Filed pursuant to Rule 424(b)(3)
Registration No. 333-222809
PROSPECTUS
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1,167,200 SHARES OF COMMON STOCK
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This prospectus relates to the resale by certain of our stockholders
named in the section of this prospectus titled “Selling Stockholders” (collectively, the “Selling Stockholders”)
of up to 1,167,200 shares (collectively, the “Shares”) of our common stock, par value $0.001. The Shares being
offered under this prospectus are comprised of:
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(a)
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445,600 shares of common stock that were purchased by the Selling Stockholders in transactions with us or with our affiliates pursuant to exemptions from the registration requirements of the Securities Act;
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(b)
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621,600 shares of common stock issuable upon the exercise of outstanding Series S Warrants allowing the holders to purchase shares of common stock at an exercise price of $3.42 per share through September 29, 2022; and
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(c)
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100,000 shares of common stock issuable upon the exercise of outstanding Series T Warrants allowing the holders to purchase shares of common stock at an exercise price of $1.70 per share through November 26, 2025.
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Although we will pay substantially all the
expenses incident to the registration of the Shares, we will not receive any proceeds from the sales by the Selling Stockholders.
We may however receive proceeds, if any, from the exercise of warrants. The Selling Stockholders and any underwriter, broker-dealer
or agent that participates in the sale of the Shares or interests therein may be deemed “underwriters” within the meaning
of Section 2(a)(11) of the Securities Act. Any discounts, commissions, concessions, profit or other compensation any of them earns
on any sale or resale of the shares, directly or indirectly, may be underwriting discounts and commissions under the Securities
Act. If a Selling Stockholders is determined to be an “underwriter” within the meaning of Section 2(a)(11) of the Securities
Act it will be subject to the prospectus delivery requirements of the Securities Act.
Our common stock is presently quoted for trading
under the symbol “WNDW” on the OTC Markets Group Inc.’s OTC Pink-Current Information tier (the “OTCPINK”). On February
16, 2021 the closing price of the common stock, as reported on the OTCPINK was $18.50 per share. Each of the Selling
Stockholders has advised us that he, she or it, will sell the Shares of common stock registered hereunder from time to time in
the open market, on the OTCPINK, in privately negotiated transactions or a combination of these methods, at market prices prevailing
at the time of sale, at prices related to the prevailing market prices, at negotiated prices, or otherwise as described under the
section of this prospectus titled “Plan of Distribution.”
The purchase of the Shares offered through
this prospectus involves a high degree of risk. Please refer to “Risk Factors” beginning on page 11.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of
this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is March 18, 2021
Table of Contents
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Page
Number
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ABOUT THIS PROSPECUTS
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3
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PROSPECTUS SUMMARY
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4
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THE OFFERING
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5
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SELECTED FINANCIAL DATA
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7
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RISK FACTORS
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8
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NOTE REGARDING FORWARD-LOOKING STATEMENTS
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27
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USE OF PROCEEDS
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28
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DETERMINATION OF OFFERING PRICE
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28
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MARKET PRICE OF AND DIVIDENDS ON OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
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29
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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32
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OUR BUSINESS
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41
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OUR MANAGEMENT
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47
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EXECUTIVE AND DIRECTOR COMPENSATION
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52
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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58
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CERTAIN RELATIONSHIPS, RELATED PARTY AND OTHER TRANSACTIONS
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59
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THE SELLING STOCKHOLDERS
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62
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PLAN OF DISTRIBUTION
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64
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DESCRIPTION OF OUR SECURITIES
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66
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DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES LAW VIOLATIONS
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68
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LEGAL MATTERS
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69
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EXPERTS
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69
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WHERE YOU CAN FIND ADDITIONAL INFORMATION
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70
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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71
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CONSOLIDATED FINANCIAL STATEMENTS
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About This Prospectus
All references in this prospectus to “we,”
“us,” “our,” “Company,” “our Company” and “SolarWindow” refer to SolarWindow
Technologies, Inc. and its consolidated subsidiaries.
You should rely only on the information contained
in this prospectus or any related prospectus supplement.
We and
the Selling Stockholders have not authorized anyone to provide you with information or to make any representations other than those
contained in this prospectus or in any free writing prospectuses prepared by or on behalf of us or to which we have referred you.
We and the Selling Stockholders take no responsibility for, and provide no assurance as to the reliability of, any other information
that others may give you. This prospectus is an offer to sell only the shares offered hereby and only under circumstances and in
jurisdictions where it is lawful to do so. You should assume that the information appearing in this prospectus is accurate as of
the date on the front cover of this prospectus only. Our business, financial condition, results of operations and prospects may
have changed since that date.
For investors
outside the United States: we and the Selling Stockholders have not done anything that would permit this offering or possession
or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States.
Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions
relating to the offering of the shares of common stock and the distribution of this prospectus outside the United States.
Trademarks
This prospectus contains references to our trademarks,
trade names and service marks, which are protected under applicable intellectual property laws and are our property. This prospectus
also contains trademarks, trade names and service marks of other companies, which are the property of their respective owners.
Solely for convenience, trademarks, trade names and service marks referred to in this prospectus may appear without the ®, ™ or
SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under
applicable law, our rights or the rights of the applicable licensor to these trademarks, trade names and service marks. We do not
intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display should
not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.
Market and Industry Data
Unless otherwise indicated, information contained
in this prospectus concerning our industry, competitive position and the markets in which we operate is based on information from
independent industry and research organizations, other third-party sources and management estimates. Management estimates are derived
from publicly available information released by independent industry analysts, subscription-based publications and other third-party
sources, as well as data from our internal research, and are based on assumptions made by us upon reviewing such data, and our
experience in, and knowledge of, such industry and markets, which we believe to be reasonable, but we have not independently verified
the accuracy of this information. Any industry forecasts are based on data (including third-party data), models and experience
of various professionals and are based on various assumptions, all of which are subject to change without notice. In addition,
projections, assumptions and estimates of the future performance of the industry in which we operate and our future performance
are necessarily subject to uncertainty and risk due to a variety of factors, including those described in “Risk Factors”
and “Special Note Regarding Forward-Looking Statements.” These and other factors could cause results to differ
materially from those expressed in the estimates made by the independent parties and by us.
This prospectus is not an offer to sell,
nor is it an offer to buy, these securities in any jurisdiction where the offer or sale is not permitted.
Prospectus Summary
This summary highlights certain information
that we present more fully in the rest of this prospectus. This summary does not contain all of the information you should consider
before investing in the securities offered pursuant to this prospectus. You should read the entire prospectus carefully, including
the “Risk Factors,” “Management's Discussion and Analysis of Financial Condition and Results of Operations”
and our financial statements and related notes, before making an investment decision.
Our Company
We were incorporated in the State of Nevada
on May 5, 1998, under the name “Octillion Corp.” On December 2, 2008, we amended our Articles of Incorporation to effect
a change of name to New Energy Technologies, Inc. Effective as of March 9, 2015, we amended our Articles of Incorporation to change
our name to SolarWindow Technologies, Inc.
Our executive office is located at 430 Park
Avenue, Suite 702, New York, New York 10022. Our telephone number is (800) 213-0689; our email is info@solarwindow.com. Our website
is www.solarwindow.com. Information contained on our web site (or any other website) does not constitute part of this prospectus.
Our operations are conducted primarily from
our offices in the Republic of South Korea, located at JA-1022HO 10F, 338, Gwanggyojungang-ro, Suji-gu, Yongin-si, Gyeonggi-do,
Republic of Korea (the “Korean Office”). Our staff in the Korean Office consists of four individuals, including John
Rhee, President and Director of both SolarWindow Technologies, Inc. and SolarWindow Asia Co., Ltd.
Our research and development activities are
conducted at the U.S. Department of Energy’s National Renewable Energy Laboratories in Golden, Colorado pursuant to a Cooperative
Research and Development Agreement.
All of our other officers, employees and consultants currently work
remotely.
Background
We are a pre-revenue company developing proprietary
transparent electricity-generating coatings, and methods for their application to various materials (“LiquidElectricity™
Coatings”). When applied to materials such as glass and plastics, our LiquidElectricity™ Coatings generate electricity
by harvesting light energy from natural sun, artificial light, and low, shaded, or reflected light conditions.
We apply ultra-thin layers of LiquidElectricity™
Coatings to rigid glass, and flexible glass and plastic surfaces where they transform otherwise ordinary surfaces into organic
photovoltaic devices. When applied to otherwise ordinary glass, for example, these coatings generate electricity, producing power
under natural, artificial, low, shaded, and reflected light conditions. Potential applications of our LiquidElectricity™
Coatings span multiple industries, including architectural, automotive, agrivoltaic (greenhouse agriculture), aerospace, commercial
transportation and marine.
We have achieved important milestones and overcome
major technical challenges in order to broaden the range of materials and products that we can coat to generate electricity. Our
goals in developing electricity-generating products have included ensuring transparency and esthetics, optimizing power generation,
and lowering the costs of our coating materials and their related application.
The subject of over
90 granted and in-process trademark and patent filings, our coatings and application processes and technologies can be applied
to generate electricity on building facades, balcony railings, curtain walls, skylights, and shading systems, as well as automotive,
truck, marine and aircraft applications, and consumer products and military uses.
Our research and development activities are
conducted through a Cooperative Research and Development Agreements with the U.S. Department of Energy’s National Renewable
Energy Laboratories in the United States; and, our executive management and operations are primarily supported by contract partners
and service providers, suppliers, part-time and full-time contract staff, and Advisors in the United States, Canada, and South
Korea.
To advance the technical development and subsequent
commercialization of our products, we are actively seeking technology and product licensing and joint venture arrangements with
commercial partners in the United States, South Korea, and elsewhere, who have established technical competencies, manufacturing
capabilities, market reach, and mature distribution networks.
Risk Factors
Our business operations are subject to numerous
risks, including the risk of delays in or discontinuation of our research and product development due to lack of financing, inability
to obtain necessary regulatory approvals to market the products, unforeseen safety issues relating to the products and dependence
on third party collaborators to conduct research and development of the products. Because we are an early-stage company with a
limited history of operations, we are also subject to many risks associated with early-stage companies. For a more detailed discussion
of some of the risks you should consider, you are urged to carefully review and consider the section entitled “Risk Factors”
beginning on page 11 of this prospectus.
The Offering
Securities Being Registered:
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Up to 1,167,200 shares of common stock, comprised of:
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(a) 445,600 shares of common stock that were purchased by the Selling Stockholders in transactions with us or with our affiliates pursuant to exemptions from the registration requirements of the Securities Act;
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(b) 621,600 shares of common stock issuable upon exercise outstanding Series S Warrants allowing the holders to purchase shares of common stock at an exercise price of $3.42 per share through September 29, 2022; and
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(c) 100,000 shares of common stock issuable upon exercise of outstanding Series T Warrants allowing the holders to purchase shares of common stock at an exercise price of $1.70 per share through November 26, 2025.
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Offering Price:
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Each of the Selling Stockholders will determine at what price hem she or it may sell the Shares, and such sales may be made at prevailing market prices, or at privately negotiated prices.
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Selling Stockholders:
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The Selling Stockholders are existing stockholders who purchased or otherwise acquired shares, or warrants to purchase shares, of our common stock from us in private transactions pursuant to exemptions from the registration requirements of the Securities Act. Please refer to the section titled “Selling Stockholders” of this prospectus.
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Shares Outstanding Prior to Completion of the Offering:
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As of the date of this prospectus there were 53,186,799shares of our common stock issued and outstanding.
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Shares Outstanding upon Closing of the Offering:
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Assuming all shares registered for resale are sold, including the maximum number of shares issued upon exercise of the Series S Warrants and Series T Warrants, upon closing of this offering there will be 53,893,533 shares issued and outstanding (without giving effect to the exercise of any outstanding options or warrants).
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Authorized Capital Stock:
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Our authorized capital stock consists of stock of 300,000,000 shares of common stock, each with a par value of $0.001, and 1,000,000 shares of preferred stock, each with a par value of $0.10. No preferred shares were issued and outstanding.
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OTCPINK Symbol:
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WNDW
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Transfer Agent:
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Worldwide Stock Transfer, LLC, One University Plaza, Suite 505, Hackensack, NJ 07601.
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Risk Factors:
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Our business operations are subject to numerous risks, including the risk of delays in or discontinuation of our research and product development due to lack of financing, inability to obtain necessary regulatory approvals to market the products, unforeseen safety issues relating to the products and dependence on third party collaborators to conduct research and development of the products. Because we are an early-stage company with a limited history of operations, we are also subject to many risks associated with early-stage companies. For a more detailed discussion of some of the risks you should consider, you are urged to carefully review and consider the section titled “Risk Factors” of this prospectus.
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Use of Proceeds:
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Although we will pay substantially all the expenses incident to the registration of the Shares, we will not receive any proceeds from the sales by the Selling Stockholders.
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Duration of Offering:
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Pursuant to the terms of applicable registration rights agreements between us and the Selling Stockholders (the “Registration Rights Agreement”) we agreed to register for resale all of the shares issued to such Selling Stockholders, including shares issuable upon exercise of warrants purchased by them from us in offerings exempt from the registration requirements of the Securities Act, and to keep the registration statements, of which this prospectus is a part of, until the earlier of: (a) the date such Selling Stockholders securities have been sold in accordance with this prospectus; (b) such securities become eligible for resale without volume or manner-of-sale restrictions and without current public information pursuant to Rule 144 as set forth in a written opinion letter to such effect, addressed, delivered and acceptable to our transfer agent as reasonably determined by us, upon the advice of our counsel; or (c) such securities have otherwise been disposed of by the investor pursuant to an exemption from the registration requirements of the Securities Act.
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Selected Financial Data
The following tables set forth a summary of
certain selected consolidated financial data for the three months ended November 30, 2020 and 2019 and for the fiscal
years ended August 31, 2020 and 2019. This information is derived from our consolidated financial statements. Historical results
are not necessarily indicative of the results that may be expected for any future period. The consolidated financial data below
should be read in conjunction with “Management's Discussion and Analysis of Financial Condition and Results of Operations”
and the consolidated financial statements and notes included elsewhere in this prospectus.
