SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 2002 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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: As of
November 13, 2002, there were outstanding 12,209,379 shares of
Common Stock, par value $0.0001 per share.
RESEARCH FRONTIERS INCORPORATED
Consolidated Balance Sheets
September 30,2002
Assets (Unaudited) Dec.31,2001
Current assets:
Cash and cash equivalents $ 5,439,608 853,210
Marketable investment securities-available for sale 11,250 7,083,606
Receivable from warrant exercise pending settlement -- 164,311
Royalty receivable 59,022 37,500
Prepaid expenses and other current assets 33,638 134,050
Total current assets 5,543,518 8,272,677
Investment in SPD Inc., at cost 750,002 750,002
Fixed assets, net 223,189 279,618
Deposits and other assets 22,605 22,605
Total assets $ 6,539,314 9,324,902
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 91,341 79,197
Deferred revenue 28,125 37,500
Accrued expenses and other 140,513 158,285
Total current liabilities 259,979 274,982
Shareholders' equity:
Capital stock, par value $0.0001 per share;
authorized 100,000,000 shares, issued and
outstanding 12,160,579 shares and 12,108,195 shares 1,216 1,211
Additional paid-in capital 51,662,977 51,359,036
Accumulated other comprehensive income (loss) (38,750) 41,835
Accumulated deficit (45,193,147)(42,199,201)
6,432,296 9,202,881
Notes receivable from officers (152,961) (152,961)
Total shareholders' equity 6,279,335 9,049,920
Total liabilities and shareholders' equity $ 6,539,314 9,324,902
See accompanying notes to consolidated financial statements.
RESEARCH FRONTIERS INCORPORATED
Consolidated Statements of Operations
(Unaudited)
Nine months ended Three months ended
Sept.30,2002 Sept.30,2001 Sept.30,2002 Sept.30,2001
Fee income $ 112,769 109,908 $ 31,019 28,656
Operating expenses 1,992,937 2,562,831 588,757 723,904
Research and development 1,393,045 1,822,001 526,085 482,160
3,385,982 4,384,832 1,114,842 1,206,064
Operating loss (3,273,213) (4,274,924) (1,083,823) (1,177,408)
Net investment income 279,767 547,129 52,505 191,879
Net loss $ (2,993,446) (3,727,795) $(1,031,318) ( 985,529)
Basic and diluted net loss
per common share $ (.25) (.31) $ (.08) (.08)
Weighted average number of
common shares outstanding 12,136,893 12,081,955 12,142,594 12,089,522
See accompanying notes to consolidated financial statements.
RESEARCH FRONTIERS INCORPORATED
Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended
Sept.30,2002 Sept.30,2001
Cash flows from operating activities:
Net loss $ (2,993,946) (3,727,795)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 84,287 87,765
Expense relating to issuance of stock, options
and warrants for services performed 102,994 112,817
Cashless exercise of warrants -- 17,588
Changes in assets and liabilities:
Royalty receivable (21,522) (37,500)
Prepaid expenses and other current assets 100,412 91,181
Deferred revenue (9,375) 25,092
Accounts payable and accrued expenses (5,628) (685,597)
Net cash used in operating activities (2,742,778) (4,116,449)
Cash flows from investing activities:
Proceeds from sale and maturity of
held-to-maturity securities -- 1,319,572
Proceeds from sale of available-for-sale securities 6,991,771 1,996,460
Investment in SPD, Inc., at cost -- (750,002)
Purchase of fixed assets (27,858) (36,685)
Net cash provided by investing activities 6,963,913 2,529,345
Cash flows from financing activities:
Proceeds from issuances of common stock 2,507,157 5,987,159
Purchase of treasury stock (2,141,894) (8,042,665)
Net cash provided by (used in) financing activities 365,263 (2,055,506)
Net increase (decrease) in cash and cash equivalents 4,586,398 (3,642,610)
Cash and cash equivalents at beginning of year 853,210 3,806,172
Cash and cash equivalents at end of period $ 5,439,608 163,562
See accompanying notes to consolidated financial statements.
RESEARCH FRONTIERS INCORPORATED
Notes to Consolidated Financial Statements
September 30, 2002
(Unaudited)
Basis of Presentation
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation of the financial position, results of
operations, and cash flows for the interim periods to which the report
relates. The results of operations for the nine-month period ended
September 30, 2002 are not necessarily indicative of the results to be
expected for the full year. The notes included herein should be read in
conjunction with the notes to the consolidated financial statements of
Research Frontiers Incorporated (the "Company") as of December 31,
2001 and for the three years then ended, included in the Company's
Annual Report on Form 10-K.
