Notes to Financial Statements

December 31, 1998, 1997 and 1996

(1) Business

Research Frontiers Incorporated (the "Company" or "Research Frontiers") operates in a single 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 a suspension of microscopic particles that is either in the form of a liquid suspension or a film, which is usually enclosed between two glass or plastic plates having transparent, electrically conductive coatings on the facing surfaces thereof. At least one of the two plates is transparent.

The Company has historically utilized its cash and the proceeds from maturities of its investments 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, 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. Based upon existing levels of expenditures, existing cash reserves and budgeted revenues, the Company believes that it would not require additional funding for at least the next two to three years. 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 commercialization of products using the Company's technology by the Company's licensees and payments of continuing royalties on account thereof.

(2) Summary of Significant Accounting Policies

(a) Cash and Cash Equivalents

The Company considers securities purchased with original maturities of three months or less to be cash equivalents. Cash equivalents consist of short-term investments in money market accounts at December 31, 1998 and 1997.

(b) Marketable Investment Securities

The Company accounts for its investments in marketable securities under the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investment in Debt and Equity Securities" (Statement 115). As of July 1, 1997 the Company transferred its marketable securities from classification as trading securities to held-to- maturity securities, as management intends and has the ability to hold such securities until their maturity. In accordance with Statement 115, held-to- maturity securities are recorded at cost and trading securities are recorded at fair value with unrealized holding gains and losses recorded in earnings. Dividend and interest income are recognized when earned. Cost is maintained on a specific identification basis for purposes of determining realized gains and losses on sales of investments.

(c) Fixed Assets

Fixed assets are carried at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets.

(d) Fee Income

Fee income represents amounts earned by the Company under various license and other agreements (note 9) relating to technology developed by the Company.

(e) Basic and Diluted Loss Per Common Share

In February 1997, the Financial Accounting Standards Board issued Statement 128, "Earnings Per Share" (Statement 128). Statement 128 replaces the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Basic earnings per share excludes any dilution. It is based upon the weighted average number of common shares outstanding during the period. Dilutive earnings 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 earnings per share equals basic earnings per share for each of the years in the three-year period ended December 31, 1998 because all common stock equivalents (i.e. options and warrants) were antidilutive in those periods.

(f) Research and Development Costs

Research and development costs are charged to expense as incurred.

(g) Patent Costs

The Company expenses costs relating to the development of patents due to the uncertainty of the recoverability of these items.

(h) Use of Estimates

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates.

(i) Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

(j) Fair Value of Financial Instruments

The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties. The carrying amounts of cash and accounts payable approximate fair value because of the short maturity of those instruments.

The fair value of the long-term notes receivable from officers approximates the carrying value as their stated interest rate, the broker call rate, is similar to other rates currently offered by local brokerage institutions for loans of similar terms to individuals with comparable credit risk.

(k) Stock Option Plan

The Company applies the intrinsic value-based method of accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25 "Accounting for Stock Issued to Employees," and related interpretations, in accounting for its fixed plan stock options. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price.

(l) Reclassifications

Certain reclassifications have been made to the 1997 and 1996 financial statements to conform to the 1998 presentation.

(m) Comprehensive Income

Effective January 1, 1998, the Company adopted the Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This Statement requires that companies disclose comprehensive income, which includes net income, foreign currency translation adjustments, minimum pension liability adjustments, and unrealized gains and losses on marketable securities classified as available-for-sale. Because the Company did not have any foreign currency translation adjustments, minimum pension liability adjustments, or unrealized gains or losses on marketable securities classified as available-for-sale, for the years ended December 31, 1998, 1997 and 1996, comprehensive loss equaled the net loss of $2,617,941, $3,229,445, and $2,474,838, respectively.

(n) Deferred Revenue

The Company has entered into a number of license agreements covering potential products. The Company receives minimum annual royalties under certain license agreements and records fee income for the amounts earned by the Company. Certain of the fees are paid to the Company in advance of the period in which they are earned resulting in deferred revenue.

