SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 2006 Commission File No. 1-9399
RESEARCH FRONTIERS INCORPORATED
(Exact name of registrant as specified in charter)
Delaware 11-2103466
(State of incorporation or organization) (IRS Employer
Identification No.)
240 Crossways Park Drive, Woodbury, N.Y. 11797
(Address of principal executive offices) (Zip Code)
(516) 364-1902
(Registrant's telephone number, including area code)
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 is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition
of "accelerated filer and large accelerated filer" in Rule 12b-2 of
the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act).
Yes [ ] No [X]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date:
As of August 10, 2006, there were outstanding 13,812,559 shares of
Common Stock, par value $0.0001 per share.
RESEARCH FRONTIERS INCORPORATED
Consolidated Balance Sheets
June 30,2006
Assets (Unaudited) December 31,2005
Current assets:
Cash and cash equivalents $ 1,911,717 3,644,685
Royalty receivables, net of reserves
of $93,674 in 2006 and $78,674 in 2005 77,500 40,000
Prepaid expenses and other current assets 58,510 138,408
Total current assets 2,047,727 3,823,093
Fixed assets, net 117,464 111,507
Deposits 22,605 22,605
Total assets $ 2,187,796 3,957,205
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 131,581 132,584
Deferred revenue 25,000 5,000
Accrued expenses and other 134,766 173,367
Total liabilities 291,347 310,951
Commitments and Contingencies
Shareholders' equity:
Capital stock, par value $0.0001 per share;
authorized 100,000,000 shares, issued and
outstanding 13,812,559 and 13,812,559
shares,respectively 1,381 1,381
Additional paid-in capital 62,577,771 62,577,771
Accumulated deficit (60,682,703) (58,932,898)
Total shareholders' equity 1,896,449 3,646,254
Total liabilities and shareholders'equity $2,187,796 3,957,205
See accompanying notes to consolidated financial statements.
RESEARCH FRONTIERS INCORPORATED
Consolidated Statements of Operations
(Unaudited)
Six months ended Three months ended
June 30,2006 June 30,2005 June 30,2006 June 30,2005
Fee income $ 90,139 78,242 $ 63,889 36,992
Operating expenses 1,294,866 1,311,363 658,204 716,447
Research and development 593,558 728,794 262,658 319,725
1,888,424 2,040,157 920,862 1,036,172
Operating loss (1,798,285) (1,961,915) (856,973) (999,180)
Net investment income 48,480 59,313 25,274 37,076
Net loss $(1,749,805) (1,902,602) $ (831,699) (962,104)
Basic and diluted net
loss per common share $(.13) (.14) $(.06) (.07)
Weighted average number
ofcommon shares outstanding 13,812,559 13,569,465 13,812,559 13,812,559
See accompanying notes to consolidated financial statements.
RESEARCH FRONTIERS INCORPORATED
Consolidated Statements of Cash Flows
(Unaudited)
Six months ended
June 30,2006 June 30,2005
Cash flows from operating activities:
Net loss $(1,749,805)(1,902,602)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 17,378 22,279
Changes in assets and liabilities:
Royalty receivable (37,500) (110,750)
Prepaid expenses and other current assets 79,898 (71,060)
Deferred revenue 20,000 80,000
Accounts payable and accrued expenses (39,604) (184,402)
Net cash used in operating activities (1,709,633)(2,166,535)
Cash flows from investing activities:
Purchase of fixed assets (23,335) (15,213)
Net cash used in investing activities (23,335) (15,213)
Cash flows from financing activities:
Proceeds from issuances of common stock -- 5,000,000
Net cash provided by financing activities -- 5,000,000
Net increase (decrease) in
cash and cash equivalents (1,732,968) 2,818,252
Cash and cash equivalents
at beginning of year 3,644,685 2,602,063
Cash and cash equivalents
at end of period $1,911,717 5,420,315
See accompanying notes to consolidated financial statements.
RESEARCH FRONTIERS INCORPORATED
Notes to Consolidated Financial Statements
June 30, 2006
(Unaudited)
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 10-01 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 six months ended
June 30, 2006 are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 2006. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Annual Report on Form 10-K (Form
10-K) relating to Research Frontiers Incorporated (the Company) for
the fiscal year ended December 31, 2005.
Business
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;
eyewear products; and flat panel displays for electronic products.
SPD-Smart light control film is now being used in architectural,
automotive, marine, aerospace and appliance applications.
Patent Costs
The Company expenses costs relating to the development or
acquisition of patents due to the uncertainty of the recoverability of
these items.
Revenue Recognition
The Company has entered into a number of license agreements
covering its light control technology. The Company receives minimum
annual royalties under certain license agreements and records fee
income on a ratable basis each quarter. In instances when sales of
licensed products by its licensees exceed minimum annual royalties,
the Company recognizes fee income as the amounts have been 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.
