Joseph Harary - President and CEO Seth Van Voorhees - CFO, VP Business Development, and Head VariGuard Division.

Ishfaque Faruk - WestPark Capital Michael Kay - Kay Associates.

Good afternoon, ladies and gentlemen. Welcome to Research Frontiers Investor Conference Call to discuss the First quarter 2017 Results and Recent Developments. During today’s presentation, all parties will be in a listen-only mode. [Operator Instructions] This conference is being recorded today.

A replay of this conference call will be available starting tomorrow 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 could cause results to differ from those anticipated are described in our filings with the SEC.

Research Frontiers undertakes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties. The Company will be answering many of the questions that were emailed to it prior to this conference call, either in their presentation or as part of the Q&A session at the end.

In some cases, the Company has responded directly to email questions prior to this call or will do so afterwards, in order to answer more questions of general interest to shareholders on this call. [Operator Instructions] 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, Anita, and good afternoon, everyone. And joining me today on this conference call is Seth Van Voorhees who is our CFO and Vice President of Business Development and also heads up our VariGuard division. Many of you speak to Seth throughout the year, and Seth and I will both be available to take questions after my presentation.

In our last conference call for investors in March, we outlined our clear strategy for growing revenues, continue to develop new licensees, continue to grow each of the five markets that our technology is used in and develop new uses for our SPD-SmartGlass technology.

As we also noted, a key element to growing revenues was reducing the cost of our technology to the final customer. In the seven weeks that have elapsed since our last call, we have made progress in all of these areas; we will talk about it.

The automotive market is currently our largest market and to recap what we said on our last conference call, until our other four markets come online with more firmness, we will be dependent upon the ups and downs of the automotive industry. On balance, the automotive industry is a great industry to be in.

The automotive industry is the first high-volume user of smart glass, and SPD offers the best performance of any switchable tint technology ever developed. The automotive industry has tried other technologies, but we are the only that has gained the foothold and has putting serial production.

The automotive industry is also one where our technology has shown itself time and time again to be highly reliable over the years across tens of thousands of cars, not one reported problem ever.

The automotive industry is also the one main industry with relatively steady and predictable volumes compared to all of the other markets of smart window technologies, and which has high unit volume potential and standard sizes. This is why being in the automotive industry is so coveted by everyone in the smart glass industry.

We are the only technology that has succeeded in being here. And we have license to majority of the world’s automotive glass production to use our technology, which has become the technology of choice in the automotive industry. As good and desirable as the automotive market is, there are some aspects of it that can be challenging.

First, it is a cost-sensitive industry to begin with. And our royalty income from this market may be influenced by numerous general factors such as trends affecting overall demand in the automotive industry. One example of this is that car makers are adjusting to a world of car sharing services such as Uber where car ownership becomes less important.

Another factor is the rate of introduction of new technology in OEM product lines. This is an area where there are dramatic changes going on, such as self driving cars, connected cars and electric vehicles. All trends which benefit Research Frontiers.

In addition to these macro factors, the Company’s royalty income from the automotive market could also be influenced by specific factors such as whether the company’s SPD-SmartGlass technology appears a standard equipment or as an option on a particular vehicle, the number of additional vehicle models that SPD-SmartGlass appears on, the size of each window on the vehicle, the number of windows on a vehicle that use SPD-SmartGlass, fluctuation in the total number of vehicles produced by the manufacturer, where in the vehicle it is in its product lifecycle.

For example, volumes typically start high, taper down and then bump up after a mid model refresh, typically three to four years into a model.

Other factors include the price of the vehicle, customer take rates and manufacturer make rates for options on a particular car model, the relative profit per component that the automaker enjoys compared to other options and changes in pricing and exchange rates.

The Company’s fee income from licensing activities for the three months ended March 31, 2017 was just under $400,000 as compared to $409,000 for the three months ended March 31, 2016.

Roughly, this was a $16,000 decrease and was principally the result of exchange rate fluctuations and lower levels of sales of SLK and SL roadster vehicles containing the Magic Sky Control option by Daimler. And it is offset somewhat by actual higher sales of the S-Class vehicles with the Magic Sky Control option.

A large portion of this $16,000 decrease can also be explained by the timing of revenues and shipments from our VariGuard division this year versus last year. Let’s focus on our revenues from the automotive market.

In the first quarter of 2017, the Company received royalty revenues from sales of the Magic Sky Control option on the S-Class sedans and coupe, and on the SLK and SL roadsters in excess of the guaranteed minimum manual royalty levels and its license agreements with our licensees to supply this glass to Daimler.

This resulted in additional royalty revenue from these licensees. Sales of S-Class and Roadster vehicles by Mercedes and also King Air aircraft using the Company’s SPD-SmartGlass technology were up by double-digit percentages in the first quarter of 2017 as compared to the previous quarter.

Operating expenses decreased by $50,000 for the three months ended March 31, 2017. They actually in essence were down by about double this amount when you account for timing differences because we paid some expenses this year earlier than last year. Research and development expenditures decreased by roughly $200,000 for the first quarter of 2017.

