SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 2008 Commission File No. 1-9399
RESEARCH FRONTIERS INCORPORATED
(Exact name of registrant as specified in charter)
Delaware 11-2103466
(State of incorporation or organization) (IRS Employer
Identification No.)
240 Crossways Park Drive, Woodbury, N.Y. 11797
(Address of principal executive offices) (Zip Code)
(516) 364-1902
(Registrant's telephone number, including area code)
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 is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or
a smaller reporting company. See the definitions of "large
accelerated filer," "accelerated filer" and "smaller reporting
company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ X ]
Non-accelerated filer [ ] Smaller reporting company [ ]
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Act).
Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: As of
November 6, 2008, there were outstanding 15,442,834 shares of
Common Stock, par value $0.0001 per share.
RESEARCH FRONTIERS INCORPORATED
Consolidated Balance Sheets
September 30,2008
Assets (Unaudited) December 31,2007
Current assets:
Cash and cash equivalents $ 2,434,597 7,260,192
Investments (US Treasury Securities) 3,032,389 --
Royalty receivables, net of reserves of
$163,674 in both periods 171,899 101,028
Prepaid expenses and other current assets 100,230 108,236
Total current assets 5,739,115 7,469,456
Fixed assets, net 151,789 127,419
Note receivable SPD Control Systems 150,000 37,500
Deposits and other assets 32,668 25,030
Total assets $ 6,073,572 7,659,405
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 67,069 144,441
Deferred revenue 15,000 --
Accrued expenses and other 240,047 184,156
Total liabilities 322,116 328,597
Commitments and Contingencies
Shareholders' equity:
Capital stock, par value $0.0001 per share;
authorized 100,000,000 shares, issued and
outstanding 15,442,834 and 15,440,434
shares, respectively 1,544 1,544
Additional paid-in capital 77,242,994 77,131,013
Accumulated deficit (71,493,082) (69,801,749)
Total shareholders' equity 5,751,456 7,330,808
Total liabilities and shareholders' equity $ 6,073,572 7,659,405
See accompanying notes to consolidated financial statements.
RESEARCH FRONTIERS INCORPORATED
Consolidated Statements of Operations
(Unaudited)
Nine months ended Three months ended
Sept.30,2008 Sept.30,2007 Sept.30,2008 Sept.30,2007
Fee income $ 1,476,131 237,810 $ 1,171,187 150,809
Operating expenses 2,263,206 3,843,219 754,739 1,839,507
Research and development 1,039,526 1,775,473 294,565 877,141
3,302,732 5,618,692 1,049,304 2,716,648
Operating income (loss) (1,826,601) (5,380,882) 121,883 (2,565,839)
Net investment income 135,268 246,482 34,772 95,558
Net income (loss) $ (1,691,333) (5,134,400) $ 156,655 (2,470,281)
Basic and diluted
net income (loss)
per common share $ (.11) (.34) $ 0.01 (.16)
Basic and diluted
weighted average number of
common shares outstanding 15,441,433 15,224,611 15,442,834 15,417,190
See accompanying notes to consolidated financial statements.
RESEARCH FRONTIERS INCORPORATED
Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended
Sept. 30,2008 Sept. 30, 2007
Cash flows from operating activities:
Net loss $(1,691,333) (5,134,400)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 30,913 25,301
Stock based compensation 94,806 2,471,128
Changes in assets and liabilities:
Royalty receivables (70,871) (110,766)
Prepaid expenses and other assets 368 (15,402)
Deferred revenue 15,000 9,792
Accounts payable and accrued expenses (21,481) 83,206
Net cash used in operating activities (1,642,598) (2,671,141)
Cash flows from investing activities:
Purchase of fixed assets (55,283) (23,779)
Note receivable from SPD Control Systems (112,500) (37,500)
Purchase of Investments (US Treasury Securities) (5,282,389) --
Proceeds from Investments (US Treasury Securities) 2,250,000 --
Net cash used in investing activities (3,200,172) (61,279)
Cash flows from financing activities:
Proceeds from the exercise of options 17,175 --
Proceeds from issuances of common stock and warrants -- 7,803,360
Net cash provided by financing activities 17,175 7,803,360
Net increase (decrease) in cash and cash equivalents (4,825,595) 5,070,940
Cash and cash equivalents at beginning of year 7,260,192 3,000,521
Cash and cash equivalents at end of period $ 2,434,597 8,071,461
See accompanying notes to consolidated financial statements.
