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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) of

THE SECURITIES AND EXCHANGE ACT OF 1934

 

For the quarter ended June 30, 2021 Commission File Number 000-14893

 

RESEARCH FRONTIERS INCORPORATED

(Exact name of registrant as specified in its charter)

 

delaware   11-2103466

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

     
240 CROSSWAYS PARK DRIVE    
WOODBURY, new york   11797-2033
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code (516) 364-1902

 

Securities registered pursuant to Section 12(b) of the Act:   Name of Exchange
Title of Class   on Which Registered
Common Stock, $0.0001 Par Value   The NASDAQ Stock Market

 

Securities registered pursuant to Section 12(g) of the Act: None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

 

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 ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer

 

Smaller reporting company Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, par value $0.0001 per share   REFR   The NASDAQ Stock Market

 

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 5, 2021, there were outstanding 31,650,396 shares of Common Stock, par value $0.0001 per share.

 

 

 

 
 

 

TABLE OF CONTENTS   Page(s)
     
Condensed Consolidated Balance Sheets – June 30, 2021 (Unaudited) and December 31, 2020   3
     
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited)   4
     
Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited)   5
     
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020 (Unaudited)   6
     
Notes to the Condensed Consolidated Financial Statements (Unaudited)   7-12
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations   13-16
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk   17
     
Item 4. Controls and Procedures   17
     
PART II - OTHER INFORMATION    
     
Item 6. Exhibits   17
     
SIGNATURES   18

 

2
 

 

RESEARCH FRONTIERS INCORPORATED

Condensed Consolidated Balance Sheets

 

Assets  June 30, 2021 (Unaudited)   December 31, 2020 (See Note 1) 
         
Current assets:          
Cash and cash equivalents  $3,471,590   $4,772,705 
Royalty receivables, net of reserves of $972,202 in 2021 and $972,202 in 2020   829,865    598,292 
Prepaid expenses and other current assets   199,925    56,512 
           
Total current assets   4,501,380    5,427,509 
           
Fixed assets, net   107,766    121,772 
Operating lease ROU assets   543,133    616,442 
Deposits and other assets   33,567    33,567 
Total assets  $5,185,846   $6,199,290 
           
Liabilities and Shareholders’ Equity          
           
Current liabilities:          
Current portion of operating lease liability  $174,103   $166,377 
Accounts payable   41,077    33,410 
Accrued expenses and other   59,435    26,279 
Deferred revenue   26,002    - 
Total current liabilities   300,617    226,066 
           
Operating lease liability, net of current portion   557,204    646,219 
Total liabilities   857,821    872,285 
           
Shareholders’ equity:          
Common stock, par value $0.0001 per share; authorized 100,000,000 shares, issued and outstanding 31,650,396 in 2021 and 31,575,786 in 2020   3,165    3,158 
Additional paid-in capital   123,250,878    123,164,623 
Accumulated deficit   (118,926,018)   (117,840,776)
Total shareholders’ equity   4,328,025    5,327,005 
           
Total liabilities and shareholders’ equity  $5,185,846   $6,199,290 

 

See accompanying notes to condensed consolidated financial statements.

 

3
 

 

RESEARCH FRONTIERS INCORPORATED

Condensed Consolidated Statements of Operations

(Unaudited)

 

                     
   Six months ended June 30,   Three months ended June 30, 
   2021   2020   2021   2020 
                 
Fee income  $327,060   $532,286   $113,937   $176,113 
                     
Operating expenses   1,128,674    1,452,404    503,078    631,963 
Research and development   284,988    330,049    139,810    146,731 
Total expenses   1,413,662    1,782,453    642,888    778,694 
                     
Operating loss   (1,086,602)   (1,250,167)   (528,951)   (602,581)
                     
Other income - PPP loan forgiveness   -    194,140    -    194,140 
Net investment income   1,360    32,452    1,016    9,460 
                     
Net loss  $(1,085,242)  $(1,023,575)  $(527,935)  $(398,981)
                     
Basic and diluted net loss per common share  $(0.03)  $(0.03)  $(0.02)  $(0.01)
                     
Weighted average number of common shares outstanding   31,642,686    31,398,818    31,650,396    31,474,431 

 

See accompanying notes to condensed consolidated financial statements.

 

4
 

 

RESEARCH FRONTIERS INCORPORATED

Condensed Consolidated Statements of Shareholders’ Equity

(Unaudited)

For the six months ended June 30, 2020 and 2021

 

                          
   Common Stock   Additional         
   Shares   Amount   Paid-in Capital   Accumulated
Deficit
   Total 
Balance, January 1, 2020   31,254,262   $3,125   $122,552,895   $(115,499,912)  $7,056,108 
                          
Exercise of options and warrants   321,524    33    284,174    -    284,207 
Net loss   -    -    -    (1,023,575)   (1,023,575)
Balance, June 30, 2020   31,575,786   $3,158   $122,837,069   $(116,523,487)  $6,316,740 
                          
Balance, January 1, 2021   31,575,786   $3,158   $123,164,623   $(117,840,776)  $5,327,005 
                          
Exercise of options   74,610    7    86,255    -    86,262 
Net loss   -    -    -    (1,085,242)   (1,085,242)
Balance, June 30, 2021   31,650,396   $3,165   $123,250,878   $(118,926,018)  $4,328,025 

 

For the three months ended June 30, 2020 and 2021

 

   Common Stock   Additional         
   Shares   Amount   Paid-in Capital   Accumulated
Deficit
   Total 
Balance, March 31, 2020   31,411,107   $3,141   $122,552,879   $(116,124,506)  $6,431,514 
                          
Exercise of options and warrants   164,679    17    284,190    -    284,207 
Net loss   -    -    -    (398,981)   (398,981)
Balance, June 30, 2020   31,575,786   $3,158   $122,837,069   $(116,523,487)  $6,316,740 
                          
Balance, March 31, 2021   31,650,396   $3,165   $123,250,878   $(118,398,083)  $4,855,960 
                          
Net loss       -     -     (527,935)   (527,935)
Balance, June 30, 2021   31,650,396   $3,165   $123,250,878   $(118,926,018)  $4,328,025 

 

See accompanying notes to condensed consolidated financial statements.

 

5
 

 

RESEARCH FRONTIERS INCORPORATED

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

           
   For the six months ended June 30, 
   2021   2020 
Cash flows from operating activities:          
Net loss  $(1,085,242)  $(1,023,575)
           
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   6,961    87,276 
Other income - PPP loan forgiveness   -    (194,140)
Bad debts expense (recovery)   -    53,217 
Change in assets and liabilities:          
Royalty receivables   (231,573)   (49,675)
Prepaid expenses and other current assets   (143,413)   (79,638)
Accounts payable and accrued expenses   40,823    (73,679)
Deferred revenue   26,002    40,567 
Net cash used in operating activities   (1,386,442)   (1,239,647)
           
Cash flows from investing activities:          
Purchases of fixed assets   (935)   (939)
Proceeds from sale of fixed asset   -    3,713 
Net cash (used in) provided by investing activities   (935)   2,774 
           
Cash flows from financing activities:          
Proceeds from exercise of options   86,262    284,207 
Proceeds from PPP Program Funding   -    202,052 
Net cash provided by financing activities   86,262    486,259 
           
Net decrease in cash and cash equivalents   (1,301,115)   (750,614)
           
Cash and cash equivalents at beginning of period   4,772,705    6,591,960 
Cash and cash equivalents at end of period  $3,471,590   $5,841,346 

 

See accompanying notes to condensed consolidated financial statements.

 

6
 

 

RESEARCH FRONTIERS INCORPORATED

Notes to Condensed Consolidated Financial Statements

June 30, 2021

(Unaudited)

 

Note 1. Basis of Presentation

 

The accompanying unaudited condensed consolidated 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 8-03 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 six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021. The condensed consolidated balance sheet at December 31, 2020 has been derived from the audited consolidated financial statements at that date. 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, 2020.

 

Note 2. Business

 

Research Frontiers Incorporated (“Research Frontiers” or the “Company”) operates in a single business segment which is engaged in the development and marketing of technology and devices to control the flow of light. Such devices, often referred to as “light valves” or suspended particle devices (“SPDs”), use colloidal particles that are either incorporated within a liquid suspension or a film, which is usually enclosed between two sheets of glass or plastic having transparent, electrically conductive coatings on the facing surfaces thereof. At least one of the two sheets is transparent. SPD technology, made possible by a flexible light-control film invented by Research Frontiers, allows the user to instantly and precisely control the shading of glass/plastic manually or automatically. SPD technology has numerous product applications, including SPD-Smart™ windows, sunshades, skylights and interior partitions for homes and buildings; automotive windows, sunroofs, sun visors, sunshades, rear-view mirrors, instrument panels and navigation systems; aircraft windows; museum display panels; eyewear products; and flat panel displays for electronic products. SPD-Smart light control film is now being developed for, or used in, architectural, automotive, marine, aerospace and appliance applications.

 

The Company has primarily utilized its cash, cash equivalents, and investments generated from sales of our common stock, proceeds from the exercise of options and warrants, and royalty fees collected to fund its research and development of SPD light valves, for marketing initiatives, and for other working capital purposes. The Company’s working capital and capital requirements depend upon numerous factors, including the results of research and development activities, competitive and technological developments, the timing and cost of patent filings, and the development of new licensees and changes in the Company’s relationships with its existing licensees. The degree of dependence of the Company’s working capital requirements on each of the foregoing factors cannot be quantified; increased research and development activities and related costs would increase such requirements; the addition of new licensees may provide additional working capital or working capital requirements; and changes in relationships with existing licensees would have a favorable or negative impact depending upon the nature of such changes. We have incurred recurring losses since inception and expect to continue to incur losses as a result of costs and expenses related to our research and continued development of our SPD technology and our corporate general and administrative expenses. Our capital requirements and operations to date have been substantially funded through sales of our common stock, exercise of options and warrants and royalty fees collected. As of June 30, 2021, we had working capital of approximately $4.2 million, cash and cash equivalents of approximately $3.5 million, shareholders’ equity of approximately $4.3 million and an accumulated deficit of approximately $118.9 million. Our projected cash flow shortfall based on our current operations adjusted for any non-recurring cash expenses for the next 12 months is approximately $400,000-$450,000 per quarter. Based on our current expectations of our cash flow shortfall for the next 12 months, our working capital would support our activities for the next 24 months.

