SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1996 Commission File No. 1-9399
RESEARCH FRONTIERS INCORPORATED
(Exact name of registrant as specified in charter)
Delaware 11-2103466
(State of incorporation or organization) (IRS Employer
Identification No.)
240 Crossways Park Drive, Woodbury, N.Y. 11797
(Address of principal executive offices) (Zip Code)
(516) 364-1902
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No __
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date:
As of August 13,1996, there were outstanding 9,889,222 shares of
Common Stock, par value $0.0001 per share.
RESEARCH FRONTIERS INCORPORATED
Condensed Balance Sheets
June 30,1996
Assets (Unaudited) Dec.31,1995
Current assets:
Cash and cash equivalents $ 959,206 3,827,573
Marketable investment securities 7,119,230 5,937,308
Accrued interest and dividends receivable 89,345 82,422
Prepaid expenses and other current assets 17,441 23,699
Total current assets 8,185,222 9,871,002
Fixed assets, net 94,638 96,491
Deposits and other assets 59,769 58,620
Total assets $8,339,629 10,026,113
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable 41,749 113,120
Other accrued expenses 91,703 129,933
Total liabilities 133,452 243,053
Shareholders' equity:
Capital stock, par value $.0001 per share;
authorized 100,000,000 shares, issued and out-
standing 9,889,222 shares and 9,830,761 shares 989 983
Additional paid-in capital 28,064,630 28,399,562
Accumulated deficit (19,284,942) (18,035,485)
8,780,677 10,365,060
Notes receivable from officers (574,500) (582,000)
Total shareholders' equity 8,206,177 9,783,060
Total liabilities and shareholders' equity $8,339,629 10,026,113
See accompanying notes to condensed financial statements.
RESEARCH FRONTIERS INCORPORATED
Condensed Statements of Operations
(Unaudited)
Six months ended Three months ended
June 30,1996 June 30,1995 June 30,1996 June 30,1995
Fee income $ 50,000 -- $ 50,000 --
Operating expenses 698,397 721,378 272,762 327,560
Research and development 732,769 707,418 316,816 375,710
1,431,166 1,428,796 589,578 703,270
Operating loss (1,381,166) (1,428,796) (539,578) (703,270)
Investment income (loss) (795,630) 247,955 (901,907) 99,408
Interest income on note
receivable from officer 211,360 7,073 -- --
Unrealized gain on investments 715,979 72,720 919,759 155,698
Net loss $(1,249,457) (1,101,048) $(521,726) (448,164)
Net loss per share $ (.13) (.12) $ (.05) (.05)
Weighted average number of
common shares outstanding 9,831,286 9,077,583 9,869,372 9,078,132
See accompanying notes to condensed financial statements.
RESEARCH FRONTIERS INCORPORATED
Condensed Statements of Cash Flows
(Unaudited)
Six months ended
June 30,1996 June 30, 1995
Cash flows from operating activities:
Net loss $ (1,249,457) (1,101,048)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 15,338 27,634
Unrealized gain on investments (715,979) (72,720)
Interest income on notes receivable from officer (211,360) (7,073)
Changes in assets and liabilities:
(Increase) decrease in investments (465,943) 1,185,942
Increase in accrued interest and
dividends receivable (6,911) 19,344
(Increase) decrease in other assets 5,109 (15,139)
Decrease in accounts payable & accrued expenses (109,601) (47,341)
Net cash provided by (used in) operating activities (2,738,804) (10,401)
Cash flows from investing activities:
Capital expenditures (13,485) (3,943)
Net cash provided by (used in) investing activities (13,485) (3,943)
Cash flows from financing activities:
Proceeds from issuances of common stock 178,922 85,436
Increase in notes from officers (295,000) --
Net cash provided by (used in) financing activities (116,078) 85,436
Net increase (decrease) in cash and cash equivalents (2,868,367) 71,092
Cash and cash equivalents at beginning of year 3,827,573 219,771
Cash and cash equivalents at end of period $ 959,206 290,863
Non-Cash Transactions:
Redemption of Treasury Stock as
payment for officer note receivable $ 302,500 300,000
See accompanying notes to condensed financial statements.
RESEARCH FRONTIERS INCORPORATED
Notes to Condensed Financial Statements
June 30, 1996
(Unaudited)
Basis of Presentation
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of the financial position, results of operations, and cash flows for
the interim periods to which the report relates. The results of operations
for the six-month period ended June 30, 1996 are not necessarily indicative
of the results to be expected for the full year. The notes included herein
should be read in conjunction with the notes to financial statements of the
Company at December 31, 1995 and for the three years then ended,included in
the Company's Annual Report on Form 10-K.
Business
Research Frontiers Incorporated (the Company) is primarily 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 a suspension of microscopic particles that is
either in the form of a liquid suspension or a film, usually enclosed
between two glass or plastic plates, at least one of which is transparent.
Statement of Cash Flows
Cash equivalents consist of short-term investments in government
securities. The Company considers securities purchased within three
months of their maturity date to be cash equivalents.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations for the Six Month Periods Ended June 30, 1996 and 1995
The Company earned fee income for the six months ended June 30, 1996
of $50,000 relating to the Company's new license agreement with
Glaverbel, SA.
Operating expenses decreased by $22,981 for the first six months of 1996
from $721,378 for the first six months of 1995. This decrease was due to
decreased travel and depreciation expenses offset by higher payroll and
insurance expenses.
