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Date
Thursday, May 7, 2026 at 4:30 p.m. ET
Call participants
- Chief Executive Officer — Joseph Harary
Takeaways
- Revenue -- First-quarter revenue declined compared to the prior year due to the nonrecurrence of upfront revenue recognized from a new license agreement in early 2025, as well as the GAAP-required timing of royalty recognition under license agreements.
- Cash position -- As of March 31, 2026, cash and cash equivalents rose to approximately $1.28 million from approximately $664,000 at year-end 2025, supported by targeted financing with long-term accredited investors.
- Debt -- The company remains debt-free at quarter's end.
- Operating and R&D expenses -- Operating and R&D expenses declined compared to the same period in 2025.
- Automotive & aircraft royalties -- Royalties from the automotive and aircraft markets increased sequentially relative to the fourth quarter of 2025.
- Licensee receivables -- Payment inflows from licensees were delayed by temporary operational and liquidity constraints at Gauzy and Vision Systems due to ongoing French rehabilitation proceedings.
- Recent receipts -- A "meaningful payment" was recently received from Vision Systems following French monitor approval, indicating some loosening of payment restrictions.
- Gauzy French proceeding -- A key legal hearing is scheduled in France on May 12 to decide among several outcomes, with the most likely outcome described as the "approval of Gauzy Vision Systems continuation plan."
- Continuation plan details -- The Gauzy continuation plan, as described by management, would eliminate unprofitable non-SPD business lines, improve capital, and ensure "suppliers, lenders and employees would be paid in full…not only in France but worldwide."
- Contingency planning -- The company has established contingency plans should the French court outcome differ from expectations or be delayed.
- SPD production continuity -- Despite ongoing challenges, SPD production and development activities continued, and key customer programs remain active across multiple regions.
- Automotive project activity -- Automotive SPD projects progressed in North America, Europe, and Asia, including a completed licensee transition for Ferrari business requiring installation of new specialized equipment.
- Asian automotive program -- The mid-market Asian vehicle program remains active and involves the black SPD variant; timelines are subject to change due to OEM integration factors.
- Automotive price targets -- Management stated, "we and our licensees were able to meet…aggressive price targets" for competitive technologies in automotive, helping to address cost barriers.
- Aerospace deliveries -- Shipments of SPD-Smart electronically dimmable aircraft windows continued during the quarter, with Vision Systems overseeing these deliveries.
- Architectural market focus -- Architectural retrofit initiatives with licensee AIT LTI are advancing, targeting energy efficiency and occupant comfort without requiring full window replacement.
- Competitive advantage claim -- CEO Harary stated, "We are also the only company that has successfully worked with 4 different OEMs to incorporate switchable glass into multiple production vehicle platforms."
- Sun visor application -- Evaluations and development work continue for sun visor SPD applications, with management noting active industry interest for this use case.
- R&D pace -- Development of next-generation SPD, including "black SPD" and specialty films, experienced some temporary delays due to operational disruptions but several projects are approaching completion.
- Q&A limitation -- The call included only pre-submitted questions due to the sensitivity of ongoing legal proceedings regarding Gauzy Vision Systems.
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Risks
- Temporary liquidity and payment delays arose from Gauzy’s and Vision Systems’ ongoing French rehabilitation proceedings, directly affecting company revenue recognition and cash flow.
- Management acknowledged continued uncertainty around the outcome and timing of the French court hearing on May 12, which could lead to outcomes including liquidation or extended monitoring.
- Operational and R&D timelines experienced disruption due to regional military conflict and cross-border logistics, delaying certain next-generation SPD developments.
- Royalty revenue for the quarter reflected accounting impacts and delays rather than actual underlying economic activity, which may cloud near-term financial assessment.
Summary
Research Frontiers (REFR 9.48%) reported lower first-quarter revenue due to royalty recognition timing and the absence of one-off licensing income recognized in early 2025. Cash and cash equivalents more than doubled from year-end, attributed to targeted financing measures undertaken amid temporary disruptions in licensee payments. Management provided extensive context on the ongoing Gauzy and Vision Systems restructuring and emphasized progress on a continuation plan that would refocus on core SPD business, pending a critical legal decision in France. Key product development programs, including automotive, aerospace, and architectural initiatives, remained active despite operational setbacks. The company restricted real-time Q&A to avoid jeopardizing ongoing legal and strategic considerations.
- Gauzy’s restructuring plan, if approved, aims to restore liquidity and working capital while reducing exposure to non-SPD activities, potentially strengthening Research Frontiers’ strategic position.
