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, 2019
Commission File Number 000-14893
RESEARCH FRONTIERS INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
240 CROSSWAYS PARK DRIVE
WOODBURY, NEW YORK
(Address of principal executive offices)
11-2103466
(I.R.S. Employer
Identification No.)
11797-2033
(Zip Code)
Registrant’s telephone number, including area code (516) 364-1902
Securities registered pursuant to Section 12(b) of the Act:
Title of Class
Common Stock, $0.0001 Par Value
Name of Exchange
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, smaller reporting company or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth
company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ]
Accelerated filer [X]
Non-accelerated filer [ ]
Smaller reporting company [X]
Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
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, 2019 (the last business day
of the registrant’s most recently completed second fiscal quarter), computed based on the closing sale price of $3.33 was $79,350,170. 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 12, 2020, the registrant had 31,411,107 shares of Common Stock outstanding.
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 to the Consolidated Financial Statements). 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 five major SPD-Smart application areas (aerospace, architectural, automotive, marine and display products) in
every country of the world.
The Company has entered into a number of license agreements covering its light control technology. During 2019, three licensees accounted for 38%, 12%
and 10%, respectively, of fee income recognized for the year. During 2018, four licensees accounted for 35%, 13%, 11% and 10%, respectively, of fee
income recognized during 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 235 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.
1
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, sun visors, side windows and rear windows;
● Aerospace and marine:
windows, doors, partitions, sun visors, 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, light conservation panels, neonatal and other incubators, consumer electronics, eyewear, self-dimming automotive rear-view mirrors and other
reflective information displays. However, such products need additional product design, engineering or testing before 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 (subsequently renamed SLC). 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 and 2016. These vehicles are reaching the latter part of their model
lifecycle. In some cases, such as the SLC and S-Class Coupe, there has been indications that these models may be discontinued completely at the end of
their current model lifecycle. In the case of the SL roadster, it is expected that the next version of the SL roadster might use a canvas roof instead of the
current switchable and static tint glass roofs. It has not been announced whether plans for the next models of the S-Class and Maybach vehicles will include
any switchable glass technology in the sunroofs or windows.
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™ 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 capital expenditures for environmental control facilities planned for the remainder of
its current fiscal year or its next succeeding fiscal year.
2
Employees:
On March 9, 2020, the Company had eight full-time employees, two of whom are technical personnel, and the rest of whom perform legal, finance,
marketing, investor relations, and administrative functions. Of these employees, two have obtained doctorates in chemistry and one has extensive industrial
experience in electronics and electrical engineering. Two employees also have additional postgraduate degrees in business administration, and one has a
doctorate in jurisprudence. 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 October 2019, MarketsandMarkets issued Smart Glass Market by Technology (Suspended Particle Display, Electrochromic, Liquid Crystal,
Photochromic, Thermochromic), Application (Architecture, Transportation, Consumer Electronics), and Geography - Global Forecast to 2023. This market
research report concludes that the smart glass market is expected to grow from USD $2.8 billion in 2016 to reach USD $8.35 billion by 2023, with a
growth rate of 16.6% between 2017 and 2023. Key conclusions in this report included:
● Smart glass, especially active glass, provides a higher control over heat and light at the will of the user, thereby providing considerable electricity
cost-savings and conclusively making the construction spaces more environment-friendly.
● Smart glass technology has been in existence for the last few decades; however, its demand is gathering momentum on account of improved
innovation in raw materials and technologies and the possibility for new applications across various sectors. North America and Europe have been
at the forefront of this trend. Smart glass demand is growing in the Asia Pacific region on account of its growing building and construction,
electronics, and transportation sectors.
● One of the biggest hindrances to the growth of smart glass industry demand is its higher cost. The higher cost of raw material and its limited
availability is undermining its penetration at a larger scale. Constant innovations are happening in terms of raw material, product design, and work
capacity, which will simultaneously attract new users and provide opportunity to manufacturers to rationalize the product cost over the forecast
period.
In June 2019, Grand View Research issued Smart Glass Market Size, Share & Trends Analysis (SPD, PDLC, Liquid Crystal, Electrochromic), By
Application (Consumer Electronics, Architectural Transportation), And Segments Forecast, 2019-2025. This market research report concludes that the
smart glass market is expected to grow from USD $3.7 billion in 2018 to reach USD $8.6 billion by 2025 reflecting a growth rate of 15.2%. Key
conclusions in this report include:
● Smart glass has gained importance due to its inherent capability of thermal and acoustic insulation, energy conservation, and aesthetic 3D designer
proposition.
■ The automotive and residential applications have witnessed a dynamic phase change in functionalities from legacy weather protection features
to seclusion apparatus and advanced energy-conserving.
■ Architecturally advanced construction philosophies incorporating the installation of large windows in the majority of buildings are projected
to drive demand in Europe.
● The transportation segment accounted for the highest market share in 2018 and is projected to retain its leading position throughout the forecast
years. The segment is further categorized into automotive, aircraft, and marine.
■ Automotive sector is the largest consumer of switchable glass and captured the largest revenue share of more than 70% in 2018.
■ The technology provides protection from UV rays and controls heat inside the vehicles by limiting energy consumption.
■ Initiative for reducing CO2 emissions and minimizing energy consumption are encouraging manufacturers to develop anti-heat glass and
glazing solutions.
■ High demand for luxury automobiles, especially in Asia Pacific, is driving the market growth.
■ Major aerospace manufacturers, such as The Boeing Company, Beechcraft Corporation, Airbus SA, Bombardier Inc., and Embraer S.A., are
shifting towards electronically dimmable windows.
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 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, Textron-Beechcraft, HondaJet, Airbus
Helicopter, Bell Helicopter, Dassault, Epic and One Aviation. 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.”
3
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 on over 40 models of various aircraft including those used in commercial aviation, general aviation and
military aviation. SPD-Smart products have been selected by aircraft manufacturers as standard equipment on new production platforms including the
Honda Aircraft HondaJet, Textron-Beechcraft King Air 250, 350i and C90GTx, Epic Aircraft E1000, and One Aviation Eclipse 700.
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.
In 2015, Research Frontiers’ patented SPD-SmartGlass technology was selected as the exclusive smart glass for the USA Pavilion at the World’s Fair, Expo
Milano 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
their 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:
1.
SPD-Smart Film Production
Hitachi Chemical
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 its initial SPD-Smart light-control film on its first factory line. During the second half of 2009, Hitachi Chemical announced
that it had begun mass production on its new, larger capacity production line and expanded its annual production capacity to 400,000 square meters (over
4.3 million square feet).
4
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.”
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 best-selling SPD “dark” film has a range of approximately 0.5% to
55.0%. 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.
Gauzy Ltd.
In October 2018, Gauzy Ltd. announced that it will be producing SPD-Smart light control film for the entire SPD-SmartGlass industry. The announcement
came at a ceremony to celebrate the inauguration of Gauzy’s production line to produce SPD-Smart light control film in Tel Aviv-Jaffo.
Gauzy initially announced that its Tel-Aviv film production line has a capacity to produce up to 364,000 square meters of film per year per shift, and that its
initial production will be 1.2 meters wide, and in 2019 it planned on expanding its SPD film coating capabilities to 1.5 meters wide rolls, and in 2020 to 1.8
meters wide rolls. In February 2019 Gauzy announced that it would be expanding its SPD film production capacity by having SPD emulsion produced in
Tel Aviv and that this emulsion would be coated into SPD-Smart light control film in a new dedicated factory being build by Gauzy in Stuttgart, Germany.
In December 2019, Gauzy Ltd. celebrated the opening of its second production facility in Stuttgart, Germany to produce SPD-Smart light control film for
the entire SPD-SmartGlass industry. This state-of-the-art facility, with specially designed coating and curing areas, will give Gauzy the capacity to coat
over one million square meters of SPD film per year in widths of up to 1.8 meters.
Customers for Hitachi Chemical’s and Gauzy’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%.
Others
Other companies are currently licensed by Research Frontiers to sell SPD-Smart light-control film to licensees of Research Frontiers. None of these other
companies has yet announced commercial SPD film for sale.
2.
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 industry leaders American Glass
Products, Asahi Glass, Custom Glass, Daimler AG, Isoclima, Pilkington Glass, Pittsburgh Glass Works, Saint-Gobain, SER, and Vision Systems. 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 current Mercedes-Benz S-Class is the third large-scale serial production vehicle to offer Magic Sky Control™ using SPD-
Smart technology.
The S-Class Coupe 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 SLC and SL roadster. With the
addition of the new 2018 S450 and S450 4MATIC S-Class Sedans, a total of 14 Mercedes-Benz model variants now offer this remarkable panoramic smart
glass roof:
● S 450 S-Class Sedan
● S 450 4MATIC S-Class Sedan
● S 560 4MATIC S-Class Sedan
● AMG S 63 S-Class Sedan
● Mercedes-Maybach S 560 4MATIC
● S550 4MATIC S-Class Coupe
● AMG S63 S-Class Coupe
● AMG S65 S-Class Coupe
● SLC 300 Roadster
● AMG SLC 43 Roadster
● SL 450 Roadster
● SL 550 Roadster
● AMG SL63 Roadster
● AMG SL65 Roadster (Standard Equipment)
A key factor in the broad adoption of SPD technology in various automotive windows is its cost. Typically, the cost for new technology products decreases
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 generate a royalty of 10% of the selling price of these roofs by our licensees to Daimler. The roofs
on the S-Class are approximately two to three times the surface area of the roofs on the SLC and SL vehicles.
5
Research Frontiers believes that the addition of the S-Class car model is also significant because 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 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, and 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. 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 sun 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:
● March 2019:
At the 2019 Geneva Auto Show, Mercedes-Benz SLC roadster, SL roadster, S-Class Sedan and Maybach vehicles in serial production were presented
using the Company’s SPD-SmartGlass technology.
In addition, two new production cars by McLaren Automotive featured SPD-SmartGlass technology in their roofs: the McLaren 720S Spyder and
MacLaren Speedtail. The McLaren 720S Spyder is currently in production and the McLaren Speedtail is expected to be in production in 2019 with
delivery to customers having begun in January 2020. Since then, McLaren has included SPD-SmartGlass in additional production models.
● January 2019:
At least four different companies showcased SPD-Smart products at CES 2019 in the automotive and consumer electronics industries.
● November 2018:
Two concept electric vehicles debuted at the 2018 Los Angeles Auto Show featured SPD-SmartGlass and were also showcased at various automotive
and other major industry trade shows during 2019 and early 2020. These two vehicles are scheduled to be in production in 2020.
At various trade shows beginning with electronics 2018 in Munich in November, Texas Instruments demonstrated a control unit reference design
(TIDA-020013) created to more intelligently and efficiently power SPD-SmartGlass electronically dimmable glass using a standard 12-volt automotive
battery. The interactive demonstration is paired with gesture control to lighten or tint glass with the SPD-SmartGlass technology.
The SPD-SmartGlass sunroof application gives occupants more control over the lighting in their car, removes unwanted heat, light and glare, and
increases the driving range of electric vehicles. It also miniaturizes the electronics package and reduces the cost of the entire system to the auto maker,
while also improving power efficiency. Engineers can use the TI reference design to accelerate their own designs using electronically dimmable glass.
The design includes TI’s highly efficient power management circuits and a 32-bit C2000™ real-time MCU to help generate the necessary signal to
drive and control substantial surface areas.
● January 2018:
A number of different companies showcased SPD-Smart products at CES 2018. In the automotive industry, Fisker debuted its new Fisker E-Motion
with a unique and innovative four-segment SPD SmartGlass roof. In addition to use in its large curved panoramic roof, Fisker says that it plans to offer
SPD-SmartGlass technology on the side windows of this new electric vehicle.
Continental Corporation (“Continental”) also showcased its Intelligent Glass Control system using SPD technology at CES 2018 to demonstrate how it
makes cars safer, more private and comfortable, lighter and more energy-efficient.
● January 2017:
Corning introduced a concept car that features an SPD-SmartGlass panoramic roof and rear glass at the 2017 Consumer Electronics Show. This large
roof and curved rear glass is made using SPD-SmartGlass light-control film laminated between Corning’s Gorilla® Glass, a special chemically-
strengthened thin and lightweight glass.