Apart from lower expenses, we also expect higher revenues in 2017 as compared to 2016. We expect further revenue increases as the newly refreshed S-Classes sedan arrives in showrooms and about three weeks Mercedes announced that the market launch of the new S-Class will start in the European markets in July, so the U.S.

market will get theirs shortly thereafter.

Let me emphasize that while refreshes of the models we’re on tend to increase our revenues and we’ve seen that experience with the SLK and SLC roadsters -- and the SL roadsters, the most important thing we could do to increase our revenues, especially our revenues from the automotive market is to reduce the cost of the end product to the auto manufacturers.

This is our biggest focus and our biggest opportunity. Take rates are better than Mercedes expected. However, we want to improve not only take rates but our dealer awareness program but also the make rates by increasing the profitability of the Magic Sky Control option to Daimler. Here’s how we’re planning to do this.

We have a cost reduction initiative which could put us in the sweet spot of the profitable options within Daimler. This has the potential to multiply revenues from Mercedes. Once we deliver the cost reductions and there may be several of them over time, it may take some time for these to filter into the Daimler production callouts.

So this is not a near-term fix, meaning over the next several months but it can cause significant growth when we achieve it. They will also motivate other OEMs since we will enter their sweet spot of profitability as well for the option. We are working with licensees at every level of the automotive OEM supply chain with intense focus.

Our licensees in the supply chain have already made progress on reducing costs. We are also working internally and on other cost reduction approaches.

I’m happy to report that since our last conference call, we and our licensees have achieved further cost reductions and we continue to work together to find more since more work is needed to be done here in order to hit our targets. In our last conference call in March, I noted several other important developments in the automotive industry.

Continental Automotive, one of the top five auto makers in the world for components, actually a component supplier in the world, featured at the Consumer Electronics show an upgraded car equipped with all SPD glass, also Corning featured at the CES, the Corning 1 concept electric vehicle that had SPD combined with Gorilla glass and the panoramic sunroof and then the rear glass.

Corning has indicated that of all the unique features in that car, this is the one that got the most attention, and they were very pleased with the feedback they received from customers. Let’s now talk briefly about the aircraft market, our second largest market in terms of revenues. First, let’s talk about last year.

Last year, aircraft revenues were down for part of 2016 because of a temporary stop in production by Textron, so they could upgrade certain passenger controls in the aircraft. Thus, when aircraft deliveries to customers stopped so they could upgrade these controls switches, so did delivery of InspecTech’s [ph] windows to Textron.

We reported in the last conference call that Textron was back in full production in the fourth quarter of last year and aircraft deliveries and the revenue from these models has resumed. Not only is Textron back in full production but royalties from their aircraft in the first quarter of 2017 more than doubled from the prior quarter.

We continue to make steady progress in the aircraft market and other areas as well. We’re on seven models as standard equipment at the OEM level and in 34 aftermarket models.

But the big change that will come here in our revenues will come as we move from general aviation or business jets to the airline transportation category market, which we estimate is eight times bigger than the business jet market.

I also think that we are pleased to see some major movements by the largest players in the industry in this area coming up. Now, moving from the aircraft market to the architectural market.

In the architectural market, one historical obstacle is the fact that Hitachi only coats SPD film one meter wide and many architectural applications call for four side one six-foot width with their glass panels.

This is not a technological limitation with SPD technology, it’s only a function of the width of their coating heads on the machine that they put into operation at Hitachi 10 years ago and at that time all other smart window films were also coated at one meters widths.

While film width is a limitation in the architectural market, our licensees are pretty good at working around it. I was asked for an update on some of the architectural projects we talked about. This past quarter, SPD-SmartGlass was installed on some very large architectural products including corporate headquarters.

And in additional high-profile projects or institutional use such as governments facilities and hospitals we’re also awarded to our licensees. Now, let’s discuss two additional developments that occurred during the roughly seven weeks since our last conference call. We licensed Hanamac International, a U.S.

based company that for that past 35 years has introduced and marketed innovative and technology based products to the architectural, defense, aerospace and power generation industries in South Korea.

We have been working with Hanamac for over 10 months and during that time we and they were collaborating on developing a new SPD products to the automotive aftermarket in South Korea. Hanamac’s approach should make it making much faster, easier and less-expensive for car owners to upgrade their cars with SPD-SmartGlass in the aftermarket.

Given the very large size of the automotive aftermarket, this represents a very exciting new use of our technology that can be broadly deployed by car dealers and auto glass replacement shops. We receive a 10% royalty on the sales of Hanamac’s products. And we received a question why 10% and not 15%.

And to answer that now, all of our automotive based products licenses bear a 10% royalty, and this is one of them. All of our other products in the last -- licenses in the last 10 or 15 years bear a 15% royalty. So, this is our standard royalty for automotive.

