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

Ishfaque Faruk - WestPark Capital Chase Basta - AWH Capital Neil Levin - NCL Financial Michael Kay - Kay Associates.

Good afternoon, ladies and gentlemen. Welcome to Research Frontiers Investor Conference Call to discuss the Second Quarter of 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 today in the Investors section of Research Frontiers website at www.smartglass.com and will be available for replay for the next 90 days. Please note that some of the comments made today may contain forward-looking information.

The words expect, anticipate, plans, forecasts and similar expressions 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 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] 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..

Thanks, Chad, and good afternoon, everyone. 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.

Our fee income for the first half of this year was up 13.4% from the first half of last year.

Our fee income was up 42.4% in the second quarter of this year compared to the second quarter of last year and even though we are only one month into the current quarter, we already expect higher fee income in the third quarter of this year compared to the current quarter.

R&D and operating expenses were also both down this year compared to last year. For the first half of this year combined they were down almost $780,000 or 26%. Expenses were down $530,000 or 39% in the second quarter of this year as compared to last year, and quarter to this quarter total expenses were down $509,000 or 38%.

So we have made good progress in reducing our cash burn without compromising operating results.

Based upon increase revenues and collections of receivables from licensees to-date and lower expenses, we estimate that our current cash position should left us at least for the next 12 months to 15 months, longer with higher revenues, continued cost reductions and collection of additional receivables. So things have stabilized and are growing.

In our last conference call for investors in March and in May, we outlined our [Technical Difficulty] (4:03) growing revenues, continue to develop new licensees, continue to grow each of the five markets that our technology is used in, develop new uses for our SPD-SmartGlass technology and reduce the cost of our technology to the final customer.

This year we have worked hard to make -- and made progress in all of these areas and will continue to have laser focus on this. The market launch of the newly refreshed Mercedes-Benz S-Class started in the European markets in July. The U.S. market will get the refreshed S-Class sedan shortly thereafter.

The newly refreshed S-Class sedans are being built now with Magic Sky Control groups and are for delivery in September in United States. New car manufacturers are becoming more active with our technology. Existing car companies that have been working with us have also moved things forward.

And this past May we have announced that Fisker Automotive’s EMotion electric vehicle was going to use our SPD-SmartGlass in the roof and rear side windows of their car. It seems as if the industry is beginning to understand the significant benefits that SPD-SmartGlass can offer electric, as well as internal combustion propelled vehicles.

We have also been working with all the other major electric vehicle manufacturers. SPD-SmartGlass can increase the driving range of electric vehicles by 5.5%. Every day we read about major automakers moving away from diesel engines because of the emissions testing scandal that are plaguing the automotive industry.

New ways besides diesel engines are necessary in order for automakers to comply with lower emissions requirements. SPD-SmartGlass saves 4 kilogram per kilometer of CO2 emissions.

We are active with development programs with the premium automakers around the world and also we have the strength and resources of very large licensees such as AGC, Pilkington and others.

More recently Continental Automotive has produced a video commercial demonstrating the many benefits of SPD-SmartGlass with their award-winning intelligent class control system for cars. It is quite well done and I recommend that anyone who has not yet seen it take a look.

It's available on our YouTube channel, as well as Continental Automotive's website. Big players such as the two largest glass companies in the world and the fifth largest automotive component supplier, as well as Mercedes certainly help develop business for our licensees.

Now we are seeing also even larger players in other areas such as electronics and other peripheral areas seeing the potential opportunities to be part of the SPD-SmartGlass industry and getting involved because of us, especially in the automotive industry. Other major players are getting involved in other industries as well.

In May our licensee Vision Systems and PPG joined forces to offer SPD-SmartGlass electronically dimmable windows or EDWs to the aircraft industry.

In June at the Paris Air Show which is the largest commercial aviation event in the world that attracted more than 350,000 visitors in 2015, PPG had SPD EDWs using the new and improved NUANCE V2 windows from Vision Systems. This event represented the first time PPG has publicly showcase an SPD-Smart EDW.

We believe that this alliance between Vision Systems and PPG significant, because of their combined leadership and resources, and also because it shows that a company PPG that was firmly in the camp of offering Electrochromics windows to the aircraft industry has now switched to SPD.

This alliance between Vision Systems and PPG has also quickly borne fruit. The alliance was announced in May and by July, ONE Aviation announced that they would be using SPD equipped EDW from PPG in their new Eclipse 700 jet. About one week ago a mockup of this jet with our windows appeared at the Wisconsin Aircraft Show.

