UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X]QUARTERLY REPORT PURSUANT TO SECTION 13 ORor 15(d) OF of

THE SECURITIES AND EXCHANGE ACT OF 1934

For the quarterly period endedSeptember 30, 2017

or 

[  ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No.000-14893

RESEARCH FRONTIERS INCORPORATED

(Exact name of registrant as specified in its charter)

(516) 364-1902

(Registrant’s telephone number, including area code)code (516) 364-1902

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 [X]

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 [X]

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 [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically, and posted on its corporate Web site, if any, 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 [X] 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 [X]          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 [X]

Securities registered pursuant to Section 12(b) of the Act:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of November 1, 2017,August 8, 2019, there were outstanding 24,043,84631,033,443 shares of Common Stock, par value $0.0001 per share.

RESEARCH FRONTIERS INCORPORATED

Consolidated Balance Sheets

(Unaudited)

See accompanying notes to consolidated financial statements.

RESEARCH FRONTIERS INCORPORATED

Consolidated Statements of Operations

(Unaudited)

See accompanying notes to consolidated financial statements.

RESEARCH FRONTIERS INCORPORATED

Consolidated Statements of Shareholders’ Equity

(Unaudited)

For the three months ending June 30, 2018 and 2019

See accompanying notes to consolidated financial statements.

RESEARCH FRONTIERS INCORPORATED

Consolidated Statements of Cash Flows

(Unaudited)

See accompanying notes to consolidated financial statements.

RESEARCH FRONTIERS INCORPORATED

Notes to Consolidated Financial Statements

SeptemberJune 30, 20172019

(Unaudited)

Note 1. Basis of Presentation

The accompanying unaudited consolidated condensed 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 10-018-03 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 ninesix months ended SeptemberJune 30, 20172019 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2017.2019. 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 (the “Company”) for the fiscal year ended December 31, 2016.2018.

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:including SPD-Smart™ windows, sunshades, skylights and interior partitions for homes and buildings; automotive windows;windows, sunroofs, sun-visors, sunshades, rear-view mirrors, instrument panels and navigation systems; aircraft windows; train 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, train, aerospace and appliance applications.

The Company has historically utilized its cash, and cash equivalents, short-term investments, and the proceeds from the sale of its investments 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 forgoingforegoing 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 onupon 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 resources 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, 2019, we had working capital of approximately $7.9 million, cash of approximately $7.3 million, shareholders’ equity of approximately $8.2 million and an accumulated deficit of approximately $113.8 million. 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 $450,000-550,000 per quarter. We may eliminate some operating expenses in the future, which will further reduce our cash flow shortfall if needed. We expect to have sufficient working capital for at least the next 3 years to fund operations based upon current expense levels. Since last year we have reduced our cash shortfall and may pursue other opportunities in the future to further reduce it.

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. 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.

To date, the Company has not generated sufficient revenue from its licensees to fund its operations. As of September 30, 2017, the Company had cash and cash equivalents of $2,188,054, working capital (total current assets less total current liabilities) of $2,599,561 and total shareholder’s equity of $3,159,421. The Company expects to have sufficient working capital for the next 12-15 months of operations. Since last year the Company has reduced its cash shortfall and is working to further reduce it, and may seek new sources of financing. However, there can be no assurance as to the availability or terms upon which such financing and capital might be available.

Note 3. Recently Adopted Accounting Pronouncement

Effective January 1, 2019, the Company adopted the Financial Accounting Standards Board’s Standard,Leases (Topic 842), as amended. The standard requires all leases to be recorded on the balance sheet as a right of use asset and a lease liability. The standard provides practical expedients in order to simplify adoption, including the following:

The Company used the above practical expedients as the transition method in the application of the new lease standard at January 1, 2019. The Company applied a policy election to exclude short-term leases from balance sheet recognition and also elected certain practical expedients at adoption. As permitted, the Company did not reassess whether existing contracts are or contain leases, the lease classification for any existing leases, initial direct costs for any existing lease, which were not previously accounted for as leases, are or contain a lease. At adoption on January 1, 2019, an operating lease liability of $1,134,000 and an operating lease right of use asset of $941,000 were recorded. The operating lease liability was $193,000 more than the operating lease right of use asset due to unamortized lease incentive from periods prior to the adoption of the new lease standard. There was no cumulative earnings effect adjustment.

