UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarter ended
OR
Commission File Number
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including
area code
Securities registered pursuant to Section 12(b) of the Act:
| Title of Class | Name of Exchange 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.
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).
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 ☐ |
| 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 | ||
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of May 8, 2025, there were outstanding shares of Common Stock, par value $ per share.
| 2 |
RESEARCH FRONTIERS INCORPORATED
Condensed Consolidated Balance Sheets
| March 31, 2025 | December 31, 2024 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Royalties receivable, net of reserves of $ | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Fixed assets, net | ||||||||
| Operating lease ROU assets | ||||||||
| Deposits and other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Current portion of operating lease liability | $ | $ | ||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Total current liabilities | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Total liabilities | ||||||||
| Shareholders’ equity: | ||||||||
| Common stock, par value $ per share; authorized shares, issued and outstanding in 2025 and 2024, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
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RESEARCH FRONTIERS INCORPORATED
Condensed Consolidated Statements of Operations
(Unaudited)
| Three months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Fee income | $ | $ | ||||||
| Operating expenses | ||||||||
| Research and development | ||||||||
| Total expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Net investment income | ||||||||
| Other income | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted net loss per common share | $ | ) | $ | ) | ||||
| Weighted average number of common shares outstanding | ||||||||
See accompanying notes to condensed consolidated financial statements.
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RESEARCH FRONTIERS INCORPORATED
Condensed Consolidated Statements of Shareholders’ Equity
(Unaudited)
For the three months ended March 31, 2025 and 2024
| Common Stock | Additional Paid-in | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balance, January 1, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Exercise of options | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Balance, January 1, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, March 31, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying notes to condensed consolidated financial statements.
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RESEARCH FRONTIERS INCORPORATED
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Three months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| ROU asset amortization | ||||||||
| Change in assets and liabilities: | ||||||||
| Royalty receivables | ( | ) | ||||||
| Prepaid expenses and other assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Operating lease liability | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of fixed assets | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Net proceeds from exercise of options | ||||||||
| Net cash provided by financing activities | ||||||||
| Net decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
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RESEARCH FRONTIERS INCORPORATED
Notes to Condensed Consolidated Financial Statements
March 31, 2025
(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 months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2025. The condensed consolidated balance sheet as of December 31, 2024 has been derived from the audited consolidated financial statements as of 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 for the fiscal year ended December 31, 2024.
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 March 31, 2025, we had working capital of approximately $
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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.
Note 3. Segment Information
The Company operates as a single
operating segment which is engaged in the development and marketing of technology and devices to control the flow of light (as
described in Note 2). The Company develops and licenses our patented suspended particle device (“SPD-Smart”)
light-control technology to other companies that manufacture and/or market the: (i) SPD-Smart chemical emulsion, (ii) light-control
film made from the chemical emulsion, (iii) the light-control panels made by laminating the film, (iv) electronics to power
end-products incorporating the film, or (v) lamination services for and the end-products themselves such as “smart”
windows, skylights and sunroofs. The Company currently has over 40 licensees that, in the aggregate, are licensed to primarily serve
five major SPD-Smart application areas (aerospace, architectural, automotive, marine and display products) in every country of the
world. The Company derives revenue from licensees in North America, Europe and Asia. The Company’s Chief Operating Decision
Maker (“CODM”) reviews revenue and consolidated net operating loss as a total and not by industry of licensees, and the
royalty rates that we charge our licensees are consistent when measuring the Company’s profitability and allocating resources
across geographical location and by industry. The Company does not have intra-entity sales or transfers. The Company’s
long-lived assets consist of property and equipment and operating lease right-of-use assets (“ROU”), all of which are located in the United
States. During the periods ended March 31, 2025 and 2024,
The CODM is the Company’s Chief Executive Officer and acting Chief Financial Officer. The CODM assesses performance for the single operating segment and decides how to allocate resources based on consolidated net operating loss that is also reported on the Company’s condensed consolidated statements of operations.
