News

May 06, 2023

Research Frontiers Incorporated (REFR) CEO Joe Harary on Q4 2021 Results

Research Frontiers Incorporated (NASDAQ:REFR) Q4 2021 Earnings Conference Call

Research Frontiers Incorporated (NASDAQ:REFR) Q4 2021 Earnings Conference Call March 9, 2022 4:30 PM ET

Company Participants

Joe Harary - President & Chief Executive Officer

Darryl Daigle - Director

Alex Kaganowicz - Director

Graham Settle - Director

Conference Call Participants

Michael Kay - Kay Associates

Alan Yakuboff - Kingsview Asset Management

John Nelson - PointView Research

Operator

Good afternoon, ladies and gentlemen. Welcome to Research Frontiers Investor Conference Call to discuss the Fourth Quarter and Year-End 2021 Results of Operations and Recent Developments. During today's presentation, all parties will be in listen-only mode. [Operator Instructions] This conference is being recorded today. A replay of this conference will be available starting later today in the Investors section of Research Frontiers website at www.smartglass.com and will be available for replay for the next 90 days.

Please note that some of the comments made today may contain forward-looking information. The words expect, anticipate, plans, 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 the shareholders on this call. [Operator Instructions]

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

Joe Harary

Thank you, Paul, and hello, everyone, and welcome to our fourth quarter and year-end 2021 Investor Conference Call. I also want to welcome our Board of Directors, Darryl Daigle, Alex Kaganowicz and Graham Settle, who are joining us today as well.

Let's review the past year together and look forward to this year and some exciting developments that we expect to happen in the next nine months. This year, we showed our lowest loss in 27 years. For the third quarter, we even earned a profit, something no other smart window company has ever done. The company's fee income from licensing activities increased by $434,584 or 52% for 2021. Total annual expenses decreased by $304,000 or approximately 9% in 2021. 2021 was the seventh consecutive year that expenses were lower than the year before at Research Frontiers.

The Company's net loss decreased by $494,512 to $0.06 per common share. The net loss for 2021 was Research Frontiers' lowest net loss in 27 years. We're also in strong financial condition. We continue to have no debt. And as of December 31, 2021, we had liquid assets of about $3 million and working capital of approximately $3.7 million. The company expects to have sufficient working capital for at least the next 22 months of operations. And as you will hear later, this will probably last longer because we expect increased revenues from automotive in the second half of this year. That 22-month estimate does not factor in these additional revenues.

Some of the highlights from this past year include increased revenue from automotive. Also, now that Gauzy is shipping wider SPD film, we saw the beginning of shipments of SPD-SmartGlass for architectural projects. This year, there are also significant new projects in the aircraft industry, including the ACJ 220 program by Airbus, Comlux and Vision Systems. Airbus has already announced orders for 15 of these transportation category-sized jets. Each of these A220 aircraft will have SPD electronically dimmable windows covering 50 structural windows. Aircraft manufacturer Epic also started delivering jets to customers with SPD-Smart EDWs.

And last month, a merger between two of our licensees Gauzy and Vision Systems was announced. This was a transaction that had our full support and one that I had personally worked on with Gauzy and Vision Systems for the past two years. It created the largest internationally diversified smart glass technologies manufacturing company in the world.

Gauzy raised $60 million in the Series D financing to acquire and fund the growth of the newly combined company. The combined entity now has over 70 certified industrial partners, five dedicated manufacturing sites, 14 global offices, international subsidiaries on six continents and customers in over 50 countries. It also has over 60 patents and 20 unique categories. It has 480 employees globally, approximately $50 million in 2021 revenues.

So let's discuss now some of the other developments in 2021. Let's start with our largest market. In automotive, we kicked off 2021 with an announcement in January by Cadillac at CES, which highlighted a four-quadrant SPD-SmartGlass roof in their flagship all-electric Celestiq.

Also in automotive, there was a new government contract in the area of specialty automotive. We also had continued and growing use of our SPD-SmartGlass technology in serial production with McLaren and more upcoming models are also being discussed with them.

McLaren has told me that the SPD-SmartGlass roof has very high take rates and is quite popular with customers. Prestigious publications with millions of readers each have highlighted the range of extending -- the range extending benefits of SPD-SmartGlass in this, the Celestiq and other electric vehicles, with a highly coveted 5.5% increase in driving range.

