Good afternoon, ladies and gentlemen. Welcome to the Research Frontiers’ Investor Conference Call to Discuss the Fourth Quarter and Full Year 2019 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 later today in the Investors section of Research Frontiers' Web site at www.smartglass.com and will be available for replay for the next 90 days.Please note that some of the comments made today may contain forward-looking information.

The words expect, anticipate, plans, forecasts and similar expressions are intended to identify forward-looking statements.

Statements that are not historical facts are forward-looking statements that are made pursuant to the safe harbor provisions that are part of the Securities Litigation Reform Act of 1995.These statements reflect the company's current beliefs, and a number of important factors could cause actual results for future periods to differ materially from those expressed.

Significant factors that could cause results to differ from those anticipated are described in our filings with the SEC.

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

In some cases, the company has responded directly to e-mail questions prior to this call, or will do so afterwards, in order to answer more questions of general interest to shareholders on this call.

If you find that your question has been substantially answered, as a courtesy and to allow others time, other shareholders to ask their questions, please remove yourself from the queue by pressing pound one.

Also, we ask that you keep your questions brief in the interest of time.I would now like to turn the conference over to Joe Harary, President and Chief Executive Officer of Research Frontiers. Please go ahead, sir..

Thank you, Ross. And good afternoon, everyone, and thanks for being here. Joining me today is Seth Van Voorhees, our CFO. First, I want to note the passing in January of a very dear friend and our Chief Technology Officer, Steve Slovak. I greatly admired Steve's work.

He was an inventor on many of our patents and also worked closely to train our licensees and get them over the finish line. All of us at Research Frontiers miss Steve very much, and my report to you today is dedicated to him.With our licensees Research Frontiers does operations on every continent in the world other than Antarctica.

Because of this, all of us think about our business virtually 24x7. But there are two special times each year when I take a moment to reflect back on what we have accomplished and what we need to be doing to succeed. One such time is our annual stockholders meeting in June.

The other is on our year-end conference call for investors, this one today.So let me take some time this afternoon to reflect upon and discuss with all of you the past year and the year to come. We judge our performance in three main areas, financial stability, operational efficiency and business growth.

The first two areas, financial stability and operational efficiency, not only give us the resources to accomplish our targets but they're especially important during volatile business and market period, such as this one.We achieved positive results in all three areas this year. It is pretty straightforward to summarize the activities in this area.

Let's start with the key initiatives that we outlined in prior conference calls. The main one to highlight is business growth. Extending our business and where SPD technology is being used is very important. Our largest market currently is automotive. Revenues from this market were up in 2019 compared to 2018.

Revenues from our second largest current market, aircraft, was down slightly by a few percent in 2019 compared to 2018, primarily as a result of inventory management by the aircraft manufacturers using our technology in the fourth quarter.We expect revenues from aircraft to be up in 2020.

The architecture market uses twice as much of the world's glass as the automotive market. It is potentially our largest market.

With the opening of Gauzy's Stuttgart factory in the fourth quarter of 2019 and its ability to make SPD film 1.8 meters wide, this allowed us for the first time to practically address the large architectural market.Since the ceremony to commemorate the opening of their factory in December, Gauzy made further improvements in the efficiency of that line, and their new improved SPD film is being shipped to key customers this week.

Royalty income from the architectural market was up substantially in the fourth quarter of 2019.

When we combine the automotive and architectural markets, royalty income was up over 40% in 2019 compared to 2018.I also note that we added licensees in each of these product areas in 2019 with the addition of SER glass in Brazil for automotive applications and Glatic for architectural applications in South Korea.

The display market was down in 2019 compared to 2018. This was because we discontinued our VariGuard business unit in the first quarter of 2019, and instead licensed it out.

But the other main component of the display market is the business that our licensee, Nippon Sheet Glass, has for next generation televisions and other information displays that use our technology to improve picture quality.

This business was up in 2019 compared to 2018, and we expect an even stronger 2020 as products for this consumer and commercial display markets come out this summer.What about the future? Last year and this year so far, we bucked some pretty strong macroeconomic headwinds that have affected other companies.

