R E S E A R C H F R O N T I E R S I N C .
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) of
THE SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015 Commission File Number 1-9399
RESEARCH FRONTIERS INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
11-2103466
(I.R.S. Employer
Identification No.)
240 CROSSWAYS PARK DRIVE
WOODBURY, NEW YORK
(Address of principal executive offices)
11797-2033
(Zip Code)
Registrant’s telephone number, including area code (516) 364-1902
Securities registered pursuant to Section 12(b) of the Act: Name of Exchange
Title of Class
Common Stock, $0.0001 Par Value
on Which Registered
The NASDAQ Stock
Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [ ] No [X]
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act. (Check one):
[ ] Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2015 (the
last business day of the registrant’s most recently completed second fiscal quarter), computed based on the closing sale price of $5.34 was
$91,564,243. In making this computation, all direct and indirect shares known to be owned by directors and executive officers of the
Company and all direct and indirect shares known to be owned by other persons holding in excess of 5% of the Company’s common stock
have been deemed held by “affiliates” of the Company, and awards of restricted stock subject to vesting are assumed to have been fully
issued and outstanding. Nothing herein shall prejudice the right of the Company or any such person to deny that any such director, executive
officer, or stockholder is an “affiliate.”
On March 7, 2016 the registrant had 24,043,846 shares of Common Stock outstanding.
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ITEM 1. BUSINESS
Forward-Looking Statements
PART I
Information included in this Annual Report on Form 10-K may contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical facts, but rather
reflect our current expectations concerning future events and results. We generally use the words “believes,” “expects,”
“intends,” “plans,” “anticipates,” “likely,” “will” and similar expressions to identify forward-looking statements. Such forward-
looking statements, including those concerning our expectations, involve risks, uncertainties and other factors, some of which are
beyond our control, which may cause our actual results, performance or achievements, or industry results, to be materially
different from any future results, performance or achievements expressed or implied by such forward-looking statements. These
risks, uncertainties and factors include, but are not limited to, those factors set forth in this Annual Report on Form 10-K under
“Item 1A. – Risk Factors” below. Except as required by applicable law, including the securities laws of the United States, we
undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information,
future events or otherwise. You are cautioned not to unduly rely on such forward-looking statements when evaluating the
information presented in this Annual Report on Form 10-K.
General:
As used herein, “we,” “us,” “our,” the “Company” or “Research Frontiers” means Research Frontiers Incorporated unless
otherwise indicated. Research Frontiers operates in a single business segment which is engaged in the development and marketing of
technology and devices to control the flow of light (see Note 1). We develop and license our patented suspended particle device
(“SPD-Smart”) light-control technology to other companies that manufacture and/or market the: (i) SPD-Smart chemical emulsion,
(ii) light-control film made from the chemical emulsion, (iii) the light-control panels made by laminating the film, (iv) electronics to
power end-products incorporating the film, or (v) lamination services for, and the end-products themselves such as “smart” windows,
skylights and sunroofs. Research Frontiers currently has over 40 companies that, in the aggregate, are licensed to primarily serve four
major SPD-Smart application areas (aerospace, architectural, automotive and marine products) in every country of the world. In
addition, in 2013 we launched our VariGuard business unit that markets and sells SPD-Smart products directly to customers for
specialty uses such as the protection of artwork and light-sensitive documents in museums and private collections.
The Company has entered into a number of license agreements covering its light control technology. During 2015, three
licensees accounted for 33%, 15%, and 9%, respectively, of fee income recognized for the year. In addition, during the year ended
December 31, 2015, approximately 14% of revenues related to fees generated by a large architectural glass project. During 2014, five
licensees accounted for 36%, 11%, 9%, 9%, and 5%, respectively of fee income recognized during the year. During 2013 six licensees
accounted for 40%, 12%, 6% and 6%, 5%, and 5% respectively of fee income recognized for the year.
Research Frontiers was incorporated in New York in 1965 to continue early work that Dr. Edwin Land, founder of Polaroid
Corporation, and others had done in the area of light-control beginning in the 1930s. Research Frontiers was reincorporated in
Delaware in 1989. Since 1965, Research Frontiers has actively worked to develop and license its own SPD technology, which it
protects using patents, trade secrets and know-how. Although patent and trade secret protection is not a guarantee of commercial
success, Research Frontiers currently has approximately 187 patents that have been issued worldwide. In addition, the Company
has current patent applications in the US and other countries that if granted, would add a significant number of additional patents
to its portfolio. The Company has and continues to devote significant resources to develop, license and protect its intellectual
property position.
SPD-Smart products use microscopic light-absorbing nanoparticles that are typically suspended in a film. These particles
align when an electrical voltage is applied, thus permitting light to pass through the film. Adjustment of the voltage to the SPD
film gives users the ability to quickly, precisely and consistently regulate the amount of light, glare and heat passing through the
window, skylight, sunroof, window shade or other SPD-Smart end-product. This SPD film can be incorporated between two layers
of glass or plastic, or combinations of both, to produce a laminate that has enhanced energy efficiency, light-control and security
performance properties.
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Research Frontiers believes that the SPD industry is in the initial phase of growth. SPD light-control technology may have
commercial applicability in many products where variable light-control is desired. Some existing product applications for SPD-
Smart glass or plastic include the following:
Automotive:
sunroofs, sunvisors, side windows and rear windows;
Aerospace and marine:
windows, doors, partitions, sunvisors, and skylights.
Architectural:
commercial and residential windows, doors, skylights, and partitions for new construction, replacement, and retrofit
applications;
In addition to the product applications listed above, SPD-SmartGlass technology may also offer potential benefits in the
development of new flat panel displays, eyewear, self-dimming automotive rear-view mirrors and other reflective information
displays. However, such products need additional product design, engineering or testing before an evaluation of the commercial
potential of such SPD-SmartGlass products can be determined.
Some of our licensees consider the stage of development, product introduction strategies and timetables, and other plans to
be proprietary or secret. Unless required to disclose such information, the Company may limit its disclosure of licensees activities
until such licensees, or their customers, make their own public announcements of planned or actual product launches.
Some of the early sales and uses of SPD technology were to low volume commercial installations and some have involved
concept and test installations by licensees and their customers. Recent progress with regard to market development and
commercialization activity has been the result of focused and active efforts by Research Frontiers and its key licensees who have
invested in product development and improvements, production facilities, increased production capacity, durability, performance
testing, quality control and assurance, and marketing programs.
Beginning in late 2011, higher volume sales of SPD products commenced with the launch by Daimler AG of the Magic Sky
Control™ all glass roof option on their Mercedes-Benz SLK. In early 2012, sales of the Magic Sky Control™ all glass roof option
commenced on their Mercedes-Benz SL. In mid-2014, sales of the Magic Sky Control™ all glass roof option commenced on the
new S-Class Coupe with other Mercedes-Benz S-Class variants began offering the Magic Sky Control™ all glass roof option in
2015.
Research Frontiers believes that with the normal progression of product and manufacturing improvements, and as licensees
become more experienced at the lamination, fabrication and installation of SPD-Smart products for various applications, the
adoption rates for SPD-Smart products will grow and accelerate, which we expect will increase the stream of royalty income for
the Company. Research Frontiers believes the largest and most predictable near and intermediate term market for its technology
will be automotive glass.
As part of their marketing and branding programs, many of our licensees have developed their own trademarks for SPD-
Smart emulsion, film, and end-products and these are listed in their respective press releases, product brochures, advertising and
other promotional materials. Research Frontiers uses the following trademarks: SPD-Smart™, SPD-SmartGlass™, VaryFast™,
SPD-CleanTech™, SPD Clean Technology™, SmartGlass™, The View of the Future - Everywhere you Look™, Powered by
SPD™, Powered by SPD-CleanTech™, Powered by SPD Clean Technology™, SG Enabled™, SPD Green and Clean™, SPD On-
Board™, Speed Matters™, VariGuard™ and Visit SmartGlass.com - to change your view of the world™.
In each of the last three fiscal years the Company devoted substantially all of its time to the development of one class of
products, namely SPD-Smart light-control technology, and therefore revenue analysis by class is not provided herein. Information
about our operations and those of our licensees is included below and in our financial statements and notes thereto.
The Company does not believe that future sales will be seasonal in any material respect. The Company does not currently
directly manufacture products on its own but rather depends on activities of its licensees and vendors. Due to the nature of the
Company’s business operations and the fact that the Company is not presently a manufacturer, there is no backlog of orders for the
Company’s products.
The Company believes that compliance with federal, state and local provisions which have been enacted or adopted
regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, will not have
a material effect upon the capital expenditures, earnings and competitive position of the Company. The Company has no material
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capital expenditures for environmental control facilities planned for the remainder of its current fiscal year or its next succeeding
fiscal year.
Employees:
On March 7, 2016 the Company had twelve full-time employees, five of whom are technical personnel, and the rest of whom
perform legal, finance, marketing, investor relations, and administrative functions. Of these employees, three have obtained
doctorates in chemistry, one has a master’s degree in chemistry, one has extensive industrial experience in electronics and
electrical engineering, and one has majored in physics. Three employees also have additional postgraduate degrees in business
administration. Also the Company’s suppliers and licensees have people on their teams with advanced degrees in a number of
areas relevant to the commercial development of products using the Company’s technology. The success of the Company is
dependent upon, among other things, the services of its senior management, the loss of which could have a material adverse effect
upon the prospects of the Company.
Smart Glass Industry Trends:
There are favorable converging global trends in the major near-term markets for smart glass and SPD-Smart products. The
potential for smart glass products is significant and is expected to attain economies of scale with increasing high volume
production. This increased production is also expected to bring down end product costs and expand market opportunities.
In both public and private sectors across the world, there are substantial efforts targeted toward the promotion and use of
energy efficient smart glass materials, including those used in automobiles, windows and other architectural glazings, aircraft and
boats. Products using SPD-Smart technology continue to be exhibited at trade shows, conferences, and industry events, with such
products not only being exhibited by our licensees but also by their customers and by OEMs. While there can be no assurance that
these trends will continue, to the extent that they do continue, each is expected to have a beneficial effect on future interest in SPD-
Smart technology.
In December 2015, ResearchandMarkets issued Smart Glass Market by Technology (SPD, Electrochromic, PDLC,
Thermochromic), Application (Architecture, Transportation, Solar Power Generation, Electronics & Others), & Geography -
Global Trend & Forecast to 2020. This reports indicates: “The emerging automobile and architectural buildings applications are
creating a huge demand for smart glass market across the world. The major factors driving the growth of the smart glass market
are the need for energy-efficient solutions, and government regulations for green buildings. Furthermore, the rising automotive
sector is expected to drive the smart glass market in the coming years.” ResearchandMarkets estimates that the Smart Glass market
is expected to reach $5.81 billion by 2020 at an estimated Compound Annual Growth Rate (CAGR) of 19.5% from 2015 to 2020.
Automotive Market:
In the automotive industry, global trends include the introduction of larger sunroofs and panoramic roof panels in
transportation vehicles, and a higher percentage of these vehicles having a sunroof or using more glass in the roof.
SPD-SmartGlass has also been shown in armored automotive glass applications, recreational vehicles, and a new market is also
beginning to develop for personalized custom conversions of automobiles for owners who wish to express themselves through the
design of the cars they own and/or drive.
Aircraft Market:
In the aircraft industry there is a trend towards larger windows with more passenger control and functionality. In the
“transport category” (primarily large commercial passenger aircraft) segment, the world's two largest aircraft manufacturers are
both promoting the size of the windows in new aircraft platforms already being delivered (e.g. Boeing 787 and Airbus A350). In
the “general aviation” category (primarily business jets, private or chartered smaller aircraft) this trend is true as well. For
example, Gulfstream is promoting the size of the windows on their G650 platform, and Bombardier highlights the size of the cabin
window on the upcoming Global 7000 and 8000 platforms. Several OEMs either already offer, or have announced their interest to
include, electronically dimmable windows in their aircraft – including Boeing, Airbus, Bombardier, Embraer, Beechcraft,
HondaJet, Airbus Helicopter, Dassault, Nextant and Epic.
Electronically dimmable windows for aircraft may use SPD technology, or may use other smart window technologies such as
liquid crystal or electrochromic technology. A window system using electrochromic technology was introduced in the Boeing 787.
There have been concerns raised that this aircraft's electronically dimmable windows are not dark enough for long haul flights,
transmit too much heat into the cabin, and have a switching speed that is too slow.
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The Company believes its SPD technology offers important performance advantages over other technologies including faster,
more uniform response time, superior heat-rejection when the aircraft is parked on the ramp, superior acoustic insulation, an
automated dimming system to continuously maintain a constant level of light in the cabin in real-time, and weight-savings.
Leading companies manufacturing electromechanical pleated window shades have products that incorporate SPD-Smart windows
into their designs, and Tier 1 suppliers of other cabin systems (e.g. cabin management systems) are featuring SPD-Smart
electronically dimmable windows in mockups.
SPD technology is also the only commercially available light-control smart window technology known to have passed the
stringent safety and durability tests required by the aviation industry and to have received a Supplemental Type Certificate (STC)
from the Federal Aviation Administration. Today SPD-Smart electronically dimmable windows are flying in 33 models of various
aircraft including those used in commercial aviation, general aviation and military aviation. SPD-Smart products have recently
been selected by aircraft manufacturers as standard equipment on new production platforms including Honda Aircraft’s HondaJet
and Textron-Beechcraft King Air 250, 350i and C90GTx. In addition, starting in 2020, SPD-Smart skylights have been selected by
Dassult Aviation for its new Falcon 5X.
Architectural Market:
The architectural community is actively increasing the use of daylight harvesting, green building technologies and building
automation systems to more effectively capture and control natural light as part of energy reduction strategies to offset
cooling/heating costs and electricity used by artificial lighting. In addition to design, aesthetic and other benefits, the expanded use
of glass also supports a growing body of research which finds that the presence of and control over incoming natural light
improves an individual’s well-being and productivity. Products using SPD-Smart light-control technology – sunroofs, windows,
skylights, partitions and others – can play an important role in supporting these converging global trends.
For architectural applications, various market forces and the distinctive features of SPD-SmartGlass are having a positive
influence on interest for SPD-Smart products. Many architects are specifying more glass in their designs to satisfy building
occupants’ desire for greater connectedness with the outside environment. In addition, there is increasing interest in improving
energy efficiency in both commercial and residential buildings. Various studies indicate that buildings in the United States and
Europe now account for an estimated 39-40% of total energy use and upwards of 70% or more of electricity consumption. Many
architects and building owners are striving for sustainable, "green" buildings that are highly energy-efficient, reduce environmental
impact, and improve occupant health and well-being. In addition, the design community is increasingly interested in advanced
daylighting systems in buildings that lower electrical lighting usage and reduce heating and cooling loads. Because of this, the
ability to control light, glare and heat in these building applications is very important and advanced solutions often are needed to
optimize operating efficiencies. SPD-Smart architectural products instantly and precisely provide shading, glare control and heat
management solutions for offices and homes, especially when these products are available for new construction, replacement and
retrofit projects. These products include insulated glass units, single-panel retrofits, unusually shaped glazings, and products with
advanced fabrications such as those with ballistic- and blast-resistant capabilities.
Research Frontiers’ patented SPD-SmartGlass technology was selected as the exclusive smart glass for the USA Pavilion at
the most recent World’s Fair, Expo Milano 2015 from May through October, 2015. The USA Pavilion featured 312 large panels of
SPD-SmartGlass manufactured under license from Research Frontiers by Isoclima S.p.A. Each panel measures approximately 1
meter by 3 meters, making the total surface area in the roof more than 10,000 square feet. This is the largest known installation of
smart glass in the world for a roof application and was seen by over 6 million people.
Marine Market:
In the marine application, where light-control needs are especially important, many yacht manufacturers currently employ
less than ideal glazing solutions as they try to satisfy various shading and solar control objectives. For example, some report
having to use as many as five different types of glass in a typical yacht to satisfy diverse glazing needs. SPD-Smart marine
products can reduce the number of different types of glass used in these yachts because of its increased functionality, superior
performance and versatility. SPD-Smart marine products provide an innovation that allows these operators to manage incoming
light, glare and heat while achieving privacy or maintaining one’s view as desired.
Historical Background and Recent Developments:
SPD-Smart Film Production:
An important material used in SPD-Smart end-products is SPD light-control film that varies the tint of glass or plastic. In
early 2007, our licensee Hitachi Chemical began producing their initial SPD-Smart light-control film on their first factory line.
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During the second half of 2009, Hitachi Chemical announced that they had begun mass production on their new, larger capacity
production line and expanded their annual production capacity to 400,000 square meters (over 4.3 million square feet).
Hitachi Chemical’s production line is dedicated exclusively to the production of SPD-Smart film. In July 2009, Hitachi
Chemical launched its website dedicated to its SPD-Smart light control film and during 2009, Hitachi Chemical outlined in its
press releases and public presentations that it plans to "accelerate the use of SPD film, which holds significant potential for
growth" and noted that "SPD film is positioned as one of the key emerging products promoted by Hitachi Chemical to become a
future leading product for the company."
Customers for Hitachi Chemical's SPD-Smart film are end-product licensees of Research Frontiers. These licensees receive
the film, laminate it between glass or plastic substrates, and then fabricate end-products which are sold into various industries.
Most end-product licensees pay Research Frontiers a royalty on the sale of these end-products that typically range from 10-15%.
In 2010, Hitachi Chemical expanded its SPD film product portfolio by initiating commercial production of a “lighter”
version of its film. Both the SPD “dark” and “light” versions of the films provide a high range of visible light transmission. The
SPD “dark” film has a range of approximately 0.5% to 55.0%, and SPD “light” film has a range of approximately 2% to 65%. This
leads to contrast ratios (the ratio of clear to dark light transmission) of up to 110:1. The commercialization of both “dark” and
“light” versions of SPD-film provides greater design and performance options for end-product applications.
In December 2014, Research Frontiers was granted a patent relating to the production of SPD-films with even higher light
and dark transmission states than currently are available commercially.
Two other companies are currently developing SPD-Smart light-control film under license from Research Frontiers using
SPD-Smart emulsion. These two companies are licensed to sell SPD-Smart light-control film to other licensees of Research
Frontiers. Neither of these companies has yet announced commercial SPD film products for sale.
SPD-Smart Automotive Products:
Research Frontiers and its licensees are currently working with multiple automotive manufacturers to introduce SPD-Smart
windows, sunroofs and roof systems on both concept and production vehicles. Research Frontiers’ end-product licensees in this
sector include: American Glass Products, Asahi Glass, BOS Automotive, Custom Glass, Daimler AG, DuPont, GKN Aerospace
Transparency Systems, Isoclima, Pilkington Glass, Pittsburgh Glass Works, Saint-Gobain Vision Systems, Tint-It JSC and
Advnanotech. The Company’s automotive glass licensees account for the majority of all glass produced for the automotive market
throughout the world.
Automotive OEMs:
In 2011, Daimler AG began using SPD-SmartGlass technology in its Magic Sky Control™ panoramic glass roof as an option
on its new Mercedes-Benz 2012 SLK. In 2012, Daimler AG began offering its Magic Sky Control™ panoramic glass roof as an
option on its new Mercedes-Benz 2013 SL. These SPD products allow drivers and passengers to change the tint of the car roof
from dark to clear quickly with a touch of a button. The SLK and SL are the first large-scale series production vehicles to offer
SPD-SmartGlass. The Research Frontiers licensees involved with the production of the Magic Sky Control™ roof for the SLK and
SL include Hitachi Chemical, which manufactures the SPD-Smart light-control film in Japan. Automotive glass companies Nippon
Sheet Glass in Japan and its subsidiary, Pilkington, in the UK and Germany then process and laminates Hitachi’s SPD film into the
glass for the Magic Sky Control™ roof.
In late 2014, Daimler AG began offering its Magic Sky Control™ as an option on the new Mercedes-Benz S-Class Coupe. In
2015 other S-Class variants (i.e. Standard Wheel base W222, Long Wheel Base V222, Maybach S600 X222 and the Maybach
Pullman Limousine) began offering Magic Sky Control™ as an option. The all-new Mercedes-Benz S-Class is the third large-scale
serial production vehicle to offer Magic Sky Control™ using SPD-Smart technology. The Research Frontiers licensees involved
with the production of the Magic Sky Control™ roof for the S-Class include Hitachi Chemical, which manufactures the SPD-
Smart light-control film and Asahi Glass Corporation which then process and laminates Hitachi’s SPD film into the glass for the
Magic Sky Control™ roof.
The S-Class offers the largest panoramic Magic Sky Control™ roof ever put into serial production. The surface area of the
panoramic roof using SPD-SmartGlass technology on the S-Class is approximately three times the size of the roof glass used on
the current SLK and SL roadster, and third-party market forecasters estimate that the total vehicle production volumes for the S-
Class is higher than the SLK and SL roadsters combined.