Fee income from Textron's King Air is also up this quarter from last quarter. Moving to other markets, Panasonic’s transparent screen product using our technology continues to sell in Asia and plans are currently being made by Panasonic in Nippon Sheet Glass for the North American product rollout in 2018.

Last night we received the royalty report from Nippon Sheet Glass and July marked the highest sales month since the product was launched in March. Revenue from the train market and marine market are also up this quarter as compared to last quarter.

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

And even more meaningful revenue growth should come our initiatives 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 for certain interpretations of our patent by the Delaware District Court. Both we and E Ink have filed our briefs with the federal circuit and are waiting for the court to review them.

We are quite confident in our position and so as our outside legal team who is now handling this case on the full contingency basis. We received by email before this call, questions from investors and we addressed many of the general -- many of them in the general topics of our presentation today, but I'll go through some of the other ones.

[Ph] E11 (10:42) has asked, do we have any estimates for when SPD sells for ONE Aviation will begin, also do we have any idea how much revenue to refer will result in 2017 and 2018 from revenues from SPD film that is used by ONE Aviation? Thanks.

Well, thank you for the question, the Eclipse 700 from ONE Aviation is a very light jet that will compete against the HondaJet, Embraer Phenom 100 and Cessna Citation M2. In some respect Eclipse is competing against these other aircraft by the amount of passenger windows. For example, the Eclipse has eight windows, the HondaJet has six.

ONE Aviation has said that the work in this aircraft should be finished within 18 months to 24 months. The jet sells for $3.6 million and they're already 30 orders on its order books not including China, where they believe the aircraft will have considerable appeal.

Since ONE Aviation does not yet know when the aircraft will be certified by the FAA and put into service, neither we nor ONE Aviation, nor PPG, nor Vision Systems, can estimate the revenues at this time.

However, as noted before, apart from the additional royalty income from this program, it is also significant that it is the first announced results from the PPG-Vision Systems alliance and it's also significant that PPG which used to firmly be in the Electrochromics window camp has now switched over to SPD.

We also believe that ONE Aviation is -- has --that because now that ONE Aviation has selected SPD EDWs for its Eclipse 700, the roughly 250 existing Eclipse 505 entities that are currently [Technical Difficulty] (12:38) represent an additional revenue opportunity as retrofits in the aftermarket.

Moving to another question, [ph] Gerard Albert and August Berman (12:48) asked similar questions. Hi, gentlemen. Please touch upon the following during the conference call. PPG-Vision Systems commercial agreement, Gentex stated on the last quarterly conference call that they felt their relationship with Boeing's was still in good shape.

What is your take of a situation? Can we have a good shot at taking that contract away? Thanks for the question. Gentex may genuinely feel that their relationship with Boeing is in good shape.

But remember they were the Tier 2 supplier to the Boeing 787 Dreamliner and they definitely got a corporate divorce from the Tier 1 supplier on that project PPG, which is now entered the SPD role with their alliance with Vision Systems and they recently announced project for the Eclipse 700.

So it may be that they will continue with Boeing and PPG for the Boeing 787, but it looks like everything else is to be done through the PPG-Vision Systems alliance.

I might point out that also with almost a decade of trying the PPG-Gentex marriage only produced two offspring the 787 Dreamliner and the Textron King Air 350i and as soon as the Textron contract was up, Textron switch to King Air 350i from Electrochromics to SPD and also adopted SPD for its other King Airs.

I can't say what Boeing will do when their contract for the Dreamliner is up. It would require some reengineering to switch over to SPD from their current Electrochromics windows and perhaps new FAA certification. I imagine that a lot of factors will go into that decision including what the airline customers prefer.

I do know that there are number of limitations with the Gentex, Electrochromics EDW, including slow switching speeds and a non-uniformity of change in tin that creates the appearance of doughnut holes in the windows. [Ph] Mr.

Claire Harness (14:52), I have two questions for the upcoming August 3rd conference call, they are in previous conference calls it was mentioned that a well-known automotive OEM would be announced that it would be using SPD technology, was Fisker that OEM? No. I was referring to another OEM.

And on June 21st, an Internet blog, Research and Markets stated that BMW is using SPD and sunroofs of their premium models. Is this correct? Well, so far the only public demonstration that has -- that BMW has done was the active tour constant crossover several years ago.

