季報
季度報告
10-Q
2026-08-06
Research Frontiers第二季授權費收入跌34% 上半年淨虧損擴大至118.6萬美元
AI 繁中摘要
Research Frontiers（NASDAQ: REFR）公佈截至2026年6月30日止第二季度及上半年業績（10-Q）。公司為智能調光技術（SPD-SmartGlass）開發及授權商，目前仍處於虧損狀態，並對持續經營能力提出重大疑慮。
📊 業績重點
- 第二季度授權費收入僅為 86,346 美元，按年下跌約 34%（去年同期 129,904 美元）；上半年授權費收入 222,665 美元，按年大跌 68%（去年同期 689,680 美元）。跌幅主因包括有被授權商在2025年陸續停止營運、Gauzy Ltd. 的 SPD 乳液及薄膜生產出現非技術性延誤，以及2025年上半年曾錄得一筆新授權合約的前期收入；部分被電單車頭盔及滑雪護目鏡市場相關權利金增長所抵銷。
- 第二季度淨虧損 660,168 美元（每股 0.02 美元），去年同期虧損 803,826 美元；上半年淨虧損擴大至 1,185,533 美元（每股 0.03 美元），去年同期虧損 981,513 美元。
- 期內營運開支及研發開支均見下降，但法律費用及信貸損失撥備增加，抵銷部分減幅。
💰 財務狀況
- 截至2026年6月30日，現金及等價物約 108.8 萬美元（2025年底為 66.4 萬美元）；營運資金約 100 萬美元，股東權益約 112.3 萬美元，累計虧損約 1.288 億美元。
- 公司於2026年2月與私人投資者簽訂認購協議，以每股 1.00 美元發行 110 萬股普通股，集資 110 萬美元，並附有每股對應一份認股權證，行使價介乎 1.10 至 1.50 美元，2031年到期。另外，公司亦從2022年一項認購協議的餘下承諾中收取 27.5 萬美元，發行 119,565 股及同等認股權證；目前仍有 57.5 萬美元待收取。
⚠️ 主要風險
- 管理層表示，基於現有營運資金、持續虧損及經營現金流出，若未來12個月未能從經營活動產生足夠現金、收回欠款或籌集額外資金，將對持續經營能力構成重大疑問。公司預期可透過現有被授權商增加採用其技術、簽訂新授權協議及收回欠款來應付，但不保證計劃成功。
- 公司於2026年6月2日接獲納斯達克通知，指其普通股連續30個交易日收市買入價低於 1.00 美元，且上市證券市值（MVLS）低於 3,500 萬美元，不符合納斯達克資本市場繼續上市的要求。公司須於2026年11月30日前恢復合規，目前無意進行股份合併，但無法保證能成功恢復。
關聯方方面，期內來自 Gauzy 及 Vision Systems 的授權費收入佔公司總收入約 44%，應收賬款亦高度集中，相關風險值得投資者關注。
展開英文正文
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REFR:GauzyLtdMember srt:MinimumMember 2023-06-04 0000793524 REFR:GauzyLtdMember srt:MaximumMember 2023-06-04 0000793524 REFR:GauzyLtdMember 2026-06-30 0000793524 REFR:GauzyAndVisionSystemsMember 2026-01-01 2026-06-30 0000793524 REFR:GauzyAndVisionSystemsMember 2025-01-01 2025-06-30 0000793524 REFR:GauzyAndVisionSystemsMember 2025-01-01 2025-12-31 iso4217:USD xbrli:shares iso4217:USD xbrli:shares xbrli:pure REFR:Segment UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the quarter ended June 30, 2026 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934 Commission File Number 000-14893 RESEARCH FRONTIERS INCORPORATED (Exact name of registrant as specified in its charter) delaware 11-2103466 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 240 CROSSWAYS PARK DRIVE WOODBURY, new york 11797-2033 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code (516) 364-1902 Securities registered pursuant to Section 12(b) of the Act: 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. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☒ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒ Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.0001 per share REFR The NASDAQ Stock Market Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of August 6, 2026, there were outstanding 34,867,786 shares of Common Stock, par value $0.0001 per share. TABLE OF CONTENTS Page(s) Condensed Consolidated Balance Sheets June 30, 2026 (Unaudited) and December 31, 2025 3 Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2026 and 2025 (Unaudited) 4 Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended June 30, 2026 and 2025 (Unaudited) 5 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2026 and 2025 (Unaudited) 6 Notes to the Condensed Consolidated Financial Statements (Unaudited) 7-13 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 14-16 Item 3. Quantitative and Qualitative Disclosures About Market Risk 17 Item 4. Controls and Procedures 17 PART II - OTHER INFORMATION Item 6. Exhibits 18 SIGNATURES 19 2 RESEARCH FRONTIERS INCORPORATED Condensed Consolidated Balance Sheets June 30, 2026 December 31, 2025 (Unaudited) (See Note 1) Assets Current assets: Cash and cash equivalents $1,087,956 $664,299 Royalties receivable, net of reserves of $1,534,850 and $1,384,850, respectively 207,955 408,666 Prepaid expenses and other current assets 159,730 70,969 Total current assets 1,455,641 1,143,934 Fixed assets, net 2,867 3,393 Operating lease ROU assets 960,989 1,048,352 Deposits and other assets 56,066 56,066 Total assets $2,475,563 $2,251,745 Liabilities and Shareholders’ Equity Current liabilities: Current portion of operating lease liability $152,960 $146,043 Accounts payable 135,206 132,666 Deferred revenue 69,068 - Accrued expenses 53,651 19,168 Total current liabilities 410,885 297,877 Operating lease liability, net of current portion 941,585 1,020,242 Total liabilities 1,352,470 1,318,119 Shareholders’ equity: Common stock, par value $0.0001 per share; authorized 100,000,000 shares, issued and outstanding 34,867,786 in 2026 and 33,648,221 in 2025 3,487 3,365 Additional paid-in capital 129,926,946 128,552,068 Accumulated deficit (128,807,340) (127,621,807) Total shareholders’ equity 1,123,093 933,626 Total liabilities and shareholders’ equity $2,475,563 $2,251,745 See accompanying notes to condensed consolidated financial statements. 