- Management maintained that SPD production and customer engagement persisted through licensee liquidations, court proceedings, and military disruptions, underlining the technology’s resilience.
- Development of black SPD is advancing and could drive broader adoption, particularly in automotive and architectural sectors seeking enhanced design flexibility and aesthetics.
- Longstanding automotive relationships were highlighted as a differentiator; management noted successful serial production partnerships across four original equipment manufacturers.
Industry glossary
- SPD (Suspended Particle Device): A light-control technology that enables the instant adjustment of window tint and light transmission via an electric current, used in automotive, aerospace, and architectural glazing applications.
Full Conference Call Transcript
Joseph Harary: Thank you, Paul, and good afternoon, everyone, and thank you for joining us on our first quarter 2026 investor conference call. I was informed a little after 4:00 p.m. that the SEC website was down. I'm not sure if it's up yet or not, but our 10-K should be filed once everything gets straightened out and whatever backlog they have is cleared. As always, I appreciate the time and interest of our shareholders, customers, licensees and industry partners joining us today. Today, I want to talk about Research Frontiers, our business, our markets and also address the question I've been asked most frequently over the past 6 months, what's happening with our licensee, Gauzy.
I'm going to give you an honest, informed and candid assessment of the situation and explain why I remain optimistic about their future and ours. Before discussing our operations and recent developments, I want to briefly address our first quarter financial results and some of the factors affecting the quarter. First, first quarter reported revenues compared to the same period last year were affected by the timing of revenue recognition under our license agreements as well as the nonrecurrence of upfront revenue recognized from a new license agreement entered into during the first quarter of 2025.
Typically, royalties in the first quarter are almost always lower than the underlying economic activity taking place in our business because GAAP accounting requires that additional royalty revenue is not recognized until a licensee exceeds their minimum annual royalty obligation for the year. And until it exceeds that level, minimum annual royalties are basically spread out roughly evenly over each of the 4 quarters of the year. Another factor affecting the comparison was ASC 606 accounting treatment associated with the new license agreement entered into during the first quarter of 2025. Under generally accepted accounting principles, or GAAP, much of that revenue was front-loaded into the first quarter of last year.
As a result, from an accounting perspective, the quarter looked weaker than the underlying economic activity taking place across several areas of our business. Sequentially, royalties from the automotive and aircraft markets increased from the fourth quarter of 2025 to the first quarter of 2026. The quarter was also affected by what we believe to be temporary operational and liquidity impacts relating to the ongoing French rehabilitation proceedings involving French subsidiaries of our licensee, Gauzy. The processing of payments to us and revenue recognition slowed because of the French proceedings and the liquidity constraints that resulted from them.
Since both Gauzy and Vision Systems are strategic licensees with meaningful businesses in multiple industries relevant to us, those issues also temporarily affected our own liquidity and financial strength. Not knowing exactly how long the situation in France would take to resolve, we took steps during the quarter to strengthen our balance sheet through a focused financing with long-term accredited investors. As of March 31, 2026, cash and cash equivalents increased to approximately $1.28 million compared to approximately $664,000 at year-end 2025, and the company remains debt-free. Our operating expenses and R&D expenses also declined compared to the same period last year. We run a tight ship.
Now let me turn in more detail to the subject many of you have asked about, Gauzy. There's been a tremendous amount of hard and focused work taking place there. Things have been improving, and they have been actively working through the situation. The liquidity issues affecting Gauzy have certainly impacted us temporarily. Funds sitting in France were subject to oversight as part of the rehabilitation proceedings and both Gauzy and Vision Systems needed approval from the French administrator for many financial transactions during the process. That naturally slowed payments to Research Frontiers as well as other companies. But importantly, the flow of funds has already begun loosening up.
A few weeks ago, we received a meaningful payment from Vision Systems that was authorized by the French monitor. So while things have not yet fully normalized, they are beginning to normalize, and we remain optimistic that they will continue to do so. This Tuesday, May 12, there is a court hearing in France to determine the next steps. The range of possible outcomes include liquidation of the French subsidiaries, a sale process, approval of Gauzy's plan of continuance or potentially an extension of the monitoring period, although we currently believe that the most likely outcome, fortunately, is approval of Gauzy Vision Systems continuation plan.
