As filed with the Securities and Exchange Commission on December 23, 1998
Registration No. 333-65219
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 2
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
RESEARCH FRONTIERS INCORPORATED
(Exact name of the Company as specified in its charter)
Delaware 2899 11-2103466
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification Number)
organization)
240 Crossways Park Drive
Woodbury, New York 11797-2033
(516) 364-1902
(Address, including zip code, and telephone number, including area code, of the
registrant's principal executive offices)
Robert L. Saxe, President
Research Frontiers Incorporated
240 Crossways Park Drive
Woodbury, New York 11797-2033
(516) 364-1902
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Joseph M. Harary, Vice President and General Counsel
Research Frontiers Incorporated
240 Crossways Park Drive
Woodbury, New York 11797-2033
(516) 364-1902
Approximate date of commencement of the proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest investment plans, please check the following box [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous pursuant to Rule 415 under the Securities Act of 1933
other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act of 1933, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]______________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Title of Proposed maximum Proposed maximum Amount of
Shares Amount to offering price aggregate registra-
to be registered be registered(1) per Share offering price tion fee
Common Stock,$0.0001
par value per share 2,331,000 shares $6.59375 $15,370,031.25 $4,534.16(2)
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended. The
shares of common stock being registered are issuable pursuant to the exercise of
a Class A Warrant and Class B Warrant (the "Warrants"). The proposed maximum
offering price per share of $6.59375 was calculated based upon the average of
the high and low trading price per share of common stock on the Nasdaq National
Market System on September 25, 1998 which was within five business days of the
original filing of this Registration Statement. In accordance with Rule 416
under the Securities Act of 1933, common stock offered hereby shall also be
deemed to cover an indeterminate number of securities to be offered or issued
to prevent dilution resulting from stock splits, stock dividends or similar
transactions.
(2) Previously paid as part of $4,743.60 fee paid upon filing of Registration
Statement on Form S-3 (Reg. No. 333-65219) on October 1, 1998.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.<PAGE>
PROSPECTUS
RESEARCH FRONTIERS INCORPORATED
2,331,000 SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE OF
CLASS A WARRANT AND CLASS B WARRANT
Ailouros Ltd. is acting as an underwriter and selling under this
Prospectus up to 2,331,000 shares of common stock of Research
Frontiers which it may receive upon exercise of its Class A
Warrant and Class B Warrant.
The actual number of shares of common stock into which the Class
A Warrant is exercisable will depend upon whether Research
Frontiers requires Ailouros to exercise all or part of such Class A
Warrant and will also depend upon future market conditions. See
"Description of Securities-The Warrants" for more details.
Ailouros may sell its shares from time to time in brokerage
transactions (which may include block sales) in the market, in
negotiated transactions at prevailing prices and terms, or at
negotiated prices. Ailouros may sell these shares directly to
purchasers, through broker-dealers acting as agents for Ailouros, or
to broker-dealers who may purchase Ailouros' shares as principals
and then sell such shares from time to time in the market, in
negotiated transactions or otherwise, or by a combination of these
methods.
Ailouros and any broker-dealers, agents or underwriters that
participate with Ailouros in the distribution of the shares of
common stock may be "underwriters," as that term is defined under
the securities laws. They therefore may be subject to the same
restrictions as any underwriter in a primary offering of securities.
Any commissions received by them and any profit on the resale of
the common stock purchased by them may be considered
underwriting commissions or discounts under the securities laws.
See "Plan of Distribution." Research Frontiers has also agreed to
indemnify Ailouros against certain liabilities, including liabilities
arising under the Securities Act.
Research Frontiers' common stock trades on the Nasdaq National
Market System under the trading symbol "REFR." On December
23, 1998, the last sales price of a share of common stock was
$9.5625.
Please read and consider carefully the risk factors beginning
on page 2 if you are deciding whether or not to invest in our
common stock.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal
offense.
Ailouros Ltd.
The date of this Prospectus is [December __, 1998.]
<PAGE>
RISK FACTORS
There are risks associated with investing in companies such as ours who
are engaged in research and development. Because of these risks, you
should only invest if you are able to bear the risk of losing your entire
investment. Before investing, in addition to risks which could apply to
any issuer or offering, you should also consider the following:
Research Frontiers is not profitable. To date, Research Frontiers' has
lost money, and you can expect operating losses for the foreseeable
future. Unless Research Frontiers' licensees produce and sell products
using Research Frontiers' technology, Research Frontiers will not be
successful. There is no guarantee that Research Frontiers will ever be
profitable. Since Research Frontiers was started in 1965 through
September 30, 1998, Research Frontiers' total net loss was $25,710,684.
In 1997, Research Frontiers had a net loss of $3,229,445 and during the
first nine months of 1998, Research Frontiers' net loss was $1,970,916.
