What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-03-09 compared with 2021-03-11 · 20 added, 257 removed, 7 unchanged (98% of the section changed)

FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Company’s common stock is traded on the NASDAQ Capital Market under the symbol “REFR”.

As of March 9, 2022,

there were 31,650,396 shares of common stock outstanding.

following table sets forth the range of the high and low selling prices (as provided by the National Association of Securities

Dealers) of the Company’s common stock for each quarterly period within the past two fiscal years:

quotations may reflect inter-dealer prices, without retail mark-up, mark-down, or commission, and may not necessarily represent

actual transactions.

following table sets forth the range of the high and low selling prices (as provided by the National Association of Securities Dealers)

of the Company’s common stock for each quarterly period within the past two fiscal years:

Quarter Ended

March 31, 2020

June 30, 2020

September 30, 2020

December 31, 2020

March 31, 2021

June 30, 2021

September 30, 2021

December 31, 2021

quotations may reflect inter-dealer prices, without retail mark-up, mark-down, or commission, and may not necessarily represent actual

transactions.

Approximate Number of Security Holders

of March 10, 2021, there were approximately 300___ holders of record of the Company’s common stock and the closing price

of March 8, 2022, there were approximately 283 holders of record of the Company’s common stock and the closing price

of our common stock was $2.38 per share.

The Company estimates that there are approximately 7,100 beneficial holders of

the Company’s common stock.

Company has not declared or paid cash dividends on its common stock for the two most recent fiscal years and does not expect to

declare or pay any cash dividends in the foreseeable future.

The Company estimates that there are approximately 7,100 beneficial holders of the Company’s

common stock.

Company has not declared or paid cash dividends on its common stock for the two most recent fiscal years and does not expect to declare

or pay any cash dividends in the foreseeable future.

There are no restrictions on the payment of dividends.

Issuer Purchases of Equity Securities

MANAGEMENT’S

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking

included in this Annual Report on Form 10-K may contain forward-looking statements within the meaning of the Private Securities

Litigation Reform Act of 1995.

Forward-looking statements are not statements of historical facts, but rather reflect our current

expectations concerning future events and results.

We generally use the words “believes,”

“expects,”

“intends,”

“plans,”

“anticipates,”

“likely,”

“will”

and similar expressions to identify forward-looking

Such forward-looking statements, including those concerning our expectations, involve risks, uncertainties and other

factors, some of which are beyond our control, which may cause our actual results, performance or achievements, or industry results,

to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

These risks, uncertainties and factors include, but are not limited to, those factors set forth in this Annual Report on Form

10-K under “Item 1A.

Risk Factors”

Except as required by applicable law, including the securities laws

of the United States, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result

of new information, future events or otherwise.

You are cautioned not to unduly rely on such forward-looking statements when evaluating

the information presented in this Annual Report on Form 10-K .

reviewing Management’s Discussion and Analysis of Financial Condition and Results of Operations, you should refer to our

consolidated financial statements and the notes related thereto.

Accounting Policies

following accounting policies 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.

For additional accounting

policies, see Note 2 to our Consolidated Financial Statements, “Summary of Significant Accounting Policies.”

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.

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.

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.

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.

receivables are stated less allowance for doubtful accounts.

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 uncollectible accounts when necessary.

Company has historically used the Black-Scholes option-pricing model to determine the estimated fair value of each option grant.

The Black-Scholes model includes assumptions regarding dividend yields, expected volatility, expected lives, and risk-free interest

These assumptions reflect our best estimates, but these items involve uncertainties based on market conditions generally

outside of our control.

As a result, if other assumptions had been used in the current period, stock-based compensation expense

could have been materially impacted.

Furthermore, if management uses different assumptions in future periods, stock-based compensation

expense could be materially impacted in future years.

occasion, the Company may issue to consultants either options or warrants to purchase shares of common stock of the Company at

specified share prices.

These options or warrants may vest based upon specific services being performed or performance criteria

In accounting for equity instruments that are issued to other than employees for acquiring, or in conjunction with

selling, goods or services, the Company is required to record consulting expenses based upon the fair value of such options or

warrants on the earlier of the service period or the period that such options or warrants vest as determined using a Black-Scholes

option pricing model and are marked to market quarterly using the Black-Scholes option valuation model.