Statements of Operations Data
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For the Three Months
Ended
November 30, 2020
Unaudited
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For the Three Months
Ended
November 30, 2019
Unaudited
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Revenue
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$
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-
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$
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-
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Loss from operations
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$
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(2,547,649
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$
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(1,199,781
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Net loss
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$
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(2,537,035
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$
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(1,105,278
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Basic and diluted net loss per share
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$
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(0.05
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$
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(0.02
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For the Year Ended
August 31,
2020
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For the Year Ended
August 31,
2019
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Revenue
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$
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-
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$
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-
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Loss from operations
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$
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(7,603,463
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$
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(6,410,865
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Net loss
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$
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(7,353,062
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$
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(6,887,678
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Basic and diluted net loss per share
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$
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(0.14
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$
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(0.14
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Weighted average shares outstanding used in basic and diluted net loss per share calculation
Balance Sheet Data
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As of
November 30,
2020
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As of
August 31,
2020
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As of
August 31,
2019
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Cash and cash equivalents
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$
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8,549,510
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$
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14,151,523
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$
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16,604,011
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Working capital
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$
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13,897,863
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$
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14,590,959
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$
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17,053,071
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Total assets
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$
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15,408,126
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$
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16,176,308
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$
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18,668,497
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Total liabilities
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$
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136,223
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$
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209,179
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$
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221,215
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Total Stockholders’ equity
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$
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15,271,903
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$
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15,967,129
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$
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18,447,282
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Risk Factors
The following risk factors and the forward-looking
statements elsewhere in this prospectus should be read carefully in connection with evaluating the business of the Company. A
wide range of events and circumstances could materially affect our overall performance and our results of operations, and therefore,
an investment in us is subject to risks and uncertainties. In addition to the important factors affecting specific business operations
and the financial results of those operations identified elsewhere in this prospectus, the following important factors, among others,
could adversely affect our operations. While each risk is described separately below, some of these risks are interrelated and
it is possible that certain risks could trigger the applicability of other risks described below. Also, the risks and uncertainties
described below are not the only ones that we face. Additional risks and uncertainties not presently known to us, or that are currently
deemed immaterial, could also potentially impair our overall performance, the performance of particular businesses and our results
of operations. These risk factors may be amended, supplemented or superseded from time to time in filings and reports that we file
with the SEC in the future.
Risks Related to the Covid-19 Pandemic
A novel strain of coronavirus, the COVID-19
virus, may adversely affect our business operations and financial condition.
In December 2019, an outbreak of the COVID-19
virus was reported in Wuhan, China. On March 11, 2020, the World Health Organization declared the COVID-19 virus a global pandemic
and on March 13, 2020, President Donald J. Trump declared the virus a national emergency in the United States. This highly contagious
disease has spread to most of the countries in the world and throughout the United States, creating a serious impact on customers,
workforces and suppliers, disrupting economies and financial markets, and potentially leading to a world-wide economic downturn.
It has caused a disruption of the normal operations of many businesses, including the temporary closure or scale-back of business
operations and/or the imposition of either quarantine or remote work or meeting requirements for employees, either by government
order or on a voluntary basis. The pandemic may adversely affect our operations, our employees and our employee productivity. It
may also impact the ability of our subcontractors, partners, and suppliers to operate and fulfill their contractual obligations,
and result in an increase in costs, delays or disruptions in performance.
Our employees are working remotely and using
various technologies to perform their functions. In reaction to the spread of COVID-19 in the United States, many businesses have
instituted social distancing policies, including the closure of offices and worksites and deferring planned business activity.
The disruption and volatility in the global and domestic capital markets may increase the cost of capital and limit our ability
to access capital. Both the health and economic aspects of the COVID-19 virus are highly fluid and the future course of each is
uncertain. For these reasons and other reasons that may come to light if the coronavirus pandemic and associated protective or
preventative measures expand, we may experience a material adverse effect on our business operations, revenues and financial condition,
and development; however, its ultimate impact is highly uncertain and subject to change.
Risks Related to Our Financial Condition
and Need for Additional Financing
We have not generated any revenues and
have experienced significant losses to date and we expect to continue incur losses for the foreseeable future. Consequently, we
will require additional financing in the future to maintain and expand operations into advanced stages of product development and
fabrication, and failure to obtain such financing would have a material adverse effect on our business, operating results, financial
condition and prospects.
We have experienced and continue to experience
negative cash flows from operations. We have not generated any revenue since inception and do not expect to generate any substantial
amounts of revenue for the foreseeable future. We had a net loss of $7,353,062 and $6,887,678 for our fiscal years ended August
31, 2020 and 2019. As of November 30, 2020, we had cash on hand of $8,549,510 and working capital of $13,897,863. Based on management’s
assessment, the Company has sufficient cash to meet its current funding requirements over the next twelve months following the
date of this prospectus, to meet our projected product development and fabrication goals during this period. However, our current
cash reserves will not be sufficient to permit us to maintain or expand our operations beyond this period.
We are currently in the advanced stages of
our research and early stages of product development and have come to the point where larger, faster, and more precise equipment
is necessary for development to continue and to be able to come to market with a commercially viable product. We expect that we
will need to raise substantial additional capital to accomplish our business plan in future years.
We anticipate seeking additional funding through
financial or strategic investors. If adequate funds are not available on reasonable terms, or at all, it would result in a material
adverse effect our business, operating results, financial condition and prospects. In particular, the Company may be required to
delay; reduce the scope of or terminate its research and development programs; sell rights to its technology or other technologies
or products based upon these technologies; or license the rights to these technologies or products on terms that are less favorable
to us than might otherwise be available.
If we raise additional funds by issuing equity
or debt securities, further dilution to stockholders may result and new investors could have rights superior to existing stockholders.
Even if financing is available to us,
because we cannot currently estimate the amount of funds or time required to commercialize our technologies, we may secure less
funding than is actually required to effectuate our business plan.
As noted above, we are currently in the advanced
stages of our research and early stages of product development. We have come to the point where larger, faster, and more precise
equipment is necessary for all facets of technology and product development to continue and to be able to come to market with a
commercially viable product. We, however, cannot accurately predict the amount of funding or the time required to successfully
commercialize our technology. The actual cost and time required to commercialize these technologies may vary significantly depending
on, among other things, the results of our research and product development efforts; the cost of developing, acquiring, or licensing
various enabling technologies, changes in the focus and direction of our research and product development programs; competitive
and technological advances; the cost of filing, prosecuting, defending and enforcing claims with respect to patents; the regulatory
approval process; process manufacturing; marketing and other costs associated with commercialization of these technologies. Because
of this uncertainty, even if financing is available to us, we may secure insufficient funding to effectuate our business plan.
In order to obtain the required financing,
we may enter in transactions that may dilute the ownership interest of our current stockholders.
In order to raise sufficient capital to meet
its financial obligations, we may enter into financing transactions that would result in dilution of the ownership interests of
our current stockholders or which may involve the sale of our securities at prices that are at a discount to current market price
of our stock as reported on the OTCPINK. Such sales will be made at prices determined by our Board based on factors deemed appropriate
at the time; accordingly, such sales by us could be made at prices less than the price of the shares of our common stock purchased,
in which case, investors could experience dilution of their investment.
Adverse conditions in the alternative
energy or the global economy more generally could have adverse effects on our results of operations and consequently the price
of our common stock.
Our business is exposed to significant financial
risks, most of which are beyond our control, related to interest rates, State & Federal subsidies, the modified accelerated
cost recovery system, taxes, and general economic conditions both domestic and internationally. These risks may affect our ability
to effect (i) borrowings or to raise capital through the offer and sale of equity based securities and (ii) the execution of our
business plan and product commercialization efforts by thwarting consumer demand for our products, and thereby adversely impacting
our potential revenue and profitability.
An increase in raw material prices could
have negative consequences on our long-term profitability.
We face exposure to fluctuations in energy,
raw materials, chemicals, and glass and plastic film prices. If we are not able to hedge, compensate or pass on our increased costs
through a supply-chain or to customers, this could have an adverse impact on our financial results and stability, and deployment
of our products.
Risks Related to Our Technology, Products and Operations
The development of our technology is
subject to the risks of failure inherent to the development of any novel technology.
Ultimately, the development and commercialization
of our technology is subject to a number of risks that are particular to the development and commercialization of any novel technology.
These risks include, but are not limited to, the following:
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our research and development efforts may not produce a commercially viable product;
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we may not be able to develop an industrial process required to manufacture a commercial product;
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we may fail to maintain license rights to the SolarWindow™ technology (or any of its derivatives);
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we may fail to develop, acquire, or license various enabling technologies that may be integral
to the commercialization of the SolarWindow™ (or any of its derivatives);
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we may fail to integrate our process into an industrial setting for the manufacturing of products;
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our technology (or any of its derivatives) may ultimately prove to be ineffective, unsafe or otherwise
fail to receive necessary regulatory or safe operating approvals;
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our technology (or any of its derivatives), even if safe and effective, may be difficult to manufacture
on a large scale or be uneconomical to market;
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our marketing license or proprietary rights to products derived from the our technology may not
be sufficient to protect our products from competitors;
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the proprietary rights of third parties may preclude us or our collaborators from making, using
or marketing products utilizing our technology; or,
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third parties may market superior, more effective, or less expensive technologies or products having
comparable performance and appearance characteristics to the LiquidElectricity™ Coatings (or any of its derivatives).
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The success of our research and development
activities is uncertain. If such efforts are not successful, we will be unable to generate revenues from our operations and we
may have to cease doing business.
Commercialization of our technology will require
significant further research, development and testing as we must ascertain whether our technology can form the basis for a commercially
viable technology or product. If our research and development fails to prove the commercial viability of our technology, we may
need to abandon our business model and/or cease doing business, in which case our shares may have no value and you may lose your
investment. We anticipate remaining engaged in technology and initial product development for (a) specific product(s) through at
least December 31, 2021.
If we ultimately do not obtain the necessary
regulatory and safe operation approvals for the commercialization of our technology, we will not achieve profitable operations
and your investment may be lost.
In order to commercialize our technology, we
may need to obtain regulatory approval from various local, state, federal or international agencies; or approval from global safety
certifying organizations that will certify safe operation of our products. At this time, we do not have a product to be submitted
for regulatory or safe operating approval. The process for obtaining these approvals may be time consuming and costly, and there
is no guaranty that we will be able to obtain such approvals. The failure to obtain any necessary approvals could delay or prevent
us from achieving revenue or profitability, which could result in the partial or total loss of your investment.
We are operating in highly fragmented
and competitive market and our competitors have several competitive advantages over us.
Our commercial success will depend on our ability
to compete effectively in product development areas such as, but not limited to, building integration, safety, efficacy, ease of
use, customer compliance, price, marketing and distribution. Our competitors may succeed in developing products that are more effective
than any products derived from our research and development efforts or that would render such products obsolete and non-competitive.
The alternative and renewable energy industry is characterized by intense competition, rapid product development and technological
change.
Most of the competition that we encounter is
expected to come from companies, research institutions and universities who are researching and developing technologies and products
similar to, or are competitive with, any technology we may develop.
These companies, research institutions and
universities may have several competitive advantages over us, including:
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Significantly greater name recognition;
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established distribution networks;
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more advanced technologies and product development;
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additional lines of products, and the ability to offer rebates, higher discounts or incentives to gain a competitive advantage;
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processes that are operational and manufacturing prototype or final products;
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greater experience in conducting research and development, manufacturing, obtaining regulatory approval for products, and marketing
approved products; and
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significantly greater financial and human resources for product development, sales and marketing, and patent litigation.
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As a result, we may not be able to compete
effectively against these companies or their products.
Any products developed from our technology
will face competition from other companies producing solar power and/or energy harvesting or storage products.
The solar power market is intensely competitive
and rapidly evolving. Some of our competitors are better capitalized, have more employees, and have established market positions
than SolarWindow. There are a number of companies that produce solar power and alternative energy products, which may be competitive
with those that we are seeking to develop. Additionally, some of our competitors may be developing or currently producing products
based on new solar power and alternative energy technologies that may have a cost basis similar to, or lower than, our projected
product costs.
Accordingly, If we fail to attract and retain
customers and establish a successful distribution network for our products, we may be unable to achieve adequate sales and market
share; or, if our competitors’ products, services or technologies become more accepted
than ours, or if they are successful in bringing their products or services to market earlier than us our revenues could be adversely
affected.
As noted above, some
of our current and potential competitors have significantly greater resources and better competitive positions in certain markets
than we do. These factors may allow our competitors to respond more effectively than us to new or emerging technologies and changes
in market requirements. Our competitors may develop products, features, or services that are similar to ours or that achieve greater
market acceptance, may undertake more far-reaching and successful product development efforts or marketing campaigns, or may adopt
more aggressive pricing policies. See “Our Business.”
Mergers of, or other strategic transactions
by, our competitors could weaken our competitive position or reduce our revenue.
If one or more of our
competitors were to merge or partner with another of our competitors, the change in the competitive landscape could adversely affect
our ability to compete effectively. A potential result of such expansion is that certain of our current or potential competitors
may be acquired by third parties with greater available resources and the ability to further invest in product improvements and
initiate or withstand substantial price competition. Our competitors also may establish or strengthen cooperative relationships
with our current or future value-added resellers, third-party consulting firms or other parties with whom we have relationships,
thereby limiting our ability to promote our products. Disruptions in our business caused by these events could reduce our revenue.
Technological changes could render our
products uncompetitive or obsolete, which could prevent us from achieving market share and sales.
Our failure to refine or advance our technologies,
and to develop and introduce new products could cause our products to become uncompetitive or obsolete, which could prevent us
from achieving market share and sales. The alternative and renewable energy industry is rapidly evolving and highly competitive.
We will need to invest significant financial resources in additional technology research & development, and product development
to keep pace with technological advances in the industry and to compete in the future; we may be unable to secure such financing.