I noticed that it is usual in the automotive market to see revenues go down as cars approach the end of their model life cycle. This is quite normal since fewer cars in total of a particular car model are made each year in the normal seven to eight year product life cycle.

It is notable that our revenue from automotive was actually up in 2019 compared to the previous year.I was also asked by a shareholder if the coronavirus has impacted our business. Well, it has clearly impacted the automotive business and almost every major carmaker has announced earnings warnings.

However, we have not seen any decrease in economic activity in the first 2.5 months of the first quarter of 2020. We get sales reports every week or so from Daimler, showing the number of cars coming off their production line using our SPD-SmartGlass.

Royalty income remains firm and strong.As a former economist, I always look for leading indicators of future performance. One of the best leading indicators that I know is to look at SPD film sales since it is this film that gets put into the end products that we receive a royalty from.

At our last conference call in November, I noted that sales of SPD film through the end of the third quarter already exceeded all of the film sales for the entire prior year.Film sales in the fourth quarter even exceeded our elevated expectations.

Just with Hitachi Chemical film sales alone, the amount of SPD films sold in 2019 exceeded the annual amount sold in all prior years since the beginning of its production. This is a 12 year record. As you might expect, most of this increase came from increases by film purchased by our licensees for automotive applications.

Notably, film used by licensees making consumer and commercial electronic applications, were also up substantially in 2019 compared to 2018.Next, let's discuss financial stability. As of the end of 2019, we had $6.6 million in cash and no debt.

We have very steady, low and predictable expenses and our cash burn is about $450,000 to $500,000 per quarter. That means we have plenty of cash that will last at least for the next three years.

It is important for us to make sure that we are operating as efficiently as possible to make being cash flow positive easier to attain, and our expenses have continuously come down.Total operating and R&D expenses in 2019 were nominally up by about $857,000 compared to last year. But when we examine this further, expenses were actually down in 2019.

The company's net loss increased by $1,122,852 to $3.8 million or about $0.13 per common share for the year ended December 31, 2019 as compared to $2.7 million or $0.10 per share for the year ending 2018.

However, over at $1.7 million of our net loss this year were non-cash accounting expenses relating to the issuance of options and warrants and other one-time charges.Without these items, the company's net loss for 2019 would have been $2.1 million or $0.07 per common share.

So in actuality, our real net losses here went by over $187,000 or $0.2 per share or about 8%. The takeaway here is that relevant expenses were down in 2019 compared to 2018, and we expect further reductions in these expenses in 2020.

These cost reductions are important steps we took to bring us closer towards being cash flow positive and profitable.The other key initiative is we're making SPD technology more affordable to the customer. I was in Belgium in February to visit the new factory that AGP built there for smart glass fabrication.

It is large, immaculate and almost entirely automated. This results in higher production yields, consistent quality and lower costs from labor and from waste.

Similar investments in automated processes have been made by Vision Systems and other licensees.Both of our active SPD filmmakers are now aggressively working to make one of the largest cost components in SPD-SmartGlass more affordable.

And my visits to AGC and Vision Systems about a week ago show the large resources going to developing the markets for SPD-SmartGlass and expansion of production capacity through investments by our licensees in property, plant and equipment.

These efforts have resulted in lower costs to customers because of supply chain efficiencies.A stronger and more efficient supply chain and lower product costs and higher production capacity, all make it easier for companies to use our technology.

We've had good results in our core markets and new automotive projects are virtually being started every month now.

The industry has a better understanding of the benefits of using our SPD-SmartGlass technology, and we're also opening up new markets this year in a bigger way, notably architectural and with consumer electronics scheduled to come online in the second half of this year.We received by email before this call questions from investors and we addressed many of the general topics in our presentation today so far.

Here are some additional questions that were emailed to us.Mr.