 

7
 

 

In the event that we are unable to generate sufficient cash from our operating activities or raise additional funds, we may be required to delay, reduce or severely curtail our operations or otherwise impede our on-going business efforts, which could have a material adverse effect on our business, operating results, financial condition and long-term prospects. The Company may seek to obtain additional funding through future equity issuances. There can be no assurance as to the availability or terms upon which such financing and capital might be available. The eventual success of the Company and generation of positive cash flow will be dependent upon the commercialization of products using the Company’s technology by the Company’s licensees and payments of continuing royalties on account thereof. To date, the Company has not generated sufficient revenue from its licensees to fund its operations.

 

Recent Global Events:

 

On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic and recommended containment and mitigation measures worldwide. As a result, the Company expects operations at its facility to continue to be affected in some capacity, as the COVID-19 virus continues to proliferate and the federal, state and local governments under which we operate continue to adopt new rules. The Company has put in place enhanced procedures, such as restricting international and domestic travel, adopting a variety of steps designed to ensure social distancing in our facilities, including working remotely where available, and increasing our cleaning and sanitizing procedures in our facilities, in an effort to protect its employees and communities.

 

Revenues were negatively impacted since the onset of the pandemic due to delays in manufacture of products using our technology. Most of the products using our technology are manufactured by licensees overseas in Europe and Asia who have been similarly affected by the pandemic. The disruption caused by public health crises, such as COVID-19, could result in lower levels of sale activity for products using our technology resulting in lower level of royalties owed to us from the sale of these products. The duration of the potential business disruptions and related financial impact cannot be reasonably estimated at this time, but could materially adversely affect our business, financial condition, results of operations, and cash flows. Net of amounts previously reserved which were fully written off in 2020, the Company increased its allowance for uncollectible royalty receivables in 2020 until the collectability from certain licensees can be better ascertained in the regions affected by COVID-19.

 

In connection with the COVID-19 crisis, Congress passed, and the president signed, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which, among other things, provides relief for businesses impacted by the pandemic. The Company applied for and received $202,052 in proceeds from the Paycheck Protection Program (“PPP Loan”) made available under the CARES Act. The PPP Loan is intended to offer businesses hurt by the COVID-19 pandemic economic assistance with the potential for the principal to be forgiven based on certain expenses incurred during the first 24 weeks after the issuance of the PPP Loan. The Company has received notification that this loan has been forgiven. Consequently, the Company recorded $202,052 as other income for the year ended December 31, 2020 representing the PPP Loan estimated to be forgiven. For the three and six months ended June 30, 2020, the Company estimated that $194,140 of this loan had been forgiven.

 

Note 3. Patent Costs

 

The Company expenses costs relating to the development, acquisition or enforcement of patents due to the uncertainty of the recoverability of these items.

 

Note 4. Revenue Recognition

 

Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers (Topic 606). The standard provides a single comprehensive revenue recognition model for all contracts with customers and supersedes existing revenue recognition guidance. The revenue standard contains principles that an entity will apply to determine the measurement of revenue and timing of when it is recognized. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services.

 

ASC 606 follows a five-step approach to determining revenue recognition including: 1) Identification of the contract; 2) Identification of the performance obligations; 3) Determination of the transaction price; 4) Allocation of the transaction price; and 5) Recognition of revenue.

 

8
 

 

The Company determined that its license agreements provide for three performance obligations which include: (i) the Grant of Use to its Patent Portfolio (“Grant of Use”), (ii) Stand-Ready Technical Support (“Technical Support”) including the transfer of trade secrets and other know-how, production of materials, scale-up support, analytical testing, etc., and (iii) access to new Intellectual Property (“IP”) that may be developed sometime during the course of the contract period (“New Improvements”). Given the nature of IP development, such New Improvements are on an unspecified basis and can occur and be made available to licensees at any time during the contract period.

 

When a contract includes more than one performance obligation, the Company needs to allocate the total consideration to each performance obligation based on its relative standalone selling price or estimate the standalone selling price if it is not observable. A standalone selling price is not available for our performance obligations since we do not sell any of the services separately and there is no competitor pricing that is available. As a consequence, the best method for determining standalone selling price of our Grant of Use performance obligation is through a comparison of the average royalty rate for comparable license agreements as compared to our license agreements. Comparable license agreements must consider several factors including: (i) the materials that are being licensed, (ii) the market application for the licensed materials, and (iii) the financial terms in the license agreements that can increase or decrease the risk/reward nature of the agreement.

 

Based on the royalty rate comparison referred to above, any pricing above and beyond the average royalty rate would relate to the Technical Support and New Improvements performance obligations. The Company focuses a significant portion of its time and resources to provide the Technical Support and New Improvements services to its licensees which further supports the conclusions reached using the royalty rate analysis.

 

The Technical Support and New Improvements performance obligations are co-terminus over the term of the license agreement. For purposes of determining the transaction price, and recognizing revenue, the Company combined the Technical Support and New Improvements performance obligations because they have the same pattern of transfer and the same term. We maintain a staff of scientists and other professionals whose primary job responsibilities throughout the year are: (i) being available to respond to Technical Support needs of our licensees, and (ii) developing improvements to our technology which are offered to our licensees as New Improvements. Since the costs incurred to satisfy the Technical Support and New Improvements performance obligations are incurred evenly throughout the year, the value of the Technical Support and New Improvements services are recognized throughout the initial contract period as these performance obligations are satisfied. If the agreement is not terminated at the end of the initial contract period, it will renew on the same terms as the initial contract for a one-year period. Consequently, any fees or minimum annual royalty obligations relating to this renewal contract will be allocated similarly to the initial contract over the additional one-year period.

 

We recognize revenue when or as the performance obligations in the contract are satisfied. For performance obligations that are fulfilled at a point in time, revenue is recognized at the fulfillment of the performance obligation. Since the IP is determined to be a functional license, the value of the Grant of Use is recognized in the first period of the contract term in which the license agreement is in force. The value of the Technical Support and New Improvements obligations is allocated throughout the contract period based on the satisfaction of its performance obligations. If the agreement is not terminated at the end of the contract period, it will renew on the same terms as the original agreement for a one-year period. Consequently, any fees or minimum annual royalties (“MAR”) relating to this renewal contract will be allocated similarly over that additional year.

 

The Company’s license agreements have a variable royalty fee structure (meaning that royalties are a fixed percentage of sales that vary from period to period) and frequently include a minimum annual royalty commitment. In instances when sales of licensed products by its licensees exceed the MAR, the Company recognizes fee income as the amounts have been earned. Typically, the royalty rate for such sales is 10-15% of the selling price. While this is variable consideration, it is subject to the sales/usage royalty exception to recognition of variable consideration in ASC 606 10-55-65 and therefore is not recognized until the subsequent sales or usage occurs or the MAR period commences.

 

Because of the immediate recognition of the Grant of Use performance obligation: (i) the first period of the contract term will generally have a higher percent allocation of the transaction price under ASC 606 than under the accounting guidance used prior to the adoption of ASC 606, and (ii) the remaining periods in the year will have less of the transaction price recognized under ASC 606 than under the accounting guidance used prior to the adoption of ASC 606. After the initial period in the contract term, the revenue for the remaining periods will be based on the satisfaction of the Technical Support and New Improvements obligations. Since most of our license agreements start as of January 1st, the revenue recognized for the contract under ASC 606 in our first quarter will tend to be higher than the accounting guidance used prior to the adoption of ASC 606.

 

9
 

 

The Company does not have any contract assets under ASC 606 as of June 30, 2021.

 

Certain of the contract fees are accrued by, or paid to, the Company in advance of the period in which they are earned resulting in deferred revenue (contract liabilities). Such excess amounts are recorded as deferred revenue and are recognized as revenue in future periods as earned. Contract assets represent unbilled receivables and are presented within accounts receivable, net on the condensed consolidated balance sheets.

 

The Company operates in a single business segment which is engaged in the development and marketing of technology and devices to control the flow of light. Our revenue source comes from the licensing of this technology and all of these license agreements have similar terms and provisions. The majority of the Company’s licensing fee income comes from the activities of several licensees participating in the automotive market. The Company currently believes that the automotive market will be the largest source of its royalty income over the next several years. The Company’s royalty income from this market may be influenced by numerous factors including various trends affecting demand in the automotive industry and the rate of introduction of new technology in OEM product lines. In addition to these macro factors, the Company’s royalty income from the automotive market could also be influenced by specific factors such as whether the Company’s SPD-SmartGlass technology appears as standard equipment or as an option on a particular vehicle, the number of additional vehicle models that SPD-SmartGlass appears on, the size of each window on a vehicle and the number of windows on a vehicle that use SPD SmartGlass, fluctuations in the total number of vehicles produced by a manufacturer, and in the percentage of cars within each model produced with SPD-SmartGlass, and changes in pricing or exchange rates.

 

As of June 30, 2021, the Company has six license agreements that are in their initial multiyear term (“Initial Term”) with continuing performance obligations going forward. The Initial Term of one of these agreements will end as of December 31, 2021, four will end as of December 31, 2022, and one will end December 31, 2024. The Company currently expects that all of these agreements will renew annually at the end of the Initial Term. As of June 30, 2021, the aggregate amount of the revenue to be recognized upon the satisfaction of the remaining performance obligations for the six license agreements is $353,000. The revenue for these remaining performance obligations is expected to be recognized evenly throughout their remaining period of the Initial Term.

 

Note 5. 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 six months of 2021, three licensees accounted for 10% or more of fee income of the Company; these licensees accounted for approximately 27%, 23% and 11% of fee income recognized during such period. During the first six months of 2020, five licensees accounted for 10% or more of fee income of the Company; these licensees accounted for approximately 22%, 17%, 12%. 12% and 12% of fee income recognized during such period.