At the 2017 Consumer Electronics Show, Continental Corporation (“Continental”) showcased an advanced version of its SPD-equipped vehicle that it
originally showcased at the 2016 Consumer Electronics Show. This vehicle has enhanced and more sophisticated electronics, Continental indicated
that its Intelligent Glass Control system increases passenger comfort and lowers CO2 emissions by keeping the interior of the vehicle cooler. As a
result, smaller, more efficient and lighter air conditioning units could be used. Calculations showed a reduction in CO2 emissions of four grams per
kilometer. Continental also estimates that its Intelligent Glass Control system can increase the driving range of electric vehicles by 5.5%
● 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 sun visor 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 debuted at the Paris Motor Show its new BMW Concept Active Tourer. This vehicle’s entire composite glass roof uses patented SPD-
SmartGlass technology.
6
● 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.
● 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.
3. 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 opportunities in the automotive market. Research Frontiers licensee American Glass Products (AGP) is offering its Vario Plus
Sky SPD-SmartGlass to the automotive aftermarket as well as to the automotive OEM market for serial production. 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. In May of
2017, Hanamac International Ltd. acquired a license from Research Frontiers to produce and sell SPD-SmartGlass automotive windows for the South
Korean aftermarket.
In August 2019, Research Frontiers licensed São Paulo, Brazil based SER Company to make SPD-SmartGlass primarily for the automotive armored glass
aftermarket in Brazil. SER Company is a Brazilian leader in the development of technologies and solutions for ballistic cars in the protection and security
sector.
4. Recreational Vehicles//Motor Homes/Busses and Motorcoaches:
● January 2019:
Vision Systems exhibited its SPD-SmartGlass technology for the coach marketplace at UMA Expo.
Most motorcoach windows use heavily tinted windows to manage excessive light, glare or heat. While this reduces somewhat the time the shade has to
be down, it remains ineffective for many conditions. Also, it limits passengers’ experience of views during dusk, nighttime and dawn hours. This is
due to the fact that when outside light levels are low, a heavily tinted window blocks or degrades elements of the scene outside. During these hours, the
high optical clarity of SPD-SmartGlass in the “clear” state eliminates this problem.
Features of Vision Systems’ SPD-SmartGlass electronically dimmable window (“EDW”) for motorcoaches include:
○ Different zones of an EDW can be independently controlled.
○ All EDWs can be controlled centrally with a master control, or automatically with light sensors.
○ The level of noise in the motorcoach is reduced.
○ The EDWs automatically turn to the darkest state when the motorcoach engine is off, keeping the interior cooler and offering lower air-
conditioning consumption and greater energy savings.
○ An ergonomic SPD-Smart dimmable motorcoach sun visor increases safety.
○ The electronics are integrated into the EDW, which facilitates OEM and aftermarket installations.
● May 2017:
At Caravan Salon in Dusseldorf, Germany, premium recreational vehicle supplier Lippert Components, and Knaus, a leading manufacturer of leisure
vehicles in Europe, both featured the world premiere of dimmable windows using SPD-SmartGlass technology. These electronically dimmable smart
windows, which dramatically improve the recreational vehicle passenger experience, were supplied by Vision Systems, a licensee of Research
Frontiers.
● 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.
● January 2012:
Vision Systems announced 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 it has been working for almost two years with a major automotive OEM to test the ease of installation, reliability, design
and performance of its new sun visor in real world conditions. It 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.
5. Rail Transport:
● September 2018:
Innotrans, the leading international trade fair for transport technology, was the stage for the world premier of new EDW solutions using SPD-
SmartGlass technology. AGC and Vision Systems launched their respective latest generations of SPD-SmartGlass EDWs for the rail industry. In
addition, Continental also new electronic control products for SPD-SmartGlass EDWs at the show.
Vision Systems at InnoTrans
Some of the products using SPD-SmartGlass for the train industry being showcased this week in Berlin include:
● EDWs with integrated control system electronics (on the passenger window EDW itself), for rapid installation in both new train car
production, and retrofitting existing train cars.
● SPD-SmartGlass solutions for the driver cabin, to eliminate glare on the dashboard with side and back window EDWs, and/or SPD sun visors
integrated into the windshield.
● “Info-Vision” window, which integrates an electroluminescent display into SPD-SmartGlass windows. This combines the benefits of the
EDW with information available directly on the window, such as time to destination, remaining distance, temperature, service options, and
train schedules.
In addition to the above information, Vision Systems confirmed at Innotrans that it was working on other high-volume train projects with major
commuter train manufacturers and operators.
7
AGC at InnoTrans
AGC, a leading Tier 1 supplier of transparencies to the rail industry for over 50 years, is also prominently featuring SPD-SmartGlass EDWs. In a
recent article entitled AGC at Innotrans with smart glass for transportation, it was noted, “AGC’s booth will feature AGC’s smart glasses for
transportation… Wonderlite light control glazing, that switches from clear to dark at the simple touch of a button.” Wonderlite is AGC’s brand name
for its SPD-SmartGlass EDWs.
Global Rail News published an article about Continental at Innotrans, noting, “The level of transparency… of the glass can be adjusted via a control
system, which can be programmed to respond to external conditions, such as sensor data on sunlight intensity.”
Continental at InnoTrans
Continental unveiled a number of new innovations, including an intelligent technology for darkening glass panes and a range of individual surface
designs…. The ‘Intelligent Glass Control’ (IGC) system by Continental provides passengers with the flexibility to adjust the amount of light and the
color of their window or other glazed areas to suit their needs. The technology, which was originally developed for the automotive industry, relies on a
film sandwiched between two panes of glass and connected to an electronic control unit (ECU).
● September 2017:
Vision Systems announced to the press in September 2017 that it had just signed a contract to supply SPD-Smart Nuance windows for a new proposed
special Shinkansen bullet train which will be put in service for the 2020 Tokyo Olympics.
● May 2017:
AGC Asahi Glass announced its light control glass, WONDERLITETM, was adopted for JR East luxury sleeper train, Train Suite Shiki-shima (“Shiki-
shima”), which began service on May 1. JR East’s luxury sleeper train Shiki-shima, conceptualized as a train for ‘enjoying changes in time and space’,
has been designed with individualized themes for each compartment. Of particular note, the front carriage, containing a special area for enjoying
panoramic views of Japan’s landscape, has been outfitted with WONDERLITETM light control glass, which makes it possible to adjust passing
sunlight simply with a switch.
● September 2016:
Vision Systems, with its customers/strategic partners, exhibited many different types of SPD-Smart products at InnoTrans 2016. Products included:
(a) A full-scale train cabin mockup equipped with many SPD-Smart passenger windows
(b) SPD-Smart windows with integrated transparent information displays
(c) SPD-Smart contrast enhancement filters for displays
(d) SPD-Smart windows with multi-zone switching capabilities
(e) Train passenger SPD-Smart windows
(f) Aftermarket driver cabin SPD-Smart windows
8
● September 2014:
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 its
“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.
6. 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, SER and Pittsburgh Glass Works are recognized industry leaders in the armored glass
market.
In August 2019, Research Frontiers licensed São Paulo, Brazil based SER Company to make SPD-SmartGlass primarily for the automotive armored glass
aftermarket in Brazil. SER Company is a Brazilian leader in the development of technologies and solutions for ballistic cars in the protection and security
sector.
7.
SPD-Smart Aircraft Products:
Four aircraft manufacturers have announced that they have selected SPD-Smart dimmable window products as standard or optional equipment for their
production aircraft:
● Honda Aircraft Company:
The HondaJet, with first delivery in December 2015, comes with SPD-Smart electronically dimmable windows as standard equipment on all passenger
windows.
● Textron-Beechcraft has SPD-Smart electronically dimmable windows as standard equipment on all models of its King Air aircraft:
● The King Air 250, with first delivery during 2015
● The King Air 350i, with first delivery during 2015
● The King Air C90GTx, with first deliveries during the first quarter of 2016
● ONE Aviation announced the selection of SPD-Smart electronically dimmable windows for its upcoming Eclipse 700 platform.
● Epic Aircraft has selected SPD-Smart electronically dimmable windows for its upcoming Epic E1000 aircraft.
● Dassault Aviation:
The Falcon 5X was scheduled to come with SPD-Smart electronically dimmable skylights as standard equipment. Subsequently, however, Dassault
announced in December 2017 that it was terminating the Falcon 5X program and announced the launch of a new Falcon program featuring the same
cross section as the Falcon 5X. This aircraft is scheduled to enter into service in 2022. No decision regarding the use of SPD-Smart electronically
dimmable windows has been made for this new program.
Other aircraft manufacturers and their suppliers continue to develop and evaluate the use of SPD technology in their window systems. Aircraft
manufacturers and SPD product suppliers have incorporated SPD-Smart electronically dimmable windows in mockups, with some of these mockups being
exhibited at major aviation shows:
● April 2019:
Vision Systems presented its SPD-Smart EDWs at the Aircraft Interiors Expo (AIX) in Hamburg, Germany. Its system delivers important passenger
experience benefits including a cooler and quieter cabin due to remarkable thermal and acoustic insulation. The following chart summarizes some of the
performance advantages highlighted at the show that Vision Systems’ SPD-Smart EDWs have over electrochromic EDWs:
Switching Speed
Uniform Tinting
Heat-Blocking When Aircraft on Ramp and Unpowered
Noise Blocking
Multizone Tinting
Replaces Dust Pane
Integrated Electronics
SPD-Smart EDW
0.5 – 3 Seconds
Yes
Extremely High:
Switches to Darkest State
Electrochromic EDW
Minutes
No
Poor – Moderate:
Switches to Clearest State
Extremely High
Poor – Moderate
Yes
Yes
Yes
No
No
No
Ability to Include PDLC Film For Additional Blackout
and Privacy
Integrated Information Display
Integrated Touch Panel
Yes
Yes
Yes
9
No
No
No
● October 2018:
Vision Systems presented its second-generation SPD-Smart EDWs, branded Nuance V2, with enhanced optics and a lower cost at the NBAA business
aviation show. The solutions on display at Vision Systems’ NBAA included:
○ Multizone: This Nuance V2 solution allows independent control of light and glare through different “zones” of an SPD-Smart EDW, to any level
of tint.
○ Variable light control with diffused light / privacy control: This SPD-Smart solution enables instant and precise dimming from clear to very dark,
plus an opaque white or dark feature for privacy and enjoying soft, diffused daylight through the EDW.
○ Interactive: Vision System’s Info-Vision is the first smart information window integrating SPD-Smart and electroluminescent technologies. This
economical innovation, for use in windows and cabin dividers, provides passengers with travel and other information right on the window. The tint
of the Info-Vision EDW can automatically adjust in real-time, providing optimal contrast and readability.
○ Cabin Divider: The Nuance V2 cabin divider enables adjustable levels of privacy between classes and allows flight attendants the ability to view
multiple cabins whenever needed.
● April 2018:
Fokker Services, in partnership with InspecTech Aero Service, featured their Element EDW brand of SPD-Smart EDWs at the AIX commercial aviation
show in Hamburg, Germany:
○ An Airbus A320 mockup was demonstrated, which includes two Element EDWs integrated into a sidewall. The EDWs replace the inboard
“scratch lens” (the surface closest to the passenger), resulting in benefits including improved optical clarity, and the perception of larger windows
as the scratch lens panel has a larger surface area than the structural window.
○ Fokker showcased a Boeing 737 cabin mockup which includes Element EDWs.
● April 2018:
At the AIX show in Hamburg, Vision Systems unveiled the world premiere of Vision System’s Info-Vision, the first smart information window integrating
both SPD-Smart and electroluminescent technologies. This economical innovation, for use in windows and cabin dividers, provides passengers with travel
information right on the panel. The tint of the Info-Vision window or divider can automatically adjust in real-time, providing optimal contrast and
readability. Other SPD-Smart EDW solutions from Vision Systems featured at AIX in Hamburg include:
○ Second-generation Nuance V2 and Nuance V2 Ultra-Dark: enhanced optics and lower cost.
○ Nuance Smart-Shell: a retrofit EDW product covering cockpit side windows.
○ Nuance Energia: a dimmable sun visor integrating a transparent photovoltaic film for self-power.