Also, although it’s not intentional, it seems that this new product developments evolving our technology seems to coincide with our quarterly conference calls. Perhaps this is by coincidence or more probably because the pace of new product announcements have accelerated.

In our last conference call, Panasonic had just announced the market launch of their new transparent screen product using SPD technology.

Initial reports are quite favorable about Panasonic’s new product hold the transparent screen that uses our SPD-SmartGlass technology combined with liquid crystal technology to switch to glass from transparent mode to screen mode.

By combining this technology, this achieves 150 to 1 contrast ratio and converts the window into a high impact video signage for stores, museums, galleries and other outdoor uses. Nippon Sheet Glass who supplies the smart glass to Panasonic for this reported this product is doing well for them and for Panasonic. Now, another product announcement.

Earlier this week, on Monday in fact, Japan Railway East, also known as JR East, began luxury train service on its new Shiki-shima ten-car sleeper train that has 17 suites to accommodate 34 passengers. It also has two observation cars in the front rear, a dining car and allowance car.

It travels from Tokyo’s Ueno station to various parts of northern Japan and was designed by award-winning designer, Kiyoyuki Okuyama, who’s also designed bullet trains, buildings and perhaps is best known for designing Porsche and Ferrari Automobiles. Asahi Glass is working with JR East to allow us to reveal more details about this.

But for now, if you want to see what this ultra luxury train looks like, Google Shiki-shima. Staying with the train market for a moment, another licensee besides Asahi Glass has also already begun supplying SPD-SmartGlass for two other luxury trains that are being built and is working on others and there are more things to come.

We continue to project higher revenues in 2017 compared to 2016 as the various markets, primarily automotive and aircraft rebound for us, and architectural marine and museum glass continue to grow, and the new markets that are recently opened up develop for us and our licensees.

And even more meaningful revenue growth should come with our initiative to reduce the cost of the final product to the customer, and this is the main focus of ours companywide. I’ve been asked to provide an update on our patent litigation. As many of you know, we’re suing E Ink, Amazon, Sony and Barnes & Noble for infringement of three of our patents.

Based upon our confidence and what the case law says, we decided to take an immediate appeal to the federal circuit court of certain interpretations of our patent by the Delaware District Court. We filed our initial briefs in early April and E Ink’s reply brief is due in mid May and we can file a further response brief if we want, in June.

We received by email before this call, questions from investors, and we addressed many of the general topics in our presentation today. And if we’ve not fully answered these questions either in our presentation or in the live Q&A coming up now, please feel free to call or email us. But, let me take a couple of the email questions we’ve got.

With the stock price in decline, are you in danger of delisting from NASDAQ? The answer to that -- and I think that’s a question we received from several people, is no. We remain in compliance even at our current stock price.

Another question we got was from -- a shareholder asked why are we holding our annual meeting in our corporate headquarters this year? Historically, we’ve have held it at the Fox Hollow Inn, five minutes away.

Well, we held it in various places but we felt that with four quarterly conference calls, the annual meeting becomes less important as a opportunity to report on the Company’s progress. In the past, that was our only report. So, we tended to have a larger crowd. Now, in our conference calls, we track a larger crowd than our annual meeting.

So, we decided that with four quarterly conference calls and also just a general cost reduction initiative in place, we thought we would save some expenses. It’s also an opportunity to show our headquarters and some new products that are in our design center. So that’s why we are doing that.

Another shareholder asked or kind of referred to the fact that news that Mercedes is dropping SLC and S-Class Coupe, what will replace these orders at Mercedes? We haven’t heard of any cars being dropped by Mercedes on the current models using our technology.

There is talk of the SLC and maybe the SL roadsters having a canvas top when it comes out in the next version, which is years away. If it is a canvas top, it’s very hard to put glass on the roof because of that. But so far, if we’re in the roof, we expect to continue in the roof.

Another question was asked about Gen 3 technology from Gentex coming in 2018. It is darker than what they were able to achieve in Gen 2. I have been on aircraft with Gen 2; there is still some real problems with the Gen 2 product that I believe will still be present with the Gen 3 problem. It’s still very, very slow.

And there is also a disuniformity of change. It tends to change from the outer edges and work its way towards the middle.

On one Dreamliner flight that I was on, when they flipped off the windows, we got, what they call as doughnut hole effect where it looked like every window would basically shape like a doughnut with a hole in the middle for a minute or two and that looks kind of funky if you’re trying to achieve that effect, but not if you’re trying to have uniform change.

Got a question regarding our proxy statement, regarding executive compensation. It seems that part of executive bonuses are based on achieving certain revenue goals. What is the revenue hurdle for 2017? We don’t provide specific revenue goals in advance because that would telegraph our licensees projections for the coming year.

I can say though that it will be a bit higher, maybe much higher than 2016. And then, the other question we got is your currently paying audit fees of over $200,000 on revenues of $1.2 million. That seems very high for a license based business with no real manufacturing operations.

I realize that there are compliance issues to public companies, but have you looked into shopping around your audit cost. Great question, Jason and thank you very much. We actually have renegotiated our audit fees and we expect them to be substantially lower in 2017.