We believe that a variety of competing solar and alternative or renewable energy technologies may be in development by other companies
that could result in lower manufacturing costs and/or higher product performance than those expected for our products. Our development
efforts may be hindered or rendered obsolete by the technological advances of others, and other technologies may prove more advantageous
for the commercialization of transparent electricity-generating products.
To the extent we are able to develop
and commercialize products, if such products do not gain market acceptance, we may not achieve sales and market share.
The development of a successful market for
our products may be adversely affected by a number of factors, some of which are beyond our control, including:
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customer, architectural and engineering acceptance of our products;
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our failure to produce products that compete favorably against other alternative or renewable energy,
or solar-photovoltaic power products on the basis of cost, quality, durability, reliability, and performance;
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our failure to produce products that compete favorably against conventional energy sources and
distributed-generation technologies on the basis of cost, quality and performance;
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our failure to qualify for and secure government grants, tax incentives and any other financial
subsidies that may be available to consumers for the implementation of alternative or renewable energy technologies such as solar
systems at such time as our products become available for commercial sale, and which potential customers for our products may reasonably
expect; and
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our failure to develop and maintain successful partnerships with manufacturers, distributors, and
other resellers, as well as strategic partners.
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If our products fail to gain market acceptance,
we will be unable to achieve sales, market share, or profitability.
If organic solar photovoltaic light energy
harvesting technologies are not suitable for widespread adoption or sufficient demand for such products does not develop or takes
longer to develop than we anticipate, we may not be able to profitably exploit our technology.
The market for OPV solar-energy related products
is emerging and rapidly evolving, and the market for energy harvesting products is generally unproven and not well established.
The success of products for these markets is uncertain.
If our OPV solar power or light energy harvesting
technologies prove unsuitable for widespread commercial deployment or if demand for such power products fails to develop sufficiently,
we would be unable to achieve sales and market share. In addition, demand for such products in the particular markets and geographic
regions we target may not develop or may develop more slowly than we anticipate. Many factors will influence the widespread adoption
of organic solar photovoltaic light energy capture and conversion products, including:
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cost-effectiveness of such technologies as compared with conventional and competitive alternative
or renewable energy technologies;
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performance, durability, and reliability of such products as compared with conventional and competitive
alternative energy products;
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success of other alternative or renewable energy technologies such as hydrogen fuel cells, wind
turbines, bio-diesel generators, and solar thermal technologies;
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public concern regarding energy security, the potential risks that may be associated with global
warming, the environmental and social impacts of fossil fuel extraction and use;
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fluctuations in economic and market conditions that impact the viability of conventional and competitive
alternative or renewable energy generating products;
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fluctuations in the prices of fossil fuels or their derivatives;
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capital expenditures by customers, which tend to decrease when domestic or foreign economies slow;
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potential deregulation of the electric power industry and broader energy industry initiatives;
and
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availability of government, state, feed-in tariff, and other financial subsidies and incentives.
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Our growth and success depends on our
ability to develop new products and services and adapt to market and customer needs.
The sectors in which we operate experience
rapid and significant changes due to the introduction of innovative technologies. Introducing new technology products and innovative
services, which we must do on an ongoing basis to meet customers' needs, requires a significant commitment to research and development,
which may not result in success. The company is pre-revenue and may suffer if it invests in technologies that do not function as
expected or are not accepted in the marketplace; its products, systems or service offers are not brought to market in a timely
manner; or products become obsolete or are not responsive to our customers' needs or requirements.
Our business model and strategy are based
on growth through in-licensing, out-licensing, cross-licensing, acquisitions, joint ventures and mergers that may be difficult
to execute.
Our business model and strategy are based on
growth through in-licensing, out-licensing, cross-licensing, acquisitions, joint ventures and mergers. External growth transactions
are inherently risky because of the difficulties that may arise in integrating people, operations, technologies and products, and
the related acquisition, administrative and other costs.
As noted above, we plan to continue
to make acquisitions, which could require significant management attention, disrupt our business, result in dilution to our stockholders,
and adversely affect our financial results.
As part of our business strategy, we intend
to make acquisitions to add specialized employees, complementary companies, products, or technologies. However, we have not made
any acquisitions to date, and, as a result, our ability to acquire and integrate larger or more significant companies, products,
or technologies in a successful manner is unproven. In the future, we may not be able to find suitable acquisition
candidates, and we may not be able to complete acquisitions on favorable terms, if at all. Any acquisitions that we consummate
may not achieve our goals, and could be viewed negatively by investors. In addition, if we fail to successfully integrate any acquisitions,
or the technologies associated with such acquisitions, into our company, the revenue and operating results of the combined company
could be adversely affected. Any integration process may require significant time and resources, and we may not be able to manage
the process successfully. We may not successfully evaluate or utilize the acquired technology or personnel, or accurately forecast
the financial impact of an acquisition transaction, including accounting charges. We may have to pay cash, incur debt, or issue
equity securities to pay for any such acquisition, any of which could adversely affect our financial results. The sale of equity
or issuance of debt to finance any such acquisitions could result in dilution to our stockholders. The incurrence of indebtedness
would result in increased fixed obligations and could also include covenants or other restrictions that would impede our ability
to manage our operations.
We may be the subject of product liability
claims and other adverse effects due to defective products, design faults or harm caused to persons and property.
Our products may not operate properly or could
contain design or fabrication faults or defects, which could give rise to disputes in respect of its performance, degradation and
reliability giving rise to liability. Product liability related to defective products could lead to a loss of revenue, claims under
warranty, and legal proceedings. Such disputes could result in a fall-off in demand or harm our reputation for product performance,
safety, and/or quality.
Our products will be subject to environmental,
occupational safety & health regulations, including but not limited to Underwriter Laboratory (UL) Certification, European
Conformity (CE) Certification, electrical codes, and other state and federal, European Union (EU), and other Country regulations.
Our products will be subject to extensive and
increasingly stringent environmental, occupational safety and health regulations and certifications, including but not limited
to, Underwriter Laboratory (UL) Certification, electrical codes, and other state and federal, EU laws, regulations, and standards
(“Laws & Regulations”). There can be no guarantee that we will not be required to pay significant fines
or compensation as a result of past, current or future breaches of Laws & Regulations. This exposure exists even if we are
not responsible for the breaches, in cases where they were committed in the past by companies or businesses that were not part
of ours that may be exposed to the risk of claims for breaches of these Laws & Regulations. Such claims could adversely affect
our financial position and reputation. If we fail to conduct our business in full compliance with the applicable Laws & Regulations,
the judicial or regulatory authorities could require us to conduct investigations and/or implement costly curative measures.
We lack sales and marketing experience
and will likely rely on third party marketers.
We have limited experience in sales, marketing
or distribution of photovoltaic and energy capture and conversion and generating products. We expect to market and sell or otherwise
commercialize our technology (or any of its derivatives) through distribution and supply-chain channels, co-marketing, co-promotion
or licensing arrangements with third parties. Therefore, any revenues received by us will be dependent on the efforts of third
parties. If any such parties breach or terminate their agreements with us or otherwise fail to conduct marketing activities successfully
and in a timely manner, the commercialization of our technology (or any of its derivatives) would be delayed or terminated, which
would adversely affect our ability to generate revenues and our profitability.
We may not be able to integrate our process
and/or technologies into a manufacturing process necessary to produce a manufacturable product.
Without sufficient capital, human resources,
the appropriate process equipment, or required supply chain, the Company may not be capable of integrating its process and/or technologies
into a manufacturing process necessary to produce a manufacturable product. The innovation of our processes and technologies is
a crucial strategic concern, with mounting pressure to meet anticipated power, financial, and ROI and IRR for our manufacturers,
or sales and distribution channels. If we are unable to integrate our process and/or technologies into industry, our product innovations
can rapidly become obsolete. LiquidElectricity™ Coatings and related processes and supply chains are highly complex and continuously
exposed to a variety of risks such as microeconomics, macroeconomic, face geopolitical pressures, regulatory requirements, environmental
risk and responsibilities, construction risk, and emerging markets. Integration of our processes is critical to product development
and revenue generation. If the process cannot be integrated into industry, products, or brought to market in a timely manner, the
Company, its potential products, and ability to operate may be threatened. At this time, the integration of our technologies into
industrial manufacturing processes is uncertain.
While there are numerous reasons for selecting
a manufacturing partner, there is considerable risk in selecting a manufacturing partner that is the correct fit for the Company.
The level and severity of risk to the Company is associated with cost, resources and resource management, quality control, scaled
production, complicated supply chain, location, corporate culture, management philosophy, market experience, and an adaptable business
model. Based on these risks, the Company may not be able to integrate our process or technology into an existing manufacturing
process with an acceptable level of risk.
Our technology and products will be subject
to environmental, occupational safety & hygiene, Underwriter laboratory, electrical codes, and other state and federal, European
Union (EU), and other Country regulations.
Our technologies and products will be subject
to extensive and increasingly stringent environmental, occupational safety & health, Underwriter Laboratory, electrical codes,
and other state and federal, EU laws, regulations, and standards (“Laws & Regulations”). There can be no
guarantee that we will not be required to pay significant fines or compensation as a result of past, current or future breaches
of Laws & Regulations. This exposure exists even if we are not responsible for the breaches, in cases where they were committed
in the past by companies or businesses that were not part of ours that may be exposed to the risk of claims for breaches of these
Laws & Regulations. Such claims could adversely affect our financial position and reputation, despite the efforts and investments
made to comply at all times with all applicable Laws & Regulations. If we fail to conduct our business in full compliance with
the applicable Laws & Regulations, the judicial or regulatory authorities could require us to conduct investigations and/or
implement costly curative measures.
Our insurance
coverage may not be adequate to protect us from all business risks.
We may be subject,
in the ordinary course of business, to losses resulting from products liability, accidents, acts of God, and other claims against
us, for which we may have no insurance coverage. As a general matter, the policies that we do have may include significant deductibles
or self-insured retentions, and we cannot be certain that our insurance coverage will be sufficient to cover all future losses
or claims against us. A loss that is uninsured or which exceeds policy limits may require us to pay substantial amounts, which
could adversely affect our financial condition and operating results.
Risks Related
to the Expansion of Our Operations Abroad
We have recently expanded our operations
to Asia with a business and corporate development operations office in the Republic of Korea, where we intend to strengthen our
business presence. This is a region where we have limited experience in intellectual property, manufacturing, regulatory compliance,
and sales, thus exposing us to certain risks inherent in doing business internationally, which may adversely affect our business,
results of operations or financial condition.
Having established
an office in the Republic of Korea, where we are working to strengthen our business presence and potentially expand into other
Asian countries, we face risks which previously were of little or no import to us but which now could have a material impact on
our overall operations and ultimate success. These new risks, include:
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protection of intellectual property and trade secrets in foreign jurisdictions in which our US
based protections may not be generally recognized or otherwise enforceable;
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tariffs, customs, trade sanctions, trade embargoes and other barriers to importing/exporting materials
and products in a cost-effective and timely manner, or changes in applicable tariffs or custom rules;
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fluctuations in currency exchange rates;
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enhanced difficulties of integrating any foreign acquisitions;
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the burden of complying with and changes in U.S. or international taxation policies;
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difficulties in staffing and managing global operations and the increased travel, infrastructure,
and legal compliance costs associated with multiple international locations;
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political, social, or economic instability;
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compliance with statutory equity requirements and management of tax consequences.
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the impact of public health epidemics on employees and the global economy, such as the coronavirus
currently impacting China, the Republic of Korea and Japan among others;
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difficulties in staffing and managing international operations;
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compliance with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and similar laws in other jurisdictions; and
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risks related to and the burdens of complying with the legal and regulatory environment in foreign jurisdictions, including
with respect to privacy, and unexpected changes in laws, regulatory requirements, and enforcement;
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Changes in regulatory,
geopolitical, social, economic, or monetary policies and other factors, if any, may have a material adverse effect on our business
in the future, or may require us to exit a particular market or significantly modify our current business practices. Abrupt political
change, terrorist activity and armed conflict pose a risk of general economic disruption in affected countries, which could also
result in an adverse effect on our business and results of operations.
We plan to continue expanding our
operations abroad where we have limited operating experience and may be subject to increased business and economic risks that could
affect our financial results.
As we move forward
with our strategy of expanding into Asian markets, and internationally, we may enter new international markets where we have limited
or no experience in marketing, selling, and deploying our products. Our operations and performance will become significantly more
dependent on worldwide economic conditions. Uncertainty about global economic conditions ultimately could have a material negative
effect on demand for our products and services and, accordingly, on our business, results of operations and financial condition.
In addition to the risks inherent in doing business internationally, as noted above, if we are unable to expand internationally
and manage the complexity of our global operations successfully, our financial results could be adversely affected.
Risks Related to Compliance with Laws
and Regulations
Compliance with environmental regulations
or dealing with harmful or hazardous materials involved in our research and development, may require us to divert our limited capital
resources.
Our research and product development programs
involve the handling of chemicals. These chemicals have the potential to be harmful or hazardous to human health and/or the environment.
Accordingly, we may become subject to federal, state and local laws and regulations governing the use, handling, storage and disposal
of dangerous and hazardous materials. If violations of environmental, and/or safety & health laws or standards occur, we could
be held liable for damages, penalties and costs of remedial actions. These expenses or this liability could have a significant
negative impact on our business, financial condition and results of operations. We may unintentionally violate environmental, and/or
safety & health laws or standards in the future as a result of human error, equipment failure or other causes. Environmental,
and safety & health laws and standards could become more stringent over time, imposing greater compliance costs and increasing
risks and penalties associated with violations. We may be subject to potentially conflicting and changing regulatory agendas of
political, business, environmental, or safety & health groups. Changes to or restrictions on permitting requirements or processes,
harmful or hazardous material storage, or chemical handling might require an unplanned capital investment or relocation of our
research or product development programs. Failure to comply with new or existing laws or regulations, or failing to plan for possible
changes in these laws could harm our business, financial condition and results of operations. Currently, we do not have any insurance
coverage with respect to damages or liabilities we may incur as a result of these activities.
