Mass production of this technology has recently begun in the automotive industry. 6 .... GL-Class. 4%. S-Class. 13%. SLS
Investor Presentation June 2012 Nasdaq: REFR
From time to time Research Frontiers Inc. may issue forwardlooking statements which involve risks and uncertainties. This presentation contains forward-looking statements, including estimates and predictions, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results could differ and are not guaranteed. Any forward-looking statements should be considered accordingly.
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Introduction to Research Frontiers
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IPO in 1986 With Singular Focus to Develop an Active (User Controllable) Light Control Technology Called SPD-SmartGlass.
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SPD-SmartGlass Technology Offers A Unique Combination of Characteristics Not Found In Any Other Light Control Technology, Including: }
Fast transition speed between widest range of light and dark tinted states
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Dark tinted state rejects 95% of heat and 99+% of UV light while not consuming any power
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Infinite tunability between light and dark tinted states
Large Scale Commercialization of SPD- SmartGlass Has Begun in the Automotive Industry.
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Other industries using SPD-Smart technology include architecture, aerospace and marine.
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Examples of Other Successful Light Control Products
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There have been other successful commercialization of products that dynamically control light: (i) photochromic lenses and (ii) electrochromic rearview mirrors. § Both of these successful commercialization initiatives created new product categories that generate billions of annual sales.
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Both photochromic and electrochromic technologies have significant technological drawbacks that limit their use in broader product applications, including: (i) limited user control of the tinting process, (ii) slow transition speeds between the light and dark states, (iii) limited tuneability of tint states.
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Research Frontiers developed a new light-control technology known as SPD-SmartGlass™ that gives the user: (i) active control of the tinting process, (ii) fast transition switching speeds, and (ii) infinitely tunabilty of tint states. § SPD-SmartGlass™ performance makes it a desirable technology for a broad array of potential applications. Mass production of this technology has recently begun in the automotive industry.
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The electrochromic mirror, which Gentex developed in 1986, eliminated glare by automatically darkening when headlight glare was detected. § They were first introduced as an option on the 1988 Lincoln Continental and then on eight General Motors models in 1989. Now on over 300 models.
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The small surface of the automotive mirror mitigated the effect of the relative slow transition speed of electrochromic technology. §
The slow transition speeds and limited tuneability of the tint states restricts the broad application of this technology. Worldwide Electrochromic Automotive Mirrors Unit Sales 25,000,000
20,000,000
15,000,000
2011 unit sales: > 24 million Adopted in over 300 Models
10,000,000
5,000,000
0
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Photochromic lenses were first developed by Corning Glass in the 1960s. After continued product improvement, they were successfully commercialized by Transitions Optical in the 1990s.
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Photochromic lenses darken in response to UV light and the user has no control over the tinting process. (i.e. typically referred to as a “passive” technology). § There are circumstances under which the darkening will not occur - for example, photochromic lenses will not darken in a car as the windshield blocks out most UV light.
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The lack of user control and slow transition speeds limits the broad application of this technology.
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Overview of Research Frontiers
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Instant switching (faster than any known shading technology)
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50-60 times darker than a typical sunroof to twice as clear as an ordinary sunroof
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Infinite intermediate states
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99+% continuous UV blockage
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SPD-SmartGlass Technology Development §
Cumulative investment > $84 million
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Company has been granted 288 patents and has pending patent applications that, if granted, would add approximately 250 patents.
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License SPD Technology §
39 companies licensed • Many of the world’s leading chemical, film and glass companies • Most of the world’s automotive/architectural glass producers
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Licensing royalty based on sales revenues of SPD-Smart end-products (5-15% royalty fee range).
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Licensing business model is highly scalable minimizing additional capital expenditures and operating expenses as SPD-Smart business expands.
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Invested to establish itself as the leading SPD film producer
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Hitachi Announced in 2009: §
Expectation for SPD film to become a core business
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Production capacity of new facility dedicated to SPD film
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4.3 million ft2 of annual capacity §
Such capacity could produce enough film to produce several hundred thousand sunroofs per year.
REFR receives a royalty payment based on the sales value of SPD-Smart end-products (a multiple of SPD film sales) produced by customers of Hitachi Chemical.
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High Volume Introduction of SPD-SmartGlass in the Automotive Market
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In February 2011 it was announced that Daimler AG will offer an all-glass panoramic roof using SPD technology on the Mercedes-Benz 2012 SLK.
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Driver/Passenger Experience §
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“Open-air feeling of a roadster even when the weather does not permit one to open the roof.”
Heat Control §
Daimler reports 18ºF lower temperature inside the vehicle in their Endless Summer Testing Program
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Energy Efficiency §
SPD technology contributes to lower CO2 emissions and higher fuel efficiency.