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A key factor in the broad adoption of SPD technology in various automotive windows is its cost. Typically, the cost for new
technology products decrease as production volumes increase. The price per square foot of SPD-SmartGlass reported by our
licensees has gone down over time in the automotive market. Royalties from the Magic Sky Control panoramic roofs for the S-
Class vehicles are generally between $150-250/car. Royalties from the Magic Sky Control roofs for the SLK and SL vehicles are
between $100-150/car. The roofs on the S-Class is approximately three times the surface area of the roofs on the SLK and SL
vehicles.
Research Frontiers believes that the addition of the S-Class car model is also significant since it applies our SPD-Smart light-
control technology to the broader class of vehicles by moving beyond roadsters to coupes and passenger sedans. Historically, since
its debut over 40 years ago, the S-Class represents the premier platform to introduce new technologies to the customer, which in
many cases expand to the other less expensive model lines within the Mercedes-Benz brand.
In November 2015 at the Los Angeles Auto Show, Mercedes-Benz launched a refreshed Mercedes-Benz SL. The press
release from Mercedes-Benz it stated, “Another feature which has been retained is the unique optional extra MAGIC SKY
CONTROL: when closed, the panoramic vario-roof automatically changes from dark to transparent or vice-versa within just a few
seconds.” The MAGIC SKY CONTROL feature is a carry-over from the previous model. Other new features include a new front
end, new headlamps, more powerful engines, a new transmission, among many others.
In January 2016 at the North American International Auto Show in Detroit, Mercedes-Benz premiered the new Mercedes-
Benz SLC, which will be available in the spring of 2016. The press release from Mercedes-Benz when the SLC was first
announced stated, “A feature that continues to be unique to the SLC is the panoramic vario-roof with Magic Sky Control – this
glass roof is lightened or darkened at the touch of a button. This means that it provides an open-air feeling at any time, but when
required gives welcome shade under a hot sun.” The Magic Sky Control feature, using Research Frontiers SPD-SmartGlass
technology, is a carry-over from the SLC’s predecessor model, the SLK roadster.
Other automakers continue to develop and evaluate the use of SPD technology in their windows systems. Such window
systems include sunroofs, side-windows, rear-windows and front-window visors.
Some automakers and their suppliers have incorporated SPD-SmartGlass in concept vehicles, with some of these concept
vehicles being exhibited at major auto shows:
January 2016:
Continental Corporation showcased its “Intelligent Glass Control” system on a demonstration vehicle at a special event at the
Consumer Electronics Show (CES) in Las Vegas. This vehicle, a Ford Mondeo station wagon, used SPD-SmartGlass
technology to enable the glass in all eleven side and rear windows and in the top sunvisor portion of the windshield to change
its transparency and darken instantly through electric control signals.
March 2015:
The Lincoln Motor Company, the luxury automotive brand of the Ford Motor Company, introduced the Lincoln Continental
Concept car using an SPD-SmartGlass electronically tinting sunroof. This Lincoln Continental Concept car featuring SPD-
SmartGlass also made its Asian debut at Auto Shanghai in April 2015.
September 2012:
BMW debut at the Paris Motor Show its new BMW Concept Active Tourer. This vehicle’s entire composite glass roof uses
patented SPD-SmartGlass technology.
March 2012:
Mercedes-Benz debuted at the Geneva International Motor Show its public evaluation of the Limited Edition Viano Pearl.
This vehicle displays the capabilities and conceptual use of SPD-SmartGlass on the side glass of vehicles from Mercedes-
Benz.
December 2011:
Toyota debuted its FS Hybrid Concept at the 2011 Tokyo Motor Show in Tokyo, Japan. The FS Hybrid Concept demonstrated
the use of SPD-Smart™ technology in side glass.
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September 2011:
Audi debuted its A2 concept car at the Frankfurt International Auto Show in Frankfurt, Germany. The A2 is an electric-
powered passenger car equipped with a large SPD-Smart™ panoramic glass roof.
Automotive Aftermarket:
While the highest volume market for which SPD-Smart technology is being developed is new car production by the world’s
automakers, the aftermarket upgrade market also presents near-term opportunities in the automotive market. Research Frontiers
licensee American Glass Products (AGP) is offering its Vario Plus Sky SPD-SmartGlass to the automotive aftermarket. In March
of 2013 Research Frontiers announced that it had added two new licensees, Tint-It JSC and Advnanotech, both of whom are
targeting the automotive aftermarket in Russia.
Recreational Vehicles//Motor Homes:
In September 2014, Global Caravan Technologies, Inc. unveiled the CR-1 Carbon which features the MagicView™ roof and
MagicView™ windshield with SPD-SmartGlass. This special glass which totals 28 square feet, was jointly developed with
Research Frontiers’ licensee Vision Systems. SPD nanotechnology on this vehicle allows infinitely variable control of privacy
between blackout and clear, and can be controlled by any smart-phone or other smart-devices. In addition to controlling the level
of light and glare coming into the RV, the MagicView™ SPD-SmartGlass on RVs offers many other advantages. This technology
provides unsurpassed thermal insulation: SPD-SmartGlass substantially rejects solar heat from entering RVs through windows.
The SPD-SmartGlass achieves its maximum dark state when the RV is parked/turned off and no power is consumed.
Vision Systems announced in January 2012 that Notin, manufacturer of motorhomes and campers, selected Visions Systems’
Nuance brand of SPD-SmartGlass for the skylight of Notin's Angara luxury motorhome. In October 2013 at Busworld 2013,
Vision Systems showcased a new sun visor using SPD-Smart light-control film technology and a light sensor to automatically and
dynamically adjust the sun visor to deal with changing light and glare conditions. Vision Systems indicated that they have been
working for almost two years with a major automotive OEM to test the ease of installation, reliability, design and performance of
their new sun visor in real world conditions. They further indicated that customer reaction regarding the effectiveness and ease of
use of this product has been excellent. The fact that this feature can be installed in the aftermarket should bring these benefits to a
wider range of drivers.
Rail Transport:
In September 2014, Poma (a leading supplier of cable transport systems) showcased at Innotrans 2014 its Cabine H2 cable
car. The windows in this cable transport vehicle used Research Frontiers licensee Vision Systems' "Nuance" SPD solution.
Innotrans 2014 is the largest international trade fair for rail transport technology with over 160,000 visitors and is held every two
years in Berlin, Germany. At this fair Bombardier, featured their "FLEXITY 2" tram platform using an electronically dimmable
window produced by Vision Systems. In addition, AGC, one of the largest producers of flat glass in the world, featured its
"WONDERLITE" SPD-SmartGlass train window.
Automotive Armored Glass Market:
Within the automotive market, a potentially additional sector is the armored glass market. Armored glass (sometimes referred
to as “transparent armor” and “bullet-resistant glass”) encompasses the military, non-military government, and civilian markets. In
addition, SPD-Smart technology in this market not only provides the benefits of light-control and UV blockage, it also enhances
security by introducing darker tints and privacy. A number of the Company’s licensees including American Glass Products, GKN,
Isoclima and Pittsburgh Glass Works are recognized industry leaders in the armored glass market.
SPD-Smart Aircraft Products:
Three aircraft manufacturers have announced that they have selected SPD-Smart dimmable window products as standard
equipment in new or upcoming production aircraft:
Honda Aircraft Company:
The new HondaJet, with first delivery in December 2015, comes with SPD-Smart electronically dimmable windows as
standard equipment on all passenger windows.
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Textron-Beechcraft will have SPD-Smart electronically dimmable windows as standard equipment on all models of its
King Air aircraft:
The King Air 250 with first production during 2015;
The King Air 350i with first production during 2015;
The King Air C90GTx with first deliveries during the first quarter first quarter of 2016.
Dassault Aviation:
The new Falcon 5X, with first deliveries expected in 2020, will come with SPD-Smart electronically dimmable skylights as
standard equipment.
Aircraft manufacturers have incorporated SPD-Smart electronically dimmable windows in mockups, with some of these
mockups being exhibited at major aviation shows:
April 2015
Vision Systems demonstrated its Nuance Touchless at the 2015 Aircraft Interiors Expo in Hamburg, Germany. The new
system allows passengers to use gestures, much like those used to operate a smart phone, to control the tint of their aircraft
windows, but without ever having to touch the window or any other aircraft interior component.
Isoclima showcased its CromaLite brand of SPD-Smart Electronically Dimmable Windows at the Aircraft Interiors Expo in
Hamburg, Germany.
March 2015:
Vision Systems unveiled its SPD-Smart Opti-Visor electronically dimmable sun visor for the aircraft market at the Helicopter
Association International Heli-Expo in Orlando, Florida.
October 2014:
Epic Aircraft featured SPD-Smart windows in the mock-up of their E1000. The mock-up was unveiled at 2014 NBAA in
Orlando, Florida.
October 2013:
Dassault announced their Falcon 5X at the 2013 NBAA show in Las Vegas. In an aviation industry first, an SPD-Smart
skylight was featured on the mock-up. The Falcon 5X will use SPD technology as standard equipment, and use of a skylight
on an aircraft is an industry first
May 2013:
Eurocopter featured SPD-Smart windows, and SPD-Smart cabin partitions, in the mock-up of their EC175 helicopter. The
mock-up was unveiled at EBACE 2013 in Geneva, Switzerland.
October 2012:
Honda Aircraft Company featured HondaJet SPD-Smart cabin windows at the 2012 National Business Aviation Association
(NBAA) Annual Meeting & Convention. The HondaJet’s passenger windows will use SPD technology as standard equipment.
SPD-Smart Nuance windows for the HondaJet went into production at Vision Systems new Melbourne, Florida factory and
the HondaJet is currently expected to get FAA certification in the first half of 2015 and be delivered to customers shortly after
that.
November 2011:
Bombardier Aerospace featured SPD-Smart aircraft windows in their CSeries aircraft cabin mock-up at the 2011 Dubai
Airshow, equipping the business class windows in its mock-up with SPD-Smart aerospace windows.
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Tier 1 suppliers of cabin systems have featured SPD-Smart electronically dimmable windows in mockups, with some of
these mockups being exhibited at major aviation shows:
April 2014:
BAE Systems featured SPD-Smart electronically dimmable windows in their cabin management system mock-up at the 2014
Hamburg Airshow. The windows can be controlled by the BAE system.
April 2014:
Vaupell featured SPD-Smart an electronically dimmable window in their commercial airliner window assembly at the 2014
Hamburg Airshow.
The latest generation of SPD-Smart electronically dimmable windows provides the aircraft industry's only complete solution
to managing in real-time the environmental challenges that outside conditions inflict on the cabin interior and passengers including
light, glare, heat and noise.
Level of darkness:
Solar radiation onboard aircraft is extreme, and requires a dimmable window that creates an environment dark enough for
passengers to sleep, even during daylight hours. Research Frontiers licensees now offer SPD-Smart windows that can be set to
block over 99.96% of incoming light, to meet the needs of OEMs and their customers.
Switching speed:
Whenever a passenger wants relief from glare, SPD-Smart aircraft windows offer immediate response. Due to instant
switching, an infinite number of light-transmission states can be selected by the passenger or flight crew, from clear to blackout,
and any level of view-preserving tint in between.
Heat-blocking:
Aircraft cabins can become hot when the aircraft is parked because of solar heat streaming through windows. The result is an
uncomfortably warm cabin upon boarding or the need to use jet fuel or auxiliary power units before boarding to cool down the
cabin. SPD-Smart aircraft windows automatically switch to their maximum heat-blocking state, even when the aircraft is parked
unpowered, and the cabin remains cool.
Other performance benefits:
Additional challenges stated by OEMs and their customers that have been successfully met by SPD-Smart dimmable aircraft
windows include:
Noise-blocking: the ability to reduce the amount of noise transmitted through windows
Curved shapes: the ability to offer curved windows to meet interior design needs
Weight-reduction: the ability to fabricate dimmable windows using lightweight plastics
FAA certification: the ability to demonstrate full compliance with all FAA requirements
Aircraft Window Licensee - InspecTech Aero Service Inc.
Research Frontiers' licensee InspecTech Aero Service Inc. markets its iShade and eShade brands of SPD-Smart windows to
both the OEM new production segment and aftermarket segment of the aviation industry. Building on previously announced
milestones including the selection by Hawker Beechcraft Corporation of InspecTech smart window shades for aftermarket
installation on King Air aircraft, and receiving a Supplemental Type Certificate (STC) for all models of King Air aircraft by the
FAA, InspecTech and its strategic partners are working with a growing number of aircraft manufacturers and their customers and
are selling SPD-Smart dimmable windows for fixed wing aircraft and helicopters. InspecTech’s SPD-Smart products have been
installed on 33 models of helicopters and commercial, corporate, and military aircraft.
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InspecTech’s SPD-Smart aircraft windows are now available for any aircraft as an aftermarket installation worldwide, and
for new production aircraft. In the transport category of the industry, InspecTech’s SPD-Smart products have been installed in
selected areas on all Airbus A380 aircraft delivered by Airbus to Qantas Airlines to date, making SPD-Smart window shades the
first and only instantly dimmable window shade flying on commercial airlines.
In 2015, InspecTech marked the 14-year anniversary of the world’s first dimmable aircraft windows. SPD-Smart iShades
installed in 2001 are still in service, validating the superior durability of iShades over any other shading system. InspecTech’s
SPD-Smart product line has evolved as a result of working closely with aircraft OEMs, private jet owners, and the changing
certification requirements of the FAA. Recent improvements include:
October 2012:
InspecTech announced enhancements to its electronics architecture used to control iShades to enable the SPD-Smart windows
to switch to their clearest state in the event of a power loss – that was a request made by certain OEMs. InspecTech’s iShades
now offer “the best of both worlds” - when unpowered on the ramp, the windows automatically switch to their darkest,
maximum heat-rejecting state, and when in the air, they instantly switch to the clear state in the event of a loss of power.
October 2012:
InspecTech announced improvements to its iShade iQ including a higher light transmission, greater contrast ratio,
unprecedented optical clarity, superior acoustic and thermal insulation properties, and lighter weight.
April 2011:
InspecTech announced a new model of its SPD-Smart iShade window, branded iShade iQ. This model, in addition to the light,
glare and heat control, also reduces noise levels in the cabin.
InspecTech has strategic partners that manufacture traditional pleated shades, combining InspecTech’s SPD-Smart iShade
dimmable window with a pleated shade. The integration of InspecTech’s iShade greatly enhances the flexibility and light-control
capability now available to these partners’ customers. SPD-Smart products offer a combination of performance benefits in a single
system – view preservation, variable shading, complete privacy, and a broader set of interior design options with the addition of a
pleated shade. Aircraft owners and operators can maintain the soft fabrics and warm colors of traditional pleated or roller shades,
and benefit from the SPD-Smart film technology used in InspecTech’s iShades. This integration highlights the creative potential
and adaptability of SPD technology.
At the end of 2015, InspecTech’s sales of its iShade and eShade brands of SPD-Smart dimmable windows had extended to
installation on 33 different aircraft models.
Aircraft Window Licensee - Vision Systems
In December 2014, at the 2014 MEBA show in Dubai, U.A.E., Vision Systems unveiled a new generation of its Energia
photovoltaic autonomous SPD-Smart dimmable window – the new product is capable of producing more energy than the prior
generation.
In May 2014, at the 2014 EBACE show in Geneva, Switzerland, Vision Systems unveiled a new SPD-Smart dimmable
window product that offers passengers the ability to independently control the tint of different “zones” within the same window. At
the same show, Vision Systems announced an improvement in the optical performance of its Nuance SPD-Smart dimmable
windows – a product offering wider amplitude between clear and dark.
In October 2013, at the 2013 AIX Americas show, Vision System’s strategic partner Vaupell announced they are offering the
industry a complete SPD-Smart light-control window system – Vision Systems’ SPD-Smart Noctis window and control system,
integrated with Vaupell’s window assembly. This product offering was showcased at Vaupell’s AIX Americas booth. Vision
Systems and Vaupell entered into a strategic partnership to develop and offer SPD-Smart Noctis and Nuance windows to OEMs,
including Vaupell’s longstanding customer Boeing.
In October 2013, at the 2013 NBAA, Vision Systems unveiled Energia – the world’s first self-powered dimmable window
for aircraft cabins. Energia adds the many practical, technical, and financial benefits of solar power to the instant switching speed,
wide range of light transmission, and relief from light, glare and heat that SPD-Smart aircraft windows already provide. Energia
operates without using the aircraft’s electrical system because it integrates a transparent photovoltaic layer that is capable of
producing its own energy – from the sun, or from artificial light sources. Energia facilitates the installation of dimmable windows
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on new production and aftermarket aircraft. It is completely independent of the cabin’s wiring, and no modifications to the
aircraft’s existing electrical system are required. Energia was developed in collaboration with Sunpartner Technologies, Vision
Systems partner and the inventor and manufacturer of the transparent photovoltaic panel. In March 2014, Vision Systems
announced that Energia had been selected as a finalist in the prestigious 2014 Crystal Cabin Award.
In June 2013 at the Paris Air Show, Vision Systems announced it will open its first-ever U.S. SPD-SmartGlass factory,
investing nearly $1.2 million in capital expenditures to serve customers with strong U.S. operations. The new factory was
highlighted by Florida Governor Rick Scott and Vision Systems President and CEO Carl Putman, with Research Frontiers
President and CEO Joseph M. Harary and others in attendance for this special announcement. This announcement of a further
expansion to the United States indicates an acceleration of existing and projected business in North and South America where
major aircraft OEMs and customers of Vision Systems are located, including HondaJet and Gulfstream.
In April 2013, Vision Systems debuted its new SPD-Smart window with integrated electronics and controls directly on the
window at the 2013 Hamburg Air Show. Developed with strategic partner Vaupell, a world leader in the production of aircraft
interior subassemblies for commercial aerospace applications, it became the first dimmable window with integrated electronics and
control panel directly on the aesthetically attractive window reveal.
In March 2012, Vision Systems announced that the company has invested over $750,000 to expand its existing factory in
France to add a production facility dedicated to the manufacture of its SPD-Smart Nuance and Noctis aerospace and transportation
windows and cabin dividers.
In November 2011, licensee Vision Systems exhibited its Nuance and Noctis brands of SPD-Smart aircraft cabin windows at
the Dubai Airshow in Dubai, United Arab Emirates. Nuance and Noctis SPD-Smart aerospace windows offer instant and precise
light-control at every level which provides OEMs and private aircraft owners a solar protection solution that enhances flying
comfort and supports fuel efficiency. These electronically dimmable aircraft and helicopter window shades and cabin dividers are
impact-resistant, completely silent, available in flat and curved surfaces, and can be controlled by the cabin management system or
by passengers. Vision Systems’ Noctis SPD-Smart product line offers enhanced blackout solar protection and complete privacy.
Also at the November 2011 Dubai Airshow, Vision Systems announced that Bombardier Aerospace was featuring Vision Systems’
SPD-Smart aircraft windows in Bombardier’s CSeries aircraft cabin mock-up. Bombardier equipped the business class windows in
its mock-up with Vision Systems’ SPD-Smart Noctis aerospace windows. Developed for the 100- to 149-seat market segment, the
CSeries family of aircraft is Bombardier’s all new mainline transport solution.
Aircraft Window Licensee - GKN Aerospace Transparency Systems
In October 2013, in a press release at the 2013 NBAA in Las Vegas, GKN stated: “In addition to the Global 7000/8000, the
aircraft transparencies operation equips the Beechcraft KingAir, the Lear 35/45 and 60 – and the complete Embraer aircraft family.
The company’s latest passenger windows are the largest and most effective on the market and GKN Aerospace is developing new
dimmable cabin management technology that will include full cabin blackout – providing passengers with new levels of comfort
and environmental control during their journey.”
In January 2011, Research Frontiers and GKN Aerospace Transparency Systems publicly announced the expansion of the
scope of the former license agreement to include the sale of SPD-Smart windows, window shades, interior partitions, cabin
dividers and other products for aircraft. The earlier license agreement with GKN focused on SPD-Smart products for armored
transportation applications. GKN Aerospace is the world-leading supplier of cockpit transparencies and passenger cabin windows.
Aircraft Window Licensee - Isoclima, S.p.A.
In March 2012, at the 2012 Aircraft Interiors Expo in Hamburg, Germany, Isoclima S.p.A. announced that Isoclima’s
CromaLite brand of SPD-Smart aerospace windows made their world premier. CromaLite is Isoclima’s SPD-Smart solar control
glazing product and enables users to efficiently control the transmitted solar radiation in both the visible and the solar range. Dr.