3 RESEARCH FRONTIERS INCORPORATED Condensed Consolidated Statements of Operations (Unaudited) 2026 2025 2026 2025 Six months ended June 30, Three months ended June 30, 2026 2025 2026 2025 Fee income $222,665 $689,680 $86,346 $129,904 Operating expenses 1,148,598 1,412,398 627,216 775,922 Research and development 274,234 331,963 128,884 169,086 Total expenses 1,422,832 1,744,361 756,100 945,008 Operating loss (1,200,167) (1,054,681) (669,754) (815,104) Net interest income 14,634 25,811 9,586 11,278 Other income - 47,357 - - Net loss $(1,185,533) $(981,513) $(660,168) $(803,826) Basic and diluted net loss per common share $(0.03) $(0.03) $(0.02) $(0.02) Weighted average number of common shares outstanding 34,513,740 33,648,221 34,867,786 33,648,221 See accompanying notes to condensed consolidated financial statements. 4 RESEARCH FRONTIERS INCORPORATED Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) For the six months ended June 30, 2025 and 2026 Shares Amount Paid-in Capital Deficit Total Common Stock Additional Paid-in Accumulated Shares Amount Capital Deficit Total Balance, January 1, 2025 33,648,221 $3,365 $128,177,193 $(125,576,223) $2,604,335 Share-based compensation - - 175,204 - 175,204 Net loss - - - (981,513) (981,513) Balance, June 30, 2025 33,648,221 $3,365 $128,352,397 $(126,557,736) $1,798,026 Balance, January 1, 2026 33,648,221 $3,365 $128,552,068 $(127,621,807) $933,626 Issuance of common stock and warrants 1,219,565 122 1,374,878 - 1,375,000 Net loss - - - (1,185,533) (1,185,533) Balance, June 30, 2026 34,867,786 $3,487 $129,926,946 $(128,807,340) $1,123,093 For the three months ended June 30, 2025 and 2026 Common Stock Additional Paid-in Accumulated Shares Amount Capital Deficit Total Balance, March 31, 2025 33,648,221 $3,365 $128,177,193 $(125,753,910) $2,426,648 Share-based compensation - - 175,204 - 175,204 Net loss - - - (803,826) (803,826) Balance, June 30, 2025 33,648,221 $3,365 $128,352,397 $(126,557,736) $1,798,026 Balance, March 31, 2026 34,867,786 $3,487 $129,926,946 $(128,147,172) $1,783,261 Balance 34,867,786 $3,487 $129,926,946 $(128,147,172) $1,783,261 Net loss - - - (660,168) (660,168) Balance, June 30, 2026 34,867,786 $3,487 $129,926,946 $(128,807,340) $1,123,093 Balance 34,867,786 $3,487 $129,926,946 $(128,807,340) $1,123,093 See accompanying notes to condensed consolidated financial statements. 5 RESEARCH FRONTIERS INCORPORATED Condensed Consolidated Statements of Cash Flows (Unaudited) 2026 2025 Six months ended June 30, 2026 2025 Cash flows from operating activities: Net loss $(1,185,533) $(981,513) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 631 6,166 Share-based compensation - 175,204 Credit loss expense 150,000 124,253 ROU asset amortization 87,363 86,925 Change in assets and liabilities: Royalty receivables 50,711 (2,413) Prepaid expenses and other assets (88,761) (67,791) Accounts payable and accrued expenses 37,023 (68,297) Deferred revenue 69,068 71,563 Operating lease liability (71,740) (63,798) Net cash used in operating activities (951,238) (719,701) Cash flows from investing activities: Purchases of fixed assets (105) (209) Net cash used in investing activities (105) (209) Cash flows from financing activities: Net proceeds from sale of common stock and warrants 1,375,000 - Net cash provided by financing activities 1,375,000 - Net increase (decrease) in cash and cash equivalents 423,657 (719,910) Cash and cash equivalents at beginning of period 664,299 1,994,186 Cash and cash equivalents at end of period $1,087,956 $1,274,276 See accompanying notes to condensed consolidated financial statements. 6 RESEARCH FRONTIERS INCORPORATED Notes to Condensed Consolidated Financial Statements June 30, 2026 (Unaudited) Note 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature. Operating results for the three and six months ended June 30, 2026 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2026. The condensed consolidated balance sheet as of December 31, 2025 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, 2025. Note 2. Business Research Frontiers Incorporated (“Research Frontiers” or the “Company”) operates in a single business segment which is engaged in the development and marketing of technology and devices to control the flow of light. Such devices, often referred to as “light valves” or suspended particle devices (“SPDs”), use colloidal particles that are either incorporated within a liquid suspension or a film, which is usually enclosed between two sheets of glass or plastic having transparent, electrically conductive coatings on the facing surfaces thereof. At least one of the two sheets is transparent. SPD technology, made possible by a flexible light-control film invented by Research Frontiers, allows the user to instantly and precisely control the shading of glass/plastic manually or automatically. SPD technology