As a lawyer, I know you can never predict the outcome of a court proceeding with certainty. But based on what has been shared with me, I believe the best outcome, not only for Research Frontiers, but also for Gauzy, Vision Systems, their employees, suppliers, lenders, customers and the SPD industry overall is approval of Gauzy's continuation plan. The details underlying the continuation plan have been described to me. The plan eliminates unprofitable non-SPD business lines and provides enough capital for Gauzy to emerge from the process substantially healthier, leaner and better capitalized.
Importantly, based on the information shared with me, the reorganized company could emerge with stronger working capital, lower overhead and without the drag of unprofitable legacy operations outside of the SPD business. Gauzy would have substantial working capital and suppliers, lenders and employees would be paid in full, not only in France but worldwide. In other words, if the continuation plan is approved, Gauzy could emerge from this process as a much healthier and stronger strategic partner for us and for the SPD industry overall. We have also worked on contingency plans in case the court approval does not approve Gauzy's continuation plan or decides to delay decision.
Amid the mostly public silence from Gauzy, many of the things I've discussed today have been referred to in their SEC filings. Hopefully, I've helped connect some of the dots for you with additional color, context and details. Throughout this period, Gauzy has kept me informed and we have had many in-person meetings and many late night and early morning conversations. At times during the height of the war involving Iran and its proxies, conversations literally started with, I just got out of the bomb shelter or ended with, I have to call you back because sirens are going off.
Travel became extraordinarily difficult at times with executives operating from multiple countries and dealing with severe transportation disruptions throughout the region. I mentioned this because it illustrates both the operational challenges they were facing outside of France and also the determination of the people there to keep their business moving forward. These circumstances also temporarily slowed some of the R&D work involving next-generation SPD products, including black SPD and certain specialized SPD film being developed primarily for automotive and architectural applications and for specific customers. Some of these projects are now getting very close to completion.
If you step back and look at the last 12 months objectively, we have seen 2 licensees liquidate, another licensee -- key licensee go through restructuring proceedings in France and a highly volatile military environment in the Middle East. Despite all of that, SPD production has continued, development work has continued. Customer programs and customer engagement remain active and plans are now in place that could allow Gauzy to emerge stronger, healthier and better capitalized. That resilience says a great deal about the determination of the people involved and their belief in our SPD technology.A number of shareholders e-mailed questions primarily relating to Gauzy. I'll answer them now.
John Nelson asked whether Gauzy continues to produce and deliver SPD film on schedule and whether the current situation is limiting new business opportunities. John, while there have certainly been delays and distractions associated with the French proceedings and broader operational challenges, SPD production activity has continued and multiple automotive, aerospace and architectural programs remain active. Turning now to questions mailed to me about some of the other markets, starting with automotive. Automotive projects in North America, Europe and Asia continue moving forward during the first quarter and into the second quarter of 2026. When Ferrari business transitioned from AGP to another European licensee, this transition required the successor licensee to purchase and install new specialized advanced equipment.
That equipment has now been installed. So activity and investment in the SPD ecosystem continues at multiple levels from the licensees to OEMs to end customers. We continue to see strong interest in SPD because of its ability to instantly and uniformly control light, glare and heat while improving comfort, energy efficiency and the user experience. Several shareholders have submitted questions regarding the previously discussed Asian vehicle program and black SPD technology. Jared asked whether the mid-market Asian vehicle program may involve black SPD technology, while Rick Carrell has asked whether the Asian program remains active since it was not discussed in our last call.
Last call was kind of long, so I didn't have a chance to catch everything, but the Asian program remains active, and it does involve black SPD. I point out that is often the case with large automotive programs, time lines and launch schedules can shift because of platform timing, integration testing, design changes, supply chain coordination and other factors. We're pretty good at dealing with that. We've been in 4 different OEMs with products put in series production. So I don't think anybody else in the world can say that. We're actively working with multiple parties on these programs, including projects involving black SPD technology currently under development. And regarding black SPD specifically, we're making encouraging progress.
Black SPD has the potential to significantly expand the design flexibility and addressable market for SPD technology, particularly in automotive and architectural applications where darker neutral aesthetics are important. Several shareholders also asked about the large volume quotations we discussed on previous conference calls and whether any have been awarded. At this stage -- well, first of all, the awards go to our licensees. We just collect the royalties from those licensees. At this stage, we remain limited in what we could publicly disclose regarding customer programs and quotations, but discussions and evaluations remain active in multiple areas, including ultimate supply licensee selection.