Alberto Bertolini, Executive Director of Isoclima, commented: “Our CromaLite brand of SPD-Smart window offers many
valuable light-control benefits: instant shading, glare control, UV rejection, the desire for passenger comfort, and keeping aircraft
cool when they are on the ground. We are very excited by the reactions we have received from OEMs and cabin designers who are
here at the Aircraft Interiors Expo, and are excited about our growing portfolio of SPD-Smart CromaLite solutions for the
transportation and architectural markets.”
SPD-Smart Architectural Products:
Research Frontiers and its licensees are currently working with multiple architectural customers to introduce SPD-Smart
products including windows, skylights, partitions and doors. The architectural markets for these products are highly fragmented
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and in general have a high sensitivity to price. In the near term, the Company expects SPD-SmartGlass products primarily will be
commercialized in specialty applications and/or sectors that value its distinctive performance attributes including fast switching
speed regardless of window size, a very wide range of visible light transmission, infinite light-control between its dark and clear
states, and availability in unusual shapes and sizes. Research Frontiers’ end-product licensees in this sector include: Advnanotech
(ADV), American Glass Products (AGP), Asahi Glass, Cricursa Cristales Curvados, ID Research Pty Ltd. (“i-Glass”), Innovative
Glass, LTI SmartGlass, Prelco, Isoclima, Traco (a business unit of Alcoa), Mecanica de Vidros Industria E Comercio (“MDV”),
and Tint-It JSC.
At its annual stockholders meeting in June 2015, Research Frontiers announced its strategic investment in Zuli Inc. a
manufacturer of smartplugs. At this meeting, Joseph Harary demonstrated how the Zuli Smartplug integrates with SPD SmartGlass
products. Mr. Harary indicated that “Using a Zuli Smartplug, you can walk into a room with your smartphone, and have the lights
automatically turn on, temperature adjust, and the glass in your windows instantly go from an energy-saving dark tint, to clear so
you can see the magnificent views outside your home. Now, walk into another room and have those lights and windows adjust too,
while the Zuli Smartplug automatically shuts off your devices in the room you left to save energy.”
In March 2015, it was announced that Research Frontiers’ patented SPD-SmartGlass technology has been selected as the
exclusive smart glass for the USA Pavilion at this year’s World’s Fair, Expo Milano 2015 from May through October, 2015. The
USA Pavilion 312 large panels of SPD-SmartGlass manufactured under license from Research Frontiers by Isoclima S.p.A. Each
panel measures approximately 1 meter by 3 meters, making the total surface area in the roof more than 10,000 square feet. This is
the largest known installation of smart glass in the world for a roof application, and was seen by over six million people.
SPD-Smart windows, skylights, doors and partitions offer various benefits in architectural applications. During 2009,
independent tests were conducted by DSET Laboratories, a division of Atlas Material Testing Technology, in accordance with
ASTM and ASHRAE testing and calculation protocols. These test results demonstrate that SPD-Smart windows have excellent
solar heat rejection and control capabilities. In January 2011 a study published by the Department of Engineering at the University
of Cambridge concluded that SPD-Smart light-control windows are exceptionally energy efficient, reducing solar heat gain by as
much as 90%. The Cambridge study indicated that the real-world testing "confirms theoretical predictions that SPD glass holds
great energy saving potential and is a technology that can really help to reduce energy wastage of glass facades." In addition to
SPD-Smart technology, the Cambridge study discussed alternative dynamic glazing technologies that could be used in windows
(e.g. electrochromics) and reported that SPD-Smart technology did not have the disadvantages that limited the potential of these
alternative technologies. For example, the study cited that an electrochromic window that is 2.4 square meters can take up to 30
minutes to change from clear to dark.
In November 2011, Research Frontiers’ licensee Innovative Glass Corporation was awarded two 2010 Crystal Achievement
Awards for their smart window product line using our SPD-Smart light-control technology. In October 2010, their SPD-
SmartGlass product was awarded WFX’s (Worship Facilities Conference & Expo) New Product award for Best Building System
Material Product/Window. Innovative Glass has completed or is working on a variety of SPD-SmartGlass projects in the
commercial, residential and institutional markets. Innovative Glass also periodically exhibits its SPD-SmartGlass architectural
products at Glass Expo Northeast in Hauppauge, New York. Glass Expo Northeast is the region’s largest conference and trade
show dedicated to the architectural glass and metal industry.
Research Frontiers licensee SmartGlass International has announced completion of several high visibility SPD-SmartGlass
installations. During February 2012, the company announced installation of SPD-SmartGlass at CERN, the European Organization
for Nuclear Research, which is one of the world’s largest and most respected centers for scientific research. SmartGlass
International installed SPD-SmartGlass in CERN’s Globe of Science and Innovation that will house a permanent exhibition and is
intended to serve as a venue for a wide range of activities, conferences and other events, In February 2011, SmartGlass
International announced it supplied retrofit SPD-SmartGlass to five London television studios of the Associated Press. The SPD-
SmartGlass used in these projects harvests daylight when it's needed, improves occupant comfort by providing controllable solar
shading during peak light conditions, and preserves views. Just prior to this installation, it was announced that SmartGlass
International installed retrofit SPD-SmartGlass panels at the set of "Daybreak," the breakfast anchor program from ITV, one of the
UK's largest commercial television networks.
Research Frontiers has added a number of new architectural licensees over the last several years. In 2014, Research Frontiers
added Teknoglass Solutions LLP and Diamond Glass. Teknoglass Solutions LLP acquired a license from Research Frontiers Inc.
to make and sell SPD-SmartGlass architectural smart window products in the United Kingdom and Republic of Ireland. Diamond
Glass acquired a license from Research Frontiers Inc. to make and sell SPD-SmartGlass architectural smart window products
throughout Europe. In November of 2013 Research Frontiers announced that it had a new licensee, MDV, who is targeting the
architectural market in Brazil. In March of 2013 Research Frontiers announced that it had added two new licensees, Tint-It JSC
and Advnanotech, both of whom are targeting the architectural market (in addition to the automotive aftermarket discussed
previously) in Russia.
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SPD-Smart Marine Products:
Research Frontiers and its licensees are currently working with marine customers to introduce SPD-Smart products including
windows, doors and partitions. When our patented SPD-Smart light-control technology is used in yacht windows and other
products, users can quickly and precisely control and “tune” the amount of light, glare and heat coming through their windows,
while preserving their view. Diamond Sea Glaze Manufacturing commenced marketing activities for products using SPD
technology during the second quarter of 2011, but is believed to currently be inactive and seeking to terminate its license for SPD-
SmartGlass technology for the marine market.
In November 2015, Silver Arrows Marine in conjunction with Mercedes-Benz Style (a design arm of Mercedes-Benz)
unveiled a new yacht called the ARROW460 – Granturismo featuring an SPD-SmartGlass electronically dimmable roof. The roof,
which is supplied by licensee Vision Systems, will be able to be electrically risen, creating a “glass pergola” effect on the yacht.
First customer deliveries of this production yacht are planned to start in early 2016. Vision Systems presented its products at the
2015 Marine Equipment Trade Show in Amsterdam in November 2015 and at the Monaco Yacht Show in September 2015.
In November 2013, Hatteras Yachts unveiled their new flagship motor yacht, the 100 Raised Pilothouse with dual
SPD-SmartGlass skylights in the galley as standard equipment at the 2013 Fort Lauderdale Boat Show.
In February 2013, licensee Isoclima demonstrated its VebLite brand of SPD-SmartGlass for marine applications at SEATEC
2013 in Italy. SEATEC 2013 is a leading international exhibition of technology and design for boats, megayachts and ships.
In November 2012, licensee Isoclima exhibited its VebLite brand of SPD-SmartGlass for marine applications at the Marine
Equipment Trade (METS) Show 2012 in The Netherlands. VebLite is Isoclima’s SPD-Smart solar control and privacy glazing
product that functions like a venetian blind. It has multiple segments that provide instantly customizable shading fully controlled
by the passenger and can be operated individually to create the effect of a shade being raised or lowered or moved to the side. This
precisely controls where incoming heat and glare enter a yacht or boat through a window or rooflite, and also controls privacy
levels.
In addition to exhibiting its SPD-Smart marine products at METS 2012, licensee Vision Systems’ SPD-Smart Nuance
dimmable marine window was named the category winner in the prestigious METS 2012 Design Award METS (DAME)
competition for interior equipment, furnishing, materials and electrical fittings used in cabins. DAME is considered the world’s
most prestigious design competition for new marine equipment and accessories. In METS’ news release about the DAME award, it
was noted “The Jury felt that Nuance is a major innovation that will benefit designers and owners greatly - with comparatively
little increase in cost.”
In October 2011, Cheoy Lee Shipyards unveiled the Alpha 76 Express, its most advanced production yacht, which is fully-
equipped with the latest yacht design features including SPD-SmartGlass supplied by Research Frontiers licensee Diamond Sea
Glaze. The Alpha has approximately 150 square feet of SPD-SmartGlass at various places throughout the vessel and it is the first
large-scale production yacht to make such extensive use of SPD-SmartGlass. In October 2012, Cheoy Lee Shipyards exhibited two
yachts – the Alpha 76 Express and the Alpha 76 Flybridge – at the 2012 Fort Lauderdale International Boat Show with SPD-
SmartGlass.
VariGuard Business Unit:
In May of 2013 Research Frontiers announced the formation of its VariGuard business unit. This business unit allows the
Company to directly address market opportunities for SPD technology outside the scope of its current license agreements or the
focus of its licensees. VariGuard is a developmental activity for the Company and its revenues are currently immaterial relative to
the Company’s licensing activities.
The VariGuard business unit markets and sells SPD-Smart products directly to customers for specialty uses such as the
protection of artwork and light-sensitive documents in museums and private collections. The business uses an optimized
fabrication designed specifically for its exhibition panels. The production of these panels is outsourced to current licensees that
have experience producing SPD laminates.
Excessive light-exposure is a leading cause of irreversible damage to many precious objects, particularly works on paper,
textiles and watercolor. Presently, no display system is able to provide these artifacts with any protection against visible light
damage. VariGuard provides the world's first and only display panels that limit an artifact's light-exposure only to when the artifact
is being viewed. This provides unequalled protection for light-sensitive artifacts by substantially reducing an artifact's overall lux-
hour exposure when compared to conventional display panels.
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VariGuard marketing and exhibition activities include:
In September 2015, the Church History Museum, operated by The Church of Jesus Christ of Latter-day Saints, installed 22
exhibit cases containing VariGuard SmartGlass panels to protect light sensitive documents and artifacts. VariGuard panels
provide a better viewing experience (by allowing substantially higher gallery illumination levels), while simultaneously
reducing damaging visible light-exposure to artifacts.
In August 2015, the Smithsonian’s National Postal Museum selected VariGuard panels to protect the 1856 British Guiana One
Cent Magenta, the world’s most famous rare postage stamp.
In May 2015, VariGuard exhibited its products at the American Institute for Conservation of Historic and Artistic Works
(“AIC”) 43rd annual meeting in Miami, FL. Seth Van Voorhees, President of the VariGuard business unit commented: “Our
display panels offer the highest level of protection against UV and visible light damage in the industry and they are being used
in cases, frames and wall cases to protect various light sensitive artifacts in museums internationally. Reinforcing the benefits
of VariGuard panels and how they limit light exposure, the Smithsonian National Postal Museum presented a paper at this
meeting entitled “(Year of Light) Lighten Up: Enhancing Visitor Experiences,” which will discuss the positive impact that
VariGuard panels have in protecting valuable artifacts and enhancing the visitor experience.
In January 2015, VariGuard exhibited its display panels at a Washington Conservation Guild meeting focused on innovative
new conservation technologies at the Smithsonian Institution’s S. Dillon Ripley Center in Washington, DC.
In November 2014, VariGuard was invited to present at a meeting of the Washington Conservation Guild which was entitled:
“Outsmarting Light: SmartGlass Technology in Exhibitions”. At this meeting, results of the light conservation benefits of its
light control panels at the National Postal Museum were reported. This study quantified the dramatic reduction (>86%) in light
exposure that artifacts experienced in cases using VariGuard display panels versus traditional glass display panels.
In June 2014, VariGuard business unit announced that the Smithsonian’s National Postal Museum will use VariGuard’s panels
based on SPD-SmartGlass technology at the “Behind the Badge” exhibition in Washington, DC. This exhibit showcases the
work of one of the nation’s oldest federal law enforcement agencies and VariGuard panels are featured in display cases that
showcase historic light-sensitive artifacts.
In January 2014, the VariGuard business unit announced that Omega Moulding will distribute its patented light control
SmartGlass products for frames and display cases in the United States and Canada. That month Omega Moulding showcased
the benefits of VariGuard SmartGlass products at the 15th Annual West Coast Art and Frame Expo and National Conference
in Las Vegas, NV.
In May 2013, VariGuard featured its panels in several framing applications at Museum Expo 2013 at the Baltimore
Convention Center in Baltimore, MD.
More information about VariGuard can be found on its independent website at www.VariGuard.com.
Marketing Activities and Licensee Support:
In addition to supporting the efforts of its licensees, the Company also recognizes the need to develop the SPD industry as a
whole. As such, the Company continues to plan and execute complementary programs that build awareness and interest in smart
glass generally and demand for SPD-Smart products specifically. In 2014, these programs include presentations at various general
industry conferences, participation in panel presentations and discussions hosted by academia, development of trade association
educational materials, and presentations to architects, designers, and other influential specifiers. During 2014 the Company gave:
(i) keynote presentations at: (i) the Smart Glass at the sixth annual 2014 IDTechEx Energy Harvesting and Storage USA
Conference in Santa Clara, California and (ii) the 2014 IDTechEx Energy Harvesting and Storage Europe Conference in Berlin,
Germany. In addition, the Company presented the benefits and recent developments relating to patented SPD-SmartGlass at the
glass industry’s largest trade show, Glasstec 2014 in Dusseldorf, Germany.
The Company’s market development department has a number of other initiatives in place. To help guide and prioritize its
technical and marketing investments, the Company periodically retains outside strategic marketing and other consultants to help
generate increased short- and medium-term market penetrations for each of the major markets for the Company’s light-control
technology, and to provide support and guidance to the Company’s licensees worldwide.
The Company has emerged as a leading resource for market research information on the subject of smart glass. Research
Frontiers lectures and presents at industry conferences in areas of energy efficiency, daylight harvesting and sustainability. The
Company has published independent test data about SPD-SmartGlass, shared the results of its research studies and test data with
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industry and the media, posted various reference materials to the Company’s website for global dissemination, and published
presentations, data and bylined articles.
Research Frontiers maintains an active role with various standards-setting organizations, including ASTM International
which has an active committee developing standards for smartglass.
In addition to Research Frontiers providing overarching support of licensees’ sales efforts by developing the SPD industry as
a whole, leveraging its prominence as a leading resource on the topic of smart glass, and maintaining an active role with standards
organizations, Research Frontiers also supports licensees’ marketing and sales efforts directly. Activities include advising and
assisting with branding strategies and advertising campaigns, website development and other marketing materials, joint
presentations to prospective customers, and additional support. As a focal point of interest in smart glass, resulting in many
consumer and business inquiries, Research Frontiers has an active referral program to generate customer leads for its licensees.
As part of this mission to develop the industry and to support our licensees’ acquiring SPD projects, Research Frontiers
completed the construction of the SPD-SmartGlass Design Center. This Center is also configured as an interactive and energy-
efficient "smart" executive office and conference room, and is located at the Company's corporate headquarters in Woodbury, New
York. The SPD-SmartGlass Design Center features leading-edge SPD-Smart windows of different sizes (some floor-to-ceiling)
and framing materials. It has a multi-functional electronic controller system for manual, remote, and automatic SPD-SmartGlass
switching, and windows that can be controlled remotely over the internet or using a smart phone. This interactive area also
contains other types of smart glass, such as those using liquid crystal and electrochromic technologies, allowing users to operate
and experience first-hand the differences in performance characteristics of different types of smart glass. Additional showcases of
SPD-SmartGlass are being established in other geographic locations to make it convenient for even more people to experience the
benefits of SPD-SmartGlass technology.
Research Frontiers’ Design Center is the only known public forum where designers, specifiers and end-users can compare
performance between SPD-Smart technology and products using other light-control technologies. Research Frontiers believes that
the growth of the smart glass industry will accelerate as more information is made available through direct comparisons. Research
Frontiers believes that SPD products will be strongly preferred over competing technologies once a direct comparison is available
to potential buyers. Research Frontiers continues to encourage its competitors to participate in public forums where consumers of
electronically tintable products can see the relative performance of products that are available.
Licensees of Research Frontiers:
The Company’s licensees are currently categorized into four main areas: materials for making films (emulsions), film,
lamination of film to glass or plastic, and end-products. Emulsion makers produce and combine the necessary materials (i.e. SPD
particles and various liquids and special polymers) from which SPD-Smart films are made. The film makers coat a thin layer of
emulsion between two sheets of plastic film, each of which has a transparent conductive coating. This emulsion is then partly
solidified to form an SPD film that allows users to control the amount of light, glare and heat passing through this film. The end-
product licensees then integrate this film into a variety of SPD-Smart products, or make electronic systems to control such SPD-
Smart products. Some of these end-product licensees do their own lamination of the SPD light-control film to glass or plastic, and
some outsource this lamination to other companies. The names of this growing list of licensees, and the year that their license
agreements were entered into, are contained in the Exhibit section of this Annual Report on Form 10-K.
Licensees of Research Frontiers that incorporate SPD technology into end-products will pay Research Frontiers a royalty of
5-15% of net sales of licensed products under license agreements currently in effect, and may also be required to pay Research
Frontiers fees and minimum annual royalties. Licensees that sell components (such as SPD emulsion or film) or lamination
services to other licensees of Research Frontiers do not pay a royalty on such sale or service, and Research Frontiers will collect a
royalty from the licensee incorporating these components into their own SPD-Smart end-products. Research Frontiers’ license
agreements typically allow the licensee to terminate the license after some period of time, and give Research Frontiers only limited
rights to terminate before the license expires. The licenses granted by the Company are non-exclusive and generally last as long as
Research Frontiers’ patents remain in effect. Due to their bankruptcy filings or other termination of their general business activities
or for other reasons, the Company does not believe that Polaroid Corporation, Kerros Limited, ThermoView Industries, BRG
Group, SPD Technologies, SPD Systems, Diamond Sea Glaze and Film Technologies International are pursuing business activities
with respect to SPD technology. The Company and licensee N.V. Bekaert, S.A mutually agreed to terminate their license
agreement during 2008 for reasons unrelated to SPD technology. Similarly, the Company and SPD Control Systems agreed to
terminate their license agreement in December 2014. The loss of SPD Control Systems as a licensee: (i) is not expected to have a
material effect on the financial performance of the Company in the future, and (ii) resulted in a grant back to Research Frontiers of
certain rights in SPD Control Systems’ intellectual property. Some of the Company’s other licensees are currently inactive with
respect to SPD technology, but may hereafter become active again. To date, the Company has not generated sufficient revenue
from its licensees to profitably fund its operations. All of the Company’s license agreements are included as exhibits to the
Company’s periodic reports filed with the United States Securities and Exchange Commission (the “SEC”).
15
The Company plans to continue to exploit its SPD-Smart light-control technology by entering into additional license and
other agreements with end-product manufacturers such as manufacturers of flat glass, flat panel displays and automotive products,
and with other interested companies who may wish to acquire rights to manufacture and sell the Company’s proprietary emulsions
and films. Although the Company believes based upon the status of current negotiations that additional license agreements with
third parties will be entered into, there can be no assurance that any such additional license agreements will be consummated, or of
the extent to which any current or future licensee of the Company will produce or sell commercial products using the Company’s
technology or generate meaningful revenue from sales of such licensed products.
The Company’s plans also call for further development of its technology and the provision of additional technological and
marketing assistance to its licensees to develop commercially viable SPD-Smart products, and expand the markets for such
products. The Company cannot predict when or if new license agreements will be entered into or the extent to which commercial
products will result from its existing or future licensees because of general economic conditions and the risks inherent in the
developmental process and because commercialization is dependent upon the efforts of its licensees as well as on the continuing
research and development efforts of the Company.
Competitive Technologies:
The Company believes that SPD light-control technology, in which particles move under the influence of an electric field,
has certain performance advantages over other “smart glass” technologies.
The Company believes that pricing and product performance are the two main factors critical to the adoption of smart glass
products. Because the non-SPD smart glass technologies listed below do not have published, consistent pricing or cost data that
can be relied upon, the Company cannot accurately report its price position relative to these other technologies. In terms of product
performance, the Company believes that SPD-SmartGlass technology offers numerous advantages over other smart glass
technologies as discussed below.