Research Frontiers may need additional funds. Since Research
Frontiers has not been profitable, we depend upon the proceeds from
selling our common stock to investors to fund our operations. If we
need additional money, there is no guarantee that additional funding will
be available when needed, or on favorable terms.
Based upon Research Frontiers' current expenses and assuming that
these expenses increase by 10% each year, even if no additional funds
are received from the exercise of the Class A Warrant and the Class B
Warrant, Research Frontiers does not believe that it would require
additional funding for at least the next three years. This estimate is based
upon Research Frontiers' $7.4 million in cash and investments on hand
as of September 30, 1998, budgeted revenues, and the fact that its losses
from operations for the first nine months of 1998 should correspond to
an annual loss for the entire year of about $2.6 million. There is no
guarantee that actual expenses will not exceed these estimates.
Research Frontiers cannot predict exactly how much additional funds
it may need. Research Frontiers expects to use its cash and investments
to fund its research and development of SPD technology and for other
working capital purposes. The amount of money Research Frontiers'
needs depends upon many factors, including:
o Whether our research and development activities are immediately
successful or whether developments take a long time.
o What developments, if any, our competitors make that we will
need to respond to.
o When and how much it costs to file patents on our inventions.
This, in turn, depends upon how complex the invention is, and
when the invention was made.
o Whether Research Frontiers gains new licensees or enters into
different future relationships with its existing licensees.
Research Frontiers cannot quantify how much its working capital
requirements depend on each of these factors. For example, increased
research and development activities would increase such requirements.
Adding new licensees may provide additional working capital but may
also require additional working capital as a result of additional research
and development which may be required for such licensee. If Research
Frontiers' relationship with existing licensees change, this could have a
favorable or negative impact, depending upon the nature of such change.
Products using SPD technology have not yet been introduced into the
marketplace. Developing new technologies and products can be risky.
The likelihood of Research Frontiers' success must be considered along
with the problems, expenses and delays frequently encountered in
commercializing and marketing new technologies.
SPD technology is the only technology Research Frontiers works with.
Because of this, all products being developed by Research Frontiers'
licensees depend on the viability of Research Frontiers' SPD
technology. Research Frontiers has not developed any other technology.
Thus, if commercially acceptable products cannot be developed from
Research Frontiers' SPD technology, Research Frontiers will not be
successful.
There may be other technologies which compete with Research
Frontiers' SPD technology. Research Frontiers' technology will
compete with other light control and display technologies. Some of
these technologies are being developed or used by companies with
substantially greater financial, marketing, technical and other resources
and name recognition than Research Frontiers. There is no guarantee
that Research Frontiers' technology (whose performance and long-term
reliability have not yet been fully ascertained) will successfully compete
with these other technologies. Also, technologies developed in the future
could make products using our technology difficult to market or
obsolete.
Research Frontiers depends upon the activities of its licensees and
does not directly manufacture or market products using SPD
technology. Research Frontiers' SPD technology is currently licensed to
eight companies. Other companies are also evaluating the technology
for use in various products. In the past, some companies have evaluated
Research Frontiers' technology without proceeding further. Research
Frontiers does not intend to manufacture products using SPD
technology. Instead we intend to continue to license our technology to
manufacturers of end products and films. Research Frontiers expects
that its licensees would be primarily responsible for marketing and
manufacturing.
Research Frontiers cannot control the activities of its licensees and some
of Research Frontiers' licensees appear to be more active than others.
There is no guarantee when or if our licensees will produce any
commercial product using SPD technology, or if produced, that such
products will be successful.
While Research Frontiers believes based upon the status of current
negotiations that it will enter into additional license agreements with
other companies, there is no guarantee that this will happen.
While SPD technology is extensively protected through patents, this is
not a guarantee of commercial success. Research Frontiers has 18
United States patents, 6 pending patent applications in the United States,
30 foreign patents, and 68 pending foreign patent applications protecting
its technology. Some of these patents cover earlier versions and features
of our technology which we do not intend to exploit. Also, the issuance
of a patent does not carry any guarantee of commercial success. There
also is no guarantee that these patents will be upheld if Research
Frontiers seeks to enforce its patent rights against an infringer or that
Research Frontiers will have enough money and other resources to do
so.
Research Frontiers also relies, to a lesser extent, on trade secrets and
confidential disclosure agreements to protect its technology. Neither the
issuance of patents nor the use of trade secrets will necessarily protect
Research Frontiers from other persons using technologies similar to
those covered by Research Frontiers' patents or trade secrets. In
addition, there is no guarantee that any particular aspect of Research
Frontiers' technology will not infringe the claims of other existing
patents.
Research Frontiers has never paid any cash dividends and does not
anticipate doing so in the foreseeable future.
If Ailouros exercises the Warrants, this could affect the price of our
stock. The market price of Research Frontiers' common stock could
drop as a result of sales of a large number of shares of its common stock
in the market, or if the public thinks that such sales could occur.