They also noted the significance of grams per kilometer reduction of CO2 emissions when SPD-SmartGlass is used in internal combustion engine vehicles. And these are not the only benefits. We also make people more comfortable and safer and protect the interiors of cars. Bentley noted that SPD-SmartGlass used in fixed non-movable panoramic roofs in cars, which is the trend, can also reduce weight in the roof by up to 13 pounds and eliminate the need for 54 components. This reduces costs and further increases driving range and reliability while contributing to the stability of the car on the road.

The benefits of SPD-SmartGlass were discussed in many prestigious automotive publications such as Automotive News, Autoline, the Detroit Free Press, Wards, Automotive News and others; more recently, we appeared on the Automotive News daily news program, First Shift. And also on the widely followed Daily Drive podcast. And just last week, we had technical peers in Wards Automotive. And I invite all of you to check out some of these articles and videos on our website and social media platforms.

And with our strategic benefits in the areas of electric vehicle range extension and reducing CO2 emissions in internal combustion engine vehicles, we have certainly gotten the attention of the automotive industry, both car manufacturers and their suppliers. I note that Hyundai and Sekesui and others heavily involved in the automotive industry create substantial investments in our industry through equity investments in our licensee, Gauzy.

Now let's talk about other important developments in other key markets for our SPD-SmartGlass technology. This year, you also saw giant display manufacturer LG display of South Korea, combine their transparent OLED display technology with SPD film to make vibrant, high-definition displays and televisions that turn into clear windows at the touch of a button. These were exhibited at the Munich Auto Show showing use of these products in automotive and at the January 2022 CES in Las Vegas, showing the consumer electronics use of this product.

One recent report indicates that LG has moved forward with plans for a new TV with a 55-inch transparent OLED SPD screen that's intended for the home entertainment market and slated for release in 2023. This fall, you also saw BMW introduce in Munich a stunning concept car using SPD-SmartGlass to control the look and output of the car's headlights.

Other new areas such as more yachts, consumer electronics and architectural applications have also grown. And in trains, our licensee, Gauzy, delivered SPD-Smart train glass to their customer, Rehau, for the Deutsche Bahn Idea Train. Rehau is a large supplier to the train and other industries with over 20,000 employees. And trains used a lot of glass and SPD-SmartGlass preserves views on such iconic luxury and sightseeing trains as the Shiki-Shima train in Japan and the Rocky Mountaineer trains in North America. And the Deutsche Bahn Train opens up SPD to a much larger new market: commuter and regional transfer trains. And since our last conference call together, SPD-SmartGlass were shipped to yet another large train project for a series of commuter trains.

Now, let me pause and take some other questions that our shareholders have sent me by e-mail.

Some of them I addressed in our general presentation, but here the additional questions that were e-mailed to us. From Chuck Michaels [ph], what effects will the Gauzy acquisition of Vision Systems have on REFR? And what are the prospects for SPD glass used in additional vehicle models with the introduction of the new EV Cadillac? Thanks.

Well, thanks, Chuck. We spoke earlier about the substantial advantages that we see in the Gauzy/Vision Systems merger. And that is why I have been supporting the efforts of both companies to get this transaction done for two years. They are both great companies to begin, and together, they're even more formidable.

Regarding your question about the near-term timing of other automotive revenues. In the GM authority article in October about the SPD range extension on EVs, I noted that the Cadillac Celestiq is on track for launch with the 2024 model year. So this means that the car is actually coming out in calendar year 2023. We expect revenues from automotive from other projects in serial production to come in Q3 2022 for one vehicle -- in Q3 2022 for one vehicle and Q4 2022 for another vehicle. These may start generating revenue for us then or perhaps one quarter earlier than start of production depending on when the OEM wants this glass delivered. So to answer your question, Chuck, there could be several cars in serial production generating revenues for Research Frontiers prior to the Celestiq coming out in 2023.

John Nelson [ph] sent in a series of questions, which I touched on in my presentation. Thank you, John, for sending those. I think our shareholders benefited from my including those topics in my presentation. One additional one for Mr. Nelson: How was the response to your products at CES in January?

Well, many of you saw the Gauzy post on social media of the Chairman of Hyundai Motors spending quite a bit of time with us at CES, along with his Chief Technology Officer and the Korean Economic Ministry. I actually took the photo they used. We also had politicians and groups from Tesla, Stellantis and other visitors. CES was a great show and Vision Systems, Gauzy, and everyone did a great job presenting our SPD technology there.

We actually benefited also from the fact that some of the larger companies had pulled out of CES due to the Omicron virus. And the companies that were there got upgraded to better locations and actually got a lot more attention. And we had people just stopping right in their tracks when they saw the transparent OLED display that we had on the outer edge of the booths to catch people's attention. It was a compelling video of SPD being used in so many different applications. And also just the fact that you could do this with a transparent OLED really blew people away.

