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 June 30, 2003 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 August
13, 2003, there were outstanding 12,515,213 shares of Common Stock, par
value $0.0001 per share.
RESEARCH FRONTIERS INCORPORATED
Consolidated Balance Sheets
June 30,2003
Assets (Unaudited) Dec.31,2002
Current assets:
Cash and cash equivalents $4,951,819 5,117,571
Marketable investment securities-available for sale 9,250 11,250
Royalty receivables 310,650 138,147
Prepaid expenses and other current assets 88,208 26,661
Total current assets 5,359,927 5,293,629
Investment in SPD Inc., net 569,704 750,002
Fixed assets, net 183,094 200,815
Deposits and other assets 22,605 22,605
Total assets $6,135,330 6,267,051
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 139,759 88,609
Deferred revenue 160,681 12,000
Accrued expenses and other 169,204 191,976
Total liabilities 469,644 292,585
Shareholders' equity:
Common stock, par value $0.0001 per share; authorized
100,000,000 shares, issued and outstanding 12,477,813
shares and 12,215,879 shares 1,248 1,222
Additional paid-in capital 54,192,522 52,124,811
Accumulated other comprehensive loss (3,250) (1,250)
Accumulated deficit (48,524,834) (46,150,317)
Total shareholders' equity 5,665,686 5,974,466
Total liabilities and shareholders' equity $ 6,135,330 6,267,051
See accompanying notes to consolidated financial statements.
RESEARCH FRONTIERS INCORPORATED
Consolidated Statements of Operations
(Unaudited)
Six months ended Three months ended
June 30,2003 June 30,2002 June 30,2003 June 30,2002
Fee income $ 149,317 81,250 $ 63,189 28,125
Operating expenses 1,241,662 1,404,180 660,208 778,466
Research and development 1,044,004 866,960 471,766 409,860
Charge for reduction in value
of investment in SPD Inc. 255,200 -- -- --
2,540,866 2,271,140 1,131,974 1,188,326
Operating loss (2,391,549) (2,189,890) (1,068,785) (1,160,201)
Net investment income 17,032 227,262 7,195 118,440
Net loss $(2,374,517) (1,962,628) $(1,061,590) (1,041,761)
Basic and diluted net loss
per common share $ (.19) (.16) $ (.09) (.09)
Weighted average number of
common shares outstanding 12,282,477 12,133,995 12,328,920 12,139,767
See accompanying notes to consolidated financial statements.
RESEARCH FRONTIERS INCORPORATED
Consolidated Statements of Cash Flows
(Unaudited)
Six months ended
June 30,2003 June 30, 2002
Cash flows from operating activities:
Net loss $(2,374,517) (1,962,628)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 55,629 55,084
Charge for reduction in value of investment in SPD Inc. 255,200 --
Expense relating to cashless exercise of stock options 40,987 --
Expense relating to issuance of stock options
and warrants for services performed 27,900 101,050
Changes in assets and liabilities:
Royalty receivable (172,503) (75,000)
Prepaid expenses and other current assets (61,547) (60,855)
Deferred revenue 148,681 18,750
Accounts payable and accrued expenses 28,378 (28,078)
Net cash used in operating activities (2,051,792) (1,951,677)
Cash flows from investing activities:
Investment in SPD Inc., at cost (74,902) --
Proceeds from sale of available-for-sale securities -- 1,199,551
Purchase of fixed assets (37,908) (20,616)
Net cash (used in) provided by investing activities (112,810) 1,178,935
Cash flows from financing activities:
Proceeds from issuances of common stock 1,998,850 1,819,367
Purchase of treasury stock -- (1,520,447)
Net cash provided by financing activities 1,998,850 298,920
Net decrease in cash and cash equivalents (165,752) (473,822)
Cash and cash equivalents at beginning of year 5,117,571 853,210
Cash and cash equivalents at end of period $ 4,951,819 379,388
See accompanying notes to consolidated financial statements.
RESEARCH FRONTIERS INCORPORATED
Notes to Consolidated Financial Statements
June 30, 2003
(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 six-month period ended June 30, 2003 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 the Company as of December 31,
2002 and for the three years then ended, included in the Company's Annual
Report on Form 10-K.
Business
Research Frontiers Incorporated (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.
Investment in SPD Inc.