Risks Related to our Intellectual Property
Our ability to operate profitably is
directly related to our ability to develop, protect and perfect rights in and to our proprietary technology.
We rely on a combination of trademark, trade
secret, nondisclosure, know-how, copyright and patent law to protect our technology, which may afford only limited protection.
We may initiate claims or litigation against
third parties for infringement of our proprietary rights or to establish the validity, scope or enforceability of our proprietary
rights. Any such claims could be time consuming, result in costly litigation, or force us to enter into royalty or license agreements
rather than dispute the merits of such claims, requiring us to pay royalties and/or license fees to third parties. There is always
a risk that patents, if issued, may be subsequently invalidated, either in whole or in part and this could diminish or extinguish
protection for any technology we may license or may adversely affect our ability to fully commercialize our technologies.
We generally require our employees, consultants,
advisors and collaborators to execute appropriate agreements with us, regarding the confidential information developed or made
known to such persons during the course of their engagement by us. These agreements provide that any proprietary technologies developed
during such engagement are owned by us and that confidential information pertaining to such technologies will be kept confidential
and not disclosed to third parties except in specific circumstances. These agreements also provide for the assignment to us by
any such person of any patents issued with respect to any such technologies. If these provisions are breached, we may not be able
to fully perfect our rights to the technologies in question, and in some instances, we may not have an appropriate remedy available
for the damages that we may incur as a result of any such breach.
Our proprietary rights may not adequately
protect our technologies and products.
Our commercial success will depend, in part,
on our ability to obtain patents and/or maintain adequate protection for our technologies and products in the United States and
other countries. We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that
our proprietary technologies and products are covered by valid and enforceable patents or are effectively maintained as trade secrets.
We intend to apply for additional patents for
our technologies, applications, processes, and products, as we deem appropriate. We may, however, fail to apply for patents on
important technologies, products, or processes in a timely manner, if at all. Our existing patents and any future patents we obtain
may not be sufficiently broad to prevent others from practicing our technologies or from developing competing products, processes,
or technologies. In addition, the patent positions of alternative energy technology companies are highly uncertain and involve
complex legal and factual questions for which important legal principles and regulations or policies remain unresolved. As a result,
the validity and enforceability of our patents cannot be predicted with certainty. In addition, we cannot guarantee that:
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we were the first to make the inventions covered by each of our issued patents and pending patent
applications;
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we were the first to file patent applications for these inventions;
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we are unable to reduce an invention to fabrication and product practice required for formation
beyond conception;
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others will not independently develop similar or alternative technologies or duplicate any of our
technologies;
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any of our pending patent applications will result in issued patents;
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any of our patents will be valid or enforceable;
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any patents issued to us will provide us with any competitive advantages, or will not be challenged
by third parties; and
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we will develop additional proprietary technologies, products, or processes that are patentable,
or the patents of others will not have an adverse effect on our business.
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The actual protection afforded by a patent
varies on a product-by-product basis, from country to country and depends on many factors, including the type of patent, the scope
of its coverage, the availability of regulatory related extensions, the availability of legal remedies in a particular country
and the validity and enforceability of the patents. Our ability to maintain and solidify our proprietary position for our products
will depend on our success in obtaining effective claims and enforcing those claims once granted. Our issued patents and those
that may be issued in the future, or those licensed to us, may be challenged, invalidated, unenforceable or circumvented, and the
rights granted under any issued patents may not provide us with proprietary protection or competitive advantages against competitors
with similar products. We also rely on trade secrets to protect some of our technology, especially where it is believed that patent
protection is inappropriate or unobtainable. However, trade secrets are difficult to maintain. While we use reasonable efforts
to protect our trade secrets, our employees, consultants, contractors or scientific and other advisors may unintentionally or willfully
disclose our proprietary information to competitors. Enforcement of claims that a third party has illegally obtained and is using
trade secrets is expensive, time consuming and uncertain. In addition, non-U.S. courts are sometimes less willing than U.S. courts
to protect trade secrets. If our competitors independently develop equivalent knowledge, methods and know-how, we may not be able
to assert our trade secrets against them and our business could be harmed.
We may not be able to protect our intellectual
property rights throughout the world.
Filing, prosecuting and defending patents on
all of our products in every jurisdiction would be prohibitively expensive. Competitors may use our technologies in jurisdictions
where we have not obtained patent protection to develop their own products. These products may compete with our products and may
not be covered by any patent claims or other intellectual property rights.
The laws of some non-U.S. countries do not
protect intellectual property rights to the same extent as the laws of the United States, and many companies have encountered significant
problems in protecting and defending such rights in foreign jurisdictions. The legal systems of certain countries, particularly
certain developing countries, do not favor the enforcement of patents and other intellectual property protection, which could make
it difficult for us to stop the infringement of our patents. Proceedings to enforce our patent rights in foreign jurisdictions
could result in substantial cost and divert our efforts and attention from other aspects of our business.
If we fail to protect our intellectual
property rights, our competitors may take advantage of our ideas and compete directly against us.
Our success will depend, to a significant degree,
on our ability to secure and protect intellectual property rights and enforce patent and trademark protections relating to our
technology. While we believe that the protection of patents and trademarks is important to our business (and as a result we have
over 90 U.S. and International patent, and trademark filings), we also rely on a combination of copyright, trade secret, nondisclosure
and confidentiality agreements, know-how and continuing technological innovation to maintain our competitive position. From time
to time, litigation may be advisable to protect our intellectual property position. However, these legal means afford only limited
protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage. Any litigation in
this regard could be costly, and it is possible that we will not have sufficient resources to fully pursue litigation or to protect
our intellectual property rights. This could result in the rejection or invalidation of our existing and future patents. Any adverse
outcome in litigation relating to the validity of our patents, or any failure to pursue litigation or otherwise to protect our
patent position, could materially harm our business and financial condition. In addition, confidentiality agreements with our employees,
consultants, customers, and key vendors may not prevent the unauthorized disclosure or use of our technology. It is possible that
these agreements will be breached or that they will not be enforceable in every instance, and that we will not have adequate remedies
for any such breach. Enforcement of these agreements may be costly and time consuming. Furthermore, the laws of foreign countries
may not protect our intellectual property rights to the same extent as the laws of the United States.
We may be accused of infringing the intellectual
property rights of others.
We cannot guarantee that we will not become
the subject of infringement claims or legal proceedings by third parties with respect to our current or future technology developments.
Any such claims could be time consuming, result in costly litigation and could ultimately lead to a determination that our technology,
or any of its derivatives, infringe on a third party's patent rights.
We may need to curtail or cease operations
if, in the future, we are unable to obtain additional licenses pursuant to our collaborative development agreements required to
maintain our rights to market products, if any, developed by us.
We may not retain all rights to developments,
inventions, patents and other proprietary information resulting from any collaborative arrangements, whether in effect as of the
date hereof or which may be entered into at some future time with third parties. As a result, we may be required to license such
developments, inventions, patents or other proprietary information from such third parties, possibly at significant cost to us.
Our failure to obtain and maintain any such licenses could have a material adverse effect on our business, financial condition
and results of our operations. In particular, the failure to obtain a license could prevent us from using or commercializing our
technology.
Our proprietary rights may not adequately
protect our technologies and products.
Our commercial success will depend, in part, on
our ability to obtain patents and/or regulatory exclusivity and maintain adequate protection for our technologies and products
in the United States and other countries. We will be able to protect our proprietary rights from unauthorized use by third parties
only to the extent that our proprietary technologies and products are covered by valid and enforceable patents or are effectively
maintained as trade secrets.
We intend to apply for additional patents covering
both our technologies and products, as we deem appropriate. We may, however, fail to apply for patents on important technologies
or products in a timely fashion, if at all. Our existing patents and any future patents we obtain may not be sufficiently broad
to prevent others from practicing our technologies or from developing competing products and technologies. In addition, the patent
positions of alternative energy technology companies are highly uncertain and involve complex legal and factual
questions for which important legal principles remain unresolved. As a result, the validity and enforceability of our patents cannot
be predicted with certainty. In addition, we cannot guarantee that:
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we were the first to make the inventions covered by each of our issued patents and pending patent
applications;
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we were the first to file patent applications for these inventions;
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others will not independently develop similar or alternative technologies or duplicate any of our
technologies;
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any of our pending patent applications will result in issued patents;
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any of our patents will be valid or enforceable;
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any patents issued to us will provide us with any competitive advantages, or will not be challenged
by third parties; and
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we will develop additional proprietary technologies that are patentable, or the patents of others
will not have an adverse effect on our business.
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The actual protection afforded by a patent
varies on a product-by-product basis, from country to country and depends on many factors, including the type of patent, the scope
of its coverage, the availability of regulatory related extensions, the availability of legal remedies in a particular country
and the validity and enforceability of the patents. Our ability to maintain and solidify our proprietary position for our products
will depend on our success in obtaining effective claims and enforcing those claims once granted. Our issued patents and those
that may be issued in the future, or those licensed to us, may be challenged, invalidated, unenforceable or circumvented, and the
rights granted under any issued patents may not provide us with proprietary protection or competitive advantages against competitors
with similar products. We also rely on trade secrets to protect some of our technology, especially where it is believed that patent
protection is inappropriate or unobtainable. However, trade secrets are difficult to maintain. While we use reasonable efforts
to protect our trade secrets, our employees, consultants, contractors or scientific and other advisors may unintentionally or willfully
disclose our proprietary information to competitors. Enforcement of claims that a third party has illegally obtained and is using
trade secrets is expensive, time consuming and uncertain. In addition, non-U.S. courts are sometimes less willing than U.S. courts
to protect trade secrets. If our competitors independently develop equivalent knowledge, methods and know-how, we would not be
able to assert our trade secrets against them and our business could be harmed.
Risks Related to Our Personnel and Management
We are dependent upon hiring and retaining
highly qualified management and technical personnel.
Competition for highly qualified management,
technical, and scientific personnel (Personnel) is intense in our industry. Future success depends in part on our ability to hire,
assimilate and retain engineers and scientists, sales and marketing personnel, and other qualified personnel, especially in the
area of OPV with focus in our technologies and products. A key risk is our ability to anticipate our needs for certain key competences
and to implement human resource solutions to recruit and hire, or improve these competences. If we are not successful in hiring
and retaining qualified Personnel our ability to execute on our business model and strategy will be adversely affected and our
ability to achieve profitability compromised.
Due to the fact that all but one of our
five directors conduct outside business activities and are not our employees, attention and efforts will not be focused solely
on our business activities which may hinder our achieving our business objectives.
Currently we have five directors, two of whom,
Mr. Jatinder S. Bhogal, our Chief Executive Officer, and John Rhee, our President and President of SolarWindow Asia Co. Ltd. each
provide their full-time efforts to our business activities. While our three (3) other Directors intend to devote as much time as
necessary to the success and development of our technology, currently each has other business interests or employment obligations
requiring their time and attention. While each has generally agreed to provide such time and attention to our business activities
as may be reasonably required, and have done so to date, there can be no assurance that their priorities will not shift in the
future and that the amount of time that each devotes to our activities will be sufficient for us to meet our business objectives.
In the event that their outside interests begin to take precedence over their positions in with the Company, our business will
suffer and may adversely impact our goal of achieving profitability through the commercialization of SolarWindow. In this event,
if effective corrective action is not taken, investors could lose all or part of their investment.
Risks Related To Ownership of Our Common Stock
We are not a fully reporting company
under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act; therefore, we are subject only to
the reporting requirements of Section 15(d) of the Exchange Act.
We are not a fully reporting company under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”); therefore, we are subject only to the
reporting requirements of Section 15(d) of the Exchange Act. Until our Common Stock is registered under the Exchange Act, we will
be subject only to the reporting obligations imposed by Section 15(d) of the Exchange Act, which we refer to as Section 15(d).
Section15(d) requires that issuers file periodic and current reports with the U.S. Securities and Exchange Commission (the “Commission”
or the “SEC”) when they have issued any class of securities for which a registration statement was filed and
became effective pursuant to the Securities Act. The purpose of Section 15(d) is to ensure that investors who buy securities in
registered offerings are provided with the same information on an ongoing basis that they would receive if the securities they
purchased were listed on a securities exchange or the issuer were otherwise subject to periodic reporting obligations. However,
companies that are required to report only under Section 15(d) are not subject to some of the Exchange Act reporting requirements.
For example, companies that are required to report only under Section 15(d) are not subject to the short-swing profit reporting
requirements contained in Section 16 of the Exchange Act, the beneficial ownership reporting requirements contained in Section
13 of the Exchange Act, the institutional investor reporting rules or the third-party tender offer rules, or the Exchange Act’s
proxy rules contained in Section 14 of the Exchange Act.
The reporting obligations under Section15(d)
of the Exchange Act are automatically suspended when: (i) any class of securities of the issuer reporting under Section 15(d) is
registered under Section 12 of the Exchange Act; or (ii) at the beginning of the issuer’s fiscal year, other than the year
in which the applicable registration statement became effective, if the class of securities covered by the registration statement
is held of record by fewer than 300 persons. In the latter case, the Company would no longer be subject to periodic reporting obligations
so long as the number of holders remained below 300 unless we filed a registration statement with the Securities and Exchange Commission
under Section 12 of the Exchange Act. If our obligation to file reports under Section 15(d) is suspended (other than due to our
having registered our common stock under Section 12 of the Exchange Act), then investors will have reduced visibility with respect
to the Company, its financial condition and results of operations.
Until our Common Stock is listed on an exchange,
we expect to remain eligible for quotation on the OTCPINK or on another over-the-counter quotation system. In those venues, however,
an investor may find it difficult to obtain accurate quotations for our common stock. In addition, if we fail to meet the criteria
set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons
other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending
or selling our common stock, which may further affect the liquidity of your shares. This would also make it more difficult for
us to raise additional capital or attract qualified employees or partners. Please refer to “Our common stock is currently
quoted on the OTCPINK which may make it more difficult for you to purchase or sell shares of the Company’s Common Stock”
below.