has numerous product applications, including SPD-Smart™ windows, sunshades, skylights and interior partitions for homes and buildings; automotive windows, sunroofs, sun visors, sunshades, rear-view mirrors, instrument panels and navigation systems; aircraft windows; museum display panels; eyewear products; and flat panel displays for electronic products. SPD-Smart light control film is now being developed for, or used in, architectural, automotive, marine, aerospace and appliance applications. The Company has primarily utilized its cash, cash equivalents, and investments generated from sales of our common stock, proceeds from the exercise of options and warrants, and royalty fees collected to fund its research and development of SPD light valves, for marketing initiatives, and for other working capital purposes. The Company’s working capital and capital requirements depend upon numerous factors, including the results of research and development activities, competitive and technological developments, the timing and cost of patent filings, and the development of new licensees and changes in the Company’s relationships with its existing licensees. The degree of dependence of the Company’s working capital requirements on each of the foregoing factors cannot be quantified; increased research and development activities and related costs would increase such requirements; the addition of new licensees may provide additional working capital or working capital requirements; and changes in relationships with existing licensees would have a favorable or negative impact depending upon the nature of such changes. We have incurred recurring losses since inception and expect to continue to incur losses as a result of costs and expenses related to our research and continued development of our SPD technology and our corporate general and administrative expenses. Our capital requirements and operations to date have been substantially funded through sales of our common stock, exercise of options and warrants and royalty fees collected. As of June 30, 2026, we had working capital of approximately $1.0 million, cash and cash equivalents of approximately $1.1 million, shareholders’ equity of approximately $1.1 million and an accumulated deficit of approximately $128.8 million. Based upon the Company’s current working capital, recurring losses and negative cash flow from operations, if the Company is unable to generate sufficient cash from operating activities, collect amounts owed to it by third parties, or raise additional funds for a period of 12 months from the issuance of these condensed consolidated financial statements, this raises substantial doubt about the Company’s ability to continue as a going concern. To alleviate this substantial doubt the Company expects to generate sufficient cash flow from operations through increased use of its SPD Technology by existing licensees, through the Company entering into new license agreements, as well as through the collection of amounts owed to it, and, as a result, the Company does not expect that it will need to raise additional capital over the next 12 months. There is no assurance that the Company’s plans will be successful. The accompanying condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern and do not include any adjustments that might result from these uncertainties. On February 18, 2026, the Company entered into subscription agreements from a group of privately accredited investors, which included family members of a director of the Company, as well as the owner of a licensee of the Company licensed to produce SPD-SmartGlass products including for the retrofit architectural glass market. The investors purchased 1.1 million shares of common stock of the Company at a price of $1.00 per share (which represents the closing market price of the Company’s common stock on February 13, 2026, which was the date that the transaction was agreed to). The Company received $1.1 million in proceeds from the sale of common stock to these investors. For each share of common stock received, the investor also received one warrant (expiring on February 28, 2031) to purchase one share of common stock at an exercise price of $1.10 if warrant exercises occur on or before February 28, 2027, $1.20 if warrant exercises occur between March 1, 2027 through February 29, 2028, $1.30 if warrant exercises occur between March 1, 2028 through February 28, 2029, and $1.50 if warrant exercises occur after February 28, 2029 and prior to the expiration of the warrants. 