Research and development expenditures increased to $732,769 for the first
six months of 1996 from $707,418 for the first six months of 1995. This
increase was primarily the result of higher salaries offset by a decrease in
costs related to patents.
Net investment income decreased by $1,043,585 to a loss of $795,630 for
the first six months of 1996 from net investment income of $247,955 for
the first six months of 1995. This decrease was due to a realized loss
recognized by the Company on the sale of securities against which the
Company had previously recorded unrealized losses. In addition, the
Company recorded an unrealized gain on investments of $715,979 for the
six months ended June 30, 1996 compared to an unrealized gain of
$72,720 for the first six months of 1995 due to a change in the Company's
investment portfolio during these periods.
As a consequence of the factors discussed above, the Company's net loss
was $1,249,457 ($.13 per share) for the first six months of 1996 as
compared to $1,101,048 ($.12 per share) for the first six months of 1995.
Results of Operations for the Three Month Periods Ended June 30, 1996 and 1995
The Company earned fee income for the second quarter of 1996 of $50,000
relating to the Company's new license agreement with Glaverbel, SA.
Operating expenses decreased approximately $55,000 for the second
quarter of 1996 from approximately $328,000 for the second quarter of
1995. This decrease was due to decreased travel and depreciation expenses
offset by higher payroll and insurance expenses.
Research and development expenditures decreased to $316,816 for the
second quarter of 1996 from $375,710 for the second quarter of 1995.
This increase was primarily the result of decreased costs related to patents.
Net investment income decreased by $1,001,315 to a loss of $901,907 for
the second quarter of 1996 from net income of $99,408 for the second
quarter of 1995. This decrease was due to a realized loss recognized by the
Company on the sale of securities against which the Company had
previously recorded unrealized losses. In addition, the Company recorded
an unrealized gain on investments of $919,759 for the second quarter of
1996 compared to an unrealized gain of $155,698 for the second quarter
of 1995 due to a change in the Company's investment portfolio during
these periods.
As a consequence of the factors discussed above, the Company's net loss
was $521,726 ($.05 per share) for the second quarter of 1996 as compared
to $448,164 ($.05 per share) for the second quarter of 1995.
Financial Condition, Liquidity and Capital Resources
During the first six months of 1996, the Company's cash and cash
equivalents and marketable investment securities balance decreased by
approximately $1,686,000 principally as a result of cash used to fund the
Company's net loss from operations (approximately $1,381,000), the
decrease in accounts payable and accrued expenses of approximately
$110,000, and the increase in notes receivable from officers of $295,000.
At June 30, 1996, the Company had working capital of $8,051,770 and its
shareholders' equity was $8,206,177.
Notes receivable from officers decreased by approximately $7,500 during
the first six months of 1996. This was a result of the repayment by the
Company's President of an outstanding note receivable, including
$211,360 in accumulated interest thereon, offset by two new notes issued
by the Company. Repayment was made through the transfer to the
Company of 49,528 shares of the Company's common stock held by the
President, which shares were subsequently retired by the Company.
The Company expects to use its cash and short-term investments to fund
its research and development of SPD light valves and for other working
capital purposes. The Company's working capital and capital
requirements depend upon numerous factors, including the results of
research and development activities, competitive and technological
developments, the timing and cost of patent filings, 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 would provide
additional working capital, and changes in relationships with existing
licensees would have a favorable or negative impact depending upon the
nature of such changes. Based upon existing levels of expenditures,
assumed ten percent annual increases therein, existing cash reserves and
budgeted revenues, the Company believes that it would not require
additional funding for the next two to three years. There can be no
assurance that expenditures will not exceed the anticipated amounts or that
additional financing, if required, will be available when needed or, if
available, that its terms will be favorable or acceptable to the Company.
Eventual success of the Company and generation of positive cash flow will
be dependent upon the commercialization of products using the
Company's technology by the Company's licensees and payments of
continuing royalties on account thereof.
PART II.OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
The Annual Meeting of Stockholders of Research Frontiers Incorporated
was held on June 13, 1996. Listed below is a summary of how the
9,043,240 shares voted at the Annual Meeting on the various proposals
voted upon and adopted at the Annual Meeting. For the election of Robert
M. Budin as a Class III member of the Company's Board of Directors, 8,991,092
shares were voted in favor of election, and 52,148 votes were withheld. For the
election of Robert L. Saxe as a Class III member of the Company's Board of
Directors, 8,994,480 shares were voted in favor of election, and 48,760 votes
were withheld. For the ratification of the appointment of KPMG Peat Marwick LLP
as auditors for 1996, 8,952,779 shares were voted in favor of election, 59,546
shares were voted against, and 30,915 shares abstained from voting. For the
proposal to amend the Company's 1992 Stock Option Plan to increase the number of
shares authorized for issuance thereunder by 450,000 shares, 8,310,649
shares were voted in favor of the proposal, 460,196 shares were voted
against, and 94,978 shares abstained from voting. The proposal to amend the
Company's certificate of incorporation to authorize a preferred stock did not
receive the required number of votes, with 4,257,886 shares voting in favor of
the amendment, 691,717 shares voting against, and 66,128 shares abstaining from
the voting.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. None
(b) Reports on Form 8-K. None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunder duly authorized.
RESEARCH FRONTIERS INCORPORATED
(Registrant)
/s/ Robert L. Saxe
Robert L. Saxe, President and Treasurer
(Principal Executive, Financial, and
Accounting Officer)
Date: August 14, 1996