Therefore, the exercise of a significant amount of the Warrants and the
sale of a substantial number of shares of common stock acquired upon
the exercise of the Warrants could cause the market price for Research
Frontiers' common stock to drop and make it more difficult for Research
Frontiers to raise money in the future. Also, whenever new shares are
issued by a company, the ownership interest and voting rights of existing
shareholders are proportionately reduced.
Part of this risk is minimized because in the case of the Class A Warrant,
Research Frontiers does exert control over the amount of this warrant
that can be exercised in any three-month period, as well as the minimum
price that Ailouros will pay for such common stock. Ailouros, however,
controls the timing of any sales of common stock which it receives upon
exercise of the Warrants. In the case of the Class B Warrant, the
exercise price is fixed at $8.25 but Research Frontiers cannot control the
timing of any exercise by Ailouros of the Class B Warrant.
AVAILABLE INFORMATION
Research Frontiers files reports, proxy statements and other information
with the Securities and Exchange Commission (the "SEC"). You may
read and copy such reports, proxy statements and other information at
the public reference facilities maintained by the SEC at Room 1204,
Judiciary Plaza, 450 Fifth Street, N.W. Washington, D.C. 20549 and you
can obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. The SEC also maintains an
Internet Web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding issuers, such as
Research Frontiers, that file electronically with the SEC. Additional
information about Research Frontiers can also be found at our Web site
at http://www.refr-spd.com.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to
you by referring you to those documents. The information incorporated
by reference is considered to be part of this Prospectus, and later
information that we file with the SEC will automatically update and
supersede this information. We incorporate by reference into this
Prospectus Research Frontiers' (1) Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 and (2) Quarterly Reports on
Form 10-Q for the fiscal quarters ended March 31, 1998, June 30, 1998,
and September 30, 1998, and any future filings made with the SEC
under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act
of 1934 as amended until all of the common stock offered under this
Prospectus is sold.
This Prospectus is part of a Registration Statement we filed with the
SEC under the Securities Act of 1933, as amended (the "Securities
Act"). As permitted by the SEC, this Prospectus does not contain all of
the information set forth in the Registration Statement and the exhibits
and schedules thereto. The statements contained in this Prospectus as to
the contents of any contract or any other document are not necessarily
complete. In each case you should refer to the copy of such contract or
document filed as an exhibit to the Registration Statement.
We will provide each person to whom this Prospectus is delivered, a
copy of any information we have incorporated by reference but have not
delivered along with this Prospectus. If you would like a copy of any
document incorporated herein by reference (other than exhibits unless
such exhibits are specifically incorporated by reference in any such
document), you can call or write to us at our principal executive offices:
240 Crossways Park Drive, Woodbury, New York 11797-2033,
Attention: General Counsel (Telephone: (516) 364-1902). We will
provide this information without charge to any person, including a
beneficial owner, to whom a copy of this Prospectus is delivered upon
written or oral request.
No dealer, salesperson or other individual has been authorized to give
any information or to make any representation not contained in or
incorporated by reference in this Prospectus or in any supplement to this
Prospectus. If given or made, you must not rely on such information or
representation as having been authorized by Research Frontiers or by
Ailouros. Neither the delivery of this Prospectus nor any sale made
hereunder will, under any circumstances, create an implication that there
has not been any change in the affairs of Research Frontiers since the
date of this Prospectus or that the information contained herein is correct
or complete as of any time after the date of this Prospectus.
This Prospectus and any supplement to this Prospectus do not constitute
an offer to sell or a solicitation of an offer to buy any securities offered
hereby to any person, or by anyone, in any jurisdiction in which such
offer or solicitation may not lawfully be made.
The information set forth herein and in all publicly disseminated
information about Research Frontiers, includes "forward-looking
statements" within the meaning of Section 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 of this Prospectus and are not guaranteed.
THE COMPANY
Research Frontiers was incorporated in New York in 1965 and
reincorporated in Delaware in 1989. Research Frontiers' business is to
develop and license its suspended particle technology for controlling the
amount of light passing through the device. Such suspended particle
devices are often referred to as "SPDs" or "light valves."
SPDs use microscopic light-absorbing particles that are either in a liquid
suspension or a film. The microscopic particles align when an electrical
voltage is applied. This permits light to pass through the device, and
allows the amount of light to be controlled. The first light valve of this
type was invented by Dr. Edwin Land, founder of Polaroid Corporation,
in 1932. Since 1965, Research Frontiers has been actively working to
develop and license its own technology, which it protects using patents,
trade secrets and know- how.
SPD technology may have wide commercial applications in many types
of products where variable light transmission is desired, such as
o "smart" windows
o variable light transmission eyewear such as goggles and sunglasses
o self-dimmable automotive sunroofs, sun visors and rear-view mirrors, and
o flat panel information displays for use in computers, televisions,
telephones and other electronic instruments.