Sam Finta writes, "there's been a lot of talk about Hyundai and Kia lately as numerous articles have popped up mentioning the new Grandeur, and I quote below, this is from Sam, a key feature of the all-new Grandeur will be the Magic Roof like Mercedes-Benz instead of a regular curtain and will be capable of blocking light and heat or becoming transparent, depending on what the drivers choose. And Sam continues, this article is very specific. And in light of the recent investments in Gauzy, one can assume this is SPD. Has Hyundai or Kia made any public announcements identifying the technologies being SPD or comments on how this project is progressing? They referenced it as Magic Roof, which is very close to Mercedes' Magic Sky term. Is this the branding the SmartGlass?

Well, Sam, I think you can infer the strong interest in SPD by multimillion-dollar investments by Hyundai that they made in Gauzy and by their Chairman and CTO's visit. Also more specifically, in one of their recent reports about their Innovation Fair in South Korea, Hyundai actually noted their work with Gauzy on this and that it was moving forward towards series production. So I guess the answer to your question is, yes, they've confirmed it.

One last question that you may be able to address on the call. Daimay was working on a sun visor product using SPD. What, if any, progress on this? I and my brother have described such a product to friends and many professions, including farming, aviation, trucking and general driving. Seems like lots of demand if this product could be made available, much, much more than sunroof. Thanks. John Nelson.

Well, thanks for the additional question, John. And Daimay is working both with an OEM, and this is to fund the development of the original equipment and aftermarket SPD sun visor products. And we're very excited about this product. Speaking personally, when our Founder, Bob Saxe, and I would drive home together after a long day in the office, we were heading west and into the glaring sun. The SPD sun visor was an application near and dear to his heart. And every time we get hit by the blinding sun, he'd say, "Joe, I can't wait for us to have a sun visor." Well he's getting his wish. And you're right, John. People do look through their window both during the day and at night more than their sun roof, and they need relief from the glare. So while an SPD-SmartGlass sunroof may be an energy saving and comfort issue, the SPD sun visor is an important safety feature.

Another question from Jared Albert [ph]. Are there examples of intellectual property licensing businesses whose history, you think, may foreshadow RFI's future?

Well, typically, Jared, as you know from companies like Qualcomm and others, asset and capex light companies always seem to get higher valuations. And that's because these companies are less risky than others. And I think you'll have to look no further than our competitor view to see the challenges in high capital expenditure requirements and manufacturing costs and substantial other risks and issues that they face. Part of this is inherent in their electrochemical technology, but I also personally think that they made forced errors in their business that have contributed substantially to their current problems. I also want to highlight that because we are a film-based technology, the logistics of manufacturing and supplying SPD-SmartGlass around the world are vastly easier. And the performance and economics of SPD-Smart light control technology is actually better.

From Jeff Harvey [ph] Joe, the chip shortage is having impact on car production. Is this slowing the implementation of smart glass? I would guess it has to. My BMW dealesaid that some parts come from Ukraine, and they anticipate problems ahead for production.

Sincerely, Jeff Harvey. Well, Jeff, thank you for that and also recounting the situation. First, let me say that our hearts and support goes out to the Ukrainian people, it's absolutely terrible what's happening to them in their country. And let's all do what we can to support them and pray for peace. To answer your question, Jeff, fortunately, we have not been as affected as other companies in automotive by the pandemic or the part shortages or the supply chain disruptions. Part of this relates to the timing of projects and development cycles, but also we are blessed with better logistics because we're a film-based technology. For example, SPD film can easily bypass clogged ports and be air shipped wherever the projects are and then laminated locally.

Well, we discussed a lot of exciting topics so far. And now I'm going to ask operator, Paul, to open up the conference to any additional questions people participating today might have that we haven't already covered.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from John Strobel [ph].

Unidentified Analyst

Hi, Joe, two questions. One about Germany, one about China, two very big countries to Research Frontiers. With this invasion of Ukraine, Germany has done a U-turn and about its defense spending and cutting off the Nord Stream two pipeline, which is going to have dramatic effects for Gauzy, I suspect. Do you have any feel for this? And maybe Graham Settle might have a thought about it, too.

Joe Harary

Well, Graham certainly has a lot of field experience in many areas of the world. As far as we can tell, so far, there has not been any disruption in Gauzy's business. A lot of the flow is actually coming from chemical production done in Tel Aviv, where the emulsion facility is, and then shipped to Germany for coating. And, of course, any time you have this kind of turmoil and disruption anywhere in the world, there's going to be things that are more difficult.