We know that BMW has been more active than just that one vehicle, but unless researcher and markets received updated information from BMW, I think, that they might be referring to the active tour concept, which is the only publicly announced vehicle by BMW that I'm aware of the disclosed use of our SPD-SmartGlass technology.

The following question is from [ph] Bob Linville (15:59) is still Mercedes-Benz plans to utilize the Magic Sky Control center concept as an available option on some of their E-Class model vehicles in future model years.

Any indication of when this might occur in the future? Well, yes, but getting on the E-Class is mostly a question of getting the cost down since the E-Class is less expensive car than the S-Class and also tends to have a different buying decision.

It is not popular among corporate executives, so the allowable cost and option packages may be somewhat decided by a company's accounting department rather than the user. So speaking across we see -- we have received the following questions Jeff Harvey and [ph] Mike Salmic (16:41) which is somewhat related to each other.

Just writing to suggest you update shareholders on your cost initiatives and where you think you will be able to reduce costs.

And it is now -- it is important now in my opinion that you expressed to shareholders and follow-through, of course, with what decisive actions are planned to take away new and increasing market share from companies who have been able to capitalize on inferior technology? And then the other question is the early announced strategy of RFI's desire to sharply reduce SPD pricing, in theory seem to make sense, how is that going, what are the prospects of success.

Importantly, over what period that expected to bear significant turnaround results, please tell the shareholders? We are not looking for feel good encouraging or as we are looking for determined turnaround action, more determined than aggressive then we have seen before.

Well, Mike and Jeff, I wholeheartedly welcome and agree with the sentiments that you expressed. And I assure you that we are determined and working hard to improve our operations. First, let's talk about inferior technologies. We have no SmartGlass competition in automotive, marine or museums.

We do compete with Electrochromics in the architectural and aircraft shedding markets. In terms of attraction, as noted earlier, Electrochromics are losing ground to us continually in aircraft.

In architectural we compete with Sage and View, so I assume that that is what your question is primarily focused on one, when you say that inferior technologies. According to various third-party industry resources, Sage loses an estimated $25 million to $30 million per year and View loses about $8 million per month or about $100 million per year.

View has raised enormous amounts of capital and has spent the vast majority of it. The most recently announced project by Sage Electrochromics was actually also announced about 18 months prior to that, so there was a second announcement, showing very long leadtimes that they need for winning the project and then actually supplying glass for it.

So I don't suggest we adopt either of their business models. So to answer your question more directly, we will succeed in architectural by getting SPD film coated wider and getting the cost down. This is our focus and is one that we are intensely working on and making good progress with.

This will result in profitable business for our licensees on the merits, without the need to raise and spend almost a $1 billion since one of our competitors in this field has done with relatively little to show for it. In the meantime, we also have revenues from five different markets.

They only have revenues from one market architectural, unless they can continue to fund large losses, large capital expenditures and subsidies for the projects they work on, they will not be in business. Regarding our cost reduction initiatives, we are achieving this in several areas.

One, we are examining and refining the chemical processes to determine if the cost of the raw materials that go into our SPD emulsion can be reduced. Two, we are looking at the new coating technologies to determine if the coating -- the process of coating is emulsion into film can be made more efficient to reduce costs and meet times.

And I note in this respect that Hitachi chemical, which has a great product put their existing SPD film cutter into production over 10 years ago and a lot is improved since then. Number three, we’re looking at the costs added by different areas of the supply chain whose -- who by film and laminated into glass, and then sell it to the end customer.

Four, we're looking at changing the ways that our materials are protected in extreme environments to make sure that durability is not compromised but that the cost can be reduced. And five, we are working to grow the size of each market for our technology to achieve better economies of scale.

This five pronged approach to cost reduction is just some of what we are doing in this area and there are other things. We have already seen result at various levels of our supply chain, but we want to see more cost reductions and quicker implementation. Another shareholder, Mr.

Bloomberg, asked about what our R&D initiatives are? Well, four of the five factors listed above that I just outlined have a heavy R&D component. Also our R&D department is working on color, performance and durability improvements as part of our plan for continuous improvement of products using SPD-Smart technology.

Well, if we haven't fully answered any questions either in our presentation today or in a live Q&A coming up now, please feel free to call or email us. I will now ask the Operator, Chad, to open up the conference to any additional questions people participating today might have that we have not already covered..

Thank you, Sir. [Operator Instructions] Our first question will come from Ishfaque Faruk with WestPark Capital. Please go ahead..