Variable light transmission technologies can be classified into two basic types: “active” technologies that can be controlled
electrically by the user either automatically or manually, and “passive” technologies that can only react to ambient environmental
conditions such as changes in lighting or temperature. One type of passive variable light transmission technology is photochromic
technology; such devices change their level of transparency in reaction to external ultra-violet radiation. As compared to
photochromic technology, the Company’s SPD technology permits the user to adjust the amount of light passing through the
viewing area of the device, rather than the viewing area of the photochromic device merely reacting to external radiation without
control by the user. In addition, the reaction time necessary to change from light to dark with SPD-Smart technology can be almost
instantaneous, as compared to the much slower reaction time for photochromic devices. Also, unlike SPD technology,
photochromic technology does not function well at the high and low ends of the temperature range in which smart windows and
other devices are normally expected to operate, nor does photochromic technology perform well in vehicles or other enclosed
settings where existing glass is blocking incoming ultra-violet light which is required for photochromic devices to operate.
Similarly, thermochromic smart windows are passive systems which change their light transmission properties as sunlight
heats or cools the glass. Because the light transmission properties of thermochromic systems are not controlled by the user, their
ability to adapt to the specific needs of occupants is very limited. For example, thermochromic glazings will remain tinted on hot
days even when occupants desire more daylight to enter the building or when they want to preserve their views. SPD-Smart
windows, which require very low amounts of power to operate, allow for much greater control of incoming light, glare and heat
and can be adjusted to any level of light transmission from dark to clear at any time. In addition, SPD-Smart windows can block up
to 99.5% of incoming light, a level many times darker than thermochromic systems. The added advantage offers much higher
levels of privacy and control over incoming solar energy. Companies involved in thermochromic technology include Pleotint,
Suntek and Ravenbrick.
Active, user-controllable technologies, sometimes referred to as “smart” technologies, are generally more useful than passive
technologies because they allow the user to actually control the state of the window. This control is achieved with a manual
adjustment, or automatically when coupled with a timer or sensing device such as a photocell, motion detector, thermostat or other
intelligent building system.
There are three main types of active devices which are compared below:
Electrochromic devices (EC)
Liquid crystal devices (LC)
Suspended-particle devices (SPD)
16
Electrochromic Technology:
Electrochromic windows and rear-view mirrors use a direct current voltage to alter the molecular structure of electrochromic
materials (which can be in the form of either a liquid, gel or solid film) causing the material to darken. When compared to
electrochromic devices, SPD technology is expected to have numerous potential performance and manufacturing advantages,
including some or all of the following:
significantly faster response time, especially compared to larger electrochromic glazings
ability to precisely “tune” an infinite number of intermediate light-transmission states
consistent and uniform switching speed regardless of size of glazing area
more reliable performance over a wider temperature range
higher contrast ratios and the capability of achieving darker shaded states for large area product applications
unpowered state is dark, maximizing solar heat gain benefits when the room, office or vehicle is not in use
lower electrical current drain
higher estimated battery life in applications where batteries are used
no “iris effect” (where light transmission changes first occur at the outer edges of a window or mirror and then work their way
toward the center) when changing from clear to dark and back again
SPD technology is a film-based technology that can be applied to plastic as well as glass, and which can be applied to curved
as well as flat surfaces
available in single panels for retrofitting existing windows, skylights and doors
Many companies with substantially greater resources than Research Frontiers such as 3M, Gentex Corp., Pilkington, PPG
Industries, Saint-Gobain and other large corporations have pursued or are pursuing projects in the electrochromic area. While some
of these companies have reportedly discontinued or substantially curtailed their work on electrochromics due to technical problems
and issues relating to the expense of these technologies, at least four companies (Gentex, PPG Industries, View (formerly known
as Soladigm), and Sage Electrochromics) are currently working to commercialize electrochromic window products. In May 2012,
Saint-Gobain acquired Sage Electrochromics and combined all of their respective electrochromic manufacturing and
developmental efforts.
Liquid Crystal Technology:
To date, the main types of liquid crystal smart windows have been produced by Taliq Corp. (a subsidiary of Raychem Corp.
which has since discontinued its liquid crystal operations and licensed its technology to others), Asahi Glass Co., Nippon Sheet
Glass, Saint-Gobain Glass, iGlass Projects Pty Limited, Polytronix, Inc., DMDisplays, and 3M (which has also reportedly
discontinued its liquid crystal film making operations). The first four companies listed above are also licensees of Research
Frontiers Inc. for SPD-Smart technology. Liquid crystal windows only change from a cloudy, opaque milky-white to a clear state,
are hazy when viewed at an angle and have no useful intermediate states. As compared to liquid crystal windows, SPD smart
windows are expected to have some or all of the following advantages:
have less haze
provide shading without loss of view
operate over a wider temperature range
use less power
have higher contrast ratios
absorb and block more light, rather than simply scatter it
permit an infinite number of intermediate states between a transparent state and a dark blue state, rather than being just two
states.
offer superior solar heat gain control
In the flat panel display market, further development (such as the achievement of faster switching speeds sufficient for full-
motion video applications) is required if the Company expects to compete against display technologies that are currently being
used commercially such as liquid crystal displays (“LCDs”) and organic light-emitting diodes (“OLEDs”). Some of the advantages
17
that SPD displays might have include the ability to make displays without using sheet polarizers or alignment layers, and lower
light loss and a corresponding reduction in backlighting requirements. However, such products need additional product design,
engineering or testing before an evaluation of the commercial potential of such SPD-SmartGlass products can be determined and
when, or if, its licensees may begin to penetrate the flat panel display market.
LCDs and other types of displays, liquid crystal windows, as well as electrochromic self-dimmable rear-view mirrors, are
already on the market, whereas products incorporating SPD technology (as well as electrochromic windows) have only begun to
appear in the marketplace. Therefore, the long-term durability and performance of SPD-Smart displays have not yet been fully
ascertained. The companies that manufacture LCD and other display devices, liquid crystal windows, and electrochromic self-
dimmable rear-view mirrors and windows, have substantially greater financial resources and manufacturing experience than the
Company. There is no assurance that comparable systems having the same advantages of the Company’s SPD technology could
not be developed by competitors at a lower cost or that other products could not be developed which would render the Company’s
products difficult to market or otherwise render our products obsolete.
Research and Development:
As a result of the Company’s research and development efforts, the Company believes that its SPD technology is now, or
with additional development will become, usable in a number of commercial products. Such products may include one or more of
the following fields: “smart” windows, doors, skylights and partitions; variable light transmission eyewear such as sunglasses and
goggles; self-dimmable automotive sunroofs, windows, sunvisors, and mirrors; display cases/frames; and instruments and other
information displays that use digits, letters, graphic images, or other symbols to supply information, including scientific
instruments, aviation instruments, automobile dashboard displays and, if certain improvements can be made in various features of
the Company’s SPD technology that increases switching speed to the levels needed for video applications, portable computer
displays and flat panel television displays.
Even though the Company’s SPD technology has much faster switching speeds than electrochromic technology, current
switching speeds are not fast enough for such video applications. The Company believes that most of its research and development
efforts have applicability to products that may incorporate the Company’s technology. At its current state of development, the
Company’s technology has been judged sufficiently advanced by various of its licensees and their customers for them to proceed
with the development, introduction and sale of SPD-Smart products. However, the Company is continuously investing in research
and development because it believes that further improvements will result in accelerated and increased market penetration. The
Company intends to continue its research and development efforts for the foreseeable future to improve its SPD light-control
technology and thereby assist our licensees in the product development, sales and marketing of various existing and new SPD-
Smart products.
During the past few years, the Company and/or its licensees have made significant advances relating to materials to enable
(1) improved stability of SPD emulsions, (2) a wider range of light transmission, (3) improved film adhesion and cohesion and (4)
increased durability of SPD films/laminates, and (5) cost reductions. These advances have resulted in two patents being issued to
the Company by the US patent office and the corresponding foreign patent applications are pending.
The Company has devoted most of the resources it has heretofore expended to research and development activities with the
goal of producing commercially viable SPD products and has developed working prototypes of SPD-Smart products for several
different applications, with primary emphasis on smart windows for various industries. In addition to working with the Company’s
licensees, Research Frontiers has also expanded its efforts to also work directly with some of our licensees’ major customers.
Research Frontiers’ main goals in its research and development include:
developing wider ranges of light transmission and quicker switching speeds
developing different colored particles
reducing the voltage required to operate SPDs
obtaining data and developing improved materials regarding environmental stability and longevity
quantifying the degree of energy savings expected by users of the Company’s technology including the degree that SPD
technology can control heat and its contribution to energy savings directly and through daylight harvesting strategies in
sustainable building designs
continually striving to improve the performance and reducing material/production costs associated with making SPD-Smart
products
18
Excluding non-cash expenses of approximately $146,000, $219,000, and $648,000, associated with the grant of stock options
and restricted stock to the Company’s technical personnel, Research Frontiers incurred approximately $1,442,000, $1,403,000, and
$1,555,000, during the years ended December 31, 2015, 2014, and 2013, respectively, for research and development. Research
Frontiers plans to engage in substantial continuing research and development activities to invest in future improvements in SPD
light-control technology and to expand for its licensees the capabilities of SPD-Smart technology and the markets for SPD-Smart
products.
Patents and Proprietary Information:
Research Frontiers continues to make substantial investments to develop, license and protect its intellectual property position.
The Company has 23 United States and 187 foreign patents in force. The Company’s United States patents expire at various dates
from 2017 through 2033, while its foreign patents expire at various dates from 2016 through 2033.
The Company has current US and foreign patent applications that, if granted, would add a significant number of additional
patents to its portfolio. The Company believes that its SPD light-control technology is adequately protected by its patent position
and by its proprietary technological know-how. However, the validity of the Company’s patents has never been contested in any
litigation. The Company also possesses know-how and relies on trade secrets and nondisclosure agreements to protect its
technology. The Company generally requires any employee, consultant, or licensee having access to its confidential information to
execute an agreement whereby such person agrees to keep such information confidential.
Rights Plan:
In February 2013, the Company’s Board of Directors adopted a Stockholders’ Rights Plan (the “Rights Plan”) and declared a
dividend distribution of one right (a “Right”) for each outstanding share of Company common stock to stockholders of record at
the close of business on March 3, 2003 (“Record Time”) and authorized the issuance of one Right in respect of each share of
Common Stock issued after the Record Time and prior to the Separation Time.
“Separation Time” shall mean the earlier of the Close of Business on the tenth Business Day (or such later date as the Board
of Directors may from time to time fix by resolution adopted prior to the Separation Time that otherwise would have occurred)
following but not including (i) the date on which any Person commences a tender or exchange offer that, if consummated, would
result in such Person’s becoming an Acquiring Person, and (ii) the date of the first event causing a Flip-in Date to occur; provided
that if any tender or exchange offer referred to in clause (i) of this paragraph is cancelled, terminated or otherwise withdrawn prior
to the Separation Time without the purchase of any shares of Common Stock pursuant thereto, such offer shall be deemed, for
purposes of this paragraph, never to have been made.
Subject to certain exceptions listed in the Rights Plan, if a person or group has acquired beneficial ownership of, or
commences a tender or exchange offer for, 15% or more of the Company’s common stock, unless redeemed by the Company’s
Board of Directors, each Right entitles the holder (other than the acquiring person) to purchase from the Company $80 worth of
common stock for $40. If the Company is merged into, or 50% or more of its assets or earning power is sold to, the acquiring
company, the Rights will also enable the holder (other than the acquiring person) to purchase $80 worth of common stock of the
acquiring company for $40. The Rights will expire at the close of business on February 11, 2023, unless the Rights Plan is
extended by the Company’s Board of Directors or unless the Rights are earlier redeemed by the Company at a price of $.0001 per
Right. The Rights are not exercisable during the time when they are redeemable by the Company.
The above description highlights some of the features of the Company’s Rights Plan and is not a complete description of the
Rights Plan. A more detailed description and copy of the Rights Plan has been filed with the SEC and is available from the
Company upon request.
Available Information:
Our principal executive offices are located at 240 Crossways Park Drive, Woodbury, New York 11797, our telephone
number is (516) 364-1902, and our Internet website address is www.SmartGlass.com. We make available free of charge on or
through our Internet website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy
statements on Schedule 14A, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such materials with, or furnish them
to, the SEC.
19
ITEM 1A.
RISK FACTORS
In addition to the other information in this Annual Report on Form 10-K, you should carefully consider the following factors
in evaluating us and our business. This Annual Report contains, in addition to historical information, forward-looking statements
that involve risks and uncertainties, some of which are beyond our control. Should one or more of these risks and uncertainties
materialize or should underlying assumptions prove incorrect, our actual results could differ materially. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed below, as well as those discussed elsewhere in this
Annual Report, including the documents incorporated by reference.
There are risks associated with investing in companies such as ours who are primarily engaged in research and development.
In addition to risks which could apply to any company or business, you should also consider the business we are in and the
following:
Source and Need for Capital.
As of December 31, 2015, we had approximately $7.2 million in cash, cash equivalents and short-term investments. As we
take steps in the commercialization and marketing of our technology, or respond to potential opportunities and/or adverse events,
our working capital needs may change. We anticipate that if our cash and cash equivalents are insufficient to satisfy our liquidity
requirements, we will require additional funding to sustain our ongoing operations and to continue our SPD technology research
and development activities.
We have funded most of our activities through sales of our common stock to investors, and upon the exercise of options and
warrants. Eventual success of the Company and generation of positive cash flow will be dependent upon the extent of
commercialization of products using the Company's technology by the Company's licensees and payments of continuing royalties
on account thereof. We can give no assurances that we will generate sufficient revenues in the future (through sales of our
common stock, exercise of options and warrants, royalty fees, or otherwise) to satisfy our liquidity requirements or sustain future
operations, or that additional funding, if required, will be available when needed or, if available, on favorable terms.
History of Operating Losses.
We have experienced net losses from operations, and we may continue to incur net losses from operations in the future. We
have incurred substantial costs and expenses in researching and developing our SPD technology. As of December 31, 2015, we
had a cumulative net loss of $102,410,558 since our inception. Our net loss was $4,279,856 in 2015, $4,413,722 in 2014, and
$6,040,611 in 2013 (which includes non-cash accounting charge in 2015, 2014 and 2013 of $725,016, $1,042,917, and $2,914,904
respectively, resulting from the expensing of grants of restricted stock and stock options).
We have never declared a cash dividend and do not intend to declare a cash dividend in the foreseeable future.
We have never declared or paid cash dividends on our common stock. Payment of dividends on our common stock is within
the discretion of our Board of Directors and will depend upon our future earnings, capital requirements, financial condition and
other relevant factors. We do not anticipate declaring or paying any cash dividends on our common stock in the foreseeable future.
We do not directly manufacture products using SPD technology. We currently depend upon the activities of our licensees and
their customers in order to be profitable.
We do not directly manufacture products using SPD technology. We currently depend upon the activities of our licensees in
order to be profitable. Although a variety of products have been sold by our licensees, and because it is up to our licensees to
decide when and if they will introduce products using SPD technology, we cannot predict when and if our licensees will generate
substantial sales of such products. Our SPD technology is currently licensed to over 40 companies. Other companies are also
evaluating SPD technology for use in various products. In the past, some companies have evaluated our technology without
proceeding further. While we expect that our licensees would be primarily responsible for manufacturing and marketing SPD-
Smart products and components, we are also engaging in market development activities to support our licensees and build the
smart glass industry. We cannot control whether or not our licensees will develop SPD products. Some of our licensees appear to
be more active than others, some appear to be better capitalized than others, and some licensees appear to be inactive. There is no
guarantee when or if our licensees will successfully produce any commercial product using SPD technology in sufficient quantities
to make the Company profitable.
20
SPD-Smart products have only recently been introduced.
Products using SPD technology have only recently begun to be introduced into the marketplace. Developing products using
new technologies can be risky because problems, expenses and delays frequently occur, and costs may or may not come down
quickly enough for such products using new technologies to rapidly penetrate mass market applications.
SPD-Smart products face intense competition, which could affect our ability to increase our revenues.
The market for SPD-Smart products is intensely competitive and we expect competition to increase in the future. We
compete based on the functionality and the quality of our product. Many of our current and potential competitors have significantly
greater financial, technical, marketing and other resources than we have. In addition, many of our competitors have well-
established relationships with our current and potential customers and have extensive knowledge of our industry. If our
competitors develop new technologies or new products, improve the functionality or quality of their current products, or reduce
their prices, and if we are unable to respond to such competitive developments quickly either because our research and
development efforts do not keep pace with our competitors or because of our lack of financial resources, we may be unable to
compete effectively.
Declining production of automobiles, airplanes, boats and real estate could harm our business.
Our licensees’ commercialization efforts of SPD-Smart products could be negatively impacted if the global production of
automobiles, airplanes, boats and real estate construction declines significantly. If such commercialization is reduced, our
revenues, results of operations and financial condition could be negatively impacted.
Single source of SPD film.
Our end-product licensees require a source of SPD film to manufacture finished products. Currently, Hitachi Chemical is the
sole source of commercial quantities of SPD-film. There are several other companies that are licensed to manufacture SPD-film,
but they have not begun commercial production of this film. Our end-product licensees’ ability to sell SPD products could be
negatively impacted if there was a prolonged disruption in SPD-film availability. Such a disruption could also negatively impact
our revenues, results of operations and financial condition.
We are dependent on key personnel.
Our continued success will depend, to a significant extent, on the services of our directors, executive management team, key
personnel and certain key scientists. If one or more of these individuals were to leave the Company, there is no guarantee that we
could replace them with qualified individuals in a timely or economically satisfactory manner or at all. The loss or unavailability
of any or all of these individuals could harm our ability to execute our business plan, maintain important business relationships and
complete certain product development initiatives, which would have a material adverse effect on our business, results of operations
and financial conditions.
Dependence on SPD-Smart technology.
Because SPD technology is the only technology we work with, our success depends upon the viability of SPD technology
which has yet to be fully proven. We have not fully ascertained the performance and long-term reliability of our technology, and
therefore there is no guarantee that our technology will successfully be incorporated into all of the products which we are targeting
for use of SPD technology. We expect that different product applications for SPD technology will have different performance and
reliability specifications. We expect that our licensees will primarily be responsible for reliability testing, but that we may also
continue to do reliability testing so that we can more effectively focus our research and development efforts towards constantly
improving the performance characteristics and reliability of products using SPD technology.
Our patents and other protective measures may not adequately protect our proprietary intellectual property, and we may be
infringing on the rights of others.
Our intellectual property, particularly our proprietary rights in our SPD technology, is critical to our success. We have
received various patents, and filed other patent applications, for various applications and aspects of our SPD technology. In
addition, we generally enter into confidentiality and invention agreements with our employees and consultants. Such patents and
agreements and various other measures we take to protect our intellectual property from use by others may not be effective for
various reasons generally applicable to patents and their granting and enforcement. In addition, the costs associated with enforcing
patents, confidentiality and invention agreements or other intellectual property rights may be expensive. Our inability to protect
21
our proprietary intellectual property rights or gain a competitive advantage from such rights could harm our ability to generate
revenues and, as a result, our business and operations.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None
ITEM 2.
PROPERTIES
The Company currently occupies approximately 9,500 square feet of space at an annual rental which in 2015 was
approximately $181,000 for its executive office, research facility and SPD-Smart Glass Design Center at 240 Crossways Park
Drive, Woodbury, New York 11797 under a lease expiring March 31, 2025. The Company believes that its space, including its
laboratory facilities, is adequate for its present needs.
ITEM 3.
LEGAL PROCEEDINGS
Research Frontiers Inc. v. E Ink Corporation et al
On July 12, 2013, Research Frontiers Inc. initiated a lawsuit against E Ink Corporation; E Ink Holdings, Inc. (f/k/a Prime
View International Co., Ltd.); Amazon.com, Inc.; Sony Electronics Inc.; Sony Corporation; Barnes & Noble, Inc.; and
Barnesandnoble.com LLC in the United States District Court for the District of Delaware for patent infringement.
Research Frontiers seeks an injunction in addition to monetary damages and pre-judgment interest and other relief. In this
lawsuit, Research Frontiers asserts infringement by the named defendants of United States Patent No. 6,606,185, entitled "SPD
Films and Light Valves Comprising Liquid Suspensions of Heat-Reflective Particles of Mixed Metal Oxides and Methods of
Making Such Particles," and United States Patent No. 5,463,491, entitled "Light Valve Employing a Film Comprising an
Encapsulated Liquid Suspension, and Method of Making Such Film."
On December 2, 2013 Research Frontiers amended its complaint and asserted an additional claim of United States No.
6,271,956 entitled “Method and Materials for Enhancing the Adhesion of SPD Films, and Light Valves Comprising Same.” No
hearing or trial dates have been set.
On August 2014, the US Patent and Trademark Office Board declined a petition by E Ink Corporation to invalidate certain
claims (1-2, 14-20, 22-27, and 29) of the 6,606,185 patent.