[Reynolds] asks, could you please address several questions regarding Gauzy's plans for producing SPD film? Is Gauzy producing SPD film at the plant in Israel, or only the emulsions? They're producing the emulsions or the chemistry, if you will, in Israel and the coating is all being done in Germany.The next question he asked is, is the first production line at the German plant producing only SPD film? Yes, it's only producing SPD film, that's what it was designed to do and that's what it's dedicated to do.Gauzy's president has stated that they plan on opening a second line at its German facility by year-end.

Will this second production line produce SPD film or PDLC film, or a combination of the two? We've already been talking about Stuttgart producing SPD. So that deals with that question about Gauzy.There's another question about Gauzy. This is from Mr. Michaels. Gauzy has said they are working on 10 automobile OEMs.

I know you said previously that REFR is under consideration for about 11 vehicles. Has that figure increased? In both the number of OEMs that Gauzy is talking to and that we're talking to, yes, they've increased. And as I noted earlier, virtually every month, including this week, new projects has come on board for us.Mr.

Keen asks, the status of getting RFI sunroofs into autos other than Mercedes, and is there any consideration of expanding automobile offerings to front side and/or rear windows? And actually the answer to both those questions is yes.

There has been great progress in getting us into other vehicles and also, these vehicles are considering all of the above front side, rear and even the windshield.Mr. Harvey's question, I already answered about the effect of the coronavirus, it’s not affecting us as far as we can tell. This is a real interesting question I got from Mr.

Albert, basically he’s asking, after three years of reduced pricing there, few real world models using SPD than before the price reduction initiative started. This lower price hasn't spurred demand. Is there a reason to think that Gauzy's lower prices will do any better? And I think in the question, there is something that I need to clarify.

Our cost reductions are being applied to future models. The current models that are out there were negotiated at inception of each program by the glass licensee and the automaker.So those prices are set. Any cost reductions, though, are basically set for future models of different cars.

And we're beginning to see that, because of that initiative that we started three years ago. The pipeline of future models is just growing tremendously and the amount of a number of cars and the amount of glass per car has also grown.

So, the price reduction initiatives haven't affected current production, but there's certainly positively affecting future prospects. But I think that was a great question and an important one to clarify.I was asked by Mr. Leven to please comment on the electric Ford Mustang that is supposed to begin sales later this year.

The specs show that the roof is electrochromatic. Okay. If that is correct, will the roof be SPD and is it an option or standard? Well, what I believe Mr. Leven is referring to is nothing in the official specs by Ford. This was some speculation or some discussion going-on on the Ford Mustang blog.

And basically, customers have talked about the fact that the new Ford Mustang does not have a pull-across shade.

And they were speculating whether they're just using tinted glass and then some of the customers and then others chimed in, started asking if it would be better if Ford put an electrochromic roof, electrochromatic similar to the Mercedes, which is our technology.I must say that I'm happy that customers are publicly asking for it and that they know that this type of product exists.

And we are getting a good response from various automakers. So while Ford may or may not do this in the future, it's nice to see the speculation on the Mustang blog that they should be doing it in the future.Mr.

Nelson asks, Gentex had a recent slideshow that indicated that, “large area dimmable devices for automotive was one target for future growth.” And I must say we not really run across Gentex at all in the automotive market, neither of our licensees.

I also note that about 15 years ago, they had targeted architectural glass as one of their main targets for future growth and they still haven't sold anything in that market.

So it's nice to have aspirational targets.One of the issues they face and this is not their fault, it's really inherent in the electrochromic technology that they in view and save use, is that as the surface area increases, the switching speed gets progressively slower and non uniform.

So because of that, it becomes very, very difficult to put an electrochromic roof in a car, because the car may arrive at the destination long before the roof switches and it may take as much as 40 minutes for, let's say, an architectural size window to switch, and it would switch in a non uniform way.

And some of the recent projects that we've been talking to have pointed out that that's not acceptable for them, either the switching speed or the non-uniformity.And then the last e-mail question we got was from Dr. Perin.

What do you think is the explanation to the recent increase in the volatility of the stock price? Well, if we're talking very recently, it's clearly the coronavirus, and just to kind of give you some relative numbers. Even with our stock being down today 4.4%, the Dow had the largest single point drop since 1987 of 10%.