But Gauzy is pretty, pretty creative in how they deal with unusual situations. Remember, they were able to go through the pandemic when Germany was shut down numerous times, still figured out how to get people in and out, to facility up and running and shipping product. So we'll have to see.

I think some of the bigger problems are going to be from disruptions to the general automotive industry. I mean, they started with chip shortages, and now with what's happening in Ukraine, there are so many other components that they rely on that's affecting things. So -- but I don't think, ultimately, it's going to affect our revenues. And hopefully, this will be over in a positive way soon, and we can all get back to normal. At least I am praying for that.

Unidentified Analyst

The second country is China, and Xi Jinping has ordered that everybody cut back on luxury goods. Of course, China has been one of our key markets for automobiles with SPD. Any thoughts for that?

Joe Harary

Yes, it's the largest auto market in the world. The -- it's hard to say how the Chinese people will react to that kind of directive. But in terms of -- there's really two aspects of China. Number one is it is a consumerism market. And, it's an important market for luxury goods.

Some of the cars that are coming out that were more general-purpose cars, so I don't think they're going to be affected. And I think that, based on the production numbers of some of these luxury cars, the rest of the market will pretty much take up the slack. So I'm not expecting too much in terms of a disruption from China in that regard.

And we're really unaffected by China as a manufacturer, because we've always taken great pains to stay out of China, especially with our intellectual property and our chemistry. And we've established production in other areas of the world for a specific reason. And that's not going to be affected by this either, as far as I could see. It's an excellent question though, and we'll find out together.

Unidentified Analyst

Yes. Thank you. Good answers on both.

Joe Harary

Thank you.

Operator

Our next question comes from Art Brady [ph].

Unidentified Analyst

Hi, Joe. How are you?

Joe Harary

Hey, Art. How are you?

Unidentified Analyst

Listen, can you explain a little bit about disposition of Vision Systems regarding safety. And the reason why Gauzy wanted to buy their technology, they call it ADAS. A-D-A-S?.

Joe Harary

Right. Well, basically…

Unidentified Analyst

What is that whole effort?

Joe Harary

The ADAS are basically assisted-driving technologies. And what the safety tech division is, is camera-based and sensor-based systems that Vision Systems has developed over the years. And not just for autonomous vehicles, they cut their teeth on passenger control systems for trains and buses and things where that kind of technology also used, but they got quite good at it.

And if you think about -- and this is something that I think is, maybe, important to note, so thank you for the question. You have one company that is a material science company, Gauzy. They were very well-known in the PDLC market. They're the highest-quality PDLC out there.

And they saw the market for SPD being bigger and became a licensee and the rest is history. They opened up two factory lines and expanded their emulsion production in Israel and really have made substantial investments in SPD for the future.

And they also have a component of their business where they actually started, before they were a material science company, they were an electronics controller company, and they got involved with PDLC actually, because they were asked by a PDLC manufacturer to controllers for them. And they realize the quality of what was being produced in the PDLC market, the real problem, not the controllers. So they ended up saying, well, we could do better and became a PDLC manufacturer. So they do have expertise in electronics as well.

And if you think about SPD-SmartGlass or any smart glass as a system, you have the solar, the intelligence for the controller and the thing that it controls, the Internet of Things, if you will. And now they have all of these expertise really, really in one place. And along the way, Vision Systems also became a material science company. They've developed certain interlayers that's highly desirable by our licensees, because it has very good eye-UV protection and very good laminating capabilities and characteristics.

So, the materials they developed as a laminator of SPD product is very complement the film that Gauzy produces. So now they have the ability to supply entire pre-laminated stock, if you will, to the entire industry. And people are -- I'm sure are very happy about that. They're rallying around that. And that's why you're seeing a lot of this, especially in automotive that I alluded to earlier, really coming to fruit.

Unidentified Analyst

Where does SPD fit into this whole technology?

Joe Harary

In the ADAS technology or in general?

Unidentified Analyst

Both.

Joe Harary

Okay. In ADAS, it's used for things like covering sensors or protecting them or regulating the light that is going into sensors, so they can work more effectively. And also, these sensors act as controllers. So, for example, your camera may tell your window what to do. So, it's a very simply ADAS system.

Unidentified Analyst

There is a Dr. [indiscernible], I think from a German research development company called Hellis, and he's been writing about micro lenses. He said he has developed the smallest micro lenses ever. And I'm wondering if SPD plays a part in enhancing the quality of these lenses?