On November 1, 2015, the Claim Construction Hearing was held before Magistrate Judge Christopher J. Burke. A ruling
from the Court regarding this hearing is expected in the near future.
In general, many patent infringement lawsuits end in a negotiated settlement before trial; lawsuits that do not settle, however,
can often last more than two to three years from the date the complaint is filed until a trial is concluded. The timeframe is
influenced by a number of factors specific to each case. Also in the course of a typical patent litigation, defendants often attempt to
challenge the infringement, validity, scope, and enforceability of certain of plaintiff’s patents.
Any action we take to protect intellectual property rights could be costly and could require significant amounts of time by
key members of executive management and other personnel. Research Frontiers entered into a contingency agreement with its
legal counsel regarding this matter that reduces the Company’s exposure to the costs associated with the prosecution of this
litigation.
ITEM 4.
MINE SAFETY DISCLOSURES
N/A
22
PART II
ITEM 5.
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
(a) Market Information
(1) The Company’s common stock is traded on the NASDAQ Capital Market under the symbol “REFR”. As of March 7, 2016,
there were 24,043,846 shares of common stock outstanding.
(2) The following table sets forth the range of the high and low selling prices (as provided by the National Association of
Securities Dealers) of the Company’s common stock for each quarterly period within the past two fiscal years:
Quarter Ended
Low
High
March 31, 2014
June 30, 2014
September 30, 2014
December 31, 2014
March 31, 2015
June 30, 2015
September 30, 2015
December 31, 2015
5.17
4.28
4.58
4.50
4.91
5.31
4.55
4.34
7.60
6.24
6.09
5.70
6.63
6.39
5.97
5.40
These quotations may reflect inter-dealer prices, without retail mark-up, mark-down, or commission, and may not necessarily
represent actual transactions.
(b) Approximate Number of Security Holders
As of March 7, 2016, there were approximately 400 holders of record of the Company’s common stock and the closing price
of our common stock was $4.56 per share. The Company estimates that there are approximately 6,900 beneficial holders of the
Company’s common stock.
(c) Dividends
The Company has not declared or paid cash dividends on its common stock for the two most recent fiscal years and does not
expect to declare or pay any cash dividends in the foreseeable future. There are no restrictions on the payment of dividends.
(d) Issuer Purchases of Equity Securities
None.
23
ITEM 6.
SELECTED FINANCIAL DATA
The following table sets forth selected data regarding the Company’s operating results and financial position. The data for
fiscal years 2015, 2014, and 2013 should be read in conjunction with Management’s Discussion and Analysis of Financial
Condition and Results of Operations and our audited consolidated financial statements and notes thereto, which are contained in
this Annual Report on Form 10-K.
2015
Year ended December 31,
2013
2014
2012
2011
Statement of Operations Data:
Fee income
$
2,007,482
$
1,598,799
$
2,161,359
$
1,957,336
$
845,982
Operating expenses (1)
Research and development (1)
Total Expenses
4,742,166
1,588,491
6,330,657
4,425,718
1,621,964
6,047,682
6,036,792
2,203,326
8,240,118
4,101,592
1,671,872
5,773,464
3,717,158
1,390,689
5,107,847
Operating loss
(4,323,175)
(4,448,883)
(6,078,759)
(3,816,128)
(4,261,865)
Net investment income
Income tax beneifit
Net loss
Basic and diluted net loss
per common share
Dividends per share
Weighted average number of
common shares outstanding
43,319
-
(4,279,856)
$
35,161
-
(4,413,722)
$
38,148
-
(6,040,611)
$
33,171
613,397
(3,169,560)
$
29,274
-
(4,232,591)
$
$
$
(0.18)
0.00
$
$
(0.19)
0.00
$
$
(0.26)
0.00
$
$
(0.16)
0.00
$
$
(0.23)
0.00
24,007,974
23,663,229
22,946,019
20,125,309
18,538,041
2015
2014
As of December 31,
2013
2012
2011
Balance Sheet Data:
Total current assets
Total assets
Total shareholders’ equity
$
8,674,234
9,544,017
9,075,805
$
10,367,561
12,564,854
12,082,170
$
11,945,295
12,032,265
11,869,937
$
14,333,421
14,415,067
14,172,675
$
4,312,104
4,417,137
4,107,198
(1) Reflects non-cash charges of $578,723, $823,584, $2,266,610, $841,511, and $693,015, to operating expenses, and non-
cash charges of $146,293, $219,333, $648,294, $143,026, and $108,345, to research and development expenses relating
to the issuance of stock and stock options in 2015, 2014, 2013, 2012, and 2011, respectively which increased the
Company’s net loss for 2015, 2014, 2013, 2012, and 2011, by $725,016, $1,042,917, $2,914,904, $984,529, and
$801,360, respectively.
24
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward-Looking Statements
Information included in this Annual Report on Form 10-K may contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical facts, but rather
reflect our current expectations concerning future events and results. We generally use the words “believes,” “expects,”
“intends,” “plans,” “anticipates,” “likely,” “will” and similar expressions to identify forward-looking statements. Such forward-
looking statements, including those concerning our expectations, involve risks, uncertainties and other factors, some of which are
beyond our control, which may cause our actual results, performance or achievements, or industry results, to be materially
different from any future results, performance or achievements expressed or implied by such forward-looking statements. These
risks, uncertainties and factors include, but are not limited to, those factors set forth in this Annual Report on Form 10-K under
“Item 1A. – Risk Factors” above. Except as required by applicable law, including the securities laws of the United States, we
undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information,
future events or otherwise. You are cautioned not to unduly rely on such forward-looking statements when evaluating the
information presented in this Annual Report on Form 10-K.
In reviewing Management’s Discussion and Analysis of Financial Condition and Results of Operations, you should refer to
our consolidated financial statements and the notes related thereto.
Critical Accounting Policies
The following accounting policies are important to understanding our financial condition and results of operations and should
be read as an integral part of the discussion and analysis of the results of our operations and financial position. For additional
accounting policies, see Note 2 to our consolidated financial statements, "Summary of Significant Accounting Policies.”
The Company has entered into a number of license agreements covering potential products using the Company’s SPD
technology. The Company receives fees and minimum annual royalties under certain license agreements and records fee income
on a ratable basis each quarter. In instances when sales of licensed products by its licensees exceed minimum annual royalties, the
Company recognizes fee income as the amounts have been earned. Certain of the fees are accrued by, or paid to, the Company in
advance of the period in which they are earned resulting in deferred revenue.
The Company expenses costs relating to the development or acquisition of patents due to the uncertainty of the recoverability
of these items. All of our research and development costs are charged to operations as incurred. Our research and development
expenses consist of costs incurred for internal and external research and development. These costs include direct and indirect
overhead expenses.
The Company has historically used the Black-Scholes option-pricing model to determine the estimated fair value of each
option grant. The Black-Scholes model includes assumptions regarding dividend yields, expected volatility, expected lives, and
risk-free interest rates. These assumptions reflect our best estimates, but these items involve uncertainties based on market
conditions generally outside of our control. As a result, if other assumptions had been used in the current period, stock-based
compensation expense could have been materially impacted. Furthermore, if management uses different assumptions in future
periods, stock-based compensation expense could be materially impacted in future years.
On occasion, the Company may issue to consultants either options or warrants to purchase shares of common stock of the
Company at specified share prices. These options or warrants may vest based upon specific services being performed or
performance criteria being met. In accounting for equity instruments that are issued to other than employees for acquiring, or in
conjunction with selling, goods or services, the Company is required to record consulting expenses based upon the fair value of
such options or warrants on the earlier of the service period or the period that such options or warrants vest as determined using a
Black-Scholes option pricing model and are marked to market quarterly using the Black-Scholes option valuation model.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from these estimates. An example of a critical estimate is the full valuation
allowance for deferred taxes that was recorded based on the uncertainty that such tax benefits will be realized in future periods.
25
Results of Operations
Overview
The majority of the Company's fee income comes from the activities of several licensees participating in the automotive
market. The Company currently believes that the automotive market will be the largest source of its royalty income over the next
several years. The Company's royalty income from this market may be influenced by numerous factors including various trends
affecting demand in the automotive industry and the rate of introduction of new technology in OEM product lines. In addition to
these macro factors, the Company's royalty income from the automotive market could also be influenced by specific factors such
as whether the Company's SPD-SmartGlass technology appears as standard equipment or as an option on a particular vehicle, the
number of additional vehicle models that SPD-SmartGlass appears on, the size of each window on a vehicle and the number of
windows on a vehicle that use SPD ¬SmartGlass, fluctuations in the total number of vehicles produced by a manufacturer, and in
the percentage of cars within model like produced with SPD-SmartGlass, and changes in pricing or exchange rates.
Year ended December 31, 2015 Compared to the Year ended December 31, 2014
The Company’s fee income from licensing activities for the year ended December 31, 2015 was $2,007,482, as compared to
$1,598,799 for the year ended December 31, 2014. Most of the increase in fee income during this period was a result of:
(i) higher fee income resulting from a full year of production of the new Mercedes-Benz S-Class Coupe (with the Magic Sky
Control panoramic roof option), and (ii) higher fee income resulting from a production of the Extra-Long Wheel Base (X222) and
the Long Wheel Base (V222) (all with the Magic Sky Control panoramic roof option), which began late in the year. Royalty
revenue levels attributable to sales of the S-Class are expected to accelerate in 2016 from a full year of production of these S-Class
vehicles. Cost reductions in the price of SPD-SmartGlass due to production efficiencies were a significant factor enabling this
higher production volume. The Company expects that lower pricing per square foot of the Company’s technology could expand
the market opportunities, adoption rates, and revenues for its technology in automotive and non-automotive applications.
Certain license fees, which are paid to the Company in advance of the accounting period in which they are earned resulting in
the recognition of deferred revenue for the current accounting period, which will be recognized as fee income in future periods.
Also, licensees may offset some or all of their royalty payments on sales of licensed products for a given period by applying these
advance payments towards such earned royalty payments. As of December 31, 2015 and December 31, 2014, there was no
material impact on revenue as a result of recognizing deferred revenue in the consolidated statement of operations.
Because the Company’s license agreements typically provide for the payment of royalties by a licensee on product sales
within 45 days after the end of the quarter in which a sale of a licensed product occurs (with some of the Company’s more recent
license agreements providing for payments on a monthly basis), and because of the time period which typically will elapse
between a customer order and the sale of the licensed product and installation in a home, office building, automobile, aircraft, boat
or any other product, there could be a delay between when economic activity between a licensee and its customer occurs and when
the Company gets paid its royalty resulting from such activity.
Operating expenses increased by $316,448 for the year ended December 31, 2015 to $4,742,166 from $4,425,718 for the
year ended December 31, 2014. This increase was the result of higher bad debt expenses ($193,000), depreciation of trade show
displays ($110,000), as well as higher professional fees ($53,000). Included in operating expenses are approximately $579,000 and
$824,000 of non-cash compensation charges for the years ended December 31, 2015 and 2014, respectively.
Research and development expenditures decreased by $33,473 to $1,588,491 for the year ended December 31, 2015 from
$1,621,964 for the year ended December 31, 2014. This decrease was the result of lower payroll and related costs ($100,000)
partially offset by higher material costs ($32,000) as well as higher allocated insurance costs ($37,000). Included in research and
development expenses are approximately $146,000 and $219,000 of non-cash compensation charges for the years ended December
31, 2015 and 2014, respectively.
The Company’s net investment income for the year ended December 31, 2015 was $43,319 as compared to $35,161 for the
year ended December 31, 2014. The difference was primarily due to greater interest earned from cash balances available for
investment.
No income tax benefit or expense was recorded for the years ended December 31, 2015 and 2014.
As a consequence of the factors discussed above, the Company's net loss was $4,279,856 ($0.18 per common share) for the
year ended December 31, 2015 as compared to $4,413,722 ($0.19 per common share) for the year ended December 31, 2014.
26
Year ended December 31, 2014 Compared to the Year ended December 31, 2013
The Company’s fee income from licensing activities for the year ended December 31, 2014 was $1,598,799, as compared to
$2,161,359 for the year ended December 31, 2013. Most of the decrease in fee income during this period was a result of (1) non-
recurring revenue recorded in the first quarter of 2013 such as one-time payments by several licensees that did not recur in 2014,
and (2) a reduction in automotive fee income resulting from (A) a pre-scheduled shut down for maintenance and other
modifications of the factory lines producing the Mercedes-Benz SLK and SL roadsters, (B) lower productions levels of these
roadsters which are typical for cars several years after their redesign, (C) a strengthening of the US dollar as compared to the euro
during 2014 (the Company’s most active automotive licensees sell SPD-SmartGlass products to automotive OEMs in euros), and
(D) cost reductions in the price of SPD-SmartGlass due to production efficiencies and higher production volumes. These
productions efficiencies are expected to continue and accelerate with the introduction of the higher vehicle production volumes for
the Mercedes-Benz S Class models going forward, and the Company expects that lower pricing per square foot of the Company’s
technology could expand the market opportunities, adoption rates, and revenues for its technology in automotive and non-
automotive applications.
Production of the new Mercedes-Benz S-Class Coupe, which offers the Magic Sky Control panoramic roof option using the
Company's SPD-SmartGlass technology, began in June 2014. Beginning in the third quarter of 2014, the Company began
receiving royalty revenues from the S-Class in excess of minimum annual royalty levels which therefore will be accretive to the
Company's royalty revenue. Royalty revenue levels attributable to sales of the S-Class accelerated in 2015 from the introduction of
the S-Class Coupe and Maybach. In addition, the acceleration of royalty revenue will be aided from the introduction of the Extra-
Long Wheel Base (X222) with the Magic Sky Control panoramic roof option expected in dealer showrooms in the first quarter of
2015. As of the second half of 2015, several higher unit volume S-Class Sedan variants with the Magic Sky Control panoramic
roof option, such as the Long Wheel Base (V222) and Standard Wheel Base (W222), became available in dealer showrooms.
Certain license fees, which are paid to the Company in advance of the accounting period in which they are earned resulting in
the recognition of deferred revenue for the current accounting period, which will be recognized as fee income in future periods.
Also, licensees may offset some or all of their royalty payments on sales of licensed products for a given period by applying these
advance payments towards such earned royalty payments. Because the Company’s license agreements typically provide for the
payment of royalties by a licensee on product sales within 45 days after the end of the quarter in which a sale of a licensed product
occurs (with some of the Company’s more recent license agreements providing for payments on a monthly basis), and because of
the time period which typically will elapse between a customer order and the sale of the licensed product and installation in a
home, office building, automobile, aircraft, boat or any other product, there could be a delay between when economic activity
between a licensee and its customer occurs and when the Company gets paid its royalty resulting from such activity.
Operating expenses decreased by $1,611,074 for the year ended December 31, 2014 to $4,425,718 from $6,036,792 for the
year ended December 31, 2013. This decrease was principally the result of lower payroll and related costs ($864,000), plus lower
director’s fees and expenses ($569,000) and lower marketing costs ($142,000). Included in operating expenses are approximately
$824,000 and $2,267,000 of non-cash compensation charges for the years ended December 31, 2014 and 2013, respectively. The
reduction of non-cash compensation charges for the year ended December 31, 2014 versus the year ended December 31, 2013
relates principally to the timing of the Company’s annual grant of common stock and options granted to directors, employees and
consultants.
Research and development expenditures decreased by $581,362 to $1,621,964 for the year ended December 31, 2014 from
$2,203,326 for the year ended December 31, 2013. This decrease was principally the result of lower payroll and related costs
($436,000) as well as lower materials and project costs ($94,000). Included in research and development expenses are
approximately $219,000 and $648,000 of non-cash compensation charges for the years ended December 31, 2014 and 2013,
respectively. The reduction of non-cash compensation charges for the year ended December 31, 2014 versus the year ended
December 31, 2013 relates principally to the timing of the Company’s annual grant of common stock and options granted to
employees.
The Company’s net investment income for the year ended December 31, 2014 was $35,161 as compared to $38,148 for the
year ended December 31, 2013. The difference was primarily due to interest from lower cash balances available for investment.
No income tax benefit or expense was recorded for the years ended December 31, 2014 and 2013.
As a consequence of the factors discussed above, the Company's net loss was $4,413,722 ($0.19 per common share) for the
year ended December 31, 2014 as compared to $6,040,611 ($0.26 per common share) for the year ended December 31, 2013.
27
Financial Condition, Liquidity and Capital Resources
The Company has primarily utilized its cash, cash equivalents, short-term investments, and the proceeds from its investments
to fund its research and development, for marketing initiatives, and for other working capital purposes. The Company’s working
capital and capital requirements depend upon numerous factors, including, but not limited to, the results of research and
development activities, competitive and technological developments, the timing and costs of patent filings, and the development of
new licensees and changes in the Company’s relationship with existing licensees. The degree of dependence of the Company’s
working capital requirements on each of the foregoing factors cannot be quantified; increased research and development activities
and related costs would increase such requirements; the addition of new licensees may provide additional working capital or
working capital requirements, and changes in relationships with existing licensees would have a favorable or negative impact
depending upon the nature of such changes.
During 2015, the Company’s cash and cash equivalents balance decreased by $1,857,227 principally as a result of cash used
for operations of $3,580,812 and cash used for the purchase of property and equipment of $316,185 partially offset by cash
proceeds from the maturity of a certificate of deposit of $1,491,295 as well as net proceeds of $548,475 from the exercise of
options and warrants. At December 31, 2015 the Company had working capital of $8,206,022 and total shareholders’ equity of
$9,075,805.
During 2014, the Company’s cash and cash equivalents balance increased by $1,703,414 principally as a result of cash
proceeds from issuances of common stock and exercise of options and warrants of $3,583,038 as well as proceeds from sale of
short-term investment of $5,076,930 partially offset by cash used for operations of $3,323,815, net cash invested in certificates of
deposits of $3,005,079 and cash used for the purchase of fixed assets of $627,660. At December 31, 2014, the Company had
working capital of $9,884,877 and total shareholders’ equity of $12,082,170.
During 2013, the Company's cash and cash equivalents balance decreased by $2,524,110 principally as a result of cash used
for operations of $3,244,859, partially offset by proceeds from the exercise of options and warrants of $795,294. At December 31,
2013, the Company had working capital of $11,782,967 and total shareholders’ equity of $11,869,937.
The Company expects to use its cash to fund its research and development of SPD light valves, its expanded marketing
initiatives, and for other working capital purposes. The Company’s working capital and capital requirements depend upon
numerous factors, including the results of research and development activities, competitive and technological developments, the
timing and cost of patent filings, the development of new licensees and changes in the Company’s relationships with its existing
licensees. The degree of dependence of the Company’s working capital requirements on each of the foregoing factors cannot be
quantified; increased research and development activities and related costs would increase such requirements; the addition of new
licensees may provide additional working capital or working capital requirements, and changes in relationships with existing
licensees would have a favorable or negative impact depending upon the nature of such changes. Based upon existing levels of
cash expenditures, existing cash reserves and budgeted revenues, the Company believes that it would not require additional
funding for the foreseeable future. There can be no assurance that expenditures will not exceed the anticipated amounts or that
additional financing, if required, will be available when needed or, if available, that its terms will be favorable or acceptable to the
Company. Eventual success of the Company and generation of positive cash flow will be dependent upon the extent of
commercialization of products using the Company’s technology by the Company’s licensees and payments of continuing royalties
on account thereof. To date the Company has not generated sufficient revenue from its licensees to fund its operations.
Inflation
The Company does not believe that inflation has a significant impact on its business.
Contractual Obligations
The Company occupies premises under an operating lease agreement which was to expire on March 31, 2025 and requires
minimum annual rent which rises over the term of the lease to approximately $222,000, plus tenant’s share of applicable taxes.
These lease obligations are summarized over time as of December 31, 2015:
<1 year
1-3 years
>5 years
Total
Payments due by period
4-5 years
Operating lease obligations
$
174,000
$
366,000
$
388,000
$
905,000
$
1,833,000
28
Off-Balance Sheet Arrangements
We have no variable interest entities or other off-balance sheet obligation arrangements.
Related Party Transactions
None.
Forward Looking Statements
The information set forth in this Report and in all publicly disseminated information about the Company, including the
narrative contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” above, includes
“forward-looking statements” within the meaning of 21E of the Securities Exchange Act of 1934, as amended, and is subject to the
safe harbor created by that section. Readers are cautioned not to place undue reliance on these forward-looking statements as they
speak only as of the date hereof and are not guaranteed.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
At times, the Company invests available cash and cash equivalents in money market funds or in short-term U.S. treasury
securities with maturities that are generally one year or less. Although the rate of interest paid on such investments in money
market funds may fluctuate over time, each of the Company’s investments in U.S. treasury securities is made at a fixed interest
rate over the duration of the investment. Accordingly, the Company does not believe it is materially exposed to changes in interest
rates as it generally holds these treasury securities until maturity.