Consolidated net operating loss is used by the Company’s CODM to monitor budget versus actual results; conducting this monitoring on at least a quarterly basis as a part of the Company’s quarterly 10-Q and annual 10-K filing processes. Included in the review process is a detailed review and discussion related to the Company’s Management’s Discussion and Analysis. In addition, meetings of the Company’s Audit Committee are also held at least quarterly and those meetings include a review of consolidated operating results.
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The following table illustrates the information about the Company’s single reportable segment, which the Company’s CODM regularly evaluates in addition to the information already presented on the Company’s condensed consolidated statements of operations and identifies expense items exceeding the Company’s significant expense thresholds described above:
| Three months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenue | $ | $ | ||||||
| Operating expenses: | ||||||||
| Employee compensation | ||||||||
| Professional fees | ||||||||
| Directors’ fees and expenses | ||||||||
| Marketing and investor relations | ||||||||
| Insurance** | ||||||||
| Occupancy costs | ||||||||
| Patent costs | ||||||||
| Stock listing fees | ||||||||
| Legal fees | ||||||||
| Depreciation and amortization | ||||||||
| Other operating expenses* | ||||||||
| Research and development expenses: | ||||||||
| Employee compensation | ||||||||
| Insurance** | ||||||||
| Occupancy costs | ||||||||
| Depreciation and amortization | ||||||||
| Other research and development costs* | ||||||||
| Operating loss | $ | ( | ) | $ | ( | ) | ||
| * | ||
| ** |
Note 4. 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 5. Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (“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.
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ASC 606 follows a five-step approach to determining revenue recognition including: 1) Identification of the contract; 2) Identification of the performance obligations; 3) Determination of the transaction price; 4) Allocation of the transaction price; and 5) Recognition of revenue.
The Company determined that its license agreements provide for three performance obligations which include: (i) the Grant of Use to its Patent Portfolio (“Grant of Use”), (ii) Stand-Ready Technical Support (“Technical Support”) including the transfer of trade secrets and other know-how, production of materials, scale-up support, analytical testing, etc., and (iii) access to new Intellectual Property (“IP”) that may be developed 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 the 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 automatically 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
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, and (ii) the remaining periods in the year will have less of the transaction price recognized under 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.
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As of March 31, 2025, the Company had $
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.
During the period ended March 31, 2025, the Company entered into a license
agreement that expires on December 31, 2030 and is subject to annual renewal thereafter. During the period ended March 31, 2025, the Company
recognized revenue of $
Note 6. 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 three months of 2025, four licensees
accounted for 10% or more of fee income of the Company; these licensees accounted for approximately
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.
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Basic net loss per share excludes any dilution. It is based upon the weighted average number of common shares outstanding during the period. Dilutive net 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 March 31, 2025 and 2024, 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) were and for the periods ended March 31, 2025 and 2024, respectively.
Note 9. Equity
During the three months ended March 31, 2024,
the Company received proceeds of $
On September
16, 2022, the Company entered into subscription agreements from a group of private accredited investors to sell them million shares
of common stock of the Company at a price of $ per share (which represented the closing market price of the Company’s common
stock on September 14, 2022 which was the date that the transaction was agreed to). As of December 31, 2022, the Company received $
The shares were issued to the investors in a private placement and, along with the shares issued in connection with the exercise of any warrants in the future, are not registered and therefore currently subject to at least a six-month holding period by the investor.
As of March 31, 2025, there were
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 an operating lease for its
facility, which was amended and extended in 2024, with a remaining lease term of
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Maturities of operating lease liabilities as of March 31, 2025 were as follows:
| March 31, 2025 | ||||
| Year 1 | $ | |||
| Years 2-3 | ||||
| Years 4-5 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less: Imputed lease interest | ( |
) | ||
| Present value of lease liabilities | ||||
| Less: Current portion of operating lease liability | ( |
) | ||
| Operating lease liability, net of current portion | $ | |||
Note 11. Related Party
Effective June 4, 2023, the Chairman and CEO
of Gauzy, Ltd. one of the Company’s licensees, joined the Board of the Company. Gauzy’s license agreement has been in
effect since September 17, 2017 and provides for minimum annual royalties and earned royalties relating to sales of SPD-SmartGlass
architectural window products. Because the Company collects a
Note 12. Other Income
During the three months ended March 31, 2025,
the Company received $
| 13 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Critical Accounting Policies and Estimates
The following accounting estimates 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.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates.