RESEARCH FRONTIERS INCORPORATED
Notes to Consolidated Financial Statements
September 30, 2008
(Unaudited)
Basis of Presentation
The accompanying unaudited consolidated condensed financial
statements have been prepared in accordance with U.S.
generally accepted accounting principles ("GAAP") for interim
financial information and with the instructions to Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete
financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have
been included. All such adjustments are of a normal recurring
nature. Operating results for the three and nine months ended
September30, 2008 are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 2008.
For further information, refer to the consolidated financial
statements and footnotes thereto included in the Annual Report
on Form 10-K relating to Research Frontiers Incorporated (the
"Company") for the fiscal year ended December 31, 2007.
Business
The Company operates in a single business segment which is
engaged in the development and marketing of technology and
devices to control the flow of light. Such devices, often referred
to as "light valves" or suspended particle devices (SPDs), use
colloidal particles that are either incorporated within a liquid
suspension or a film, which is usually enclosed between two
sheets of glass or plastic having transparent, electrically
conductive coatings on the facing surfaces thereof. At least one
of the two sheets is transparent. SPD technology, made possible
by a flexible light-control film invented by Research Frontiers,
allows the user to instantly and precisely control the shading of
glass/plastic manually or automatically. SPD technology has
numerous product applications, including: SPD-Smart
windows, sunshades, skylights and interior partitions for homes
and buildings; automotive windows, sunroofs, sun-visors,
sunshades, rear-view mirrors, instrument panels and navigation
systems; aircraft windows; eyewear products; and flat panel
displays for electronic products. SPD-Smart light control film is
now being developed for, or used in, architectural, automotive,
marine, aerospace and appliance applications.
Patent Costs
The Company expenses costs relating to the development or
acquisition of patents due to the uncertainty of the recoverability
of these items.
Revenue Recognition
The Company has entered into a number of license agreements
covering its light-control technology. The Company receives
minimum annual royalties under certain license agreements and
records fee income on a ratable basis each quarter. In instances
when sales of licensed products by its licensees exceed
minimum annual royalties, the Company recognizes fee income
as the amounts have been earned. Certain of the fees are
accrued by, or paid to, the Company in advance of the period in
which they are earned resulting in deferred revenue. Such
excess amounts are recorded as deferred revenue and recognized
into income in future periods as earned.
Fee Income
Fee income represents amounts earned by the Company under
various license and other agreements relating to technology
developed by the Company. During the first nine months of
2008, six licensees of the Company accounted for
approximately 68%, 23%, 3%, 2%, 2%, and 1%, respectively, of
fee income recognized during such period. During the first nine
months of 2007, six licensees of the Company accounted for
approximately 57%, 9%, 6%, 6%, 6%, and 6%, respectively, of
fee income recognized during such period.
Stock-Based Compensation
Prior to January 1, 2006, the Company accounted for
stock-based employee compensation under the intrinsic value
method as outlined in the provisions of APB Opinion No. 25,
"Accounting for Stock Issued to Employees," and related
interpretations while disclosing pro-forma net income and net
income per share as if the fair value method had been applied in
accordance with Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based
Compensation." Under the intrinsic value method, no
compensation expense was recognized if the exercise price of
the Company's employee stock options equaled or exceeded the
market price of the underlying stock on the date of grant.
Effective January 1, 2006, the Company adopted SFAS No.
123(R), "Share-based Payment." SFAS No. 123(R) replaces
SFAS No. 123 and supersedes APB Opinion No. 25. SFAS
123(R) requires that all stock-based compensation be recognized
as an expense in the financial statements and that such costs be
measured at the fair value of the award. SFAS 123(R) also
requires that tax benefits related to stock option exercises be
reflected as financing cash inflows instead of operating cash
inflows.
No options were granted during the first nine months of 2008.