Our common stock is currently quoted
on the OTCPINK which may make it more difficult for you to purchase or sell shares of the Company’s Common Stock.
The OTCPINK is viewed by most investors as
a less desirable, and less liquid, marketplace. As a result, an investor may find it more difficult to purchase, dispose of or
obtain accurate quotations as to the value of, our common stock. We may reapply for listing on the OTCQB, which application may
or may not be approved. If not approved, we expect that our stock will continue to trade on the OTCPINK
To be eligible for OTCQB, companies will be
required to at least:
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meet a minimum bid price test of $0.01. Securities that do not meet the minimum bid price test
will be downgraded to OTC Pink;
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submit an application to OTCQB and pay an application and annual fee; and
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submit an OTCQB “annual certification” confirming the Company Profile displayed on
www.otcmarkets.com is current and complete and providing additional information on officers, directors, and controlling stockholders.
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In the event we do not submit an application
for listing on the OTCQB or other stock exchange or if we do and the application is not approved, we expect that our stock will
continue to trade on the OTCPINK, which could adversely affect the market liquidity of our common stock.
Our common stock
is not registered for trading on any national stock exchange and thus, should the price of our stock on the OTCPINK fall below
five dollars per share and our net tangible assets fall below two million dollars our stock may be deemed a “penny stock”
and is not traded on a national securities exchange you may find it difficult to, deposit, transfer, sell or purchase the shares
of our common stock in open market transactions.
“Penny stocks” are, generally speaking,
those securities that are not listed on a national securities exchange and are priced under $5. There are exclusions for securities
of issuers that have net tangible assets greater than $2 million if they have been in operation at least three years or greater
than $5 million if in operation less than three years. Securities of issuers with average revenue of at least $6 million for the
last three years are also not considered penny stocks.
Currently our
common stock is considered “penny stock exempt” by the OTCPINK. This means that our stock is exempt from the definition
of a Penny Stock under SEC under Rule 240.3a51-1 because it meets one of the following
tests: 1) A price of over $5 per share, 2) the issuer has Average Revenue of at least $6 million for the last 3 years, or 3) the
issuer has Net Tangible Assets in excess of $2 million if the issuer has been in continuous operations for at least 3 years or
$5 million if less than 3 years. The closing price of our common stock on the OTCPINK has closed above $5 since November 23, 2020;
and, the value of our net tangible assets for the fiscal years ended August 31, 2020 and 2019 was, approximately $15,967,000 and
$18,447,000 respectively.
As long as we continue to satisfy at least
one of the foregoing exemptions, our common stock should continue to be deemed “penny stock exempt.” However, because
our stock is not registered for trading on a national stock exchange should we no longer satisfy at least one of the exemption
criteria described above, our common stock would be considered a “penny stock.”
The penny stock rules are designed to prevent
deceptive or manipulative practices. It provides that a broker cannot sell a penny stock to any person unless it has approved that
person's account for penny stock transactions and the broker/dealer has received in writing from customer agreement to the transaction;
approving an account includes, among other things, reviewing the customer's financial data and determining the customer's suitability,
including the capability to evaluate the risks of trading in penny stocks. Some types of transactions in penny stocks are exempt
from these rules. Exempt transactions include those with an established customer (a customer of more than one year or one who has
made at least three separate penny stock purchases) and transactions in which the customer is an institutional investor.
In addition, the penny stock regulations require
that prior to any non-exempt buy/sell transaction in a penny stock, a disclosure schedule proscribed by the SEC relating to the
penny stock market must be delivered by a broker-dealer to the purchaser of such penny stock. This disclosure must include the
amount of commissions payable to both the broker-dealer and the registered representative and current price quotations for our
common stock. The regulations also require that monthly statements be sent to holders of penny stock that disclose recent price
information for the penny stock and information of the limited market for penny stocks. These requirements adversely affect the
market liquidity of our common stock.
Accordingly, should our common stock be deemed
a “penny stock,” you may find it difficult to, deposit, transfer, sell or purchase the shares of our common stock in
open market transactions.
Financial Industry Regulatory Authority
(“FINRA”) sales practice requirements may also limit a stockholder’s ability to buy and sell our common stock,
which could depress the price of our common stock.
In addition to the “penny stock”
rules described above, FINRA has adopted rules that require a broker-dealer to have reasonable grounds for believing that the investment
is suitable for that customer before recommending an investment to a customer. Prior to recommending speculative low-priced securities
to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s
financial status, tax status, investment objectives, and other information. Under interpretations of these rules, FINRA believes
that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. Thus,
the FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which
may limit your ability to buy and sell our shares of common stock, have an adverse effect on the market for our shares of common
stock, and thereby depress our price per share of common stock.
There is a limited market for our common
stock, which may make it difficult for holders of our common stock to sell their stock.
Our common stock currently trades on the OTCPINK
under the symbol “WNDW” and currently there is limited and sporadic trading in our common stock. Accordingly, there
can be no assurance as to the liquidity of any markets that may develop for our common stock, the ability of holders of our common
stock to sell our common stock, or the prices at which holders may be able to sell our common stock. Further, many brokerage firms
will not process transactions involving low price stocks, especially those that come within the definition of a “penny stock.”
If we cease to be quoted, holders of our common stock may find it more difficult to dispose of, or to obtain accurate quotations
as to the market value of our common stock, and the market value of our common stock would likely decline.
The trading price of our common stock
has been and will likely continue to be volatile.
The trading price of our common stock has been,
and is likely to continue to be, highly volatile and could be subject to wide fluctuations in response to various factors, some
of which are beyond our control. From December 31, 2019 through February 3, 2021 the stock price of our common stock has ranged
from a low price on the OTCPINK of $1.05 to a high of $19.45 per share. In addition to the factors discussed in these “Risk
Factors” and elsewhere in this prospectus, factors that may cause volatility in our share price include:
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changes in projected operational and financial results;
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issuance of new or updated research or reports by securities analysts;
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market rumors or press reports;
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announcements of significant transactions;
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announcements related to our stock repurchase program;
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the use by investors or analysts of third-party data regarding our business that may not reflect our actual performance;
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fluctuations in the valuation of companies perceived by investors to be comparable to us;
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fluctuations in the trading volume of our shares, or the size of our public float relative to the total number of shares of
our common stock that are issued and outstanding;
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share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; and
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general economic and market conditions.
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In addition, in recent years, broad stock market
indices in general, and smaller capitalization companies in particular, have experienced substantial price fluctuations. In a volatile
market, we may experience wide fluctuations in the market price of our common stock. These fluctuations may have a negative effect
on the market price of our common stock.
If securities or industry analysts do
not publish, or cease publishing, research or publish inaccurate or unfavorable research about our business or our market, or if
they change their recommendations regarding our stock adversely, our stock price and any trading volume could decline.
The trading market for our common stock that
may depend in part on the research and reports that securities or industry analysts publish about us or our business, markets or
competitors. Securities and industry analysts do not currently, and may never, publish research on us or our business. If no securities
or industry analysts commence coverage of our company, the trading price for our stock would be negatively affected. If securities
or industry analysts initiate coverage, and one or more of those analysts downgrade our stock or publish inaccurate or unfavorable
research about our business or our market, our stock price would likely decline. If one or more of these analysts cease coverage
of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price
and any trading volume to decline.
The sale or availability for sale of substantial
amounts of our common stock could adversely affect their market price.
Sales of substantial amounts of our common
stock in the public market after the filing of the Form S-1 of this prospectus, or the perception that these sales could occur,
could adversely affect the market price of our common stock and could materially impair our ability to raise capital through equity
offerings in the future. Shares held by our existing stockholders may be sold in the public market in the future subject to the
restrictions in Rule 144 and Rule 701 under the Securities Act.
As of the date of this prospectus, we have
53,186,799shares of common stock outstanding. We cannot predict what effect, if any, market sales of securities held by our significant
stockholders or any other stockholder or the availability of these securities for future sale will have on the market price of
our common stock.
As a smaller reporting company within
the meaning of the Securities Act, we may utilize certain modified disclosure requirements, and we cannot be certain if these reduced
requirements will make our common stock less attractive to investors.
Generally, a “smaller
reporting Company” or (“SRC”) is a company that as of the last business day of its most recently completed second
quarter: (i) Had a public float of less than $250 million; or (ii) Had annual revenues of less than $100 million and either: (A)
No public float; or (B) A public float of less than $700 million. On February 28, 2020 we had a public float of $36,464,000.
We are a SRC; and,
for as long as we continue to be a SRC, we are exempt from various reporting requirements applicable to other public companies
but not to a “SRC,” including, for example, not being required to have our independent registered public accounting
firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations
regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding
a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute compensation not previously
approved. We have in this prospectus utilized, and we may in future filings with the SEC continue to utilize, the modified disclosure
requirements available to emerging growth companies. As a result, our stockholders may not have access to certain information they
may deem important and may therefore find our stock a less attractive investment.
The sale by our stockholders of restricted
shares, either pursuant to a resale prospectus or Rule 144, may adversely affect our ability to raise the funds we will require
to effectuate our business plan.
As of the date of this prospectus, we had 53,186,799shares
issued and outstanding, of which 31,425,614 are deemed “restricted securities” or “control securities”
within the meaning of Rule 144. The possibility that substantial amounts of our common stock may be sold into the public market,
either under Rule 144, or pursuant to a resale registration statement, may adversely affect prevailing market prices for the common
stock and could impair our ability to raise capital in the future through the sale of equity securities because of the perception
that future re-sales could decrease our stock price and because of the availability of resale shares to those interested in investing
in our common stock.
Kalen Capital Corporation (“KCC”),
a private corporation solely owned by Mr. Harmel S. Rayat, our former Chairman and former director, beneficially owns approximately
75.54% of our issued and outstanding stock when giving effect to derivative securities owned by KCC. This ownership interest may
preclude you from influencing significant corporate decisions.
As of the date of this report, Kalen Capital
Holdings LLC, a wholly owned subsidiary of KCC, a private corporation solely owned by Harmel S. Rayat, beneficially owned 54,200,848
shares (inclusive of 18,561,917 shares issuable upon exercise of outstanding warrants, conversion of the Convertible Note and the
exercise of the warrants included upon conversion thereof), or approximately 75.54%, of our outstanding common stock, on a fully
diluted basis.
As a result, Mr. Rayat, having voting control
of 35,638,931 shares of our total issued and outstanding 53,186,799 shares, is able to exercise significant influence over matters
requiring stockholder approval, including the election of directors and approval of significant corporate transactions, and will
have significant control over our management and policies. Mr. Rayat's interests may be different from yours. For example, he may
support proposals and actions with which you may disagree, or which are not in your interest. This concentration of ownership could
delay or prevent a change in control of our company or otherwise discourage a potential acquirer from attempting to obtain control
of our company, which in turn could reduce the price of our common stock. In addition, Mr. Rayat could use his voting influence
to maintain our existing management and Board of Directors (“Board”) in office, or support or reject other management
and Board members) proposals that are subject to stockholder approval, such as the adoption of employee stock plans and significant
unregistered and registered financing transactions.
The company may be subject to compliance
with rules requiring the adoption of certain corporate governance measures, which requires control measures for related party transactions,
conflicts of interest and similar matters.
The Sarbanes-Oxley Act of 2002 (“SOX”),
as well as rule changes proposed and enacted by the SEC, the New York and American Stock Exchanges and the Nasdaq Stock Market,
as a result of SOX, require the implementation of various measures relating to corporate governance. These measures are designed
to enhance the integrity of corporate management and the securities markets and apply to securities which are listed on those exchanges
or the Nasdaq Stock Market.
A significant requirement that applies to accelerated
and large accelerated filers under SOX 404(c), but not to non-accelerated filers, is the requirement that accelerated and large
accelerated filers have an internal control over financial reporting (“ICFR”) auditor attestation. An ICFR auditor
attestation requires the independent accounting firm that prepares or issues the issuer’s financial statement audit report
to also attest to, and report on, management’s assessment of the effectiveness of the issuer’s ICFR. SOX Section 404(c),
however, exempts non-accelerated filers from the ICFR auditor attestation requirement. As a result of our public float exceeding
$75 million (prior to the rule change described below) on February 28, 2018, for our year ended August 31, 2018, the Company was
subject to SOX 404(b).
On March 12, 2020, the SEC approved amendments
to Rule 12b-2 that excludes from the definitions of “accelerated filer” and “large accelerated filer” any
issuer that is eligible to be a SRC and had revenues of less than $100 million in the most recent fiscal year for which audited
financial statements are available. These amendments align the June 2018 amendments to Rule 12b-2 that raised the cap for status
as an SRC from less than $75 million in public float to less than $250 million. The June 2018 amendments also designated
as SRCs companies with less than $100 million in annual revenues if they also had either no public float or a public float of less
than $700 million. As a result of the recent amendments to the definition of an SRC and the resulting increase in the thresholds
in revenue and public float value, the Company is not subject to the attest requirements of SOX 404(b). However, should our fiscal
year revenues exceed $100 million and our second quarter public float exceed $250 million, the Company will again be subject to
SOX 404(b) and the added additional professional fees and management time required to comply SOX 404(b).
There are options to purchase shares
of our common stock currently outstanding.
As of November 30, 2020, we have granted options
to purchase shares of our common stock to various persons and entities, under which we could be obligated to issue up to 7,817,234
shares of our common stock. The exercise prices of these options range from $2.32 to $8.00 per share. 7,279,334 of the options
contain cashless exercise provisions. If issued, the shares underlying these options would increase the number of shares of our
common stock currently outstanding and dilute the holdings and voting rights of our then-existing stockholders.
There are warrants to purchase shares
of our common stock currently outstanding.