NASDAQ and the S&P were down 9.5%. The Russell 2000 was down 10.5% and the Russell 3000 was down 8.5% today.So just kind of cumulatively, year-to-date the Dow is down 27.5%, the S&P down 24 -- little more than 24.5%, the NASDAQ is down about 21%, the Russell 2000 is down 35% and the Russell 3000 is down 24%. We're down 13% for the year.

We're also up 23% since this time last year, every other indices is down between 2.5% and 19%.

So, I guess what that says is that the coronavirus is maybe disproportionately affected the general market, and Research Frontiers was a good place to put your money for the last year.So we discussed a lot of the exciting topics today, and I'll now ask our operator, Ross, to open up the conference to any additional questions people participating today might have that we have not already covered..

[Operator Instructions] First question comes from Alan Ginsberg..

My condolences to Steve Slovak's family. And the question has to do with that. How are you going to replace him? He seemed to be a key member of your research team..

Steve was a good friend and certainly a key member of our Research Frontiers team. I can't say I've met a better problem-solver or talented scientist with the exception perhaps of Bob Sacks. They both were tremendous scientists that really brought Research Frontiers from the lab to the real world. We have a different skill set that we need now.

Now that the technology is in the marketplace and a lot of the things that we work on as technical support for our licensees in areas like lamination, and durability, and testing and other areas like that, we would probably need someone with a different skill set than Steve.

But that's not to minimize the tremendous, tremendous work that he's done for us. And he's, as I mentioned earlier, the inventor and in many cases the lead inventor on a lot of our key patents..

So are you looking for other people to replace him or do you have enough staff now?.

Well, we have enough staff but we're looking to expand the services that we can provide our licensees to make sure that they have no issues. So part of my recent tour of Europe especially was to solicit comments from our key licensees as to what type of R&D and tech support they would need..

Our next question comes from Mike [Forester]. Please go ahead, Mike..

You mentioned or commented about [Genentech].

Didn't they get a contract from Boeing in regard to windows or continuing to provide windows to the Boeing airplanes?.

No, they do the 787 and they've an option on 777..

Well, in that regard, can you -- and I understood also that they had a very reduced transition speed from dark to light.

Can you comment on that and how Research Frontiers was unsuccessful in persuading Boeing to go with SPD product?.

Yes, I could touch on that briefly. A lot of this work was actually very detailed and focused work done by our licensees. But when you say substantially reduced switching speed, it's still over a minute to switch.

I just was on one of the Dreamliner that had that technology coming back from Europe, and it's still slow and it's still dis-uniform and you'd get the, what we call the donut hole effect.

The only thing I could say is that unless Gentex highly subsidize the window as an incentive, the only thing I could tell you is that there was negative inertia in switching, because apparently when Boeing had certified with the FAA, the original electrochromic windows for the Dreamliner, they went through a tremendously difficult process.

We haven't had the same difficulties. But I think they were a little gun shy on trying to go through anything again with that technology. So there was a little bit of inertia in that case..

And in regard to, you’re coming about the cost and I think it was $1.7 billion of one-time cost.

Do you anticipate any I guess new funding or non-cash expenses occurring in the next couple of years?.

Mike, those were mostly non-cash costs. So it didn't really affect our requirement for funding. And a lot of them had to deal with some fairly esoteric accounting treatment on how a prior stock offering was handled and structured.

And quite frankly, I think it was news to everyone, including our audit team that the accounting treatment would be that way. But it doesn't matter because we closed it out, so we don't have to worry about market fluctuations causing non-cash charges as a result of that..

So you're not answering any....

And then the other component, which may or may not repeat, is going to be dependent on the amount of stock options granted in the future, because that's also a non-cash charge. But if I remember correctly, a large chunk of that was based on a very esoteric accounting treatment for a stock offering we did..

All right, thank you..

You're welcome. And just to reiterate, it didn't really have any cash impact on us at all..