The Company does not currently have any sales, purchases, assets or liabilities determined in currencies other than the U.S.
dollar, and as such, is not subject to foreign currency exchange risk.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements listed in Item 15(a)(1) and (2) are included in this Report beginning on page F-1.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
29
ITEM 9A.
CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
As of the end of the period covered by this Annual Report on Form 10-K, the Company carried out an evaluation, under the
supervision and with the participation of the Company's management, including the Company’s Chairman and its Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and
procedures pursuant to Exchange Act Rule 13a-15(e) and 15d-15(e). Based upon that evaluation, the Company's Chairman and its
Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective
in timely alerting them to material information relating to the Company (including its consolidated subsidiary) required to be
included in the Company's periodic SEC filings. Our officers have concluded that as of December 31, 2015 our disclosure controls
and procedures are designed, and are effective, to ensure that information required to be disclosed by our company in the reports
we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in
the commission’s rules and forms, and are also effective to ensure that information required to be disclosed in the reports that we
file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer
and chief financial officer, to allow timely decisions regarding required disclosure. There were no changes in the Company's
internal control over financial reporting during the quarterly period ended December 31, 2015 that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such
term is defined in Exchange Act Rule 13a-15(f). Our internal control system is designed to provide reasonable assurance to our
management and Board of Directors regarding the preparation and fair presentation of published financial statements. Under the
supervision and with the participation of our management, including our chief executive officer and chief financial officer, we
conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal
Control-Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission, or the COSO
Framework. Based on our evaluation under the COSO Framework (2013) our management concluded that our internal control over
financial reporting was effective as of December 31, 2015.
The effectiveness of our internal control over financial reporting as of December 31, 2015 has been independently audited by
BDO USA, LLP, an independent registered public accounting firm, as stated in its report that is included herein.
30
Report of Independent Registered Public Accounting Firm
The Shareholders and Board of Directors
Research Frontiers Incorporated
Woodbury, New York
We have audited Research Frontiers Incorporated’s internal control over financial reporting as of December
31, 2015, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the COSO criteria). Research Frontiers Incorporated’s
management is responsible for maintaining effective internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A,
“Management’s Report on Internal Control Over Financial Reporting.” Our responsibility is to express an opinion
on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, Research Frontiers Incorporated maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2015, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets of Research Frontiers Incorporated as of December 31, 2015 and
2014, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the
three years in the period ended December 31, 2015 and our report dated March 10, 2016 expressed an unqualified
opinion thereon.
/s/ BDO USA, LLP
Melville, New York
March 10, 2016
31
ITEM 9B.
OTHER INFORMATION
None.
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The Company has adopted a code of ethics applicable to its Chief Executive Officer, Chief Operating Officer,
Treasurer and Chief Financial Officer, any Vice President and other employees of the Company with important roles
in the financial reporting process. This Code of Ethics was adopted by the entire Board of Directors of the Company,
including all of its Audit Committee members, in March 2004 in accordance with the requirements of the Sarbanes
Oxley Act. The code of ethics is available on the Company’s website at www.SmartGlass.com and was also filed as
an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. The Company
intends to satisfy the disclosure requirement under Item 10 of Form 8-K regarding any amendment to, or waiver
from, a provision of this code of ethics by posting such information on the website specified above.
The other information required by this Item 10 is incorporated by reference to the Company’s definitive Proxy
Statement to be filed with the Commission on or before April 29, 2016.
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this Item 11 is incorporated by reference to the Company’s definitive Proxy
Statement to be filed with the Commission on or before April 29, 2016. Notwithstanding anything to the contrary set
forth herein or in any of the Company’s past or future filings with the SEC that might incorporate by reference the
Company’s definitive Proxy Statement, in whole or in part, the report of the compensation committee and the stock
price performance graph contained in such definitive Proxy Statement shall not be incorporated by reference into
this Annual Report on Form 10-K or in any other such filings.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
The information required by this Item 12 is incorporated by reference to the Company’s definitive Proxy
Statement to be filed with the Commission on or before April 29, 2016.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE.
The information required by this Item 13 is incorporated by reference to the Company’s definitive Proxy
Statement to be filed with the Commission on or before April 29, 2016.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item 14 is incorporated by reference to the Company’s definitive Proxy
Statement to be filed with the Commission on or before April 29, 2016.
32
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) and (2) Financial Statements and Financial Statement Schedules
The following consolidated financial statements of Research Frontiers Incorporated are filed under “Item 8.
Financial Statements and Supplemental Data” of this Report.
Page
Report of Independent Registered Public Accounting Firm .................................................................................. F-1
Consolidated Financial Statements:
Consolidated Balance Sheets,
December 31, 2015 and 2014 .................................................................................................................. F-2
Consolidated Statements of Operations,
Years ended December 31, 2015, 2014 and 2013 .................................................................................... F-3
Consolidated Statements of Shareholders’ Equity,
Years ended December 31, 2015, 2014 and 2013 .................................................................................... F-4
Consolidated Statements of Cash Flows,
Years ended December 31, 2015, 2014 and 2013 .................................................................................... F-5
Notes to Consolidated Financial Statements ......................................................................................................... F-6
Schedule II - Valuation and Qualifying Accounts ................................................................................................. F-19
All other schedules have been omitted because they are not applicable, or not required, or the required information is
disclosed elsewhere in this Annual Report.
(a)(3)
Exhibits
3.1
3.2
4.1
4.2
4.3
Restated Certificate of Incorporation of the Company. Previously filed as Exhibit 3.1 to the
Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1994, and
incorporated herein by reference.
Amended and Restated Bylaws of the Company. Previously filed as Exhibit 99.2 to the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2007, and incorporated herein
by reference.
Form of Common Stock Certificate. Previously filed as an Exhibit to the Company’s Registration
Statement on Form S-18 (Reg. No. 33-5573NY), declared effective by the Commission on July 8,
1986, and incorporated herein by reference.
Rights Agreement dated as of February 18, 2003 between Research Frontiers Incorporated and
Continental Stock Transfer & Trust Company, as Rights Agent, which includes as Exhibit A thereto
the Form of Rights Certificate. Previously filed as an Exhibit to the Company’s Registration
Statement on Form 8-A dated February 13, 2013, and incorporated herein by reference.
Common Stock and Warrants Purchase Agreement between the Company and certain investors.
Previously filed as an Exhibit 4.3 to the Company’s Current Report on Form 8-K dated October 2,
2012 filed with the Securities and Exchange Commission, and incorporated herein by reference.
33
10.1A*
10.1B*
10.1C*
10.1D*
10.2*
10.3*
10.31*
10.4*
10.5
10.5.1
10.5.2
10.5.3
10.5.4
Amended and Restated Employment Contract effective January 1, 1989 between the Company and
Robert L. Saxe. Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 1993 and incorporated herein by reference.
Employment Agreement effective as of January 1, 2009 between the Company and Joseph M.
Harary. Previously filed as an Exhibit to the Company’s Current Report on Form 8-K dated April
30, 2009 and incorporated herein by reference.
Amendment to Employment Agreement effective as of June 12, 2014 between the Company and
Joseph M. Harary. Previously filed as an Exhibit to the Company’s Current Report on Form 8-K
dated June 13, 2014 and incorporated herein by reference.
Employment Agreement effective as of January 1, 2014 between the Company and Seth L. Van
Voorhees Previously filed as an Exhibit to the Company’s Current Report on Form 10-K dated
December 31, 2013 and incorporated herein by reference.
Amended and Restated 1992 Stock Option Plan. Previously filed as Exhibit 4 to the Company’s
Registration Statement on Form S-8 (Reg. No. 33-86910) filed with the Commission on November
30, 1994, and incorporated herein by reference.
1998 Stock Option Plan, as amended. Previously filed as an Exhibit to the Company’s Definitive
Proxy Statement dated April 30, 1998 filed with the Commission on April 29, 1998, 1994, and
incorporated herein by reference.
2008 Equity Incentive Plan. Previously filed as an Exhibit to the Company’s Definitive Proxy
Statement dated April 30, 2008 filed with the Commission on April 29, 2008, and incorporated
herein by reference.
Form of Stock Option Agreement between the Company and recipients of stock options issued
pursuant to the Company’s Stock Option Plans. Previously filed as part of Exhibits 4.1, 4.2, and
4.3 to the Company’s Registration Statement on Form S-8 (Reg. No. 33-53030) filed with the
Commission on October 6, 1992, and incorporated herein by reference.
Lease Agreement dated November 7, 1986, between the Company and Industrial & Research
Associates Co. Previously filed as an exhibit to the Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 1986 and incorporated herein by reference.
First Amendment to Lease dated November 26, 1991 between the Company and Industrial and
Research Associates Co. Previously filed as an Exhibit to Amendment No. 1 to the Company’s
Registration Statement on Form S-1 (Reg. No. 33-43768) declared effective by the Commission
on December 17, 1991, and incorporated herein by reference.
Second Amendment to Lease dated March 11, 1994 between the Company and Industrial and
Research Associates Co. Previously filed as an exhibit to the Company’s Annual Report on Form
10-K for the fiscal year ended December 31, 1993 and incorporated herein by reference.
Third Amendment to Lease dated July 14, 1998 between the Company and Industrial and Research
Associates Co. Previously filed as an exhibit to the Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 1998 and incorporated herein by reference.
Fourth Amendment to Lease dated January 13, 2004 between the Company and Industrial and
Research Associates Co. Previously filed as an exhibit to the Company’s Annual Report on Form
10-K for the fiscal year ended December 31, 2003 and incorporated herein by reference.
34
10.5.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
Fifth Amendment to Lease dated February 21, 2014 between the Company and CLK-HP 230-240
CROSSWAYS PARK LLC and LAKE PARK 230-240 CROSSWAYS PARK LLC. Previously
filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2013 and incorporated herein by reference.
License Agreement effective as of August 2, 1995 between the Company and General Electric
Company. Previously filed as an Exhibit to the Company’s Current Report on Form 8-K dated
August 2, 1995 with portions omitted pursuant to the Registrant’s request for confidential treatment
and filed separately with the Securities and Exchange Commission, and incorporated herein by
reference.
License Agreement effective as of April 29, 1996 between the Company and Glaverbel, S.A.
Previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1996 with portions omitted pursuant to the Registrant's request for
confidential treatment and filed separately with the Securities and Exchange Commission, and
incorporated herein by reference.
License Agreement effective as of January 18, 1997 between the Company and Material Sciences
Corporation. Previously filed as an Exhibit to the Company’s Current Report on Form 8-K dated
March 3, 1997 with portions omitted pursuant to the Registrant's request for confidential treatment
and filed separately with the Securities and Exchange Commission, and incorporated herein by
reference.
License Agreement effective as of March 31, 1997 between the Company and Hankuk Glass
Industries, Inc. Previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30, 1997 with portions omitted pursuant to the Registrant's
request for confidential treatment and filed separately with the Securities and Exchange
Commission, and incorporated herein by reference.
License Agreement effective as of August 8, 1997 between the Company and Orcolite, a Unit of
Monsanto Company. Previously filed as an Exhibit to the Company’s Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 1997 with portions omitted pursuant to the
Registrant's request for confidential treatment and filed separately with the Securities and Exchange
Commission, and incorporated herein by reference.
License Agreement effective as of June 25, 1999 between the Company and Dainippon Ink and
Chemicals, Incorporated. Previously filed as an Exhibit to the Company’s Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1999 with portions omitted pursuant to the
Registrant's request for confidential treatment and filed separately with the Securities and
Exchange Commission, and incorporated herein by reference.
License Agreement effective as of August 9, 1999 between the Company and Hitachi Chemical
Co., Ltd. Previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1999 with portions omitted pursuant to the Registrant's request
for confidential treatment and filed separately with the Securities and Exchange Commission, and
incorporated herein by reference.
License Agreement effective as of December 3, 1999 between the Company and Global Mirror
GmbH & Co. KG. Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 1999 with portions omitted pursuant to the Registrant's
request for confidential treatment and filed separately with the Securities and Exchange
Commission, and incorporated herein by reference.
35
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
License Agreement effective as of December 13, 1999 between the Company and Global Mirror
GmbH & Co. KG. Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 1999 with portions omitted pursuant to the Registrant's
request for confidential treatment and filed separately with the Securities and Exchange
Commission, and incorporated herein by reference.
License Agreement effective as of March 21, 2000 between the Company and ThermoView
Industries, Inc. Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 1999 with portions omitted pursuant to the Registrant's request
for confidential treatment and filed separately with the Securities and Exchange Commission, and
incorporated herein by reference.
License Agreement effective as of May 23, 2000 between the Company and Polaroid Corporation.
Previously filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 2000 with portions omitted pursuant to the Registrant's request for
confidential treatment and filed separately with the Securities and Exchange Commission, and
incorporated herein by reference.
License Agreement effective as of February 16, 2001 between the Company and AP Technoglass
Co. Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2001 with portions omitted pursuant to the Registrant's request for
confidential treatment and filed separately with the Securities and Exchange Commission, and
incorporated herein by reference.
License Agreement effective as of March 21, 2001 between the Company and InspecTech Aero
Service, Inc. Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2001 with portions omitted pursuant to the Registrant's request for
confidential treatment and filed separately with the Securities and Exchange Commission, and
incorporated herein by reference.
License Agreement effective as of March 28, 2001 between the Company and Film Technologies
International, Inc. Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2001 with portions omitted pursuant to the Registrant's
request for confidential treatment and filed separately with the Securities and Exchange
Commission, and incorporated herein by reference.
License Agreement effective as of November 29, 2001 between the Company and Avery Dennison
Corporation. Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2001 with portions omitted pursuant to the Registrant's request for
confidential treatment and filed separately with the Securities and Exchange Commission, and
incorporated herein by reference.
License Agreement effective as of February 4, 2002 between the Company and BOS GmbH & Co.
KG. Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2001 with portions omitted pursuant to the Registrant's request for
confidential treatment and filed separately with the Securities and Exchange Commission, and
incorporated herein by reference.
License Agreement effective as of March 11, 2002 between the Company and Isoclima S.p.A.
Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2001 with portions omitted pursuant to the Registrant's request for
confidential treatment and filed separately with the Securities and Exchange Commission, and
incorporated herein by reference.
36
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
License Agreement effective as of July 2, 2002 between the Company and Isoclima S.p.A.
Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2002 with portions omitted pursuant to the Registrant's request for
confidential treatment and filed separately with the Securities and Exchange Commission, and
incorporated herein by reference.
License Agreement effective as of August 19, 2002 between the Company and Razor’s Edge
Technologies, Inc. Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2002 with portions omitted pursuant to the Registrant's
request for confidential treatment and filed separately with the Securities and Exchange
Commission, and incorporated herein by reference.
License Agreement effective as of October 7, 2002 between the Company and American Glass
Products (Glass Technology Investment Ltd.). Previously filed as an Exhibit to the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2002 with portions omitted
pursuant to the Registrant's request for confidential treatment and filed separately with the
Securities and Exchange Commission, and incorporated herein by reference.
License Agreement effective as of October 7, 2002 between the Company and SPD Systems, Inc.
Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2002 with portions omitted pursuant to the Registrant's request for
confidential treatment and filed separately with the Securities and Exchange Commission, and
incorporated herein by reference.
License Agreement effective as of October 24, 2002 between the Company and Cricursa Cristales
Curvados S.A. Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2002 with portions omitted pursuant to the Registrant's request
for confidential treatment and filed separately with the Securities and Exchange Commission, and
incorporated herein by reference.
License Agreement effective as of December 9, 2002 between the Company and BRG Group, Ltd.
Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2002 with portions omitted pursuant to the Registrant's request for
confidential treatment and filed separately with the Securities and Exchange Commission, and
incorporated herein by reference.
License Agreement effective as of December 13, 2002 between the Company and Laminated
Technologies Inc. Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2002 with portions omitted pursuant to the Registrant's
request for confidential treatment and filed separately with the Securities and Exchange
Commission, and incorporated herein by reference.
License Agreement effective as of April 17, 2003 between the Company and Custom Glass
Corporation. Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K/A for
the fiscal year ended December 31, 2003 with portions omitted pursuant to the Registrant's request
for confidential treatment and filed separately with the Securities and Exchange Commission, and
incorporated herein by reference.
License Agreement effective as of May 2, 2003 between the Company and Air Products and
Chemicals, Inc. Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K/A
for the fiscal year ended December 31, 2003 with portions omitted pursuant to the Registrant's
request for confidential treatment and filed separately with the Securities and Exchange
Commission, and incorporated herein by reference.
37
10.32
License Agreement effective as of May 30, 2003 between the Company and Kerros Limited.
Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K/A for the fiscal year
ended December 31, 2003 with portions omitted pursuant to the Registrant's request for
confidential treatment and filed separately with the Securities and Exchange Commission, and
incorporated herein by reference.
10.33
10.34
10.35
10.36
10.37
10.38
10.39
10.40
License Agreement effective as of June 6, 2003 between the Company and Traco, Inc. Previously
filed as an Exhibit to the Company’s Annual Report on Form 10-K/A for the fiscal year ended
December 31, 2003 with portions omitted pursuant to the Registrant's request for confidential
treatment and filed separately with the Securities and Exchange Commission, and incorporated
herein by reference.
License Agreement effective as of June 16, 2003 between the Company and Saint-Gobain Glass
France S.A. Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K/A for
the fiscal year ended December 31, 2003 with portions omitted pursuant to the Registrant's request
for confidential treatment and filed separately with the Securities and Exchange Commission, and
incorporated herein by reference.
License Agreement effective as of August 1, 2003 between the Company and Vision
(Environmental Innovation) Limited. Previously filed as an Exhibit to the Company’s Annual
Report on Form 10-K/A for the fiscal year ended December 31, 2003 with portions omitted
pursuant to the Registrant's request for confidential treatment and filed separately with the
Securities and Exchange Commission, and incorporated herein by reference.
License Agreement effective as of November 13, 2003 between the Company and Innovative Glass
Corporation. Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K/A for
the fiscal year ended December 31, 2003 with portions omitted pursuant to the Registrant's request
for confidential treatment and filed separately with the Securities and Exchange Commission, and
incorporated herein by reference.
License Agreement effective as of December 11, 2003 between the Company and Leminur
Limited. Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K/A for the
fiscal year ended December 31, 2003 with portions omitted pursuant to the Registrant's request for
confidential treatment and filed separately with the Securities and Exchange Commission, and
incorporated herein by reference.
License Agreement effective as of March 25, 2004 between the Company and Pilkington plc.
Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2004 with portions omitted pursuant to the Registrant's request for
confidential treatment and filed separately with the Securities and Exchange Commission, and
incorporated herein by reference.
License Agreement effective as of April 5, 2004 between the Company and SmartGlass Ireland
Ltd. Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2004 with portions omitted pursuant to the Registrant's request for
confidential treatment and filed separately with the Securities and Exchange Commission, and
incorporated herein by reference.
License Agreement effective as of April 8, 2004 between the Company and Prelco Inc. Previously
filed as an Exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2004 with portions omitted pursuant to the Registrant's request for confidential
treatment and filed separately with the Securities and Exchange Commission, and incorporated
herein by reference.
38
10.41
10.42
10.43
10.44
10.45
10.46
10.47
10.48
10.49
License Agreement effective as of April 13, 2004 between the Company and E. I. Dupont De
Nemours and Company. Previously filed as an Exhibit to the Company’s Annual Report on Form
10-K for the fiscal year ended December 31, 2004 with portions omitted pursuant to the Registrant's
request for confidential treatment and filed separately with the Securities and Exchange
Commission, and incorporated herein by reference.
License Agreement effective as of September 3, 2004 between the Company and Nippon Sheet
Glass Co., Ltd. Previously filed as an Exhibit to the Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2004 with portions omitted pursuant to the Registrant's request
for confidential treatment and filed separately with the Securities and Exchange Commission, and
incorporated herein by reference.
License Agreement effective as of October 25, 2005 between the Company and SPD Control
Systems Corporation. Previously filed as an Exhibit to the Company’s Current Report on Form 8-
K dated October 31, 2005 with portions omitted pursuant to the Registrant's request for confidential
treatment and filed separately with the Securities and Exchange Commission, and incorporated
herein by reference.
License Agreement effective as of March 30, 2006 between the Company and Dainippon Ink and
Chemicals. Previously filed as an Exhibit to the Company’s Current Report on Form 8-K dated
April 4, 2006 with portions omitted pursuant to the Registrant's request for confidential treatment
and filed separately with the Securities and Exchange Commission, and incorporated herein by
reference.
License Agreement effective as of May 11, 2006 between the Company and Asahi Glass Company.
Previously filed as an Exhibit to the Company’s Current Report on Form 8-K dated May 15, 2006
with portions omitted pursuant to the Registrant's request for confidential treatment and filed
separately with the Securities and Exchange Commission, and incorporated herein by reference.
