Research Frontiers(REFR) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements The unaudited condensed consolidated financial statements for Research Frontiers Incorporated as of June 30, 2025, show a decrease in total assets and shareholders' equity compared to December 31, 2024, with a year-over-year decline in fee income and a significant increase in net loss, primarily driven by lower royalties and higher operating expenses, leading to a reduction in cash and cash equivalents Condensed Consolidated Balance Sheets As of June 30, 2025, the company's total assets decreased to $3.17 million from $4.04 million at the end of 2024, primarily due to a reduction in cash and cash equivalents, while total liabilities saw a slight decrease and total shareholders' equity declined from $2.60 million to $1.80 million, largely due to the accumulated deficit Condensed Consolidated Balance Sheet Highlights (in USD) | Account | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $1,274,276 | $1,994,186 | | Total current assets | $1,971,930 | $2,745,889 | | Total assets | $3,172,806 | $4,039,647 | | Liabilities & Equity | | | | Total current liabilities | $280,235 | $269,027 | | Total liabilities | $1,374,780 | $1,435,312 | | Total shareholders' equity | $1,798,026 | $2,604,335 | Condensed Consolidated Statements of Operations For the second quarter of 2025, fee income dropped sharply to $129,904 from $489,594 in Q2 2024, leading to a significantly wider operating loss of $815,104, with the net loss for the quarter at $803,826, or $0.02 per share, and the six-month results showing a similar trend of decreasing fee income and nearly doubling net loss year-over-year Statement of Operations Summary (in USD) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Fee income | $129,904 | $489,594 | $689,680 | $802,972 | | Operating loss | $(815,104) | $(116,134) | $(1,054,681) | $(585,884) | | Net loss | $(803,826) | $(94,022) | $(981,513) | $(536,626) | | Basic and diluted net loss per share | $(0.02) | $(0.00) | $(0.03) | $(0.02) | Condensed Consolidated Statements of Shareholders' Equity Shareholders' equity decreased from $2.60 million at the beginning of 2025 to $1.80 million by June 30, 2025, primarily driven by a net loss of $981,513 for the six-month period, partially offset by $175,204 in share-based compensation - For the six months ended June 30, 2025, total shareholders' equity decreased by approximately $806,000, mainly due to the net loss of $981,513[14] Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash used in operating activities was $719,701, an increase from $577,972 in the same period of 2024, leading to the company's cash and cash equivalents balance falling from $1.99 million at the start of the year to $1.27 million at the end of the period Cash Flow Summary (in USD) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(719,701) | $(577,972) | | Net decrease in cash and cash equivalents | $(719,910) | $(569,456) | | Cash and cash equivalents at end of period | $1,274,276 | $1,906,502 | Notes to the Condensed Consolidated Financial Statements The notes detail the company's business as a single segment focused on licensing its SPD-Smart light-control technology, highlighting significant reliance on the automotive market, revenue concentration among a few licensees, and the post-quarter bankruptcy filing of a major European licensee that accounted for 33% of revenue in the first half of 2025, alongside the company's receipt of an Employee Retention Credit under the CARES Act - The company operates in a single business segment, licensing its patented SPD-Smart light-control technology to over 40 licensees serving aerospace, architectural, automotive, marine, and display markets[21][24] - For the first six months of 2025, 99% of the company's revenue was generated from sources outside the United States, a significant increase from 61% in the same period of 2024[24] - Subsequent to June 30, 2025, a significant European licensee, which accounted for 33% of revenue in the first half of 2025, filed for bankruptcy, with the company having no outstanding accounts receivable from this licensee[46] - The company recorded $175,204 in share-based compensation during the six months ended June 30, 2025, related to stock options granted in June 2025[52] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 73% decrease in Q2 2025 fee income primarily to lower royalties from the automotive market and the disruption caused by a major European licensee's bankruptcy, with operating expenses rising due to non-cash stock option compensation and credit loss expenses, widening the net loss, yet management asserts the company has sufficient working capital for more than the next five years despite operational challenges and cash burn Results of Operations Fee income for Q2 2025 fell by $359,690 (73%) year-over-year, mainly due to reduced automotive royalties and the bankruptcy of a licensee supplying Ferrari, which has since transitioned to another of the company's licensees, while operating expenses increased by $299,024 in the quarter, driven by non-cash compensation and credit loss expenses, and for the six-month period, fee income decreased by 14%, with net loss widening from $536,626 to $981,513 - Q2 2025 fee income decreased by 73% YoY, primarily due to lower automotive royalties and the bankruptcy of a European licensee that supplied Ferrari, with Ferrari transitioning its business to another existing licensee[69] - Q2 2025 operating expenses increased by $299,024 YoY, mainly due to higher non-cash compensation cost ($165,000) and higher credit loss expense ($124,000)[70] Net Loss Comparison (in USD) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three months ended June 30 | $803,826 ($0.02/share) | $94,022 ($0.00/share) | | Six months ended June 30 | $981,513 ($0.03/share) | $536,626 ($0.02/share) | Financial Condition, Liquidity and Capital Resources The company's cash and cash equivalents decreased by $719,910 during the first six months of 2025, ending the period with approximately $1.3 million, yet management states that current working capital of $1.7 million is sufficient to fund operations for more than the next five years - As of June 30, 2025, the company had cash and cash equivalents of approximately $1.3 million and working capital of $1.7 million[80] - Management expects to have sufficient working capital for more than the next five years of operations[81][82] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reports no material change in its market risk disclosures from what was presented in its Annual Report on Form 10-K for the year ended December 31, 2024 - There has been no material change in the company's market risk since the last annual report[84] Item 4. Controls and Procedures Management, including the CEO and acting interim CFO, evaluated the company's disclosure controls and procedures as of June 30, 2025, and concluded they were effective, with no material changes in internal control over financial reporting during the quarter - The company's management concluded that disclosure controls and procedures were effective as of June 30, 2025[85] - No material changes were made to the internal control over financial reporting during the three months ended June 30, 2025[86] PART II - OTHER INFORMATION Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including officer certifications (Rule 13a-14(a)/15d-14(a) and Section 1350) and Inline XBRL data files - The report includes certifications from CEO Joseph M Harary and various Inline XBRL documents as exhibits[88] SIGNATURES - The report is signed by Joseph M Harary, serving as President, CEO, and acting interim CFO, on August 7, 2025[90]