Research Frontiers Inc 2026 Q2 Earnings Call

Please go ahead, sir. Thank you, Paul, and good afternoon, everyone.

I'd like to welcome all of you to our second quarter 2026 investor conference call. Before I begin discussing the current quarter, I'd like to start by talking about our last conference call. Many of you have noticed that unlike virtually every other conference call we've held over the years, we did not have a live question and answer session. Some shareholders criticized that decision, and I understand why. The reason wasn't because we were trying to avoid questions. In fact, throughout our history, we've devoted an extraordinary amount of time to answering shareholder questions, not only during our conference calls, but also before and after them by email and telephone. I estimate we've probably spent more time in open dialogue with shareholders than many companies our size. The decision last quarter was driven by timing.

At the time of our last conference call, there were significant court proceedings underway involving our principal licensee, Gauzy. We believe it would have been inappropriate and potentially harmful to speculate publicly while those proceedings were still unfolding. Judges generally prefer that important matters be resolved in their courtroom rather than in the court of public opinion, and we believe the responsible course was to allow that legal process to move forward. Today, the situation is much clearer than it was three months ago, and so rather than simply reading mostly from a prepared script, I'd like this call to be more of a town hall meeting. I'll spend a few minutes discussing where we are today, what has happened over the past several quarters, and perhaps more importantly, what has not happened. I'd like to devote most of our remaining time to answering your questions.

Out of respect to your fellow shareholders, so we can answer as many live questions as we can on this call, I ask that you try to keep your questions to those that are of general interest to shareholders. When I step back and look objectively at the past nine months, I think it's important not to lose sight of the bigger picture. We spent the last several quarters dealing with an extraordinary situation. Let's be clear about what that situation actually was. Understanding this is important because it explains almost everything that has happened over the past nine months. It was not a technology problem. It was not a product problem. It was not a customer acceptance problem. It was not a competitive problem. It was fundamentally a supply chain disruption resulting from the financial restructuring of our principal SPD film manufacturer and licensee, Gauzy.

Everything that followed flowed from that one event. Making that distinction is important because it explains both the challenges we experienced and why we remain optimistic about the future. Sometimes companies and their investors become so focused on what did happen that they lose sight of what didn't happen. We did not lose confidence in our technology. We did not lose our intellectual property. We did not lose our automotive qualifications. We did not lose our development pipeline. We did not lose customer interest. Remarkably, we did not lose the major programs already underway. In fact, what impressed me most over the past nine months was the patience shown by our customers and the hard work by our licensees. These are sophisticated global companies with many alternatives available to them, yet they remain committed to SPD, and that tells me something very important.

They understand the unique performance advantages SPD technology provides, they continue to believe those advantages are worth having and worth waiting for. I think that patience is perhaps the strongest independent valuation of our technology that we could have asked for. Another proof point came from something that occurred during this very challenging period. We actually entered into a new license agreement with KLIM, a division of New York Stock Exchange-listed company, Polaris, and a globally recognized leader in premium motorcycle equipment to develop SPD applications for motorcycle helmet visors and sports goggles. Think about what that says. During one of the most difficult periods in our industry's recent history, another company carefully evaluated SPD technology, evaluated our intellectual property, evaluated the markets they wanted to serve, and decided that now is the right time to become a Research Frontiers licensee.

Companies don't make long-term product development decisions based on technologies they don't believe in. They do so because they see opportunity. That agreement wasn't just another press release. It was another independent validation of where SPD technology is headed. Many people have asked, what has management been doing during these past several quarters? The answer is simple. We haven't been standing still. While Gauzy worked through its restructuring, we continued to support them as well as moving the business forward. Development of Black SPD technology continued. Another encouraging validation came from the CEO of LTI or AIT, the company that developed our retrofit product for the architectural market. He not only remains enthusiastic about the opportunity for SPD retrofit products, but also personally participated in our February friends and family financing.

I believe that's another indication that people who know this technology best and know our industry best continue to have confidence in where it's all headed. Our retrofit product for the architectural market continued to advance and is well positioned to move forward as film production returns to normal. We continue supporting automotive OEM programs. We continue supporting aircraft programs. In fact, two major new programs were won during this period. We continue working with our licensees and customers around the world. We continue strengthening relationships with existing customers while adding new ones. We continue managing our expenses carefully while preserving the financial flexibility necessary to position the company for future growth. In other words, we didn't spend nine months waiting, we spent nine months preparing.

We spent nine months navigating through the challenges that Gauzy faced and helped them and their customers and their industries move forward. Some investors have asked, why don't we simply establish another SPD film manufacturer immediately? It's a reasonable question. Historically, Research Frontiers has had only one commercial SPD film manufacturer at any given time. First Hitachi, then Gauzy. Producing automotive-grade SPD film is not like purchasing an off-the-shelf commodity. It requires years of development, substantial capital investment, highly specialized manufacturing expertise, and perhaps most importantly, consistent quality that automotive manufacturers demand. Could there be additional film manufacturers in the future? Certainly. Those decisions have to be made thoughtfully because consistency and quality are absolutely critical in the automotive industry. I'd also like to briefly address two accounting matters that a few shareholders had asked us about right before this call.

First, the reserve and going concern language relating to receivables associated with Gauzy and Vision Systems. Our accounting treatment reflects uncertainty regarding timing, not uncertainty about our expectation of ultimate collectability. The test is you have to have auditable proof that you're going to get paid within 12 months to count something. We believe these amounts will ultimately be collected in full. However, because the exact timing depends upon court-supervised proceedings outside of our control, our auditors appropriately recommended that we take a conservative accounting approach. We would not have to do that had the court indicated, for example, that on September seventeenth or eighteenth, distributions will be made to creditors. In any event, this is prudent financial reporting, and it should not be interpreted as a change in management's confidence regarding ultimate collection. Second, regarding our Nasdaq listing compliance. Our board and management are actively monitoring the situation.

Our objective remains to regain compliance to improve business performance and improve market valuation. We believe that's the appropriate long-term solution rather than something like a reverse stock split. One thing I've learned over many years in this business is that technology companies are often tested not when everything is going well, but when unexpected events occur. Over the past nine months, I believe the entire SPD ecosystem has demonstrated remarkable resilience. Mercedes has continued supporting its existing SPD-equipped vehicles. Programs with Ferrari remain intact. Programs with Cadillac remain intact. Programs with McLaren remain intact. Aircraft opportunities continue moving forward, and as I mentioned earlier, two new ones from a large OEM were won recently. Retrofit development and project acquisition continues. New applications continue to emerge. New licensees continue joining us. Customer enthusiasm has remained strong.

When I look at all these facts together, I don't see a technology or a company in retreat. I see a technology whose underlying momentum has continued despite a temporary interruption in its supply chain. Our business model remains exactly what it's always been. We invent, we innovate, we license, and our licensees manufacture. Our customers incorporate SPD into products that improve the lives of people around the world. That business model has enabled us to build an extraordinary intellectual property portfolio while addressing markets ranging from automotive and aerospace to architecture, marine, transportation, and now premium eyewear. In addition to what our licensees have invested, Research Frontiers has invested well over $125 million over the years to bring SPD technology from the laboratory and into commercial production. Many companies spend years proving that a technology works in the laboratory but never succeed in commercializing it.