Business
Research Frontiers Incorporated 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 microscopic
particles that are either incorporated within a liquid suspension or a
film, which is usually enclosed between two glass or plastic plates,
having transparent, electrically conductive coatings on the facing
surfaces thereof. At least one of the two plates is transparent.
During the second quarter of 2001, the Company, through its wholly-
owned subsidiary, SPD Enterprises, Inc., invested approximately
$750,000 for a minority equity interest in SPD Inc., a subsidiary of
Hankuk Glass Industries Inc., Korea's largest glass manufacturer,
which is dedicated exclusively to the production of suspended particle
device (SPD) light-control film and a wide variety of end-products
using SPD film.
Patent Costs
The Company expenses costs relating to the development or
acquisition of patents due to the uncertainty of the recoverability of
these items.
Adoption of New Accounting Pronouncements
The Company adopted on January 1, 2002 Financial Accounting
Standards Board Statement No. 144, Accounting for the Impairment
of Long-Lived Assets ("SFAS No. 144"),which addresses financial
accounting and reporting for the impairment or disposal of long-lived
assets. This statement supersedes Financial Accounting Standards
Board Statement No. 121, Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of ("SFAS
No. 121"), while retaining the fundamental recognition and
measurement provisions of that statement. SFAS No. 144 requires that
a long-lived asset to be abandoned, exchanged for a similar productive
asset or distributed to owners in a spinoff to be considered held and
used until it is disposed of. However, SFAS No. 144 requires that
management consider revising the depreciable life of such long-lived
asset. With respect to long-lived assets to be disposed of by sale,
SFAS No. 144 retains the provisions of SFAS No. 121, and therefore,
requires that discontinued operations no longer be measured on a net
realizable value basis and that future operating losses associated with
such discontinued operations no longer be recognized before they
occur. The implementation of SFAS No. 144 had no impact on the
Company's financial position or results of operations.
In July 2002, the Financial Accounting Standards Board issued
Statement No. 146, Accounting for Costs Associated with Exit or
Disposal Activities ("SFAS No. 146"). SFAS No. 146 will spread out
the reporting of expenses relating to restructurings initiated after 2002,
because commitment to a plan to exit an activity or dispose of long-
lived assets will no longer be enough to record a liability for the
anticipated costs. Instead, companies will record exit and disposal
costs when they are "incurred" and can be measured at fair value, and
they will subsequently adjust the recorded liability for changes in
estimated cash flows. The Company is required to adopt the provisions
of SFAS No. 146 as of January 1, 2003. The Company does not
believe that the adoption of SFAS No. 146 will have any impact on the
Company's consolidated financial statements as no planned
restructuring charges currently exist.
Deferred Revenue
The Company has entered into a number of license agreements
covering potential products. The Company receives minimum annual
royalties under certain license agreements and records fee income for
the amounts earned by the Company. Certain of the fees are paid to
the Company in advance of the period in which they are earned,
resulting in deferred revenue.
Marketable Investment Securities
During the second quarter of 2001, the Company determined that it
may sell its marketable investment securities prior to their maturity
dates in order to invest in other marketable securities, repurchase and
retire its common stock, and for general working capital purposes.
Accordingly, as of June 30, 2001, the Company transferred its
classification of marketable securities from held-to-maturity to
available-for-sale. As a result, the Company records the securities at
fair value with the unrealized holding loss of $38,750 at September 30,
2002 recorded as a component of shareholders' equity.
Shareholders' Equity
Issuance of Common Stock
For the nine months ended September 30, 2002, the Company received
$2,507,157 of net cash proceeds from (i) the issuance of 33,875 shares
of common stock issued upon the exercise of options resulting in net
proceeds of $243,767; (ii) 181,000 shares of common stock issued
upon the exercise of warrants resulting in net proceeds of $2,099,081;
and (iii) $164,311 of cash received in early January for the settlement
of a warrant exercised in late December 2001. In addition, 2,816
shares with a value of $39,200 were delivered to the Company and
immediately retired in payment of the exercise price of options to
purchase 10,500 shares, and 250 shares of common stock were issued
in connection with the acquisition by the Company of the domain name
"SmartGlass.com" resulting in non-cash marketing expense of $1,518.