Hi, Joe. And….

How are you, Ishfaque?.

Good. Good. Okay. A couple of questions from me, first of all, your operating expenses -- your operating expenses were down a lot this quarter.

I mean, how are you guys thinking of it going forward, I mean, like you guys have been spending costs in OpEx as well as R&D?.

Yeah. So going forward we will probably continued to always look at whether we are spending our resources efficiently and I don't expect such a dramatic drop as we get from the last couple of quarters. But, like I said, we don't want to compromise operations. We have good success. We want to build on it.

But, I think, you can look at our current expenditures as is probably representative of a good healthy and leman lean company moving forward..

Okay.

In terms of the OEM announcement, do you have any additional visibility in terms of the timing of the OEM announcement?.

I don't at this point and as you know, Ishfaque, we have to wait for the OEM to announce before we can say anything..

Okay. My last question, in terms of you guys briefly mentioned, PPG and Gentex in the call. How -- do you think that at some point in the future, if you could lower your cost that you might be able to like get into like one of the major airline makers and….

Okay. Yeah..

Get….

That’s a great question. That's a great question. We believe based on our own competitive intelligence that we are already the low cost switchable EDW solution in the market.

I think the issues that come up in the airline market is, to some extent the airlines have been somewhat burned by the first-generation Dreamliner, because they didn’t get dark enough, customers complain, they were very slow and there have been some improvements in some of those areas like darkness, but not so much with speed or other things like uniformity.

So there is this perception out there is talk that EDW's can be little clunky and we’re working to change that, because we are not clunky. I mean, we can switch in two seconds where very dark, we are uniform in the way we switch. We are film-based technologies, so we are not adding weight to the aircraft.

So everybody gone through a space certification in many instances, so it’s not like the headache that Boeing had to go through the first time, they try to certify an EDW when they were going through this with the Electrochromics product.

So really just a matter of educating customers and I got to tell you the approach is very straightforward and very simple. If you show the airlines what's possible, they are not going to want the old stuff, they are going to want the new stuff..

Okay. And my last question….

Licensees have special departments that are focusing on the airlines..

Okay.

In terms of the transparent display sector, and well, how are you feeling about that space in the future, in the near, maybe long-term future?.

Well, I am seeing an upward trend in the royalty reports. As I mentioned earlier, last night we got….

Yeah..

… the July report from Nippon Sheet Glass and that had record sales. Now remember when I say record sales, the product is only launched in March. So we are talking about five months..

Yeah..

But it's good to see a positive trend and that's only with the Asian market. The idea is to roll it out in Asia this year in 2017, roll it out in North America in 2018 and roll it out the rest of the world in 2019 with some pretty big expectations for how it’s going to be used in 2020.

So we got this a very positive outlook on what Panasonic in the Nippon Sheet Glass are doing with the transparent screen product and it is a very cool product, a very cool product..

All right. Thank you very much..

Thanks, Ishfaque..

The next question will be from Chase Basta with AWH Capital. Please go ahead..

Hi, guys. Thanks for taking my question..

Hi..

Can you talk about liquidity and how you view your funding needs as you look out over the next several quarters?.

So we have enough cash right now, Chase, to last us between 12 months and 15 months, assuming no increase in revenue, assuming no increase in collections, assuming no reduction in costs. As I mentioned, costs are probably relatively stable right now. They may go down a little bit more. But we are expecting higher revenues and things.

So it could be longer before we actually need to raise capital. I wouldn't wait for the last minute. There's no shortage of interested parties that want to fund our company, including I would say strategic investors that, I think, our shareholders would like to see involve.

But we are moving forward and as these opportunities that we've been developing in terms of cost reductions come up to the extent they need additional capital, we may raise additional money for that..

Okay. Thank you..

Thanks..

The next question will be from Gerard Albert, a private investor. Please go ahead..

Hi, Joe..

Hi..

[Inaudible] (29:11) your second OEM you mentioned in the past remain on the timeline that you had assumed let’s say a year ago?.

As far as I know they are still moving forward on the same timeline. Remember, the OEMs tend to be a black box even when you visit with them.

So they don't always tell us what their plans are, and quite frankly, I have seen in other areas, not ours, changes in timing, they decide to announce something at one show versus the other, because the competitor is making a major announcement at the show that they were planning to make an announcement at.

So they all try to steal as much thunder they can from everyone else. But as far as I know everything is moving forward upon..