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 the 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 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 credit losses. 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 credit losses when necessary.
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 new car models 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 2025 and 2024, the Company received royalty revenues from sales of SPD-SmartGlass products for various car models 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.
Three months ended March 31, 2025 compared to the three months ended March 31, 2024
The Company’s fee income from licensing activities for the three months ended March 31, 2025 was $559,776 as compared to $313,378 for the three months ended March 31, 2024. This increase in fee income of $246,398 (79%) was primarily the result of higher royalties from the automotive market as compared to the first quarter of 2024. The Company expects revenue in all market segments to increase further as new car models and other products using the Company’s SPD-SmartGlass technology are introduced into the market.
Operating expenses increased by $3,089 for the three months ended March 31, 2025 to $636,476 from $633,387 for the three months ended March 31, 2024. This increase is the result of higher payroll costs ($40,000) as well as higher allocated occupancy costs ($8,000) partially offset by lower marketing and investor relations costs ($20,000), lower patent costs ($8,000) and lower allocated insurance costs ($8,000).
Research and development expenditures increased by $13,136 to $162,877 for the three months ended March 31, 2025 from $149,741 for the three months ended March 31, 2024. This increase is primarily a result of higher allocated occupancy costs ($18,000) partially offset by lower allocated insurance costs ($6,000).
The Company’s net investment income, consisting of interest income, for the three months ended March 31, 2025 was $14,533 as compared to income of $27,146 for the three months ended March 31, 2024 with the change due to lower cash balances available for investment.
The Company recorded $47,357 of other income for the three months ended March 31, 2025 relating to an Employee Retention Credit, a refundable tax credit available under the CARES Act that was designed to keep employees on the payroll during the Covid-19 pandemic.
As a consequence of the factors discussed above, the Company’s net loss was $177,687 ($0.01 per common share) for the three months ended March 31, 2025 as compared to net loss of $442,604 ($0.01 per common share) for the three months ended March 31, 2024.
Financial Condition, Liquidity and Capital Resources
The Company has primarily utilized its cash, cash equivalents, and investments generated from sales of our common stock, proceeds from the exercise of options and warrants, and royalty fees collected to fund its research and development 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, 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 three months ended March 31, 2025, the Company’s cash and cash equivalents balance decreased by $641,381 as a result of cash used to fund operations of $641,271 and cash used to purchase fixed assets of $110. As of March 31, 2025, the Company had cash and cash equivalents of approximately $1.4 million, working capital of $2.3 million and total shareholders’ equity of $2.4 million.
We currently expect to have sufficient working capital for more than the next five years of operations.
The Company expects to use its cash to fund its research and development of SPD light valves, its expanded marketing initiatives, and for other working capital purposes. The Company believes that its current cash and cash equivalents would fund its operations for more than the next five years. 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.
| 15 |
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, 2024. 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 March 31, 2025, 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 March 31, 2025 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.