During the quarter ended March 31, 2007, the Company granted
fully vested options to purchase 96,000 shares of its common
stock to employees, directors, and an outside consultant. The
Company utilized the Black-Scholes option valuation method to
value these options, and the assumptions used in such valuation
were as follows: Expected Option Life: 5 years; Volatility:
73.61%; Risk-free Interest Rate: 4.729%; Stock Price on Date of
Grant: $11.375 resulting in a per option value of $7.1974.
During the quarter ended September 30, 2007, the Company
granted options, most of which were fully vested at grant, to
purchase 278,881 shares of its common stock to employees,
directors, and outside consultants. The Company utilized the
Black-Scholes option valuation method to value these options,
and the assumptions used in such valuation were as follows:
Expected Option Life: 3 years in the case of options issued to
directors of the Company and 5 years in the case of all other
options; Volatility: 60.318% in the case of options with a 3 year
expected option life and 62.033% in the case of options with a 5
year expected option life; Risk-free Interest Rate: 4.851 % in the
case of options with a 3 year expected option life and 4.661% in
the case of options with a 5 year expected option life; Stock
Price on Date of Grant: $14.93 resulting in a per option value of
between $6.56 and $8.42 per share. These grants resulted in the
Company recording a non-cash charge to operations of
$2,471,128 during the first nine months of 2007.
Shareholders' Equity
Issuance of Common Stock
For the first nine months ended September 30, 2008, the
Company received $17,175 in proceeds from the exercise of
2,400 options.
For the nine months ended September 30, 2007, the Company
received $6,640,000 (net of expenses) in proceeds from the sale
of 682,102 shares of its common stock. In addition, the
Company received $1,163,335 in proceeds from the exercise of
156,900 options and warrants. In addition, during the nine
months ended September 30, 2007, 85,925 shares were issued
through the cashless exercise of certain options under which the
number of shares issuable upon exercise of such option was
reduced by 126,175 shares in payment of the exercise price of
options to purchase 212,100 shares plus the receipt of $25 in
cash for fractional shares.
Treasury Stock
The Company did not repurchase any of its stock during the
nine months ended September 30, 2008 or 2007.
Investments
The Company classifies investments in marketable securities as
trading, available-for-sale or held-to-maturity at the time of
purchase and periodically re-evaluates such classifications.
Trading securities are carried at fair value, with unrealized
holding gains and losses included in earnings. Held-to-maturity
securities are recorded at cost and are adjusted for the
amortization or accretion of premiums or discounts over the life
of the related security. Unrealized holding gains and losses on
available-for-sale securities are excluded from earnings and are
reported as a separate component of accumulated other
comprehensive income (loss) until realized. In determining
realized gains and losses, the cost of securities sold is based on
the specific identification method. Interest and dividends on the
investments are accrued at the balance sheet date. At September
30, 2008, Investments consisted of $3.0 million in short term US
Treasury Securities which are reported at fair value (which
approximates cost) on the accompanying balance sheet.
Note Receivable from SPD Control Systems
On May 9, 2007, the Company began participating in the
funding of the ongoing development of automotive controllers
by SPD Control Systems Corp., a licensee of the Company.
This development work is to produce the electronic controllers
to operate SPD-Smart automotive windows and glass roof
systems for one or more of the top five automotive makers in
the world. The Company's funding of this project is reflected in
the form of a senior secured convertible promissory note (the
"Note") of SPD Control Systems Corp. held by Research
Frontiers' wholly-owned subsidiary, SPD Enterprises Inc. The
note bears interest at 10% per annum, is secured by all of the
assets (including intellectual property) of SPD Control Systems,
and is convertible at the option of SPD Enterprises into common
stock of SPD Control Systems at an initial conversion price of
$0.50 per share. This conversion price is adjustable downward
to result in the issuance to SPD Enterprises of additional shares
of SPD Control Systems common stock under certain
conditions. The Note provides for funding of up to $150,000 by
SPD Enterprises based upon the achievement of certain
development milestones by SPD Control Systems. As of
September 30, 2008, the principal amount outstanding under
this Note was $150,000.
New Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board
("FASB") issued FAS 157, "Fair Value Measurements," ("FAS
157"). FAS 157 defines fair value, establishes guidelines for
measuring fair value and expands disclosures regarding fair
value measurements. FAS 157 will apply whenever another
standard requires (or permits) assets or liabilities to be measured
at fair value. This standard does not expand the use of fair value
to any new circumstances. FAS 157 is effective for financial
statements issued for fiscal years beginning after November 15,
2007 and interim periods within those fiscal years. On February
6, 2008 the FASB approved the Financial Staff Position that will
defer the effective date of FAS 157 by one year for nonfinancial
assets and liabilities that are recognized or disclosed at fair
value in the financial statements on a nonrecurring basis. The
partial adoption of FAS 157 for financial assets and liabilities
did not have a material impact on our consolidated financial
position, results of operations or cash flows.
In February 2007, the FASB issued FAS 159, "The Fair Value
Option for Financial Assets and Financial Liabilities-including
an amendment of FASB Statement No. 115," ("FAS 159").
Under FAS 159, a company may elect to measure eligible
financial assets and financial liabilities at fair value. Unrealized
gains and losses on items for which the fair value option has
been elected are reported in earnings at each subsequent
reporting date. Eligible items include, but are not limited to,
accounts and loans receivable, equity method investments,
accounts payable, guarantees, issued debt and firm
commitments. If elected, FAS 159 is effective for fiscal years
beginning after November 15, 2007. Currently, we have not
elected to account for any of our eligible items using the fair
value option under FAS 159.
In December 2007, the FASB issued FAS 141R, "Business
Combinations" and FAS 160, "Business Combinations and
Noncontrolling Interests" (FAS 141R and FAS 160,
respectively). FAS 141R and FAS 160 are effective for fiscal
years beginning after December 15, 2008. FAS 141R changes
the definitions of a business and a business combination, and
will result in more transactions recorded as business
combinations. Certain acquired contingencies will be recorded
initially at fair value on the acquisition date, transaction and
restructuring costs generally will be expensed as incurred and in
partial acquisitions companies generally will record 100 percent
of the assets and liabilities at fair value, including goodwill. We
do not expect these pronouncements to have an effect on our
financial statements unless we enter a business combination.
Fair Value Measurements
We adopted FAS 157 as of January 1, 2008, with the exception
of the application of the statement to nonrecurring nonfinancial
assets and nonfinancial liabilities.
FAS 157 establishes a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value. These tiers
include: Level 1, defined as observable inputs such as quoted
prices in active markets for identical assets or liabilities; Level
2, defined as inputs other than quoted prices for similar assets or
liabilities in active markets that are either directly or indirectly
observable; and Level 3, defined as unobservable inputs in
which little or no market data exists, therefore requiring an
entity to develop its own assumptions.
Financial assets accounted for at fair value on a recurring basis
at September 30, 2008 include cash equivalents of
approximately $2.4 million and US Treasury Securities of $3.0
million. These assets are carried at fair value based on quoted
market prices for identical securities (Level 1 inputs).
Management's Discussion and Analysis of
Financial Condition and Results of Operations
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" contained in the Company's Annual
Report on Form 10-K.
The Company has entered into a number of license agreements
covering potential products using the Company's SPD
technology. The Company receives minimum annual royalties
under certain license agreements and records fee income on a
ratable basis each quarter. In instances when sales of licensed
products by its licensees exceed minimum annual royalties, the
Company recognizes fee income as the amounts have been
earned. Certain of the fees are accrued by, or paid to, the
Company in advance of the period in which they are earned
resulting in deferred revenue.
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 accordance with Emerging
Issues Task Force Issue 96-18, Accounting for Equity
Instruments that are Issued to Other than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services,
the Company would be required to record consulting expenses
based upon the fair value of such options or warrants on the date
that such options or warrants vest as determined using a Black-
Scholes option pricing model. Depending upon the difference
between the exercise price and the market price of the
Company's common stock on the date that such options or
warrants vest, the amount of non-cash expenses that could be
recorded as a result of the vesting of such options or warrants
can be material.
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires us to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the
financial statements, and reported amounts of revenues and
expenses during the reporting periods. Actual results could
differ from these estimates. An example of a critical estimate is
the full valuation allowance for deferred taxes that was recorded
based on the uncertainty that such tax benefits will be realized
in future periods.
