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Quoting
from the May 31st, 2002 press release, " Research Frontiers Presents SPD
Inc. With Award for Being the First Company in the World to Mass-Produce SPD
Light-Control Technology":
"SPD
Inc. qualified for the SPD film component of the program by having produced in
their new factory tens of thousands of square feet of SPD film for sales to
customers for use in a variety of SPD-Smart end-products. SPD Inc. also reports
that film production over the next few
months is scheduled to be over 20,000 square feet per month and should increase
rapidly thereafter."
"In
addition to SPD film produced at its new factory in Incheon, Korea, SPD Inc. is
now producing SPD-Smart end-products including insulating glass units (IGUs),
the standard in residential windows."
In
conjunction with this award, Research Frontiers during the second quarter of
2002, issued warrants to SPD Inc. to purchase 10,000 shares of common stock at
an exercise price of $12.19 per share as an award for being the first licensee
of the Company to produce and sell commercial quantities of SPD film. The
Company recorded $64,000 of non-cash expense in connection with the issuance of
these warrants.
In
the 2002 Form 10-K, several significant customers were identified, with four
customers responsible for approximately $162,500 in License Revenues in 2002
and three customers responsible for approximately $125,000 in 2001.
1)
Does SPD, Inc. have any relationship with any of these licensees and, if so,
what is the relationship?
If
the answer is "YES":
2)
Should Research Frontiers account for any license payments received from
parties related to SPD, Inc. as a reduction in their investment in SPD, Inc.?
If
the answer is "YES" or "NO":
3)
Is there another company besides SPD, Inc. producing commercial quantities of
SPD film?
4)
Did any of the significant customers as of December 31 for any of the years
presented have amounts owed to Research Frontiers or vice versa?
5)
What is the breakdown of Revenues between the United States licensees and
international licensees?
"The
Company's license agreement with Hankuk Glass Industries provides for the
payment of minimum annual royalties to the Company in 2002 and 2003."
The
preceding was not disclosed in Research Frontiers’ 2002 Form 10-K. It was not
disclosed until the company reported it in their Form 10-Q for the period ended
March 31, 2003.
1) Where did Research Frontiers disclose the minimum annual royalties due from Hankuk for any of the periods they have on file at the SEC?
2) Was Hankuk or an affiliate of Hankuk a significant customer for reporting purposes in 2002?
3) Was the $255,200 write-down in the Investment in SPD, Inc. in any way related to the minimum annual royalty payments?
4) Did REFR through its wholly owned subsidiary have an undisclosed commitment to make additional investments in SPD, Inc.?
5) Why was the investment in SPD, Inc. written down as opposed to an adjustment in Other Comprehensive Loss?
In
2000, Thermoview Industries Inc. (THV) became a Research Frontiers Licensee and
paid Research Frontiers $50,000 in common stock. Further, they agreed to pay
$37,500 in 2001, $37,500 in 2002 and $100,000 in 2003. These royalty payments
were payable in cash or stock at THV’s option.
1)
Was the common stock issued by THV to Research Frontiers restricted stock at
the time it was issued?
2)
Was there any restriction or agreement that prevented Research Frontiers from
selling this stock?
3)
Had THV paid all minimum royalties due to Research Frontiers through December
31, 2002?
4)
Were these minimum royalties paid in cash or stock?
5)
How do the 10-Q filings during 2003 reflect the THV obligation for 2003?
What
is Research Frontiers revenue recognition policy?
How
can Licensees terminate License Agreements?
What
is Research Frontiers policy regarding reserves for uncollected accounts
receivable?
Reviewing
the reported Revenues and calculating the apparent cash collections shows a
growing rift since 2001 through September 30, 2003:
Calendar Reported Computed Cash
Year Revenues
Collected
2001
$142,002 $104,500
2002 217,519
53,872
2003 229,625
44,979
Year
2003 is for YTD through 9/30/03.
Note
actual cash collections have steadily decayed since 2000.
Have
Revenues been accrued for Licensees that now appear the Licensees have no
intention of paying?
Will
Research Frontiers address the nature and extent of related party transactions
in Form 10-K?