● October 2017:
PPG Aerospace, in partnership with Vision Systems, launched a new product at the National Business Aviation Association Convention and Exhibition
in Las Vegas, Nevada. Nuance V2 Ultra Clear is a new product responding to the industry requests for aircraft cabin shading systems that allow for
brighter cabin interiors, while providing for more effective shading. This Electronically Dimmable Window (EDW) solution uses patented SPD-Smart
light control technology developed by Research Frontiers.
10
● July 2017:
ONE Aviation announced the selection of the ALTEOS EDW by PPG for its new Eclipse 700 aircraft. The Eclipse 700 aircraft is an upgraded version
of its Eclipse 500/550. The Alteos EDW utilizes the NUANCE V2 shading product by Vision Systems that uses SPD-Smart light-control technology
from Research Frontiers. As ONE Aviation stated in the announcement, “A priority at ONE Aviation is to maximize ease of use and passenger
comfort. The PPG ALTEOS system provides both with simple and effective control of window shading.”
● May 2017:
Vision Systems and PPG Aerospace announced that they have reached a commercial agreement to work together on developing new applications
utilizing Vision Systems’ EDW shading solutions for aircraft. These solutions use Research Frontiers’ SPD-Smart EDW technology and also combine
the considerable experience that both PPG Aerospace and Vision Systems have in supplying the aircraft industry with EDW systems. As stated in their
press release, “The agreement provides a framework for PPG and Vision Systems to pursue opportunities in commercial, regional, military and general
aviation applications that capitalize on each company’s expertise.”
● October 2016:
At the MRO Europe conference Fokker Services, a division of GKN Aerospace, launched “Element EDW,” a new electronically dimmable window
system for commercial airliners. Developed in collaboration with Research Frontiers licensee InspecTech Aero Service, this “smart transparency”
controls and manages both beneficial and undesirable outside elements coming into aircraft cabins through passenger windows.
Vision Systems exhibited SPD-Smart EDWs at Aircraft Interiors Expo Asia and at the National Business Aviation Association (NBAA) Business
Aviation Convention & Exhibition. These products improve the airline passenger experience by controlling light, glare, heat and noise entering the
cabin.
11
● May 2016:
Easier SPD-Smart EDW control switches from InspecTech Aero Service were featured at the EBACE aircraft show on the newly redesigned King Air
350i and 250 that were on display by Textron-Beechcraft. Also, at EBACE it was reported that the King Air C90GTx (the third King Air to offer SPD-
Smart EDWs as standard equipment) has received FAA certification, and Textron highlighted the improved EDWs on its newly redesigned aircraft as
an important cabin enhancement.
Vision Systems debuted an Acti-Vision interactive aircraft window at the EBACE aircraft show that not only dims but brings the passenger important
information such as flight status, moving map, satellite imagery, and even tourist information about what the passenger is looking at out the window
via a transparent video touchscreen built into the window.
● April 2016:
Vision Systems introduced a solution for the light and glare issues commonly experienced in aircraft cockpits at the Aircraft Interiors Expo. Vision
Systems’ Nuance Smart Shell, using Research Frontiers SPD-Smart EDW technology, is designed for lateral cockpit windows, which account for a
large percentage of light and glare entering cockpits, and are extremely difficult to shade. The Nuance Smart Shell EDW covers the entire window
surface area and brings dynamic solar control to aircraft cockpits – providing automated management of intense high-altitude light and glare, and
protection from harmful UV radiation.
● April 2015:
Vision Systems demonstrated its Nuance Touchless SPD-Smart EDW 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.
● 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.
● October 2014:
Epic Aircraft featured SPD-Smart windows in the mock-up of its upcoming E1000 aircraft. The mock-up was unveiled at 2014 NBAA in Orlando,
Florida.
● 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.
12
● April 2014:
BAE Systems featured SPD-Smart electronically dimmable windows in its cabin management system mock-up at the 2014 Hamburg Airshow. The
windows can be controlled by the BAE system.
Vaupell featured an SPD-Smart electronically dimmable window in its commercial airliner window assembly at the 2014 Hamburg Airshow.
● October 2013:
At the 2013 AIX Americas show, Vision Systems’ 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.
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 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 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.”
● 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.
● May 2013:
Eurocopter featured SPD-Smart windows, and SPD-Smart cabin partitions, in the mock-up of its EC175 helicopter. The mock-up was unveiled at
EBACE 2013 in Geneva, Switzerland.
● 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.
● 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.
13
InspecTech announced enhancements to its electronics architecture used to control its iShade to enable the SPD-Smart electronically dimmable
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.
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.
● 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 its world premiere. 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.”
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.
● November 2011:
Bombardier Aerospace featured SPD-Smart aircraft windows in its CSeries aircraft cabin mock-up at the 2011 Dubai Airshow, equipping the business
class windows in its mock-up with SPD-Smart aerospace windows.
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.
● 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.
● 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.
14
Key performance requirements for aircraft light-control windows:
● 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.
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 and thin chemically strengthened glass
● FAA certification: the ability to demonstrate full compliance with all FAA requirements
8.
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 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
industry leaders such as: American Glass Products (AGP), Asahi Glass, Cricursa Cristales Curvados, Gauzy, Glatic, Innovative Glass, Isoclima, LTI
SmartGlass, NSG UMU Products Co., Ltd Prelco, Isoclima, Smartglass International and Traco (a business unit of Alcoa).
In December 2019, Research Frontiers licensed Seoul, South Korea based Glatic Co., Ltd. to produce and sell SPD-SmartGlass smart windows for the
South Korean architectural market.
In January 2017, Research Frontiers and NSG UMU Products Co., Ltd. announced that UMU Products has acquired a license from Research Frontiers to
produce and sell SPD-SmartGlass architectural intelligent products throughout the United States, Canada, Mexico, Japan, the People’s Republic of China
and Taiwan. The non-exclusive license grants UMU Products, a subsidiary of world-leading glass manufacturer Nippon Sheet Glass, the right to
manufacture and sell SPD-SmartGlass products including windows, doors, solar shading screens, curtainwalls, skylights and other intelligent smart glass
architectural products.
In September 2016, Smartglass International announced that its Solar SmartGlass brand of SPD-SmartGlass has been selected for both new construction
and retrofit projects. An example of a retrofit project is the University of Edinburgh’s historic McEwan Hall. The interior of this hall, built in 1897, is being
refurbished. In an article on the Smartglass International website, the company indicates that its Solar SmartGlass “…will be retrofitted to the internal
building walls to protect the beautiful paintings and features for many more years to come. The glass will increase the functionality of the space by
allowing instant control over the amount of light entering the hall. Smartglass International will create bespoke solar switchable panels that will be fitted
inside each of the 13 circular oculi, each more than 2 metres in diameter.”
15
At its annual stockholders meeting in June 2015, Research Frontiers announced a small 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, Research Frontiers’ patented SPD-SmartGlass technology was 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 its smart window
product line using our SPD-Smart light-control technology. In October 2010, its 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.
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.
9.
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 did not renew its license for SPD-SmartGlass technology for
the marine market which terminated at the end of December 2017.
16
In June 2019, Vision Systems exhibited at the Cruise Ship Interiors Expo in Miami, Florida. Building upon its expertise in dimmable shading systems,
Vision Systems exhibited its Electronically Dimmable Windows (EDWs) for solar protection and privacy, including a curved dimmable solution, a
complete privacy solution, and a multizone Electronically Dimmable Window with integrated information display. Vision Systems’ innovative solutions
make it possible to eliminate shades that clutter up the space, block the view and require regular maintenance. They also allow for a solar protection on
windows where shades could not, or be difficult, to be installed.
In October 2016, Vision Systems announced at the Monaco Yacht Show and 2016 IBEX new relationships for offering SPD-SmartGlass products with
Taylor Made Systems, ProCurve Glass, and Yachtglass. In addition, the Monaco Yacht Show hosted the world premiere of the “Edition 1” model of the
“ARROW460 – Granturismo,” which has SPD-Smart dimmable glazing products throughout the Silver Arrows Marine motor yacht supplied by Vision
Systems and designed by Mercedes-Benz Design.
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 its 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 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 that 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.
10. VariGuard SmartGlass Business Unit:
In May of 2013, Research Frontiers announced the formation of its VariGuard SmartGlass 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 SmartGlass is a
developmental activity for the Company and its revenues are currently immaterial relative to the Company’s licensing activities.
The VariGuard SmartGlass 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 SmartGlass 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.
17
VariGuard SmartGlass marketing and exhibition activities include:
● October 2018: In an inauguration ceremony presided over by the King and Queen of Sweden, the country’s Nationalmuseum reopened after a five-year
$132 million renovation. The Nationalmuseum selected ArtRatio’s display case, engineered using VariGuard SmartGlass, to allow visitors to
experience these objects while at the same time providing unprecedented protection against irreversible damage from exposure to light.
Some of the works being protected by the ArtRatio display case include:
● Book of Hours, St. Christopher carrying the Christ Child, watercolour and gold on parchment, Spain, c1400.
● Book of Hours, Arrest of Christ, watercolour and gold on parchment, France, c1500.
● Ivory object, Christ on the Cross, France, c1350.
● Book of Hours, St. Catherine and Kneeling Donor, watercolour and gold on parchment, Netherlands, c1430.
● Book, The Hours of Giraldi-Guicciardini: The Rising of Lazarus; Death Carrying a Scythe; 1500-1525, Watercolour, gold on parchment, Italy.
Many objects in the collection date from the Middle Ages and are highly susceptible to permanent damage from exposure to UV, visible and infrared
light.
Nationalmuseum Comments:
“The ArtRatio smart glass table works wonderfully, does its job of protecting our manuscripts and looks great in the room as well!” Carina Pia
Fryklund – Curator, Department of Prints and Drawings, Nationalmuseum
“With VariGuard SmartGlass we can now show very light sensitive illuminations in a gallery where we also let daylight coming in.” Joakim Werning –
Exhibition Designer, Nationalmuseum
● January 2018: VariGuard SmartGlass showcased its SPD-SmartGlass products at the West Coast Art and Framing Expo at Omega Moulding’s booth
#431.
● December 2017: To raise awareness of the unprecedented benefits of VariGuard SmartGlass, the Company has launched an advertising campaign
targeting the display case and custom framing industries. The first phase of the campaign utilizes publications from leading conservation institutions in
the US (Journal of the American Institute of Conservation) and the UK (Institute of Conservation) as well the leading institution for the picture framing
industry (Picture Framing Magazine).
● May 2017: VariGuard SmartGlass showcased its SPD-SmartGlass products at the 45th annual meeting of the American Institute for Conservation of
Historic and Artistic Works (AIC) in Chicago at booth #107.
● 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.
● August 2015: The Smithsonian’s National Postal Museum selected VariGuard SmartGlass panels to protect the 1856 British Guiana One Cent
Magenta, the world’s most famous rare postage stamp.
● May 2015: VariGuard SmartGlass 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 SmartGlass 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.
● January 2015: VariGuard SmartGlass 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.
● November 2014: VariGuard SmartGlass 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 SmartGlass display panels versus traditional glass display panels.
● June 2014: VariGuard SmartGlass business unit announced that the Smithsonian’s National Postal Museum will use VariGuard SmartGlass 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.
● January 2014: VariGuard SmartGlass 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.
● May 2013: VariGuard SmartGlass featured its panels in several framing applications at Museum Expo 2013 at the Baltimore Convention Center in
Baltimore, MD.
On March 14, 2019, the Company suspended its VariGuard SmartGlass business unit activities. Instead, the Company licensed a new entity to pursue the
business opportunities previously pursued by the Company’s VariGuard SmartGlass business unit. This new licensee continues to use the VariGuard
SmartGlass name. The non-exclusive license grants this new licensee the right to manufacture and sell: (i) SPD-SmartGlass products used in panels,
frames, cases, wall cases, appliances or other similar products to protect light-sensitive documents, artwork or other objects, (ii) SPD-SmartGlass products
used in panels, frames, cases, wall cases, appliances or other similar products to provide “hide and reveal” functionality, and (iii) SPD-SmartGlass products
used in a medical device to provide control and management of visible light. See Related Party Transactions in Item 7 of this report for more details
regarding this transaction.
