Research Frontiers Discusses Gauzy Supply Disruption on Q2 Call

Research Frontiers (NASDAQ: REFR ) held its second-quarter earnings conference call on Thursday. Below is the complete transcript from the call. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

View the webcast at Summary Research Frontiers discussed the financial and operational impact of the restructuring of its principal SPD film manufacturer, Gauzy, highlighting that this was not a technology or customer issue but a supply chain disruption. The company remains optimistic about the future, citing continued customer and licensee support, new license agreements, and ongoing development of new products, such as black SPD technology. Research Frontiers outlined multiple contingency plans for ensuring SPD film supply, including potential new manufacturers and direct involvement in manufacturing if necessary.

Management addressed accounting conservatism in receivables related to Gauzy and discussed their approach to NASDAQ compliance, focusing on improving business performance rather than a reverse stock split. The company highlighted the resilience of its technology and customer base, noting new opportunities and commitments despite the challenges faced in recent months. Full Transcript OPERATOR Good afternoon, and welcome to the Research Frontiers investor conference call to discuss the second quarter of 2026 results of operations and recent developments.

The company will be answering many of the questions that were emailed to it prior to this conference call and their presentation. In some cases, the company has responded directly to email questions prior to this call or will do so afterwards. There will be a live question-and-answer session after the company's presentation. " These reflect current beliefs, and actual results may differ materially from those expressed due to various risk factors, including those detailed in our SEC filings.

Research Frontiers assumes no obligation to update or revise these statements. com for the next 90 days. I would now like to turn the conference over to Joe Harari, President and Chief Executive Officer of Research Frontiers. Please go ahead, sir.

Joseph M. Harary, CEO Thank you, Paul, and good afternoon everyone. I'd like to welcome all of you to our second quarter 2026 investor conference call. And 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.

And I estimate we've probably spent more time in open dialogue with shareholders than many companies our size. But 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. Then I'd like to devote most of our remaining time to answering your questions.

Out of respect to your fellow shareholders and 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. But let's be clear about what that situation actually was.

And 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. And 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. And 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, and 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. And 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 and the answer is simple. We haven't been standing still while Gauzy worked through its restructuring. We continue 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 8th 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, and 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. And 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 and 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. But 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. And 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 17th or 18th 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. And 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. And 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.

Others achieve commercialization but never reach the quality, consistency, reliability and cost structure demanded by industries like automotive and aerospace. We and our licensees have accomplished all that. SPD today is not an experimental technology. It is a proven, reliable commercial product that has met the demanding standards of some of the world's leading manufacturers.

And we're the only company that has done that across four different automotive OEMs. Many companies never get that far. They never accomplish that. Many spend considerably more before ultimately abandoning their technologies.

We did it. SPD is proven and reliable commercial technology. And when I step back today and look at where we are today compared with a year ago, I actually see more reasons for optimism than pessimism. The smart glass market continues to expand.

Our intellectual property portfolio is strong. Our application pipeline continues to broaden. We've added a new licensee, we added two new aircraft programs, and our customers have remained committed. And the restructuring process that has dominated so much of our recent discussion regarding Gauzy is substantially closer to its conclusion than to its beginning and may be concluded as soon as next month.

Nine months ago, some investors wondered whether SPD technology could survive the disruption created by Gauzy's restructuring. Today, I believe the evidence points to a very different conclusion. SPD didn't simply survive. It continued attracting customers, it continued attracting new licensees, it continued opening new applications, and it continued earning the confidence of companies making long term commitments to the technology.

Our job now is to convert that resilience into renewed growth as production returns to normal. We have a great deal of work ahead of us and I remain very confident in the long term opportunities for SPD technology and the dedication of the people who work every day to realize that opportunity. With that, rather than continue with prepared remarks, I'd like to turn this town hall discussion over. So let's open the floor to questions.

And as always, if your questions are of general interest to our shareholders, we'll answer as many as we can during today's call. If we don't get to your question, or if it's specific to your individual circumstances, please contact us after the call and we'll do our best to respond as promptly as possible. We usually respond to email questions within 24 hours. Thank you and let's begin.

And as we wait for people to join the Q and A queue, let me answer a question received from several shareholders about the status of current production of SPD emulsion and film and possible scenarios that Research Frontiers might be considering. This is probably the most asked question I have received, so I know it's on many people's minds right now. As Gauzy has publicly disclosed, its financial restructuring substantially affected its operations over the past several months. Like many companies undergoing court supervised restructurings, there were periods when liquidity constraints affected its ability to operate at normal production levels.

Also, workers were unpaid and some left and some were laid off. As a result, production of SPD emulsion and film slowed significantly and at some point essentially stopped while those issues were being addressed. Then things started to flow again. Gauzy has continued supplying customers using existing inventories of SPD emulsion and film while working through the restructuring process.

That inventory, together with careful prioritization of customer requirements, has allowed important programs to continue even though production has not yet been at the level any of us would like. You can see this reflected in lower royalties that we had this quarter. Looking forward, there are several possible paths by which the supply of SPD film can continue and they all ultimately support the same long term objective, restoring and expanding production capacity. The first plan, Plan A, is what we believe to be the most likely outcome.

Gauzy successfully completes its restructuring and resumes full scale production of both SPD emulsion and SPD film. This would be the least disruptive to our supply chain and the timing of product deliveries. Another possible outcome, Plan B, would be for Gauzy to continue manufacturing SPD emulsion while another qualified company coats that emulsion into finished SPD film. Plan C would be for another qualified manufacturer to produce both SPD emulsion and SPD film under license from us.

And finally, depending on circumstances and opportunities that may arise, Plan D is that Research Frontiers itself could participate more directly in preserving or acquiring certain SPD manufacturing assets, if doing so were determined to be in the best interest of our shareholders. The important point is that none of these scenarios changes the long term opportunity for SPD technology. They simply represent different paths forward towards restoring and expanding manufacturing capacity. Some may be more disruptive to our supply chain than others, so we are also factoring that in.

Variants of these contingency plans are all underway. But once again, our expectation is that Gauzy will successfully emerge from bankruptcy shortly under Plan A.