For the nine months ended September 30, 2001, the Company received
$5,987,159 of net cash proceeds from (i) the issuance of 44,175 shares
of common stock issued upon the exercise of options resulting in net
proceeds of $344,847 and (ii) 302,000 shares of common stock issued
upon the exercise of warrants resulting in net proceeds of $5,642,312.
In addition, 3,715 shares were issued to directors in payment of
$69,221 in directors fees, and 687 shares were issued through the
cashless exercise of certain warrants, resulting in non-cash consulting
expense of $17,588 being recorded.
Treasury Stock
For the nine months ended September 30, 2002, the Company
purchased in the open market and subsequently retired 170,425 shares
of treasury stock with an aggregate cost of $2,141,894. In addition,
2,816 shares with a value of $39,200 were delivered to the Company
and immediately retired in payment of the exercise price of options to
purchase 10,500 shares.
For the nine months ended September 30, 2001, the Company
purchased in the open market and subsequently retired 400,665 shares
of treasury stock with an aggregate cost of $8,042,665.
Issuance of Warrants and Options
During the second quarter of 2002, the Company issued warrants to
SPD Inc. to purchase 10,000 shares of common stock at an exercise
price of $12.19 per share as an award for being the first licensee of the
Company to produce and sell commercial quantities of SPD film. The
Company recorded $64,000 of non-cash expense in connection with
the issuance of these warrants.
During the second quarter of 2002, the Company issued options to its
five Advisory Board members to purchase a total of 5,000 shares of
common stock at an exercise price of $12.775 per share. The Company
recorded $37,050 of non-cash expense in connection with the issuance
of these options. During the third quarter of 2002, the Company issued
options to purchase 250 shares of common stock in connection with
the acquisition by the Company of the domain name
"SmartGlass.com" resulting in non-cash marketing expense of $2,647.
Comprehensive Income
The Company accounts for its comprehensive income under the
provisions of Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income." (Statement 130). Statement 130
requires that companies disclose comprehensive income, which
includes net income, foreign currency translation adjustments,
minimum pension liability adjustments, and unrealized gains and
losses on marketable securities classified as available-for-sale. The
components of comprehensive loss for the three and nine months
ended September 30, 2002 and 2001 are as follows:
Three months ended Nine months ended
Sept.30,2002 Sept.30,2001 Sept.30,2002 Sept.30,2001
Net loss $ (1,032,818) ( 985,529) (2,995,446) (3,727,795)
Reclassification
adjustments for gains
realized in net loss
during the period (60,217) (46,665) (80,585) --
Unrealized holding gain
arising during period 56,588 139,281 80,585 147,434
Total comprehensive loss $(1,036,447) (892,813) (2,995,446) (3,580,361)
Performance Bonus Plan
In December 2000, the Company's Board of Directors approved a
performance bonus plan which provides for a bonus to be paid on
or after July 2, 2001 and on or after January 2, 2002 equal to 1% of
the increase, if any, in the Company's market value during the first
and second halves of 2001. Bonuses are capped at a recipient's
salary in the case of employees of the Company, and are currently
capped at $60,000 in the case of non-employee directors and certain
employees of the Company. The Company's Board of Directors
approved a similar bonus plan for 2002 but with higher thresholds
to be met before a bonus is payable under such plan. In addition to
the payment caps described above, under the current plan, in order
to insure that bonuses are not paid based upon temporary
fluctuations in the market value of the Company, bonuses under this
plan will only be paid to the various participants under this plan if
and when the market value of the Company exceeds $280,489,009
(and in the case of any bonus paid to Robert L. Saxe, if and when
the market value of the Company exceeds $304,207,362). The
Company recorded $0 and $785,500 of expenses in connection with
these plans for the nine months ended September 30, 2002 and
2001, respectively. On November 6, 2002, the Company's Board of
Directors voted to terminate this bonus plan with respect to 2003
and replace it with a general bonus plan under which bonuses are
awarded to employees of the Company for outstanding achievement
including technical accomplishments, sales and revenue growth, and
other performance milestones. All employees of the Company are
eligible to receive bonuses under this plan and the bonuses shall not
exceed $300,000 in the aggregate for 2003. The existing bonus plan
remains in effect through December 31, 2002.