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

Actual results could differ from these estimates.

An example of a critical estimate is the full valuation allowance for

deferred taxes that was recorded based on the uncertainty that such tax benefits will be realized in future periods.

Global Events

March 11, 2020, the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic

and recommended containment and mitigation measures worldwide.

As a result, the Company expects operations at its facility to

continue to be affected in some capacity, as the COVID-19 virus continues to proliferate and the federal, state and local governments

under which we operate continue to adopt new rules.

The Company has put in place enhanced procedures, such as restricting international

and domestic travel, adopting a variety of steps designed to ensure social distancing in our facilities, including working remotely

where available, and increasing our cleaning and sanitizing procedures in our facilities, in an effort to protect its employees

and communities.

were negatively impacted in our second, third and fourth quarters due to delays in manufacture of products using our technology.

Most of the products using our technology are manufactured by licensees overseas in Europe and Asia who have been similarly affected

by the pandemic.

The disruption caused by public health crises, such as COVID-19, could result in lower levels of sale activity

for products using our technology resulting in lower level of royalties owed to us from the sale of these products.

of the potential business disruptions and related financial impact cannot be reasonably estimated at this time, but could materially

adversely affect our business, financial condition, results of operations, and cash flows.

Net of amounts previously reserved

which were fully written off in 2020, the Company has increased its allowance for uncollectible royalty receivables in 2020 until

the collectability from certain licensees can be better ascertained in the regions affected by COVID-19.

connection with the COVID-19 crisis, Congress passed, and the president signed, the Coronavirus Aid, Relief, and Economic Security

Act (“CARES Act”) which, among other things, provides relief for businesses impacted by the pandemic.

applied for and received $202,052 in proceeds from the Paycheck Protection Program (“PPP Loan”) made available under

the CARES Act.

The PPP Loan is intended to offer businesses hurt by the COVID-19 pandemic economic assistance with the potential

for the principal to be forgiven based on certain expenses incurred during the first 24 weeks after the issuance of the PPP Loan.

The Company estimated that the $194,140 of the PPP Loan principal will be forgiven based on payroll and other expenses incurred

through June 30, 2020.

The Company estimated that all of the loan will be forgiven when the additional payroll and other expenses

incurred from July 1, 2020 to September 30, 2020 are included.

Consequently, the Company recorded $202,052 as other income for

the year ended December 31, 2020 representing the PPP loan estimated to be forgiven.

of Operations

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

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 and the impact of COVID-19.

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 model like produced with SPD-SmartGlass, and changes in pricing or exchange rates.

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, which 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.

2019 and 2020, the Company received royalty revenues from sales of the Magic Sky Control option using the Company’s technology

to Daimler (as well as sales of SPD-SmartGlass products to McLaren Automotive) that were accretive to the Company’s royalty

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.

the Company’s license agreements typically provide for the payment of royalties by a licensee on product sales within 45

days after the end of the quarter in which a sale of a licensed product occurs (with some of the Company’s more recent license

agreements providing for payments on a monthly basis), and because of the time period which typically will elapse between a customer

order and the sale of the licensed product and installation in a home, office building, automobile, aircraft, boat or any other

product, there could be a delay between when economic activity between a licensee and its customer occurs and when the Company

gets paid its royalty resulting from such activity.

discussed in Note 1, the Company’s financial results has been impacted by the COVID-19 pandemic.

Most of the products using

the Company’s technology are manufactured by licensees overseas in Europe and Asia who have been similarly affected by the

The disruption caused by COVID-19 could result in lower levels of sale activity for products using our technology resulting

in lower level of royalties owed to us from the sale of these products.

The duration of the potential business disruptions and

related financial impact cannot be reasonably estimated at this time.

ended December 31, 2020 Compared to the Year ended December 31, 2019

The Company’s fee income from licensing

activities for the year ended December 31, 2020 was $828,450 as compared to $1,564,024 for the year ended December 31,

Lower fees in the aircraft market and automotive market as production of certain Daimler vehicles was curtailed due to the

COVID-19 pandemic and as these vehicles approached the end of their model lifetimes, were partially offset by higher fee income

from the display market.

expenses decreased by $900,205 for the year ended December 31, 2020 to $2,777,535 from $3,677,740 for the year ended December

The decrease was the result of lower non-cash compensation expense between the two years of $388,000 relating to charges

to operations for stock options granted to employees, directors and a consultant.

