Research Frontiers(REFR) - 2025 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements The company's unaudited financial statements show its financial position, performance, and cash flows for Q1 2025 Condensed Consolidated Balance Sheets Total assets decreased to $3.77 million, driven by a reduction in cash and cash equivalents Condensed Consolidated Balance Sheets | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Current Assets | | | | Cash and cash equivalents | $1,352,805 | $1,994,186 | | Royalties receivable, net | $969,059 | $658,213 | | Total Assets | $3,768,086 | $4,039,647 | | Current Liabilities | | | | Total current liabilities | $210,708 | $269,027 | | Total Liabilities | $1,341,438 | $1,435,312 | | Total Shareholders' Equity | $2,426,648 | $2,604,335 | Condensed Consolidated Statements of Operations A significant increase in fee income reduced the company's operating and net loss in Q1 2025 Condensed Consolidated Statements of Operations | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Fee income | $559,776 | $313,378 | | Total expenses | $799,353 | $783,128 | | Operating loss | $(239,577) | $(469,750) | | Net loss | $(177,687) | $(442,604) | | Basic and diluted net loss per common share | $(0.01) | $(0.01) | Condensed Consolidated Statements of Shareholders' Equity Shareholders' equity decreased solely due to the net loss incurred during the first quarter of 2025 - The change in shareholders' equity for the three months ended March 31, 2025, was solely due to the net loss of $177,687, as there were no equity transactions during the period[14] Condensed Consolidated Statements of Cash Flows Cash and cash equivalents decreased due to a higher cash burn from operating activities in Q1 2025 Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(641,271) | $(391,120) | | Net cash used in investing activities | $(110) | $(50) | | Net cash provided by financing activities | $0 | $8,670 | | Net decrease in cash | $(641,381) | $(382,500) | | Cash at end of period | $1,352,805 | $2,093,458 | Notes to the Condensed Consolidated Financial Statements This section details accounting policies, business operations, revenue recognition, and lease obligations Note 2. Business The company develops SPD technology and has sufficient working capital for the next 12 months - The company develops and markets SPD technology for applications in architectural, automotive, marine, aerospace, and other industries[20] - As of March 31, 2025, the company had working capital of approximately $2.3 million and cash of $1.4 million, which is expected to be sufficient for at least the next 12 months[21] Note 3. Segment Information The company operates as a single segment, with all revenue generated from outside the United States - The company operates as a single business segment, licensing its SPD-Smart light-control technology to over 40 licensees worldwide[23] - For the three-month periods ending March 31, 2025 and 2024, 100% of the company's revenue was generated from sources outside of the United States[23] Note 5. Revenue Recognition Revenue from license agreements is recognized based on three distinct performance obligations - The company identifies three performance obligations in its license agreements: Grant of Use, Technical Support, and access to New Improvements[32] - Revenue from the 'Grant of Use' is recognized upfront, while revenue from 'Technical Support' and 'New Improvements' is recognized over the contract period, which can lead to higher revenue recognition in the first period of a new contract[36][38] - During Q1 2025, the company entered a new license agreement and recognized $226,400 related to the Grant of Use performance obligation[42] Note 6. Fee Income Fee income shows significant customer concentration, with four licensees comprising 93% of the total - In Q1 2025, four licensees accounted for approximately 40%, 33%, 10%, and 10% of total fee income[44] - In Q1 2024, four licensees accounted for approximately 39%, 19%, 19%, and 10% of total fee income[44] Note 10. Leases The company holds an operating lease with a remaining term of 6.8 years and liabilities of $1.26 million Maturities of Operating Lease Liabilities | Maturities of Operating Lease Liabilities | Amount | | :--- | :--- | | 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 | Note 11. Related Party Fee income from related party Gauzy, Ltd represented 11% of total fee income in Q1 2025 - Fee income from related parties Gauzy and Vision Systems was 11% of total fee income in Q1 2025 and 21% in Q1 2024[54] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 79% increase in fee income, a reduced net loss, and a stable financial outlook Results of Operations Fee income rose 79% due to higher automotive royalties, significantly narrowing the company's net loss Q1 2025 vs Q1 2024 Performance | Metric | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Fee Income | $559,776 | $313,378 | +79% | | Operating Expenses | $636,476 | $633,387 | +0.5% | | R&D Expenditures | $162,877 | $149,741 | +8.8% | | Net Loss | $(177,687) | $(442,604) | -60% | - The increase in fee income was primarily the result of higher royalties from the automotive market[66] - The company recorded $47,357 of other income in Q1 2025 from an Employee Retention Credit under the CARES Act[70] Financial Condition, Liquidity and Capital Resources The company's working capital is sufficient for over five years despite a quarterly cash burn - Cash and cash equivalents decreased by $641,381 in Q1 2025, mainly due to cash used to fund operations[73] - Management currently expects to have sufficient working capital for more than the next five years of operations[74][75] Item 3. Quantitative and Qualitative Disclosures About Market Risk Market risk disclosures remain materially unchanged from the 2024 Annual Report on Form 10-K - There has been no material change in the disclosure regarding market risk from the company's most recent Form 10-K[77] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes - The Chief Executive Officer and acting interim Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[78] - No changes in internal control over financial reporting occurred during Q1 2025 that have materially affected, or are reasonably likely to materially affect, internal controls[79] PART II - OTHER INFORMATION Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including required CEO/CFO certifications - The exhibits filed with this report include CEO/CFO certifications and Inline XBRL documents[81]