Various licensees of Research Frontiers have developed advanced
prototypes of smart window, automotive and eyewear products. Also,
prototypes of flat panel displays and self-dimming automotive rear-view
mirrors have also been developed. These prototypes demonstrate the
feasibility and operation of the products they relate to, but they may
need additional product design, engineering or testing before
commercial products are introduced. Our licensees may consider the
exact stage of development, product introduction strategies and
timetables, and other plans to be proprietary or secret.
The following table summarizes Research Frontiers' existing license and
option agreements and lists the year these agreements were entered into:
Licensee or Optionee Products Covered Territory
General Electric Company SPD film for other licensees and Worldwide
prospective licensees (1995)
Glaverbel, S.A. Automotive vehicle rear-view mirrors, Worldwide
transportation vehicle sun visors,and (exceptKorea
architectural windows (1996) for windows)
Hankuk Glass Industries Inc.Broad range of SPD light control products Worldwide
including windows, flat panel displays,
automotive vehicle rear-view mirrors,
sun visors, and sunroofs; SPD film for
licensees and prospective licensees (1997)
Japan Steel Works Ltd. and Windows (1989) Japan
Central Glass Company Ltd.
Material Sciences Corp. Architectural and automotive windows, Worldwide
SPD film for other licensees, prospective
licensees and architectural and automotive
window companies (1997)
Vision-Ease Lens Azusa,Inc. Eyewear (1997) Worldwide
Saint Gobain Vitrage, S.A. Architectural Windows (option)(1994) Worldwide
(except Korea
and South America)
Sanyo Electric Co., Ltd. Flat panel displays (1995) Worldwide
Licensees will pay us a 3-10% royalty on the sale of licensed products,
and may also be required to pay us minimum annual royalties. Research
Frontiers' license agreements typically allow the licensee to terminate
the license after some period of time, and give Research Frontiers only
limited rights to terminate before the license expires. Most licenses are
non-exclusive and generally last as long as our patents remain in effect.
The license granted to Hankuk Glass Industries is exclusive within
Korea for certain applications through December 2004. Vision-Ease's
license for eyewear is exclusive during the term of the license.
Research Frontiers' main goals in its research and development are:
o developing suspensions that more rapidly change their light transmission,
o increasing the light transmission range obtainable from these suspensions,
o developing different colored particles,
o reducing the voltage required to operate SPDs, and
o obtaining data and developing improved materials regarding environmental
stability and longevity.
Research Frontiers spent about $1,831,000, $1,712,000, and $1,410,000
during the years ended December 31, 1997, 1996, and 1995,respectively, for
research and development. Research Frontiers plans to engage in substantial
continuing research and development activities.
Six of Research Frontiers' eleven full-time employees are principally
engaged in Research Frontiers' research and development activities. Of
these six employees, two have obtained their doctorate in chemistry, one
has a masters in chemistry, two have extensive industrial experience in
electronics and electrical engineering, and one has majored in physics.
Two employees also have additional postgraduate degrees in business
administration. Also, Research Frontiers' licensees have teams of
people with advanced degrees in a number of areas relevant to the
commercial development of products using Research Frontiers'
technology.
DIVIDENDS
Research Frontiers has never paid any cash dividends and does not
expect to pay any cash dividends for the foreseeable future.
USE OF PROCEEDS
If you buy stock offered by Ailouros under this Prospectus, it means that
either Research Frontiers has required Ailouros to exercise its Class A
Warrant or Ailouros has decided to exercise its Class B Warrant.
Research Frontiers will not directly receive any proceeds from the sale
of common stock to you by Ailouros. However, Research Frontiers will
receive from Ailouros the aggregate exercise price of the Warrants if
such Warrants are exercised by Ailouros.
Research Frontiers received $10,000 for issuance of the Warrants.
Research Frontiers would receive total gross proceeds of $15 million if
the Class A Warrant is exercised in full, and would receive gross
proceeds of $1,080,000 if the Class B Warrant is exercised in full.
Research Frontiers currently has no specific plans for the proceeds from
the exercise of the Warrants and is raising the money at this time
because it is available on terms which Research Frontiers feels are very
attractive. If Research Frontiers spends the money raised in this
offering, Research Frontiers expects that it will be used for research and
development, working capital, possible acquisitions, and for general
corporate purposes including executive compensation and other payroll
expenses, in such amounts as Research Frontiers, in its discretion, deems
appropriate. Until this money is used, Research Frontiers intends to
invest such funds in money market funds and other interest-bearing
investments. We do not currently believe that we will need additional
funds to accomplish our goals.
SELLING STOCKHOLDER
Research Frontiers is registering the common stock issuable to Ailouros
upon exercise of the Warrants. Ailouros is a privately-owned and
independent institutional money management and investment fund and
has represented to Research Frontiers that it is an "accredited investor"
as defined by the securities laws. Ailouros' Managing Director, Michael
Katz, manages the fund's portfolio and has sole voting, investment and
dispositive power over the Warrants and all common stock issuable upon
exercise of the Warrants. Ailouros does not, and has never, held any
position, office or other material relationship with Research Frontiers.