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.

Note 4.5. Revenue Recognition

In May 2014, the FASB issued guidance on revenue recognition (ASC 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.

This new ASC 606 guidance was adopted by the Company beginning January 1, 2018. ASC 606 was applied using the modified retrospective method, with the cumulative effect of the initial adoption being recognized as an adjustment to opening retained earnings at January 1, 2018.

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 has entered into a number ofdetermined that its license agreements coveringprovide for three performance obligations which include: (i) the Grant of Use to its light-control technology.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 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 receivesfocuses 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 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 under certain(“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 records fee income onfrequently include a ratable basis each quarter once collectability is reasonably assured.minimum annual royalty commitment. In instances when sales of licensed products by its licensees exceed minimum annual royalties,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 than under the accounting guidance used prior to the adoption of ASC 606, and (ii) the remaining periods in the year will have less of the transaction price recognized under ASC 606 than under the accounting guidance used prior to the adoption of 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. Since most of our license agreements start as of January 1st, the revenue recognized for the contract under ASC 606 in our first quarter will tend to be higher than the accounting guidance used prior to the adoption of ASC 606.

The Company does not have any contract assets under ASC 606 as of June 30, 2019.

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. Such excess amounts are recorded as deferred revenue and are recognized into income in future periods as earned.

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.

As of June 30, 2019, the Company has six license agreements that are in their initial multiyear term (“Initial Term”) with continuing performance obligations going forward. The Initial Term of four of these agreements will end as of December 31, 2019, one will end as of December 31, 2021, and one will end as of December 31, 2022. The Company currently expects that all six of these agreements will renew annually at the end of the Initial Term. As of June 30, 2019, the aggregate amount of the revenue to be recognized upon the satisfaction of the remaining performance obligations for the six license agreements is $266,924. The revenue for these remaining performance obligations for each of the six license agreements is expected to be recognize evenly throughout their remaining period of the Initial Term.

Note 5.6. 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 ninesix months of 2017, four2019, two licensees accounted for 10% or more of fee income of the Company; these licensees accounted for approximately 31%,36% and 15%, 12% and 11%, respectively, of fee income recognized during such period. During the first ninesix months of 2016,2018, three licensees accounted for 10% or more of fee income of the Company; these licensees accounted for approximately 30%33%, 29%13% and 15%12%, respectively, of fee income recognized during this period. During the three-month period ending June 30, 2019, three licensees accounted for 10% or more of fee income of the Company; these licensees accounted for approximately 43%, 16% and 10%, respectively, of fee income recognized during such period. During the three-month period ending June 30, 2018, three licensees accounted for 10% or more of fee income of the Company; these licensees accounted for approximately 32%, 15% and 11%, respectively, of fee income recognized during such period.

Note 6.7. Stock-Based Compensation

The Company has granted options/warrants to consultants. GAAP requires that all stock-based compensation be recognized as an expense in the financial statements and that such costs be measured at the fair value of the award at the date of grant. These awards generally vest ratably over 12 to 60 months from the date of grant and the Company charges to operations quarterly the current market value of the options using the Black-Scholes method. During the ninethree and six months ended SeptemberJune 30, 20172019 and 20162018 there were no charges related to options granted to consultants.

During the six-month period ended June 30, 2018, the Company granted 150,182 fully vested options to employees and recorded share-based compensation of $69,309. All of the options granted to employees during the six-month period ended June 30, 2018 occurred during the second quarter of 2018. The Company did not grant any stockvalued these grants using the Black-Scholes option pricing model with the following assumptions:

During the six-month period ended June 30, 2019, the Company granted 233,500 fully vested options to employees and directors and recorded share-based compensation of $356,228. All of the options granted to employees during the nine monthssix-month period ended SeptemberJune 30, 2017 and 2016.2019 occurred during the second quarter of 2019. The Company valued these grants using the Black-Scholes option pricing model with the following assumptions:

There was no compensation expense recorded relating to restricted stock grants to employees and directors during the ninethree and six months ended SeptemberJune 30, 20172019 and 2016.2018.