As of November 30, 2020, we had issued warrants
to purchase shares of our common stock to various persons and entities, under which we could be obligated to issue up to 19,483,517
shares of common stock with exercise prices ranging from $1.70 to $4.00 per share. Each of the Company’s warrants outstanding
entitles the holder to purchase one share of the Company’s common stock for each warrant share held. Other than the Series
P and Series T Warrants, which combined total 16,880,167, all of the Company’s unexercised warrants may be exercised on a
cashless basis. If issued, the shares underlying these warrants would increase the number of shares of our common stock currently
outstanding and dilute the holdings and voting rights of our then-existing stockholders.
We may issue preferred stock which may
have greater rights than our common stock.
Our Articles of Incorporation allow our Board
to issue up to 1,000,000 shares of preferred stock. Currently, no shares of preferred stock are issued and outstanding. However,
we can issue shares of our preferred stock in one or more series and can set the terms of the preferred stock without seeking any
further approval from the holders of our common stock. Any preferred stock that we issue may rank ahead of our common stock in
terms of dividend priority or liquidation premiums and may have greater voting rights than our common stock. In addition, such
preferred stock may contain provisions allowing it to be converted into shares of common stock, which could dilute the value of
our common stock to then current stockholders and could adversely affect the market price, if any, of our common stock.
The Company may sell additional equity
securities in the future and your ownership interest in the Company may be diluted as a result of such sales.
The Company may sell additional equity securities
in order to fully implement our business plan. Such sales will be made at prices determined by our Board based on factors deemed
appropriate at the time; accordingly, such sales by us could be made at prices less than the price of the shares of our common
stock purchased, in which case, investors could experience dilution of their investment.
Our compliance with changing laws and
rules regarding corporate governance and public disclosure may result in additional expenses to us which, in turn, may adversely
affect our ability to continue our operations.
Keeping abreast of, and in compliance with,
changing laws, regulations and standards relating to corporate governance and public disclosure, including SOX, new SEC regulations
and, in the event we are ever approved for listing on a registered national exchange, such exchange's rules, will require an increased
amount of management attention and external resources. We intend to continue to invest all reasonably necessary resources to comply
with evolving standards, which may result in increased general and administrative expenses and a diversion of management time and
attention from revenue-generating activities to compliance activities. Our failure to adequately comply with any of these laws,
regulations, standards or rules may result in substantial fines or other penalties and could have an adverse impact on our ongoing
operations.
Because we do not intend to pay dividends
for the foreseeable future you should not purchase our shares if you are seeking dividend income.
We currently intend to retain future earnings,
if any, to support the development and expansion of our business and do not anticipate paying cash dividends in the foreseeable
future. Our payment of any future dividends will be at the discretion of our Board after taking into account various factors, including
but not limited to our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements
that we may be a party to at the time. Accordingly, investors must rely on sales of their common stock after price appreciation,
which may never occur, as the only way to realize their investment. Investors seeking cash dividends should not purchase our common
stock.
Our articles of incorporation provide
for indemnification of officers and directors at our expense and limit their liability, which may result in a major cost to us
and hurt the interests of our stockholders because corporate resources may be expended for the benefit of officers and/or directors
and may inhibit actions against our officers and directors.
Our articles of incorporation and applicable
Nevada law provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against
attorney’s fees and other expenses incurred by them in any litigation to which they become a party arising from their association
with or activities on our behalf. We will also bear the expenses of such litigation for any of our directors, officers, employees,
or agents, upon such person’s promise to repay us if it is ultimately determined that any such person shall not have been
entitled to indemnification. This indemnification policy could result in substantial expenditures by us, which we will be unable
to recoup.
The provisions of the Nevada Revised Statutes
and our bylaws may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. The
provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though
such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may
be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to
these indemnification provisions. We believe that these amended and restated certificate of incorporation provisions, amended and
restated bylaw provisions, indemnification agreements and the insurance are necessary to attract and retain qualified persons as
directors and officers.
We have been advised that, in the opinion of
the SEC, indemnification for liabilities arising under federal securities laws is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for indemnification against these types of liabilities, other than
the payment by us of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action,
suit or proceeding, is asserted by a director, officer or controlling person in connection with the securities being registered,
we will (unless in the opinion of our counsel, the matter has been settled by controlling precedent) submit to a court of appropriate
jurisdiction, the question whether indemnification by us is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue. The legal process relating to this matter, if it were to occur, is likely to
be very costly and may result in us receiving negative publicity, either of which factors is likely to materially reduce the market
and price for our common stock.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements that are based on our management’s beliefs and assumptions and on information
currently available to our management. The forward-looking statements are contained principally in the sections captioned “Prospectus
Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition
and Results of Operations,” “Industry Overview” and “Business.” Forward-looking statements
include information concerning our possible or assumed future results of operations, business strategies, technology developments,
financing and investment plans, dividend policy, competitive position, industry and regulatory environment, potential growth opportunities
and the effects of competition. Forward-looking statements include statements that are not historical facts and can be identified
by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,”
“intend,” “may,” “plan,” “potential,” “predict,” “project,”
“seek,” “should,” “will,” “would” or similar expressions and the negatives of those
terms.
Forward-looking
statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements
to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
Given these uncertainties, you should not place undue reliance on forward-looking statements. Also, forward-looking statements
represent our management’s beliefs and assumptions only as of the date of this prospectus. You should read this prospectus
and the documents that we have filed as exhibits to the registration statement, of which this prospectus is a part, completely
and with the understanding that our actual future results may be materially different from what we expect.
Important factors
that could cause actual results to differ materially from our expectations include:
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If we fail to obtain financing on acceptable terms or in amounts sufficient to permit us to execute
on our business plan;
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|
·
|
if our research and development efforts are not successful, we will be unable to generate revenues
from our operations and we may have to cease doing business;
|
|
·
|
if we fail to obtain necessary regulatory and safe operation approvals for the commercialization
of the our technology;
|
|
·
|
if we fail to, or incur significant costs in order to, obtain, maintain, protect, defend or enforce
our intellectual property and other proprietary rights, our business and results of operations could be materially harmed;
|
|
·
|
if we are unable to protect the confidentiality of our trade secrets, our business and competitive
position would be harmed;
|
|
·
|
if our trademarks and trade names are not adequately protected, we may not be able to build name
recognition in our markets of interest, and our competitive position may be harmed;
|
|
·
|
we may need to defend ourselves against third-party claims that we are infringing, misappropriating
or otherwise violating others’ intellectual property rights, which could divert management’s attention, cause us to
incur significant costs, and prevent us from selling or using the technology to which such rights relate;
|
|
·
|
we may experience delays, disruptions or quality control problems in our manufacturing operations;
|
|
·
|
the interruption of the flow of components and materials from international vendors could disrupt
our supply chain, including as a result of the imposition of additional duties, tariffs and other charges on imports and exports;
|
|
·
|
we face risks related to actual or threatened health epidemics, such as the COVID-19 pandemic,
and other outbreaks, which could significantly disrupt our manufacturing and operations;
|
|
·
|
the viability and demand for our products are impacted by many factors outside of our control,
which makes it difficult to predict our future prospects;
|
|
·
|
our reputation and brand strength relative to our competitors;
|
|
·
|
our ability to consummate strategic transactions, including, licenses, joint ventures, development
partnerships, and acquisitions;
|
|
·
|
our ability to cost-effectively manage and grow our operations;
|
|
·
|
changes mandated by legislation, regulatory authorities, or litigation, including settlements and
consent decrees, some of which may have a disproportionate effect on us;
|
|
·
|
defects or performance problems in our products could result in loss of customers, reputational
damage and decreased revenue, and we may face warranty, indemnity and product liability claims arising from defective products;
|
|
·
|
enhanced competition in the markets in which we seek operate;
|
|
·
|
Kalen Capital Corporation (“KCC”) will continue to have significant influence over
us after this offering, including control over decisions that require the approval of stockholders, which could limit your ability
to influence the outcome of matters submitted to stockholders for a vote;
|
|
·
|
we are a “controlled company,” and as a result, we will qualify for, and intend to
rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders
of companies that are subject to such requirements. In addition, KCC’s interests may conflict with our interests and the
interests of other stockholders; and
|
|
·
|
the requirements of being a public company may strain our resources, divert management’s
attention and affect our ability to attract and retain qualified board members and officers.
|
We have little likelihood of long-term success
unless we are able to continue to raise capital from the sale of our securities or financing from other sources until, if ever,
we generate positive cash flow from operations.
Except as required
by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ
materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
USE OF PROCEEDS
All of the Shares offered by the Selling Stockholders
pursuant to this prospectus will be sold by the Selling Stockholders for their respective accounts. We will not receive any of
the proceeds from the sale of the Shares hereunder. We will receive up to an aggregate of approximately $2,355,819 from the exercise
of the Warrants assuming the exercise in full of all of the Warrants for cash. We expect to use the net proceeds from the exercise
of the Warrants for general corporate purposes.
With respect to the
registration of the Shares, the Selling Stockholders will pay any underwriting discounts and commissions and expenses incurred
by them for brokerage, accounting, tax or legal services or any other expenses incurred by them in disposing of the Shares. We
will bear all other costs, fees and expenses incurred in effecting the registration of the Shares covered by this prospectus, including,
without limitation, all registration and filing fees, listing fees, and fees of our counsel and our independent registered public
accountants.
DETERMINATION OF OFFERING PRICE
Each of the Selling Stockholders will determine
at what price he, she or it may sell the Shares, and such sales may be made at prevailing market prices, or at privately negotiated
prices. Please refer to “Plan of Distribution.”
MARKET PRICE OF AND DIVIDENDS ON OUR COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
Our common stock is quoted on the OTCPINK under
the symbol “WNDW”. Our warrants to purchase common stock are not currently traded on any market.
As of the date of this prospectus there were 53,186,799
shares of our common stock outstanding and held by approximately 61 stockholders of record. Because a portion of our common stock
is held in “street name” or by beneficial holders, whose shares are held of record by banks, brokers, and other financial
institutions, we are unable to estimate the total number of stockholders represented by these record holders.
The closing price of our common stock as quoted
on the OTCPINK on February 16, 2021 was $18.50. The following table sets forth the high and low bid quotations of our
common stock for each quarter during the past two fiscal years as reported by the OTCQB:
|
|
High
|
|
Low
|
Interim Period Ended November 30, 2020
|
|
|
|
|
|
|
|
|
|
First Quarter 2021 (September 1 – November 30, 2020)
|
|
$
|
8.45
|
|
|
$
|
3.00
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended August 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter 2020 (September 1 – November 15, 2019)
|
|
$
|
3.18
|
|
|
$
|
2.32
|
|
Second Quarter 2020 (December 1, 2019 – February 28, 2020)
|
|
$
|
3.00
|
|
|
$
|
2.15
|
|
Third Quarter 2020 (March 1 – May 31, 2020)
|
|
$
|
3.05
|
|
|
$
|
1.27
|
|
Fourth Quarter 2020 (June 1 – August 31, 2020)
|
|
$
|
4.99
|
|
|
$
|
2.27
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended August 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter 2019 (September 1 – November 28, 2018)
|
|
$
|
3.36
|
|
|
$
|
1.53
|
|
Second Quarter 2019 (December 1, 2017 – February 28, 2019)
|
|
$
|
3.50
|
|
|
$
|
2.03
|
|
Third Quarter 2019 (March 1 – May 31, 2019)
|
|
$
|
3.19
|
|
|
$
|
2.10
|
|
Fourth Quarter 2019 (June 1 – August 31, 2019)
|
|
$
|
3.84
|
|
|
$
|
2.57
|
|
Dividend Policy
We have not paid any dividends on our common
stock and our Board of Directors (the “Board”) presently intends to continue a policy of retaining earnings,
if any, for use in our operations. The declaration and payment of dividends in the future, of which there can be no assurance,
will be determined by the Board in light of conditions then existing, including earnings, financial condition, capital requirements
and other factors. The Nevada Revised Statutes prohibit us from declaring dividends where, if after giving effect to the distribution
of the dividend:
|
·
|
We would not be able to pay our debts as they become due in the usual course of business; or
|
|
·
|
Our total assets would be less than the sum of our total liabilities plus the amount that would
be needed to satisfy the rights of stockholders who have preferential rights superior to those receiving the distribution.
|
Except as set forth above, there are no restrictions
that currently materially limit our ability to pay dividends or which we reasonably believe are likely to limit materially the
future payment of dividends on common stock.
Securities Authorized for Issuance under Equity Compensation
Plans
The following sets forth certain information
regarding the common stock that may be issued upon the exercise of options, warrants and other rights that have been or may be
granted to employees, directors or consultants under all of our existing equity compensation plans. The 2006 Incentive Stock Option
Plan (see below) is our only equity-based compensation plan as of November 30, 2020.
2006 Incentive Stock Option Plan (Equity Compensation Plan
Approved by Security Holders)
On October 10, 2006, the Board adopted and approved,
and on February 7, 2011, stockholders owning a majority of our issued and outstanding stock approved, our 2006 Incentive Stock
Option Plan (the “2006 Plan”) that provides for the grant of stock options to employees, directors, officers
and consultants. The 2006 Plan provides for the granting of options to purchase a maximum of 15,000,000 shares of our common stock.
Stock options granted to employees under the 2006 Plan generally vest over zero to five years or as otherwise determined by the
plan administrator. Stock options to purchase shares of our common stock expire no later than ten years after the date of grant. The
2006 Plan was extended by the Board to expire on February 7, 2023.
We measure all stock-based compensation awards
using a fair value method on the date of grant and recognize such expense in our financial statements over the requisite service
period. We use the Black-Scholes option pricing model to calculate the fair value of stock option grants. The Black-Scholes option
pricing model requires management to make assumptions regarding the option lives, expected volatility, and risk-free interest rates,
all of which impact the fair value of the option and, ultimately, the expense that will be recognized over the life of the option.
The risk-free interest rate is based on the
U.S. Treasury yield curve in effect at the time of grant for a bond with a similar term. We do not anticipate declaring dividends
in the foreseeable future. Volatility is calculated based on the historical daily closing stock prices for the same period as the
expected life of the option. We use the “simplified” method for determining the expected term of our “plain vanilla”
stock options.