| 16 |
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. | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| 17 |
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: May 8, 2025
| 18 |
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: May 8, 2025 | /s/ Joseph M. Harary |
| Joseph M. Harary | |
| President, Chief Executive Officer and acting interim Chief Financial Officer |
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 March 31, 2025 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 | |
| May 8, 2025 |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) |
Mar. 31, 2025 |
Dec. 31, 2024 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Royalties receivables, reserves | $ 1,253,450 | $ 1,253,450 |
| Common stock, par value | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 100,000,000 | 100,000,000 |
| Common stock, shares issued | 33,648,221 | 33,648,221 |
| Common stock, shares outstanding | 33,648,221 | 33,648,221 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2025 |
Mar. 31, 2024 |
|
| Income Statement [Abstract] | ||
| Fee income | $ 559,776 | $ 313,378 |
| Operating expenses | 636,476 | 633,387 |
| Research and development | 162,877 | 149,741 |
| Total expenses | 799,353 | 783,128 |
| Operating loss | (239,577) | (469,750) |
| Net investment income | 14,533 | 27,146 |
| Other income | 47,357 | |
| Net loss | $ (177,687) | $ (442,604) |
| Net loss per common share - Basic | $ (0.01) | $ (0.01) |
| Net loss per common share - Diluted | $ (0.01) | $ (0.01) |
| Weighted average number of common shares outstanding - Basic | 33,648,221 | 33,510,408 |
| Weighted average number of common shares outstanding - Diluted | 33,648,221 | 33,510,408 |
Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) |
Common Stock [Member] |
Additional Paid-in Capital [Member] |
Retained Earnings [Member] |
Total |
|---|---|---|---|---|
| Balance at Dec. 31, 2023 | $ 3,351 | $ 127,779,221 | $ (124,264,841) | $ 3,517,731 |
| Balance, shares at Dec. 31, 2023 | 33,509,287 | |||
| Exercise of options | $ 1 | 8,669 | 8,670 | |
| Exercise of options, shares | 8,500 | |||
| Net loss | (442,604) | (442,604) | ||
| Balance at Mar. 31, 2024 | $ 3,352 | 127,787,890 | (124,707,445) | 3,083,797 |
| Balance, shares at Mar. 31, 2024 | 33,517,787 | |||
| Balance at Dec. 31, 2024 | $ 3,365 | 128,177,193 | (125,576,223) | 2,604,335 |
| Balance, shares at Dec. 31, 2024 | 33,648,221 | |||
| Net loss | (177,687) | (177,687) | ||
| Balance at Mar. 31, 2025 | $ 3,365 | $ 128,177,193 | $ (125,753,910) | $ 2,426,648 |
| Balance, shares at Mar. 31, 2025 | 33,648,221 |
Basis of Presentation |
3 Months Ended |
|---|---|
Mar. 31, 2025 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Basis of Presentation | 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 months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2025. The condensed consolidated balance sheet as of December 31, 2024 has been derived from the audited consolidated financial statements as of 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 for the fiscal year ended December 31, 2024.
|
Business |
3 Months Ended |
|---|---|
Mar. 31, 2025 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Business | 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 March 31, 2025, we had working capital of approximately $2.3 million, cash and cash equivalents of approximately $1.4 million, shareholders’ equity of approximately $2.4 million and an accumulated deficit of approximately $125.8 million. Based on current operations, we expect to have sufficient working capital for at least 12 months from the issuance of these financial statements.
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.
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Segment Information |
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| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Information | Note 3. Segment Information
The Company operates as a single operating segment which is engaged in the development and marketing of technology and devices to control the flow of light (as described in Note 2). The Company develops and licenses our patented suspended particle device (“SPD-Smart”) light-control technology to other companies that manufacture and/or market the: (i) SPD-Smart chemical emulsion, (ii) light-control film made from the chemical emulsion, (iii) the light-control panels made by laminating the film, (iv) electronics to power end-products incorporating the film, or (v) lamination services for and the end-products themselves such as “smart” windows, skylights and sunroofs. The Company currently has over 40 licensees that, in the aggregate, are licensed to primarily serve five major SPD-Smart application areas (aerospace, architectural, automotive, marine and display products) in every country of the world. The Company derives revenue from licensees in North America, Europe and Asia. The Company’s Chief Operating Decision Maker (“CODM”) reviews revenue and consolidated net operating loss as a total and not by industry of licensees, and the royalty rates that we charge our licensees are consistent when measuring the Company’s profitability and allocating resources across geographical location and by industry. The Company does not have intra-entity sales or transfers. The Company’s long-lived assets consist of property and equipment and operating lease right-of-use assets (“ROU”), all of which are located in the United States. During the periods ended March 31, 2025 and 2024, 100% of the Company’s revenue was generated from sources outside of the United States.
The CODM is the Company’s Chief Executive Officer and acting Chief Financial Officer. The CODM assesses performance for the single operating segment and decides how to allocate resources based on consolidated net operating loss that is also reported on the Company’s condensed consolidated statements of operations.
Consolidated net operating loss is used by the Company’s CODM to monitor budget versus actual results; conducting this monitoring on at least a quarterly basis as a part of the Company’s quarterly 10-Q and annual 10-K filing processes. Included in the review process is a detailed review and discussion related to the Company’s Management’s Discussion and Analysis. In addition, meetings of the Company’s Audit Committee are also held at least quarterly and those meetings include a review of consolidated operating results.