Note 7.8. 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 not more likely than not that the Company would achieve profitable operations.operations and be able to utilize the benefit of the net operating loss carryforwards.

Note 9. Basic and Diluted Loss Per Common Share

Basic loss per share excludes any dilution. It is based upon the weighted average number of common shares outstanding during the period. Dilutive 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, 2019 and 2018 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) was 3,441,152 and 2,975,985 for the three and six months ended June 30, 2019 and 2018, respectively.

Note 810. Equity

During the six months ended June 30, 2019, the Company received $1,105,900 in proceeds from the exercise of outstanding options and warrants and issued 1,003,870 shares of its capital stock in connection with these exercises. In addition, during the six months ended June 30, 2019, the Company issued 363,125 shares of its capital stock in connection with the cashless exercise of 603,569 of its outstanding options and warrants. During the three-month period ended June 30, 2019, the Company received $4,118 in proceeds from the exercise of outstanding options and issued 2,250 shares of its capital stock in connection with these exercises. In addition, during the three-month period ended June 30, 2019, the Company issued 363,125 shares of its capital stock in connection with the cashless exercise of 603,569 of its outstanding options and warrants. There were no proceeds from the exercise of outstanding warrants and/or options during the three or six month period ended June 30, 2018.

On or around February 16, 2018, a small group of long-time shareholders of the Company who are accredited investors made an interest-free five-year convertible loan of $1.25 million to the Company which, upon the occurrence of certain conditions which have already occurred, automatically converted into 1,388,893 shares of common stock at a price equal to the market price of the Company’s common stock when the loan was made, plus warrants expiring February 28, 2023 to purchase 1,388,893 shares of common stock at an exercise price of $1.10, $1.20 or $1.35 per share depending on the exercise date. No payments are due on this note during its five-year term or after conversion into equity. On April 23, 2018, Research Frontiers Incorporated filed a prospectus supplement relating to the issuance and sale of the above common stock and warrant securities with the Securities and Exchange Commission. The Company recorded this transaction as an equity transaction whereby the proceeds were accounted for as the issuance of the Company’s common stock on the date that the proceeds were received.

On September 7, 2018, the Company announced that it had sold common stock to a group of investors led by Gauzy Ltd., a licensee of the Company’s SPD technology (Gauzy). The aggregate proceeds from these stock offerings was $2.0 million. At the closing, the investors received 2,173,916 shares of Research Frontiers common stock at a price of $0.92 per share, as well as five-year warrants to purchase 1,086,957 shares of Research Frontiers common stock at an exercise price of $1.10, $1.20 or $1.38 per share depending on the exercise date. In connection with the issuance of certain of these warrants during the third quarter of 2018, the Company recorded $223,370 as a warrant liability upon the issuance of these warrants on August 13, 2018 and recorded a non-cash accounting expense of $278,044 to mark the warrants to their estimated market value as of December 31, 2018. This resulted in a liability of $501,414 recorded on the Company’s December 31, 2018 balance sheet.

On or around May 30, 2019, the Company sold to accredited investors a total of 1,276,599 shares of common stock and warrants expiring May 31, 2024 to purchase 638,295 shares of common stock at an exercise price of $3.384, $3.666 or $4.23 per share depending on the exercise date. Research Frontiers also sold to Gauzy, at a price of $1.38 per unit, with each unit comprised of one share of unregistered common stock and one half of one warrant. The warrant can be converted into one share of unregistered common stock at an exercise price of $1.656, $1.794 or $2.07 per share depending on the exercise date. Gauzy received a total of 724,638 shares of unregistered common stock and warrants expiring May 31, 2024 to purchase 362,319 shares of common stock. The aggregate proceeds from these stock offerings was $4.6 million.