At this point, I think we’ve covered pretty much either in the course of the presentation or some of the questions I just read, most of the questions that we received. So, I’ll now ask Anita to open up the conference to any additional questions people participating today might have that we’ve not already covered..

[Operator Instructions] First question today comes from Ishfaque Faruk with WestPark Capital. Please go ahead..

Hi. Good afternoon, Joe..

Hey Ishfaque, how are you?.

Good, good. Could you give....

I must say by the way, you have very sharp eyes in finding that Asahi press release so quickly..

Thank you. All right.

Could you give us a sense of your partnership with this new licensee who’s going to be focused primarily on the South Korean aftermarket?.

Sure. And maybe I could also give you kind of the longer game plan. So, they have a license from us to supply the automotive aftermarket in South Korea. It’s a market that they’re very, very familiar with. They’ve supplied automotive based products, architectural based products, aircraft, aerospace products.

The idea is to go after the lowest hanging fruit that they see right now, which is avoid that exist in the market. And you question gives me an opportunity maybe to elaborate a little bit more on some of the challenges that have faced the aftermarket. So, let’s say you had a car that you wanted to upgrade with SPD-SmartGlass in the past.

If it didn’t come as a factory installed option, the next thing that you would look at is whether it was existing laminated glass or not. There’s about 40 different car models that have laminated glass on the side glass and they typically do it for either solar control or acoustic reduction -- sound reduction.

A primary example is the Mercedes S-Class has laminated glass on the side because it’s quieter and cooler.

So, if you had that then what you would do if you wanted to upgrade your car, see if the auto glass manufacturer, either the OEM manufacturer or the aftermarket glass manufacturer will be willing to sell the glass in an unlaminated form so that you can laminate our film in between it; and if they would, you would laminate the film inside it, and then you would install it in the existing door panel.

However, most cars don’t have laminated glass and also most suppliers wouldn’t supply glass that’s not fully laminated. So, what then you ought to do is either work with some that already that already had the glass molds and the tooling to form the glass in the shape that the car needs or they would have to develop it.

And glass tooling can be very expensive. So, some of our licensees over the years have developed glass tooling for high-end vehicles.

And the reason they do this is when you make a car bullet proof or bullet resistant rather I should say, you need to laminate glass with multiple layers of glass and plastics, so you need to have those glass molds in place in order to do that.

So, for example, two of our licensees that are very strong in the bullet resistant glass market are Isoclima in Italy and AGP in South America. And over the years, if you wanted your Toyota Land Cruiser or your Jaguar or a number of vehicles upgraded, you can go to them and they have the tooling.

But what if you didn’t have one of those cars? Then, there would be an added expense and delay in trying to determine, can we make the tooling for this car, how much would it cost and then how long would it take us to mold the glass.

So, what Hanamac’s approach is to change that around and develop some innovative approach is to still get a very, very high quality installation without having to develop glass tooling and things like that.

So, in essence, the goal is for them to develop kits that either the auto glass companies or the dealerships can stock that would allow them to quickly upgrade your car. And if you think about -- once you kind of remove the need for fabricating glass, then installing this glass becomes a lot like replacing a broken window.

When I was lived in Brooklyn, that was part of the life out there and you would take your car to an auto glass shop; they would call up the local distributor; your glass would be there in an hour or two; they would unscrew your door panel; they’d put in the new glass; they vacuum out all the glass, bits that had from the broken glass and you would be on your way.

Well, these same auto glass shops also would do other things. They would install high-end stereos, they would install car starters, remote starters and other things into the car. And because of that they had an expertise not only in glass but also in electronics.

So, if you think about that, most other glass shops today have exactly the capabilities they need to install SPD-SmartGlass, assuming they can get the glass relatively quickly. So, that’s why I’m very excited about the Hanamac approach.

And then, if you take this to the higher level, which is if you want window tinting for example on your car today, you can go to a tint shop on the corner and you can get kind of a variety of different quality installation or you could ask your dealer to install the tint.

And typically, they’ll go to a very high end tint that can do a quality installation. But a lot of customers will ask the dealer to take care of upgrading the tinting and do something better. So, this same approach that works with the auto glass shops can also work with the auto dealers; it becomes a dealer installed option.

So, it’s quite exciting for us..

Will the SPD-SmartGlass get much -- be like a hit in the aftermarket hours, considering the fact that it’s a pretty pricy option for installing in aftermarket?.

Yes. Well, there are things such as aluminum wheels that are lot more expensive than you could imagine, they get upgraded everyday in the aftermarket. So, people are spending money on customizing their car.

And this is probably one of the most dramatic things you can do to upgrade your car, unless you want to flashing blue LED lights on the undercarriage or something like that. But in terms of kind of a desirable and functional upgrade option, the market seems to really rally around this.