Vesting of Performance Warrants
During the first quarter of 2001, certain warrants granted to
consultants in 1995 to purchase 7,000 shares of common stock
became vested due to services performed and performance
criteria being met. In accordance with EITF 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 recorded consulting expense of
$43,596 during the first quarter of 2001, based upon the fair
value of such warrants on the date the warrants vested as
determined using a Black-Scholes option pricing model.
Reclassifications
During the second quarter, the Company has reclassified costs
associated with patents and patent applications from research and
development expenses to operating expenses. The amount of
patent costs for the three and nine months ended September 30,
2002 was approximately $83,000 and $238,000, respectively.
The reclassification was also reflected in the consolidated
statement of operations for the three and nine months ended
September 30, 2001 to conform to the current period's
presentation. The amount of patent costs reclassified from
research and development expense to operating expense for the
three and nine months ended September 30, 2001 was
approximately $81,000 and $322,000 respectively.
Subsequent Event
On November 8, 2002, one of the Company's officers, Joseph M.
Harary paid the Company $192,171 in cash in payment in full of
all principal and accrued interest on the loans made by the
Company to Mr. Harary.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
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 for the year ended December 31, 2001.
We have entered into a number of license agreements covering
potential products using the Company's SPD technology. Under
these agreements, we generally recognize income from royalties
when earned in accordance with the terms of the agreements.
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 research-related
overhead expenses. Direct expenses include a portion of our chief
executive officer's compensation.
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 EITF 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, 2002 and 2001
The Company's fee income from licensing activities for the first
nine months of 2002 was $112,269 which was essentially the
same as the first nine months of 2001. Although sales of licensed
products under some of the Company's license agreements have
occurred during the first nine months of 2002, the earned
royalties on such sales have not yet exceeded the minimum
annual royalties payable by certain licensees under their license
agreements, and/or are included as a royalty receivable on the
Company's balance sheet since the license agreements in effect
with the Company's licensees typically do not require the
licensee to make payment of earned royalties on the sale of
licensed products until 45 days after the end of the quarter in
which such sales occurred.
Operating expenses decreased by $569,894 for the first nine
months of 2002 to $1,992,937 from $2,562,831 for the first nine
months of 2001. This decrease was primarily the result of lower
payroll, patent, office, public relations, and directors expenses,
offset somewhat by increased legal, consulting and marketing
expenses.
Research and development expenditures decreased by $428,956
to $1,393,045 for the first nine months of 2002 from $1,822,001
for the first nine months of 2001. This decrease was primarily the
result of lower payroll expenses and materials costs.
Operating expenses and research and development expenses
listed above included amounts accrued under a performance
bonus plan of $496,790 and $288,710, respectively, during the
first nine months of 2001. No amounts were accrued under the
bonus plan with respect to the first nine months of 2002.
The Company's net gain from its investing activities for the first
nine months of 2002 was $279,767 as compared to a net gain
from its investing activities of $547,129 for the first nine months
of 2001. This difference was primarily due to a lower level of
average investment balances in 2002 compared to 2001, and
lower prevailing interest rates in the U.S. Treasury Markets.
As a consequence of the factors discussed above, the Company's
net loss was $2,993,946 ($0.25 per share) for the first nine
months of 2002 as compared to $3,727,795 ($0.31 per share) for
the first nine months of 2001.
Results of Operations for the Three-Month Periods Ended
September 30, 2002 and 2001
The Company's fee income from licensing activities for the third
quarter of 2002 was $31,019 as compared to $28,656 for the
third quarter of 2001. Although sales of licensed products under
some of the Company's license agreements have occurred during
the third quarter of 2002 at an higher level than during the
previous two quarters of 2002, the earned royalties on such sales
have not yet exceeded the minimum annual royalties payable by
certain licensees under their license agreements, and/or are
included as a royalty receivable on the Company's balance sheet
since the license agreements in effect with the Company's
licensees typically do not require the licensee to make payment of
earned royalties on the sale of licensed products until 45 days
after the end of the quarter in which such sales occurred.
Operating expenses decreased by $135,147 for the third quarter
of 2002 to $588,757 from $723,904 for the third quarter of 2001.
This decrease was primarily the result of lower payroll, office,
public relations, and directors expenses offset by increased legal,
consulting and marketing expenses.
Research and development expenditures increased by $43,925 to
$526,085 for the third quarter of 2002 from $482,160 for the
third quarter of 2001. This increase was the result of increased
cost of materials offset by a decrease in payroll expenses.