Investors that participated in the May 30, 2019 offering agreed to amending/clarifying language to the terms of the warrants that they received in the September 7, 2018 offering. Those investors that received warrants in the September 7, 2018 offering that did not participate in the May 30, 2019 offering, separately agreed as of June 27, 2019 to the same amending/clarifying language used in the May 30, 2019 offering. The amending/clarifying language relating to the September 7, 2018 warrants does not allow for a net cash settlement option for the warrants even if no registered shares of common stock are available upon the exercise of the warrant. The Company recorded a non-cash expense of $404,435 and $652,025 respectively for the three and six month period ended June 30, 2019 to mark these warrants to their estimated market value as of their respective amendment/clarification date.The warrant liability was valued at $1,153,439 (including all valuation adjustments since their issuance) through the date of these new agreements and amendments and, based on the amended warrant terms, the warrant liability was reclassified to equity as of these dates.

. EquityNote 11. Leases

The Company did not sell any equity securities duringdetermines if an arrangement is a lease at its inception. This determination generally depends on whether the nine months ended September 30, 2017arrangement 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 2016. The Company did not receive any proceeds duringto obtain substantially all of the nine months ended September 30, 2017economic benefits from the use of, the underlying asset. Lease expense for variable leases and 2016 in connection with stock issued byshort-term leases is recognized when the exercise of options and warrants previously granted.

Note 9. Treasury Stockobligation is incurred.

The Company did not repurchase anyhas operating leases for certain facilities, vehicles and equipment with a weighted average remaining lease term of its stock during the nine months ended September5.7 years as of June 30, 2017 and 2016.

Note 10. Investments

The Company classifies investments in marketable securities as trading, available-for-sale or held-to-maturity at the time of purchase and periodically re-evaluates such classifications. Trading securities2019. Operating leases are carried at fair value, with unrealized holding gains and losses included in earnings. Held-to-maturity securitiesright of use lease assets, other current liabilities and long-term lease liabilities on the Condensed Consolidated Balance Sheet. Right of use lease assets and liabilities are recordedrecognized at cost and are adjusted for the amortization or accretion of premiums or discounts over the life of the related security. Unrealized holding gains and losses on available-for-sale securities are excluded from earnings and are reported as a separate component of accumulated other comprehensive income (loss) until realized. In determining realized gains and losses, the cost of securities sold iseach lease’s commencement date based on the specific identification method. Interest and dividends onpresent value of its lease payments over its respective lease term. The Company does not have an established incremental borrowing rate as it does not have any debt. The Company uses the investments are accrued atstated borrowing rate for a lease when readily determinable. When the balance sheet date. At December 31, 2016 all investments were classified as held to maturity and consisted ofinterest rates implicit in its lease agreements is not readily determinable, the following:

Note 11. Fair Value Measurements

We value financial instruments using a three-tier fair value hierarchy, which prioritizes the inputsCompany used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than quoted prices for similar assets or liabilities in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Note 12. New Accounting Pronouncements

In May 2014, the FASB amended the existing accounting standards for revenue recognition. The amendments areinterest rate based on the principle that revenue should be recognized to depict the transfermarketplace for public debt. The weighted-average discount rate associated with operating leases as of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenueJune 30, 2019 is recognized.  The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers.  In July 2015, the FASB affirmed its proposal of a one-year deferral of the effective date of the new revenue standard.  As a result, the new guidance will be effective5.5%.

Operating lease expense for the Company beginning inthree months ended June 30, 2019 was approximately $55,000 and approximately $111,000 for the first quarter of 2018. The amendments may be applied retrospectively to each prior period presented or with the cumulative effect recognized as of the date of initial application and the Company intends to apply the modified retrospective method.six months ended June 30, 2019. The Company currently recognizes its minimum annual royalties (fixed payments) ratably overhas no material variable lease costs or sublease income for the term ofsix months ended June 30, 2019. Subsequent to the contract and we are evaluating the number of performance obligations within each specific contract and whether the licenses of IP are distinct from the related performance obligations in order to conclude on the timing and pattern of revenue recognition under the new standard. The Company is continuing to evaluate the standard’s impact on the consolidated results of operations and financial condition.  In addition, we continue to assess the potential impact the new standard will have on our related disclosures and internal processes to address the new standard.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updated (“ASU”) No. 2016-02, Leases. ASU 2016-02 requires lessees to apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. EarlyCompany’s adoption of the new lease accounting guidance is permitted. The new standard is effective foron January 1, 2019, the Company beginning inrecorded new right of use lease assets of approximately $900 thousand and associated lease liabilities of approximately $1.1 million.

