REFR LETTER TO OUR SHAREHOLDERS
Last year at our Annual Meeting, we spoke about “Building an Industry.” Since then, all three of the world’s largest glass groups have either licensed or sublicensed our SPD-Smart™ light-control technology. These companies include Japan’s largest glass company, Asahi Glass Company, Ltd., which has acquired a sublicense from its affiliate, AGC Automotive Americas (formerly called AP Technoglass) for using SPD technology for automotive sunroofs. Saint-Gobain France SA, a subsidiary of Europe’s largest glass company, Compagnie de Saint-Gobain, was granted a broad non-exclusive license to make various SPD-Smart™ products. And, most recently, Pilkington plc, inventors of the world-renowned float glass process for producing flat glass, has been granted a worldwide non-exclusive license to work with SPD-Smart light control technology and to provide lamination and other services to Research Frontiers’ licensees.
Since the end of last year, we have seen the number of companies licensed by us grow from 21 to 33. These companies are involved in many aspects of SPD technology including production of emulsions and films, and the fabrication and lamination of end-products such as SPD windows, doors and skylights for architectural uses and automotive products, as well as windows for aircraft and marine vessels. The pace of adoption of SPD technology (even by companies that had worked with other light-control technologies in the past) seems to be accelerating around the world. Also, products using SPD-Smart technology have begun to appear much more frequently at trade shows, conferences, and industry events, with such products not only being exhibited by our licensees, but also by their customers and by original equipment manufacturers. We have also seen in recent months indications that the amount (in terms of surface area and dollar value) of SPD-Smart glass being used in, or considered for, architectural projects has begun to increase as project architects and developers
begin to specify more SPD-Smart glass in their projects. These factors should be good leading indicators of substantial increases in sales levels of SPD-Smart emulsions, films, end-products and related services.
During 2003 the pace of commercial sales of SPDSmart products began to increase. Perhaps the most significant SPD event in the automotive market was DaimlerChrysler’s introduction in September of its new Setra 415 HD luxury touring bus with a panoramic glass roof using SPD-Smart light control technology (pictured above). SPD-Smart glass is also being used in the Jeep Rescue concept vehicle which so far this year has been featured at the Detroit, Chicago and New York Auto Shows. In addition to DaimlerChrysler, other automobile manufacturers are working with our licensees to introduce a variety of SPD-Smart automotive products into their vehicles.
After rigorous design, engineering and testing, our licensee, InspecTech Aero Service of Fort Lauderdale, Florida has received FAA certification for numerous commercial and private airplanes and helicopters. InspecTech has already installed or is currently engineering SPD-Smart windows for many models of aircraft manufactured by Airbus, Boeing, Bombardier, Cessna, Dassault, EADS Eurocopter, Gulfstream, Learjet, Piaggio, Raytheon, Sikorsky and Textron/Bell Helicopter. Any of these manufacturers can become large customers for SPD-Smart aircraft windows. The two largest jet manufacturers in the world have even announced plans to include electronic smart window shades in their next-generation aircraft. This bodes well for our licensees and, of course, for Research Frontiers.
Moving from ground, to air, to sea, SPD-Smart glass is also beginning to be adopted in the high-end marine market. Yachts and cruise ships have special glare and heat problems, not only because they are constantly moving, but also because they operate on a reflective surface—water—that intensifies heat and glare.
Due to the growing number of licensees, and because of their strong interest in meeting and doing business together, we held our first-ever SPD Licensee Conference on April 15–17, 2004 in Fort Lauderdale, Florida. This was the first time that we assembled together as an industry. The conference was attended by more than 50 representatives from 22 licensees headquartered in eight countries in North America, Asia and Europe. Among the companies giving formal presentations were all three of our active emulsion makers, Dainippon Ink and Chemicals, the Hitachi Chemical Company and Air Products and Chemicals. All three companies have made excellent progress and should have SPD-Smart emulsion and film products available for sale and/or sampling as early as May of this year. A more recent addition to the world of SPD technology is DuPont which in April became licensed by us to make SPDSmart emulsions, films and architectural and automotive end-products. The importance of the new emulsion-based SPD film cannot be overstated. It has fast response time and a wide range of light transmission. The films demonstrated by Hitachi and Dainippon at the conference go from nearly as clear as an ordinary window to approximately seven times darker than the dark window tints commonly found on glass office buildings today. The haze levels of these films in their activated state is virtually invisible to the naked eye (approximately one-third to one fifth the haze levels of switchable windows currently on the market today), and it has good durability to severe weathering conditions.
This expands the markets for SPD-technology in many ways and opens up new markets. These latest SPD light-control film products have wide applicability in SPD-Smart architectural, automotive, aircraft and marine windows, as well as in instantly adjustable variable tint eyewear such as sunglasses or ski goggles. At the Conference, Dr. Albert P. Malvino (internationally-known electronics textbook author and Research Frontiers Director, pictured upper left) discussed the latest electronic control systems for SPDSmart windows for a variety of project installations, ranging from residential projects to commercial projects such as the SPD-Smart windows currently being used at Walt Disney World’s Epcot Center, to those being considered for convention centers and hotels where it is desirable to control large areas of SPD-Smart glass with a single controller. Power consumption using Dr. Malvino’s designs are now under 0.03 watts/square foot, resulting in operating costs of pennies per month for SPD-Smart windows. The LTI Smart Glass division of our licensee, Laminated Technologies, presented the capabilities of their two state-of-the-art production facilities, expansion plans, and latest product and service offerings, and gave an overview of the SPD production process for making laminated SPD-Smart glass and plastic panels for various product applications.
Advertising and marketing expert Marco Greenberg (far left), as well as Research Frontiers’ Michael R.LaPointe and Gregory M. Sottile, made presentations at the conference discussing industry trends, market development programs, and new initiatives.
The Company’s loss in 2003 was approximately $4.77 million or $0.38 per share compared to $3.95 million or $0.33 per share in 2002. Although operating expenses decreased, the increase in our loss for 2003 was attributable to a write-down of our investment in SPD Inc., lower investment income due to lower prevailing interest rates, and a higher investment in R&D during 2003. However, our cash and cash equivalents as of December 31, 2003 were approximately $5.1 million, about the same as one year earlier.
Major progress toward our goal of achieving substantial sales of SPD products was made in 2003 and early 2004, and we expect that larger orders and increased sales of SPD-Smart materials and products by our licensees will occur this year. We look forward to the coming year with great anticipation, and expect to see good growth in sales of SPD-Smart products in many parts of the world. We thank our licensees and employees for their hard work and successes, and we thank our shareholders for their patience and fortitude as we continue to build and strengthen the SPD light-control industry.
Sincerely,
Robert L. Saxe
Chairman and Chief Executive Officer
Joseph M. Harary
President and Chief Operating Officer |