Our next question comes from Leonard [Litz]. Please go ahead, Leonard..

A couple of questions. Is there any way you can quantify the volume of business that'll come in this year from these different sources.

It sounds fairly substantial and would it come increasing quarter-to-quarter, or how do you see that?.

The answer is no, I can't quantify it without knowing exactly the production call outs and the take rates for the glass.

I will say some recent conversations I have with the OEMs, have said that they targeted certain take rates and they're getting multiples of that and they want to even get more vehicles with this, because the customers are loving the technology.

So anecdotally, I expect that in many cases we're going to continue to buck the trend of a smaller number of vehicles being produced every year by, for each car model with increased adoption and expansion to other models. And that's about the most I could say about that without going into some details that our OEM customers want me to say..

And you already said architectural is already part of this year's….

Yes, that one of your questions that I wanted to answer in the presentation, because a lot of people have been wondering about architectural and it was nice to see that up..

In the past, you had a poison pill out there for the stockholders so that somebody couldn't come in and make an offer and it take you away from us.

Is that still active?.

Yes, the poison pill is still operative. Just to clarify, I know that you're a market professional, so you're probably more used to poison pills. But it would never prevent an offer for fair value from being consummated.

What a poison pill typically is meant to, is designed to do is, to make sure that the offers we receive from outside parties are fair. And our Board of Directors under Delaware law has a fiduciary obligation to redeem the poison pill once we're offered what's considered fair value..

But that wouldn't be one of the things you would encourage, I assume?.

Not at our current market valuation. But at 10 or 20 times our market valuation, we have a horse race starting at least..

Our next question comes from Todd Brady..

I'm wondering if you could comment on Saint-Gobain and their right tuning technology, which is premised on SPD..

I can't comment more specifically that I'm happy to see that companies like Saint-Gobain and others are active licensees. And a lot of that is driven by the automotive and train customers..

Another question I have is AGP.

Has any revenue started to flow from the factory, the new factory that was established?.

The answer is I can't disclose any particular licensee’s financials. And in the case of AGP, some of the projects that they're currently working on in the automotive market, they view as highly secretive.

So I have to be especially careful in their case, because there's some fairly large things that they're working on that we would like to make sure cross the finish line..

The real question there is, has any revenue started flowing from them yet?.

We have royalty income from them, yes..

Our next question comes from Michael Kay. Please go ahead Michael..

I was very surprised that I just learned today, I guess with other shareholders that -- it said VariGuard operation was suspended. What went into the decision to do so? And shouldn't shareholders have been told that development had occurred? It was launched with a great deal of fanfare. So I was....

We actually announced this Michael a year-ago and there was a press release about it. You might've missed it, but that was something that was disclosed. And the thinking behind it is that as a division, it has cost and it has revenues and as a licensee, what it generates is basically going more towards the bottom line.

So we felt it was in shareholders’ best interest to spin that off as a licensee..

So it's like a separate entity and just -- and the company would be generating income, royalty income….

It's just like any other licensee now, just like AGC or AGP..

Okay, thank you..

Thanks. Which is why also you saw that revenue from the display market was down in 2019 versus 2018, because all of that went basically into the licensee bucket as opposed to a direct business unit..

Our next question comes from Jared Albert. Please go ahead Jared..

Can you expect to choose cash flow positive and one of the quarters in 2020?.

I'm not going to predict financial results until they happen, I apologize. But we came down close in the third quarter of 2019. We were a penny a share loss, so it's certainly possible..

I don't think you can answer it, but do you expect to teach you through to use SPD, you expect they will continue that program?.

As I mention, I'm not going to discuss any car models that haven't been officially announced by the OEMs. We've been asked specifically not to do that..

Our next question comes from John Nelson. Please go ahead John..

Could you discuss in brief, whether any key patents expire anytime soon, and whether any significant enhancements to the patent portfolio have been achieved recently?.

We have some fairly important inventions that have come up into our company in the last two years. And apart from that, if we just look at what patents have been filed already, the key patents don't start expiring until 2032 I think, or 2033..