Such excess amounts are recorded as deferred revenue and recognized
into income in future periods as earned.
Stock-Based Compensation
Prior to January 1, 2006, the Company accounted for stock-based
employee compensation under the intrinsic value method as outlined
in the provisions of APB Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations while disclosing pro-
forma net income and net income per share as if the fair value method
had been applied in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-
Based Compensation." Under the intrinsic value method, no
compensation expense was recognized if the exercise price of the
Company's employee stock options equaled or exceeded the market
price of the underlying stock on the date of grant. Since the Company
had issued all stock option grants with exercise prices equal to, or
greater than, the market value of the common stock on the date of
grant, through December 31, 2005 no compensation cost was
recognized in the consolidated statements of operations.
Effective January 1, 2006, the Company adopted SFAS No. 123(R),
"Share-based Payment." SFAS No. 123(R) replaces SFAS No. 123 and
supersedes APB Opinion No. 25. SFAS 123(R) 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. This statement was adopted using the modified prospective
method, which requires the Company to recognize compensation
expense on a prospective basis. Therefore, prior period financial
statements have not been restated. Under this method, in addition to
reflecting compensation expense for new share-based payment awards,
expense is also recognized to reflect the remaining vesting period of
awards that had been included in pro-forma disclosures in prior
periods. Since all options outstanding as of December 31, 2005 were
fully vested, and no new options were granted during the first six
months of 2006, there was no compensation expense recognized for
those options in the consolidated statement of operations for the six
months ended June 30, 2006. SFAS 123(R) also requires that tax
benefits related to stock option exercises be reflected as financing cash
inflows instead of operating cash inflows. For the six months ended
June 30, 2006, this new treatment resulted in no change in cash flows
from financing activities or cash flows from operating activities.
Because there were no options granted during the quarter ended June
30, 2006, there was no impact on net loss for the three months ended
June 30, 2006 regardless of whether the Company had consistently
measured the compensation cost for the Company's stock option grants
under the fair value method adopted in fiscal 2006. The Company
expects that the adoption of SFAS No. 123(R) could have a material
effect on the Company's consolidated financial statements, depending
upon the number and terms of stock options issued by the Company in
the future. The adoption of SFAS No. 123(R) had no impact on
previously granted options, since all options granted prior to January
1, 2006 are fully vested.
In 1998, the shareholders approved a stock option plan (1998 Stock
Option Plan) which provides for the granting of both incentive stock
options at the fair market value at the date of grant and nonqualified
stock options at or below the fair market value at the date of grant to
employees or non-employees who, in the determination of the Board
of Directors, have made or may make significant contributions to the
Company in the future. The Company may also award stock
appreciation rights or restricted stock under this plan. The Company
initially reserved 540,000 shares of its common stock for issuance
under this plan. In 1999, the Company's shareholders approved an
additional 545,000 shares for issuance under this Plan, and in each of
2000 and 2002, the Company's shareholders approved an additional
600,000 shares for issuance under this Plan. In 2006, the Company's
shareholders approved an additional 675,000 shares for issuance under
this Plan. As of June 30, 2006, awards for 816,779 shares of common
stock were available for issuance under this Plan.
At the discretion of the Board of Directors, options expire in ten years
or less from the date of grant and are generally fully exercisable upon
grant but in some cases may be subject to vesting in the future. Full
payment of the exercise price may be made in cash or in shares of
common stock valued at the fair market value thereof on the date of
exercise, or by agreeing with the Company to cancel a portion of the
exercised options. When an employee exercises a stock option through
the surrender of options held, rather than of cash for the option
exercise price, compensation expense is recorded in accordance with
APB Opinion No. 25. Accordingly, compensation expense is recorded
for the difference between the quoted market value of the Company's
common stock at the date of exchange and the exercise price of the
option.
The following summarizes the shares of common stock under option
for all plans at December 31, 2005 and June 30, 2006, and the activity
with respect to options for the six months ended June 30, 2006:
Number of Shares Weighted Average
Subject to Option Exercise Price
Balance at December 31, 2005 2,690,993 $ 11.45
Granted -- --
Cancelled (126,400) $ 9.63
Exercised -- $ --
Balance at June 30, 2006 2,564,5493 $ 11.52
The following table summarizes information about stock options
at June 30, 2006:
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Options Contractual Exercise Shares Exercise
Exercise Price Outstanding Life (Years) Price Exercisable Price
$3.00 to $6.00 388,433 7.36 $ 5.86 388,433 $ 5.86
$6.01 to $7.50 636,750 2.88 $ 7.12 636,750 $ 7.12
$7.51 to $9.00 457,800 2.95 $ 8.38 457,800 $ 8.38
$9.01 to $12.00 328,060 6.85 $10.72 328,060 $ 10.72
$12.01 to $15.00 319,250 5.65 $13.30 319,250 $ 13.30
$15.01 to $19.00 107,000 4.42 $18.99 102,000 $ 19.00
$19.01 to $37.03 327,300 4.70 $27.77 327,300 $ 27.77
2,564,593 4.72 $11.52 2,559,593 $ 11.50
During 2005, the Company issued options to a consultant to purchase
500 shares of common stock at an exercise price of $5.60 per share
and recorded $1,483 of non-cash expense in connection with the
issuance of these options.
Shareholders' Equity
Issuance of Common Stock
For the six months ended June 30, 2005, the Company received
$5,000,000 of net cash proceeds from the issuance to institutional
investors of one million shares of its common stock and the issuance
of five-year warrants to purchase 200,000 shares of common stock at
an exercise price of $7.50 per share.
Treasury Stock
The Company did not repurchase any of its stock during the six months
ended June 30, 2006 or 2005.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
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 note 2 to our consolidated financial statements, "Summary of
Significant Accounting Policies" contained in the Company's Annual
Report on Form 10-K.
The Company has entered into a number of license agreements
covering potential products using the Company's SPD technology.
The Company receives minimum annual royalties under certain license
agreements and records fee income on a ratable basis each quarter. In
instances when sales of licensed products by its licensees exceed
minimum annual royalties, the Company recognizes fee income as the
amounts have been 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.
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 had been used
in the current period, stock-based compensation expense could have
been materially impacted. Furthermore, if management uses different
assumptions in future periods, stock-based compensation expense
could be materially impacted in future years.
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 accordance with Emerging Issues Task Force
Issue 96-18, Accounting for Equity Instruments that are Issued to
Other than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services, the Company would be required to record
consulting expenses based upon the fair value of such options or
warrants on the date that such options or warrants vest as determined
using a Black-Scholes option pricing model. Depending upon the
difference between the exercise price and the market price of the
Company's common stock on the date that such options or warrants
vest, the amount of non-cash expenses that could be recorded as a
result of the vesting of such options or warrants can be material.
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. An example
of a critical estimate is the full valuation allowance for deferred taxes
that was recorded based on the uncertainty that such tax benefits will
be realized in future periods.
Results of Operations for the Six Month Periods Ended June 30, 2006 and 2005
The Company's fee income from licensing activities for the first six
months of 2006 was $90,139, as compared to $78,242 for the first six
months of 2005. This difference in fee income was primarily the result
of the timing and amount of minimum annual royalties paid, and the
date of receipt of such payment on certain license agreements, by end-
product licensees. Certain license fees, which are paid to the Company
in advance of the accounting period in which they are earned resulting
in the recognition of deferred revenue for the current accounting
period, 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.
Operating expenses decreased by $16,497 for the first six months of
2006 to $1,294,866 from $1,311,363 for the first six months of 2005.
This decrease was primarily the result of lower insurance and payroll
costs, and lower depreciation expenses and stock listing fees, partially
offset by higher marketing and consulting fees.
Research and development expenditures decreased by $135,236 to
$593,558 for the first six months of 2006 from $728,794 for the first
six months of 2005. This decrease was primarily the result of
decreased payroll, depreciation, materials, consulting and insurance
expenses.
The Company's net investment income for the first six months of 2006
was $48,480, as compared to net investment income of $59,313 for the
first six months of 2005. This difference was primarily due to lower
cash balances available to invest partially offset by higher interest
rates during 2006.
As a consequence of the factors discussed above, the Company's net
loss was $1,749,805 ($0.13 per common share) for the first six months
of 2006 as compared to $1,902,602 ($0.14 per common share) for the
first six months of 2005.
Results of Operations for the Three Month Periods Ended June 30, 2006 and 2005
The Company's fee income from licensing activities for the second
quarter of 2006 was $63,889, as compared to $36,992 for the second
quarter of 2005. This difference in fee income was primarily the result
of new license agreements entered into, the timing and amount of
minimum annual royalties paid, and the date of receipt of such
payment on certain license agreements, by end-product licensees.
Certain license fees, which are paid to the Company in advance of the
accounting period in which they are earned resulting in the recognition
of deferred revenue for the current accounting period, 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.
Operating expenses decreased by $58,243 for the second quarter of
2006 to $658,204 from $716,447 for the second quarter of 2005. This
decrease was primarily the result of lower insurance, consulting,
marketing, and payroll expenses, and lower stock listing fees, partially
offset by higher marketing expenses.
Research and development expenditures decreased by $57,067 to
$262,658 for the second quarter of 2006 from $319,725 for the second
quarter of 2005. This decrease was primarily the result of decreased
payroll, insurance, and depreciation expenses, and lower materials
costs.