The following table illustrates the information about the Company’s single reportable segment, which the Company’s CODM regularly evaluates in addition to the information already presented on the Company’s condensed consolidated statements of operations and identifies expense items exceeding the Company’s significant expense thresholds described above:
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Patent Costs |
3 Months Ended |
|---|---|
Mar. 31, 2025 | |
| Goodwill and Intangible Assets Disclosure [Abstract] | |
| Patent Costs | Note 4. 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.
|
Revenue Recognition |
3 Months Ended |
|---|---|
Mar. 31, 2025 | |
| Revenue from Contract with Customer [Abstract] | |
| Revenue Recognition | Note 5. Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (“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.
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 the 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 automatically 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, and (ii) the remaining periods in the year will have less of the transaction price recognized under 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.
As of March 31, 2025, the Company had $274,253 in unbilled revenue included in royalty receivables.
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.
During the period ended March 31, 2025, the Company entered into a license agreement that expires on December 31, 2030 and is subject to annual renewal thereafter. During the period ended March 31, 2025, the Company recognized revenue of $226,400 relating to the Grant of Use to its Patent Portfolio.
|
Fee Income |
3 Months Ended |
|---|---|
Mar. 31, 2025 | |
| Fee Income | |
| Fee Income | Note 6. 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 three months of 2025, four licensees accounted for 10% or more of fee income of the Company; these licensees accounted for approximately 40%, 33%, 10% and 10% of fee income recognized during such period. During the first three months of 2024, four licensees accounted for 10% or more of fee income of the Company; these licensees accounted for approximately 39%, 19%, 19% and 10% of fee income recognized during such period.
|
Income Taxes |
3 Months Ended |
|---|---|
Mar. 31, 2025 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | 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.
|
Basic and Diluted Loss Per Common Share |
3 Months Ended |
|---|---|
Mar. 31, 2025 | |
| Earnings Per Share [Abstract] | |
| Basic and Diluted Loss Per Common Share |
Basic net loss per share excludes any dilution. It is based upon the weighted average number of common shares outstanding during the period. Dilutive net 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 March 31, 2025 and 2024, 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) were and for the periods ended March 31, 2025 and 2024, respectively.
|
Equity |
3 Months Ended |
|---|---|
Mar. 31, 2025 | |
| Equity [Abstract] | |
| Equity | Note 9. Equity
During the three months ended March 31, 2024, the Company received proceeds of $8,670 in connection with the exercise of options covering shares of common stock. No options or warrants were exercised during the three-month period ended March 31, 2025.
On September 16, 2022, the Company entered into subscription agreements from a group of private accredited investors to sell them million shares of common stock of the Company at a price of $ per share (which represented the closing market price of the Company’s common stock on September 14, 2022 which was the date that the transaction was agreed to). As of December 31, 2022, the Company received $3,450,000 under these subscription agreements and issued common shares and issued 1,500,000 warrants. During 2024, the Company received $300,000 and issued shares and 130,434 warrants in connection with a remaining outstanding commitment under these subscription agreements. The Company has an outstanding commitment from a potential investor for the remaining $850,000 under these subscription agreements. The Company did not sell any equity securities during the three month-periods ended March 31, 2025 and 2024.
The shares were issued to the investors in a private placement and, along with the shares issued in connection with the exercise of any warrants in the future, are not registered and therefore currently subject to at least a six-month holding period by the investor.
As of March 31, 2025, there were 1,630,434 warrants and options outstanding.
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Leases |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases | 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 an operating lease for its facility, which was amended and extended in 2024, with a remaining lease term of 6.8 years (including renewal options) as of March 31, 2025. As of March 31, 2024, the weighted average remaining lease term was 1.0 years. The initial term of the lease expires on December 31, 2027 with renewal options that potentially extend expiration through December 31, 2031. Operating leases are included in Operating lease ROU assets, other current liabilities and long-term lease liabilities on the condensed consolidated balance sheets. Operating lease ROU assets and operating lease 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 rate implicit in its lease agreements is not readily determinable, the Company uses an interest rate based on the marketplace for public debt. The incremental borrowing rate associated with the operating lease as of March 31, 2025 and 2024 is 7.0% and 5.5%, respectively. Cash rent paid for the three months ended March 31, 2025 and 2024 was $57,000 and $47,000, respectively.