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. In April
2003, the Company's wholly-owned subsidiary, SPD Enterprises, Inc.,
invested $74,902 in SPD Inc., raising its equity ownership from 6.67% to
6.91%. SPD Inc.'s parent company invested at the same time and at the
same price, $748,931, raising its equity ownership in SPD Inc. from
66.67% to 69.09%. Because of these recent financing activities by SPD
Inc. in which Hankuk and SPD Enterprises paid a lower price than
originally paid by SPD Enterprises in connection with its initial investment
in SPD Inc., the value of SPD Enterprises' investment in SPD Inc. was
reduced by $255,200 during the first quarter of 2003. The Company's
license agreement with Hankuk Glass Industries provides for the payment
of minimum annual royalties to the Company in 2002 and 2003.
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, 2003 Financial Accounting Standards
Board Statement No. 146, Accounting for Costs Associated with Exit or
Disposal Activities ("SFAS No. 146"). SFAS No. 146 spreads 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
adoption of SFAS No. 146 had no impact on the Company's consolidated
financial statements as no restructurings are planned.
Revenue Recognition
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. 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.
Stock-Based Compensation
As permitted by SFAS No. 123, Accounting for Stock-Based
Compensation, the Company accounts for common stock options granted
to employees and directors using the intrinsic value method, and thus,
recognizes no compensation expense for such stock-based awards where
the exercise prices are equal to or greater than the fair value of the
Company's common stock on the date of grant. Pro forma information
regarding net income or loss is required by SFAS No. 123.
The following table illustrates the effect on net loss and earnings per share
as if the fair value method had been applied:
Three months ended Six months ended
June 30,2003 June 30,2002 June 30,2003 June 30,2002
Net loss $(1,061,590) (1,041,761) (2,374,517) (1,962,628)
Add:Total stock-based employee
compensation expense
included in net loss $ 40,987 -- 40,987 --
Deduct: Total stock-based
employee compensation
determined under fair-
value based method
for all awards $ (704,437) (144,768) (760,712) (201,043)
Pro forma $(1,725,040) (1,186,529) (3,094,242) (2,163,671)
Basic and diluted net loss
per common share As reported $ (0.09) (0.09) $ (0.19) (0.16)
Pro forma $ (0.14) (0.10) $ (0.25) (0.18)
Shareholders' Equity
Issuance of Common Stock
For the six months ended June 30, 2003, the Company received
$1,998,850 of net cash proceeds from (i) the issuance of 25,000 shares of
common stock of the Company (along with a ten-year warrant to purchase
25,000 shares of common stock of the Company at an exercise price of
$9.00 per share) in a private placement to a director of the Company
resulting in net proceeds of $165,000; (ii) 169,700 shares of common stock
issued upon the exercise of warrants resulting in net proceeds of
$1,418,320; and (iii) the issuance of 58,475 shares of common stock
issued upon the exercise of options resulting in net proceeds of $415,530.
In addition, 3,754 shares were issued through the cashless exercise of
certain options and warrants, resulting in non-cash directors expense of
$40,987 being recorded, and 9,995 shares with a value of $108,995 were
delivered to the Company and immediately retired in payment of the
exercise price of options to purchase 15,000 shares.
For the six months ended June 30, 2002, the Company received
$1,819,367 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) 99,000 shares of common stock issued upon the exercise
of warrants resulting in net proceeds of $1,411,289; 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.
Treasury Stock
The Company did not repurchase any of its stock during the six months
ended June 30, 2003. In addition, 9,995 shares with a value of $108,995
were delivered to the Company and immediately retired in payment of the
exercise price of options to purchase 15,000 shares.
For the six months ended June 30, 2002, the Company purchased in the
open market and subsequently retired 104,175 shares of treasury stock with
an aggregate cost of $1,520,447. 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.
Issuance of Warrants and Options
During the second quarter of 2003, the Company issued options to a
consultant to purchase 5,000 shares of common stock at an exercise price
of $9.54 per share. The Company recorded $27,900 of non-cash expense
in connection with the issuance of these 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.