The Company's net gain from its investing activities for the third
quarter of 2002 was $52,505, as compared to a net gain from its
investing activities of $191,879 for the third quarter of 2001.
This difference was primarily due to a lower level of average
investment balances in 2002 compared to 2001, and lower
prevailing interest rates in the U.S. Treasury Markets.
As a consequence of the factors discussed above, the Company's
net loss was $1,031,318 ($0.08 per share) for the third quarter of
2002 as compared to $985,529 ($0.08 per share) for the third
quarter of 2001.
Financial Condition, Liquidity and Capital Resources
During the first nine months of 2002, the Company's cash and
cash equivalent balance increased by $4,586,398, principally as
a result of proceeds received from sale of $6,991,771 of
available-for-sale securities, and $2,507,157 of proceeds
received, net of expenses, from the issuance of common stock
upon the exercise of options and warrants, the , offset by cash
used to fund the Company's operating activities of $2,742,778,
and the repurchase and subsequent retirement of $2,141,894
worth of the Company's common stock in the open market. At
September 30, 2002, the Company had working capital of
$5,282,039 and its shareholders' equity was $6,277,835.
In December 2000, the Company's Board of Directors approved
a performance bonus plan which provides for a bonus to be paid
on or after July 2, 2001 and on or after January 2, 2002 equal to
1% of the increase, if any, in the Company's market value during
the first and second halves of 2001. Bonuses are capped at a
recipient's salary in the case of employees of the Company, and
are currently capped at $60,000 in the case of non-employee
directors and certain employees of the Company. The Company's
Board of Directors approved a similar bonus plan for 2002 but
with higher thresholds to be met before a bonus is payable under
such plan. In addition to the payment caps described above, under
the current plan, in order to insure that bonuses are not paid based
upon temporary fluctuations in the market value of the Company,
bonuses under this plan will only be paid to the various
participants under this plan if and when the market value of the
Company exceeds $280,489,009 (and in the case of any bonus
paid to Robert L. Saxe, if and when the market value of the
Company exceeds $304,207,362). As noted above, no bonuses
are currently payable in connection with these plans, therefore no
amount has been accrued for. On November 6, 2002, the
Company's Board of Directors voted to terminate this bonus plan
with respect to 2003 and replace it with a general bonus plan
under which bonuses are awarded to employees of the Company
for outstanding achievement including technical
accomplishments, sales and revenue growth, and other
performance milestones. All employees of the Company are
eligible to receive bonuses under this plan and the bonuses shall
not exceed $300,000 in the aggregate for 2003. The existing
bonus plan remains in effect through December 31, 2002.
On October 1, 1998, the Company announced that Ailouros Ltd.,
a London-based institutional money management fund, has
committed to purchase up to $15 million worth of common stock
of the Company through December 31, 2001. This commitment
is in the form of a Class A Warrant issued to Ailouros Ltd. which
gives the Company the option in any three-month period to
deliver a put notice to Ailouros requiring them to purchase an
amount of common stock specified by the Company at a price
equal to the greater of (A) 92% of the seven-day average trading
price per share of common stock, or (B) a minimum or "floor"
price per share set by the Company from time to time. The
pricing was initially subject to an overall cap of $15 per share,
which cap has now been eliminated by mutual agreement so that
the Company may put stock to Ailouros at selling prices in excess
of $15 per share. However, the Company is not required to sell
any shares under the agreement. Before the beginning of each of a
series of three-month periods specified by the Company, the
Company determines the amount of common stock that the
Company wishes to issue during such three-month period. The
Company also sets the minimum selling or "floor" price, which
can be reset by the Company in its sole discretion prior to the
beginning of any subsequent three-month period. Therefore, at
the beginning of each three-month period, the Company will
determine how much common stock, if any, is to be sold (the
amount of which can range from $0 to $1.5 million during such
three-month period), and the minimum selling price per share. In
March 2000, Ailouros agreed to expand its commitment beyond
the original $15 million, thereby giving the Company the right to
raise additional funds from Ailouros so long as the Company
does not have to issue more shares than were originally registered
with the Securities and Exchange Commission, and in December
2001 the expiration date of the Class A Warrant was extended to
December 31, 2003.