Ailouros' main offices are located in London.
The following table sets forth certain information regarding Ailouros'
beneficial ownership of the Company's common stock as of the date of
this Prospectus.
Shares Beneficially Number of Shares Beneficially
Owned Prior to Shares Offered Owned After
Offering by Selling Offering (1)
Beneficial Owner Number % Shareholder Number %
Ailouros Ltd. 2,343,500 (2) 17.6 2,331,000 12,500 *
___________________________
(*) Less than one percent
(1) Assumes that all shares of common stock offered by Ailouros are sold.
(2) This number is an estimate. The maximum number of shares the
Class B Warrant would be exercisable into would be 131,000
shares. Because the number of shares of common stock into which
the Class A Warrant are exercisable depends upon whether
Research Frontiers requires Ailouros to exercise all or part of the
Class A Warrant issued to it, and will also depend upon the market
price of Research Frontiers' common stock from time to time, it is
not possible to calculate the exact number of shares of common
stock which will be ultimately issued upon exercise of the Class A
Warrant. The aggregate exercise price of the Class A Warrant
subscribed for by Ailouros is $15 million. If the entire $15 million
were exercised by Ailouros, based upon market conditions as of
the date of this Prospectus, the Class A Warrant would be
exercisable into [1,880,141] shares of common stock. If these
shares plus the 131,000 shares issuable upon exercise of the Class
B Warrant were issued, this would represent [15.49] percent of the
total shares of common stock outstanding. However, under the
terms of the Class A Warrant, the total number of shares of
common stock of Research Frontiers owned by Ailouros, together
with all shares of the common stock of Research Frontiers owned
by any of its "affiliates" as defined under the securities laws, may
never exceed 4.9% of the total issued and outstanding shares of the
common stock of Research Frontiers.
As of the date of this Prospectus, no put notices have been issued by
Research Frontiers requiring Ailouros to exercise the Class A Warrant,
the Class A Warrant and the Class B Warrant have not been exercised,
and no common stock has been issued upon exercise of such Warrants.
DESCRIPTION OF SECURITIES
Common Stock
Research Frontiers can issue 100,000,000 shares of common stock,
$0.0001 par value per share. [10,972,868] shares were outstanding as of
the date of this Prospectus. Holders of common stock are entitled (1) to
receive dividends when and if declared by the board of directors; (2) to
share in all of Research Frontiers' assets distributed upon liquidation,
dissolution or winding up of Research Frontiers; and (3) to one vote for
each share held of record on each matter submitted to a vote of
stockholders. All outstanding shares of common stock are fully paid for
and non-assessable. Holders of common stock do not have cumulative
voting rights or preemptive rights. Therefore, a minority stockholder
may be less able to gain representation on Research Frontiers' board of
directors.
The Warrants
On October 1, 1998, Research Frontiers sold Ailouros the Class A
Warrant and the Class B Warrant. By raising money through the
exercise of the Class A Warrant, Research Frontiers can choose when
and if it raises money through future equity offerings, and the size of
such offerings. It also allows Research Frontiers to take into account
prevailing market conditions and corporate opportunities, and to control
the general price at which its common stock is sold to Ailouros. This
basically gives Research Frontiers a source of equity funding on terms
we think are very favorable if and when we need it. Research Frontiers
must register the issuance of all shares of common stock issuable upon
exercise of the Warrants.
Class A Warrant
o The Class A Warrant is essentially a "put option" under which
Ailouros is required to buy from Research Frontiers a dollar
amount (which can range from $0 to $1.5 million during each
three-month period set by Research Frontiers) of common stock
set by Research Frontiers from time to time. A maximum of $15
million may be raised over the life of the Class A Warrant.
Research Frontiers may also choose not to issue any shares of
common stock under the Class A Warrant.
o Research Frontiers has the discretion to set the dollar amount of the
Class A Warrant to be exercised, and the minimum or "floor" price
per share below which such warrant may not be exercised. This
amount can be reset by Research Frontiers before each three-month
exercise period begins. Therefore, at the beginning of each three-
month period, Research Frontiers can control the aggregate amount
of common stock to be issued under the Class A Warrant, and the
minimum price per share for such issuance.
o Unless otherwise agreed to, the amount that Research Frontiers can
require Ailouros to buy during any three-month period is also
limited to 7% of the dollar trading volume in Research Frontiers'
common stock for the prior three-month period, or the three-month
period before that, whichever is lower.
o The "Exercise Price" is the actual price paid by Ailouros for each
share of common stock. The Exercise Price per share is the lesser
of (1) $15.00 or (2) 92% of the average of the high and low trading
prices per share for each of the seven trading days before the date
of exercise, but can never be lower than the floor price set by
Research Frontiers from time to time.
o The Class A Warrant expires on December 31, 2001.