Maturities of operating lease liabilities as of March 31, 2025 were as follows:
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Related Party |
3 Months Ended |
|---|---|
Mar. 31, 2025 | |
| Related Party Transactions [Abstract] | |
| Related Party | Note 11. Related Party
Effective June 4, 2023, the Chairman and CEO of Gauzy, Ltd. one of the Company’s licensees, joined the Board of the Company. Gauzy’s license agreement has been in effect since September 17, 2017 and provides for minimum annual royalties and earned royalties relating to sales of SPD-SmartGlass architectural window products. Because the Company collects a 10-15% royalty from the higher-priced end product sales by Gauzy’s customers purchasing their SPD-Smart light control film, under its license agreement with Gauzy, the Company does not collect a royalty on sales by Gauzy of SPD-Smart light control film to these licensee customers. In addition, the Company’s licensee Vision Systems, Inc. is a 100% owned subsidiary of Gauzy, Ltd. For the three-month periods ended March 31, 2025 and 2024, fee income related to Gauzy and Vision Systems represented 11% and 21%, respectively, of the Company’s total fee income. In addition, as of March 31, 2025 and 2024, the Company’s accounts receivable from Gauzy and Vision Systems represented 10% and 3%, respectively, of the Company’s total royalty receivables, before reserves.
|
Other Income |
3 Months Ended |
|---|---|
Mar. 31, 2025 | |
| Other Income and Expenses [Abstract] | |
| Other Income | Note 12. Other Income
During the three months ended March 31, 2025, the Company received $47,357 in Employee Retention Credits, a refundable tax credit available under the Coronavirus Aid, Relief, and Economic Securities Act (“CARES Act”) that was designed to keep employees on the payroll during the COVID-19 pandemic. There were no such credits received during the three months ended March 31, 2024. |
Segment Information (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Segment Information Related to Statement of Operations |
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Leases (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Maturities of Operating Lease | Maturities of operating lease liabilities as of March 31, 2025 were as follows:
|
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Business (Details Narrative) - USD ($) |
Mar. 31, 2025 |
Dec. 31, 2024 |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|---|---|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
| Working capital | $ 2,300,000 | |||
| Cash and Cash Equivalents, at Carrying Value | 1,352,805 | $ 1,994,186 | ||
| Shareholders equity | 2,426,648 | 2,604,335 | $ 3,083,797 | $ 3,517,731 |
| Accumulated deficit | $ 125,753,910 | $ 125,576,223 |
Schedule of Segment Information Related to Statement of Operations (Details) - USD ($) |
3 Months Ended | |||||
|---|---|---|---|---|---|---|
Mar. 31, 2025 |
Mar. 31, 2024 |
|||||
| Segment Reporting [Abstract] | ||||||
| Revenue | $ 559,776 | $ 313,378 | ||||
| Operating expenses: | ||||||
| Employee compensation | 286,511 | 246,910 | ||||
| Professional fees | 87,900 | 63,150 | ||||
| Directors’ fees and expenses | 120,000 | 120,242 | ||||
| Marketing and investor relations | 30,246 | 50,121 | ||||
| Insurance | [1] | 46,189 | 52,374 | |||
| Occupancy costs | 21,515 | 15,414 | ||||
| Patent costs | 11,804 | 19,742 | ||||
| Stock listing fees | 17,500 | 16,375 | ||||
| Legal fees | 24,586 | |||||
| Depreciation and amortization | 2,860 | 3,704 | ||||
| Other operating expenses | [2] | 11,951 | 20,769 | |||
| Operating expenses | 636,476 | 633,387 | ||||
| Research and development expenses: | ||||||
| Employee compensation | 47,363 | 46,706 | ||||