The Company expects to use its cash and the proceeds from
maturities of its investments 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
expenditures, assumed ten percent annual increases therein,
existing cash reserves and budgeted revenues, the Company
believes that it would not require additional funding for the next
18 months (without giving effect to any new financing raised).
There can be no assurance that expenditures will not exceed the
anticipated amounts or that additional financing, if required, will
be available when needed or, if available, that its terms will be
favorable or acceptable to the Company. Eventual success of the
Company and generation of positive cash flow will be dependent
upon the commercialization of products using the Company's
technology by the Company's licensees and payments of
continuing royalties on account thereof.
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, 2001. There has been no material change in
the disclosure regarding market risk.
Related Party Transactions
Statement of Financial Accounting Standards No. 57, "Related
Party Disclosures" requires the Company to identify and
describe material transactions involving related persons or
entities and to disclose information necessary to understand the
effects of such transactions on our consolidated financial
statements. The Company has loaned two officers an aggregate of
$152,961. Each of the aforementioned loans were made in April
1997 or prior thereto; are due in January 2003; relate to the
purchase of common stock of the Company; are collateralized by
the pledge of shares of common stock of the Company; may be
prepaid in part or in full without notice or penalty; are
represented by a promissory note which bears interest at a rate
per annum equal to the broker call rate in effect on the first day of
each calendar quarter; and permit repayment of the loan by
delivery of securities of the Company having a fair market value
equal to the balance of the loan outstanding. On November 8,
2002, one of these officers, Joseph M. Harary, paid the Company
$192,171 in cash in payment in full of all principal and accrued
interest on the loans made by the Company to Mr. Harary.
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.
Item 4. Controls and Procedures
We maintain a system of controls and procedures designed to
provide reasonable assurance as to the reliability of the financial
statements and other disclosures included in this report, as well as
to safeguard assets from unauthorized use or disposition. We
evaluated the effectiveness of the design and operation of our
disclosure controls and procedures under the supervision and with
the participation of management, including our Chief Executive
Officer, within 90 days prior to the filing date of this report.
Based upon that evaluation, our Chief Executive Officer
concluded that our disclosure controls and procedures are
effective in timely alerting them to material information required
to be included in our periodic Securities and Exchange
Commission filings. No significant changes were made to our
internal controls or other factors that could significantly affect
these controls subsequent to the date of their evaluation.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. None
(b) Reports on Form 8-K. None
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 and Treasurer
(Principal Executive, Financial, and
Accounting Officer)
Date: November 14, 2002
CERTIFICATION
I, Robert L. Saxe, the Chief Executive Officer and Chief
Accounting Officer of Research Frontiers Incorporated ("RFI")
certify that;
1. I have reviewed this quarterly report on Form 10-Q of RFI,
2.Based on my knowledge, this quarterly 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 quarterly report;
3.Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of RFI as of, and for, the periods presented in this
quarterly report;
4.I am responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for RFI and I have:
a)designed such disclosure controls and procedures to ensure that
material information relating to RFI, including its consolidated
subsidiaries, is made known to me by others within those entities,
particularly during the period in which this quarterly report is
being prepared;
b)evaluated the effectiveness of RFI's disclosure controls and
procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c)presented in this quarterly report my conclusions about the
effectiveness of the disclosure controls and procedures based on
my evaluation as of the Evaluation Date;
5.I have disclosed, based on our most recent evaluation, to RFI's
auditors and audit committee of RFI's Board of Directors:
a)all significant deficiencies in the design or operation of
internal controls which could adversely affect RFI's ability to
record, process, summarize and report financial data and have
identified for RFI's auditors any material weaknesses in
internal controls; and
b)any fraud, whether or not material, that involves management or
other employees who have a significant role in RFI's internal
controls; and
6.I have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of my
most recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.
Dated: November 14, 2002
/s/ Robert L. Saxe
Robert L. Saxe
Chairman and Chief Executive Officer,
Treasurer and Principal Accounting Officer
EXHIBIT 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Research
Frontiers Incorporated (the "Company") on Form 10-Q for the
quarter ended September 30, 2002 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I,
Robert L. Saxe, Chairman of the Board and Chief 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. The Report fully complies with the requirements of Section
13(a) or 15(d), as applicable, of the Securities Exchange Act
of 1934; and
2. The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
/s/ Robert L. Saxe
Robert L. Saxe
Chairman of the Board
and Chief Executive Officer
November 14, 2002