Research Frontiers' decision whether to require Ailouros to exercise the
Class A Warrant may depend upon a variety of factors. These factors
may include Research Frontiers' need for additional funding, the timing
that such funding is required, the current and anticipated market price
for Research Frontiers' common stock, the availability and terms of
equity funding elsewhere, and general market conditions. Each three-
month period begins on the date specified in Research Frontiers' put
notice to Ailouros, and ends on the earlier of the date three months later
or when the entire amount of stock which Ailouros is obligated to buy
during such three-month period has been exercised. The three-month
periods may not necessarily be consecutive.
If Research Frontiers decides to require Ailouros to purchase the amount
specified by Research Frontiers, Ailouros would then exercise a portion
of the Class A Warrant during such three-month period into the number
of shares of common stock which equals the amount specified by
Research Frontiers divided by the Exercise Price in effect at the time.
During each three-month period in which Ailouros is required to buy
shares of common stock from Research Frontiers, Ailouros must send
Research Frontiers a Notice of Exercise.
Ailouros' obligation to exercise the Class A Warrant and buy common
stock during such three-month period is suspended for so long as the
Exercise Price is lower than the floor price. Thus, while the Exercise
Price is determined by the timing of Ailouros' Notice of Exercise within
any three-month period and by the market price for Research Frontiers'
common stock, Research Frontiers sets the ultimate floor price during
such period.
To give an example of how this would work: If Research Frontiers
wanted to raise $500,000 during the course of the next three months, it
would send Ailouros a Put Notice specifying that Ailouros must exercise
$500,000 worth of the Class A Warrant during such three month period.
Research Frontiers' Put Notice would also contain a floor price under
which the Class A Warrant may not be exercised. If Ailouros decided to
exercise $100,000 of this amount the next day, it would send Research
Frontiers $100,000 along with a Notice of Exercise stating that it was
exercising $100,000 of the Class A Warrant and that $400,000 of the
Class A Warrant remains to be exercised during the remainder of the
three month period. If the average of the high and low trading prices
per share of Research Frontiers' common stock during the seven days
prior to Ailouros' exercise was $10 per share (and the floor price set by
Research Frontiers was not above $10 per share), then Research
Frontiers would issue to Ailouros 10,000 shares of common stock.
During the remainder of the three-month period, Ailouros would send
Research Frontiers Notices of Exercise for the remaining $400,000.
Class B Warrant
o The Class B Warrant is initially exercisable into 65,500 shares of
common stock, but can be exercisable into an additional 65,500
shares if, among other things, Research Frontiers has not sent
Ailouros at least three put notices requiring them to buy common
stock from Research Frontiers under the Class A Warrant by
December 31, 2001.
o The exercise price per share of the Class B Warrant is $8.25.
O The Class B Warrant expires on September 30, 2008.
PLAN OF DISTRIBUTION
As noted above under "Description of Securities-The Warrants,"
Ailouros may be required to purchase common stock from Research
Frontiers under the terms of the Class A Warrant, and may also, at its
option, purchase additional shares of common stock from Research
Frontiers under the Class B Warrant. Ailouros can sell from time to
time the common stock issued to it upon exercise of the Warrants.
Ailouros can act independently of Research Frontiers in making
decisions with respect to the timing, manner and size of each sale.
Research Frontiers will bear all of the expenses in connection with the
registration of the shares of common stock which is estimated to be
$50,000. Research Frontiers has also agreed to indemnify Ailouros
against certain liabilities, including liabilities arising under the Securities
Act.
Ailouros may sell its shares from time to time in one or more brokerage
transactions (which may involve block sales) on NASDAQ, on any
exchange on which the common stock may then be listed, in the over-
the-counter market, in negotiated transactions, through the writing of
options on shares, or a combination of such methods of sale, at market
prices prevailing prices or at negotiated prices. Ailouros may sell shares
to or through broker-dealers, and such broker-dealers may receive
compensation in the form of underwriting discounts, concessions or
commissions from Ailouros and/or purchasers of common stock for
whom they may act as agent (which compensation may be in excess of
customary commissions). Ailouros, participating brokers and dealers
may be deemed to be "underwriters" within the meaning of the
Securities Act, and any commissions received by them and any profit on
the resale of the common stock purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. Since
Ailouros is acting as an underwriter, it is subject to the same rules and
restrictions as an underwriter in a primary offering of securities by
Research Frontiers, including prospectus delivery requirements,
restrictions on certain market making activities, and Regulation M which
may limit Ailouros' selling activities.