And the fact that we now have a path to get this into the market is quite useful. I mentioned, I’ve talked about the longer term plans for this product. The South Korean market is something that Hanamac is very, very familiar with. Their head of product development and their president or both are originally from Korea educated in United States.

They do plan to expand this into other markets once they’ve kind of established the business and the distribution channels in South Korea. I don’t think South Korea will be the end of where they go with this..

Joe, sticking to the -- moving on to the train side of things. The Asahi Glass WONDERLITE, is that using your SPD or is it like some computing frames? Because it’s not very clearly....

Yes. That’s using our SPD technology; it’s just that their trademark -- their trade name for SPD-SmartGlass is WONDERLITE..

And will the company get like similar contracts from train SPD folks in other parts and like how big would these contracts be, like comparable to like airplane manufacturers, car manufacturers? I’m just trying to get a sense for like the size of this market..

Thank you for the question. The train market can be quite large. First of all, one of the challenges the trains face is that they use a lot of glass and it’s not only in the side window but also in the roof now. And it’s to create a more of an open air atmosphere and a panoramic view of your surroundings.

Anytime you have a captive customer, whether it’s in a aircraft or a train or in the future an autonomously driven vehicle, people want to look out more. And in trains, there is a lot of glass because of that. But the problem is most train air conditioning systems can’t keep up with the solar heat gain requirements of using a lot of glass.

So, part of the benefit that Asahi was mentioning with this is the fact that it allows the air conditioning systems to actually make the passenger properly comfortable. How big is the market? Well, this is a ten-car train, it’s ultra luxury train. When you see the pictures on Google, you will be reminded of a luxury cruise ship.

And this is catering to the silver market in Japan. It doesn’t go very fast. I think it’s 115 kilometers an hour, so about 70 miles an hour. So, it’s not a bullet train; it’s very much a leisurely ride through some of the most scenic areas of Northern Japan. But, other markets have bigger trains.

And when you start deploying this on all of the first class cars and then all of the cars on the train, you’re talking about a substantial amount of glass. And as I mentioned in my presentation, Asahi is not the only one working on this.

And by the way, JR East is the first one to adopt this but JR West is working on their own luxury train in different part of Japan. And then you have in other areas and in other continents luxury trains that are doing quite well in Europe and in North America.

So, you are going to see luxury train travel I think become a more important way of getting around. And we are very important part of that because panoramic views are key to that. And in the train market, likely the automotive market, we get a 10% royalty..

The next question comes from Michael Kay with Kay Associates. Please go ahead..

Hello, Joe. Just a few follow-up questions regarding the Hanamac deal.

When do you think that they will be able to offer the retrofit SPD glass to their market, how long would it take?.

Their product development people are in South Korea right now and they have been interfacing with Hitachi to purchase the film. It could be as soon as the end of this year or early next year that this product is available. So, very quick development times..

And then, who actually will be on letting the people in South Korea know that such a thing is possible, will it be the auto companies or other shops?.

They have a marketing plan that is meant to get the word out in a very efficient manner. The press release has been widely picked up in the market also. But, when you think about the fact that people come to these auto glass shops and the dealers for upgrade now, just the standard existing traffic is going to be very interested in this.

And of course, this is going to be such a novel item that finally available on a much easier basis than prior -- and before that, word is going to spread pretty quickly. The aftermarket is a great market because of that..

What about the United States because that technology be used -- have that market in the U.S.?.

Absolutely. Like I said, they are starting in South Korea but they are going to expanse other markets once they establish their footholds and their distribution channel in the South Korea. But this kind of approach can be done anywhere..

And what’s the status of the Vision -- the sunvisors, the Vision Systems has been on working on, sunvisor?.

They are continuing to market this to the automotive market, to the aircraft market. They are getting some very positive feedback from launch customers on this. And maybe this will also inspire them to take a quicker step into the aftermarket as well..

And a last thing.

You didn’t mention it but could we assume that there will be a major announcement regarding a major OEM, auto OEM sometime this year, like you said in previous calls?.

I’ve never said when it was not going to happen, so I don’t want to say this year or not but things are moving forward..

The next question comes from Jeffery Harvey, [ph] a private investor. Please go ahead..

Just a couple of thoughts here. I think one of the reasons why the stock is so low is that you can’t ever talk about really anything that you are doing.

And I just wonder in the future, is there any way you can structure licenses with companies or maybe you get a little more freedom about talking about what’s going on?.

It’s not a factor of our license agreements. Our license agreements do not restrict us from saying anything with some very limited exceptions that are very specific. What the constrain is, is the industries we’re in. For example, we’ve been talking to Asahi about this train project for quite a long time, since the beginning of development.

But even they couldn’t announce it until this week. And they lamented the fact that even they didn’t have the flexibility to say as much as they would have liked to say in their press release, which is now available both in Japanese and English on their website. But, they are working to get JR East to allow them to say more and us to say more.

Same things holds true in the aircraft market; it’s the customer that speaks for us. They control the marketing message about their planes. It’s the same thing in the car market. Daimler controls the marketing message about their cars. And it’s just the nature of the industries that we are in.