More information about VariGuard SmartGlass can be found on its independent website at www.VariGuard.com.
18
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 2019 and 2018, these programs included 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.
In January 2020, the Company and Gauzy presented at the CES in Las Vegas the benefits of SPD-SmartGlass for the automotive, architectural and
consumer electronics industries. Some examples on display were automotive sunroofs that could be controlled electronically with a variety of control
systems including smart speakers, high definition and projection displays. The use of SPD-SmartGlass technology enhances the clarity and vibrancy of
displayed images, and when used to control the tint of automotive windows, sunroofs and sun visors, reduces heat, light or glare on demand or
automatically. This can increase the driving range of electric vehicles by up to 5.5% and reduce CO2 emissions by up to four grams per kilometer and
reduce air conditioner compressor sizes by 40%.
In February 2019, Research Frontiers and its licensee Gauzy rang the opening bell at the Nasdaq Market Site in Times Square to announce Gauzy’s new
SPD-Smart light control film factory in Stuttgart, Germany. In early December 2019, Research Frontiers, Gauzy and executives from the automotive and
architectural smart glass industries, invited guests and government officials, celebrated the opening of Gauzy’s new state-of-the-art production facility in
Stuttgart, Germany. In May 2019, Research Frontiers presented the benefits of SPD-SmartGlass to the Automotive Industry at the 5th International CTI
Automotive Glazing USA conference in Novi, Michigan. In March 2019, the Company presented the benefits of SPD-SmartGlass to the Automotive
Industry at the Automotive Glazing Summit in Berlin, Germany. Both of these presentations focused on a real-world analysis of the use, benefits and
reliability of SPD-SmartGlass in automotive and other glazings. SPD-SmartGlass technology, which allows users to instantly vary the tint of glass or
plastic, is currently being used in the automotive, aircraft, marine, architectural, museum and consumer electronics industries.
In 2018, the Company was invited to speak at the 12th International CTI Conference – Automotive Glazing Europe and at the 3rd Annual 2018 Disruptive
Growth & Healthcare Conference on the subject of disruptive automotive technologies. In 2017 and 2016, the Company participated in clean tech,
emerging growth and automotive glass conferences in Europe, and during 2016 the Company presented at the Autonomous Vehicle Interior Design &
Technology Symposium in Novi, Michigan and was the keynote speaker, and event chairman, at the annual CTI Automotive Glazing USA Conference in
Rochester, Michigan.
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 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.
19
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 Research Frontiers’ licensees, and the year that their license agreements were entered into, are available on the
Company’s SmartGlass.com website and with its filings with the Securities and Exchange Commission.
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, MDV, Hanamac, SPD Technologies, SPD Systems, and Film
Technologies International are pursuing business activities with respect to SPD technology. The Company and SPD Control Systems agreed to terminate
their license agreement in December 2014 which 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.
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.
20
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)
21
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, acrylic, and chemically strengthened glass 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., Gauzy, 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 direct and off-angle haze
● In its intermediate tinted states provides shading without loss of view
● operates over a wider temperature range
● uses less power
● higher contrast ratios
● reduction in the amount of light transmitted rather than simply scatter it
● permits an infinite number of intermediate states between a transparent state and a dark blue state, rather than typically just two states.
● offers 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 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.
22
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, sun visors, 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 44 patents being issued to the Company by the US Patent Office and by foreign patent offices between
2018-2019 in addition to other patents and patent applications that are pending worldwide.
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
Excluding non-cash expenses of approximately $143,000 and $9,000, associated with the grant of stock options and restricted stock to the Company’s
technical personnel, Research Frontiers incurred approximately $892,000 and $854,000 during the years ended December 31, 2019 and 2018 respectively,
for research and development costs. 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.
23
Patents and Proprietary Information:
Research Frontiers continues to make substantial investments to develop, license and protect its intellectual property position. The Company has 21 United
States and 214 foreign patents in force. The Company’s United States patents expire at various dates from 2020 through 2037, while its foreign patents
expire at various dates from 2020 through 2036.
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.
24
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, 2019, we had approximately $6.6 million in cash and cash equivalents.
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 cash 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.
At December 31, 2019 the Company had cash and cash equivalents of $6,591,960, working capital of $6,919,428 and total shareholders’ equity of
$7,056,108. Our quarterly projected cash flow shortfall, based on our current operations, adjusted for any non-recurring cash expenses for the next 12
months, is approximately $450,000 - $500,000 per quarter. We may eliminate some operating expenses in the future, which will further reduce our cash
flow shortfall if needed. We currently expect to have sufficient working capital for the next 36 months of operations.
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, 2019, we had an accumulated deficit of $115,499,912 since our
inception. Our net loss was $3,808,978 in 2019 and $2,686,128 in 2018, (which includes non-cash accounting charges in 2019 and 2018 of $841,612 and
$69,309, respectively, resulting from the expensing of grants of stock options).
We may not generate sufficient cash flows to cover our operating expenses.
As noted above, we have incurred recurring losses since inception and expect to continue to incur losses as a result of costs and expenses related to our
research and continued development of our SPD technology and our corporate general and administrative expenses. Our limited capital resources and
operations to date have been substantially funded through sales of our common stock, exercise of options and warrants and royalty fees collected. As of
December 31, 2019, we had working capital of approximately $6.9 million, cash of approximately $6.6 million, shareholders’ equity of approximately $7.1
million and an accumulated deficit of $115.5 million. In the event that we are unable to generate sufficient cash from our operating activities or raise
additional funds, we may be required to delay, reduce or severely curtail our operations or otherwise impede our on-going business efforts, which could
have a material adverse effect on our business, operating results, financial condition and long-term prospects.
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.
25
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.
We have several large licensees that account for 10% or more of our annual fee income.
During 2019, three licensees accounted for 38%, 12% and 10%, respectively, of fee income recognized for the year. During 2018, four licensees accounted
for 35%, 13%, 11% and 10%, respectively, of fee income recognized during the year. The loss of all or a substantial portion of the fee income from any of
these customers (or certain other significant customers) could have a material adverse effect on our business, financial condition, and/or results of
operations.
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, trains, 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, trains,
boats and real estate construction declines significantly. If such commercialization is reduced, our revenues, results of operations and financial condition
could be negatively impacted.
Limited source of SPD film.
Our end-product licensees require a source of SPD film to manufacture finished products. Currently, Hitachi Chemical and Gauzy Ltd. are the only sources
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 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.
26
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
ITEM 2. PROPERTIES
The Company currently occupies approximately 9,500 square feet of space at an annual rent which, in 2019 was approximately $191,000, 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
There are no legal proceedings pending by or against the Company required to be reported under this Item 3.
ITEM 4. MINE SAFETY DISCLOSURES
N/A
27
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
PART II
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 12, 2020, there were 31,411,107
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:
March 31, 2018
June 30, 2018
September 30, 2018
December 31, 2018
March 31, 2019
June 30, 2019
September 30, 2019
December 31, 2019
$
Low
High
0.85 $
0.60
0.78
1.10
1.48
1.97
2.70
2.76
1.37
1.20
1.83
1.95
3.49
3.71
5.38
3.80
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 11, 2020, there were approximately 306 holders of record of the Company’s common stock and the closing price of our common stock was
$2.74 per share. The Company estimates that there are approximately 7,000 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.
28
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 2019 and 2018
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.
Statement of Operations Data:
2019
2018
Year ended December 31,
2017
2016
2015
Fee income
$
1,564,024
$
1,488,642
$
1,509,070 $
1,236,097 $
2,007,482
Operating expenses (1)
Research and development (1)
Loss on impairment of fixed asset
Total Expenses
3,677,740
1,035,623
50,666
4,764,029
3,043,460
863,401
-
3,906,861
3,127,979
799,702
-
3,927,681
4,086,408
1,417,634
-
5,504,042
4,742,166
1,588,491
-
6,330,657
Operating loss
(3,200,005)
(2,418,219)
(2,418,611)
(4,267,945)
(4,323,175)
Warrant market adjustment
Net investment income
Net loss
Basic and diluted net loss per common share
Weighted average number of common shares
outstanding
Balance Sheet Data:
Total current assets
Total assets
Total shareholders’ equity
$
$
$
(652,025)
43,052
(3,808,978)
(0.13)
$
$
(278,044)
10,135
(2,686,128)
(0.10)
$
$
-
4,752
(2,413,859) $
-
29,535
(4,238,410) $
-
43,319
(4,279,856)
(0.10) $
(0.18) $
(0.18)
30,011,556
25,956,232
24,043,846
24,043,846
24,007,974
2019
2018
As of December 31,
2017
2016
2015
$
7,306,857
8,256,133
7,056,108
$
3,711,822
4,058,566
3,099,490
2,364,985 $
2,881,113
2,567,366
4,588,974 $
5,274,196
4,904,926
8,674,234
9,544,017
9,075,805
(1) Reflects non-cash charges of $698,247, $60,079, $64,709, $51,093, and $578,723 to operating expenses, and non-cash charges of $143,365, $9,230,
$11,590, $16,438, and $146,293 to research and development expenses relating to the issuance of stock and stock options in 2019, 2018, 2017, 2016,
and 2015 respectively which increased the Company’s net loss for 2019, 2018, 2017, 2016, and 2015, by $841,612, $69,309, $76,299, $67,531, and
$725,016, respectively.
29
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 adopted ASC 606, the new revenue recognition standard, beginning January 1, 2018. The Company determined that its license agreements
provide for three performance obligations: (i) Grant of Use, (ii) Technical Support, and (iii) New Improvements.
The best method for determining standalone selling price of our Grant of Use performance obligation is through a comparison of the average royalty rate
for comparable license agreements as compared to our license agreements. Based on the royalty rate comparison referred to above, any pricing above and
beyond the average royalty rate would relate to the Technical Support and New Improvements performance obligations.
We recognize revenue when or as the performance obligations in the contract are satisfied. For performance obligations that are fulfilled at a point in time,
revenue is recognized at the fulfillment of the performance obligation. Since the IP is determined to be a functional license, the value of the Grant of Use is
recognized in the first period of the contract term in which the license agreement is in force. Since the costs incurred to satisfy the Technical Support and
New Improvements performance obligations are incurred evenly throughout the year, the value of the Technical Support and New Improvements services
are recognized throughout the contract period as these performance obligations are satisfied.
Effective January 1, 2019, the Company adopted the Financial Accounting Standards Board’s Standard, Leases (Topic 842), as amended. The standard
requires all leases to be recorded on the balance sheet as a right of use asset and a lease liability. The standard provides practical expedients in order to
simplify adoption, including the following:
● An entity need not reassess whether any expired or existing contracts are or contain leases.
● An entity need not reassess the lease classification for any expired or existing leases. Instead, any leases previously classified as operating leases
will continue to be classified as operating leases, while any leases previously classified as capital leases will be classified as finance leases.
● An entity need not reassess initial direct costs for any leases.
The Company used the above practical expedients as the transition method in the application of the new lease standard at January 1, 2019. The Company
applied a policy election to exclude short-term leases from balance sheet recognition and elected certain practical expedients at adoption. As permitted, the
Company did not reassess whether existing contracts are or contain leases, the lease classification for any existing leases or the initial direct costs for any
existing leases which were not previously accounted for as leases, are or contain a lease. At adoption on January 1, 2019, an operating lease liability of
$1,134,000 and an operating lease right of use asset of $941,000 were recorded (most of this liability relating to the Company’s lease for its facilities in
Woodbury, New York). The operating lease liability was $193,000 more than the operating lease right of use asset due to unamortized lease incentive from
periods prior to the adoption of the new lease standard. There was no cumulative earnings effect adjustment.
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. Our revenue source comes from the licensing of this technology and all of these license agreements have similar terms and provisions.
The Company has entered into license agreements covering products using the Company’s SPD technology. When royalties from the sales of licensed
products by a licensee exceed its contractual minimum annual royalties, the excess amount is recognized by the Company as fee income in the period that it
was 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.
Royalty receivables are stated less allowance for doubtful accounts. The allowance represents estimated uncollectible receivables usually due to licensees’
potential insolvency. The allowance includes amounts for certain licensees where risk of default has been specifically identified. The Company evaluates
the collectability of its receivables on at least a quarterly basis and records appropriate allowances for uncollectible accounts when necessary.