Ailouros (and any affiliate or person acting in concert with it) may not:
o sell any shares of Research Frontiers short or enter into any other
hedging transaction so long as the Class A Warrant or the Class B
Warrant is outstanding,
o create the lowest reported sales price for the common stock of
Research Frontiers on any trading day,
o offer to sell shares of Research Frontiers' common stock at a price
lower than the then prevailing bid price for the common stock, or
o own more than 4.9% of the total issued and outstanding shares of
common stock of Research Frontiers.
To comply with certain states' securities laws, if applicable, the common
stock will not be offered or sold in a particular state unless the common
stock has been registered or qualified for sale in such state or an
exemption from registration or qualification is available and complied
with.
EXPERTS
The financial statements of Research Frontiers as of December 31, 1997
and 1996, and for each of the years in the three-year period ended
December 31, 1997, have been incorporated by reference into this
Prospectus and in the Registration Statement in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants,
which is also incorporated by reference into this Prospectus, and upon
the authority of KPMG Peat Marwick LLP as experts in accounting and
auditing.
LEGAL MATTERS
The legality of the securities offered hereby has been passed upon by
Joseph M. Harary, Esq., Research Frontiers' Vice President and General
Counsel. Mr. Harary holds common stock and options to purchase
common stock granted pursuant to Research Frontiers' 1992 Stock
Option Plan and 1998 Stock Option Plan totaling 356,574 shares.
TABLE OF CONTENTS
Prospectus Cover Page. . . . . . . . . . . . . . . . . . . . . . .1
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Available Information. . . . . . . . . . . . . . . . . . . . . . .4
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . .7
Selling Stockholder. . . . . . . . . . . . . . . . . . . . . . . .8
Description of Securities. . . . . . . . . . . . . . . . . . . . .9
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . 11
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 12
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 13. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities.
As described in Item 15, the Certificate of Incorporation of Research
Frontiers provides for the indemnification of certain persons. Insofar as
indemnification for liabilities arising under the Securities Act of 1933
(the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the Certificate of Incorporation or
By-Laws of Research Frontiers, or otherwise, the registrant has been
informed that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 14. Other Expenses of Issuance and Distribution.
Estimated expenses relating to the distribution of the Common Stock
registered herein are set forth below. Such expenses will be paid by
Research Frontiers.
Registration Fee under the Securities Act of 1933 $ 4,743.60
Nasdaq Listing Fee . . . . . . . . . . . . . . . .$ 17,500.00
Accounting fees and expenses . . . . . . . . . . $ 2,000.00
Legal and due diligence fees and expenses . . . . . $25,000.00
Miscellaneous expenses. . . . . . . . . . . . . . $ 756.40
Total. . . . . . . . . . . . . . . . . . . $ 50,000.00
All of the amounts set forth above, except for the filing fees for the
Securities and Exchange Commission, are estimated and subject to
future contingencies.
Item 15. Indemnification of Directors and Officers.
Article EIGHTH of Research Frontiers' Certificate of Incorporation
provides for the indemnification of Research Frontiers' officers and
directors to the fullest extent permitted by Section 145 of the Delaware
General Corporation Law (the "GCL").
Section 145 of the GCL provides as follows:
145 Indemnification of Officers, Directors, Employees and Agents;
Insurance
(a) A corporation shall have power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that the person is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by the
person in connection with such action, suit or proceeding if the person
acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe the person's conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the person's conduct
was unlawful.
(b) A corporation shall have the power to indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that
the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust, or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by the person in
connection with the defense or settlement of such action or suit if the
person acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the corporation
and except that no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this
section (unless ordered by a court) shall be made by the corporation only
as authorized in the specific case upon a determination that
indemnification of the present or former director, officer, employee or
agent is proper in the circumstances because the person has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made with respect to a person who
is a director or officer at the time of such determination, (1) by a
majority vote of the directors who are not parties to such action, suit or
proceeding, or (2) by a committee of such directors designated by a
majority vote of such directors, even though less than a quorum, or (3) if
there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion, or (4) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the corporation as authorized in this
section. Such expenses (including attorneys' fees) incurred by former
directors and officers or other employees and agents may be so paid
upon such terms and conditions, if any, as the corporation deems
appropriate.
(f) The indemnification and advancement of expenses provided by,
or granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in such person's official capacity and as to
action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against such person and incurred by such person in
any such capacity, or arising out of such person's status as such, whether
or not the corporation would have the power to indemnify such person
against such liability under this section.
(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best
interests of the corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided by,
or granted pursuant to, this section shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be
a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive
jurisdiction to hear and determine all actions for advancement of
expenses or indemnification brought under this section or under any
bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise. The Court of Chancery may summarily determine a
corporation' obligation to advance expenses (including attorneys' fees).
Article NINTH of Research Frontiers' Certificate of Incorporation
provides for the elimination of any personal liability for monetary
damages of directors to the Corporation or its stockholders for breach of
fiduciary duty, for negligence or for taking or omitting to take any action
to the fullest extent permitted by Section 102(b) (7) of the GCL.