As I have noted in the past, the 2 biggest challenges to wider adoption in the automotive industry were color, especially in vertical glass applications and cost. As I said on previous conference calls, we were given aggressive price targets to match competitive technologies, and we and our licensees were able to meet those targets. So cost and color are being addressed nicely between that and the black particle. Turning to aerospace. Deliveries of SPD-Smart electronically dimmable windows for aircraft applications continued during the first and second quarter of 2026. Just today, I saw an announcement of another ACJ TwoTwenty being delivered by Airbus to one of its customers. As you may know, Vision Systems handles this business.
Aerospace remains an important long-term market for SPD technology because of the operational, passenger comfort, weight maintenance and performance advantages that SPD offers compared to traditional mechanical shading systems and also compared to competing technologies. We are also advancing development efforts in specialty transportation and other applications where dynamic light control and energy management are becoming increasingly important. On the architectural side, we continue advancing our retrofit initiatives with our licensee AIT LTI. Judy McKay asked whether AIT's SPD RetroWAL system may qualify under certain low-carbon building standards. Thanks, Judy, and I apologize for the delay in responding. Retrofit applications like these are becoming increasingly attractive because they improve energy efficiency and occupant comfort without requiring full window replacement.
They also can meaningfully reduce the carbon footprint of a building and allow the SPD Smart Glass to work symbiotically with the other systems in the building such as HVAC and lighting systems. That is particularly important in government buildings, transportation hubs, historic structures, commercial retrofits and other projects where replacing exterior glazing is expensive, disruptive or impractical. We believe architectural retrofit applications represent an important and near-term growth area for SPD Technology. Another shareholder asked whether there have been renewed discussions with General Motors regarding SPD following the previously reported issues with the Corvette Targa roof involving another company's electrochromic glass technology. That's a well-known competitor of ours.
As you may know, like other automotive industry suppliers, we don't comment on specific OEM discussions unless programs become public. But SPD remains one of the most capable technologies available for large area automotive glazing applications because of its switching speed, uniformity, heat management and overall user experience. It is also the only switchable shading technology that has been reliably commercialized in serial production. And frankly, our public profile in automotive smart glass is second to none, and I mean to none. I recently served as keynote speaker at North America's premier automotive glass conference with many OEMs, licensees and prospective new licensees in attendance.
We're also the only company that has successfully worked with 4 different OEMs to incorporate switchable glass into multiple production vehicle platforms. That's multiple models and multiple spec standards and procurement systems, and we were able to succeed in all of them. No one else has been able to do that as recently exhibited by one of our competitors. But to answer your specific question, I think that the recent negative experience that GM had with the Corvette and another supplier's technology and execution has helped us tremendously. It has shown them the strength and resiliency of our supply chain and the dominant and superior performance of SPD Smart Glass technology. We also received questions regarding sun visor development.
SPD remains very well suited for dynamic visor applications because of its ability to instantly manage glare and light transmission while maintaining visibility and user comfort, and we have been approached specifically about that. Development discussions and evaluation in this area remain active. Because sun visors have relatively small surface areas, this market, similar to aircraft, also has several technologies that try to compete against us. However, none of them have the combination of switching speed, range of light transmission and logistical and performance benefits that we have with SPD technology. Now before concluding, I want to briefly address today's format. As many of you know, our conference calls are normally very open and often include extensive live Q&A.
They also tend to run much longer than most typical quarterly conference calls at other companies. However, because of Gauzy's ongoing legal rehabilitation proceedings as well as ongoing discussions involving strategic opportunities and alternative paths forward, we decided not to conduct a live Q&A session today. I'm glad that we received so many mailing questions because it allowed me to cover them earlier. Given the circumstances and the sensitivity surrounding Tuesday's court proceedings in France regarding Gauzy Vision Systems, I wanted to avoid saying anything that could potentially interfere with a successful outcome there. At the same time, I also wanted to share as much meaningful information and context with our shareholders as I responsibly could.
As you heard today, we incorporated many shareholder questions directly into this presentation, and I want to stress, we remain available following the call by e-mail and telephone. And in closing, as we look forward, we believe the long-term opportunities for SPD Technology remain significant. Despite the disruptions of the past year at some of our licensees, the overall platform supporting SPD technology today is broader, more diversified and more mature than any previous point in our company's history. We see opportunities across automotive, aerospace, architecture, specialty transportation and other emerging applications. Our focus remains straightforward, supporting our licensees and customers, advancing next-generation SPD technologies, executing carefully and positioning Research Frontiers for long-term and sustained growth.
Thank you again for joining us today and for your continued support of Research Frontiers.
Operator: The meeting has now concluded. Thank you for joining, and have a pleasant day.