Good. And so quickly the expectation that you had last year’s annual meeting, it sounds like nothing has changed, but you don’t have much more….

No. I will say what have changed in the automotive industry is two major trends, electric vehicles and emissions have become very hot topics, and we have substantial benefits according to the Continental Automotive's calculations in both of those areas.

And then the third trend which is, coming faster than people think, but everyone I think still think, it is not going to happen tomorrow, is autonomous driven vehicles and we've all -- we've carried the banner also of the importance of how glass can enhance the passenger experience on trains, planes and on some autonomously driven cars at the various industry conferences.

And I think that will also be something that people focus on as autonomous driven vehicles to become more mainstream. So I think there is a change….

Okay..

I mean, I will say that, if you look at the level of activity including OEMs that are reaching out to us as opposed to the other way around, that’s increased substantially and noticeably. So, I think, our messages getting through loud and clear, and people are beginning to realize that..

Okay. That Continental videos is quite impressive, I am assuming that that’s the demonstration of the simulation, okay..

No. That’s an actual product. And I think that they did a beautiful job of thinking through some very practical uses for our glass. I mean when you approach the car the glass clears up. This way you have security. You can see inside the vehicle.

When you leave the car and lock it it darkens and they have going into extreme power saving mode and heat rejecting mode. When you go through a tunnel the glass clears up and as soon as you leave it darkens again to prevent glare and lots of night vision and things like that..

Yeah. It’s a compelling….

When you put it in reverse -- when you put it in reverse it clears up the rear window. I mean, it's everything you wanted in a smart way to power our glass. And I think, Gerard, the other thing to keep in mind is, look, Research Frontiers is a small public company.

But when you have the -- two largest glass companies in the world have our technology in serial production and the fifth largest automotive component supplier developing systems around us, and as I implied earlier, there is other people getting involve with the electronics as well, big players, people are getting the serious as a significant business opportunity and when they go to visit the OEMs, that also carries weight, because it’s not just Research Frontiers, but as Research Frontiers and the largest glass companies in the world and the largest electronic and component suppliers in the world, all coming in there and all presenting the same solution, which is SPD-SmartGlass.

So it looks pretty good for us and we’re going to capitalize on the fact that we have these heavy credible resources behind us..

Yeah. I think there are kind of little demo is better than a lot of the simulations I see and there is actual demonstration of how that….

Yeah. Exact….

… changes dynamically, go ahead….

Yeah. For the salable car..

But if I want to get on my cars sounds like Hanamac will be the place in a couple years and I'm wondering, I mean, it seems like bigger….

I think you wanted in the aftermarket. I mean, what we are -- we are also really carrying the banner on Gerard. I mean, the aftermarket is important, because it’s -- even Mercedes buyers they aren’t smart enough to order the Magic Sky Control, have the buyers remorse and they contact us and say, how do I get this on my car, I bought it.

But the aftermarket will be important things like can -- things like the solution Hanamac has can be very important.

But we’re also pushing very much and very hard at the OEM level for them to realize the benefits on electrification, the benefits on CO2 emission, the benefits for autonomously driven vehicles and just the benefits on certain types of vehicles like a coop, you can’t open the roof of a coop, like you can the SL or SLC Roadsters.

So if you want that open-air feeling, the only way you are going to get that is with our technology. So, as automakers are designing new coops to come out and they like coops, because they tend to be high profit, more luxurious vehicles for them.

The benefit of having that open-air feeling without having to open the roof is something that is very powerful with our technology. So we’re really pushing the OEMs, as well as the aftermarket..

Okay. What I was going to say with Hanamac, it’s seems like they assets with the [ph] Adam, Peter Sloan (35:19), however, they are doing it, you haven’t really said. But, however, they are doing it, maybe on the expense where you go down the street and get this going over a week.

It seems like sort of think should be, are you being more choosy and if you are choosy, you got to modifying cars with a very common to people that people spend really money on this stuff, should you be -- something people want and I wonder if you are pursuing at elsewhere, I don’t know Hanamac had some exclusive on their technology, maybe some proprietary….

They don’t have an exclusive..

…exclusive..

They don't have an exclusive from us and lot of what was developer has been jointly done between us and them. I will say this, Gerard their plans are not just to stay in Korea. So they are starting with the market that they understand best, which is the Korean auto market. But they certainly have worldwide plants for this..

Okay. Well, thank you for your time..

Thanks, Gerard..

The next question will be from Neil Levin with NCL Financial. Please go ahead..