Section 102(b) (7) of the GCL provides as follows:
(b) In addition to the matters required to be set forth in the
certificate of incorporation by subsection (a) of this section, the
certificate of incorporation may also contain any or all of the following
matters:
(7) A provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, provided that such provision shall
not eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under section 174 of this
Title, or (iv) for any transaction from which the director derived an
improper personal benefit. No such provision shall eliminate or limit the
liability of a director for any act or omission occurring prior to the date
when such provision becomes effective. All references in this paragraph
to a director shall also be deemed to refer (x) to a member of the
governing body of a corporation which is not authorized to issue capital
stock, and (y) to such other person or persons, if any, who, pursuant to a
provision of the certificate of incorporation in accordance with section
141(a) of this title, exercise or perform any of the powers or duties
otherwise conferred or imposed upon the board of directors by this title.
Item 16. Exhibits.
4.1 Subscription Agreement between Research Frontiers and Ailouros
Ltd. dated as of October 1, 1998. (1)
4.2 Class A Warrant between Research Frontiers and Ailouros Ltd.
dated as of October 1, 1998. (1)
4.3 Class B Warrant between Research Frontiers and Ailouros Ltd.
dated as of October 1, 1998. (1)
5.1 Opinion re legality of the Common Stock and issuance thereof.
(Filed herewith)
23.1 Consent of KPMG Peat Marwick LLP (Filed herewith).
23.2 Consent of Joseph M. Harary (included in Exhibit 5.1)
24. Power of Attorney. (1)
- ------------------------------------
(1) Incorporated by reference to the exhibit filed with Research
Frontiers' Registration Statement on Form S-3 (No. 333-65219) on
October 1, 1998.
Item 17. Undertakings.
The undersigned registrant undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of any employee benefit plan's annual report pursuant to
section 15(d) of the Securities Act of 1934) that is incorporated by
reference in the registration statement shall be to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Woodbury, State of New York,
on December 23, 1998.
RESEARCH FRONTIERS INCORPORATED
(Registrant)
By:/s/ Robert L. Saxe
Robert L. Saxe, President,Treasurer,
Principal Executive, Financial and
Accounting Officer.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Robert L. Saxe Chairman of the Board, President December 23, 1998
Robert L. Saxe Treasurer and Director (Principal
Executive, Financial and Accounting
Officer)
/s/ Robert M. Budin* Director December 23, 1998
Robert M. Budin
/s/ Bernard D. Gold* Director December 23, 1998
Bernard D. Gold
/s/ Joseph M. Harary Director December 23, 1998
Joseph M. Harary
*By: /s/ Robert L. Saxe
Robert L. Saxe as attorney-in-fact
<PAGE>
EXHIBIT 5.1
December23, 1998
Research Frontiers Incorporated
240 Crossways Park Drive
Woodbury, New York 11797-2033
Gentlemen:
I am the Vice President and General Counsel of Research Frontiers
Incorporated (the "Company"), a Delaware corporation, and render this
opinion in connection with the registration pursuant to a Registration
Statement on Form S-3 (the "Registration Statement") by the Company
under the Securities Act of 1933, as amended (the "Act"), of 2,331,000
shares of the Company's common stock, $0.0001 par value (the
"Common Stock"), to be issued pursuant to the exercise from time to
time of the Class A Warrant and the Class B Warrant (the "Warrants")
issued to Ailouros Ltd. by the Company pursuant to that certain
Subscription Agreement dated as of October 1, 1998 between the
Company and Ailouros Ltd.
I have examined the Company's Certificate of Incorporation and
By-Laws, both as amended, and minute books and such other documents
and records as I have deemed necessary and relevant as a basis for my
opinions hereinafter set forth. For the purposes of this opinion, I have
assumed the genuineness of all signatures and the conformity to original
documents of all instruments furnished to me for review or examination
as copies.
Based on the foregoing and having regard to such legal
considerations as I have deemed relevant, it is my opinion that:
1. The Company is a corporation duly organized under the laws of
the State of Delaware.
2. The Common Stock covered by the Registration Statement has
been validly authorized.
3. When the Common Stock has been duly registered under the
Act, when certificates for the Common Stock have been duly delivered,
and when the Company shall have received the consideration to be
received by it pursuant to and upon exercise of the related Warrants, the
Common Stock will be validly issued, fully paid and non-assessable by
the Company, with no personal liability attaching to ownership thereof.
I hereby consent to the inclusion of this opinion in the Registration
Statement and to the references to me contained therein.
Very truly yours,
/s/ Joseph M. Harary
Joseph M. Harary, Esq.
Vice President and General Counsel
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Research Frontiers Incorporated
We consent to the use of our report dated February 26, 1998
incorporated herein by reference and to the reference to our firm under
the heading "Experts" in the Registration Statement.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Melville, New York
December 23, 1998