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 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.
30
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. 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 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.
In 2019 and 2018, the Company received royalty revenues from sales of the Magic Sky Control option on the S-Class Coupe, Maybach and S-Class Sedan,
and SL and SLK/SLC roadsters as well as royalty activity from other automotive models in excess of the minimum annual royalty levels for the two
licensees supplying products using the Company’s technology to Daimler. As such, royalties from these five car models were accretive to the Company’s
royalty revenue. Production efficiencies are expected to continue and accelerate with the introduction of the higher vehicle production volumes for various
car 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. The Company expects to generate additional
royalty income from the near-term introduction of additional new car and aircraft models from other OEM’s (original equipment manufacturers), continued
growth of sales of products using the Company’s technology for the marine industry in yachts and other watercraft, in trains, in museums, and in larger
architectural projects.
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.
Year ended December 31, 2019 Compared to the Year ended December 31, 2018
The Company’s fee income from licensing activities for the year ended December 31, 2019 was $1,564,024 as compared to $1,488,642 for the year ended
December 31, 2018 representing a $75,382 increase between these two periods. When operations from the Company’s suspended VariGuard business unit
are factored out, fee income for 2019 would have been $130,316 (9%) higher than 2018. This increase in revenues was principally the result of higher
royalty income from licensees focused on automotive and architectural markets partially offset by slightly lower royalty income from licensees focused on
aircraft, and lower revenue from the suspension of the Company’s VariGuard business unit.
Operating expenses increased by $634,280 for the year ended December 31, 2019 to $3,677,740 from $3,043,460 for the year ended December 31, 2018.
The increase was the result of higher non-cash compensation expense between the two periods of $638,000 relating to charges to operations for stock
options granted to employees, directors and a consultant. In addition, the Company incurred higher bad debt expenses ($114,000), higher investor relations
and marketing costs, net of non-cash consultant charges discussed above, ($78,000) and higher professional fees ($91,000). Partially offsetting these
increases were lower payroll and related costs, net of non-cash compensation costs discussed above ($259,000).
31
Research and development expenditures increased by $172,222 for the year ended December 31, 2019 to $1,035,623 from $863,401 for the year ended
December 31, 2018. This increase was the result of higher payroll and related costs ($175,000). Included in the higher payroll and related costs is higher
non-cash compensation costs related to stock options granted to employees ($134,000) between the two periods.
In connection with the issuance of certain warrants during the third quarter of 2018, the Company recorded a non-cash accounting expense of $278,044 to
mark these to their market value as of December 31, 2018. Investors that participated in the May 2019 offering agreed to amending/clarifying language to
the terms of the warrants that they received in the September 2018 offering. Those investors that received warrants in the September 2018 offering that did
not participate in the May 2019 offering, separately agreed to the same amending/clarifying language used in the May 2019 offering. The
amending/clarifying language relating to the September 2018 warrants does not allow for a net cash settlement option for the warrants even if no registered
shares of common stock are available upon the exercise of the warrant. With this new language, the warrants issued as part of the September 2018 Offering
to these investors were reclassified from a warrant liability to equity as of the amendment/clarification date (May 30, 2019 and June 27, 2019 respectively).
The Company incurred a charge of $652,025 in 2019 in connection with marking these warrants to market prior to the amending/clarifying language
agreement described above.
In 2019, the Company incurred a loss from the impairment of a fixed asset of $50,666 in value of an automobile which was subsequently sold to an
employee at fair market value.
The Company’s net investment income for the year ended December 31, 2019 was $43,052 as compared to $10,135 for the year ended December 31, 2018.
The difference was primarily due to higher cash balances available for investment.
No income tax benefit or expense was recorded for the years ended December 31, 2019 and 2018.
As a consequence of the factors discussed above, the Company’s net loss was $3,808,978 ($0.13 per common share) for the year ended December 31, 2019
as compared to $2,686,128 ($0.10 per common share) for the year ended December 31, 2018.
32
Financial Condition, Liquidity and Capital Resources
The Company has primarily utilized its cash, cash equivalents, and investments generated from sales of our common stock, proceeds from the exercise of
options and warrants, and royalty fees collected 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 2019, the Company’s cash and cash equivalents balance increased by $3,622,544 principally as a result of cash proceeds of $5,770,545 from the
sale of common stock and warrants and the exercise of options and warrants, partially offset by cash used for operations of $2,082,719 and cash used for
the purchase of property and equipment of $65,282. At December 31, 2019 the Company had cash and cash equivalents of $6,591,960, working capital of
$6,919,428 and total shareholders’ equity of $7,056,108. Our quarterly projected cash flow shortfall, based on our current operations, adjusted for any non-
recurring cash expenses for the next 12 months, is approximately $450,000 - $500,000 per quarter. We may eliminate some operating expenses in the
future, which will further reduce our cash flow shortfall if needed. We currently expect to have sufficient working capital for the next 36 months of
operations.
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 believes that its current cash and cash equivalents would fund its operations until late 2022. There can be no assurances 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 fully fund its operations.
During 2018, the Company’s cash and cash equivalents balance increased by $1,231,569 principally as a result of cash proceeds of $3,314,292 from the
sale of common stock and warrants and the exercise of options and warrants, partially offset by cash used for operations of $2,071,060 and cash used for
the purchase of property and equipment of $11,663. At December 31, 2018 the Company had cash and cash equivalents of $2,969,416, working capital of
$3,254,160 and total shareholders’ equity of $3,099,490.
Inflation
The Company does not believe that inflation has a significant impact on its business.
33
Contractual Obligations:
The Company has operating leases for certain facilities, vehicles and equipment with a weighted average remaining lease term of 5.2 years as of December
31, 2019. The maturities over time of the operating lease obligations as of December 31, 2019 were as follows:
Year 1
Years 2-3
Years 4-5
Thereafter
Total lease payments
December 31, 2019
213,146
420,548
439,021
55,874
1,128,589
$
$
See Note 8 to our Consolidated Financial Statements for further discussion of the Company’s lease obligations.
Off-Balance Sheet Arrangements
The Company has no variable interest entities or other off-balance sheet obligation arrangements.
Related Party Transactions
On March 14, 2019, the Company suspended its VariGuard SmartGlass business unit activities. Instead, the Company licensed a new entity to pursue the
business opportunities previously pursued by the Company’s VariGuard SmartGlass business unit. This new licensee continues to use the VariGuard
SmartGlass name. In addition to other employees at VariGuard SmartGlass Inc., two of the Company’s officers (Seth L. Van Voorhees, Michael R.
LaPointe) are principals at VariGuard SmartGlass Inc. and as consequence, this transaction is a related party relationship which has been reviewed and
approved by the Company’s Board of Directors pursuant to the requirements of Delaware corporate law and the Company’s Code of Ethics. Dr. Van
Voorhees and Mr. LaPointe also remain full-time employees at the Company.
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
On October 15, 2019, Research Frontiers Inc. dismissed BDO USA LLP (“BDO”) as the Company’s independent registered public accounting firm and
appointed CohnReznick LLP (“CohnReznick”) as its new auditors. The decision to change the Company’s independent registered public accounting firm
was the result of a comprehensive review process conducted by the Audit Committee, which included, but was not limited to, an assessment of the
expertise of each firm, the service approach and the overall level of fees. Based on such review, it was determined that CohnReznick was best suited to
serve as the Company’s independent registered public accounting firm. BDO’s audit report on the Company’s consolidated financial statements as of and
for the year ended December 31, 2018 did not contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty,
audit scope, or accounting principles. During the years ended December 31, 2018 and December 31, 2017, and through the subsequent interim period
through October 15, 2019, there were (i) no disagreements (as described in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the
Company and BDO on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which, if not
resolved to BDO’s satisfaction, would have caused BDO to make reference thereto in their reports on the financial statements for such years, and (ii) no
“reportable events” within the meaning of Item 304(a)(1)(v) of Regulation S-K.
On October 15, 2019, the Audit Committee approved the appointment of CohnReznick as the Company’s independent registered public accounting firm for
the Company’s year ending December 31, 2019. During the fiscal years ended December 31, 2018 and through the subsequent interim period through
October 15, 2019, neither the Company nor anyone acting on its behalf has consulted with CohnReznick regarding (i) the application of accounting
principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial
statements, and neither a written report or oral advice was provided to the Company that was an important factor considered by the Company in reaching a
decision as to any accounting, auditing, or financial reporting issue, (ii) any matter that was the subject of a disagreement within the meaning of Item
304(a)(1)(iv) of Regulation S-K, or (iii) any reportable event within the meaning of Item 304(a)(1)(v) of Regulation S-K.
34
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 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 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, 2019 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 3 months ended December 31, 2019 has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial reporting.
Management’s Annual 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 (2013), or the
COSO Framework. Based on the evaluation of our disclosure controls and procedures as of December 31, 2019, our Chief Executive Officer and Chief
Financial Officer concluded that, as of such date, our internal control over financial reporting were effective.
Changes in Internal Control Over Financial Reporting
There were no changes to controls during the 3 months ended December 31, 2019 that have materially affected or are reasonably likely to materially affect
our internal control over financial reporting.
35
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Research Frontiers Incorporated
Opinion on Internal Control Over Financial Reporting
We have audited Research Frontiers Incorporated’s (the “Company’s”) internal control over financial reporting as of December 31, 2019, based on criteria
established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019,
based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (the “PCAOB”), the
consolidated balance sheet and the related consolidated statements of operations, shareholders’ equity and cash flows of the Company, and the related notes
and financial statement schedule listed in the index at Item 15(a), and our report dated March 12, 2020, expressed an unqualified opinion.
Basis for Opinion
The Company’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 Management’s Annual 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 are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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 of internal control over
financial reporting 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.
Definition and Limitations of Internal Control Over Financial Reporting
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 accounting principles generally accepted in the United States of
America. 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 accounting principles generally accepted in the
United States of America, 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.
/s/ CohnReznick LLP
Jericho, New York
March 12, 2020
36
ITEM 9B. OTHER INFORMATION
None.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PART III
The Company has adopted a code of ethics applicable to its Chief Executive Officer, Chief Operating Officer, Treasurer and Chief Financial Officer, Vice
Presidents 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, 2020.
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, 2020. 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, 2020.
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, 2020.
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, 2020.
37
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) and (2) Financial Statements and Financial Statement Schedules
PART IV
The following consolidated financial statements of Research Frontiers Incorporated are filed under “Item 8. Financial Statements and Supplemental Data”
of this Report.
Reports of Independent Registered Public Accounting Firms
Consolidated Financial Statements:
Consolidated Balance Sheets, December 31, 2019 and 2018
Consolidated Statements of Operations, Years ended December 31, 2019 and 2018
Consolidated Statements of Shareholders’ Equity, Years ended December 31, 2019 and 2018
Consolidated Statements of Cash Flows, Years ended December 31, 2019 and 2018
Notes to Consolidated Financial Statements
Schedule II - Valuation and Qualifying Accounts
Page
F-1
F-3
F-4
F-5
F-6
F-7
F-20
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
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.
38
10.1A*
10.1B*
10.1B*
10.1C*
10.2*
10.3*
10.31*
10.32*
10.4*
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.
Amendment to Employment Agreement effective as of September 26, 2019 between the Company and Joseph M. Harary. Previously filed as
an Exhibit to the Company’s Current Report on Form 8-K dated September 26, 2019 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.
2019 Equity Incentive Plan. Previously filed as an Exhibit to the Company’s Definitive Proxy Statement dated April 29, 2019 filed with the
Commission on April 29, 2019, 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.
10.5
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.
10.5.1
10.5.2
10.5.3
10.5.4
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.
39
10.5.5
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.
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
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.
40
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
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.
41
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
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.
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.
42
10.32
10.33
10.34
10.35
10.36
10.37
10.38
10.39
10.40
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.
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.
43
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.
44
10.50
10.51
10.52
10.53
10.54
10.55
10.56
10.57
14
21
23.1
23.2
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.
Consent of CohnReznick LLP - Filed herewith.
45
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.
ITEM 16. Form 10-K Summary
None.