Results of Operations for the Nine Month Periods Ended
September 30, 2008 and 2007
The Company's fee income from licensing activities for the first
nine months of 2008 was $1,476,131 as compared to $237,810
for the first nine months of 2007. This difference in fee income
was primarily due to the receipt of a one-time payment from a
former licensee in full settlement of past due minimum annual
royalties for several years, the timing and amount of minimum
annual royalties paid, and the date of receipt of such payment on
certain license agreements, by end-product licensees, and the
Company entering into an agreement in 2007 with Hitachi
Chemical regarding payments made by Hitachi Chemical to the
Company for guaranteed access to future improvements in the
Company's technology. 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, will be recognized as fee income
in future periods. Also licensees may offset some or all of their
royalty payments on sales of licensed products for a given
period by applying these advance payments towards such earned
royalty payments. Because the Company's license agreements
typically provide for the payment of royalties by a licensee on
product sales within 45 days after the end of the quarter in
which a sale of a licensed product occurs (with some of the
Company's more recent license agreements providing for
payments on a monthly basis), and because of the time period
which typically will elapse between a customer order and the
sale of the licensed product and installation in a home, office
building, automobile, aircraft, boat, or any other product, there
could be a delay between when economic activity between a
licensee and its customer occurs and when the Company gets
paid its royalty resulting from such activity.
Operating expenses decreased by $1,580,013 for the first nine
months of 2008 to $2,263,206 from $3,843,219 for the first nine
months of 2007. This decrease was principally the result of
decreased non-cash charges to operating expenses ($1,587,000)
resulting from the expensing of options granted during the first
and third quarters of 2007, lower payroll ($130,000) and
marketing expenses ($39,000), partially offset by higher patent
costs ($68,000) and professional fees ($40,000).
Research and development expenditures decreased by $735,947
to $1,039,526 for the first nine months of 2008 from $1,775,473
for the first nine months of 2007. This decrease was principally
the result of decreased non-cash charges to research and
development expenses ($789,000) resulting from the expensing
of options granted during the first and third quarters of 2007 to
the Company's scientific personnel, as well as lower material
costs ($95,000) partially offset by higher payroll ($89,000),
insurance ($25,000) and consulting expenses ($17,000), and
higher allocated rent and building maintenance costs ($15,000).
The Company's net investment income for the first nine months
of 2008 was $135,268, as compared to net investment income of
$246,482 for the first nine months of 2007. This difference was
primarily due to lower cash balances available to invest as well
as lower interest rates.
As a consequence of the factors discussed above, the Company's
net loss was $1,691,333 ($0.11 per common share) for the first
nine months of 2008 as compared to $5,134,400 ($0.34 per
common share) for the first nine months of 2007. The difference
is primarily due to higher non-cash charges of $2,376,000
resulting from the issuance of stock options during the first and
third quarters of 2007 as well as $1,238,000 in higher fee
income.
Results of Operations for the Three Month Periods Ended
September 30, 2008 and 2007
The Company's fee income from licensing activities for the
third quarter of 2008 was $1,171,187 as compared to $150,809
for the third quarter of 2007. This difference in fee income was
primarily due to the receipt of a one-time payment from a
former licensee in full settlement of past due minimum annual
royalties for several years, the timing and amount of minimum
annual royalties paid, and the date of receipt of such payment on
certain license agreements, by end-product licensees, and the
Company entering into an agreement in 2007 with Hitachi
Chemical regarding payments made by Hitachi Chemical to the
Company for guaranteed access to future improvements in the
Company's technology. 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, will be recognized as fee income
in future periods. Also, licensees may offset some or all of their
royalty payments on sales of licensed products for a given
period by applying these advance payments towards such earned
royalty payments. Because the Company's license agreements
typically provide for the payment of royalties by a licensee on
product sales within 45 days after the end of the quarter in
which a sale of a licensed product occurs (with some of the
Company's more recent license agreements providing for
payments on a monthly basis), and because of the time period
which typically will elapse between a customer order and the
sale of the licensed product and installation in a home, office
building, automobile, aircraft, boat, or any other product, there
could be a delay between when economic activity between a
licensee and its customer occurs and when the Company gets
paid its royalty resulting from such activity.