 

During the three months ended June 30, 2021, three licensees accounted for 10% or more of fee income of the Company; these licensees accounted for approximately 27%, 21% and 15% of fee income recognized during such period. During the three months ended June 30, 2020, four licensees accounted for 10% or more of fee income of the Company; these licensees accounted for approximately 17%, 17%, 11%, and 10% of fee income recognized during such period.

 

10
 

 

Note 6. Stock-Based Compensation

 

The Company has granted options/warrants to consultants. GAAP 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 at the date of grant. These awards generally vest ratably over 12 to 60 months from the date of grant and the Company charges to operations quarterly the current market value of the options using the Black-Scholes method. During the six months ended June 30, 2021 and 2020 there were no charges related to options or warrants granted to consultants.

 

During the six months ended June 30, 2021 and 2020, the Company did not grant options to employees or directors.

 

There was no compensation expense recorded relating to restricted stock grants to employees and directors during the six months ended June 30, 2021 and 2020.

 

As of June 30, 2021, there were 683,500 shares available for future grant under our 2019 Equity Incentive Plan, which was approved by the Company’s shareholders in June 2019.

 

Note 7. Income Taxes

 

Since inception, the Company has incurred losses from operations and as a result has not recorded income tax expense. Benefits related to net operating loss carryforwards and other deferred tax items have been fully reserved since it was more likely than not that the Company would not achieve profitable operations and be able to utilize the benefit of the net operating loss carryforwards.

 

Note 8. Basic and Diluted Loss Per Common Share

 

Basic loss per share excludes any dilution. It is based upon the weighted average number of common shares outstanding during the period. Dilutive loss per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. The Company’s dilutive loss per share equals basic loss per share for the periods ended June 30, 2021 and 2020, respectively, because all common stock equivalents (i.e., options and warrants) were antidilutive in those periods. The number of options and warrants that were not included (because their effect is antidilutive) was 2,406,651 and 2,498,251 for the three and six months ended June 30, 2021 and 2020, respectively.

 

Note 9. Equity

 

During the six months ended June 30, 2021, the Company received $86,262 in proceeds from the exercise of outstanding options and warrants and issued 39,500 shares of its capital stock in connection with these exercises. In addition, during the six months ended June 30, 2021, the Company issued 35,110 shares of its capital stock in connection with the cashless exercise of 101,000 of its outstanding options. No options or warrants were exercised during the three months ended June 30, 2021.

 

During the six months ended June 30, 2020, the Company received $284,207 in proceeds from the exercise of outstanding options and warrants and issued 83,152 shares of its capital stock in connection with these exercises. In addition, during the six months ended June 30, 2020, the Company issued 238,372 shares of its capital stock in connection the cashless exercise of 450,091 of its outstanding options.

 

During the three-month period ended June 30, 2020, the Company received $284,207 in proceeds from the exercise of outstanding options and warrants and issued 83,152 shares of its capital stock in connections with these exercises. In addition, during the three-month period ended June 30, 2020, the Company issued 81,527 shares of its capital stock in connection with the cashless exercise of 207,000 of its outstanding options.

 

The Company did not sell any equity securities during the six months ended June 30, 2021 and 2020.

 

As of June 30, 2021, there were 1,399,991 warrants and 1,006,660 options outstanding.

 

11
 

 

Note 10. Leases

 

The Company determines if an arrangement is a lease at its inception. This determination generally depends on whether the arrangement conveys the right to control the use of an identified fixed asset explicitly or implicitly for a period of time in exchange for consideration. Control of an underlying asset is conveyed if the Company obtains the rights to direct the use of, and to obtain substantially all of the economic benefits from the use of, the underlying asset. Lease expense for variable leases and short-term leases is recognized when the obligation is incurred.

 

The Company has operating leases for certain facilities and equipment with a weighted average remaining lease term of 3.7 years as of June 30, 2021. Operating leases are included in right of use lease assets, other current liabilities and long-term lease liabilities on the condensed consolidated balance sheet. Right of use lease assets and liabilities are recognized at each lease’s commencement date based on the present value of its lease payments over its respective lease term. The Company does not have an established incremental borrowing rate as it does not have any debt. The Company uses the stated borrowing rate for a lease when readily determinable. When the interest rates implicit in its lease agreements is not readily determinable, the Company used an interest rate based on the marketplace for public debt. The weighted average discount rate associated with operating leases as of June 30, 2021 is 5.5%.

 

Operating lease expense for the three and six months ended June 30, 2021 was approximately $55000 and $110,000, respectively. The Company has no material variable lease costs or sublease income for the three and six months ended June 30, 2021. Subsequent to the Company’s adoption of the new lease accounting guidance on January 1, 2019, the Company recorded new right of use lease assets of approximately $900,000 and associated lease liabilities of approximately $1.1 million.

 

Maturities of operating lease liabilities as of June 30, 2021 were as follows:

 

   June 30, 2021 
For the remainder of the year ending December 31, 2021  $105,000 
For the year ending December 31, 2022   213,000 
For the year ending December 31, 2023   217,000 
For the year ending December 31, 2024   222,000 
For the year ending December 31, 2025 and beyond   56,000 
Total lease payments   813,000 
Less: imputed lease interest   (81,693)
Present value of lease liabilities  $731,307 

 

 

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Item 2. 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 December 31, 2020 consolidated financial statements, “Summary of Significant Accounting Policies.”

 

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. The Company determined that its license agreements provide for three performance obligations: (i) Grant of Use, (ii) Technical Support, and (iii) New Improvements.

 

The best method for determining standalone selling price of our Grant of Use performance obligation is through a comparison of the average royalty rate for comparable license agreements as compared to our license agreements. Based on the royalty rate comparison referred to above, any pricing above and beyond the average royalty rate would relate to the Technical Support and New Improvements performance obligations.

 

We recognize revenue when or as the performance obligations in the contract are satisfied. For performance obligations that are fulfilled at a point in time, revenue is recognized at the fulfillment of the performance obligation. Since the IP is determined to be a functional license, the value of the Grant of Use is recognized in the first period of the contract term in which the license agreement is in force. Since the costs incurred to satisfy the Technical Support and New Improvements performance obligations are incurred evenly throughout the year, the value of the Technical Support and New Improvements services are recognized throughout the contract period as these performance obligations are satisfied.

 

The Company operates in a single business segment which is engaged in the development and marketing of technology and devices to control the flow of light. Our revenue source comes from the licensing of this technology and all of these license agreements have similar terms and provisions.

 

The Company has entered into license agreements covering products using the Company’s SPD technology. When royalties from the sales of licensed products by a licensee exceed its contractual minimum annual royalties, the excess amount is recognized by the Company as fee income in the period that it was earned. Certain of the fees are accrued by, or paid to, the Company in advance of the period in which they are earned resulting in deferred revenue.

 

Royalty receivables are stated less allowance for doubtful accounts. The allowance represents estimated uncollectible receivables usually due to licensees’ potential insolvency. The allowance includes amounts for certain licensees where risk of default has been specifically identified. The Company evaluates the collectability of its receivables on at least a quarterly basis and records appropriate allowances for uncollectible accounts when necessary.

 

The Company has historically used the Black-Scholes option-pricing model to determine the estimated fair value of each option grant. The Black-Scholes model includes assumptions regarding dividend yields, expected volatility, expected lives, and risk-free interest rates. These assumptions reflect our best estimates, but these items involve uncertainties based on market conditions generally outside of our control. As a result, if other assumptions had been used in the current period, stock-based compensation expense could have been materially impacted. Furthermore, if management uses different assumptions in future periods, stock-based compensation expense could be materially impacted in future years.

 

On occasion, the Company may issue to consultants either options or warrants to purchase shares of common stock of the Company at specified share prices. These options or warrants may vest based upon specific services being performed or performance criteria being met. In accounting for equity instruments that are issued to other than employees for acquiring, or in conjunction with selling, goods or services, the Company is required to record consulting expenses based upon the fair value of such options or warrants on the earlier of the service period or the period that such options or warrants vest as determined using a Black-Scholes option pricing model and are marked to market quarterly using the Black-Scholes option valuation model.

 

13
 

 

The preparation of condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the condensed consolidated 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.

 

Recent Global Events:

 

On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic and recommended containment and mitigation measures worldwide. As a result, the Company expects operations at its facility to continue to be affected in some capacity, as the COVID-19 virus continues to proliferate and the federal, state and local governments under which we operate continue to adopt new rules. The Company has put in place enhanced procedures, such as restricting international and domestic travel, adopting a variety of steps designed to ensure social distancing in our facilities, including working remotely where available, and increasing our cleaning and sanitizing procedures in our facilities, in an effort to protect its employees and communities.

 

Revenues were negatively impacted since the onset of the pandemic due to delays in manufacture of products using our technology. Most of the products using our technology are manufactured by licensees overseas in Europe and Asia who have been similarly affected by the pandemic. The disruption caused by public health crises, such as COVID-19, could result in lower levels of sale activity for products using our technology resulting in lower level of royalties owed to us from the sale of these products. The duration of the potential business disruptions and related financial impact cannot be reasonably estimated at this time, but could materially adversely affect our business, financial condition, results of operations, and cash flows. Net of amounts previously reserved which were fully written off in 2020, the Company increased its allowance for uncollectible royalty receivables in 2020 until the collectability from certain licensees can be better ascertained in the regions affected by COVID-19.

 

In connection with the COVID-19 crisis, Congress passed, and the president signed, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which, among other things, provides relief for businesses impacted by the pandemic. The Company applied for and received $202,052 in proceeds from the Paycheck Protection Program (“PPP Loan”) made available under the CARES Act. The PPP Loan is intended to offer businesses hurt by the COVID-19 pandemic economic assistance with the potential for the principal to be forgiven based on certain expenses incurred during the first 24 weeks after the issuance of the PPP Loan. The Company has received notification that this loan has been forgiven. Consequently, the Company recorded $202,052 as other income for the year ended December 31, 2020 representing the PPP Loan estimated to be forgiven. For the three and six months ended June 30, 2020, the Company estimated that $194,140 of this loan had been forgiven.