The Company's net investment income for the second quarter of 2006
was $25,274, as compared to net investment income of $37,076 for the
second quarter of 2005. This difference was primarily due to lower
cash balances available to invest, partially offset by higher interest
rates during 2006.
As a consequence of the factors discussed above, the Company's net
loss was $831,699 ($0.06 per common share) for the second quarter
of 2006 as compared to $962,104 ($0.07 per common share) for the
second quarter of 2005.
Financial Condition, Liquidity and Capital Resources
During the first six months of 2006, the Company's cash and cash
equivalent balance decreased by $1,732,968 principally as a result of
cash used to fund the Company's operating activities of $1,709,633. At
June 30, 2006, the Company had working capital of $1,756,380 and
its shareholders' equity was $1,896,449.
The Company occupies premises under an operating lease agreement
which expires on January 31, 2014 and requires minimum annual rent
which rises over the term of the lease to approximately $138,269.
In February 2005, the Company raised $5 million in net proceeds in
connection with the registered sale to institutional investors of one
million shares of its common stock and the issuance of five-year
warrants to purchase 200,000 shares of common stock at an exercise
price of $7.50 per share.
The Company expects to use its cash to fund its research and
development of SPD light valves 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, 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. Based
upon existing levels of cash expenditures, existing cash reserves and
budgeted revenues, the Company believes that it would not require
additional funding until the first quarter of 2007. There can be no
assurance 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.
New Accounting Standards
In December 2004, the Financial Accounting Standards Board,
or FASB, issued SFAS No. 123R "Share Based Payment," which
replaces SFAS No. 123 and supersedes APB No. 25. SFAS No. 123R
requires that the cost resulting from all share-based payment
transactions be recognized in the consolidated financial statements.
This statement applies to all share-based payment transactions in
which an entity acquires goods or services by issuing its shares,
options or other equity instruments. This statement establishes fair
value as the measurement objective in accounting for share-based
payment arrangements and requires all entities to apply a
fair-value-based measurement method in accounting for share-based
payment transactions with employees, except for equity instruments
held by employee share ownership plans. This statement is effective as
of the beginning of the first annual reporting period that begins after
June 15, 2005, which was the Company's first fiscal quarter of 2006.
The Company expects that the adoption of SFAS No. 123R could have
a material effect on the Company's consolidated financial statements,
depending upon the number and terms of stock options issued by the
Company in the future. The adoption of SFAS No. 123R had no
impact on previously granted options, since all options granted prior
to January 1, 2006 are fully vested.
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, 2005. There has been no material change in the
disclosure regarding market risk.
Item 4. Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form
10-Q, the Company carried out an evaluation, under the supervision
and with the participation of the Company's management, including
the Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of the Company's disclosure
controls and procedures pursuant to Exchange Act Rule 13a-15. Based
upon that evaluation, the Company's Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls
and procedures are effective in timely alerting them to material
information relating to the Company (including its consolidated
subsidiary) required to be included in the Company's periodic SEC
filings. There were no changes in the Company's internal control over
financial reporting during the quarterly period ended June 30, 2006
that has materially affected, or is reasonably likely to materially affect,
the Company's internal control over financial reporting.
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 4. Submission of Matters to a Vote of Security-Holders
The Annual Meeting of Stockholders of Research Frontiers
Incorporated was held on June 8, 2006. Listed below is a summary of
how the 13,026,601 shares voted at the Annual Meeting on the various
proposals voted upon and adopted at the Annual Meeting. For the
election of Joseph M. Harary as a Class I member of the Company's
Board of Directors, 12,318,217 shares were voted in favor of election,
and 708,384 votes were withheld. For the ratification of the
appointment of BDO Seidman, LLP as Independent Registered Public
Accountants for the 2006 fiscal year, 12,828,376 shares were voted in
favor of appointment, 131,219 shares were voted against, and 67,006
shares abstained from voting. For the amendment to the Company's
1998 Stock Option Plan to increase the shares issuable thereunder by
675,000 shares, 3,615,833 shares were voted in favor of the
amendment, 1,843,776 shares were voted against, and 79,145 shares
abstained from voting.
Item 6. Exhibits
31.1 Rule 13a-14(a)/15d-14(a) Certification of Robert L. Saxe-Filed herewith.
31.2 Rule 13a-14(a)/15d-14(a) Certification of Joseph M. Harary-Filed herewith.
32.1 Section 1350 Certification of Robert L. Saxe- Filed herewith.
32.2 Section 1350 Certification of Joseph M. Harary- Filed herewith.
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.
RESEARCH FRONTIERS INCORPORATED
(Registrant)
/s/ Robert L. Saxe
Robert L. Saxe, Chairman
(Principal Executive Officer)
/s/ Joseph M. Harary
Joseph M. Harary, President and Treasurer
(Principal Financial, and Accounting Officer)
August 10, 2006