46
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 12, 2020
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
/s/ Alexander Kaganowicz
Alexander Kaganowicz
/s/ Seth L. Van Voorhees
Seth L. Van Voorhees
Position
Director
Director
Date
March 12, 2020
March 12, 2020
Director, President, CEO
March 12, 2020
Director
March 12, 2020
Vice President, CFO, Treasurer
March 12, 2020
47
Report of Independent Registered Public Accounting Firm
The Shareholders and Board of Directors
Research Frontiers Incorporated
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Research Frontiers Incorporated (the “Company”) as of December 31, 2019, and the
related consolidated statements of operations, shareholders’ equity and cash flows for the year then ended, and the related notes and financial statement
schedule listed in the index at Item 15(a) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the year then
ended in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (the “PCAOB”), the
Company’s internal control over financial reporting as of December 31, 2019, 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 12, 2020 expressed an
unqualified opinion thereon.
Change in Accounting Principle
As discussed in Notes 2 and 8 to the financial statements, the Company has changed its method of accounting for leases as of January 1, 2019 due to the
adoption of Accounting Standard Codification Topic 842, Leases.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ CohnReznick LLP
We have served as Research Frontiers Incorporated’s auditor since 2019.
Jericho, New York
March 12, 2020
F-1
Report of Independent Registered Public Accounting Firm
The Shareholders and Board of Directors
Research Frontiers Incorporated
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of Research Frontiers Incorporated as of December 31, 2018 and the related statements of
operations, shareholders’ equity and cash flows in the year ended December 31, 2018 and the related notes and financial statement schedule presented in
Item 15 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 2018 and the results of their operations and their cash flows for the year ended
December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an
understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and
disclosures within the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable
basis for our opinion.
We had served as the Company’s auditors from 2005 to 2019.
/s/ BDO USA, LLP
Melville, New York
March 14, 2019
F-2
RESEARCH FRONTIERS INCORPORATED
Consolidated Balance Sheets
December 31, 2019 and 2018
2019
2018
Assets
Current assets:
Cash and cash equivalents
Royalties receivable, net of reserves of $1,135,598 in 2019 and $1,094,774 in 2018
Prepaid expenses and other current assets
Total current assets
Fixed assets, net
Operating lease ROU assets
Deposits and other assets
Total assets
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of operating lease liability
Accounts payable
Accrued expenses and other
Deferred revenue
Total current liabilities
Operating lease liability, net of current portion
Warrant liability
Total liabilities
$
$
$
6,591,960 $
656,062
58,835
7,306,857
141,720
773,989
33,567
8,256,133 $
163,236 $
169,750
46,709
7,734
387,429
812,596
-
1,200,025
2,969,416
689,677
52,729
3,711,822
313,177
-
33,567
4,058,566
-
133,486
273,606
50,570
457,662
-
501,414
959,076
Shareholders’ equity:
Common stock, par value $0.0001 per share; authorized 100,000,000 shares, issued and
outstanding 31,254,262 in 2019 and 27,665,211 in 2018
Additional paid-in capital
Accumulated deficit
Total shareholders’ equity
3,125
122,552,895
(115,499,912)
7,056,108
2,767
114,787,657
(111,690,934)
3,099,490
Total liabilities and shareholders’ equity
$
8,256,133 $
4,058,566
See accompanying notes to consolidated financial statements.
F-3
RESEARCH FRONTIERS INCORPORATED
Consolidated Statements of Operations
Years ended December 31, 2019 and 2018
2019
2018
$
1,564,024 $
1,488,642
3,677,740
1,035,623
50,666
4,764,029
3,043,460
863,401
-
3,906,861
(3,200,005)
(2,418,219)
(652,025)
43,052
(278,044)
10,135
(3,808,978) $
(2,686,128)
(0.13) $
(0.10)
$
$
Fee income
Operating expenses
Research and development
Loss on impairment of fixed asset
Total Expenses
Operating loss
Warrant market adjustment
Net investment income
Net loss
Basic and diluted net loss per common share
Weighted average number of common shares outstanding
30,011,556
25,956,232
See accompanying notes to consolidated financial statements.
F-4
RESEARCH FRONTIERS INCORPORATED
Consolidated Statements of Shareholders’ Equity
Years ended December 31, 2019 and 2018
Common Stock
Shares
Amount
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Balance, January 1, 2018
24,043,846
$
2,404 $
111,627,789 $ (109,062,827) $
2,567,366
Adoption of ASC 606
Issuance of capital stock
Exercise of options and warrants
Share-based compensation
Net loss
Balance, December 31, 2018
Exercise of options and warrants
Issuance of common stock
Warrants converted to equity
Share-based compensation
Net loss
Balance, December 31, 2019
-
3,562,809
58,556
-
-
27,665,211
1,587,814
2,001,237
-
-
-
31,254,262
See accompanying notes to consolidated financial statements.
$
F-5
-
357
6
-
-
2,767
158
200
-
-
-
3,125 $
-
3,026,273
64,286
69,309
-
114,787,657
1,170,388
4,599,799
1,153,439
841,612
-
122,552,895 $
58,021
-
-
-
(2,686,128)
(111,690,934)
-
-
-
-
(3,808,978)
(115,499,912) $
58,021
3,026,630
64,292
69,309
(2,686,128)
3,099,490
1,170,546
4,599,999
1,153,439
841,612
(3,808,978)
7,056,108
RESEARCH FRONTIERS INCORPORATED
Consolidated Statements of Cash Flows
Years ended December 31, 2019 and 2018
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
2019
2018
$
(3,808,978) $
(2,686,128)
Depreciation and amortization
Warrant market adjustment
Share-based compensation
Loss on impairment of fixed asset
Bad debts
Change in assets and liabilities:
Royalties receivable
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
Net cash used in investing activities
Cash flows from financing activities:
Net proceeds from issuances of common stock and warrants
and exercise of options and warrants
Net cash provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
See accompanying notes to consolidated financial statements
$
F-6
195,377
652,025
841,612
50,666
156,636
(123,021)
(6,104)
1,904
(42,836)
(2,082,719)
(65,282)
(65,282)
5,770,545
5,770,545
3,622,544
2,969,416
6,591,960 $
181,047
278,044
69,309
-
43,350
(77,565)
(23,032)
94,169
49,746
(2,071,060)
(11,663)
(11,663)
3,314,292
3,314,292
1,231,569
1,737,847
2,969,416
(1) Business and Basis for Presentation
RESEARCH FRONTIERS INCORPORATED
Notes to Consolidated Financial Statements
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; museum display panels, 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 primarily utilized its cash, cash equivalents, and investments generated from sales of our common stock, proceeds from the exercise of
options and warrants, and royalty fees collected 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. We have incurred recurring losses since inception and expect to continue to incur
losses as a result of costs and expenses related to our research and continued development of our SPD technology and our corporate general and
administrative expenses. Our limited capital resources and operations to date have been substantially funded through sales of our common stock, exercise
of options and warrants and royalty fees collected. As of December 31, 2019, we had working capital of approximately $6.9 million, cash of approximately
$6.6 million, shareholders’ equity of approximately $7.1 million and an accumulated deficit of approximately $115.5 million. Our projected cash flow
shortfall based on our current operations adjusted for any non-recurring cash expenses for the next 12 months, is approximately $450,000-500,000 per
quarter. Based on our current expectations of our cash flow shortfall for the next 12 months, our working capital would support our activities for the next
36 months.
In the event that we are unable to generate sufficient cash from our operating activities or raise additional funds, we may be required to delay, reduce or
severely curtail our operations or otherwise impede our on-going business efforts, which could have a material adverse effect on our business, operating
results, financial condition and long-term prospects. The Company may seek to obtain additional funding through future equity issuances. There can be no
assurance as to the availability or terms upon which such financing and capital might be available. 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, 2019 and 2018.
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, 2019 and 2018 are
approximately $6.3 million and $2.7 million, respectively.
F-7
(b) 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 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 as well as the current status of the Company’s
customers. 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, 2019, two companies accounted for 14% and 13%, respectively, of the Company’s outstanding receivables. As of December 31, 2018, three
companies accounted for 30%, 22% and 16%, respectively, of the Company’s outstanding receivables.
(c) Fixed Assets
Fixed assets are carried at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method
over the estimated useful lives of the assets.
(d) Revenue Recognition/Fee Income
In May 2014, the FASB issued guidance on revenue recognition (“ASC 606”). The standard provides a single comprehensive revenue recognition model
for all contracts with customers and supersedes existing revenue recognition guidance. The revenue standard contains principles that an entity will apply to
determine the measurement of revenue and timing of when it is recognized. The underlying principle is that an entity will recognize revenue to depict the
transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services.
The ASC 606 guidance was adopted by the Company beginning January 1, 2018. ASC 606 was applied using the modified retrospective method, with the
cumulative effect of the initial adoption being recognized as an adjustment to opening retained earnings at January 1, 2018. The policies described below
refer to those in effect as of January 1, 2018.
ASC 606 follows a five-step approach to determining revenue recognition including: 1) Identification of the contract; 2) Identification of the performance
obligations; 3) Determination of the transaction price; 4) Allocation of the transaction price and 5) Recognition of revenue.
The Company determined that its license agreements provide for three performance obligations which include: (i) the Grant of Use to its Patent Portfolio
“Grant of Use”, (ii) Stand-Ready Technical Support (“Technical Support”) including the transfer of trade secrets and other know-how, production of
materials, scale-up support, analytical testing, etc., and (iii) access to new Intellectual Property (“IP”) that may be developed some time during the course
of the contract period (“New Improvements”). Given the nature of IP development, such New Improvements are on an unspecified basis and can occur and
be made available to licensees at any time during the contract period.
F-8
When a contract includes more than one performance obligation, the Company needs to allocate the total consideration to each performance obligation
based on its relative standalone selling price or estimate the standalone selling price if it is not observable. A standalone selling price is not available for our
performance obligations since we do not sell any of the services separately and there is no competitor pricing that is available. As a consequence, the best
method for determining standalone selling price of our Grant of Use performance obligation is through a comparison of the average royalty rate for
comparable license agreements as compared to our license agreements. Comparable license agreements must consider several factors including: (i) the
materials that are being licensed, (ii) the market application for the licensed materials, and (iii) the financial terms in the license agreements that can
increase or decrease the risk/reward nature of the agreement.
Based on the royalty rate comparison referred to above, any pricing above and beyond the average royalty rate would relate to the Technical Support and
New Improvements performance obligations. The Company focuses a significant portion of its time and resources to provide the Technical Support and
New Improvements services to its licensees, which further supports the conclusions reached using the royalty rate analysis.
The Technical Support and New Improvements performance obligations are co-terminus over the term of the license agreement. For purposes of
determining the transaction price, and recognizing revenue, the Company combined the Technical Support and New Improvements performance
obligations because they have the same pattern of transfer and the same term. We maintain a staff of scientists and other professionals whose primary job
responsibilities throughout the year are: (i) being available to respond to Technical Support needs of our licensees, and (ii) developing improvements to our
technology which are offered to our licensees as New Improvements. Since the costs incurred to satisfy the Technical Support and New Improvements
performance obligations are incurred evenly throughout the year, the value of the Technical Support and New Improvements services are recognized
throughout the initial contract period as these performance obligations are satisfied. If the agreement is not terminated at the end of the initial contract
period, it will renew on the same terms as the initial contract for a one-year period. Consequently, any fees or minimum annual royalty obligations relating
to this renewal contract will be allocated similarly to the initial contract over the additional one-year period.
We recognize revenue when or as the performance obligations in the contract are satisfied. For performance obligations that are fulfilled at a point in time,
revenue is recognized at the fulfillment of the performance obligation. Since the IP is determined to be a functional license, the value of the Grant of Use is
recognized in the first period of the contract term in which the license agreement is in force. The value of the Technical Support and New Improvements
obligations is allocated throughout the contract period based on the satisfaction of its performance obligations. If the agreement is not terminated at the end
of the contract period, it will renew on the same terms as the original agreement for a one-year period. Consequently, any fees or minimum annual royalties
(“MAR”) relating to this renewal contract will be allocated similarly over that additional year.