7 In the event that we are unable to generate sufficient cash from our operating activities or raise additional funds, we may be required to delay, reduce or severely curtail our operations or otherwise impede our on-going business efforts, which could have a material adverse effect on our business, operating results, financial condition and long-term prospects. The Company may seek to obtain additional funding through future equity issuances. There can be no assurance as to the availability or terms upon which such financing and capital might be available. The eventual success of the Company and generation of positive cash flow will be dependent upon the commercialization of products using the Company’s technology by the Company’s licensees and payments of continuing royalties on account thereof. On June 2, 2026, Company received two deficiency notification letters from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”). The first notification letter advised the Company that, based upon the closing bid price of the Company’s common stock for the 30 consecutive business days from April 15, 2026 to June 1, 2026, the Company no longer satisfies the $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2). The second notification letter advised the Company that, based upon Nasdaq’s review of the Company’s Market Value of Listed Securities (“MVLS”) for the 30 consecutive business days from April 20, 2026 to June 1, 2026, the Company no longer satisfies the $35 million minimum MVLS requirement for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(b)(2). The notification letter also noted that the Company does not currently meet the alternative continued listing standards under Nasdaq Listing Rules 5550(b)(1) and 5550(b)(3), relating to minimum stockholders’ equity and net income from continuing operations, respectively. The Nasdaq notifications have no immediate effect on the listing or trading of the Company’s common stock, which will continue to trade on The Nasdaq Capital Market under the symbol “REFR.” In accordance with Nasdaq Listing Rules 5810(c)(3)(A) and 5810(c)(3)(C), the Company has been provided 180 calendar days, or until November 30, 2026, to regain compliance with the minimum bid price requirement and the MVLS requirement, respectively. To regain compliance with the minimum bid price requirement, the closing bid price of the Company’s common stock must be at least $1.00 per share for a minimum of 10 consecutive business days during the compliance period, unless Nasdaq exercises its discretion to require a longer period as permitted under its rules. To regain compliance with the MVLS requirement, the Company’s MVLS must close at $35 million or more for a minimum of 10 consecutive business days during the compliance period, unless Nasdaq exercises its discretion to require a longer period as permitted under its rules. The Company intends to monitor the closing bid price of its common stock and its MVLS and will consider available options to regain compliance with the applicable Nasdaq continued listing requirements. The Company’s objective is to regain compliance through improved market valuation and bid-price performance, and the Company does not currently intend to effect a reverse stock split for the purpose of regaining compliance. However, there can be no assurance that the Company will regain compliance with either requirement within the applicable compliance period, or at all, or that the Company will otherwise remain in compliance with the other Nasdaq continued listing standards. Note 3. Segment Information The Company operates as a single1 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 numerous 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 six month periods ended June 30, 2026 and 2025, 93% and 99%, respectively, 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. 8 The following table illustrates the information about the Company’s 1single 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: Schedule of Segment Information Related to Statement of Operations 2026 2025 2026 2025 Six months ended June 30, Three months ended June 30, 2026 2025 2026 2025 Revenue $222,665 $689,680 $86,346 $129,904 Operating Expenses: Employee compensation 460,885 599,072 201,731 312,560 Professional fees 162,204 132,657 55,404 44,757 Directors fees and expenses 154 227,107 154 107,107 Marketing and investor relations 56,465 79,002 35,209 48,756 Insurance** 67,359 91,544 31,243 45,355 Occupancy costs 39,664 42,132 19,998 20,615 Credit loss expense 150,000 124,253 150,000 124,253 Patent costs 54,532 27,117 21,957 15,313 Stock listing fees 36,250 35,000 18,125 17,500 Legal fees 96,224 1,070 76,675 1,070 Depreciation and amortization 289 5,723 145 2,864 Other operating expenses* 24,572 47,721 16,575 35,772 Operating expenses 1,148,598 1,412,398 627,216 775,922 Research and Development Expenses: Employee compensation 81,588 90,643 34,167 43,280 Insurance** 65,848 89,635 30,612 44,425 Occupancy costs 118,989 127,796 59,993 63,252 Depreciation and amortization 342 443 173 223 Other research and development costs* 7,467 23,446 3,939 17,906 Research and development expenses 274,234 331,963 128,884 169,086 Operating Loss $(1,200,167) $(1,054,681) $(669,754) $(815,104) * Other operating expenses and other research and development expenses consist principally of miscellaneous expenses, each of which is under the Company’s threshold to be separately presented as a significant expense. ** Insurance includes all coverage including property, liability, directors’ and officers’ and employees’ medical. 