmartGlass. Last week I traveled over 12,000 miles to four countries to promote the benefits of SPD-SmartGlass.

By the way someone made the comment privately, maybe I shouldn't be traveling so much. I fly economy and it didn't cost the company that much for me to do that. But that trip culminated in me presenting the keynote speech at the Automotive Glazing Summit in Stuttgart.

And we're now continuing that successful effort of bringing the magic of SPD-SmartGlass to many people. And now is the time to do it, now that the cars are on their way to dealerships, the SLC, the SL, the S-Class Coupe, and the V222, with Magic Sky Control, that's the time to really step up what we're doing.

So today on this call I'm announcing an important marketing initiative.

We and our licensees have been working together and with the direct support and encouragement of Daimler in Germany and major regions of the world, such as The United States where MBUSA has been very supportive, we're making sure that in key dealerships, when a customer walks then they'll be able to see, touch and feel the magic of Magic Sky Control.

And understand this is a coordinated effort by Research Frontiers, Mercedes-Benz in Germany, their key regional arms around the world such as MP USA, and key dealers in all of the major regions. Because the dealers and the Mercedes-Benz sales people all tell us the same thing. When people know what Magic Sky Control is, they want it, plain and simple.

This marketing initiative is already underway and we're taking firm steps and making steady progress with very strong partners to increase sales of the Magic Sky Control option. And our goal is to grow the use of SPD-SmartGlass in all five markets for it.

And we're achieving that goal with hard and focused work, good market intelligence provided by Mercedes and their dealers, and the support of Mercedes in Germany at the highest levels of the company, and in their key regional headquarters around the world, and at their key dealers for the SLC, the SL, the Maybach, the S-Class Coupe and the S-Class Sedan.

And in addition to the strong support and guidance by Mercedes and their dealers, we have world-class licensees supporting us. And of course, we appreciate and rely upon the support of our investors as we ramp up sales in all markets.

So with that I want to thank everyone for today, for hopefully understanding the situation much better, now that we've had a chance to talk about it in more detail than our 10-K would allow. And I thank you all for your participation in today's conference call..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..