 

Results of Operations

 

Overview

 

The majority of the Company’s fee income comes from the activities of several licensees participating in the automotive market. The Company currently believes that the automotive market will be the largest source of its royalty income over the next several years. The Company’s royalty income from this market may be influenced by numerous factors including various trends affecting demand in the automotive industry and the rate of introduction of new technology in OEM product lines. In addition to these macro factors, the Company’s royalty income from the automotive market could also be influenced by specific factors such as whether the Company’s SPD-SmartGlass technology appears as standard equipment or as an option on a particular vehicle, the number of additional vehicle models that SPD-SmartGlass appears on, the size of each window on a vehicle and the number of windows on a vehicle that use SPD-SmartGlass, fluctuations in the total number of vehicles produced by a manufacturer, and in the percentage of cars within model like produced with SPD-SmartGlass, and changes in pricing or exchange rates. Certain license fees, which are paid to the Company in advance of the accounting period in which they are earned resulting in the recognition of deferred revenue for the current accounting period, will be recognized as fee income in future periods. Also, licensees offset some or all of their royalty payments on sales of licensed products for a given period by applying these advance payments towards such earned royalty payments.

 

14
 

 

In 2019 and 2020, the Company received royalty revenues from sales of the Magic Sky Control option using the Company’s technology to Daimler (as well as sales of SPD-SmartGlass products to McLaren Automotive) that were accretive to the Company’s royalty revenue. Production efficiencies are expected to continue and accelerate with the introduction of the higher vehicle production volumes for various car models going forward, and the Company expects that lower pricing per square foot of the Company’s technology could expand the market opportunities, adoption rates, and revenues for its technology in automotive and non-automotive applications. The Company expects to generate additional royalty income from the near-term introduction of additional new car and aircraft models from other OEMs (original equipment manufacturers), continued growth of sales of products using the Company’s technology for the marine industry in yachts and other watercraft, in trains, in museums, and in larger architectural projects.

 

Because the Company’s license agreements typically provide for the payment of royalties by a licensee on product sales within 45 days after the end of the quarter in which a sale of a licensed product occurs (with some of the Company’s more recent license agreements providing for payments on a monthly basis), and because of the time period which typically will elapse between a customer order and the sale of the licensed product and installation in a home, office building, automobile, aircraft, boat or any other product, there could be a delay between when economic activity between a licensee and its customer occurs and when the Company gets paid its royalty resulting from such activity.

 

As discussed in Note 2, the Company currently does not have the ability to assess whether the COVID-19 pandemic is likely to have a material impact on our near-term financial results. Most of the products using the Company’s technology are manufactured by licensees overseas in Europe and Asia who have been similarly affected by the pandemic. The disruption caused by COVID-19 could result in lower levels of sale activity for products using our technology resulting in lower level of royalties owed to us from the sale of these products. The duration of the potential business disruptions and related financial impact cannot be reasonably estimated at this time.

 

Three months ended June 30, 2021 compared to the three months ended June 30, 2020

 

The Company’s fee income from licensing activities for the three months ended June 30, 2021 was $113,937 as compared to $176,113 for the three months ended June 30, 2020, representing a $62,176 decrease between these two periods. Lower fees in the automotive, aircraft and architectural markets were partially offset by higher fee income from licensees in the display market.

 

Operating expenses decreased by $128,885 for the three months ended June 30, 2021 to $503,078 from $631,963 for the three months ended June 30, 2020. This decrease is the result of lower payroll and related costs ($48,000), lower depreciation ($37,000) as well as lower bad debt expense ($58,000) partially offset by higher patent costs ($9,000).

 

Research and development expenditures decreased by $6,921 to $139,810 for the three months ended June 30, 2021 from $146,731 for the three months ended June 30, 2020. This decrease was the result of lower materials costs ($6,000).

 

The Company’s net investment income for the three months ended June 30, 2021 was $1,016 as compared to $9,460 for the three months ended June 30, 2020. The difference was primarily due to lower interest rates as well as lower cash balances available for investment.


In addition, the Company recorded $194,140 of other income for the three months ended June 30, 2020 representing the portion of the PPP loan estimated to be forgiven through such date. There was no PPP loan forgiveness during the three months ended June 30, 2021.

 

As a consequence of the factors discussed above, the Company’s net loss was $527,935 ($0.02 per common share) for the three months ended June 30, 2021 as compared to $398,981 ($0.01 per common share) for the three months ended June 30, 2020.

 

15
 

 

Six months ended June 30, 2021 compared to the six months ended June 30, 2020

 

The Company’s fee income from licensing activities for the six months ended June 30, 2021 was $327,060 as compared to $532,286 for the six months ended June 30, 2020, representing a $205,226 decrease between these two periods. Lower fees in the automotive, aircraft and architectural markets were partially offset by higher fee income from licensees in the display market.

 

Operating expenses decreased by $323,732 for the six months ended June 30, 2021 to $1,128,672 from $1,452,404 for the six months ended June 30, 2020. This decrease was the result of lower payroll and related costs ($196,000), lower depreciation ($73,000) and lower bad debts expense ($53,000).

 

Research and development expenditures decreased by $45,060 to $284,989 for the six months ended June 30, 2021 from $330,049 for the six months ended June 30, 2020. This decrease was the result of lower payroll and related costs ($31,000) as well as lower allocated insurance costs ($12,000).

 

The Company’s net investment income for the six months ended June 30, 2021 was $1,359 as compared to $32,452 for the six months ended June 30, 2020. The difference was primarily due to lower interest rates as well as lower cash balances available for investment.

 

In addition, the Company recorded $194,140 of other income for the six months ended June 30, 2020 representing the portion of the PPP loan estimated to be forgiven through such date. There was no PPP loan forgiveness during the six months ended June 30, 2021.

 

As a consequence of the factors discussed above, the Company’s net loss was $1,085,242 ($0.03 per common share) for the six months ended June 30, 2021 as compared to $1,023,575 ($0.03 per common share) for the six months ended June 30, 2020.

 

Financial Condition, Liquidity and Capital Resources

 

The Company has primarily utilized its cash, cash equivalents, short-term investments, and the proceeds from its investments to fund its research and development, for marketing initiatives, and for other working capital purposes. The Company’s working capital and capital requirements depend upon numerous factors, including, but not limited to, the results of research and development activities, competitive and technological developments, the timing and costs of patent filings, and the development of new licensees and changes in the Company’s relationship with existing licensees. The degree of dependence of the Company’s working capital requirements on each of the foregoing factors cannot be quantified; increased research and development activities and related costs would increase such requirements; the addition of new licensees may provide additional working capital or working capital requirements, and changes in relationships with existing licensees would have a favorable or negative impact depending upon the nature of such changes.

 

During the six months ended June 30, 2021, the Company’s cash and cash equivalents balance decreased by $1,301,115 principally as a result of cash used for operations of $1,386,442 partially offset by cash proceeds from the exercise of options and warrants of $86,262. As of June 30, 2021, the Company had cash and cash equivalents of $3,471,590, working capital of $4,200,673 and total shareholders’ equity of $4,328,025.

 

Our quarterly projected cash flow shortfall, based on our current operations adjusted for any non-recurring cash expenses for the next 12 months, is approximately $400,000-$450,000 per quarter. We expect to have sufficient working capital for at least the next 24 months of operations. We may seek to eliminate some operating expenses in the future to reduce our cash flow shortfall.

 

The Company expects to use its cash to fund its research and development of SPD light valves, its expanded marketing initiatives, and for other working capital purposes. The Company believes that its current cash and cash equivalents would fund its operations until mid-2023. There can be no assurances that expenditures will not exceed the anticipated amounts or that additional financing, if required, will be available when needed or, if available, that its terms will be favorable or acceptable to the Company. Eventual success of the Company and generation of positive cash flow will be dependent upon the extent of commercialization of products using the Company’s technology by the Company’s licensees and payments of continuing royalties on account thereof. To date the Company has not generated sufficient revenue from its licensees to fully fund its operations.

 

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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, 2020. There has been no material change in the disclosure regarding market risk.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We designed our disclosure controls and procedures to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and acting interim Chief Financial Officer, with assistance from other members of our management, has reviewed the effectiveness of our disclosure controls and procedures as of June 30, 2021, and, based on his evaluation, has concluded that our disclosure controls and procedures were effective.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the three months ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our 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 Joseph M. Harary - Filed herewith.
32.1 Section 1350 Certification of Joseph M. Harary - Filed herewith.

 

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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/ Joseph M. Harary
  Joseph M. Harary, President, CEO, acting interim CFO and Treasurer
  (Principal Executive Officer and Principal Financial Officer)

 

Date: August 5, 2021

 

18

EX-31.1 2 ex31-1.htm

 

EXHIBIT 31.1 CERTIFICATION

 

I, Joseph M. Harary, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Research Frontiers Incorporated (the “registrant”);

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the condensed consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: August 5, 2021 /s/ Joseph M. Harary
  Joseph M. Harary
  President, Chief Executive Officer and acting interim Chief Financial Officer

 

 

EX-32.1 3 ex32-1.htm

 

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Research Frontiers Incorporated (the “Company”) on Form 10-Q for the quarter ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joseph M. Harary, President and Chief Executive Officer and Principal Executive Officer and acting interim Chief Financial Officer and Principal Financial 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/ Joseph M. Harary  
Joseph M. Harary  
President, Chief Executive Officer and Principal Executive Officer and acting interim Chief Financial Officer and Principal Financial Officer  
August 5, 2021  

 