Plan Category
|
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
(a)
|
|
Weighted-average exercise price of outstanding options, warrants and rights
(b)
|
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(c)
|
Equity compensation plans approved by security holders (1)
|
|
|
7,817,234(2)
|
|
|
$
|
4.16
|
|
|
|
6,001,169
|
|
Equity compensation plans not approved by security holders
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
Total
|
|
|
7,817,234
|
|
|
$
|
4.16
|
|
|
|
6,001,169
|
|
(1) Consists of grants under the 2006 Plan.
(2) Please refer to “NOTE 5 - STOCK OPTIONS,”
to the Notes to the Consolidated Financial Statements commencing on page F-9; “MANAGEMENT,” and “SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.”
Recent Sales of Unregistered Securities
All funds received from the sale of our shares
were used for working capital purposes. All shares bear a legend restricting their disposition. The foregoing securities may not
be offered or sold in the United States unless registered under the Act, or pursuant to an exemption from registration.
The shares were issued in reliance upon an exemption
from registration pursuant to, among others, Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities
Act”) and Regulations D and S as promulgated under the Securities Act. Each investor took his securities for investment
purposes without a view to distribution and had access to information concerning us and our business prospects, as required by
the Securities Act. In addition, there was no general solicitation or advertising for the purchase of our shares. Our securities
were sold only to an accredited investor and a limited number of sophisticated investors, as defined in the Securities Act with
whom we had a direct personal preexisting relationship, and after a thorough discussion. Finally, our stock transfer agent has
been instructed not to transfer any of such shares, unless such shares are registered for resale or there is an exemption with
respect to their transfer.
Each purchaser was provided with access to our
filings with the United States Securities and Exchange Commission (the “SEC”), including the following:
|
•
|
if
requested by the purchaser in writing, a copy of our most recent Form 10-K under the Exchange Act of 1934, as amended (the “Exchange
Act”).
|
|
•
|
the
information contained in an annual report on Form 10-K under the Exchange Act.
|
|
•
|
the
information contained in any reports or documents required to be filed by SolarWindow Technologies, Inc. under sections 13(a),
14(a), 14(c), and 15(d) of the Exchange Act since the distribution or filing of the reports specified above.
|
|
•
|
a
brief description of the securities being offered, the use of the proceeds from the offering, and any material changes in our
affairs that are not disclosed in the documents furnished.
|
On November 26, 2018, the Company completed
a self-directed offering (the “November 2018 Private Placement”) to accredited investors of 16,666,667 units of the
Company’s equity securities (each a “Unit” and collectively, the “Units”) at a price of $1.50 per
Unit with each Unit comprised of (a) one share of common stock; and (b) one warrant to purchase one share of common stock at a
price, subject to certain adjustments, of $1.70 per share for a period of seven (7) years (the “Series T Warrant”).
The unit price was based on a 15% discount to the average of the 20-day closing price (last day being Monday, November 12, 2018)
of the Company's common stock as reported on the OTCPINK. Pursuant to the November 2018 Private Placement, the Company issued 13,200,000
Units in exchange for cash of $19,800,000 and 3,466,667 Units for the conversion of a) $4,401,434 of the principal and unpaid interest
owed under the 2013 Note; and b) $798,566 of the principal and unpaid interest owed under the March 2015 Loan. The interest payable
remaining under the 2013 Note and March 2015 Loan totals $52,182. The Company agreed to repay the remaining interest from proceeds
received from the November 2018 Private Placement. Of the 13,200,000 Units issued in exchange for cash, Kalen Capital Corporation
purchased 13,100,000 Units.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion
and Analysis (“MD&A”) is intended to help the reader understand the results of operations and financial condition
of SolarWindow Technologies, Inc. The MD&A is provided as a supplement to, and should be read in conjunction with financial
statements and the accompanying notes to the financial statements included in this prospectus.
Our discussion and analysis of our financial
condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities and expenses and related disclosure of contingent
assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed
to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different
assumptions or conditions.
Overview
We are a developer of transparent electricity-generating
coatings, and methods for their application to various materials (“LiquidElectricity™ Coatings”). When applied
in ultra-thin layers to rigid glass, and flexible glass and plastic surfaces our LiquidElectricity™ Coatings transform otherwise
ordinary surfaces into photovoltaic devices capable of generating electricity from natural sun, artificial light, and low, shaded,
or reflected light conditions while maintaining transparency.
We have overcome major technical challenges
and achieved many important milestones resulting in an expansion of the potential applications of LiquidElectricity™ Coatings
which span multiple industries, including architectural, automotive, agrivoltaic, aerospace, commercial transportation and marine.
Our LiquidElectricity™ Coatings and products are under development with support from commercial contract firms and at the
U.S. Department of Energy’s National Renewable Energy Laboratory, through Cooperative Research and Development Agreements.
Research and Related Agreements
We are a party to certain agreements related
to the development of our technology.
Stevenson-Wydler Cooperative Research and Development Agreement
with the Alliance for Sustainable Energy
On March 18, 2011, we entered into the NREL
CRADA with Alliance for Sustainable Energy, the operator of the NREL under its U.S. Department of Energy contract to advance the
commercial development of our technology. Under terms of the NREL CRADA, NREL researchers make use of our exclusive intellectual
property (“IP”), newly developed IP, and NREL’s background IP in order to work towards specific product
development goals, established by the Company. Under the terms of the NREL CRADA, we agreed to reimburse Alliance for Sustainable
Energy for filing fees associated with all documented, out-of-pocket costs directly related to patent application preparation and
filings, and maintenance of the patent applications.
On March 6, 2013, we entered into Phase II of
our NREL CRADA. Under the terms of the agreement, researchers will additionally work towards:
|
·
|
further improving our technology efficiency and transparency;
|
|
·
|
optimizing electrical power (current and voltage) output;
|
|
·
|
optimizing the application of the active layer coatings which make it possible for LiquidElectricity™
Coatings to generate electricity on glass surfaces;
|
|
·
|
developing improved electricity-generating coatings and application processes by enhancing performance,
processing, reliability, and durability;
|
|
·
|
optimizing LiquidElectricity™ Coating performance on flexible substrates; and
|
|
·
|
developing high speed and large area roll-to-roll (R2R) and sheet-to-sheet (S2S) coating methods
required for commercial-scale building integrated photovoltaic (“BIPV”) products and windows.
|
On December 28, 2015, we entered into another
modification to the NREL CRADA (the “Modification”). Under the Modification, (i) the date of completion was
extended to December 2019; and (ii) the Company and the NREL will work jointly towards achieving specific product development goals
and objectives for the purpose of preparing to commercialize our OPV-based transparent electricity-generating coatings for various
applications, including BIPV, glass and flexible plastics.
Over the course of our collaborative research
and development efforts with the NREL under the CRADA, both parties have agreed to modifications to extend the date of completion.
The Company and NREL have entered into eight such No Cost Time Extensions (“NCTE”). Under the terms of each
NCTE, all terms and conditions of the NREL CRADA remain in full force and effect without change. The current NCTE was executed
on September 15, 2020 and extends the date of completion to December 31, 2021. As of November 30, 2020, the Company had a capitalized
asset balance of $463,614 related to deferred research and development costs for advances to Alliance for Sustainable Energy for
work to be performed under the NREL CRADA.
U.S. Department of Energy (DOE) Office of Energy Efficiency
and Renewable Energy’s (EERE) Advanced Manufacturing Office (AMO) Cooperative Research and Development Agreement
On March 15, 2018 the Company was awarded it’s
first-ever AMM CRADA by the DOE EERE AMO. SolarWindow was awarded the AMM CRADA after submitting a proposal outlining its coating
technologies and fabrication methods to the DOE’s Roll-to-Roll Advanced Materials Manufacturing Consortium, led by ORNL and
partnering with ANL, LBNL, and NREL. The AMM CRADA will be carried out with the DOE by SolarWindow, ANL, and NREL.
On September 15, 2020, we entered into NCTE
that extends the date of completion to December 31, 2021 pursuant to which researchers work towards specific product development
goals outlined in the AMM CRADA.
Through the developments of AMM CRADA, the
Company accomplished initiatives to improve and optimize its laser patterning system and methods of fabrication for our electricity-generating
coatings on flexible plastics. Once optimized for industry, this advancement is expected to reduce process time, improve device
performance, and reduce the costs of LiquidElectricity™ Coating based plastic products. Another objective of the AMM CRADA
is to develop and demonstrate a unique high-throughput process methodology for semitransparent OPV modules compatible with high
process speeds for many different advanced material manufacturing systems.
Results of Operations
Three months ended November 30, 2020 compared to the three
months ended November 30, 2019
Our quarterly periods
end on November 30, February 28, May 31, and August 31. Our operating results for the fiscal quarter ended November 30, 2020 may
not be indicative of the results that may be expected for the fiscal year ending August 31, 2021 because of the COVID-19 pandemic
and other potential beneficial or detrimental unforeseen occurrences. In addition, our quarterly results of operations have varied
in the past and are likely to do so again in the future. As such, we believe that period-to-period comparisons of our results of
operations should not be relied upon as an indication of our future performance.
The following table
presents the components of our consolidated results of operations for the periods indicated:
|
|
Three Months Ended
|
|
2020 compared to 2019
|
|
|
November 30,
|
|
Increase /
|
|
Percentage
|
|
|
2020
|
|
2019
|
|
(Decrease)
|
|
Change
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general & administrative
|
|
$
|
465,961
|
|
|
$
|
448,562
|
|
|
$
|
17,399
|
|
|
|
4
|
%
|
Research and development
|
|
|
243,156
|
|
|
|
330,249
|
|
|
|
(87,093
|
)
|
|
|
-26
|
%
|
Stock compensation
|
|
|
1,838,532
|
|
|
|
420,970
|
|
|
|
1,417,562
|
|
|
|
337
|
%
|
Total Operating expense
|
|
$
|
2,547,649
|
|
|
$
|
1,199,781
|
|
|
$
|
1,347,868
|
|
|
|
112
|
%
|
Selling, General and Administrative
Selling, general and administrative (“SG&A”)
costs include all expenditures incurred other than research and development related costs, including costs related to personnel,
professional fees, travel and entertainment, public company costs, insurance and other office related costs. During the three months
ended November 30, 2020 compared to the three months ended November 30, 2019, SG&A costs increased due primarily to a $92,000
increase in personnel costs and $69,459 increase in other administrative costs offset by a decrease of $144,061 in professional
fees.
Research and Development
Research and Development (“R&D”)
costs represent costs incurred to develop our technology and are incurred pursuant to our research agreements and agreements with
other third-party providers and certain internal R&D cost allocations. Payments under these agreements include salaries and
benefits for R&D personnel, allocated overhead, contract services and other costs. R&D costs are expensed when incurred,
except for non-refundable advance payments for future research and development activities which are capitalized and recognized
as expense as the related services are performed. During the three months ended November 30, 2020 compared to the three months
ended November 30, 2019, R&D costs decreased as a result of a $51,177 decrease in CRADA costs and $42,502 decrease in other
R&D related costs offset by a $6,587 increase in personnel costs.
Stock Based Compensation
The Company grants stock options to its Directors,
employees and consultants. Stock compensation represents the expense associated with the amortization of our stock options. Expense
associated with equity-based transactions is calculated and expensed in our financial statements as required pursuant to various
accounting rules and is non-cash in nature. Stock based compensation expense increased due primarily to the Company entering into
an Executive Consulting Agreement with each of Mr. Jatinder S. Bhogal, CEO and Chairman and Mr. John Rhee, President and Director,
pursuant to which each party was granted 2,500,000 stock purchase options in the fourth quarter of last fiscal year.
Other Income (Expense)
A summary of our other income (expense) for
the three months ended November 30, 2020 and 2019 follows:
|
|
Three Months Ended
|
|
2020
|
|
|
November 30,
|
|
compared to
|
|
|
2020
|
|
2019
|
|
2019
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
19,389
|
|
|
$
|
94,503
|
|
|
|
(75,114
|
)
|
Loss on disposal of assets
|
|
|
(8,775
|
)
|
|
|
-
|
|
|
|
8,775
|
|
Total other income (expense)
|
|
$
|
10,614
|
|
|
$
|
94,503
|
|
|
$
|
(66,339
|
)
|
Total other income (expense)
|
|
$
|
21,228
|
|
|
$
|
189,006
|
|
|
$
|
17,550
|
|
Interest income relates to the interest earned
on our cash and cash equivalents and short-term investments. We experienced a decrease over the prior year due to a decrease in
the rate of interest earned. The loss on disposal of fixed assets relates to the closing of the Vestal, New York office and related
disposal of office equipment and furniture.
Liquidity and Capital Resources
Our primary cash needs are for personnel, professional
and development related fees and insurance. Our principal sources of liquidity are cash and cash equivalents and short-term investments.
As of November 30, 2020 and August 31, 2020, we had cash and cash equivalents and short-term investments of $13,549,510 and $14,151,523,
respectively. We have financed our operations primarily from the sale of equity and debt securities. We expect the cost of funding
the South Korea office to be approximately $850,000 over the twelve months ending August 31, 2021.
The following table presents a summary of our
cash flows for the periods indicated:
|
|
Three Months Ended
|
|
2020
|
|
|
November 30,
|
|
compared to
|
|
|
2020
|
|
2019
|
|
2019
|
Net cash used in operating activities
|
|
$
|
(579,314
|
)
|
|
$
|
(648,468
|
)
|
|
$
|
69,154
|
|
Net cash used in investing activities
|
|
|
(5,025,565
|
)
|
|
|
(5,031
|
)
|
|
|
(5,020,534
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
2,866
|
|
|
|
|
|
|
|
2,866
|
|
Net (decrease) in cash and cash equivalents
|
|
$
|
(5,602,013
|
)
|
|
$
|
(653,499
|
)
|
|
$
|
(4,948,514
|
)
|
Operating Activities
Operating activities consist of net loss adjusted
for certain non-cash items, including depreciation, non-cash lease expense, stock-based compensation expense, realized gains or
losses on disposal of property and equipment, and the effect of working capital changes. The decrease over the prior period is
mainly due to the increase in net loss, and the timing of accounts payable. The increase in net loss was primarily due to an increase
in stock based compensation resulting from the grant of options to Mr. Jatinder S. Bhogal, CEO and Mr. John Rhee, President and
Director, and higher personnel and SG&A costs partially offset by a decrease in professional fees.