Operating expenses decreased by $1,084,768 for the third
quarter of 2008 to $754,739 from $1,839,507 for the third
quarter of 2007. This decrease was principally the result of
decreased non-cash charges to operating expenses ($1,200,000)
resulting from options granted for the third quarter of 2007,
partially offset by higher patent costs ($69,000).
Research and development expenditures decreased by $582,576
to $294,565 for the third quarter of 2008 from $877,141 for the
second quarter of 2007. This decrease was principally the result
of decreased non-cash charges to research and development
expenses ($548,000), lower materials costs ($76,000) partially
offset by higher payroll expenses ($25,000) and higher
insurance costs ($7,000).
The Company's net investment income for the third quarter of
2008 was $34,772, as compared to net investment income of
$95,558 for the third quarter of 2007. This difference was
primarily due to lower cash balances available to invest as well
as lower interest rates.
As a consequence of the factors discussed above, the
Company's net income was $156,655 ($0.01 per common share)
for the third quarter of 2008 as compared to a net loss of
$2,470,281 ($0.16 per common share) for the third quarter of
2007. The difference is primarily due to lower non-cash charges
of $1,748,000 resulting from the issuance of stock options
during the third quarter of 2007 as well as $1,020,000 in higher
fee income.
Financial Condition, Liquidity and Capital Resources
During the first nine months of 2008, the Company's cash and
cash equivalent balance decreased by $4,825,595 principally as
a result of the net investment in US Treasury Securities of
$3,032,389 as well as cash used to fund the Company's
operating activities of $1,642,598. At September 30, 2008, the
Company had working capital of $5,416,999 and its
shareholders' equity was $5,751,456.
The Company occupies premises under an operating lease
agreement which expires on January 31, 2014 and requires
minimum annual rent which rises over the term of the lease to
approximately $138,269.
The Company expects to use its cash to fund its research and
development of SPD light valves and for other working capital
purposes. The Company's working capital and capital
requirements depend upon numerous factors, including the
results of research and development activities, competitive and
technological developments, the timing and cost of patent
filings, the development of new licensees and changes in the
Company's relationships with its existing licensees. The degree
of dependence of the Company's working capital requirements
on each of the foregoing factors cannot be quantified; increased
research and development activities and related costs would
increase such requirements; the addition of new licensees may
provide additional working capital or working capital
requirements, and changes in relationships with existing
licensees would have a favorable or negative impact depending
upon the nature of such changes. Based upon existing levels of
cash expenditures, existing cash reserves and budgeted
revenues, the Company believes that it would not require
additional funding until the second quarter of 2010. There can
be no assurance that expenditures will not exceed the
anticipated amounts or that additional financing, if required, will
be available when needed or, if available, that its terms will be
favorable or acceptable to the Company. Eventual success of the
Company and generation of positive cash flow will be
dependent upon the extent of commercialization of products
using the Company's technology by the Company's licensees
and payments of continuing royalties on account thereof.
Item 3.Quantitative and Qualitative Disclosures About Market Risk
The information required by Item 3 has been disclosed in Item
7A of the Company's Annual Report on Form 10-K for the year
ended December 31, 2007. There has been no material change
in the disclosure regarding market risk.
Item 4. Controls and Procedures
As of the end of the period covered by this Quarterly Report on
Form 10-Q, the Company carried out an evaluation, under the
supervision and with the participation of the Company's
management, including the 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. 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. There were no changes in the
Company's internal control over financial reporting during the
quarterly period ended September 30, 2008 that has materially
affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
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
Section 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.
PART II. OTHER INFORMATION
Item 6. Exhibits
31.1 Rule 13a-14(a)/15d-14(a) Certification of Robert L. Saxe-Filed herewith.
31.2 Rule 13a-14(a)/15d-14(a) Certification of Joseph M. Harary-Filed herewith.
32.1 Section 1350 Certification of Robert L. Saxe-Filed herewith.
32.2 Section 1350 Certification of Joseph M. Harary-Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunder duly authorized.
RESEARCH FRONTIERS INCORPORATED
(Registrant)
/s/ Robert L. Saxe
Robert L. Saxe, Chairman
(Principal Executive Officer)
/s/ Joseph M. Harary
Joseph M. Harary, President and Treasurer
(Principal Financial, and Accounting Officer)
Date: November 6, 2008