 
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style="text-decoration: underline">Note 1. <span id="xdx_82F_zCOvBkPoQsm">Basis of Presentation</span></span></span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">The accompanying unaudited condensed consolidated 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 8-03 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 six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021. The condensed consolidated balance sheet at December 31, 2020 has been derived from the audited consolidated financial statements at that date. 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, 2020.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p id="xdx_80A_eus-gaap--NatureOfOperations_z7hCT2aeub8h" style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"><span style="text-decoration: underline">Note 2. <span id="xdx_828_zDuhyfKj9M0l">Business</span></span></span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">Research Frontiers Incorporated (“Research Frontiers” or the “Company”) operates in a single business segment which is engaged in the development and marketing of technology and devices to control the flow of light. Such devices, often referred to as “light valves” or suspended particle devices (“SPDs”), use colloidal particles that are either incorporated within a liquid suspension or a film, which is usually enclosed between two sheets of glass or plastic having transparent, electrically conductive coatings on the facing surfaces thereof. At least one of the two sheets is transparent. SPD technology, made possible by a flexible light-control film invented by Research Frontiers, allows the user to instantly and precisely control the shading of glass/plastic manually or automatically. SPD technology has numerous product applications, including SPD-Smart™ windows, sunshades, skylights and interior partitions for homes and buildings; automotive windows, sunroofs, sun visors, sunshades, rear-view mirrors, instrument panels and navigation systems; aircraft windows; museum display panels; eyewear products; and flat panel displays for electronic products. SPD-Smart light control film is now being developed for, or used in, architectural, automotive, marine, aerospace and appliance applications.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">The Company has primarily utilized its cash, cash equivalents, and investments generated from sales of our common stock, proceeds from the exercise of options and warrants, and royalty fees collected to fund its research and development of SPD light valves, for marketing initiatives, and for other working capital purposes. The Company’s working capital and capital requirements depend upon numerous factors, including the results of research and development activities, competitive and technological developments, the timing and cost of patent filings, and the development of new licensees and changes in the Company’s relationships with its existing licensees. The degree of dependence of the Company’s working capital requirements on each of the foregoing factors cannot be quantified; increased research and development activities and related costs would increase such requirements; the addition of new licensees may provide additional working capital or working capital requirements; and changes in relationships with existing licensees would have a favorable or negative impact depending upon the nature of such changes. We have incurred recurring losses since inception and expect to continue to incur losses as a result of costs and expenses related to our research and continued development of our SPD technology and our corporate general and administrative expenses. Our capital requirements and operations to date have been substantially funded through sales of our common stock, exercise of options and warrants and royalty fees collected. As of June 30, 2021, we had working capital of approximately $<span id="xdx_90A_ecustom--WorkingCapital_iI_pn5n6_c20210630_zs5cNwsqFiE2" title="Working capital">4.2</span> million, cash and cash equivalents of approximately $<span id="xdx_90D_eus-gaap--CashAndCashEquivalentsAtCarryingValue_iI_pn5n6_c20210630_zvcppsJ10Kzb" title="Cash and cash equivalents">3.5</span> million, shareholders’ equity of approximately $<span id="xdx_906_eus-gaap--StockholdersEquity_iI_pn5n6_c20210630_zVDpykDeMFQh" title="Shareholders' equity">4.3</span> million and an accumulated deficit of approximately $<span id="xdx_900_eus-gaap--RetainedEarningsAccumulatedDeficit_iNI_pn5n6_di_c20210630_z9beiXIFcEY9" title="Accumulated deficit">118.9</span> million. Our projected cash flow shortfall based on our current operations adjusted for any non-recurring cash expenses for the next 12 months is approximately $<span id="xdx_90B_ecustom--NonrecurringCashExpenses_iN_pp0p0_di_c20210101__20210630__srt--RangeAxis__srt--MinimumMember_zr7D6xSKcfo2">400,000</span>-$<span id="xdx_90E_ecustom--NonrecurringCashExpenses_iN_pp0p0_di_c20210101__20210630__srt--RangeAxis__srt--MaximumMember_z11S6ngdGp5f" title="Non-recurring cash expenses per quarter">450,000</span> per quarter. Based on our current expectations of our cash flow shortfall for the next 12 months, our working capital would support our activities for the next 24 months.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">In the event that we are unable to generate sufficient cash from our operating activities or raise additional funds, we may be required to delay, reduce or severely curtail our operations or otherwise impede our on-going business efforts, which could have a material adverse effect on our business, operating results, financial condition and long-term prospects. The Company may seek to obtain additional funding through future equity issuances. There can be no assurance as to the availability or terms upon which such financing and capital might be available. The eventual success of the Company and generation of positive cash flow will be dependent upon the commercialization of products using the Company’s technology by the Company’s licensees and payments of continuing royalties on account thereof. To date, the Company has not generated sufficient revenue from its licensees to fund its operations.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"><b>Recent Global Events:</b></span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic and recommended containment and mitigation measures worldwide. As a result, the Company expects operations at its facility to continue to be affected in some capacity, as the COVID-19 virus continues to proliferate and the federal, state and local governments under which we operate continue to adopt new rules. The Company has put in place enhanced procedures, such as restricting international and domestic travel, adopting a variety of steps designed to ensure social distancing in our facilities, including working remotely where available, and increasing our cleaning and sanitizing procedures in our facilities, in an effort to protect its employees and communities.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">Revenues were negatively impacted since the onset of the pandemic due to delays in manufacture of products using our technology. Most of the products using our technology are manufactured by licensees overseas in Europe and Asia who have been similarly affected by the pandemic. The disruption caused by public health crises, such as COVID-19, could result in lower levels of sale activity for products using our technology resulting in lower level of royalties owed to us from the sale of these products. The duration of the potential business disruptions and related financial impact cannot be reasonably estimated at this time, but could materially adversely affect our business, financial condition, results of operations, and cash flows. Net of amounts previously reserved which were fully written off in 2020, the Company increased its allowance for uncollectible royalty receivables in 2020 until the collectability from certain licensees can be better ascertained in the regions affected by COVID-19.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">In connection with the COVID-19 crisis, Congress passed, and the president signed, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which, among other things, provides relief for businesses impacted by the pandemic. The Company applied for and received $<span id="xdx_90B_eus-gaap--ProceedsFromLoans_c20210101__20210630__us-gaap--DebtInstrumentAxis__custom--PPPLoanMember_pp0p0" title="Proceeds from loan">202,052</span> in proceeds from the Paycheck Protection Program (“PPP Loan”) made available under the CARES Act. The PPP Loan is intended to offer businesses hurt by the COVID-19 pandemic economic assistance with the potential for the principal to be forgiven based on certain expenses incurred during the first 24 weeks after the issuance of the PPP Loan. The Company has received notification that this loan has been forgiven. Consequently, the Company recorded $<span id="xdx_905_eus-gaap--OtherIncome_c20200101__20201231_pp0p0" title="Other income">202,052</span> as other income for the year ended December 31, 2020 representing the PPP Loan estimated to be forgiven. For the three and six months ended June 30, 2020, the Company estimated that $<span id="xdx_906_ecustom--OtherIncomeFromPaycheckProtectionProgramLoanForgiveness_c20200401__20200630_pp0p0" title="Other income - PPP loan forgiveness"><span id="xdx_901_ecustom--OtherIncomeFromPaycheckProtectionProgramLoanForgiveness_c20200101__20200630_pp0p0" title="Other income - PPP loan forgiveness">194,140</span></span> of this loan had been forgiven.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> 4200000 3500000 4300000 -118900000 -400000 -450000 202052 202052 194140 194140 <p id="xdx_80D_eus-gaap--IntangibleAssetsDisclosureTextBlock_zKFlw2uDwdl5" style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"><span style="text-decoration: underline">Note 3. <span id="xdx_82E_zOyDwIqDjNoe">Patent Costs</span></span></span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">The Company expenses costs relating to the development, acquisition or enforcement of patents due to the uncertainty of the recoverability of these items.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p id="xdx_80E_eus-gaap--RevenueFromContractWithCustomerTextBlock_zvX7UbfaA1xb" style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"><span style="text-decoration: underline">Note 4. <span id="xdx_82D_z3yO7lBfyYWk">Revenue Recognition</span></span></span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">Company recognizes revenue in accordance with ASC 606, <i>Revenue from Contracts with Customers (Topic 606</i>). The standard provides a single comprehensive revenue recognition model for all contracts with customers and supersedes existing revenue recognition guidance. The revenue standard contains principles that an entity will apply to determine the measurement of revenue and timing of when it is recognized. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">ASC 606 follows a five-step approach to determining revenue recognition including: 1) Identification of the contract; 2) Identification of the performance obligations; 3) Determination of the transaction price; 4) Allocation of the transaction price; and 5) Recognition of revenue.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">The Company determined that its license agreements provide for three performance obligations which include: (i) the Grant of Use to its Patent Portfolio (“Grant of Use”), (ii) Stand-Ready Technical Support (“Technical Support”) including the transfer of trade secrets and other know-how, production of materials, scale-up support, analytical testing, etc., and (iii) access to new Intellectual Property (“IP”) that may be developed sometime during the course of the contract period (“New Improvements”). Given the nature of IP development, such New Improvements are on an unspecified basis and can occur and be made available to licensees at any time during the contract period.