The Company’s license agreements have a variable royalty fee structure (meaning that royalties are a fixed percentage of sales that vary from period to
period) and frequently include a minimum annual royalty commitment. In instances when sales of licensed products by its licensees exceed the MAR, the
Company recognizes fee income as the amounts have been earned. Typically, the royalty rate for such sales is 10-15% of the selling price. While this is
variable consideration, it is subject to the sales/usage royalty exception to recognition of variable consideration in ASC 606 10-55-65 and therefore is not
recognized until the subsequent sales or usage occurs or the MAR period commences.
Because of the immediate recognition of the Grant of Use performance obligation: (i) the first period of the contract term will generally have a higher
percent allocation of the transaction price under ASC 606 than under the accounting guidance used prior to the adoption of ASC 606, and (ii) the remaining
periods will have less of the transaction price recognized under ASC 606 than under the accounting guidance used prior to the adoption of ASC 606. After
the initial period in the contract term, the revenue for the remaining periods will be based on the satisfaction of the technical support and New
Improvements obligations. Since most of our license agreements start as of January 1st, the revenue recognized for the contract under ASC 606 in our first
quarter will tend to be higher than the accounting guidance used prior to the adoption of ASC 606. In 2018, the Company reported $64,823 lower revenue
under ASC 606 as compared to the accounting guidance used prior to the adoption of ASC 606 due to the higher percent of the transaction price being
recognized in the first period of multiyear contracts that were executed prior to fiscal 2018.
F-9
Certain of the contract 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 recognized as revenue in future periods as earned.
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. Our revenue source comes from the licensing of this technology and all of these license agreements have similar terms and provisions. The majority
of the Company’s licensing 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 each model produced
with SPD-SmartGlass, and changes in pricing or exchange rates.
As of December 31, 2019, the Company has four license agreements that are in their initial multiyear term (“Initial Term”) with continuing performance
obligations going forward. The Initial Term of one of these agreements will end as of December 31, 2020, one will end as of December 31, 2021, one will
end as of December 31, 2022, and one will end as of December 31, 2024. The Company currently expects all four of these agreements will renew annually
at the end of the Initial Term. As of December 31, 2019, the aggregate amount of the revenue to be recognized upon the satisfaction of the remaining
performance obligations for the four license agreements is $579,369. The revenue for these remaining performance obligations for each of the four license
agreements is expected to be recognized evenly throughout their remaining period of the Initial Term.
For the years ended December 31, 2019 and 2018, the Company entered into a number of license agreements covering its light control technology. The
Company received minimum annual royalties under certain license agreements and recorded fee income based on ASC 606 revenue recognition each
quarter. In instances when sales of licensed products by its licensees exceed minimum annual royalties, the Company recognized additional 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 when earned. As of December 31,
2019 and 2018, deferred revenue balances were $7,734 and $50,570, respectively.
Fee income represents amounts earned by the Company under various license and other agreements relating to technology developed by the Company.
During 2019, three licensees accounted for 38%, 12% and 10% of fee income recognized for the year. During 2018, four licensees accounted for 35%,
13%, 11%, and 10% of fee income recognized during the year.
F-10
(e) Basic and Diluted Loss Per Common Share
Basic loss per share excludes any dilution. It is based upon the weighted average number of common shares outstanding during the period. Dilutive 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 two-year period ended December 31, 2019 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 3,031,494 and 3,754,386 for 2019 and 2018, respectively.
(f) Research and Development Costs
Research and development costs are charged to expense as incurred.
(g) Patent Costs
The Company expenses costs relating to the development or acquisition of patents due to the uncertainty of the recoverability of these items.
(h) 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.
(i) 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.
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, 2019 and 2018, 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,
2019 and 2018.
The tax years subject to examination by major tax jurisdictions include the years 2014 and forward by the U.S. Internal Revenue Service and certain states.
The Company is not currently being audited by any tax jurisdiction.
(j) Equity-Based Compensation
We recognize all stock-based compensation as an expense in the consolidated 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.
The exercise prices 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 numbers of shares granted are fixed at the date of grant.
F-11
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 employee and director stock options, the Company charged to compensation expense $790,339 and $69,309 during the years ended
December 31, 2019 and 2018, respectively. As of December 31, 2019, these awards were fully vested. In lieu of higher cash compensation, the Company
has granted warrants and non-employee options to consultants. These warrants and non-employee options vested fully on the date of grant. During the year
ended December 31, 2019, the Company charged $51,273 to expense in connection with options granted to a consultant. There were no such charges for
the year ended December 31, 2018.
(k) 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 vesting period for such shares. Restricted stock is included in total
common shares outstanding upon the lapse of any vesting conditions.
(l) 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. In 2019, the Company incurred a
loss from the impairment of a fixed asset of $50,666 in value of an automobile which was subsequently sold to an employee at fair market value. There was
no impairment of long-lived assets recorded during 2018.
(m) 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.
In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company records assets and liabilities at fair value on a non-
recurring basis as required by GAAP. Assets measured at fair value on a non-recurring basis include goodwill, tangible assets, and intangible assets. Such
assets are reviewed quarterly for impairment indicators. If a triggering event has occurred, the assets are re-measured when the estimated fair value of the
corresponding asset group is less than the carrying value. The fair value measurements, in such instances, are based on significant unobservable inputs
(Level 3).
As of December 31, 2019 and 2018, the fair value of the Company’s financial assets and non-warrant liabilities including cash and cash equivalents,
royalties receivable, accounts payable and accrued expenses approximated carrying value due to the short-term maturity of these instruments. The carrying
value of the warrant liabilities was adjusted to fair value each reporting period (until these warrants were reclassified as equity) using the Black-Scholes
method to determine the fair value of the warrants. The issued warrants treated as warrant liabilities have different exercise prices depending on the date of
exercise. The lowest exercise price for these warrants was used in the Black Scholes method to value the warrant liabilities since it was deemed a
reasonable approximation of fair market value. The Company’s warrant liability was considered a Level 3 financial instrument. The estimated fair value for
warrant liabilities for the years ended December 31, 2019 and 2018 using the Black-Scholes method was $0 and $501,414 respectively.
F-12
(n) Recent Accounting Pronouncements
New Accounting Standards
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement: Disclosure Framework – Changes to the Disclosure Requirements for Fair
Value Measurement,” which eliminates, amends and adds disclosure requirements for fair value measurement. The standard is effective for the interim and
annual periods beginning after December 15, 2019, with early adoption permitted. The Company will adopt this standard as of January 1, 2020 and it is not
expected to have a material impact on the consolidated financial statements.
In June 2018, the FASB issued ASU 2018-07 “Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment
Accounting” (“ASU 2018-07”), which simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-
based payments to employees, with certain exceptions. ASU 2018-07 is effective for us in the first quarter of fiscal 2020.
Effective January 1, 2019, the Company adopted the Financial Accounting Standards Board’s Standard, Leases (Topic 842), as amended. The standard
requires all leases to be recorded on the balance sheet as a right of use asset and a lease liability. The standard provides practical expedients in order to
simplify adoption, including the following:
● An entity need not reassess whether any expired or existing contracts are or contain leases.
● An entity need not reassess the lease classification for any expired or existing leases. Instead, any leases previously classified as operating leases
will continue to be classified as operating leases, while any leases previously classified as capital leases will be classified as finance leases.
● An entity need not reassess initial direct costs for any leases.
The Company used the above practical expedients as the transition method in the application of the new lease standard at January 1, 2019. The Company
applied a policy election to exclude short-term leases from balance sheet recognition and elected certain practical expedients at adoption. As permitted, the
Company did not reassess whether existing contracts are or contain leases, the lease classification for any existing leases or the initial direct costs for any
existing leases which were not previously accounted for as leases, are or contain a lease. At adoption on January 1, 2019, an operating lease liability of
$1,134,000 and an operating lease right of use asset of $941,000 were recorded (most of this liability relating to the Company’s lease for its facilities in
Woodbury, New York). The operating lease liability was $193,000 more than the operating lease right of use asset due to unamortized lease incentive from
periods prior to the adoption of the new lease standard. There was no cumulative earnings effect adjustment.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments” – Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments” (“ASU 2016-13”), which requires entities to use a new impairment model based on expected losses. Under this new model an entity would
recognize an impairment allowance equal to its current estimate of credit losses on financial assets measured at amortized cost. ASU 2016-13 is effective
for us beginning January 1, 2020 with early adoption permitted January 1, 2019. The Company does not expect the adoption of this standard to have a
material impact on the consolidated financial statements.
F-13
(3) Fixed Assets
Depreciation and amortization expense for the years ended December 31, 2019 and 2018 was $195,377 and $181,047 respectively. Fixed assets and their
estimated useful lives as of December 31, 2019 and 2018 are as follows:
Equipment and furniture
Trade show materials
Autos
Leasehold improvements
Less accumulated depreciation and amortization
$
$
2019
2018
1,387,245 $
775,654
62,148
584,967
2,810,014
(2,668,294)
141,720 $
1,384,112
775,654
-
584,967
2,744,733
(2,431,556)
313,177
Estimated useful life
5 years
5 years
5 years
Life of lease or estimated
life of asset if shorter
(4) Accrued Expenses and Other
Accrued expenses consist of the following at December 31, 2019 and 2018:
Payroll, bonuses and related benefits
Professional services
Deferred rent
Other
(5) Income Taxes
$
$
2019
2018
43,049 $
3,300
-
360
46,709 $
74,010
4,400
192,537
2,659
273,606
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 because 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, 2019 and 2018 and the fact that no
income tax benefit was recorded in each of these years are attributable to the change in the valuation allowance recorded in each year.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets at December 31, 2019 and 2018 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
2019
2018
$
$
102,000 $
243,000
15,314,000
354,000
1,099,000
15,000
17,127,000
(17,127,000)
- $
87,000
234,000
15,528,000
257,000
1,161,000
15,000
17,282,000
(17,282,000)
-
The reconciliation of the income tax expense (benefit) computed at the Federal statutory tax rates to income tax expense (benefit) is as follows:
Income tax provision at federal statutory rate
Permanent differences
Credits
Expired carryforwards and other
Valuation allowance
Total income tax provision
2019
2018
(800,000) $
136,900
(5,000)
823,100
(155,000)
- $
(564,100)
73,000
(5,000)
640,000
(143,900)
-
$
$
F-14
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 due to the uncertainty regarding the future
utilization of the deferred tax assets for all periods presented.
At December 31, 2019, the Company had a net operating loss carry-forward for federal income tax purposes of approximately $71,452,000, of which a
total of $66,952,000 will expire in varying amounts from 2020 through 2038. Research and other credit carry-forwards of approximately $1,099,000 are
available to the Company to reduce income taxes payable in future years principally through 2038. The Company’s ability to utilize its net operating loss
carryforwards and its current year tax credits in future periods could be subject to the 382 limitation. The Company will need to complete an analysis to
determine whether its net operating losses are subject to the 382 limitation.
(6) Shareholders’ Equity
(a) Common Stock and Warrants
On or around February 16, 2018, a small group of long-time shareholders of the Company who are accredited investors made an interest-free five-year
convertible loan of $1.25 million to the Company which, upon the occurrence of certain conditions which have already occurred, automatically converted
into 1,388,893 shares of common stock at a price equal to the market price of the Company’s common stock when the loan was made, plus warrants
expiring February 28, 2023 to purchase 1,388,893 shares of common stock at an exercise price of $1.10, $1.20 or $1.35 per share depending on the exercise
date. No payments were due on this note during its five-year term or after conversion into equity. On April 23, 2018, Research Frontiers Incorporated filed
a prospectus supplement relating to the issuance and sale of the above common stock and warrant securities with the Securities and Exchange Commission.
The Company recorded this transaction as an equity transaction whereby the proceeds were accounted for as the issuance of the Company’s common stock
on the date that the proceeds were received.
On September 7, 2018, the Company announced that it had sold common stock to a group of investors led by Gauzy Ltd., a licensee of the Company’s SPD
technology (Gauzy). The aggregate proceeds from these stock offerings was $2.0 million. At the closing, the investors received 2,173,916 shares of
Research Frontiers common stock at a price of $0.92 per share, as well as five-year warrants to purchase 1,086,957 shares of Research Frontiers common
stock at an exercise price of $1.10, $1.20 or $1.38 per share depending on the exercise date. In connection with the issuance of certain of these warrants
during the third quarter of 2018, the Company recorded $223,370 as a warrant liability upon the issuance of these warrants on August 13, 2018 and
recorded a non-cash expense of $278,044 to mark the warrants to their estimated market value as of December 31, 2018. This resulted in a liability of
$501,414 recorded on the Company’s December 31, 2018 consolidated balance sheet.