Maturities of operating lease liabilities as of June 30, 2019 were as follows:

Pursuant to the first quarter of 2019. While not yet in a position to assess the full impact of this applicationCompany’s adoption of the new standard,lease accounting guidance, comparative information has not been restated and continues to be reported under the Company expects thataccounting standards in effect for those periods. As previously disclosed in its Annual Report filed on Form 10-K for the impactyear ended December 31, 2018, the following table presents the Company’s future minimum rental commitments under operating leases as of recording the lease liabilities and the corresponding right to use assets will have an impact on its total asset and liabilities with a minimal impact on equity.December 31, 2018:

In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting, which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company does not believe this new accounting standard update will have a material impact on its consolidated financial statements.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Critical Accounting Policies

The 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 noteNote 2 to our consolidated financial statements, “Summary of Significant Accounting Policies”Policies.”

The Company adopted ASC 606, the new revenue recognition standard, beginning January 1, 2018. The Company determined that its license agreements provide for three performance obligations: (i) Grant of Use, (ii) Technical Support, and (iii) New Improvements.

The best method for determining 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.

We recognize revenue when or as the performance obligations in our Form 10-K report for 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 ending December 31, 2016.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.

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 Company has entered into a number of license agreements covering products using the Company’s SPD technology. The Company receives fees and minimum annualWhen royalties under certain license agreements and records fee income on a ratable basis each quarter as earned. In instances whenfrom the sales of licensed products by a licensee exceed its licensees exceedcontractual minimum annual royalties, the excess amount is recognized by the Company recognizesas fee income asin the amounts have beenperiod 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.

Royalty 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.

The Company expenses costs relating to the development or acquisition of patents due to the uncertainty of the recoverability of these items. All of our research and development costs are charged to operations as incurred. Our research and development expenses consist of costs incurred for internal and external research and development. These costs include direct and indirect overhead expenses.

The 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 rates. 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 arehad been used in the current period, stock-based compensation expense could behave been materially impacted. Furthermore, if management uses different assumptions in future periods, stock-based compensation expense could be materially impacted in future years.

On 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 being met. In accounting for equity instruments that are issued to other than employees for acquiring, or in conjunction with selling, goods or services, the Company would beis 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.

Effective January 1, 2019, the Company adopted the Financial Accounting Standards Board’s Standard,Leases (Topic 842), as amended. The standard requires all leases to be recorded on the balance sheet as a right of use asset and a lease liability. The Company used a transition method that applies the new lease standard at January 1, 2019. The Company applied a policy election to exclude short-term leases from balance sheet recognition and also elected certain practical expedients at adoption. As permitted, the Company did not reassess whether existing contracts are or contain leases, the lease classification for any existing leases, initial direct costs for any existing lease, which were not previously accounted for as leases, are or contain a lease. At adoption on January 1, 2019, an operating lease liability of $1,133,821 and an operating lease right of use asset of $941,000 was recorded. The operating lease liability was $192,537 more than the operating lease right of use asset due to unamortized lease incentive from periods prior to the adoption of the new lease standard. There was no cumulative earnings effect adjustment.

The 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 assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. ExamplesAn example of oura critical estimates include: (i)estimate is the full valuation allowance for deferred taxes that was recorded based on the uncertainty that such tax benefits wouldwill be realized in future periods, and (ii) royalty receivable reserves.