(3) Marketable Investment Securities

The fair value of marketable investment securities is based upon quoted market prices. The amortized cost, gross unrealized holding gains and fair value for the Company's securities at December 31, 1998 and 1997 were as follows:

                                                        Gross
                                           Amortized    Unrealized    Fair
                                           Cost         Holding Gain  Value

At December 31, 1998:

U.S. treasury securities (held-to-maturity) 1,189,386      2,828   1,192,214

At December 31, 1997:

U.S. treasury securities (held-to-maturity) 7,499,184     40,373   7,539,557

Maturities of all U.S. treasury securities were less than one year at December 31, 1998 and 1997.

(4) Notes Receivable from Officers

In 1993, the Company loaned one of its officers $50,000, and in 1994 the Company loaned several officers an aggregate of $529,144. In January 1995, one officer repaid in full two of these loans with an aggregate principal balance of $299,644 principally through the surrender of 45,545 shares of the Company's common stock. In 1996, the Company loaned several officers an aggregate of $350,000. In March and April 1997, the Company loaned several officers an aggregate of $1,390,000. During 1997, officers made aggregate principal payments of $592,353 against such loans of which $39,810 was paid in cash and $552,543 was paid through the surrender of the Company's common stock. During 1998, officers made aggregate principal payments of $542,186 against such loans of which $40,000 was paid in cash and $502,186 was paid through the surrender of the Company's common stock. In connection with the aforementioned loan repayments, the Company recorded $50,968, $68,810, and $211,360 in interest income in 1998, 1997 and 1996, respectively, of which $43,367, $8,086, and $211,360 was paid through the surrender of the Company's common stock in 1998, 1997 and 1996, respectively. It is the Company's policy to record interest income on these notes as received.

Each of the aforementioned loans are due in January 2000. The loans relate to the purchase of common stock of the Company; are collateralized by the pledge of shares of common stock of the Company (note 11); may be prepaid in part or in full without notice or penalty; are represented by a promissory note which bears interest at a rate per annum equal to the broker call rate (6.50% at December 31, 1998 and 7.25% at December 31, 1997) in effect on the first day of each calendar quarter; and permit repayment of the loan by delivery of securities of the Company having a fair market value equal to the balance of the loan outstanding.

(5) Fixed Assets

Fixed assets and their estimated useful lives, are as follows:

                                 1998         1997     Estimated useful life

Equipment and furniture    $  766,610      662,162     5 years
Leasehold improvements        228,076      195,055     Life of lease or
                              994,686      857,217     estimated life if shorter

Less accumulated depreciation
   and amortization           725,602      629,215
                           $  269,084      228,002

(6)   Accrued Expenses

Accrued expenses consist of the following at December 31, 1998 and 1997:

                                              1998          1997
Payroll, bonuses and related benefits     $ 75,690       276,218
Professional services                       24,000        17,750
Other                                        9,444         2,978
                                     $     109,134       296,946

(7) Income Taxes

There was no income tax expense in 1998, 1997 and 1996 due to losses incurred by the Company.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets at December 31, 1998 and 1997 are presented below.

                                            1998            1997
Deferred tax assets:
 Net operating loss carryforwards      $8,525,000          7,600,000
 Research and other credits               525,000            450,000
    Total gross deferred tax assets     9,050,000          8,050,000

 Less valuation allowance               9,050,000          8,050,000
                                               --                 --

The Company has recorded a valuation allowance against the deferred tax assets as they will not be realized unless the Company achieves profitable operations in the future.

At December 31, 1998, the Company had a net operating loss carryforward for federal income tax purposes of approximately $21,345,000, varying amounts of which will expire in each year from 1999 through 2018. Research and other credit carryforwards of $525,000 are available to the Company to reduce income taxes payable in future years principally through 2018.

(8) Shareholders' Equity

(a) Sale of Common Stock and Warrants

During 1996, the Company received $1,440,462 of net cash proceeds from the issuance of 250,955 shares of common stock, as follows: a private placement of 172,019 shares of common stock resulting in proceeds of $1,187,511; the issuance of 49,687 shares of common stock from the exercise of warrants resulting in proceeds of $94,999; and the issuance of 29,249 shares of common stock from the exercise of unit purchase warrants resulting in proceeds of $157,952. In addition, 54,066 shares of common stock were issued, of which 43,125 shares were exercised through the surrender of 9,357 shares of common stock and 10,941 shares for which payment was received through the cancellation of 37,121 options resulting in compensation expense of $108,357.