Joe Harary

Well, I think these micro lenses will be part of -- if they work as advertised, will be part of the ADAS systems to make them better. So they could, if you will, see better. So I think there's -- it's certainly a complementary technology that would benefit making the entire system better. And all these developments really are -- things were excited but agnostic about, because we work with almost every system out there. We have a very easy to work with technology, so it's very easy for these systems to address our smart glass.

Unidentified Analyst

How do we benefit from the ADAS systems if they're installed?

Joe Harary

Like I said, it's one of the ways you could control our smart glass. So, we could take this conversation offline, but just to leave time for other people that might have questions. Butbasically, think of the ADAS system as a type of intelligent control system that can benefit. And also, one other thing which may not be obvious, the ADAS system is used in the autonomous vehicles. Smart Glass is a very -- is expected to be a very integral part of autonomous vehicles, self-driven vehicles because of things that I've talked about in the past about the interaction between the passengers and their outside world and their devices. So the SPD, in conjunction with an ADAS system can be quite sophisticated.

Unidentified Analyst

Thank you.

Joe Harary

Thanks a lot, Art.

Operator

[Operator Instructions] And we have a question from Michael Kay. Your line is open.

Michael Kay

Hell, Joe.

Joe Harary

Hey, Michael. How are you?

Michael Kay

Okay. Now that the so-called sweet spot was reached in terms of the price, the declining price of SPD film and also the fact that Gauzy now could produce it in much wider sizes, could you indicate what progress has been made in terms of getting SPD, the architectural market, since we had the last conference call?

Joe Harary

Sure. So Gauzy ships film that is much wider than Hitachi ever shipped before and there are some architectural projects that, that glass is being used for. One of the things, just to kind of maybe go to the other part of your question about the sweet spot and the costs, one of the things that we designed into their coating facility is the ability to do variable with coating. So for example, for the train project that I mentioned, that series of commuter trains, they had ship film that was 1.55 meters wide for them.

Now, I mentioned that precise number because in the past, you'd have to either take a roll of film that was 1.6 or 1.8 typically, and cut it down and lose 10% or 20% through cutting. Now, you don't have to do that, you could actually coat the film for large projects exactly the width that's needed. So you eliminate any kind of wastage from cutting and things like that.

And actually, I was happy to hear, in connection with some of the automotive projects that I had alluded to, that part of the thing that Gauzy is focusing on with that in order to bring in the product at a good price for the OEM was the cutting and the – getting the film exactly custom sized for the customer so they don't have wastage. So these are the happy problems we focus on now, not whether the technologies will work or whether it could be coated wide enough but instead, how do we make it more effective or better for the customer?

Michael Kay

Do you foresee the price of SPD film further declining, so it will be even more attractive to –?

Joe Harary

Yes. In the business plan that I've seen for the facility in Germany, the cost can come down substantially even more than what they are now. So I think we're well on our way towards being a very feasible technology for all different types of applications, not just high-end ones.

Michael Kay

But Hitachi still is producing SPD film as well. So we have like two suppliers. Is that – are they..

Joe Harary

Yeah. It's always good to have multiple suppliers, especially for competition and redundancy and the automotive industry likes that.

Michael Kay

Are you still trying to get a third one in the United States? You once mentioned the geographic?

Joe Harary

Well, at one point, Gauzy was considering putting their factory either their second factory, the one that's currently in Germany in the United States, in Asia. My guess is with the connection with European and Asian car manufacturers, you might see the next one in Asia first.

Michael Kay

Oh, I see. Okay. Thank you for…

Joe Harary

But it's not a big deal, because we had projects here in the United States, some government projects that they were able to send by air shipment, DHL, the film. So it doesn't really matter where you are in the world, and that's one of the advantages of our film-based technologies, you can do that.

Michael Kay

Thank you, Joe.

Joe Harary

Thanks a lot.

Operator

Our next question comes from Q - Alan Yakuboff. Your line is open.

Alan Yakuboff

Thank you. Hi, Joe. How are you?

Joe Harary

Hey, Alan. How are you?

Alan Yakuboff

I’m well, I’m well. Is it any – is it possible that you could provide any revenue projections for this year and next, since a lot of things seems to be coming together?

Joe Harary

No. I don't mean to be glib about it, but these are going to depend on things such as what month this year production starts for some of these vehicles and whether they front mode and based on demand or whether they have more of a steady-state production of cars with our technology. And not even our production licensees know those questions yet. But we're not capacity constrained, so it doesn't really matter. I mean, we obviously want to do as much and as fast as we can, but we have the capacity to do it.