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SPD SmartGlass™ Automo/ve Announcements
March 2011:
Mercedes-Benz SLK world debut at Geneva Auto Show. First Car To Use SPD-Smart Technology.
January
2011 February
January 2012 Mercedes-Benz SL Iworld debut at the Detroit Auto Shows.The Second Car To Use SPD-Smart Technology
March
September 2011: Audi Premieres A2 Concept Car With SPD-SmartGlass at 2011 Frankfurt Auto Show
April
2012 May
March 2012: Daimler Limited Edition of the Viano Pearl . Daimler ‘s public evaluation of SPD-SmartGlass in side windows.
“Killer app…the very coolest part of the SLK…amazing stuff... without question the highlight of the new SLK.”
“Being a Mercedes, the SLK will overflow with technology… but the coolest will be …Magic Sky Control roof.”
“Magic indeed.” 16
Overall Market for SPD-SmartGlass in the Premium Automotive Market
M-Class 13%
CLS-Class G-Class 1% 5%
E-Class 45%
Currently, the SLK & SL represents approximately 10% of premium vehicles produced by Daimler.
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Daimler’s other premium vehicles (non-SLK or SL), represents an additional 680,000 vehicle opportunity to SPD-SmartGlass technology.
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At current royalty rates, these additional Daimler vehicles represent up to $100MM annual revenue opportunity for REFR (assuming 100% take rate).
GL-Class 4% S-Class 13% SLS-Class 0% SL-Class 3%
E-Class Coupe 9%
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SLK-Class 7%
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Tata 8%
Toyota 6%
VW 12%
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The premium auto OEM market for SPD is highly concentrated with Daimler and BMW, accounting for 66% of production and the top 3 OEM’s accounting for 78% of production.
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96% of vehicles in the premium auto OEM market have glass sunroofs or glass panoramic roofs offered as either standard or optional equipment.
BMW 29%
Nissan 2% Hyundai 1% Honda 0% GM 4% Ford 1%
Daimler 37% FIAT 0%
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Approximately 75-80MM automotive light vehicles produced in 2011.
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REFR estimates that approximately 3% of this total (approximately 2MM) are “premium” vehicles with a US$ MSRP ≥ $45K.
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We estimate that >1.5MM of these premium vehicles (>75%) have sunroofs that generate significant glare and heat control issues for their users.
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Research Frontiers receives a 10% royalty (currently $100-150/sunroof) installed on Daimler’s 2012 Mercedes-Benz SLK and SL.
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§
At this royalty rate, the premium vehicle sunroof market represents up to a $225MM annual revenue opportunity for the Company.
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Fee Income and Ownership
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Quarterly Fee Income ($)
Positive Impact on Fee Income beginning to be seen from Daimler rollout of SPD SmartGlass on its SLK and SL models.
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234% Year over Year Increase in Fee
500,000 450,000 400,000 350,000 300,000
Income (off a low base) as reported in
250,000
our latest March 31, 2012 Form 10-Q
200,000
Quarter over Quarter Increase in Fee
100,000
Income averaged 52% over last 12 months.
150,000
50,000 -
2Q'2011
3Q'2011
4Q'2011
1Q'2012
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During the next 12 months we are optimistic regarding the following significant milestones for Research Frontiers: }
Continued success of Magic Sky Control (Daimler version of SPDSmartGlass) on the Mercedes-Benz SLK and SL.
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Adoption of SPD-SmartGlass on other production vehicles.
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Use of SPD-Smart light control technology across all four industry groups.
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Typically in the automotive and aerospace industries, the OEMs control when announcements are made.
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Insider Ownership (Directors & Officers): 16.5% (April 25, 2012 Proxy Statement)
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Total Shares Outstanding: 18,907,555 (March 31, 2012 Form 10-Q)
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Options: 1,269,649 $9.48 Weighted Average Exercise Price Warrants: 704,257 $5.00-9.00 Exercise Price (December 31, 2011 Form 10-K)
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Summary
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Benefits of SPD Technology: Energy Savings, Comfort, Security and Safety.
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Automotive adoption of SPD SmartGlass technology has started.
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Research Frontiers and its licensees are currently working with a number of automotive OEMs.
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Adoption of SPD SmartGlass products has begun in other industries.
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Production infrastructure established and 39 companies under license (including major chemical film and glass companies).
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Strong worldwide IP position.
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Scalable licensing business model capable of generating significant free cash flow.
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Questions and discussion.
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For more information, please contact: Joseph M. Harary, President & CEO Research Frontiers Inc. 240 Crossways Park Drive Woodbury, NY 11797 516-364-1902
[email protected]
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