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. 9 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. 10 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. 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 six months of 2026, two licensees accounted for 10% or more of fee income of the Company; these licensees accounted for approximately 40% and 40% of fee income recognized during such period. During the first six months of 2025, four licensees accounted for 10% or more of fee income of the Company; these licensees accounted for approximately 35%, 33%, 13% and 13% of fee income recognized during such period. During the three months ending June 30, 2026, three licensees accounted for 10% or more of fee income of the Company; these licensees accounted for approximately 35%, 35% and 18% of fee income recognized during such period. During the three months ending June 30, 2025, three licensees accounted for 10% or more of fee income of the Company; these licensees accounted for approximately 40%, 23% and 23% of fee income recognized during such period. Subsequent to June 30, 2025, the Company was notified that one of its significant licensees filed for bankruptcy. The licensee accounted for approximately 33% and 0% of the Company’s revenue during the six and three months ended June 30, 2025, respectively. No revenue was recognized from this licensee during the periods ended June 30, 2026. There was no outstanding accounts receivable from this licensee as of June 30, 2026. 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. 11 Note 8. 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 June 30, 2026 and 2025, 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 4,325,499 and 2,911,923 for the periods ended June 30, 2026 and 2025, respectively. Note 9. Equity On September 16, 2022, the Company entered into subscription agreements from a group of privately accredited investors to sell them 2.0 million shares of common stock of the Company at a price of $2.30 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 1,500,000 common shares and issued 1,500,000 warrants. During 2024, the Company received $300,000 and issued 130,434 shares and 130,434 warrants in connection with a remaining outstanding commitment under these subscription agreements. During the six months ended June 30, 2026, the Company received $275,000 and issued 119,565 shares and 119,565 warrants in connection with the remaining outstanding commitment under these subscription agreements. The Company has an outstanding commitment from an investor for the remaining $575,000 under these subscription agreements. The Company did not sell any equity securities during the three months ended June 30, 2026 and 2025. On February 18, 2026, the Company entered into subscription agreements from a group of privately accredited investors, which included family members of a director of the Company, as well as the owner of a licensee of the Company licensed to produce SPD-SmartGlass products including for the retrofit architectural glass market. The investors purchased 1.1 million shares of common stock of the Company at a price of $1.00 per share (which represents the closing market price of the Company’s common stock on February 13, 2026, which was the date that the transaction was agreed to). The Company received $1.1 million in proceeds from the sale of common stock to these investors. For each share of common stock received, the investor also received one warrant (expiring on February 28, 2031) to purchase one share of common stock at an exercise price of $1.10 if warrant exercises occur on or before February 28, 2027, $1.20 if warrant exercises occur between March 1, 2027 through February 29, 2028, $1.30 if warrant exercises occur between March 1, 2028 through February 28, 2029, and $1.50 if warrant exercises occur after February 28, 2029 and prior to the expiration of the warrants. 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 June 30, 2026, there were 2,849,999 warrants and 1,475,500 options outstanding. 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