Alan Yakuboff

No, I understand that, but it's been a long time coming, so to speak. I mean, in 2011, when you got the deal with Mercedes, your stock was at $10, it peaked out at $10, it's 1/5 the price. And nothing has really happened in 11 years, Joe. I just -- and I've been a longtime stockholder. I don't know why the current management team is still in place if they can't generate the revenue that we all hope to see from this company.

Joe Harary

Well, I appreciate the fact that you and I are both long-term shareholders and..

Alan Yakuboff

It looked like you've got a great technology. That's the problem. I mean it looks like you got a great technology, but -- yes.

Joe Harary

Yes. Alan, the two things that we had to solve were cost and cost. And we did that. And the added benefit was width as well. So markets that didn't exist to us now exist like architectural. And I guess maybe what I would also say is, we're in an industry that's not very easy to do. If you look at our two closest public competitors, one is their stock has been decimated.

Alan Yakuboff

Yes, what's the name of that company?

Joe Harary

That's View. That's View. And another one, Crown, has no revenue. So, maybe we're the tallest midget, but start to use a politically incorrect thing. But it's not an easy industry and they would kill to be in some of the markets that we're in, like automotive and aircraft.

Alan Yakuboff

Yes. I see View is $1.50, $1.60 that it was $10 not in the past year.

Joe Harary

It was $10 when they de-SPAC -- yes, it was $10 a year ago.

Alan Yakuboff

Look, I don't mean to see -- you're a great guy, and I just -- we just like to see this thing gel together eventually. Because -- I mean everybody feels -- and we all do that there's tremendous opportunity here.

Joe Harary

I was born three months premature. Patience is not my strong suit. So there's nobody more than me that want to see this happen sooner. But you want to also see it done right. And I think that what you see when things aren't done, right, is some of the disasters that have existed in other parts of our industry. So we focus on quality customers, quality installations and doing things right and also not subsidizing it. I mean, we obviously will make long-term investments in things. But if you look at for economics on View, every dollar of revenue cost them $4 and there's no expectation that they're going to get economies of scale. So, every time they announce a new project, I love it. I mean they're digging a deeper hole. And when you're digging a hole, you should stop digging.

Alan Yakuboff

I know you did say that a while ago, and obviously, that stock has not performed well. But the stocks are voting machines. And at the end of the day is voting on how your company -- any individual company is doing.

Joe Harary

And I think once we generate revenue, you'll be able to model us more like a traditional company. But right now, out of the smart glass companies, we're doing quite well and we're certainly not resting on any laurels. I mean 20-hour days and filled with opportunities are things that I love. So for me -- and honestly, we are blessed with some world-class people that work at our licensees that have been working very hard and other people at Research Frontiers that are quite talented. So, we're firing on all cylinders. It's just a tough industry to be in. And we seem to be the ones that are going to emerge successful out of this based on everything I can see from competitors..

Alan Yakuboff

I think View is focusing in on more of the architectural industry or China and skyscrapers..

Joe Harary

Yes. They -- and it's mostly domestic that they're focusing on because one of the problems with a glass-based technology as compared to a film-based technology is that the logistics are difficult. You got to ship fragile, heavy expensive glass across the world if you have a project somewhere else. That's not easy to do and certainly not in this environment where you have supply chain disruptions, or as in our case, you're just shipping film by airfreight and laminating it, so it's much easy.

Alan Yakuboff

All right. I have patience, and I just hope your execution moves forward, and we can get to a profitable company eventually.

Joe Harary

Thank you. Thank you. Well, we did something no other company did. We stop it. Now the idea is to show a consistent profit. And while revenues may be choppy in the beginning as these markets start to emerge and develop. Over time, because of our business model, we have very modest expenses and it all flows to the bottom line. So we should be a very profitable company.

Alan Yakuboff

Okay. let's hope so and thank you for your time.

Joe Harary

Thanks a lot, Alan.

Operator

Our next question comes from John Nelson. Your line is open.

John Nelson

Hi, Joe.

Joe Harary

Hey, John.

John Nelson

Thanks again for all your efforts and especially an excellent job in controlling costs over the years. I have to ask this question, and if you can't say anything about it, I understand. But the -- one of the sources of revenues listed though was a special government contract in the automotive area. Can you comment any further on that?

Joe Harary

Without naming the government agency, I could say that it's a very highly visible high-end use of SPD-SmartGlass that can promote security and comfort inside a vehicle.

Q - John Nelson

A vehicle?

Joe Harary

Actually, a vehicle, and a fleet of vehicles as well, and the expectation is that this will have uses outside of the initial agency that we're working with on this. It tends to -- this type of thing tends to start there and end up in a lot of different areas within the government -- and I apologize for being a little quiet.