I wouldn’t chose to be in other industries because these are very good industries with very good business opportunities. Now, in architectural, we typically have more freedom, unless it’s a private residence or something like that. Typically commercial installations like to talk about the energy savings, things that they are doing.

So, maybe you can get a little bit more visibility on that. But, one thing I think that is important to understand is, we can talk about what we are doing but really it’s the revenues that those activities generate that is the things that we all most care about, us at Research Frontiers, our investors, our licensees.

So, talking about something is not as improvements as actually achieving it. And that’s why we have this very, very focused effort on growing the markets we are in, reducing the cost of the end product, establishing new markets because all of those things will generate additional revenue for us, and that’s the thing that matters most..

I agree with that. Looking at the auto industry and I don’t know the track record of Gentex and how they ramped up. But, you have been on the Mercedes for a long time now, you have had no failures.

What do you see? Why aren’t the other the companies jumping on board? And when do you see a meaningful revenue ramp in that industry? At some point in time I would think would be like a hockey stick and maybe it’s the cost. Do you think you need stronger licensees in that industry….

Let me -- it’s a great question. So, first of all, we don’t need stronger licensees. We have pretty much the [indiscernible] of the world’s automotive glass production licensees our technology and these are the active companies. So.

God bless them; they really are great partners to have and have tremendous capabilities in resources to bring to bear on this. Purely a matter of cost.

If you’re a car maker and they assume 20% of the car’s MSRP goes to options, you want to make sure that that 20% pool of money that is option money is going to the most profitable options on the car because that’s where your automakers make their profit. The dealers make the same profit on everything, pretty much.

So, it’s not really a dealership driven thing. They just want to sell cars that achieve high customer satisfaction, so they make their hold back from the automakers. But at the OEM level, it’s truly a matter of which options are relatively more profitable than others.

So, if we can get into the sweet spot, which I referred to earlier, same thing is aluminum wheels and some other options that are commonly put on cars whether you wanted or not, then we expect the same thing to happen with our technology that we become not only a highly made option -- forget about what the customer requests but what the guy in single thing [ph] and that’s making S-Classes, checks off on the box there or the guy in Munich at BMW or in Wolfsburg at VW or Ingolstadt at Audi or Coventry with Jaguar Land Rover, once you get into those sweet spots, then it becomes a very compelling economic case for the automakers to have to put this on the car.

And when you consider that it’s a functional feature as well as a cool feature that even enhances the value to the OEM. So, it’s purely a matter of cost and that’s why our focus is so much on cost reduction..

So, does that mean you are talking you think another two or three years before that’s going to come to fruition?.

Well, we’ve already seen for example cost reductions over the last couple of months even. This is a sustained effort by us and by our licensees….

Do you know what the sweet spots are for these auto companies?.

Well, I know what they are for Mercedes and I’m assuming that those same sweet spots exist for the other car makers too. So, we know what our target is..

They airplane industry always seems to me to be actually probably even bigger market maybe than the auto industry. And the way you have it where you can retrofit the existing airplanes and you make a lot of sense, it’s not that expensive; it could be done when airplane goes in for retrofit for electronics.

Again, do you have the right licensees for that or do you need stronger licensees in that market?.

Well, we have the right licensees in the aircraft market. Fokker Services is a subsidiary of the largest manufacturer of aircraft windows in the world, and Vision Systems is also a substantial company that incidentally has the largest team devoted to SPD technology out of any licensee out there. So, we have strong licensees.

It also seems to be a compelling market because it’s not….

[Multiple Speakers] cost again?.

No, I don’t think so. I don’t think it’s a factor of cost. In some markets, Jeff, we’re cheaper than motorized shades and things like that that are placed on aircraft now. What it is I believe -- what I think it is, is that these are very highly engineered products with very long development cycles. And you have to start that process early.

And some of the certification issues and things like that that any component faces, it’s fairly lengthy and expensive. Our licensees fortunately have started that process a while ago, so they are not just starting out now but they have been working in these markets for a while.

And we have what I consider the most reliable technology in aircraft, we’ve been flying the longest; we’ve switched the fastest; we are the most uniform in switching. So, I think there is a lot of strong suites here. And the one thing that we can do that our competition and electrochromics can’t do is we could retrofit in existing plain.

Right now, the only plains that have electrochromic technology from Gentex on it are once that have especially designed exterior windows that are meant to protect it.

So, if you put it on a plain that doesn’t have those windows, you might have to change all the structural windows in your plain as well as the inside windows, whereas we can be placed on the dust cover, the interior panel between the structural window and the dust cover, pretty much anywhere you want on the plain.

So, it becomes much easier to upgrade us in the aftermarket. And that’s something that Fokker has developed their element product, which is basically a cassette that when a plain comes in for C check or D check, you could upgrade it, you don’t have to change your structural windows, and nobody wants to do that anyway.

It’s just a matter of pressing forward, Jeff..