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

Okay, thanks a lot. In past conference calls, I outlined our initiatives for Research Frontiers. These all center around our growth strategy. We began to see the results of this in 2019, and we're working hard in 2020 to also achieve our growth and profitability targets. First, reducing the cost of our SPD-SmartGlass technology to the customer.

Simply put, lower cost of our technology opens up wider market penetration. It also allows our technology to be used in new markets.

For example, Panasonic and others have shown what the next generation televisions will look like, as well as display advertising, and we're very much part of that.SPD film sales are one of the best near-term leading indicators of future revenues for us, since this film gets put into products in subsequent quarters that generate royalty income for us.

In terms of the amount of SPD films sold, 2019 was a record year since inception 12 years ago of commercial SPD film production.We expect the main part of our business growth to come from core businesses, primarily automotive and architectural.

As noted earlier, fee income from automotive and architectural markets were up over 40% this year compared to last year. We spoke about the drivers in these two markets before.

In automotive, we make cars more efficient, energy efficient, reduce CO2 emissions by 4 grams per kilometer and increase the driving range of electric vehicles by up to 5.5%.We also make people more comfortable and safer and protect the interiors of cars. The auto industry is certainly hearing our message.

In architectural applications, we make buildings more comfortable, energy efficient and functional, and more pleasant to work in or live in. We saw expansion and growth in the architecture market in 2019 and we're looking forward to continued growth in 2020.

With a growing movement as a result of the recent events, including the coronavirus, another aspect of our technology, the ability for smart glass to be more easily clean than shades or blinds, can be important.We have seen from the hospital market, even before the coronavirus, that curtains and shades can collect allergens, dust and germs.

I also think that in some way the general aviation market may gain some strength as commercial aviation has become more disruptive at late.

As you know, one of our strongholds in the aircraft industry is in general aviation, and the ability for our SPD technology to be retrofitted onto existing planes is a key advantage.Just this morning, I read an article that one private jet fleet operator saw 27% increase in its business this year, which it attributes to the coronavirus.

Of course, like you I don't wish for these events to be present but they do add additional reasons why people and companies should use our smart glass. For those of you who have listened to our conference calls over the past several years, we identified what we needed to do.This year, we saw all of these things accomplished.

We needed to have multiple producers of SPD film. This has been done. We needed to have wider SPD film so we could pursue the architectural glass market. This too has been done. We needed to have SPD technology available at lower cost to the customer. This also has been done.

We needed greater awareness in the various industries as to what SPD smart technology could do for them. We expanded our public relations efforts, and spoke at various industry conferences.

This increased awareness has also been done, and it's been quite effective.Customers with new uses for our technology, as well as traditional ones, are all coming to us and our licensees. We needed a stronger balance sheet. This too has been done. We have over three years worth of cash and remain debt-free. We wanted to reduce internal expenses.

This has been done in each of the past five years, and we expect cost reductions to continue in the coming year.

In our last conference call, you got a glimpse and today you see in more detail what ultimately will be the best indicators of our success, revenue growth, new products and applications, and more widespread use of our SPD light control technology.The main ingredients that to-date have contributed to our success are, the world-class high-performing and reliable technology, hard and focused work by us and our licensees and their customers and determination.

And I must say this year a substantially increased investment by very few players in the industry. These main ingredients to our success will continue. And as the markets for smart glass grows, we’ll undoubtedly face cheaper or subsidized imitators and competition.

But the core strength that I point out to any company wanting to incorporate a variable tint window, or sun roof or skylight into their product line, is that the customers want the best and we have the best-performing, most reliable smart glass in the world.It is the only one proven since 2001 in the aircraft industry and since 2011 in the automotive industry.

Tens of thousands of cars, aircraft, boats and home and office windows using our technology show this performance and reliability. And with costs coming down, we're becoming affordable in more and more products and markets. We said what we needed to do and we did it, and we will continue to work hard.

Thank you all for your support while we focused on this..

This conclude today's conference call. Thank you for attending..