In addition, the Company incurred lower patent

and professional fees ($262,000), lower bad debt expenses ($75,000), lower investor relations and marketing costs ($41,000), lower

depreciation ($112,000) and lower allocated facility and insurance costs ($138,000).

Partially offsetting these decreases were

higher payroll and related costs, net of non-cash compensation costs discussed above ($14,000).

and development expenditures decreased by $407,319 for the year ended December 31, 2020 to $628,304 from $1,035,623 for the year

ended December 31, 2019.

This decrease was the result of lower payroll and related costs ($340,000) as well as lower materials

costs ($30,000) and lower allocated insurance costs ($15,000).

Included in the lower payroll and related costs is lower non-cash

compensation costs related to stock options granted to employees ($126,000) between the two periods.

connection with the issuance of certain warrants during the third quarter of 2018, the Company recorded a non-cash accounting

expense of $652,025 in 2019 to mark these warrants to their market through the date that they were reclassified as equity in 2019.

2019, the Company incurred a loss from the impairment of a fixed asset of $50,666 in value of an automobile which was subsequently

sold to an employee at fair market value.

Company’s net investment income for the year ended December 31, 2020 was $34,473 as compared to $43,052 for the year ended

December 31, 2019.

The difference was primarily due to higher cash balances available for investment in 2019.

Company recorded $202,052 of other income for the year ended December 31, 2020 representing the entire PPP loan estimated to be

forgiven through such date.

income tax benefit or expense was recorded for the years ended December 31, 2020 and 2019.

a consequence of the factors discussed above, the Company’s net loss was $2,340,864 ($0.07 per common share) for the year

ended December 31, 2020 as compared to $3,808,978 ($0.13 per common share) for the year ended December 31, 2019.

Condition, Liquidity and Capital Resources

Company has primarily utilized its cash, cash equivalents, and proceeds from sales of our common stock, proceeds from the exercise

of options and warrants, and royalty fees collected to fund its research and development, 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

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;

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.

2020, the Company’s cash and cash equivalents balance decreased by $1,819,255 principally as a result of cash used for operations

of $2,252,691 and cash used for the purchase of property and equipment of $56,536 partially offset by cash generated from the

exercise of options and warrants of $284,207 and cash proceeds from a PPP loan of $202,052.

At December 31, 2020, the Company

had cash and cash equivalents of $4,772,705, working capital of $5,201,443 and total shareholders’

equity of $5,327,005.

Our quarterly projected cash flow shortfall, based on our current operations, adjusted for any non-recurring cash expenses for

the next 12 months, is approximately $400,000 - $450,000 per quarter.

We may eliminate some operating expenses in the future,

which will further reduce our cash flow shortfall if needed.

We currently expect to have sufficient working capital for the next

34 months of operations.

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

until mid to late 2023.

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

The 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

To date the Company has not generated sufficient revenue from its licensees to fully fund its operations.

2019, the Company’s cash and cash equivalents balance increased by $3,622,544 principally as a result of cash proceeds of

$5,770,545 from the sale of common stock and warrants and the exercise of options and warrants, partially offset by cash used

for operations of $2,082,719 and cash used for the purchase of property and equipment of $65,282.

At December 31, 2019,

the Company had cash and cash equivalents of $6,591,960, working capital of $6,919,428 and total shareholders’

Company does not believe that inflation has a significant impact on its business.

Company has operating leases for certain facilities, vehicles and equipment with a weighted average remaining lease term of 4.2

years as of December 31, 2020.

The maturities over time of the operating lease obligations as of December 31, 2020 were as follows:

December 31, 2020

Total lease payments

Note 8 to our Consolidated Financial Statements for further discussion of the Company’s lease obligations.

Sheet Arrangements

Company has no variable interest entities or other off-balance sheet obligation arrangements.

Looking Statements

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 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.

STATEMENTS AND SUPPLEMENTARY DATA

consolidated financial statements listed in Item 15(a)(1) and (2) are included in this report beginning on page F-1.

IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity