Note 2. Business

Research Frontiers Incorporated (“Research Frontiers” or the “Company”) operates in a single business segment which is engaged in the development and marketing of technology and devices to control the flow of light. Such devices, often referred to as “light valves” or suspended particle devices (“SPDs”), use colloidal particles that are either incorporated within a liquid suspension or a film, which is usually enclosed between two sheets of glass or plastic having transparent, electrically conductive coatings on the facing surfaces thereof. At least one of the two sheets is transparent. SPD technology, made possible by a flexible light-control film invented by Research Frontiers, allows the user to instantly and precisely control the shading of glass/plastic manually or automatically. SPD technology has numerous product applications, including SPD-Smart™ windows, sunshades, skylights and interior partitions for homes and buildings; automotive windows, sunroofs, sun visors, sunshades, rear-view mirrors, instrument panels and navigation systems; aircraft windows; museum display panels; eyewear products; and flat panel displays for electronic products. SPD-Smart light control film is now being developed for, or used in, architectural, automotive, marine, aerospace and appliance applications.

The Company has primarily utilized its cash, cash equivalents, and investments generated from sales of our common stock, proceeds from the exercise of options and warrants, and royalty fees collected to fund its research and development of SPD light valves, for marketing initiatives, and for other working capital purposes. The Company’s working capital and capital requirements depend upon numerous factors, including the results of research and development activities, competitive and technological developments, the timing and cost of patent filings, and the development of new licensees and changes in the Company’s relationships with its existing licensees. The degree of dependence of the Company’s working capital requirements on each of the foregoing factors cannot be quantified; increased research and development activities and related costs would increase such requirements; the addition of new licensees may provide additional working capital or working capital requirements; and changes in relationships with existing licensees would have a favorable or negative impact depending upon the nature of such changes. We have incurred recurring losses since inception and expect to continue to incur losses as a result of costs and expenses related to our research and continued development of our SPD technology and our corporate general and administrative expenses. Our capital requirements and operations to date have been substantially funded through sales of our common stock, exercise of options and warrants and royalty fees collected. As of June 30, 2026, we had working capital of approximately $1.0 million, cash and cash equivalents of approximately $1.1 million, shareholders’ equity of approximately $1.1 million and an accumulated deficit of approximately $128.8 million. Based upon the Company’s current working capital, recurring losses and negative cash flow from operations, if the Company is unable to generate sufficient cash from operating activities, collect amounts owed to it by third parties, or raise additional funds for a period of 12 months from the issuance of these condensed consolidated financial statements, this raises substantial doubt about the Company’s ability to continue as a going concern. To alleviate this substantial doubt the Company expects to generate sufficient cash flow from operations through increased use of its SPD Technology by existing licensees, through the Company entering into new license agreements, as well as through the collection of amounts owed to it, and, as a result, the Company does not expect that it will need to raise additional capital over the next 12 months. There is no assurance that the Company’s plans will be successful. The accompanying condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern and do not include any adjustments that might result from these uncertainties.

On February 18, 2026, the Company entered into subscription agreements from a group of privately accredited investors, which included family members of a director of the Company, as well as the owner of a licensee of the Company licensed to produce SPD-SmartGlass products including for the retrofit architectural glass market.

The investors purchased 1.1 million shares of common stock of the Company at a price of $1.00 per share (which represents the closing market price of the Company’s common stock on February 13, 2026, which was the date that the transaction was agreed to). The Company received $1.1 million in proceeds from the sale of common stock to these investors. For each share of common stock received, the investor also received one warrant (expiring on February 28, 2031) to purchase one share of common stock at an exercise price of $1.10 if warrant exercises occur on or before February 28, 2027, $1.20 if warrant exercises occur between March 1, 2027 through February 29, 2028, $1.30 if warrant exercises occur between March 1, 2028 through February 28, 2029, and $1.50 if warrant exercises occur after February 28, 2029 and prior to the expiration of the warrants.

In the event that we are unable to generate sufficient cash from our operating activities or raise additional funds, we may be required to delay, reduce or severely curtail our operations or otherwise impede our on-going business efforts, which could have a material adverse effect on our business, operating results, financial condition and long-term prospects. The Company may seek to obtain additional funding through future equity issuances. There can be no assurance as to the availability or terms upon which such financing and capital might be available. The eventual success of the Company and generation of positive cash flow will be dependent upon the commercialization of products using the Company’s technology by the Company’s licensees and payments of continuing royalties on account thereof.

On June 2, 2026, Company received two deficiency notification letters from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”). The first notification letter advised the Company that, based upon the closing bid price of the Company’s common stock for the 30 consecutive business days from April 15, 2026 to June 1, 2026, the Company no longer satisfies the $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2). The second notification letter advised the Company that, based upon Nasdaq’s review of the Company’s Market Value of Listed Securities (“MVLS”) for the 30 consecutive business days from April 20, 2026 to June 1, 2026, the Company no longer satisfies the $35 million minimum MVLS requirement for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(b)(2). The notification letter also noted that the Company does not currently meet the alternative continued listing standards under Nasdaq Listing Rules 5550(b)(1) and 5550(b)(3), relating to minimum stockholders’ equity and net income from continuing operations, respectively. The Nasdaq notifications have no immediate effect on the listing or trading of the Company’s common stock, which will continue to trade on The Nasdaq Capital Market under the symbol “REFR.” In accordance with Nasdaq Listing Rules 5810(c)(3)(A) and 5810(c)(3)(C), the Company has been provided 180 calendar days, or until November 30, 2026, to regain compliance with the minimum bid price requirement and the MVLS requirement, respectively. To regain compliance with the minimum bid price requirement, the closing bid price of the Company’s common stock must be at least $1.00 per share for a minimum of 10 consecutive business days during the compliance period, unless Nasdaq exercises its discretion to require a longer period as permitted under its rules. To regain compliance with the MVLS requirement, the Company’s MVLS must close at $35 million or more for a minimum of 10 consecutive business days during the compliance period, unless Nasdaq exercises its discretion to require a longer period as permitted under its rules.

The Company intends to monitor the closing bid price of its common stock and its MVLS and will consider available options to regain compliance with the applicable Nasdaq continued listing requirements. The Company’s objective is to regain compliance through improved market valuation and bid-price performance, and the Company does not currently intend to effect a reverse stock split for the purpose of regaining compliance. However, there can be no assurance that the Company will regain compliance with either requirement within the applicable compliance period, or at all, or that the Company will otherwise remain in compliance with the other Nasdaq continued listing standards.