License Agreement effective as of March 19, 2007 between the Company and SmartGlass
International Ltd. Previously filed as an Exhibit to the Company’s Current Report on Form 8-K
dated March 19, 2007 with portions omitted pursuant to the Registrant's request for confidential
treatment and filed separately with the Securities and Exchange Commission, and incorporated
herein by reference.
License Agreement effective as of October 16, 2007 between Research Frontiers Incorporated and
Glass Wholesalers, Ltd. d/b/a Craftsman Fabricated Glass, Ltd. Previously filed as an Exhibit to
the Company’s Current Report on Form 8-K dated October 18, 2007, and incorporated herein by
reference.
License Agreement effective as of December 14, 2007 between Research Frontiers Incorporated
and AGC Flat Glass Europe SA. Previously filed as an Exhibit to the Company’s Current Report
on Form 8-K dated December 17, 2007 with portions omitted pursuant to the Registrant's request
for confidential treatment and filed separately with the Securities and Exchange Commission, and
incorporated herein by reference.
License Agreement effective as of February 21, 2008 between Research Frontiers Incorporated
and GKN Aerospace Transparency Systems Inc. Previously filed as an Exhibit to the Company’s
Current Report on Form 8-K dated March 5, 2008 with portions omitted pursuant to the
Registrant's request for confidential treatment and filed separately with the Securities and
Exchange Commission, and incorporated herein by reference.
39
10.50
10.51
10.52
10.53
10.54
10.55
10.56
10.57
14
21
23
License Agreement effective as of September 29, 2008 between Research Frontiers Incorporated
and PPG Industries, Inc. (now known as Pittsburgh Glass Works, LLC). Previously filed as an
Exhibit to the Company’s Current Report on Form 8-K dated October 6, 2008 with portions
omitted pursuant to the Registrant's request for confidential treatment and filed separately with
the Securities and Exchange Commission, and incorporated herein by reference.
License Agreement effective as of September 10, 2009 between Research Frontiers Incorporated
and Pilkington Group Ltd. Previously filed as an Exhibit to the Company’s Current Report on
Form 8-K dated September 15, 2009 with portions omitted pursuant to the Registrant's request for
confidential treatment and filed separately with the Securities and Exchange Commission, and
incorporated herein by reference.
License Agreement effective as of January 25, 2010 between Research Frontiers Incorporated and
Vision Systems. Previously filed as an Exhibit to the Company’s Current Report on Form 8-K
dated January 25, 2010 with portions omitted pursuant to the Registrant's request for confidential
treatment and filed separately with the Securities and Exchange Commission, and incorporated
herein by reference.
License Agreement effective as of February 8, 2010 between Research Frontiers Incorporated and
ID Research Pty Ltd. (iGlass). Previously filed as an Exhibit to the Company’s Current Report on
Form 8-K dated February 16, 2010 with portions omitted pursuant to the Registrant's request for
confidential treatment and filed separately with the Securities and Exchange Commission, and
incorporated herein by reference.
License Agreement effective as of December 13, 2010 between Research Frontiers Incorporated
and Diamond Sea-Glaze Manufacturing Ltd. Previously filed as an Exhibit to the Company’s
Current Report on Form 8-K dated December 14, 2010 with portions omitted pursuant to the
Registrant's request for confidential treatment and filed separately with the Securities and
Exchange Commission, and incorporated herein by reference.
License Agreement effective as of December 22, 2010 between Daimler AG, Research Frontiers
Incorporated and SPD Control Systems Corp. Previously filed as an Exhibit to the Company’s
Current Report on Form 8-K dated February 9, 2011 with portions omitted pursuant to the
Registrant's request for confidential treatment and filed separately with the Securities and
Exchange Commission, and incorporated herein by reference.
License Agreement effective as of February 19, 2013 between Tint-It JSC and Research Frontiers
Incorporated. Previously filed as an Exhibit to the Company’s Current Report on Form 8-K dated
March 5, 2013 with portions omitted pursuant to the Registrant's request for confidential treatment
and filed separately with the Securities and Exchange Commission, and incorporated herein by
reference.
License Agreement effective as of August 6, 2012 between Advnanotech LLC and Research
Frontiers Incorporated. Previously filed as an Exhibit to the Company’s Current Report on Form
8-K dated March 12, 2013 with portions omitted pursuant to the Registrant's request for
confidential treatment and filed separately with the Securities and Exchange Commission, and
incorporated herein by reference.
Code of Ethics of Research Frontiers Incorporated. Previously filed as an Exhibit to the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2003, and incorporated herein
by reference.
Subsidiaries of the Registrant - SPD Enterprises, Inc.
Consent of BDO USA, LLP - Filed herewith.
40
31.1
31.2
32.1
32.2
Rule 13a-14(a)/15d-14(a) Certification of Joseph M. Harary - Filed herewith.
Rule 13a-14(a)/15d-14(a) Certification of Seth L. Van Voorhees - Filed herewith.
Section 1350 Certification of Joseph M. Harary - Filed herewith.
Section 1350 Certification of Seth L. Van Voorhees - Filed herewith.
EX-101.INS
XBRL INSTANCE DOCUMENT
EX-101.SCH
XBRL TAXONOMY EXTENSION SCHEMA
EX-101.PRE
XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE
EX-101.LAB
XBRL TAXONOMY EXTENSION LABEL LINKBASE
EX-101.CAL
XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
EX-101.DEF
XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
_________________
* Executive Compensation Plan or Arrangement.
41
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
RESEARCH FRONTIERS INCORPORATED
(Registrant)
/s/ Joseph M. Harary
Joseph M. Harary, President and CEO
(Principal Executive Officer)
/s/ Seth L. Van Voorhees
Seth L. Van Voorhees, Vice President, CFO and Treasurer
(Principal Financial and Accounting Officer)
Dated: March 10, 2016
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature
/s/Darryl Daigle
Darryl Daigle
/s/Gregory G. Grimes
Gregory G. Grimes
/s/Joseph M. Harary
Joseph M. Harary
Position
Director
Director
Date
March 10, 2016
March 10, 2016
Director, President, CEO
March 10, 2016
/s/ Alexander Kaganowicz
Alexander Kaganowicz
Director
March 10, 2016
/s/Robert L. Saxe
Robert L. Saxe
/s/Seth L. Van Voorhees
Seth L. Van Voorhees
Director, Chairman
March 10, 2016
Vice President, CFO, Treasurer
March 10, 2016
42
Report of Independent Registered Public Accounting Firm
The Shareholders and Board of Directors
Research Frontiers Incorporated
Woodbury, New York
We have audited the accompanying consolidated balance sheets of Research Frontiers Incorporated as of
December 31, 2015 and 2014 and the related consolidated statements of operations, shareholders’ equity and cash flows
for each of the three years in the period ended December 31, 2015. In connection with our audits of the consolidated
financial statements, we have also audited the financial statement schedule as listed in the accompanying index. These
consolidated financial statements and schedule are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements and schedule are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and schedule, assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements and schedule. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Research Frontiers Incorporated at December 31, 2015 and 2014, and the results of its operations
and its cash flows for each of the three years in the period ended December 31, 2015, in conformity with accounting
principles generally accepted in the United States of America.
Also, in our opinion, the financial statement schedule when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), Research Frontiers Incorporated’s internal control over financial reporting as of December 31, 2015,
based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) and our report dated March 10, 2016 expressed an unqualified
opinion thereon.
/s/ BDO USA, LLP
Melville, New York
March 10, 2016
F-1
RESEARCH FRONTIERS INCORPORATED
Consolidated Balance Sheets
December 31, 2015 and 2014
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Royalties receivable, net of reserves of $629,457 in 2015
and $305,171 in 2014
Prepaid expenses and other current assets
Total current assets
Fixed assets, net
Long-term investments
Deposits and other assets
Total assets
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable
Accrued expenses and other
Total current liabilities
Shareholders’ equity:
Common stock, par value $0.0001 per share;
authorized 100,000,000 shares, issued and outstanding
24,043,846 and 23,924,465 shares for 2015 and 2014
Additional paid-in capital
Accumulated deficit
Total shareholders’ equity
2015
2014
$
5,712,310
1,513,784
$
7,569,537
1,501,554
1,314,675
133,465
1,175,218
121,252
8,674,234
10,367,561
836,216
-
33,567
9,544,017
$
660,201
1,503,525
33,567
12,564,854
$
$
46,734
421,478
468,212
$
159,312
323,372
482,684
2,404
111,483,959
(102,410,558)
9,075,805
2,392
110,210,480
(98,130,702)
12,082,170
Total liabilities and shareholders’ equity
$
9,544,017
$
12,564,854
See accompanying notes to consolidated financial statements.
F-2
RESEARCH FRONTIERS INCORPORATED
Consolidated Statements of Operations
Years ended December 31, 2015, 2014 and 2013
2015
2014
2013
Fee income
$
2,007,482
$
1,598,799
$
2,161,359
Operating expenses
Research and development
Total Expenses
4,742,166
1,588,491
6,330,657
4,425,718
1,621,964
6,047,682
6,036,792
2,203,326
8,240,118
Operating loss
(4,323,175)
(4,448,883)
(6,078,759)
Net investment income
43,319
35,161
38,148
Net loss
(4,279,856)
(4,413,722)
(6,040,611)
Basic and diluted net loss
per common share
Weighted average number of
common shares outstanding
$
(0.18)
$
(0.19)
$
(0.26)
24,007,974
23,663,229
22,946,019
See accompanying notes to consolidated financial statements.
F-3
RESEARCH FRONTIERS INCORPORATED
Consolidated Statements of Shareholders’ Equity
Years ended December 31, 2015, 2014 and 2013
Common Stock
Shares
Amount
Additional
Paid-in Capital
Accumulated
Deficit
Total
Balance, January 1, 2013
22,646,782
$
2,265
$
101,846,779
$
(87,676,369)
$
14,172,675
Exercise of options and warrants
Share-based compensation
Net Loss
Balance, December 31, 2013
Issuance of Common Stock
Exercise of options and warrants
Share-based compensation
Net Loss
Balance, December 31, 2014
Exercise of options and warrants
Share-based compensation
Net Loss
Balance, December 31, 2015
179,983
282,900
-
23,109,665
750,000
64,800
-
-
23,924,465
119,381
-
-
24,043,846
18
28
-
2,311
75
6
-
-
2,392
822,951
2,914,876
-
105,584,606
3,278,175
304,782
1,042,917
-
110,210,480
-
-
(6,040,611)
(93,716,980)
-
-
-
(4,413,722)
(98,130,702)
822,969
2,914,904
(6,040,611)
11,869,937
3,278,250
304,788
1,042,917
(4,413,722)
12,082,170
12
-
-
2,404
$
548,463
725,016
-
111,483,959
$
-
-
(4,279,856)
(102,410,558)
$
548,475
725,016
(4,279,856)
9,075,805
$
See accompanying notes to consolidated financial statements.
F-4
RESEARCH FRONTIERS INCORPORATED
Consolidated Statements of Cash Flows
Years ended December 31, 2015, 2014 and 2013
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization
Stock based compensation
Bad debts
Change in assets and liabilities:
Royalty receivables
Prepaid expenses and other current assets
Accounts payable and accrued expenses
Deferred revenue
Net cash used in operating activities
Cash flows from investing activities:
Purchases of fixed assets
Purchase of investments
Proceeds from sale of investment
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Net proceeds from issuances of common stock and
exercise of options and warrants
Net cash provided by financing activities
2015
2014
2013
$
(4,279,856)
$
(4,413,722)
$
(6,040,611)
140,170
725,016
324,286
(463,743)
(12,213)
(14,472)
-
(3,580,812)
(316,185)
-
1,491,295
1,175,110
31,824
1,042,917
131,250
(439,306)
2,866
345,356
(25,000)
(3,323,815)
(627,660)
(3,005,079)
5,076,930
1,444,191
45,212
2,914,904
81,198
(260,042)
94,544
(80,064)
-
(3,244,859)
(50,536)
(24,009)
-
(74,545)
548,475
548,475
3,583,038
3,583,038
795,294
795,294
Net (decrease) increase in cash and cash equivalents
(1,857,227)
1,703,414
(2,524,110)
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
7,569,537
5,712,310
$
5,866,123
7,569,537
$
8,390,233
5,866,123
$
See accompanying notes to consolidated financial statements.
F-5
RESEARCH FRONTIERS INCORPORATED
Notes to Consolidated Financial Statements
(1) Business and Basis for Presentation
Research Frontiers Incorporated (“Research Frontiers” or the “Company”) operates in a single business segment
which is engaged in the development and marketing of technology and devices to control the flow of light. Such devices,
often referred to as "light valves" or suspended particle devices (SPDs), use colloidal particles that are either incorporated
within a liquid suspension or a film, which is usually enclosed between two sheets of glass or plastic having transparent,
electrically conductive coatings on the facing surfaces thereof. At least one of the two sheets is transparent. SPD
technology, made possible by a flexible light-control film invented by Research Frontiers, allows the user to instantly and
precisely control the shading of glass/plastic manually or automatically. SPD technology has numerous product
applications, including: SPD-Smart™ windows, sunshades, skylights and interior partitions for homes and buildings;
automotive windows, sunroofs, sun-visors, sunshades, rear-view mirrors, instrument panels and navigation systems;
aircraft windows; eyewear products; and flat panel displays for electronic products. SPD-Smart light control film is now
being developed for, or used in, architectural, automotive, marine, aerospace and appliance applications.
The Company has historically utilized its cash, cash equivalents, short-term investments, and the proceeds from the
sale of its investments to fund its research and development of SPD light valves, for marketing initiatives, and for other
working capital purposes. The Company’s working capital and capital requirements depend upon numerous factors,
including the results of research and development activities, competitive and technological developments, the timing and
cost of patent filings, and the development of new licensees and changes in the Company’s relationships with its existing
licensees. The degree of dependence of the Company’s working capital requirements on each of the foregoing factors
cannot be quantified; increased research and development activities and related costs would increase such requirements;
the addition of new licensees may provide additional working capital or working capital requirements, and changes in
relationships with existing licensees would have a favorable or negative impact depending upon the nature of such changes.
There can be no assurance that expenditures will not exceed the anticipated amounts or that additional financing, if
required, will be available when needed or, if available, that its terms will be favorable or acceptable to the Company.
Eventual success of the Company and generation of positive cash flow will be dependent upon the commercialization of
products using the Company’s technology by the Company’s licensees and payments of continuing royalties on account
thereof. To date, the Company has not generated sufficient revenue from its licensees to fund its operations.
(2) Summary of Significant Accounting Policies
(a) Cash and Cash Equivalents
The Company considers securities purchased with original maturities of three months or less to be cash equivalents.
Cash equivalents consist of short-term investments in money market accounts at December 31, 2015 and 2014.
Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally
insured limits. We have never experienced any losses related to these balances. FDIC insurance coverage is $250,000 per
depositor at each financial institution, and our non-interest bearing cash balances may again exceed federally insured
limits. Amounts on deposit in excess of federally insured limits at December 31, 2015 and 2014 is approximately $5.0
million and $6.8 million, respectively.
F-6
(b) Short-term/Long-term Investments
The Company classifies investments in marketable securities as trading, available-for-sale or held-to-maturity at the
time of purchase and periodically re-evaluates such classifications. Trading securities are carried at fair value, with
unrealized holding gains and losses included in earnings. Held-to-maturity securities are recorded at cost and are adjusted
for the amortization or accretion of premiums or discounts over the life of the related security. Unrealized holding gains
and losses on available-for-sale securities are excluded from earnings and are reported as a separate component of
accumulated other comprehensive income (loss) until realized. In determining realized gains and losses, the cost of
securities sold is based on the specific identification method. Interest and dividends on the investments are accrued at the
balance sheet date. At December 31, 2015 and 2014 all investments were classified as held to maturity and consisted of
the following:
Certificates of Deposit
Investment
$
$
1,501,554
1,503,525
Maturity
Date
8/27/2015
8/27/2016
December 31, 2015
Value of Held to Maturity
Investments (based on cost)
December 31, 2014
Value of Held to Maturity
Investments (based on cost)
$
-
$
1,513,784
$
$
1,501,554
1,503,525
$
1,513,784
$
3,005,079
(c) Royalties Receivable
Royalties receivable from licensees are recorded at the amounts specified within the license agreements when the
collectability of the receivable is reasonably assured. The receivables do not bear interest. The allowance for doubtful
accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing royalties
receivable. The Company determines the allowance based on historical write off experience. The Company reviews its
allowance for doubtful accounts periodically. Past due accounts are reviewed individually for collectability. Account
balances are charged off against the allowance after all means of collection have been exhausted and the potential for
recovery is considered remote. As of December 31, 2015, four companies accounted for 21%, 15%, 12% and 11%,
respectively, of the Company’s outstanding receivables. As of December 31, 2014, four companies accounted for 19%,
17%, 10% and 10%, respectively, of the Company’s outstanding receivables.
(d) Fixed Assets
Fixed assets are carried at cost. Depreciation and amortization are computed using the straight-line method over the
estimated useful lives of the assets.
(e) Revenue Recognition/Fee Income
The Company has entered into a number of license agreements covering its light control technology. The Company
receives minimum annual royalties under certain license agreements and records fee income on a ratable basis each quarter.
In instances when sales of licensed products by its licensees exceed minimum annual royalties, the Company recognizes
fee income as the amounts have been earned. Certain of the fees are accrued by, or paid to, the Company in advance of the
period in which they are earned resulting in deferred revenue. Such excess amounts are recorded as deferred revenue and
are typically recognized as fee income by year end. As of December 31, 2015 and December 31, 2014, there was no
material impact on revenue as a result of recognizing deferred revenue in the consolidated statement of operations.
Fee income represents amounts earned by the Company under various license and other agreements (note 8) relating
to technology developed by the Company. During 2015, three licensees accounted for 33%, 15%, and 9%, respectively, of
fee income recognized for the year. In addition, during the year ended December 31, 2015, approximately 14% of revenues
related to fees generated by a large architectural glass project. During 2014, five licensees accounted for 36%, 11%, 9%,
9%, and 5%, respectively of fee income recognized during the year. During 2013 six licensees accounted for 40%, 12%,
6% and 6%, 5%, and 5% respectively of fee income recognized for the year.
F-7
(f) Basic and Diluted Loss Per Common Share
Basic earnings (loss) per share excludes any dilution. It is based upon the weighted average number of common shares
outstanding during the period. Dilutive earnings (loss) per share reflects the potential dilution that would occur if securities
or other contracts to issue common stock were exercised or converted into common stock. The Company’s dilutive loss per
share equals basic loss per share for each of the years in the three-year period ended December 31, 2015 because all common
stock equivalents (i.e., options and warrants) were antidilutive in those periods. The number of options and warrants that
were not included because their effect is antidilutive was 2,197,369, 2,924,419, and 2,860,219, for 2015, 2014, and 2013,
respectively.
(g) Research and Development Costs
Research and development costs are charged to expense as incurred.
(h) Patent Costs
The Company expenses costs relating to the development or acquisition of patents due to the uncertainty of the
recoverability of these items.
(i) Use of Estimates
The preparation of the Company’s consolidated financial statements requires management of the Company to make a
number of estimates and assumptions relating to the reported amount of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses
during this period. Actual results could differ from those estimates.
(j)
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
In accordance with ASC Topic 740 (FIN 48), we recognize tax benefits only for tax positions that are more likely than
not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit
that is greater than 50 percent likely to be realized upon ultimate settlement. Unrecognized tax benefits are tax benefits
claimed in tax returns that do not meet these recognition and measurement standards. We classify accrued interest and
penalties related to any unrecognized tax benefits in our income tax provision. At December 31, 2015 and 2014, we do not
have accrued interest and penalties related to any unrecognized tax benefits. We do not believe we have any uncertain tax
positions as of December 31, 2015 and 2014.
The tax years subject to examination by major tax jurisdictions include the years 2011 and forward by the U.S. Internal
Revenue Service and certain states. The Company is not currently being audited by any tax jurisdiction.
(k)
Equity-Based Compensation
We recognize all stock-based compensation as an expense in the financial statements and such costs are measured at
the fair value of the award at the date of grant. In addition to reflecting compensation expense for new share-based payment
awards, expense is also recognized to reflect the remaining vesting period of awards that had been granted in prior periods.
Tax benefits related to stock option exercises are reflected as financing cash inflows instead of operating cash inflows.
The exercise price for stock options granted are generally set at the average for the high and low trading prices of the
Company’s common stock on the trading date immediately prior to the date of grant, and the related number of shares
granted are fixed at the date of grant.