John Nelson

All right. No, and you're protecting the business, so -- potential business. So I understand that.

Joe Harary

Well, I'm also -- I think in my license agreement with this agency, it's demeanor effect. So I want to stay out of jail, if you don't mind. Doing better outside than I'm inside.

John Nelson

Yes. Okay. Understood. Thanks. Thanks and go Research Frontiers.

Joe Harary

Thank you, John.

Operator

We have a question from Alan Ginsberg [ph]. Your line is open.

Unidentified Analyst

Yes. Hi, Joe. How are you?

Joe Harary

Hey, Alan. How are you?

Unidentified Analyst

Okay. Now you mentioned in your comments that the cost has gone down. Does that mean that we could see in car models that are not as expensive as some of the ones that you've already been in, but more moderately priced cars?

Joe Harary

Absolutely. Absolutely. Yes. That was the goal…

Unidentified Analyst

That's something that's on the horizon? That's what I'm asking.

Joe Harary

On the near-term horizon, yes.

Unidentified Analyst

Okay. That's all I have. Fair enough. Thank you very much. Bye-bye.

Joe Harary

You’re welcome. Bye-bye.

Operator

We have a question from Francis Cordoba [ph]. Your line is open.

Unidentified Analyst

Hello, Joe. How are you today?

Joe Harary

Hey, Francis. How are you?

Unidentified Analyst

Pretty good. My question is, what has been the problem with costs. It seems as if that's been the main problem. Years ago, when I met with Bob, he said it was very inexpensive to make. And that was quite a few years ago. And now you're finally talking about costs coming down. What was the problem?

Joe Harary

So yes, so let me break it down into different components. The SPD are materials that are synthesized. So that's not the expensive part. Some of the transparent conductive coatings on the plastic is probably the most expensive part of the system. And when you have a single supplier like Hitachi, nothing wrong with Hitachi. They make a great product, and we're very happy with not only the product, but how it's fared in automotive as being highly reliable, which was essential for a new technology coming out of the gate.

But a single source of anything, they tend to act like monopolistic suppliers and adding a second layer immediately Hitachi to drop price. So it wasn't all inherent in the technology now that there is high cost. But also with volume products, the ability to buy the components like the coated PET and others becomes substantially cheaper and that also contributes to a lower cost.

And then you add to it manufacturing yield. So the Gauzy facility in Germany is state-of-the-art, it's 11 years newer than the Hitachi facility. The technology that just, quite frankly, didn't exist when Hitachi opened their facility, such as LED-based UV curing where you don't have to generate a lot of heat from the UV lamps to cure the materials. So it means that you get better throughputs and a quick around -- turnaround time and more control over the process. So things like that were things that Gauzy built in, and they gave a lot of thought to other things, and I mentioned one of them, which was variable width coating so that you can eliminate a lot of the cost in terms of materials lost through cutting and other costs like that.

So those were some of the things. And then you have typical economies of scale. You put this in one vehicle, it's expensive. You put it in a million vehicles, it's a lot cheaper. So as we get closer, prices come down, and that's what I alluded to earlier when I was asking this make it into the mass market. I've seen substantially lower prices even from today's prices, which are lower than Hitachi's, substantially lower in volume. So..

Unidentified Analyst

Are they experiencing any problems coating?

Joe Harary

Was that Gauzy or Hitachi? In the beginning, everybody does. I mean coating is an art, but the yields are quite high and their quality is quite high on both products. You'd have to be. I mean if you have Mercedes as a customer, you cant’ come out come out with something that's in a top notch. So one of the best things that happened to our industry, Francis, was how hard Mercedes kicked the tires in the beginning because with the entire supply kind of -- which is what we needed.

Unidentified Analyst

Is there a difference in the actual color of Gauzy versus Hitachi film?

Joe Harary

Subjectively, yes, the Gauzy film looks blacker, to me. We've up side by side with the Hitachi film and it looks blacker. And for a given coating thickness, it looks darker. And -- but it's the same basis of materials.

Unidentified Analyst

McLaren is getting it from Gauzy or Hitachi?

Joe Harary

I'm not allowed to discuss where they're getting it from.

Unidentified Analyst

Okay.

Joe Harary

Initially, before -- but well, I will say -- I'll say this. Initially, before Gauzy was on the scene, they were still producing the McLaren. McLaren, in the past, at least has used Hitachi film and likes it.

Unidentified Analyst

I don't think they would prefer a darker film than the lighter one, but that's just me.