Comprehensive Income
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income. (SFAS No. 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 six
months ended June 30, 2003 and 2002 are as follows:
Three months ended Six months ended
June 30,2003 June 30,2002 June 30,2003 June 30,2002
Net loss $(1,061,590) (1,041,761) (2,374,517) (1,962,628)
Reclassification adjustments
for gains realized in net
income during the period -- (20,368) -- (20,368)
Unrealized holding gain (loss)
arising during period 3,625 80,868 (2,000) 23,997
Total comprehensive loss $(1,057,965) (981,261) (2,376,517) (1,958,999)
Performance Bonus Plan
In November 2002, the Company's Board of Directors approved a
performance bonus plan to replace earlier bonus plans 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. During the first quarter of 2003, bonuses were awarded under
this plan to certain non-management employees of the Company totaling
$52,500, and no bonuses were awarded under this plan to any members of
management.
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.
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 indirect overhead expenses.
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 Company applies the cost method of accounting for its minority
equity interest in SPD Inc., a subsidiary of Hankuk Glass Industries, Inc.
Because no public market exists for the common stock of SPD Inc., the
Company reviews the operating performance, financing and forecasts for
such entity in assessing the net realizable value of this investment. As a
result, any significant adverse change in the above could lead to an
impairment charge in future periods.
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.
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 and Chief Financial Officer, within 90 days prior to the
filing date of this report. Based upon that evaluation, our Chief Executive
Officer and Chief Financial 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.
Results of Operations for the Six-Month Periods Ended June 30, 2003 and 2002
The Company's fee income from licensing activities for the first six
months of 2003 was $149,317 as compared to $81,250 for the first six
months of 2002. This increase in fee income was primarily the result of
new license agreements entered into in 2002 and 2003 and minimum
annual royalties paid by end-product licensees. 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 their advance payments
towards such earned royalty payments.
Operating expenses decreased by $162,518 for the first six months of 2003
to $1,241,662 from $1,404,180 for the first six months of 2002. This
decrease was primarily the result of decreased expenses in connection with
market research, public relations and patent expenses, partially offset by
increases in salaries, legal fees, non-cash directors expenses resulting from
the cashless exercise of stock options of $40,987, and insurance costs.
Research and development expenditures increased by $177,044 to
$1,044,004 for the first six months of 2003 from $866,960 for the first six
months of 2002. This increase was primarily the result of increased payroll
expenses primarily from performance bonuses paid to non-management
employees, and higher insurance and materials costs.
Results for the first six months of 2003 reflect a non-cash charge of
$255,200 against income recorded by the Company in the first quarter of
2003 to reflect a reduction in the value of its investment in SPD Inc.
determined based upon recent financing activities by SPD Inc.
The Company's net gain from its investing activities for the first six
months of 2003 was $17,032 as compared to a net gain from its investing
activities of $227,262 for the first six months of 2002. This difference was
primarily due to a lower level of average investment balances in 2003
compared to 2002, and lower interest rates.
As a consequence of the factors discussed above, the Company's net loss
was $2,374,517 ($0.19 per share) for the first six months of 2003 as
compared to $1,962,628 ($0.16 per share) for the first six months of 2002.
Results of Operations for the Three-Month Periods Ended June 30, 2003 and 2002
The Company's fee income from licensing activities for the second quarter
of 2003 was $63,189 as compared to $28,125 for the second quarter of
2002. This increase in fee income was primarily the result of new license
agreements entered into in 2002 and 2003 and minimum annual royalties
paid by end-product licensees. 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 their advance payments towards
such earned royalty payments.
Operating expenses decreased by $118,258 for the second quarter of 2003
to $660,208 from $778,466 for the second quarter of 2002. This decrease
was primarily the result of decreased expenses in connection with market
research, public relations and patent expenses, partially offset by increases
in salaries and insurance costs.
Research and development expenditures increased by $61,906 to $471,766
for the second quarter of 2003 from $409,860 for the second quarter of
2002. This increase was primarily the result of increased payroll expenses,
and higher insurance and materials costs.
The Company's net gain from its investing activities for the second quarter
of 2003 was $7,195 as compared to a net gain from its investing activities
of $118,440 for the second quarter of 2002. This difference was primarily
due to a lower level of average investment balances in 2003 compared to
2002, and lower interest rates.
As a consequence of the factors discussed above, the Company's net loss
was $1,061,590 ($0.09 per share) for the second quarter of 2003 as
compared to $1,041,761 ($0.09 per share) for the second quarter of 2002.