F-8
In order to determine the fair value of stock options on the date of grant, the Company uses the Black-Scholes option-
pricing model. Inherent in this model are assumptions related to expected stock-price volatility, option term, risk-free
interest rate and dividend yield. While the risk-free interest rate and dividend yield are less subjective assumptions that are
based on factual data derived from public sources, the expected stock-price volatility and option term assumptions require
a greater level of judgment.
In connection with the employee stock options and restricted stock grants, the Company charged $715,009,
$1,010,489, and $2,545,060 to operations during the years ended December 31, 2015, 2014, and 2013, respectively. In lieu
of higher cash compensation, the Company has granted warrants and non-employee options to consultants. These warrants
and non-employee options vested ratably over various terms ranging from 24 to 59 months. As of December 31, 2015 these
awards were fully vested. Non-employee options covering 24,000 shares were granted to consultants during 2014. These
non-employee options are valued at fair value at the time that the related services are provided using the Black Scholes
method and marked to market quarterly using the Black Scholes method. The Company incurred a charge to operations of
$10,007, $32,428, and $369,844, for 2015, 2014, and 2013, respectively in connection with these warrants and non-
employee options.
(l) Restricted Stock
Compensation cost for restricted stock is measured using the quoted market price of the Company's common stock at
the date the common stock is granted. The compensation cost is recognized over the period between the issue date and the
date any restrictions lapse. Restricted stock is included in total common shares outstanding upon the lapse of any restrictions.
(m) Impairment of Long-Lived Assets
The Company reviews long-lived assets to determine whether an event or change in circumstances indicates the
carrying value of the asset may not be recoverable. The Company bases its evaluation on such impairment indicators as the
nature of the assets, the future economic benefit of the assets and any historical or future profitability measurements, as
well as other external market conditions or factors that may be present.
(n) Fair Value Measurements
The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current
transaction between willing parties. The carrying amounts of all financial instruments classified as a current asset or current
liability are deemed to approximate fair value because of the short maturity of those instruments.
Accounting Standards Codification (“ASC”) Topic 820 “Fair Value Measurements and Disclosures” (“ASC Topic
820”) establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures
about fair value measurements. ASC Topic 820 applies other previously issued accounting pronouncements that require or
permit fair value measurements but does not require any new fair value measurements.
ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. ASC Topic 820 establishes a fair value
hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from
independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions
developed based on the best information available in the circumstances (unobservable inputs).
We value financial instruments using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring
fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical
assets or liabilities; Level 2, defined as inputs other than quoted prices for similar assets or liabilities in active markets that
are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data
exists, therefore requiring an entity to develop its own assumptions.
Financial assets accounted for at fair value on a recurring basis at December 31, 2015 and 2014, include cash and cash
equivalents of approximately $5.7 million and $7.6 million, respectively, as well as short term investments of $1.5 million
and $1.5 million in 2015 and 2014, respectively. The carrying value of these assets approximates fair value due to the short-
term maturity of these instruments.
F-9
(o) Recent Accounting Pronouncements
New Accounting Standards
In May 2014, the FASB and the International Accounting Standards Board (IASB) jointly issued ASU No. 2014-09,
Revenue from Contracts with Customers (Topic 606), which clarifies the principles for recognizing revenue and develops
a common revenue standard for GAAP and International Financial Reporting Standards (IFRS). The core principle of the
guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.
In July 2015, the FASB approved a deferral of the ASU effective date from annual and interim periods beginning after
December 15, 2016 to annual and interim periods beginning after December 15, 2017. The Company is currently evaluating
the impact of adopting this guidance on its financial position and results of operations.
In November 2015, the FASB issued Accounting Standard Update (ASU) No. 2015-17, Income Taxes (Topic 740),
Balance Sheet Classification of Deferred Taxes. The amendments under the new guidance require that deferred tax liabilities
and assets be classified as noncurrent in a classified statement of financial position. The guidance is effective for financial
statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods.
Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The amendments
in this ASU may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods
presented. The Company is currently evaluating the impact of adopting this guidance.
In January 2016, the FASB issued ASU 2016-01, "Financial Instruments--Overall (Subtopic 825-10): Recognition
and Measurement of Financial Assets and Financial Liabilities," which amends the guidance in U.S. GAAP on the
classification and measurement of financial instruments. Changes to the current guidance primarily affects the accounting
for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for
financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when
recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is
effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply
the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting
period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value
changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other
comprehensive income. The Company is currently evaluating the impact of adopting this guidance.
In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updated (“ASU”)
No. 2016-02, Leases. ASU 2016-02 requires lessees to apply a modified retrospective transition approach for leases existing
at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption
of the new guidance is permitted. We are currently evaluating the impact of ASU 2016-02 on our consolidated financial
statements.
F-10
(3) Fixed Assets
Depreciation and amortization expense for the periods ending December 31, 2015, 2014 and 2013 was $140,170,
31,824 and $45,212, respectively. Fixed assets and their estimated useful lives as of December 31, 2015 and 2014 are as
follows:
2015
2014
Estimated useful life
Equipment and furniture
Trade show materials
$
1,375,911
775,654
$
1,362,308
502,789
Leasehold Improvements
581,902
2,733,467
552,185
2,417,282
5 years
5 years
Life of lease or estimated
life of asset if shorter
Less accumulated depreciation
and amortization
(1,897,251)
836,216
$
(1,757,081)
660,201
$
(4) Accrued Expenses and Other
Accrued expenses consist of the following at December 31, 2015 and 2014:
2015
2014
Payroll, bonuses and related benefits
Professional services
Deferred rent
Other
$
$
247,562
4,400
169,156
360
421,478
206,427
29,400
75,569
11,976
323,372
$
$
(5)
Income Taxes
Since inception, the Company has incurred losses from operations and as a result has not recorded income tax
expense. Benefits related to net operating loss carry-forwards and deferred items have been fully reserved since it is not
more likely than not that the Company will achieve profitable operations. The difference between the total income taxes
at the federal statutory rate for each of the years ended December 31, 2015, 2014 and 2013 and the fact that no income
tax benefit was recorded in each of these three years is attributable to the change in the valuation allowance recorded in
each year.
F-11
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets at
December 31, 2015 and 2014 are presented below.
Deferred tax assets:
Depreciation
Allowance for bad debts
Net operating loss carry-forwards
Stock option expense
Research and other credits
Other temporary differences
Total gross deferred tax assets
Less valuation allowance
2015
2014
$
113,000
211,000
23,628,000
1,358,000
1,154,000
15,000
26,479,000
(26,479,000)
$
-
$
113,000
108,000
25,469,000
1,439,000
1,031,000
15,000
28,175,000
(28,175,000)
$
-
In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon
future taxable income during the period in which those temporary differences become deductible. The Company considers
the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this
assessment. Based upon its historical operating losses, utilization of deferred tax assets cannot currently be determined.
Accordingly, the Company has recorded a full valuation allowance against the deferred tax assets, as they will not be
realized until the Company achieves profitable operations in the future.
At December 31, 2015, the Company had a net operating loss carry-forward for federal income tax purposes of
approximately $67,000,000, varying amounts of which will expire in each year from 2016 through 2035. Research and
other credit carry-forwards of approximately $1,154,000 are available to the Company to reduce income taxes payable in
future years principally through 2035. The Company’s ability to utilize its net operating loss carryforwards and its current
year tax credits in future periods are subject to the 382 limitation. The $1,696,000 decrease in the valuation allowance
between the period ending December 31, 2015 and 2014 respectively is primarily due to the change in the applicable tax
rate that is expected to be applied towards taxable income in periods in which the deferred tax asset or liability is expected
to be settled or realized.
(6) Shareholders’ Equity
(a) Common Stock and Warrants
During 2015 and 2014, the Company received proceeds of $548,475 and $304,788 in connection with the exercise
of options and warrants representing 119,381 and 64,800 shares of common stock, respectively.
In May 2014, under an existing shelf registration statement, the Company sold 750,000 shares of common stock to a
current institutional shareholder, Kevin Douglas and his related parties. Net proceeds from the offering were $3,278,250
which the Company intends to use for working capital and general corporate purposes.
(b) Options and Warrants
(i)
Employee Options
In 2008, the shareholders approved the Company’s 2008 Equity Incentive Plan which provides for the granting of
both incentive stock options at the fair market value at the date of grant and nonqualified stock options at the fair market
value at the date of grant to employees or non-employees who, in the determination of the Board of Directors, have made
or may make significant contributions to the Company in the future. The Company may also award stock appreciation
rights, restricted stock, or restricted stock units under this plan. The Company initially reserved 750,000 shares of its
F-12
common stock for issuance under this plan, and 173,942 options and other awards were available for issuance under this
plan as of December 31, 2015.
At the discretion of the Board of Directors, options expire in ten years or less from the date of grant and are generally
fully exercisable upon grant but in some cases may be subject to vesting in the future. Full payment of the exercise price
may be made in cash or in shares of common stock valued at the fair market value thereof on the date of exercise, or by
agreeing with the Company to cancel a portion of the exercised options.
The Company granted 499,700 fully vested options during 2013 and recorded share-based compensation of
$1,431,620. The Company granted 209,750 fully vested options during 2014 and recorded share-based compensation of
$483,915. The Company granted 204,000 fully vested options during 2015 and recorded share-based compensation of
$483,133. The Company valued these grants using the Black-Scholes option pricing model with the following weighted
average assumptions:
Fair value on grant date
Expected Dividend yield
Expected volatility
Risk free interest rate
Expected term of the option
2015
$2.37
-
50%
1.80%
5 years
2014
$2.30
-
50%
1.68%
5 years
2013
$2.86
-
64%
1.62%
5 years
Activity in stock options is summarized below:
Number of Shares
Subject to Option
Weighted Average
Exercise Price
Weighted Average Remaining
Contractual Term (Years)
Aggregate Intrinsic Value
Balance at December 31, 2012
1,117,899
$
9.03
3.7
Granted
Cancelled
Exercised
Balance at December 31, 2013
Granted
Cancelled
Exercised
Balance at December 31, 2014
Granted
Cancelled
Exercised
Balance at December 31, 2015
499,700
(64,500)
(72,500)
1,480,599
209,750
(104,750)
(14,800)
1,570,799
204,000
(367,793)
-
1,407,006
$
$
$
$
5.26
12.81
4.83
7.80
$
$
$
$
5.19
7.83
5.56
7.49
5.26
$
7.70
$
$
-
$
7.11
All options are exercisable at December 31, 2015.
5.2
5.2
6.2
$
232,000
During 2015, 2014 and 2013, the Company received $0, $82,288 and $322,475, respectively in proceeds from the
exercise of options.
F-13
(ii) Warrants and Non-Employee Options
Activity in warrants is summarized below:
Number of Shares Underlying
Warrants and Non-Employee
Options Granted
Weighted Average
Exercise Price
Balance at December 31, 2012
1,512,103
$ 5.56
Exercised
Terminated
Issued
Balance at December 31, 2013
Exercised
Terminated
Issued
Balance at December 31, 2014
Exercised
Terminated
Issued
Balance at December 31, 2015
(107,483)
(25,000)
-
1,379,620
(50,000)
-
24,000
1,353,620
(137,174)
(426,083)
-
790,363
4.45
9.00
-
$ 5.58
4.45
-
6.58
$ 5.64
4.73
6.09
$ 5.56
In lieu of higher cash compensation, the Company has granted warrants and non-employee options to consultants.
These warrants and non-employee options vest ratably over various terms ranging from 24 to 59 months. Non-employee
five year options covering 24,000 shares were granted to consultants during 2014 that vest over a period of 12 months.
These non-employee options are valued at fair value at the time that the related services are provided using the Black-
Scholes option valuation model and marked to market quarterly using the Black-Scholes option valuation model. The
Company incurred a charge to operations of $10,007, $32,428, and $369,844, for 2015, 2014, and 2013, respectively in
connection with these warrants and non-employee options.
During 2015, 2014 and 2013, the Company received $548,475, $222,500 and $478,299, respectively in proceeds from
the exercise of warrants.
Warrants and non-employee options generally expire from five to ten years from the date of issuance. At December
31, 2015, all warrants outstanding were exercisable.
(c) Restricted Stock Grants
During 2014 and 2015, the Company did not issue restricted stock to its directors and employees.
During 2013, the Company granted 282,900 shares of restricted stock to its directors and employees. Directors
received 91,500 of these shares of restricted common stock. All the shares granted to the directors, as well as 3,400 shares
granted to employees vested immediately upon grant. The remaining 188,000 shares vest ratably over the 36 months
following grant. The market value per share on the date of grant was $3.70.
In connection with these grants, as well as prior grants that are not yet fully vested, the Company charged $231,876,
$526,574, and $1,131,440, to operations during 2015, 2014, and 2013, respectively. At December 31, 2015 all prior grants
have vested. At December 31, 2014 and 2013, 62,667, and 611,692 of these grants remain unvested respectively. In
addition, at December 31, 2015, all charges to operations relating to these grants have been recorded.
F-14
(7)
License and Other Agreements
The Company has entered into a number of license agreements covering various products using the Company’s SPD
technology. Some of these license agreements are limited to specific countries and/or markets. Licensees of Research
Frontiers who incorporate SPD technology into end products pay Research Frontiers an earned royalty of 5-15% of net
sales of licensed products under license agreements currently in effect, and may also be required to pay Research Frontiers
fees and minimum annual royalties. Licensees who sell products or components to other licensees of Research Frontiers do
not pay a royalty on such sale; Research Frontiers will collect such royalty from the licensee incorporating such products
or components into its own end-products. Research Frontiers’ license agreements typically allow the licensee to terminate
the license after some period of time, and give Research Frontiers only limited rights to terminate before the license expires.
Most licenses are non-exclusive and generally last as long as our patents remain in effect.
(8) Commitments
The Company has an employment agreement with three of its officers which provides for an annual base salary of
$450,000, $402,000 and $255,000 respectively for calendar year 2016. Each of these employment agreements have an
evergreen provision that extend the term by one year on the anniversary date unless either the Company or the employee
has given notice that they will not be renewing the agreement upon the expiration of its term.
The Company has a defined contribution profit sharing (401K) plan covering employees who have completed one
year of service. Contributions are made at the discretion of the Company. The Company did not make any contributions to
this plan for 2015, 2014, or 2013.
The Company occupies premises under an operating lease agreement which expires on March 31, 2025. As of
December 31, 2015, the approximate minimum annual future rental commitments under lease agreements for the next five
years are as follows:
Year
2016
2017
2018
2019
2020
Thereafter:
Amount
$
$
$
$
$
$
174,000
180,000
186,000
191,000
197,000
905,000
Rent expense, including other occupancy related expenses, amounted to approximately $181,000, $173,000, and
$187,000, for 2015, 2014, and 2013, respectively.
(9) Rights Plan
In February 2013, the Company’s Board of Directors adopted a Stockholders’ Rights Plan (the “Rights Plan”) and
declared a dividend distribution of one right (a “Right”) for each outstanding share of Company common stock to
stockholders of record at the close of business on March 3, 2003 (“Record Time”) and authorized the issuance of one Right
in respect of each share of Common Stock issued after the Record Time and prior to the Separation Time.
“Separation Time” shall mean the earlier of the Close of Business on the tenth Business Day (or such later date as
the Board of Directors may from time to time fix by resolution adopted prior to the Separation Time that otherwise would
have occurred) following but not including (i) the date on which any Person commences a tender or exchange offer that,
if consummated, would result in such Person’s becoming an Acquiring Person, and (ii) the date of the first event causing
a Flip-in Date to occur; provided that if any tender or exchange offer referred to in clause (i) of this paragraph is cancelled,
terminated or otherwise withdrawn prior to the Separation Time without the purchase of any shares of Common Stock
pursuant thereto, such offer shall be deemed, for purposes of this paragraph, never to have been made.
Subject to certain exceptions listed in the Rights Plan, if a person or group has acquired beneficial ownership of, or
commences a tender or exchange offer for, 15% or more of the Company’s common stock, unless redeemed by the
Company’s Board of Directors, each Right entitles the holder (other than the acquiring person) to purchase from the
Company $80 worth of common stock for $40. If the Company is merged into, or 50% or more of its assets or earning
F-15
power is sold to, the acquiring company, the Rights will also enable the holder (other than the acquiring person) to purchase
$80 worth of common stock of the acquiring company for $40. The Rights will expire at the close of business on February
11, 2023, unless the Rights Plan is extended by the Company’s Board of Directors or unless the Rights are earlier redeemed
by the Company at a price of $.0001 per Right. The Rights are not exercisable during the time when they are redeemable
by the Company.
The above description highlights some of the features of the Company’s Rights Plan and is not a complete description
of the Rights Plan. A more detailed description and copy of the Rights Plan has been filed with the SEC and is available
from the Company upon request.
F-16
(10) Selected Quarterly Financial Data (Unaudited)
2015
Fee Income
Operating loss
Net loss
Basic and diluted net loss
First
Second
Third
Fourth (2)
$ 379,398
$ 803,494
$ 445,846
$ 378,744
(1,227,427)
(492,751)
(766,725)
(1,836,272)
(1,216,211)
(481,287)
(757,320)
(1,825,038)
per common share (1)
(0.05)
(0.02)
(0.03)
(0.08)
2014
Fee Income
Operating loss
Net loss
Basic and diluted net loss
Quarter
First
Second
Third
Fourth (2)
$ 308,348
$ 395,619
$ 452,937
$ 441,895
(1,178,626)
(1,150,453)
(649,444)
(1,470,360)
(1,169,985)
(1,141,858)
(639,806)
(1,462,073)
per common share (1)
(0.05)
(0.05)
(0.03)
(0.06)
(1) Since per share information is computed independently for each quarter and the full year, based on the respective
average number of common shares outstanding, the sum of the quarterly per share amounts does not necessarily
equal the per share amounts for the year.
(2) The Company incurred higher costs in the fourth quarter of 2015 and 2014 primarily due to: (i) $483,000 and
$616,000 of stock and option compensation charges in 2015 and 2014, respectively relating to common stock and
options granted to directors and employees, and (ii) $324,000 of bad debt expense in the fourth quarter of 2015.
F-17
SCHEDULE II
RESEARCH FRONTIERS INCORPORATED
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 2015, 2014, and 2013
Balance at
beginning of
period
Charged to
costs and
expenses
Deductions
Balance
Description
Allowance for uncollectible
royalty receivables:
December 31, 2015
$
305,171
$
324,286
$
-
$
629,457
December 31, 2014
$
173,921
$
131,250
$
-
$
305,171
December 31, 2013
$
92,723
$
81,198
$
-
$
173,921
F-18
Consent of Independent Registered Public Accounting Firm
Exhibit 23
The Board of Directors
Research Frontiers Incorporated:
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-184785, 333-
179099, 333-133858, 333-40369, 333-115052, 333-65219 and 333-159093) and Form S-8 (No. 333-80575, 333-179097,
33-53030, 33-86910, 333-08623, 333-34163, 333-80575, 333-63374, 333-106754, 333-159094 and 333-196746) of
Research Frontiers Incorporated of our reports dated March 10, 2016, relating to the consolidated financial statements and
the financial statement Schedule II and the effectiveness of Research Frontiers Incorporated’s internal control over
financial reporting, which appear in this Annual Report on Form 10-K.
/s/ BDO USA, LLP
Melville, NY
March 10, 2016
EXHIBIT 31.1 CERTIFICATION
I, Joseph M. Harary, certify that:
1. I have reviewed this annual report on Form 10-K of Research Frontiers Incorporated (the “registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4. The registrant's other certifying officer’s and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant's other certifying officer’s and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Dated: March 10, 2016
/s/ Joseph M. Harary
Joseph M. Harary
President, Chief Executive Officer
EXHIBIT 31.2 CERTIFICATION
I, Seth L. Van Voorhees, certify that:
1. I have reviewed this annual report on Form 10-K of Research Frontiers Incorporated (the “registrant”);
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4. The registrant's other certifying officer’s and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant's other certifying officer’s and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Dated: March 10, 2016
/s/ Seth L. Van Voorhees
Seth L. Van Voorhees
Vice President, Chief Financial Officer,
Treasurer and Principal Accounting Officer
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Research Frontiers Incorporated (the “Company”) on Form 10-K for the
year ended December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I,
Joseph M. Harary, President and Chief Executive Officer and Principal Executive Officer of the Company, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
2.
The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities
Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
/s/ Joseph M. Harary
Joseph M. Harary
President, Chief Executive Officer and Principal Executive Officer
March 10, 2016
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Research Frontiers Incorporated (the “Company”) on Form 10-K for the
year ended December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I,
Seth L. Van Voorhees, Vice President, Chief Financial Officer, Treasurer and Principal Accounting Officer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable,
of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
/s/ Seth L. Van Voorhees
Seth L. Van Voorhees
Vice President, Chief Financial Officer,
Treasurer and Principal Accounting Officer
March 10, 2016
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