Hi, Joe.

How are you?.

Hi, Neil..

It seems like every conference call you're able to cover the material more quickly, so it's harder for me to try to assimilate it all with that going back and reviewing it, that was a little bit….

There should be a conference transcript also plus an audio file..

Yeah..

So, hopefully, we answered most of the questions including the one that you had email then, but if there's any other question of course you could email us, if we don't answer them today..

Yeah. I will just think actually despite. My question is, since I may have missed it, what can you say about the, actually I have two questions.

What can you say about the S-Class revenue in United States, has it started or is it about to start and can you say anything else about it? And secondly, you’ve talked about take rates without specifying any percentages in the past.

Can you say anything about the S-Class make rate, has that been increasing or do you expect that to increase and can you comment any further on it?.

Well, we get limited data in terms of breaking down between the U.S. and the rest of the world. So I can’t answer your questions specifically about what's happening in the U.S. A grades versus elsewhere in the world. I get aggregate production numbers from Daimler basically every other day or so on cars produced with our technology. We did see an uptick.

Remember though the refreshed S-Class is just starting to be built for delivery in the U.S. in September. I went to my dealer last week and he said for cars produced August 8 you'll have it by six weeks later.

So it gives you an idea of the production and then the shipping time to get it over to the United States to dealers and then from Newark if it’s coming to the East Coast or California to the dealership, but if you are talking about the six week lead time basically between when it’s -- when you start building and when it get there..

Is there anything that you can say about, let's say, how the make rate has increased over the last couple of years?.

Nothing I could say, because remember we only have data that's relatively recent on the S -- the high volume S-Class sedan, and of course, make rates and take rates are things that Mercedes just won’t let me talk about.

But we do know that if we get the cost down the make rate and the take rate will go up, because instead of a customer ordering this, there will be a guy in simple thing and checking the box, because Mercedes is making a much profit on the Magic Sky Control as they are making on aluminum wheels.

And if you go try to buy a car without aluminum wheels, it is pretty hard to do, because every automaker is making a ton of money on that. So we are trying to get into that sweet spot with our technology..

Okay.

Just one last thing Joe, are they -- is Mercedes selling all of the SPD cars that they are producing?.

Well, I know, they don't stay on a lot..

So wouldn't they want to make more of them?.

Sure. But they want to make sure that you don't sit there and over stuff the car especially if you get closer to the end of the year and then have them sitting on the lot and have to be deeply discounted, yeah….

And….

… they don’t play the same game. Yeah, they don’t play same game that BMW does which is, there is this legendary competition in the premium market between Mercedes and BMW, and if you're looking to buy a BMW, you should buy it in by the November and December, because they trying to beat Mercedes on the U.S.

sales record and I think last year they didn’t and the year before they might have been close. But Mercedes says we are not going to play that game. We are just going to produce what will be good for the industry, good for our dealers and good for the customer, so that’s….

Understand. I heard today that Elon Musk is saying that on a model 3 he expects to be making, I guess, it's 10,000 cars a month next year. Is there anything you can say about Tesla..

I like Tesla. I was the person that told Elon Musk that he won the Car of the Year Award when the model S got it, because that happened to be at the events of that. He has a big challenge on his hand. But if you look at the things he is involved with. He seems to like big global challenges, like effects and producing a high-quality electrified car.

And Tesla makes a beautiful product and I don't know if our technology would migrate down to the model, the model 3 right away, because of costs, the same issue is, let’s say, the s -- the E-Class versus the S-Class.

But when you consider the benefits of SPD AND the world of electrified vehicles and the slow progress that's been made on battery technology, conserving the energy becomes more important than generating it in order to increase the driving range. So we become significant as a solution in that market..

So they haven’t come after us yet then?.

I did say that..

I know, I'm trying to get you to say something?.

I did say something, if you do not listen. Anyway let’s move to the next question..

Okay. I didn’t get. Thanks..

I did, I did in 300s, I did say that we are working with all of the major electrified vehicle makers in the world. So that was earlier on the conference call. So I wasn't being facetious when I said I did say something, I actually did and I am not trying to be quite..

The next question will come from [ph] Arthur Faruqa (43:17), a private investor. Please go ahead..

Joe, any feedback from any companies in India, which really, really hot?.

When you talk about hot, you are talking about the automotive or architectural market?.

I am talking about the world look?.

No.

But in terms of what products, you said feedback?.

No. Just in general, I mean, are you in contact with any Indian companies..