New Accounting Pronouncements

In May 2014, the FASB amended the existing accounting standards for revenue recognition. The amendments are based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized.  The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers.  In July 2015, the FASB affirmed its proposal of a one-year deferral of the effective date of the new revenue standard.  As a result, the new guidance will be effective for the Company beginning in the first quarter of 2018. The amendments may be applied retrospectively to each prior period presented or with the cumulative effect recognized as of the date of initial application and the Company intends to apply the modified retrospective method. The Company currently recognizes its minimum annual royalties (fixed payments) ratably over the term of the contract and we are evaluating the number of performance obligations within each specific contract and whether the licenses of IP are distinct from the related performance obligations in order to conclude on the timing and pattern of revenue recognition under the new standard. The Company is continuing to evaluate the standard’s impact on the consolidated results of operations and financial condition.  In addition, we continue to assess the potential impact the new standard will have on our related disclosures and internal processes to address the new standard.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updated (“ASU”) No. 2016-02, Leases. ASU 2016-02 requires lessees to apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption of the new guidance is permitted. The new standard is effective for the Company beginning in the first quarter of 2019. While not yet in a position to assess the full impact of this application of the new standard, the Company expects that the impact of recording the lease liabilities and the corresponding right to use assets will have an impact on its total asset and liabilities with a minimal impact on equity.

In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting, which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company does not believe this new accounting standard update will have a material impact on its consolidated financial statements.periods.

Results of Operations

Overview

The 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 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,SPD-SmartGlass, fluctuations in the total number of vehicles produced by a manufacturer, and in the percentage of cars within each model like produced with SPD-SmartGlass, and changes in pricing or exchange rates.

Certain license fees, which are paid to the Company in advance of the accounting period in which they are earned resultresulting in the recognition of deferred revenue for the current accounting period, which will be recognized as fee income in future periods. Also, licensees may 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.

In 2019 and 2018, the Company received royalty revenues from sales of the Magic Sky Control option on the S-Class Coupe, Maybach and S-Class Sedan, and SL and SLK/SLC. In addition to Daimler, one of the Company’s licensees started commercial production of SPD products for McLaren Automotive in the first quarter of 2019. 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 OEM’s (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.

Because 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 its 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.

In the first quarter of 2017, the Company received royalty revenues from sales of the Magic Sky Control option on the S-Class sedans and coupe, and on the SLK and SL roadsters in excess of minimum annual royalty levels in its license agreements with our licensees who supply this glass to Daimler which resulted in accretive royalty revenue from these licensees for the remained of the year. Fluctuations in exchange rates, total vehicle production levels, and take rates for the Magic Sky Control option are expected to continue. Production efficiencies are also expected to continue 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. As noted previously, the Company is working with all levels of licensees in the supply chain to further reduce the cost of final products using the Company’s technology.

NineThree months ended SeptemberJune 30, 20172019 Compared to the Ninethree months ended SeptemberJune 30, 20162018

The Company’s fee income from licensing activities for the ninethree months ended SeptemberJune 30, 20172019 was $1,229,631$301,035 as compared to $958,337$324,853 for the ninethree months ended SeptemberJune 30, 20162018 representing a $271,294 increase$23,818 decrease between these two periods. Lower fee income from licensees in the architectural and display markets was partially offset by higher fee income from licensees in the automotive market.

Operating expenses increased by $293,395 for the three months ended June 30, 2019 to $939,355 from $645,960 for the three months ended June 30, 2018. This increase was principally the result of higher revenues from licensees innon-cash charges related to the aircraft, architectural, automotivegrant of fully-vested options to employees and marine sectorsdirectors ($230,000) as well as revenue from a new licensee focused on the transparent display sector.

Operating expenses decreased by $295,850 for the nine months ended September 30, 2017 to $2,380,328 from $2,676,178 for the nine months ended September 30, 2016. This decrease was principally the result of lower patenthigher bad debts expense ($23,000), higher professional fees ($18,000) and patent litigation costshigher cash payroll ($108,000) as well as lower payroll and related costs ($100,000) and lower investor relations and marketing costs ($84,000)11,000).

Research and development expenditures decreasedincreased by $561,906$63,157 to $598,638$313,981 for the ninethree months ended SeptemberJune 30, 20172019 from $1,160,544$250,824 for the ninethree months ended SeptemberJune 30, 2016.2018. This decreaseincrease was principally the result of lower payrollhigher non-cash charges related to the grant of fully-vested options to employees ($56,000) as well as higher allocated facility costs ($516,000)9,000) partially offset by lower materials costs ($11,000).

In connection with the issuance of certain warrants during the third quarter of 2018, the Company recorded a non-cash expense of $404,435 to mark these warrant liabilities to their market value through the date that they were reclassified to equity. The Company’s higher stock price at the end of this period as compared to the start of the period was the leading factor in the higher non-cash expense to mark these warrants to their market value.

The Company’s net investment income for the ninethree months ended SeptemberJune 30, 20172019 was $3,830$6,258 as compared to $25,203 earned$2,040 for the ninethree months ended SeptemberJune 30, 2016 with lower earnings2018. The difference was primarily due to redemption of the Company’s investments in 2017.higher cash balances available for investment.

As a consequence of the factors discussed above, the Company’s net loss was $1,745,505$1,350,478 ($0.070.05 per common share) for the ninethree months ended SeptemberJune 30, 20172019 as compared to $2,853,182$569,891 ($0.120.02 per common share) for the ninethree months ended SeptemberJune 30, 2016.2018. Had the Company not incurred the non-cash expenses to mark the warrants to their market value and the non-cash compensation charges related to stock options granted to employees and directors, the Company’s net loss would have been $760,663 less or $589,815 ($0.02 per common share) for the three months ended June 30, 2019 as compared to a net loss that would have been $69,309 less or $500,582 ($0.02 per common share) for the three months ended June 30, 2018.

ThreeSix months ended SeptemberJune 30, 20172019 Compared to the Threesix months ended SeptemberJune 30, 20162018

The Company’s fee income from licensing activities for the threesix months ended SeptemberJune 30, 20172019 was $488,336$719,692 as compared to $304,772$758,122 for the threesix months ended SeptemberJune 30, 20162018 representing a $183,564 increase$38,430 decrease between these two periods. Lower fee income from licensees in the architectural and display markets was partially offset by higher fee income from licensees in the automotive and aircraft markets.

Operating expenses increased by $34,735 for the six months ended June 30, 2019 to $1,690,520 from $1,655,785 for the six months ended June 30, 2018. This increase was principally the result of higher revenues from licensees innon-cash charges related to the aircraft, automotivegrant of fully-vested stock options to employees and marine sectorsdirectors ($230,000) as well as revenue from a new licensee focused on the transparent display sector.

Operating expenses decreasedhigher bad debts expense ($23,000) partially offset by $16,789 for the three months ended September 30, 2017 to $607,291 from $624,080 for the three months ended September 30, 2016. This decrease was principally the result lower cash payroll and related costs ($50,000),144,000) as well as lower office and facilitypatent costs ($15,000)41,000) and lower travelstock listing and entertainmenttransfer costs ($10,000) partially offset by higher patent and patent litigation costs ($44,000)35,000).

Research and development expenditures decreasedincreased by $61,459$74,504 to $185,296$543,944 for the threesix months ended SeptemberJune 30, 20172019 from $246,755$469,440 for the threesix months ended SeptemberJune 30, 2016.2018. This decreaseincrease was principally the result of lower payroll costshigher non-cash charges related to the grant of fully-vested options to employees ($25,000)56,000) as well as lower materials costs ($16,000) as well as lower office andhigher allocated facility costs ($12,000)6,000).

In connection with the issuance of certain warrants during the third quarter of 2018, the Company recorded a non-cash expense of $652,025 to mark these to their market value through the date that they were reclassified to equity. The Company’s higher stock price at the end of this period as compared to the start of the period was the leading factor in the higher non-cash expense to mark these warrants to their market value.

The Company’s net investment income for the threesix months ended SeptemberJune 30, 20172019 was $1,113$12,422 as compared to $6,332 earned$3,445 for the threesix months ended SeptemberJune 30, 2016 with lower earnings2018. The difference was primarily due to redemption of the Company’s investments in 2017.higher cash balances available for investment.