Joe Harary

I think you might be right. They're both great products though. Thanks.

Unidentified Analyst

Okay. Thanks.

Joe Harary

Bye.

Operator

[Operator Instructions] And we have a question from August Berman. Your line is open.

Unidentified Analyst

Hey, Joe. How are you?

Joe Harary

Hey, August, how are you?

Unidentified Analyst

Good, good. Just one question for me. The new autos that you're talking about that are going into series production later this year, are those more moderately priced vehicles?

Joe Harary

Some are, yes.

Unidentified Analyst

Meaning sub-$60,000 cars?

Joe Harary

I don't know what they're going to charge. They're typically known to be much less expensive than the cars we've been in.

Unidentified Analyst

Got it. Perfect. Thanks, Joe.

Joe Harary

You're welcome.

Operator

And we have no more questions in queue at this time.

Joe Harary

Okay. Well, look, if we haven't fully answered any questions that were either e-mailed to us or present in our presentation today or during the Q&A, just e-mail me and we'll do our best. A couple of closing remarks. 2021 began a year of great accomplishments for your company.

In our main revenue segment, automotive, great companies like Gentex, who I'm a big fan of, saw Q4 revenues down 21%. And weakness was driven by an overall double-digit decline in production.

But even in the midst of this and the pandemic and the chip shortage and the supply chain disruptions and other logistic disruptions, Research Frontiers' automotive revenues were up for the year.

I mentioned in January 2021, Cadillac announced the use of the four-quadrant SPD-SmartGlass sunroof on their all-new electric flagship, Celestiq. And during the year, more-and-more companies increased their investment in electric vehicles, and they also accelerated their timetables, both were helpful for us.

Every major car company has announced an all-electric strategy and energy efficiency and the reduction of CO2 and other emissions remains an important topic for the industry, and our ability to extend the range of electric vehicles by 5.5% is significant. And the advantages of using, SPD technology has been recognized by virtually every major automotive publication out there.

Hyundai made an equity investment in our licensee, Gauzy. And when I was at CES two months ago, the Chairman of Hyundai Motors himself, along with the CTO and the Korean Economic Ministry visited us at Gauzy's booth where SPD sunroofs and other SPD products were on display.

Spent quite a bit of time there, too, I must say. It was an honor to meet them. Other licensees have also moved forward automotive projects put SPD-SmartGlass into serial production. And next week, we're demonstrating a new concept in solar protection for a major OEM on one of their new electric vehicles.

As noted, we expect revenues from these new automotive programs to start coming in perhaps as early as the next quarter, with start of production of these vehicles in Q3 and Q4 2022 and the Cadillac Celestiq in2023.

Also, Vision Systems had a major project win with SPD-Smart EDWs is being used on the Airbus ACJ 220 as well as the Epic and other aircraft. And trains using large amounts of SPD-SmartGlass are transporting passengers on the rails, and new higher-volume train projects were started this year internationally.

LG Display announced a new transparent OLED technology that thanks to SPD turns a a clear window into a high-definition TV.

In architectural, it remains to be seen whether companies like Crown will overcome the financial scale- up and other technical challenges they currently face, whether the economics of Sage's long-beleaguered electrochromic business will ever make sense for the architectural industry, or whether companies like View will even survive the year. My estimate is they have between nine and 11 months' worth of cash. So if I was Rao Mulpuri, and he probably does not need my advice, he's probably out there trying to raise capital now, which is why they probably haven't filed their financials in over a year.

I wish them all well because they help promote the idea of smart windows to the market. Their sales teams are helping us in our licensees businesses by building awareness of the benefits of dynamic variable tint windows. And their performance also makes our SPD technology look good!

So architectural projects using SPD-SmartGlass have now begun to ship because Gauzy can coat wide film on their dedicated SPD film production line outside of Stuttgart, Germany. And they also expanded this year the emulsion production capacity in Tel Aviv.

And in fact, our licensees have expanded production capacity in all areas of the supply chain from the chemistry, production, to the film coating, to the fabrication of end products for all industries, including the architectural, automotive, aircrafts, marine, transit, and consumer electronics businesses.

And the merger between our licensees, Gauzy and Vision Systems, created a powerhouse who has bet their growth on our SPD technology. And unlike competitors, View, Sage and Crown in the architectural e space, we have a worldwide coverage and much better economics and logistics and certainly better performance.

So the seeds of success and growth have been planted and are beginning to sprout, and our future looks bright. We all enter 2022 with strength and a strong position to grow and prosper. I thank all of our loyal investors for their continued support and trust, and I thank you for participating on today's call.

Operator

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