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">When a contract includes more than one performance obligation, the Company needs to allocate the total consideration to each performance obligation based on its relative standalone selling price or estimate the standalone selling price if it is not observable. A standalone selling price is not available for our performance obligations since we do not sell any of the services separately and there is no competitor pricing that is available. As a consequence, the best method for determining standalone selling price of our Grant of Use performance obligation is through a comparison of the average royalty rate for comparable license agreements as compared to our license agreements. Comparable license agreements must consider several factors including: (i) the materials that are being licensed, (ii) the market application for the licensed materials, and (iii) the financial terms in the license agreements that can increase or decrease the risk/reward nature of the agreement.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">Based on the royalty rate comparison referred to above, any pricing above and beyond the average royalty rate would relate to the Technical Support and New Improvements performance obligations. The Company focuses a significant portion of its time and resources to provide the Technical Support and New Improvements services to its licensees which further supports the conclusions reached using the royalty rate analysis.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">The Technical Support and New Improvements performance obligations are co-terminus over the term of the license agreement. For purposes of determining the transaction price, and recognizing revenue, the Company combined the Technical Support and New Improvements performance obligations because they have the same pattern of transfer and the same term. We maintain a staff of scientists and other professionals whose primary job responsibilities throughout the year are: (i) being available to respond to Technical Support needs of our licensees, and (ii) developing improvements to our technology which are offered to our licensees as New Improvements. Since the costs incurred to satisfy the Technical Support and New Improvements performance obligations are incurred evenly throughout the year, the value of the Technical Support and New Improvements services are recognized throughout the initial contract period as these performance obligations are satisfied. If the agreement is not terminated at the end of the initial contract period, it will renew on the same terms as the initial contract for a one-year period. Consequently, any fees or minimum annual royalty obligations relating to this renewal contract will be allocated similarly to the initial contract over the additional one-year period.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">We recognize revenue when or as the performance obligations in the contract are satisfied. For performance obligations that are fulfilled at a point in time, revenue is recognized at the fulfillment of the performance obligation. Since the IP is determined to be a functional license, the value of the Grant of Use is recognized in the first period of the contract term in which the license agreement is in force. The value of the Technical Support and New Improvements obligations is allocated throughout the contract period based on the satisfaction of its performance obligations. If the agreement is not terminated at the end of the contract period, it will renew on the same terms as the original agreement for a one-year period. Consequently, any fees or minimum annual royalties (“MAR”) relating to this renewal contract will be allocated similarly over that additional year.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">The Company’s license agreements have a variable royalty fee structure (meaning that royalties are a fixed percentage of sales that vary from period to period) and frequently include a minimum annual royalty commitment. In instances when sales of licensed products by its licensees exceed the MAR, the Company recognizes fee income as the amounts have been earned. Typically, the royalty rate for such sales is <span id="xdx_90D_ecustom--RoyaltyRateOnSellingPrice_pid_dp_c20210101__20210630__us-gaap--TypeOfArrangementAxis__custom--LicenseAgreementMember__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__srt--RangeAxis__srt--MinimumMember_zrTVROzqG5Yl" title="Royalty rate on selling price">10</span>-<span id="xdx_906_ecustom--RoyaltyRateOnSellingPrice_pid_dp_c20210101__20210630__us-gaap--TypeOfArrangementAxis__custom--LicenseAgreementMember__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__srt--RangeAxis__srt--MaximumMember_zWLsGf0QZQI" title="Royalty rate on selling price">15</span>% of the selling price. While this is variable consideration, it is subject to the sales/usage royalty exception to recognition of variable consideration in ASC 606 10-55-65 and therefore is not recognized until the subsequent sales or usage occurs or the MAR period commences.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">Because of the immediate recognition of the Grant of Use performance obligation: (i) the first period of the contract term will generally have a higher percent allocation of the transaction price under ASC 606 than under the accounting guidance used prior to the adoption of ASC 606, and (ii) the remaining periods in the year will have less of the transaction price recognized under ASC 606 than under the accounting guidance used prior to the adoption of ASC 606. After the initial period in the contract term, the revenue for the remaining periods will be based on the satisfaction of the Technical Support and New Improvements obligations. Since most of our license agreements start as of January 1st, the revenue recognized for the contract under ASC 606 in our first quarter will tend to be higher than the accounting guidance used prior to the adoption of ASC 606.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">The Company does not have any contract assets under ASC 606 as of June 30, 2021.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">Certain of the contract fees are accrued by, or paid to, the Company in advance of the period in which they are earned resulting in deferred revenue (contract liabilities). Such excess amounts are recorded as deferred revenue and are recognized as revenue in future periods as earned. Contract assets represent unbilled receivables and are presented within accounts receivable, net on the condensed consolidated balance sheets.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">The Company operates in a single business segment which is engaged in the development and marketing of technology and devices to control the flow of light. Our revenue source comes from the licensing of this technology and all of these license agreements have similar terms and provisions. The majority of the Company’s licensing fee income comes from the activities of several licensees participating in the automotive market. The Company currently believes that the automotive market will be the largest source of its royalty income over the next several years. The Company’s royalty income from this market may be influenced by numerous factors including various trends affecting demand in the automotive industry and the rate of introduction of new technology in OEM product lines. In addition to these macro factors, the Company’s royalty income from the automotive market could also be influenced by specific factors such as whether the Company’s SPD-SmartGlass technology appears as standard equipment or as an option on a particular vehicle, the number of additional vehicle models that SPD-SmartGlass appears on, the size of each window on a vehicle and the number of windows on a vehicle that use SPD SmartGlass, fluctuations in the total number of vehicles produced by a manufacturer, and in the percentage of cars within each model produced with SPD-SmartGlass, and changes in pricing or exchange rates.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">As of June 30, 2021, the Company has six license agreements that are in their initial multiyear term (“Initial Term”) with continuing performance obligations going forward. The Initial Term of one of these agreements will end as of December 31, 2021, four will end as of December 31, 2022, and one will end December 31, 2024. The Company currently expects that all of these agreements will renew annually at the end of the Initial Term. As of June 30, 2021, the aggregate amount of the revenue to be recognized upon the satisfaction of the remaining performance obligations for the six license agreements is $<span id="xdx_901_eus-gaap--RevenueFromContractWithCustomerExcludingAssessedTax_c20210101__20210630__us-gaap--TypeOfArrangementAxis__custom--LicenseAgreementMember_pp0p0" title="Revenue recognition">353,000</span>. The revenue for these remaining performance obligations is expected to be recognized evenly throughout their remaining period of the Initial Term.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> 0.10 0.15 353000 <p id="xdx_807_ecustom--FeeIncomeDisclosureTextBlock_z80nciRsbt6l" style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"><span style="text-decoration: underline">Note 5. <span id="xdx_826_zNLyMrsGyfqj">Fee Income</span></span></span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">Fee income represents amounts earned by the Company under various license and other agreements relating to technology developed by the Company.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">During the first six months of 2021, three licensees accounted for 10% or more of fee income of the Company; these licensees accounted for approximately <span id="xdx_908_eus-gaap--ConcentrationRiskPercentage1_pid_dp_c20210101__20210630__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__srt--ProductOrServiceAxis__custom--LicenseeOneMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember_zviz9BUsa82j" title="Percentage of fee income">27</span>%, <span id="xdx_905_eus-gaap--ConcentrationRiskPercentage1_pid_dp_c20210101__20210630__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__srt--ProductOrServiceAxis__custom--LicenseeTwoMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember_zz6jJV8fTH81" title="Percentage of fee income">23</span>% and <span id="xdx_90C_eus-gaap--ConcentrationRiskPercentage1_pid_dp_c20210101__20210630__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__srt--ProductOrServiceAxis__custom--LicenseeThreeMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember_zh8RSi2kfko8" title="Percentage of fee income">11</span>% of fee income recognized during such period. During the first six months of 2020, five licensees accounted for 10% or more of fee income of the Company; these licensees accounted for approximately <span id="xdx_908_eus-gaap--ConcentrationRiskPercentage1_pid_dp_c20200101__20200630__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__srt--ProductOrServiceAxis__custom--LicenseeOneMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember_zSfSPPgMSlYl" title="Percentage of fee income">22</span>%, <span id="xdx_904_eus-gaap--ConcentrationRiskPercentage1_pid_dp_c20200101__20200630__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__srt--ProductOrServiceAxis__custom--LicenseeTwoMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember_zcYpIJ0B0Y3b" title="Percentage of fee income">17</span>%, <span id="xdx_908_eus-gaap--ConcentrationRiskPercentage1_pid_dp_c20200101__20200630__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__srt--ProductOrServiceAxis__custom--LicenseeThreeMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember_zs9bDvmS13a8" title="Percentage of fee income">12</span>%. <span id="xdx_90C_eus-gaap--ConcentrationRiskPercentage1_pid_dp_c20200101__20200630__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__srt--ProductOrServiceAxis__custom--LicenseeFourMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember_zGjrtuwkUsJ2" title="Percentage of fee income">12</span>% and <span id="xdx_905_eus-gaap--ConcentrationRiskPercentage1_pid_dp_c20200101__20200630__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__srt--ProductOrServiceAxis__custom--LicenseeFiveMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember_zBE5ljKvTxr4" title="Percentage of fee income">12</span>% of fee income recognized during such period.