Okay..

They have an interest in SmartGlass or any application, in all of the applications?.

Yeah. We do. I’d say most of the interest is coming from the automotive sector. But there is also interest in others markets too. But remember that market is typically served by our existing licensees and their customers.

So it’s -- Mercedes are selling their cars into India, but we do get approach for a lot of people they want to become distributors and other things. We have to apply those opportunities carefully though..

Has there new interest in SPD by Saint-Gobain in addition to what they have done with Corning glassware?.

Oh! Sure. Saint-Gobain is a licensee of ours and there's been a number of programs that we work with them on..

Thank you. Our next question will come from Michael Kay with Kay Associates. Please go ahead..

Hello, Joe. I came in a bit late because that the call center made me wait for long time you may want to reconsider changing.

Could you briefly indicate what the fee income was, was at the higher or lower about the same the previous quarter?.

It was higher. What you should do is look at the press release that was issued and also just listen to the transcript, you will see that revenue compared to the second quarter of last year was up 40 something percent and compared to the first half of this year versus last year was also up..

I see.

And do you find that the licensees are willing to cooperate on reducing the expenses, so you get to that sweet spot that will make it more attractive for OEMs?.

Yeah. One thing I mentioned earlier that we’re seeing some cost reductions at different levels of the supply. But I -- what I said also, just to be fair is, it’s not happening as fast or as large as I would like, but I'm not satisfied until we dominate the world. So that’s always our mantra and that’s where we are focusing on..

And has there any progress been made with getting another filmmaker based in the United States because of North Korea launches a missile it could hit Japan?.

I'm more concerned about other things than that, but thanks for the question..

And also what about Zuli, is any progress being made with their application of SPD?.

You mean the smartplug company. They continue to sell….

Yeah..

… the smartplug and loads, I think, it's on Amazon and a couple of other online retailers than some other actual physical resellers. It’s a great product. You plug it in.

It's very easy to work with and what need about it is the presence check technology that they pegged it because it detect who is in the room and what -- adjust your smart home accordingly..

The next question will come from [ph] Francis Carterbau (47:25), a private investor. Please go ahead..

Good afternoon, Joe..

Hi.

How are you doing?.

Is there any progress -- is there any progress on the dark particle?.

You mean like a different color particle?.

Yeah..

We are not talking about any..

Color particle..

Yeah. We are not talking about anything that is still not commercial. There is work being done on, as I mentioned earlier on different colors and that would include a darker or more neutral color particle. But until we have it and until it commercialized we are not going to say anything about it..

Okay.

Once it is commercialized there will be additional testing before it will be released commercially?.

Depends on the nature of the particle, if it’s -- what we call a drop in which can work with our existing matrix polymer and suspending materials then it’s a lot easier to test. If not, we would certainly start the testing on that.

But one of the criteria that we use in identifying materials is much likely to be happening on a durability and performance standpoint with all these materials. So in order to pick a material we keep that in mind. Good question though..

Do you think the darker particle will be more favorable in the marketplace?.

Right now we have the widest range of light transmission on the planet. But I would like to have a wider product offering. So while it’s not a necessary condition and certainly desirable thing for us to have and we are focusing some of our resources on achieving that..

No.

You said widest range, the darkest range is still the bluish color, is it right?.

Right.

Light blockage from color, the reason we’re blue is that we are blocking all areas of the spectrum except dark blue, so through transmission the window looks blue when you look through it, but let's say, sunlight coming through your window, it’s not going to catch the blue pearl, I am not say a white interior of the car, because blue light is not visible from the naked eye, but when you look through the window you are going to see blue, because it’s not filtering that.

It’s a little bit complicated the optics, but we would like that something that look less blue if we could and the different ways of achieving that and we are exploring them and so our licensees..

The next question is from [ph] August Furman (50:08), a private investor. Please go ahead..

Hi, Joe.

Just wanted to have a couple of follow-up questions with you, in terms of Fokker Services, could you touch upon them, have they made much progress?.

So, yeah, Fokker is publicly shown a very nice way with virtual-reality glasses at the last show I attended. They and their cabin using our technology plus they had mockups and things like that. So they are moving forward with their element product. And just to kind of refresh people’s recollection of the element product.

It is designed to be a modular cassette-based system that makes it easy to upgrade existing aircraft to make the existing window SPD-Smart. So the idea behind that is to target the commercial airline market.