| Insurance | [1] | 45,210 | 50,896 | |||
| Occupancy costs | 64,546 | 46,250 | ||||
| Depreciation and amortization | 220 | 2,745 | ||||
| Other research and development costs* | 5,538 | 3,144 | ||||
| Research and development expenses | 162,877 | 149,741 | ||||
| Operating loss | $ (239,577) | $ (469,750) | ||||
| ||||||
Segment Information (Details Narrative) - Segment |
3 Months Ended | |
|---|---|---|
Mar. 31, 2025 |
Mar. 31, 2024 |
|
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||
| Number of operating segments | 1 | |
| Number of reportable segments | 1 | |
| Non-US [Member] | ||
| Revenues from External Customers and Long-Lived Assets [Line Items] | ||
| Percentage of revenue | 100.00% | 100.00% |
Revenue Recognition (Details Narrative) |
3 Months Ended |
|---|---|
|
Mar. 31, 2025
USD ($)
| |
| Unbilled receivables current | $ 274,253 |
| License Agreements [Member] | |
| Recognized revenue | $ 226,400 |
| Minimum [Member] | Revenue Benchmark [Member] | License Agreement [Member] | |
| Royalty rate on selling price | 10.00% |
| Maximum [Member] | Revenue Benchmark [Member] | License Agreement [Member] | |
| Royalty rate on selling price | 15.00% |
Fee Income (Details Narrative) - Revenue Benchmark [Member] - Customer Concentration Risk [Member] |
3 Months Ended | |
|---|---|---|
Mar. 31, 2025 |
Mar. 31, 2024 |
|
| Licensee One [Member] | ||
| Product Information [Line Items] | ||
| Concentration risk percentage | 40.00% | 39.00% |
| License Two [Member] | ||
| Product Information [Line Items] | ||
| Concentration risk percentage | 33.00% | 19.00% |
| License Three [Member] | ||
| Product Information [Line Items] | ||
| Concentration risk percentage | 10.00% | 19.00% |
| Licensee Four [Member] | ||
| Product Information [Line Items] | ||
| Concentration risk percentage | 10.00% | 10.00% |
Basic and Diluted Loss Per Common Share (Details Narrative) - shares |
3 Months Ended | |
|---|---|---|
Mar. 31, 2025 |
Mar. 31, 2024 |
|
| Options and Warrants [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Antidilutive securities | 2,773,422 | 3,262,015 |
Schedule of Maturities of Operating Lease (Details) - USD ($) |
Mar. 31, 2025 |
Dec. 31, 2024 |
|---|---|---|
| Leases | ||
| Year 1 | $ 219,000 | |
| Years 2-3 | 454,000 | |
| Years 4-5 | 485,000 | |
| Thereafter | 447,000 | |
| Total lease payments | 1,605,000 | |
| Less: Imputed lease interest | (340,459) | |
| Present value of lease liabilities | 1,264,541 | |
| Less: Current portion of operating lease liability | (133,811) | $ (129,875) |
| Operating lease liability, net of current portion | $ 1,130,730 | $ 1,166,285 |
Leases (Details Narrative) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2025 |
Mar. 31, 2024 |
|
| Leases | ||
| Weighted average remaining lease term | 6 years 9 months 18 days | 1 year |
| Lease expiration date | Dec. 31, 2027 | |
| Weighted average discount rate of operating leases | 7.00% | 5.50% |
| Payments for rent | $ 57,000 | $ 47,000 |
Related Party (Details Narrative) |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2025 |
Mar. 31, 2024 |
Jun. 04, 2023 |
|
| Gauzy Ltd [Member] | |||
| Subsidiary, ownership percentage | 100.00% | ||
| Gauzy Ltd [Member] | Minimum [Member] | |||
| Royalty percentage | 10.00% | ||
| Gauzy Ltd [Member] | Maximum [Member] | |||
| Royalty percentage | 15.00% | ||
| Gauzy and Vision Systems [Member] | |||
| Total fee income percentage | 11.00% | 21.00% | |
| Related party percentage | 10.00% | 3.00% | |
Other Income (Details Narrative) |
3 Months Ended |
|---|---|
|
Mar. 31, 2025
USD ($)
| |
| Other Income and Expenses [Abstract] | |
| Refundable tax credit | $ 47,357 |
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