Financial Condition, Liquidity and Capital Resources
During the first six months of 2003, the Company's cash and cash
equivalent balance decreased by $165,752 principally as a result of cash
used to fund the Company's operating activities of $2,051,792, offset by
$1,998,850 of proceeds received, net of expenses, from the private
placement of common stock and the issuance of common stock upon the
exercise of options and warrants. At June 30, 2003, the Company had
working capital of $4,890,283 and its shareholders' equity was $5,665,686.
In April 2003, the Company's wholly-owned subsidiary, SPD Enterprises,
Inc., invested $74,902 in SPD Inc., raising its equity ownership from
6.67% to 6.91%. SPD Inc.'s parent company invested at the same time and
at the same price, $748,931, raising its equity ownership in SPD Inc. from
66.67% to 69.09%.
In November 2002, the Company's Board of Directors approved a
performance bonus plan to replace earlier bonus plans 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. During the first quarter of 2003, bonuses were awarded under
this plan to certain non-management employees of the Company totaling
$52,500, and no bonuses were awarded under this plan to any members of
management.
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. As of June 30, 2003, 294,017 shares remained registered for
future issuance under the Class A Warrant.
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 16 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 extent of commercialization of products using the
Company's technology by the Company's licensees and payments of
continuing royalties on account thereof.
Recently Issued Accounting Standards
In December 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure" ("SFAS 148").
SFAS 148 provides alternative methods of transition for a voluntary
change to the fair value method of accounting for stock-based employee
compensation as originally provided by SFAS No. 123 "Accounting for
Stock-Based Compensation". Additionally, SFAS 148 amends the
disclosure requirements of SFAS 123 to require prominent disclosure in
both the annual and interim financial statements about the method of
accounting for stock-based compensation and the effect of the method used
on reported results. The transitional requirements of SFAS 148 are
effective for all financial statements for fiscal years ending after December
15, 2002. The Company adopted the disclosure portion of this statement
for the fiscal quarter ended March 31, 2003. The application of the
disclosure portion of this standard will have no impact on our consolidated
financial position or results of operations. The Financial Accounting
Standards Board recently indicated that they will require stock-based
employee compensation to be recorded as a charge to earnings beginning
in 2004 and that FASB will issue further rules on this subject. The
Company will continue to monitor FASB's progress on the issuance of this
standard as well as evaluate the Company's position with respect to current
guidance.
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 31,2002.
There has been no material change in the disclosure regarding market risk.
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 4. Submission of Matters to a Vote of Security-Holders
The Annual Meeting of Stockholders of Research Frontiers Incorporated
was held on June 12, 2003. Listed below is a summary of how the
11,539,379 shares voted at the Annual Meeting on the various proposals
voted upon and adopted at the Annual Meeting. For the election of Joseph
M. Harary as a Class I member of the Company's Board of Directors,
11,311,425 shares were voted in favor of election, and 227,954 votes were
withheld. For the ratification of the appointment of KPMG LLP as auditors
for the 2003 fiscal year, 11,469,463 shares were voted in favor of election,
57,191 shares were voted against, and 12,725 shares abstained from
voting. For the adoption of the amendment to the Company's 1998 Stock
Option Plan, 10,511,353 shares were voted in favor of election, 953,642
shares were voted against, and 74,384 shares abstained from voting.
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
(Principal Executive Officer)
/s/ Joseph M. Harary
Joseph M. Harary, President and Treasurer
(Principal Financial, and Accounting Officer)
Date: August 13, 2003
CERTIFICATION
I, Robert L. Saxe, the Chairman and Chief Executive Officer of Research
Frontiers Incorporated ("RFI" or the "registrant") 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 the
registrant as of, and for, the periods presented in this quarterly 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-14 and 15d-14) for the registrant and
we 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 quarterly 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 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 registrant's board of
directors (or persons performing the equivalent function):
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: August 13, 2003 /s/ Robert L. Saxe
Robert L. Saxe
Chairman and Chief Executive Officer
CERTIFICATION
I, Joseph M. Harary, the President, Chief Operating Officer, Treasurer
and Chief Accounting Officer of Research Frontiers Incorporated ("RFI"
or the "registrant") 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 the
registrant as of, and for, the periods presented in this quarterly 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-14 and 15d-14) for the registrant and
we 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 quarterly 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 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 registrant's board of
directors (or persons performing the equivalent function):
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: August 13, 2003 /s/ Joseph M. Harary
Joseph M. Harary
President, Treasurer,
Principal Accounting Officer