So let say your Delta at any given time you have a number of aircraft being refurbished with new seats and new entertainment system and new interiors and you would just basically be also changing the windows during that seat check or wheel check and that’s the idea behind the element product.

A question I think I would ask is, they were targeting third quarter for a launch customer and we know they've identified a launch customer. I don't have all the details on where that is in the process, because it's not me, it’s really the licensees that supply them, which is InspecTech that is doing the EDW elements for that.

So it's really a work in progress..

Okay. And then in terms of -- I just saw recent dealer ordering guide for Mercedes-Benz Maybach S-Class and it is effective from 21st of September 2017. They says the Maybach fix if you are going to have the Magic Sky Control standard. Is that new news or is that something that’s been going on based on the 2018 model year.

I always see that was an option in the past and if it’s a standard thing now that’s going up that’s a good sign considering, I know you have said in the past technology goes have an option and then it goes to a package and then it become standard, what are you talking about?.

Yeah. Well, it is certainly encouraging if they put on that, I mean, the Maybach, I would caution against reading too much into it, because that’s a very expensive car. So it’s not really the customer making a decision. Typically -- well, I guess, I could say this.

One of the things that Mercedes and we discussed about a year and a half ago was ways for them distinguish the Maybach from the S550, which is the high-volume S-Class sedan, because basically they are based on the same platform.

And the feedback we were getting in talking to all of the dealers in the United States was that they create the sales friction if a customer comes in and they want a fully-loaded Maybach and if for some reason the dealer has one that's almost fully loaded but doesn't have the heated seat or does have the by master stereo system or doesn't have the Magic Sky Control than it creates kind of there you know you could say doesn’t explaining to do why doesn't have everything in it.

So one of the things they are considering was making its standard so that it made it easier for the dealers to just get something now the customer wanted which was fully loaded. And so I think that what you say is very consistent with what they were doing or thinking about doing, which is really loading up the cars with it.

And remember certain markets have things standard versus others, like I remember even with the SLK, our technology was standard I think in India. I don't think you could order a SLK without our technology in India. So they kind of segregate the markets also depending on what's going on there, certainly good sign now and -- certainly good sign..

Ladies and gentlemen, this concludes our question-and-answer session. I’d like to turn the conference back to you Mr. Harary for any closing remarks..

Okay. Thank, Chad. Well, I'm going to let the numbers speak for themselves.

Revenues are up, expenses are down, we have enough cash for at least the next 12 months to 15 months until it’s continue to grow in all the major markets for our SPD technology and looking forward we expect to have higher royalty income in the third quarter as compared to the second quarter.

Revenue growth will come from continued development of the main markets that were in. It will come from new product and new applications for our technology. It will also come from making our technology more affordable. Cost reduction initiatives are underway to make our technology more affordable and this is already achieved results.

There is a lot more hard work to do, but also let’s not loss side of where we are. No one in the SmartGlass industry is come as far as we have in automotive ever. No one has been in as many cars as we have or as many different car models ever. No one is achieved the performance and reliability that we have demonstrated the automotive industry ever.

No technology other than ours have been used by the aircraft industry as long as we have or flown in as many different aircraft as we have.

Our performance, reliability and logistical advantages have resulted in little or no competition except in the architectural and aircraft markets, and in the aircraft market our competition is losing traction and major alliances are forming around our SPD technology.

In automotive we have the largest glass companies in the world with active licensees producing SPD-SmartGlass for serial production.

We have Mercedes launch customer and we have Continental Automotive, the world's fifth largest automotive component supplier and projects with virtually every premium automaker including the major and emerging electric vehicle makers.

We offer the automotive industry an effective alternative to diesel engines is the way to reduce CO2 emissions and comply with existing regulator. We offer the electric vehicle makers a way to increase the driving range of their vehicles. We offer internal combustion vehicles the ability to reduce CO2 emissions and increase gas mileage.

In architectural, we’re getting more done with less. Our competitors are spending as much as 25 times what we are spending and we have more to show for it. We remain the best selling and best performing smart window technology in the world.

We will continue to work hard to maintain and build upon these successes, and in the process we will make cars, trains, planes and other vehicles more efficient and we will make people safer and more comfortable.

One only has to look at the Continental Automotive video where the PPG-Vision Systems alliance to see that a change is taking place in our industry. A transformational change is also taking place within Research Frontiers itself. I thank you all for being part of this effort, as together we shape the way that people live, work and travel. Thank you..

And thank you, Sir. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Take care..