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">During the three months ended June 30, 2021, three licensees accounted for 10% or more of fee income of the Company; these licensees accounted for approximately <span id="xdx_90A_eus-gaap--ConcentrationRiskPercentage1_pid_dp_c20210401__20210630__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__srt--ProductOrServiceAxis__custom--LicenseeOneMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember_zEQ5NeRCKfQb" title="Percentage of fee income">27</span>%, <span id="xdx_90E_eus-gaap--ConcentrationRiskPercentage1_pid_dp_c20210401__20210630__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__srt--ProductOrServiceAxis__custom--LicenseeTwoMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember_z6Yn7FTHL8ik" title="Percentage of fee income">21</span>% and <span id="xdx_904_eus-gaap--ConcentrationRiskPercentage1_pid_dp_c20210401__20210630__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__srt--ProductOrServiceAxis__custom--LicenseeThreeMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember_zRnnFnm9nZtl" title="Percentage of fee income">15</span>% of fee income recognized during such period. During the three months ended June 30, 2020, four licensees accounted for 10% or more of fee income of the Company; these licensees accounted for approximately <span id="xdx_908_eus-gaap--ConcentrationRiskPercentage1_pid_dp_c20200401__20200630__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__srt--ProductOrServiceAxis__custom--LicenseeOneMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember_zATEyEPSnDOa" title="Percentage of fee income">17</span>%, <span id="xdx_909_eus-gaap--ConcentrationRiskPercentage1_pid_dp_c20200401__20200630__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__srt--ProductOrServiceAxis__custom--LicenseeTwoMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember_zXMYEuCabNS4" title="Percentage of fee income">17</span>%, <span id="xdx_909_eus-gaap--ConcentrationRiskPercentage1_pid_dp_c20200401__20200630__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__srt--ProductOrServiceAxis__custom--LicenseeThreeMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember_z7EBMDkv8zOc" title="Percentage of fee income">11</span>%, and <span id="xdx_907_eus-gaap--ConcentrationRiskPercentage1_pid_dp_c20200401__20200630__us-gaap--ConcentrationRiskByBenchmarkAxis__us-gaap--SalesRevenueNetMember__srt--ProductOrServiceAxis__custom--LicenseeFourMember__us-gaap--ConcentrationRiskByTypeAxis__us-gaap--CustomerConcentrationRiskMember_zILODUULFUoh" title="Percentage of fee income">10</span>% of fee income recognized during such period.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> 0.27 0.23 0.11 0.22 0.17 0.12 0.12 0.12 0.27 0.21 0.15 0.17 0.17 0.11 0.10 <p id="xdx_806_eus-gaap--CompensationRelatedCostsGeneralTextBlock_zxHFfrvdg9ue" style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"><span style="text-decoration: underline">Note 6. <span id="xdx_826_zixp7xMqAFHf">Stock-Based Compensation</span></span></span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">The Company has granted options/warrants to consultants. GAAP 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 at the date of grant. These awards generally vest ratably over <span id="xdx_90E_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardAwardVestingPeriod1_dtY_c20210101__20210630__srt--RangeAxis__srt--MinimumMember_zBxRJi7f9cac">12 </span></span><span style="font: 10pt Times New Roman, Times, Serif">to <span id="xdx_904_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardAwardVestingPeriod1_dtM_c20210101__20210630__srt--RangeAxis__srt--MaximumMember_zkvxEtJuBXQ5">60 </span></span><span style="font: 10pt Times New Roman, Times, Serif">months from the date of grant and the Company charges to operations quarterly the current market value of the options using the Black-Scholes method. During the six months ended June 30, 2021 and 2020 there were no charges related to options or warrants granted to consultants.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">During the six months ended June 30, 2021 and 2020, the Company did <span id="xdx_902_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantsInPeriodGross_do_c20210101__20210630__srt--TitleOfIndividualAxis__custom--EmployeesAndDirectorsMember_z4ObGX1Tav16" title="Stock options granted"><span id="xdx_90C_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantsInPeriodGross_do_c20200101__20200630__srt--TitleOfIndividualAxis__custom--EmployeesAndDirectorsMember_zjGIxRpiqJmi" title="Stock options granted">no</span></span>t grant options to employees or directors.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">There was <span id="xdx_90A_eus-gaap--EmployeeBenefitsAndShareBasedCompensation_pp0p0_do_c20210101__20210630__srt--TitleOfIndividualAxis__custom--EmployeesAndDirectorsMember_zs2ey5KH24Xk" title="Compensation expense"><span id="xdx_902_eus-gaap--EmployeeBenefitsAndShareBasedCompensation_pp0p0_do_c20200101__20200630__srt--TitleOfIndividualAxis__custom--EmployeesAndDirectorsMember_zFDTK1qL11fg" title="Compensation expense">no</span></span> compensation expense recorded relating to restricted stock grants to employees and directors during the six months ended June 30, 2021 and 2020.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">As of June 30, 2021, there were <span id="xdx_90E_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardNumberOfSharesAvailableForGrant_c20210630__us-gaap--TypeOfArrangementAxis__custom--TwoThousandNineteenEquityIncentivePlanMember_pdd" title="Shares available for future grant">683,500</span> shares available for future grant under our 2019 Equity Incentive Plan, which was approved by the Company’s shareholders in June 2019.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> P12Y P60M 0 0 0 0 683500 <p id="xdx_80B_eus-gaap--IncomeTaxDisclosureTextBlock_zn33UsB5eZ1k" style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"><span style="text-decoration: underline">Note 7. <span id="xdx_820_zRzp5ZVKZr">Income Taxes</span></span></span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">Since inception, the Company has incurred losses from operations and as a result has not recorded income tax expense. Benefits related to net operating loss carryforwards and other deferred tax items have been fully reserved since it was more likely than not that the Company would not achieve profitable operations and be able to utilize the benefit of the net operating loss carryforwards.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p id="xdx_806_eus-gaap--EarningsPerShareTextBlock_zRQrAUOhayl5" style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0"><span style="font: 10pt Times New Roman, Times, Serif"><span style="text-decoration: underline">Note 8. <span id="xdx_820_zaa9WcEtyor4">Basic and Diluted Loss Per Common Share</span></span></span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">Basic loss per share excludes any dilution. It is based upon the weighted average number of common shares outstanding during the period. Dilutive loss per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. The Company’s dilutive loss per share equals basic loss per share for the periods ended June 30, 2021 and 2020, respectively, because all common stock equivalents (i.e<i>., </i>options and warrants) were antidilutive in those periods. The number of options and warrants that were not included (because their effect is antidilutive) was <span id="xdx_902_eus-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount_c20210401__20210630__us-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareByAntidilutiveSecuritiesAxis__custom--OptionsAndWarrantsMember_z1PWEzGxEVJl" title="Anti-dilutive securities effect"><span id="xdx_907_eus-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount_c20210101__20210630__us-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareByAntidilutiveSecuritiesAxis__custom--OptionsAndWarrantsMember_zZOakTmM9qm7" title="Anti-dilutive securities effect">2,406,651</span> </span></span><span style="font: 10pt Times New Roman, Times, Serif">and <span id="xdx_90D_eus-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount_c20200401__20200630__us-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareByAntidilutiveSecuritiesAxis__custom--OptionsAndWarrantsMember_zAyWKmpc3hm2" title="Anti-dilutive securities effect"><span id="xdx_908_eus-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount_c20200101__20200630__us-gaap--AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareByAntidilutiveSecuritiesAxis__custom--OptionsAndWarrantsMember_zQCEVPckPct3" title="Anti-dilutive securities effect">2,498,251</span> </span></span><span style="font: 10pt Times New Roman, Times, Serif">for the three and six months ended June 30, 2021 and 2020, respectively.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> 2406651 2406651 2498251 2498251 <p id="xdx_804_eus-gaap--StockholdersEquityNoteDisclosureTextBlock_zbG7PuhpGlf5" style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"><span style="text-decoration: underline">Note 9. <span id="xdx_827_zNlCoAaMM5Eh">Equity</span></span></span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">During the six months ended June 30, 2021, the Company received $<span id="xdx_90C_ecustom--ProceedsFromExerciseOfOptionsAndWarrants_c20210101__20210630_pp0p0" title="Proceeds from exercise of options and warrants">86,262</span> in proceeds from the exercise of outstanding options and warrants and issued <span id="xdx_90B_ecustom--OptionsAndWarrantIssuedInConnectionWithExercises_c20210101__20210630_pdd" title="Options and warrant issued in connection with exercises">39,500</span> shares of its capital stock in connection with these exercises. In addition, during the six months ended June 30, 2021, the Company issued <span id="xdx_906_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardSharesIssuedInPeriod_c20210101__20210630_pdd" title="Capital stock issued">35,110</span> shares of its capital stock in connection with the cashless exercise of <span id="xdx_90C_ecustom--IssuanceOfCommonStockOptionsAndWarrants_c20210101__20210630_zJ3BsiJEdxe9" title="Issuance of common stock options and warrants">101,000</span> of its outstanding options. No options or warrants were exercised during the three months ended June 30, 2021.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">During the six months ended June 30, 2020, the Company received $<span id="xdx_90E_ecustom--ProceedsFromExerciseOfOptionsAndWarrants_c20200101__20200630_pp0p0" title="Proceeds from exercise of options and warrants">284,207</span> in proceeds from the exercise of outstanding options and warrants and issued <span id="xdx_905_ecustom--OptionsAndWarrantIssuedInConnectionWithExercises_c20200101__20200630_pdd" title="Options and warrant issued in connection with exercises">83,152</span> shares of its capital stock in connection with these exercises. In addition, during the six months ended June 30, 2020, the Company issued <span id="xdx_904_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardSharesIssuedInPeriod_c20200101__20200630_pdd" title="Capital stock issued">238,372</span> shares of its capital stock in connection the cashless exercise of <span id="xdx_909_ecustom--IssuanceOfCommonStockOptionsAndWarrants_c20200101__20200630_ziR3rqnYuyTf">450,091</span> of its outstanding options.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">During the three-month period ended June 30, 2020, the Company received $<span id="xdx_90D_ecustom--ProceedsFromExerciseOfOptionsAndWarrants_c20200401__20200630_pp0p0" title="Proceeds from exercise of options and warrants">284,207</span> in proceeds from the exercise of outstanding options and warrants and issued <span id="xdx_90A_ecustom--OptionsAndWarrantIssuedInConnectionWithExercises_c20200401__20200630_pdd" title="Options and warrant issued in connection with exercises">83,152</span> shares of its capital stock in connections with these exercises. In addition, during the three-month period ended June 30, 2020, the Company issued <span id="xdx_908_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardSharesIssuedInPeriod_c20200401__20200630_pdd" title="Capital stock issued">81,527</span> shares of its capital stock in connection with the cashless exercise of <span id="xdx_90D_ecustom--IssuanceOfCommonStockOptionsAndWarrants_c20200401__20200630_z6FkHsO99rOi">207,000</span> of its outstanding options.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">The Company did not sell any equity securities during the six months ended June 30, 2021 and 2020.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">As of June 30, 2021, there were <span id="xdx_902_eus-gaap--ClassOfWarrantOrRightOutstanding_c20210630_pdd" title="Warrants outstanding">1,399,991</span> warrants and <span id="xdx_906_eus-gaap--ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingNumber_c20210630_pdd" title="Options outstanding">1,006,660</span> options outstanding.