You did indicate that you expect some sort of commercial announcements sometime soon..

Yes..

You mentioned -- okay.

I mean, are we talking -- looking out your business plan and your future revenue growth, when do you see a substantial ramp in revenue?.

There is lot of factors that will contribute to it. I’m going to have to be very brief though, because we have a couple of other questions in the queue and we got a leave time for them. But, one thing we’ve said is that we expect that with cost reductions, substantially higher revenue from the automotive market.

So, the quicker we achieve that the quicker we’re going to get those ramp ups there. One model can do that for us. Second thing is going from the aircraft -- the general aviation market, business to commercial aviation, that’s eight times larger.

So, basically, it’s just focusing on that and then you have the other markets, the new products like the Panasonic products or the Hanamac or the Corning products and things like that that come out that use our technology that further enhance them. And that’s how you win ball games, but I think singles, doubles and triples as well as homerun..

The next question comes from Jarrett Albert, [ph] a private investor. Please go ahead..

I don’t know if you got my email about the Panasonic IPS LCD coupled with light-modulating cells, if you are just able to answer that?.

That’s another Panasonic product, not the smart, the transparent screen product, that’s more of a TV. And they are achieving the black modulation probably through something like a better TFT or something you could do when you don’t have ambient light sources, like do in the other markets.

I don’t think that does [ph] but quite frankly, the more experience Panasonic has with the benefits of SPD, when it deals with ambient lighting, the more products we’re going to be in. So, it’s a positive first product that we’re in..

The next comes from Charles Michaels, [ph] a private investor. .

I think my questions are covered..

Thanks Charles..

[Operator Instructions] Our next question comes from Michael Forrester, [ph] a private investor. Please go ahead..

I have listened to a lot of these conferences. And it’s always great to hear the news about what may happen in the future.

But, what are your worries? What are the things coming up that can retard improvement of revenues or cause a decrease in revenues?.

For lack of a better way of expressing this, stupid decisions by people. I have seen big companies and small companies make dumb decisions, I am not expecting any but it’s something we’re going to come to come of out [indiscernible], it would be in that category.

I am not so worried about competition, maybe just to kind of expand your question little bit.

What I have seen in terms of the performance of other technologies really is not up to par with what I consider what the market expects which is if you are going to spend money on a premium product like a smart window, you are going to want the best performance, you’re not going to want to wait 40 minutes for your window to switch.

And then, the other thing I would say is at some point, and we have protections in place, someone they want to buy Research Frontiers at a low value, and that’s probably the thing that keeps me awake more than anything else is that with our stock where it is, we become a very attractive target.

Now, we have things in place to prevent that or to maybe get shareholders better value and prevent some of the abusive techniques that have been tried in the past and hostile takeovers.

But quite frankly, the best thing I could do for the Company and all of us can do, and this is what when we wake up we think about and when we go to sleep we think about, how do we grow revenues and how do we reduce cost. And that’s really very simple approach that we have.

We are expanding our view on how to achieve those things and our licensees are too. So, we are going to be in a good shape..

How safe are the licenses and patents? It seems like we have gone -- and I won’t miss stock for 20 years, it seems to me one of these days somebody may be able to take advantage of the technology as a competitor..

Remember, if you are working with 20-year old technology and really when things come off of patent, you are talking about taking a snapshot in history that as it existed 20 years ago, you are going to really have a tough time competing with the current state of the art technology that’s out there.

For example, someone wanted to work with some of our initial film technology, they wouldn’t be able to put it in production. So, I am not so worried about that. And we have a very talented staff of scientists here that are inventing and patenting new things every day. So, it’s a very big investment for us and it’s part of what we do..

Last question. In light of the picture you’re giving us about the future for the Company, can you explain why since I think at the last conference call, Seth mentioned that the stock price was a joke. And here we are 15 to 20% lower in price, less than two months later..

I think you have a number of people out there that are looking for sustained revenue growth before they pull the trigger on buying more stock. So, until the happens and that’s where we are focusing our efforts on is getting that sustained revenue growth, you’re going to have the markets fluctuate around. Seth, do you have any thoughts on....

Yes, sure, and I still stand behind my comment. Although at the end of the day we don’t control our stock price; it’s the market that does.

I’m sharing my view, my personal view on our valuation and compared to other companies that are in the same space that we’re participating in that have much higher valuations with much less developed products in the marketplace.

So, from that prospective, I still feel exactly the way I felt in our last call, even more so since the valuation has gone down as you correctly point out. But to Joe’s point, the best thing that we can do is not focus on what the stock market is doing but focus on how do get our revenue growth going.

And it is absolutely clear to us that we could have a very meaningful revenue increase, if we were able to deliver some of the cost reductions we’re trying to do in the automotive market. That is mission one for us as a company..

Okay, with no idea of when mission one will be achieved, right?.

We achieve it every day; this is a continuous effort to reduce cost and pass those cost savings on to the customer. At the same time, we have a very sustained business development team that’s out there developing new markets and new products and developing the existing markets. And agree with Seth.