On or around May 30, 2019, the Company sold to accredited investors a total of 1,276,599 shares of common stock and warrants expiring May 31, 2024 to
purchase 638,295 shares of common stock at an exercise price of $3.384, $3.666 or $4.23 per share depending on the exercise date. Research Frontiers
Incorporated also sold to Gauzy, at a price of $1.38 per unit, with each unit comprised of one share of unregistered common stock and one half of one
warrant. The warrant can be converted into one share of unregistered common stock at an exercise price of $1.656, $1.794 or $2.07 per share depending on
the exercise date. Gauzy received a total of 724,638 shares of unregistered common stock and warrants expiring May 31, 2024 to purchase 362,319 shares
of common stock. The aggregate proceeds from these stock offerings was $4.6 million.
Investors that participated in the May 30, 2019 offering agreed to amending/clarifying language to the terms of the warrants that
they received in the September 7, 2018 offering. Those investors that received warrants in the September 7, 2018 offering that did
not participate in the May 30, 2019 offering, separately agreed as of June 27, 2019 to the same amending/clarifying language
used in the May 30, 2019 offering. The amending/clarifying language relating to the September 7, 2018 warrants does not allow
for a net cash settlement option for the warrants even if no registered shares of common stock are available upon the exercise of
the warrant. The warrant liability was valued at $1,153,439 (including all valuation adjustments since their issuance) through the
date of these new agreements and amendments and, based on the amended warrant terms, the warrant liability was reclassified to
equity as of these dates. The Company recorded a non-cash expense $652,025 for the twelve-month period ended December 31,
2019 to mark these warrants to their estimated market value as of their respective amendment/clarification date.
F-15
During 2019, the Company received proceeds of $1,170,546 and issued 1,587,814 shares of common stock in connection with the exercise of outstanding
options and warrants. During 2018, the Company received proceeds of $64,292 and issued 58,556 shares of common stock in connection with the exercise
of outstanding options and warrants.
(b) Options and Warrants
(i) Employee Options
In 2019, the shareholders approved the Company’s 2019 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 1,400,000 shares of its
common stock for issuance under this plan, and 882,500 options and other awards were available for issuance under this plan as of December 31,
2019.
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 517,500 fully vested options during 2019 and recorded share-based compensation of $841,612. The Company granted 150,182
fully vested options during 2018 and recorded share-based compensation of $69,309. 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
Activity for stock options is summarized below:
All options are exercisable at December 31, 2019.
2019
2018
$
$
1.63
-
63%
1.75%
0.46
-
51%
2.77%
5 years
5 years
Balance at January 1, 2018
Granted
Cancelled
Exercised
Balance at December 31, 2018
Granted
Cancelled
Exercised
Balance at December 31, 2019
Number of Shares
Subject to Option
Weighted Average
Exercise Price
978,910 $
150,182 $
- $
(3,000) $
1,126,092 $
517,500 $
(30,400) $
(64,841) $
1,548,351 $
F-16
4.26
1.00
-
1.06
3.84
3.00
3.69
1.07
3.68
Weighted Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic Value
7.1 $
-
6.6 $
161,602
6.9 $
603,683
(ii) Warrants and Non-Employee Options
Activity in warrants is summarized below:
Balance at January 1, 2018
Exercised
Terminated
Issued
Balance at December 31, 2018
Exercised
Terminated
Issued
Balance at December 31, 2019
Number of Shares Underlying
Warrants and Non-Employee
Options Granted
Weighted Average
Exercise Price
458,000 $
(55,556)
(250,000)
2,475,850
2,628,294 $
(1,961,765)
(184,000)
1,000,614
1,483,143 $
6.43
1.10
6.73
1.10
1.49
1.20
6.00
2.76
2.13
In lieu of cash compensation, the Company has granted warrants to investors and non-employee options to consultants. These warrants and non-employee
options vested ratably over various terms ranging from 12 to 59 months. The 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.
There are 30,000 option issued to non-employees in 2019. There were no such charges for non-employee options in 2018. There are 1,483,143 warrants
issued to investors that are outstanding that are accounted for as equity.
Warrants and non-employee options generally expire in five years from the date of issuance. At December 31, 2019, all warrants and non-employee options
outstanding were exercisable.
(c) Restricted Stock Grants
During 2019 and 2018, the Company did not issue restricted stock to its directors and employees.
F-17
(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.
On March 14, 2019, the Company suspended its VariGuard SmartGlass business unit activities. Instead, the Company licensed a new entity to pursue the
business opportunities previously pursued by the Company’s VariGuard SmartGlass business unit. This new licensee continues to use the VariGuard
SmartGlass name. In addition to other employees at VariGuard SmartGlass Inc., two of the Company’s officers (Seth L. Van Voorhees, Michael R.
LaPointe) are principals at VariGuard SmartGlass Inc. and as consequence, this transaction is a related party relationship which has been reviewed and
approved by the Company’s Board of Directors pursuant to the requirements of Delaware corporate law and the Company’s Code of Ethics. Dr. Van
Voorhees and Mr. LaPointe also remain full-time employees at the Company.
(8) Commitments
The Company has an employment agreement with its chief executive officer which provides for an annual base salary of $500,000 for calendar year 2020.
This employment agreement has an evergreen provision that extends the term by one year on the expiration 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 2019 or 2018.
The Company determines if an arrangement is a lease at its inception. This determination generally depends on whether the arrangement conveys the right
to control the use of an identified fixed asset explicitly or implicitly for a period of time in exchange for consideration. Control of an underlying asset is
conveyed if the Company obtains the rights to direct the use of, and to obtain substantially all of the economic benefits from the use of, the underlying
asset. Lease expense for variable leases and short-term leases is recognized when the obligation is incurred.
The Company has operating leases for certain facilities, vehicles and equipment with a weighted average remaining lease term of 5.2 years as of December
31, 2019. Operating leases are included in right of use lease assets, other current liabilities and long-term lease liabilities on the consolidated balance sheet.
Right of use lease assets and liabilities are recognized at each lease’s commencement date based on the present value of its lease payments over its
respective lease term. The Company does not have an established incremental borrowing rate as it does not have any debt. The Company uses the stated
borrowing rate for a lease when readily determinable. When the interest rates implicit in its lease agreements are not readily determinable, the Company
uses an interest rate based on the marketplace for public debt. The weighted-average discount rate associated with operating leases as of December 31,
2019 is 5.5%.
Subsequent to the Company’s adoption of the new lease accounting guidance on January 1, 2019, the Company recorded new right of use lease assets of
approximately $900,000 and associated lease liabilities of approximately $1.1 million.
Maturities of operating lease liabilities as of December 31, 2019 were as follows:
Year 1
Years 2-3
Years 4-5
Thereafter
Total lease payments
Less: imputed lease interest
Present value of lease liabilities
December 31, 2019
213,146
420,548
439,021
55,874
1,128,589
(152,756)
975,833
$
$
(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 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-18
(10) Selected Quarterly Financial Data (Unaudited)
2019
Fee income
Operating loss
Net loss
Basic and diluted net loss
per common share (1)
2018
Fee income
Operating loss
Net loss
Basic and diluted net loss
per common share (1)
First
Second
Third
Fourth
Quarter
$
$
$
$
418,657
(562,472)
(803,897)
(0.03)
First
433,269
(795,172)
(793,767)
301,035 $
(952,301)
(1,350,478)
462,869 $
(410,855)
(397,712)
381,463
(1,274,377)
(1,256,891)
(0.05)
(0.01)
(0.04)
Quarter
Second
Third
Fourth
324,853 $
(571,931)
(569,891)
359,725 $
(403,890)
(688,301)
370,795
(647,226)
(634,169)
(0.03)
(0.02)
(0.03)
(0.02)
(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 second and fourth quarter of 2019 due to $356,228 and $485,384 of stock and option compensation charges
in 2019 respectively, relating to common stock and options granted to directors, employees and a consultant. In addition, during the first and second
quarters of 2019 the Company incurred higher (lower) costs of $247,590 and $404,435, respectively, relating to market valuation adjustments for
warrants.
(3) The Company incurred higher costs in the second quarter of 2018 due to $69,000 of stock option compensation charges in 2018 related to options
granted to employees. In addition, during the third and fourth quarters of 2018 the Company incurred higher (lower) costs of $286,631 and ($8,587),
respectively, relating to market valuation adjustments for warrants.
F-19
SCHEDULE II
RESEARCH FRONTIERS INCORPORATED
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 2019 and 2018
Balance at
beginning of
year
Charged to
costs and
expenses
Deductions (1)
Balance
at end
of year (2)
Description
Allowance for uncollectible royalty receivables:
December 31, 2019
December 31, 2018
$
$
1,094,774
1,051,424
$
$
156,636 $
115,812 $
1,135,598
43,350 $
- $
1,094,774
(1) To write-off uncollectible receivables from the allowance for royalty receivable account.
(2) Benefits related to net operating loss carry-forwards and deferred items have been fully reserved because 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 and the fact that no income tax
benefit was recorded are attributable to the change in the valuation allowance of $17,282,000 and $17,127,000 for the periods ended December 31,
2019 and 2018 respectively. These valuation allowances are not included in Schedule II (See Note 5 to our Consolidated Financial Statements for
further discussion of the Company’s tax valuation allowance).
F-20
Subsidiary of the Registrant:
SPD Enterprises, Inc. (a)
(a) SPD Enterprises, Inc. also conducts its business under VariGuard SmartGlass.
EXHIBIT 21
State or
Country of
Organization
Delaware
Consent of Independent Registered Public Accounting Firm
EXHIBIT 23.1
We consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-184785, 333-179099, 333-133858, 333-40369, 333-
115052, 333-65219 and 333-159093) and Form S-8 (Nos. 333-80575, 333-179097, 33-53030, 33-86910, 333-08623, 333-34163, 333-63374, 333-106754,
333-159094, 333-196746 and 333-237035) of Research Frontiers Incorporated of our reports dated March 12, 2020, relating to the consolidated financial
statements and schedule of Research Frontiers Incorporated as of December 31, 2019 and the year then ended, and the effectiveness of internal control over
financial reporting of Research Frontiers Incorporated as of December 31, 2019 included in this Annual Report on Form 10-K of Research Frontiers
Incorporated for the year ended December 31, 2019.
/s/ CohnReznick LLP
March 12, 2020
Jericho, New York
Consent of Independent Registered Public Accounting Firm
EXHIBIT 23.2
The Board of Directors
Research Frontiers Incorporated
Woodbury, New York
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, 333-63374, 333-
106754, 333-159094, 333-196746, and 333-237035) of Research Frontiers Incorporated of our report dated March 14, 2019, relating to the consolidated
financial statements which appear in this Annual Report on Form 10-K.
/s/ BDO USA LLP
Melville, NY
March 12, 2020
EXHIBIT 31.1
I, Joseph M. Harary, certify that:
1. I have reviewed this annual report on Form 10-K of Research Frontiers Incorporated (the “registrant”);
CERTIFICATION
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 officers 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 officers 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 12, 2020
/s/ Joseph M. Harary
Joseph M. Harary
President, Chief Executive Officer
EXHIBIT 31.2
I, Seth L. Van Voorhees, certify that:
1. I have reviewed this annual report on Form 10-K of Research Frontiers Incorporated (the “registrant”);
CERTIFICATION
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 officers 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 officers 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 12, 2020
/s/ Seth L. Van Voorhees
Seth L. Van Voorhees
Vice President, Chief Financial Officer,
Treasurer and Principal Accounting Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.1
In connection with the Annual Report of Research Frontiers Incorporated (the “Company”) on Form 10-K for the year ended December 31, 2019
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 12, 2020
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.2
In connection with the Annual Report of Research Frontiers Incorporated (the “Company”) on Form 10-K for the year ended December 31, 2019
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.
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/ Seth L. Van Voorhees
Seth L. Van Voorhees
Vice President, Chief Financial Officer,
Treasurer and Principal Accounting Officer
March 12, 2020