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> 86262 39500 35110 101000 284207 83152 238372 450091 284207 83152 81527 207000 1399991 1006660 <p id="xdx_809_eus-gaap--LesseeOperatingLeasesTextBlock_zy0jYulOD7D2" style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"><span style="text-decoration: underline">Note 10. <span id="xdx_82B_z3m0fJ5dtPql">Leases</span></span></span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">The Company determines if an arrangement is a lease at its inception. This determination generally depends on whether the arrangement conveys the right to control the use of an identified fixed asset explicitly or implicitly for a period of time in exchange for consideration. Control of an underlying asset is conveyed if the Company obtains the rights to direct the use of, and to obtain substantially all of the economic benefits from the use of, the underlying asset. Lease expense for variable leases and short-term leases is recognized when the obligation is incurred.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">The Company has operating leases for certain facilities and equipment with a weighted average remaining lease term of <span id="xdx_90A_eus-gaap--OperatingLeaseWeightedAverageRemainingLeaseTerm1_iI_dtY_c20210630_zphbfZ49OIQe" title="Weighted average remaining lease term">3.7</span> years as of June 30, 2021. Operating leases are included in right of use lease assets, other current liabilities and long-term lease liabilities on the condensed consolidated balance sheet. Right of use lease assets and liabilities are recognized at each lease’s commencement date based on the present value of its lease payments over its respective lease term. The Company does not have an established incremental borrowing rate as it does not have any debt. The Company uses the stated borrowing rate for a lease when readily determinable. When the interest rates implicit in its lease agreements is not readily determinable, the Company used an interest rate based on the marketplace for public debt. The weighted average discount rate associated with operating leases as of June 30, 2021 is <span id="xdx_90A_eus-gaap--OperatingLeaseWeightedAverageDiscountRatePercent_iI_pid_dp_c20210630_zeC4qZo9X2f9" title="Weighted-average discount rate">5.5</span>%.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">Operating lease expense for the three and six months ended June 30, 2021 was approximately $<span id="xdx_90B_eus-gaap--OperatingLeaseExpense_c20210401__20210630_zpSOq7plNWha" title="Operating lease expense">55000</span> and $<span id="xdx_909_eus-gaap--OperatingLeaseExpense_c20210101__20210630_zalP8wP14tg7" title="Operating lease expense">110,000</span>, respectively. The Company has no material variable lease costs or sublease income for the three and six months ended June 30, 2021. Subsequent to the Company’s adoption of the new lease accounting guidance on January 1, 2019, the Company recorded new right of use lease assets of approximately $<span id="xdx_90D_eus-gaap--OperatingLeaseRightOfUseAsset_c20190102_pp0p0">900,000 </span></span><span style="font: 10pt Times New Roman, Times, Serif">and associated lease liabilities of approximately $<span id="xdx_900_eus-gaap--OperatingLeaseLiability_iI_pn5n6_c20190102_zA5ruM9hCZ3f">1.1 </span></span><span style="font: 10pt Times New Roman, Times, Serif">million.</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <p id="xdx_892_eus-gaap--LesseeOperatingLeaseLiabilityMaturityTableTextBlock_zewPDAg7ACUk" style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">Maturities of operating lease liabilities as of June 30, 2021 were as follows:</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: left"><span id="xdx_8B1_za8zjPBE0N15" style="font: 10pt Times New Roman, Times, Serif; display: none">Schedule of Maturities of Opearing Lease</span><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-left: auto; border-collapse: collapse; width: 80%; margin-right: auto"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" id="xdx_49F_20210630_zRsQQvDuREn6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">June 30, 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr id="xdx_407_eus-gaap--LesseeOperatingLeaseLiabilityPaymentsRemainderOfFiscalYear_iI_pp0p0_maLOLLPzKpc_zZD22Fo8mlcd" style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 76%">For the remainder of the year ending December 31, 2021</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 20%; text-align: right">105,000</td><td style="width: 1%; text-align: left"> </td></tr> <tr id="xdx_40C_eus-gaap--LesseeOperatingLeaseLiabilityPaymentsDueNextTwelveMonths_iI_pp0p0_maLOLLPzKpc_zM371B0Pjvtj" style="vertical-align: bottom; background-color: White"> <td>For the year ending December 31, 2022</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">213,000</td><td style="text-align: left"> </td></tr> <tr id="xdx_40D_eus-gaap--LesseeOperatingLeaseLiabilityPaymentsDueYearTwo_iI_pp0p0_maLOLLPzKpc_zdlZqimUxUb8" style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td>For the year ending December 31, 2023</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">217,000</td><td style="text-align: left"> </td></tr> <tr id="xdx_405_eus-gaap--LesseeOperatingLeaseLiabilityPaymentsDueYearThree_iI_pp0p0_maLOLLPzKpc_zKmgRUJXvqqc" style="vertical-align: bottom; background-color: White"> <td>For the year ending December 31, 2024</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">222,000</td><td style="text-align: left"> </td></tr> <tr id="xdx_40A_eus-gaap--LesseeOperatingLeaseLiabilityPaymentsDueAfterYearFive_iI_pp0p0_maLOLLPzKpc_zWOMWxV5pHJ8" style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">For the year ending December 31, 2025 and beyond</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">56,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr id="xdx_400_eus-gaap--LesseeOperatingLeaseLiabilityPaymentsDue_iTI_pp0p0_mtLOLLPzKpc_zRWARmhwiUGc" style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Total lease payments</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">813,000</td><td style="text-align: left"> </td></tr> <tr id="xdx_400_eus-gaap--LesseeOperatingLeaseLiabilityUndiscountedExcessAmount_iNI_pp0p0_di_zAFrX2ldV5u8" style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Less: imputed lease interest</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(81,693</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr id="xdx_40F_eus-gaap--OperatingLeaseLiability_iI_pp0p0" style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 2.5pt">Present value of lease liabilities</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">731,307</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> </table> <p id="xdx_8AA_zJxKttUKYYJf" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: left"> </p> P3Y8M12D 0.055 55000 110000 900000 1100000 <p id="xdx_892_eus-gaap--LesseeOperatingLeaseLiabilityMaturityTableTextBlock_zewPDAg7ACUk" style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0; text-align: justify"><span style="font: 10pt Times New Roman, Times, Serif">Maturities of operating lease liabilities as of June 30, 2021 were as follows:</span></p> <p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: left"><span id="xdx_8B1_za8zjPBE0N15" style="font: 10pt Times New Roman, Times, Serif; display: none">Schedule of Maturities of Opearing Lease</span><span style="font: 10pt Times New Roman, Times, Serif"> </span></p> <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-left: auto; border-collapse: collapse; width: 80%; margin-right: auto"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" id="xdx_49F_20210630_zRsQQvDuREn6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">June 30, 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr id="xdx_407_eus-gaap--LesseeOperatingLeaseLiabilityPaymentsRemainderOfFiscalYear_iI_pp0p0_maLOLLPzKpc_zZD22Fo8mlcd" style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 76%">For the remainder of the year ending December 31, 2021</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 20%; text-align: right">105,000</td><td style="width: 1%; text-align: left"> </td></tr> <tr id="xdx_40C_eus-gaap--LesseeOperatingLeaseLiabilityPaymentsDueNextTwelveMonths_iI_pp0p0_maLOLLPzKpc_zM371B0Pjvtj" style="vertical-align: bottom; background-color: White"> <td>For the year ending December 31, 2022</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">213,000</td><td style="text-align: left"> </td></tr> <tr id="xdx_40D_eus-gaap--LesseeOperatingLeaseLiabilityPaymentsDueYearTwo_iI_pp0p0_maLOLLPzKpc_zdlZqimUxUb8" style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td>For the year ending December 31, 2023</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">217,000</td><td style="text-align: left"> </td></tr> <tr id="xdx_405_eus-gaap--LesseeOperatingLeaseLiabilityPaymentsDueYearThree_iI_pp0p0_maLOLLPzKpc_zKmgRUJXvqqc" style="vertical-align: bottom; background-color: White"> <td>For the year ending December 31, 2024</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">222,000</td><td style="text-align: left"> </td></tr> <tr id="xdx_40A_eus-gaap--LesseeOperatingLeaseLiabilityPaymentsDueAfterYearFive_iI_pp0p0_maLOLLPzKpc_zWOMWxV5pHJ8" style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">For the year ending December 31, 2025 and beyond</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">56,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr id="xdx_400_eus-gaap--LesseeOperatingLeaseLiabilityPaymentsDue_iTI_pp0p0_mtLOLLPzKpc_zRWARmhwiUGc" style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Total lease payments</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">813,000</td><td style="text-align: left"> </td></tr> <tr id="xdx_400_eus-gaap--LesseeOperatingLeaseLiabilityUndiscountedExcessAmount_iNI_pp0p0_di_zAFrX2ldV5u8" style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Less: imputed lease interest</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(81,693</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr id="xdx_40F_eus-gaap--OperatingLeaseLiability_iI_pp0p0" style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 2.5pt">Present value of lease liabilities</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">731,307</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> </table> 105000 213000 217000 222000 56000 813000 81693 731307 XML 10 R1.htm IDEA: XBRL DOCUMENT v3.21.2
Cover - shares
6 Months Ended
Jun. 30, 2021
Aug. 05, 2021
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Jun. 30, 2021  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2021  
Current Fiscal Year End Date --12-31  
Entity File Number 000-14893  
Entity Registrant Name RESEARCH FRONTIERS INCORPORATED  
Entity Central Index Key 0000793524  
Entity Tax Identification Number 11-2103466  
Entity Incorporation, State or Country Code DE  
Entity Address, Address Line One 240 CROSSWAYS PARK DRIVE  
Entity Address, City or Town WOODBURY  
Entity Address, State or Province NY  
Entity Address, Postal Zip Code 11797-2033  
City Area Code (516)  
Local Phone Number 364-1902  
Title of 12(b) Security Common Stock, par value $0.0001 per share  
Trading Symbol REFR  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   31,650,396
XML 11 R2.htm IDEA: XBRL DOCUMENT v3.21.2
Condensed Consolidated Balance Sheets - USD ($)
Jun. 30, 2021
Dec. 31, 2020
Current assets:    
Cash and cash equivalents $ 3,471,590 $ 4,772,705
Royalty receivables, net of reserves of $972,202 in 2021 and $972,202 in 2020 829,865 598,292
Prepaid expenses and other current assets 199,925 56,512
Total current assets 4,501,380 5,427,509
Fixed assets, net 107,766 121,772
Operating lease ROU assets 543,133 616,442
Deposits and other assets 33,567 33,567
Total assets 5,185,846 6,199,290
Current liabilities:    
Current portion of operating lease liability 174,103 166,377
Accounts payable 41,077 33,410
Accrued expenses and other 59,435 26,279
Deferred revenue 26,002
Total current liabilities 300,617 226,066
Operating lease liability, net of current portion 557,204 646,219
Total liabilities 857,821 872,285
Shareholders’ equity:    
Common stock, par value $0.0001 per share; authorized 100,000,000 shares, issued and outstanding 31,650,396 in 2021 and 31,575,786 in 2020 3,165 3,158
Additional paid-in capital 123,250,878 123,164,623
Accumulated deficit (118,926,018) (117,840,776)
Total shareholders’ equity 4,328,025 5,327,005
Total liabilities and shareholders’ equity $ 5,185,846 $ 6,199,290