As a consequence of the factors discussed above, the Company’s net loss was $303,138$2,154,375 ($0.010.07 per common share) for the threesix months ended SeptemberJune 30, 20172019 as compared to $559,731$1,363,658 ($0.020.05 per common share) for the threesix months ended SeptemberJune 30, 2016.2018. Had the Company not incurred the non-cash expenses to mark the warrants to their market value and the non-cash compensation charges related to stock options granted to employees and directors, the Company’s net loss would have been $1,008,253 less or $1,146,122 ($0.04 per common share) for the six months ended June 30, 2019 as compared to a net loss that would have been $69,309 less or $1,294,349 ($0.05 per common share) for the six months ended June 30, 2018.

Financial Condition, Liquidity and Capital Resources

The Company has primarily utilized its cash, cash equivalents, short-term investments, and the proceeds from its investments 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 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.

During the ninesix months ended SeptemberJune 30, 2017,2019, the Company’s cash and cash equivalents balance increased by $496,451. The increase was due to$4,329,254 principally as a result of cash proceeds of $5,705,898 from the maturityissuance of a certificatecapital stock and the exercise of deposit for $1,523,333warrants, partially offset by cash used for operations of $1,020,520$1,313,676 and cash used for the purchase of fixed assetsproperty and equipment of $6,362. As of September$62,968. At June 30, 2017,2019 the Company had cash and cash equivalents of $2,188,054,$7,298,670, working capital (total current assets less total current liabilities) of $2,599,561$7,879,933 and total shareholder’sshareholders’ equity of $3,159,421. $8,160,680.

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$450,000-550,000 per quarter. We may eliminate some operating expenses in the future, which will further reduce our cash flow shortfall if needed. Based on the expected benefit of expense reductions, weWe expect to have sufficient working capital for at least the next 12-15 months3 years of operations. Since last year we have reduced our cash shortfall and are workingmay pursue other opportunities in the future to further reduce it, and may seek new sources of financing.it.

The 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 at least the third quarter of 2022. 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 Company. 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 thereof. To date the Company has not generated sufficient revenue from its licensees to fully fund its operations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information required by Item 3 has been disclosed in Item 7A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2018. There has been no material change in the disclosure regarding market risk.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We designed our disclosure controls and procedures to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, to allow timely decisions regarding required disclosure. Our chief executive officer and chief financial officer, with assistance from other members of our management, have reviewed the effectiveness of our disclosure controls and procedures as of SeptemberJune 30, 2017,2019, and, based on their evaluation, have concluded that, because of the need to test a new control during 20172019 over the determination of our allowancethe method for doubtful accounts,accounting for warrants issued in connection with a registered offering of common stock, that our disclosure controls and procedures were not effective at the reasonable assurance level solely as a result of the material weakness in our internal control over financial reporting discussed below.

Changes in Internal Control Over Financial Reporting

In connection with the preparation of our consolidated financial statements as of and for the yearquarter ended December 31, 2016,September 30, 2018, we identified a material weakness in our internal control over financial reporting related to our controls over the determinationmethod for accounting for warrants issued in connection with a registered offering of our allowance for doubtful accounts.common stock. This control deficiency resulteddid not result in a material adjustment to our provision for bad debt expense which is reflected in our annual financial statements for the period ended September 30, 2018. Management implemented additional review controls of equity transactions that were considered operating effectively as of and for the year ended December 31, 2016.

Management has implemented a remediation plan to address the control deficiency that led to the material weakness. The remediation plan includes but is not limited to, the implementation of additional review procedures designed to enhance our evaluation controls over our allowance for doubtful accounts. We implemented our enhanced review/evaluation procedures and documentation standards with respect to the first, second and third quarters of 2017. Our goal is to remediate the identified material weakness by the end of 2017, subject to there being sufficient opportunities to conclude, through testing, that the enhanced control is operating effectively.June 30, 2019.

Forward-Looking Statements

The 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 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 hereof and are not guaranteed.

PART II. OTHER INFORMATION

Item 6. Exhibits

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunder duly authorized.

Date: November 2, 2017August 8, 2019