Revenue growth is a thing that will do the most good for us and the way you achieve that is develop your markets and cut your cost, so that it becomes more cost effective for more and more customers. And it’s not rocket science, it’s just hard work.

And when you consider the lack of success that others in our industry have had in really doing that, we’re in good shape relative to everyone else but we want to be the best company for our investors. So, we want to change that..

The next question comes from Bruce Toni, [ph] a private investor. Please go ahead..

First, one is, I apologize in advance if you’ve already answered this one, but I didn’t hear you say with any clarity when we can expect a wider film for architectural installations. .

I didn’t say. What I said so far in the call is that our licensees are pretty creative in how they design around that limitation, but it’s not a technological limitation. So, one of few things would have to happen for us to have wider film.

Either Hitachi would have to widen their coating head, which is certainly an investment they can make or somebody else would have to make the film and I just have to leave it at that..

Okay.

And the second question was in reference to the question you just spoke about, looking at the curve, if you will, how much you’ve been able to reduce cost so far? Can you make even a general prediction, if the curve is continuous, where we might reach that point where costs have come down to encourage wider adaptation of the film?.

Right, okay. So, let’s start with kind of the rule of thumb that everyone is in a manufacturing business works by. They’ve looked at every technology based products from fine chemicals to computers, to cell phones, to cars. And typically as you double your production experience, your value-added costs come down by 20%.

So, if it costs you $100 to make the first 100 wedges, it should cost you $80 to make the next 100 and then have 200 wedges, it should cost you $64 to make the next 200 and so on and so forth, this is why prices come down.

Until we can really go up that experience curve in terms of doubling production experience, the other ways you can do this are achieving some cost reductions through economies of scale, and some cost reductions by just kind of reexamining some of the things that you do in figuring out if there is ways to do it cheaper.

Are there processes that you can take out for example that you can safely take out because those technology doesn’t really need them or they built some suspenders that you can eliminate. And maybe to give a kind of a color to things.

In the automotive industry, you don’t expect huge, huge decreases in costs overnight; it’s kind of a sustained effort in the partnership between the automaker and the suppliers and also kind of an expectation about doing business. And I’ve seen scheduled cost reductions for our technology for example by our licensees and things like that.

And I must say that since we started our initiative to reduce cost, the cost reduction percentage has been bigger than anything I’ve even seen in the -- with these scheduled cost reductions that you typically see in automotive. So, we’re doing okay; we’re doing better than probably people have expected we would, but we haven’t hit our targets yet.

And quite frankly, when we hit our targets, we are going to keep going. If we can make this more affordable, it’s good for everybody..

Yes. And do you get any feedback from the manufacturers about when do they wake up and realize that having this product available is going to sell their car, say Mercedes versus BMW? Maybe people are going to look for this product and want to see it on the cars that they buy.

I don’t know whether they factor that in, but it seems like a no brainer to me. I don’t know why they keep dragging their feet. It’s just not understandable..

It has to be as profitable as the aluminum wheels. Probably that’s something matters. I think I’m going to make a few closing remarks because I think that was our last question in the queue..

Thank you..

Thanks a lot Bruce. Even though we have competition in all of the markets other than automotive and some of our competitors are spending as much as 25 times what we are spending, we actually have more to sow for it. We remain the best selling and best performing smart window technology in the world.

Our revenue growth will come from continued development of the main markets that we are in, and our revenue growth will also come from new products to new applications for our smart SPD technology, and will also come from making our technology more affordable.

We’ve made progress in all of these areas but this is certainly a focused and continuous effort, and we’re all working hard to achieve this.

No one in the smart glass industry has come as far as we have in automotive; no one has been on as many cars as we have or in as many different car models; and no one has achieved the performance and reliability that we’ve demonstrated to the automotive industry.

No one has been in as many different aircraft models as we have or as flown as long, and we’re building upon this. Everyday people in tens of thousands of cars on the road have our glass over their head on the road, protecting them from sun, heat, UV and glare, making their driving experience more comfortable and enjoyable.

It’s also in their home, their offices, boats and aircrafts, protecting life-sensitive documents in museums. And it is now also entering more of the consumer electronics and multimedia markets and new uses for virtual SPD light-control technology or constantly being developed.

Take for example what Vision Systems is doing with it to convey information from within the glass of an aircraft or train window or what Panasonic is doing with their transparent screen to project images on to a piece of glass or Hanamac’s development of a more cost-effective way to serve the automotive aftermarket or Asahi and its customer JR East catering to the premium train traveler with ultra luxurious train travel and innovative new designs.

And with the further electrification of vehicles, more connected cars and self-driving cars, SPD-SmartGlass technology will be there to make these products and the passenger experience with them even better. It has been said that the best way to predict the future is to invent it.

Thank you all for being part of this effort as together we shape the way that people live, work and travel. Good afternoon, everyone..

This conference has now concluded. Thank you for attending today’s presentation. You may now disconnect..