During 1997, the Company received $5,857,791 of net cash proceeds from the issuance of 326,803 shares of common stock, as follows: a private placement of 91,668 shares of common stock resulting in proceeds of $475,004; the issuance of 26,750 shares of common stock from the exercise of warrants resulting in proceeds of $187,250; net proceeds of $4,626,985 from the issuance of a redeemable prepaid warrant (note 8(e)) with the issuance of 122,685 shares of common stock from the partial exercise of this warrant, and the issuance of 85,700 shares of common stock from the exercise of options resulting in net proceeds of $568,552. In addition, 16,695 shares were issued through the cancellation of 7,397 options, resulting in compensation expense of $133,555; and 8,800 shares issued to acquire certain technology pursuant to a license agreement.

During 1998, the Company received $460,476 of net cash proceeds from the issuance of 70,489 shares of common stock from the exercise of options and warrants, as follows: the issuance of 36,600 shares of common stock from the exercise of options resulting in net proceeds of $217,476; and the issuance of 33,889 shares of common stock from the exercise of warrants resulting in net proceeds of $233,000. The Company also issued 688,673 shares of common stock pursuant to the exercise of the remaining outstanding redeemable prepaid warrant. In addition, the Company received $10,000 from the issuance of the Class A Warrant and Class B Warrant. (note 8(f)).

(b) Options, Warrants and Unit Purchase Warrants

(i) Options

In 1992, the shareholders approved a stock option plan (1992 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 has reserved 468,750 shares of its common stock for issuance under this plan. In 1994 and 1996, the Company's shareholders approved an additional 300,000 shares and 450,000 shares, respectively, for issuance under this plan. As of December 31, 1998, no options were available for issuance under this Plan.

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 has reserved 540,000 shares of its common stock for issuance under this plan. As of December 31, 1998, awards for 76,248 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. 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. During 1998, options were exercised that resulted in the issuance of 36,600 shares of common stock.

Activity in stock options is summarized below:

                              Number of Shares       Weighted Average
                              Subject to Option      Exercise Price

Balance at December 31, 1995      764,940                $  7.83
   Granted                        327,400                $  8.24
   Cancelled                      (52,371)               $  3.14
   Exercised                     ( 54,066)               $  2.98

Balance at December 31, 1996      985,903                $  8.20
   Granted                        195,800                $  6.00
   Cancelled                       (8,397)               $  3.77
   Exercised                     (102,395)               $  5.95

Balance at December 31, 1997    1,070,911                $  8.05
   Granted                        526,300                $  7.23
   Cancelled                      (65,452)               $  8.53
   Exercised                     ( 36,600)               $  5.94

Balance at December 31, 1998    1,495,159                $  7.79

The outstanding options have a weighted-average contractual life of 7.71 years at December 31, 1998. At December 31, 1998, the number of options exercisable was 1,467,359 at a weighted average exercise price of $7.80 per share. These options are exercisable at a range of prices from $3.73 to $14.85 per share. The remaining 27,800 options become exercisable during 1999.

The per share weighted average fair value of warrants issued to directors and stock options granted during 1998, 1997 and 1996 were approximately $3.27, $2.92 and $3.51, respectively, on the date of grant using the Black- Scholes option-pricing model with the following weighted average assumptions:

                  Expected          Risk-Free       Expected Stock Expected Life
Grant Date        Dividend Yield    Interest Rate   Volatility     in Years
December 1998          0 %             4.540%         57.980%          3.50
August 1998            0 %             5.135%         55.330%          3.50
June 1998              0 %             5.505%         56.582%          3.50
June 1997              0 %             6.260%         57.430%          3.75
November 1996          0 %             5.790%         49.920%          3.50
June 1996              0%              6.530%         50.820%          3.50

The Company applies APB Opinion No. 25 in accounting for its stock option plans and, accordingly, no compensation cost has been recognized for its stock options and warrants in the financial statements as the exercise price of such instruments were equal to the fair value of the Company's common stock at the date of grant. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company's net loss and net loss per share would have been increased to the pro forma amounts indicated below:

                                           1998          1997          1996

Net loss                As reported  $ (2,617,941) $ (3,229,445) $ (2,474,838)
                        Pro forma    $ (4,409,868) $ (3,731,702) $ (3,747,886)

Basic and diluted net
 loss per common share  As reported       $ (0.24)      $ (0.32)      $ (0.25)
                        Pro forma         $ (0.41)      $ (0.37)      $ (0.38)

Pro forma net loss reflects only options and warrants granted since January 1, 1995. Therefore, the full impact of calculating compensation cost for stock options and warrants under Statement 123 is not reflected in the pro forma net loss amounts presented above because compensation costs for options and warrants granted prior to January 1, 1995 were not considered.

(ii) Warrants

Activity in warrants is summarized below, excluding the effect of the redeemable prepaid warrant (note 8(e)):

                                       Number of Shares           Exercise
                                 Underlying Warrants Granted      Price

Balance at December 31, 1995             262,412                  1.47-13.50
   Exercised                             (49,687)                  1.47-4.00
   Terminated                           (100,000)                         --
   Issued                                 98,100 (a)              7.38-11.63

Balance at December 31, 1996             210,825                  5.88-13.50
   Exercised                             (26,750)                       7.00
   Terminated                            (13,125)                       6.43
   Issued                                153,778 (b)               6.00-9.60

Balance at December 31, 1997             324,728                 $5.88-13.50
   Exercised                             (33,889)                  7.00-7.20
   Terminated                            (50,000)                 8.72-11.63
   Issued                                 65,500 (c)                    8.25
Balance at December 31, 1998             306,339                 $5.88-13.50

(a) Represents warrants to purchase 5,600 shares at $9.625 per share and 30,000 shares at $7.375 per share issued to two directors of the Company and redeemable warrants to purchase 31,250 shares at $8.72 per share and 31,250 shares at $11.625 per share issued to institutional investors in a private placement of the Company's common stock.

(b) Represents warrants to purchase 26,000 shares at $6.00 per share issued to two directors of the Company; redeemable warrants to purchase 13,889 shares at $7.20 per share and 13,889 shares at $9.60 per share issued to institutional investors in a private placement of the Company's common stock; and warrants to purchase 100,000 shares at $7.00 per share in payment for investor relations services provided to the Company, which vested 25,000 shares per quarter commencing April 1, 1997.

(c) Represents Class B Warrant to purchase 65,500 shares at $8.25 per share issued to an institutional investor in a private placement. An additional 65,500 shares may be issuable under such Class B Warrant under certain conditions. See note 8(f).

Warrants generally expire from two to ten years from the date of issuance. At December 31, 1998, the number of warrants exercisable was 264,339 at a weighted average exercise price of $6.93 per share.

(iii) Unit Purchase Warrants

In connection with the 1991 public offering of the Company's common stock, 7,800 unit purchase warrants rights remained outstanding at the end of 1995. Such unit purchase warrants enable the holders to purchase 29,249 shares of common stock at an effective exercise price of $5.40 per share. During 1996 all of these unit purchase warrants were exercised.

(c) Treasury Stock

During 1998, the Company purchased in the open market and subsequently retired 118,600 shares of treasury stock with an aggregate cost of $747,716. During 1997, the Company purchased in the open market and subsequently retired 17,000 shares of treasury stock with an aggregate cost of $126,637. During 1996, the Company purchased in the open market and subsequently retired 10,000 shares of treasury stock with an aggregate cost of $78,841.

(d) Restricted Stock

In connection with a license agreement entered into during 1996 pursuant to which certain technology was licensed to the Company, the Company agreed to issue to the licensor 8,800 shares of its common stock as a licensing fee. These shares, which were issued in 1997, were discounted based upon restrictions on transferability and $46,970 was charged to expense in 1996.

(e) Redeemable Prepaid Warrant

In October 1997, a group of institutional investors invested $5,000,000 in equity capital through the private placement of a redeemable prepaid common stock warrant. The warrant, which is redeemable by the Company or the investors under certain defined circumstances, is exercisable over its five-year term only in the form of issuance of common stock at an exercise price which fluctuates with market conditions. The net proceeds of the private placement after deducting professional fees of $373,015 were $4,626,985. This redeemable prepaid warrant was fully exercised by the holders by July 22, 1998 and is no longer outstanding. In connection with the redeemable prepaid warrant, 688,673 and 122,685 shares of common stock were issued in 1998 and 1997, respectively.

(f) Class A and Class B Warrants

On October 1, 1998, the Company announced that Ailouros Ltd., a London-based institutional money management fund, has committed to purchase up to $15 million worth of common stock of Research Frontiers through December 31, 2001. This commitment is in the form of a Class A Warrant issued to Ailouros Ltd. which gives Research Frontiers the option in any three-month period to deliver a put notice to Ailouros requiring them to purchase an amount of common stock specified by Research Frontiers at a price equal to the greater of (A) 92% of the seven-day average trading price per share of common stock, or (B) a minimum or "floor" price per share set by Research Frontiers from time to time. The pricing is subject to an overall cap of $15 per share. However, Research Frontiers is not required to sell any shares under the agreement. Before the beginning of each of a series of three-month periods specified by the Company, the Company determines the amount of common stock that the Company wishes to issue during such three-month period. The Company also sets the minimum selling or "floor" price, which can be reset by the Company in its sole discretion prior to the beginning of any subsequent three-month period. Therefore, at the beginning of each three-month period, the Company will determine how much common stock, if any, is to be sold (the amount of which can range from $0 to $1.5 million during such three-month period), and the minimum selling price per share.

In connection with the financing, the Company also issued Ailouros Ltd. a Class B Warrant which expires on September 30, 2008. The Class B Warrant is exercisable at $8.25 per share which represents 120% of average of the closing bid and ask price of the Company's common stock on the date of the Class B Warrant's issuance. The Class B Warrant is initially exercisable into 65,500 shares. If the Company has not sent Ailouros at least three put notices by December 31, 2001, under certain circumstances the Class B Warrant will be exercisable into an additional 65,500 shares. Ailouros paid the Company $10,000 upon issuance of the Class A Warrant and the Class B Warrant.

(9) License and Other Agreements

The Company has entered into a number of license agreements and one option agreement covering potential products using the Company's SPD technology. Although the Company may receive minimum annual royalties under certain of these licenses, to date no products have been sold resulting in earned royalties under these license agreements.

The following table summarizes the Company's license and option agreements as of December 31, 1998 and the year they were entered into:

Licensee or Optionee          Products Covered                      Territory

General Electric Company     SPD film for other licensees and       Worldwide
                             prospective licensees (1995)

Glaverbel, S.A.              Automotive vehicle rear-view mirrors,  Worldwide
                             transportation vehicle sun visors,    (except Korea
                             and architectural windows  (1996)      for windows)

Hankuk Glass Industries Inc. Broad range of SPD light control products Worldwide
                             including windows, flat panel displays,
                             automotive vehicle rear-view mirrors,
                             sun visors, and sunroofs; SPD film for
                             licensees and prospective licensees (1997)

Japan Steel Works Ltd. and   Windows (1989)                            Japan
Central Glass Company Ltd.

Material Sciences Corp.      Architectural and automotive windows,     Worldwide
                             SPD film for other licensees, prospective
                             licensees and architectural and automotive
                             window companies (1997)

Vision-Ease Lens Azusa, Inc. Eyewear (1997)                           Worldwide

Saint Gobain Vitrage, S.A.   Architectural Windows (option) (1994)    Worldwide
                                                                   (except Korea

and South America)

Sanyo Electric Co., Ltd. Flat panel displays (1995) Worldwide

Licensees will pay Research Frontiers a 3-10% royalty on the sale of licensed products, and may also be required to pay the Company minimum annual royalties. Research Frontiers' license agreements typically allow the licensee to terminate the license after some period of time, and give Research Frontiers only limited rights to terminate before the license expires. Most licenses are non-exclusive and generally last as long as the Company's patents remain in effect. The license granted to Hankuk Glass Industries is exclusive within Korea for certain applications through December 2004. Vision-Ease's license for eyewear is exclusive during the term of the license.

(10) Commitments

The Company has an employment agreement with one of its officers which provides for an annual base salary of $345,515 through December 31, 1999.

The Company occupies premises under an operating lease agreement which expires on January 31, 2004 and requires minimum annual rent which rises over the term of the lease to approximately $113,500. Rent expense, including other expenses, amounted to approximately $131,000, $127,000 and $139,000 for 1998, 1997 and 1996, respectively.

(11) Contingency

On March 25, 1999, the Company was served with a summons in an action brought in the Supreme Court of the State of New York, County of Nassau, by Jean Thompson in her individual capacity and as Executrix of the estate of Robert I. Thompson, a former officer and director of the Company. The action does not seek monetary damages and essentially seeks a declaration that certain common stock of the Company securing loans made to Mr. Thompson are not available as collateral to secure such loans. The Company has referred this matter to outside counsel and does not believe that the action has merit, or, if the declaratory relief sought in the action is granted, that this would have a material adverse impact on the financial position, operations or liquidity of the Company.

EXHIBIT 10.5.3

THIRD AMENDMENT TO LEASE

THIS AGREEMENT made the 14th day of July, 1998, by and between INDUSTRIAL & RESEARCH ASSOCIATES CO., with offices at 7600 Jericho Turnpike, Woodbury, New York 11797, hereinafter referred to as the "LANDLORD" and RESEARCH FRONTIERS INCORPORATED, with offices at 240 Crossways Park Drive, Woodbury, New York 11797, hereinafter referred to as the "TENANT".

W I T N E S S E T H :

WHEREAS, the parties have heretofore on or about the 7th day of November, 1986, entered into a certain agreement of lease which was amended the 26th day of November, 1991 and the 11th day of March, 1994, for certain premises located at 240 Crossways Park Drive, Woodbury, New York 11797 and

NOW, THEREFORE, in consideration of One Dollar and other good and valuable consideration, each in hand paid to the other, the receipt whereof is hereby acknowledged and in further consideration of the mutual covenants contained herein, it is agreed as follows:

FIRST: The term of this lease shall be extended for a period of five (5) years and shall terminate on January 31, 2004.

SECOND: LANDLORD, at LANDLORD'S sole cost and expense, shall provide all work as noted on the floor plan and work letter attached hereto as Exhibits "A" and "B" respectively. Such work shall be ready for occupancy approximately thirty (30) days after the commencement of the renovations at which time LANDLORD shall "substantially complete" in good workmanlike order and in compliance with all applicable laws, regulations, ordinances and building codes, the work as per the plan and work letter attached. "Substantially complete" shall mean to be so completed as to allow TENANT to lawfully occupy the premises and continue its normal course of business without interference by the LANDLORD'S workmen. All "Punch List" items (consisting of minor decorative items) shall be completed within thirty
(30) days of occupancy of the Demised Premises.

THIRD: Commencing the 1st day of February 1999, TENANT shall pay an Annual Basic Rent based upon the following schedule:

        TERM           BASIC ANNUAL RENT          MONTHLY RENT
02/01/99 - 01/31/00      $105,404.00               $8,783.67
02/01/00 - 01/31/01      $107,431.00               $8,952.58
02/01/01 - 01/31/02      $109,458.00               $9,121.50
02/01/02 - 01/31/03      $111,485.00               $9,290.42
02/01/03 - 01/31/04      $113,512.00               $9,459.33
(Replaces previous rent schedules.)

FOURTH: Section "Fifth" of the Second Amendment to Lease shall be revised to read as follows: "...TENANT shall pay to the LANDLORD on the first of each month the sum of $2,027.00 per month for taxes incurred..."

FIFTH: Should TENANT be desirous of any additional space within the building, TENANT shall notify the LANDLORD in writing. LANDLORD shall then respond within fifteen (15) days of receipt of said notice as to whether or not there shall be any space coming available within the building within the next six (6) month period. If any space shall become available within said six (6) month period, LANDLORD and TENANT shall meet in an effort to negotiate the applicable business terms for the TENANT'S expansion.

SIXTH: The foregoing provisions are intended to modify said lease only in the foregoing respects and such modifications and the terms hereof as herein set forth are to be strictly construed. It is further agreed that except as hereinabove provided all of the terms, covenants and conditions of said lease dated the 7th day of November, 1986 and amended the 26th day of November, 1991 and the 11th day of March, 1994, shall continue to remain in full force and effect as therein written and shall be read and construed together with this instrument.

IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals the day and year first above written.

INDUSTRIAL & RESEARCH ASSOCIATES CO.

By: /s/  Peter Tilles


RESEARCH FRONTIERS INCORPORATED

By: /s/ Robert L. Saxe
        Robert L. Saxe, President