Investing Activities
We have used cash
primarily for short-term investments, investments in property and equipment, and, to a lesser extent, for the purchase of furniture
and office equipment, including computers and software. Net investment activities for capital expenditures were $25,565 during
the three months ended November 30, 2020, compared to $5,031 during the three months ended November 30, 2019. Also, during the
three months ended November 30, 2020, we purchased a twelve month term deposit in the amount of $5,000,000.
Indebtedness
None.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Other Contractual Obligations
In September 2020, the Company, through its
wholly owned subsidiaries, SolarWindow Asia (USA) Corp. and SolarWindow Asia Co., Ltd., entered a lease for office space in South
Korea. The lease has a term of one year from September 23, 2020 through September 23, 2021 with monthly payments of approximately
$1,200.
During fiscal 2019 the Company made payments
totaling $1,292,655 towards the purchase of manufacturing equipment with an estimated total cost of $1,803,000. The remaining $510,345
will be paid upon the completion of the equipment once the final specifications have been determined pending optimization of the
Company’s product iteration specific to this equipment. For additional information, see “Note 3 – Property and
Equipment” located in the footnotes to our financial statements for the three months ended November 30, 2020 and 2019.
Recent accounting pronouncements not yet adopted
See Note 2 to our consolidated financial
statements for the three months ended November 30, 2020 and 2019.
Recently adopted accounting pronouncements
See Note 2 to our consolidated financial
statements for the three months ended November 30, 2020 and 2019.
Critical Accounting Policies and Significant Judgments’
and Use of Estimates
Management’s discussion and analysis
of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared
in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements required
the use of estimates and judgments that affect the reported amounts of our assets, liabilities, and expenses. Management bases
estimates on historical experience and other assumptions it believes to be reasonable under the circumstances and evaluates these
estimates on an on-going basis. Actual results may differ from these estimates. There have been no significant changes to the critical
accounting policies and estimates included in our Annual Report on Form 10-K for the fiscal year ended August 31, 2020.
Related Party Transactions
See Note 7 to our consolidated financial
statements for the three months ended November 30, 2020 and 2019 for a discussion of our related party transactions.
Year ended August 31, 2020 compared to the year ended August 31, 2019
Operating Expenses
A summary of our operating expenses for the years ended August 31,
2020 and 2019 follows:
|
|
|
|
|
|
2020 compared to 2019
|
|
|
Year Ended August 31,
|
|
Increase /
|
|
Percentage
|
|
|
2020
|
|
2019
|
|
(Decrease)
|
|
Change
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general & administrative
|
|
$
|
1,535,041
|
|
|
$
|
1,438,111
|
|
|
$
|
96,930
|
|
|
|
7
|
%
|
Research and product development
|
|
|
1,195,513
|
|
|
|
1,013,387
|
|
|
|
182,126
|
|
|
|
18
|
%
|
Stock compensation
|
|
|
4,872,909
|
|
|
|
3,959,367
|
|
|
|
913,542
|
|
|
|
23
|
%
|
Total Operating expense
|
|
$
|
7,603,463
|
|
|
$
|
6,410,865
|
|
|
$
|
1,192,598
|
|
|
|
19
|
%
|
Selling, General and Administrative
Selling, general and administrative (“SG&A”)
costs include all expenditures incurred other than research and development related costs, including costs related to personnel,
professional fees, travel and entertainment, public company costs, insurance and other office related costs. During the year ended
August 31, 2020 compared to the year ended August 31, 2019, SG&A costs increased due primarily to a $121,554 increase in personnel
costs and $72,612 increase in other administrative costs offset by a decrease of $97,236 of professional costs.
Research and Product Development
Research and Product Development (“R&PD”)
costs represent costs incurred to develop our technology and are incurred pursuant to our research agreements and agreements with
other third-party providers and certain internal R&PD cost allocations. Payments under these agreements include salaries and
benefits for R&D personnel, allocated overhead, contract services and other costs. R&PD costs are expensed when incurred,
except for non-refundable advance payments for future research and development activities which are capitalized and recognized
as expense as the related services are performed. During the year ended August 31, 2020 compared to the year ended August 31, 2019,
R&PD costs increased primarily as a result of a $272,860 increase in personnel costs and $88,053 increase in CRADA costs offset
by a decrease of $178,787 in other R&PD related costs.
Stock Based Compensation
The Company grants stock options to its Directors,
employees and consultants. Stock compensation represents the expense associated with the amortization of our stock options. Expense
associated with equity-based transactions is calculated and expensed in our financial statements as required pursuant to various
accounting rules and is non-cash in nature. Stock based compensation expense increased due primarily to the Company entering into
an Executive Consulting Agreement with each of Mr. Jatinder S. Bhogal, CEO and Chairman and Mr. John Rhee, President and Director,
pursuant to which each party was granted 2,500,000 stock purchase options.
Other Income (Expense)
A summary of our other income (expense) for
the years ended August 31, 2020 and 2019 follows:
|
|
|
|
|
|
2020
|
|
|
Year Ended August 31,
|
|
compared to
|
|
|
2020
|
|
2019
|
|
2019
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
250,401
|
|
|
$
|
315,344
|
|
|
|
(64,943
|
)
|
Interest expense
|
|
|
-
|
|
|
|
(128,239
|
)
|
|
|
(128,239
|
)
|
Accretion of debt discount
|
|
|
-
|
|
|
|
(663,918
|
)
|
|
|
(663,918
|
)
|
Total other income (expense)
|
|
$
|
250,401
|
|
|
$
|
(476,813
|
)
|
|
$
|
(727,214
|
)
|
“Interest income” relates to the
interest earned on our cash. “Interest expense” relates to the stated interest of our convertible promissory notes
and bridge note. “Accretion of debt discount” represents the accretion of the discount applied to those notes as a
result of the issuance and modification of detachable warrants and the beneficial conversion feature contained therein. As a result
of the financing received by the Company on November 26, 2018, all outstanding debt was converted resulting in the elimination
of further interest expense and an increase in accretion due to the recognition of all remaining debt discount related to the 2013
Note. For additional information, see “NOTE 4 – Debt” and “NOTE 5 – November 2018 Private Placement”
to our Financial Statements for the years ended August 31, 2020 and 2019.
Liquidity and Capital Resources
Our principal source of liquidity is cash in
the bank. As of August 31, 2020, the Company had $14,151,523 of cash compared to $16,604,011 as of August 31, 2019. We have financed
our operations primarily from the sale of equity and debt securities. We expect the cost of funding the South Korea office to be
approximately $850,000 over the twelve months ended August 31, 2021.
Summary of Cash Flows
Presented below is a table that summarizes
the cash provided or used in our activities and the amount of the respective increases or decreases in cash provided by (used in)
those activities between the fiscal periods:
|
|
|
|
|
|
2020
|
|
|
Years Ended August 31,
|
|
compared to
|
|
|
2020
|
|
2019
|
|
2019
|
Operating activities
|
|
$
|
(2,447,457
|
)
|
|
$
|
(2,545,151
|
)
|
|
$
|
97,694
|
|
Investing activities
|
|
|
(5,031
|
)
|
|
|
(1,347,664
|
)
|
|
|
1,342,633
|
|
Financing activities
|
|
|
-
|
|
|
|
19,800,000
|
|
|
|
(19,800,000
|
)
|
Net increase in cash
|
|
$
|
(2,452,488
|
)
|
|
$
|
15,907,185
|
|
|
$
|
(18,359,673
|
)
|
Operating Activities
Net cash used in operating activities decreased
3.8% to $2,447,457 for the year ended August 31, 2020 as compared to $2,545,151 for the year ended August 31, 2019.
Investing Activities
Net cash used in investing activities totaled
$5,031 for the year ended August 31, 2020 as compared to $$1,347,664 for the year ended August 31, 2019. The $1,342,633 decrease
was the result of prior year purchases of computer and equipment, furniture and various production and R&D equipment, including
payments totaling $1,292,655 towards the purchase of manufacturing equipment with an estimated total cost of $1,803,000. The finalization
of that equipment to meet our process and product fabrication standards and requirements has been pushed out due to the effects
of the pandemic on our ability to secure a development and manufacturing partner.
Financing Activities
Net cash provided by financing activities totaled
$0 for the year ended August 31, 2020, compared to $19,800,000 for the year ended August 31, 2019. During the year ended August
31, 2019, the Company received proceeds of $19,800,000 from the November 2018 Private Placement.
Indebtedness
None.
Other Contractual Obligations
The Company entered into an operating lease
for office space with a term from May 1, 2019 through May 1, 2022 with monthly rent due of $2,200 for the first two years and $2,266
during year three. For additional information, see “Note 8 – Lease” located in the footnotes to our financial
statements.
In September 2020, the Company, through its
wholly owned subsidiaries, SolarWindow Asia (USA) Corp. and SolarWindow Asia Co., Ltd., entered a lease for office space in South
Korea. The lease has a term of one year from September 23, 2020 through September 23, 2021 with monthly payments of approximately
$1,200.
During fiscal 2019 the Company made payments
totaling $1,292,655 towards the purchase of manufacturing equipment with an estimated total cost of $1,803,000. The remaining $510,345
will be paid upon the completion of the equipment once the final specifications have been determined pending optimization of the
Company’s product iteration specific to this equipment. For additional information, see “Note 3 – Equipment”
located in the footnotes to our financial statements.
Off-Balance Sheet Arrangements
There were no off-balance sheet arrangements for the years ended
August 31, 2020 and 2019.
Recently Issued Accounting Standards
For more information regarding recent accounting
standards and their impact to our results of operations and financial position, see “Note 2- Summary of Significant Accounting
Policies” to our Financial Statements for the years ended August 31, 2020 and 2019.
Critical Accounting Policies
Our discussion and analysis of our financial
condition and results of operations are based upon our Financial Statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America (“GAAP”). The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and
the related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates based on its historical
experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or conditions.
We believe the following critical accounting
policies and estimates affect the preparation of our financial statements:
Stock Based Compensation
Pursuant to the provisions of the Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 718-10, Compensation-Stock
Compensation, which establishes accounting for share-based payment transactions for acquiring goods and services from employees
and nonemployees, we utilize the Black-Scholes option pricing model to estimate the fair value of employee stock option awards
at the date of grant, which requires the input of highly subjective assumptions, including expected volatility and expected life.
Changes in these inputs and assumptions can materially affect the measure of estimated fair value of our share-based compensation.
These assumptions are subjective and generally require significant analysis and judgment to develop. When estimating fair value,
some of the assumptions will be based on, or determined from, external data and other assumptions may be derived from our historical
experience with stock-based payment arrangements. The appropriate weight to place on historical experience is a matter of judgment,
based on relevant facts and circumstances.
New Accounting Standards to be Adopted Subsequent to August
31, 2020
In August 2020, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update No. 2020-06, “Debt—Debt with Conversion and Other Options
(Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible
Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible
instruments by removing major separation models required under current U.S. GAAP. ASU 2020-06 removes certain settlement conditions
that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings
per share calculation in certain areas. ASU 2020-06 is effective for the Company for fiscal years beginning after August 31, 2021,
including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after
December 15, 2020 and adoption must be as of the beginning of the Company’s annual fiscal year. The Company will early adopt
ASU 2020-06 beginning with our fiscal year starting on September 1, 2021. We do not expect the adoption of ASU 2020-06 to have
a material impact on our consolidated financial statements.
Related Party Transactions
For a discussion of our Related Party Transactions,
see “Note 9 - Transactions with Related Persons” to our Financial Statements for the years ended August 31,
2020 and 2019.
OUR BUSINESS
We are a pre-revenue company developing proprietary
transparent electricity-generating coatings and methods for their application to various materials which we refer to as our “LiquidElectricity™
Coatings”. Our LiquidElectricity™ Coatings generate electricity by harvesting light energy from natural sun, artificial
light, and low, shaded, or reflected light conditions. We apply ultra-thin layers of LiquidElectricity™ Coatings to rigid
glass, and flexible glass and plastic surfaces where they transform otherwise ordinary surfaces into organic photovoltaic devices.
Potential applications of our LiquidElectricity™ Coatings span multiple industries, including architectural, automotive,
agrivoltaic (greenhouse agriculture), aerospace, commercial transportation and marine.
We have achieved important milestones and overcome
major technical challenges in order to broaden the range of materials and products that we can coat to generate electricity. Our
goals in developing electricity-generating products have included ensuring transparency and esthetics, optimizing power generation,
and lowering the costs of our coating materials and their related application.
We first coated rigid flat glass with our LiquidElectricity™
Coatings to generate electricity. Numerous technological advancements over the past two years enabled us to fabricate panes of
flat glass layered with LiquidElectricity™ Coatings at room temperature and ambient pressure; this process represents a significant
technical achievement which may provide manufacturing advantages over expensive and cumbersome high temperature and high positive
or negative pressure-sensitive manufacturing methods common to conventional solar photovoltaic manufacturing.
Among important field tests, LiquidElectricity™
Coatings on flat glass have been successfully processed through the rigorous autoclave system for window glass lamination at a
commercial fabricator. At the fabricator’s facilities, glass panes layered with LiquidElectricity™ Coatings were subjected
to the extremely high heat and pressure of autoclave equipment used in commercial glass lamination. Subsequent performance testing
confirmed that glass with LiquidElectricity™ Coatings continued to produce power.
LiquidElectricity™ Coatings on glass
panes have also been subjected to more than 200 freeze/thaw cycles, yielding favorable performance. Our edge sealing processes
and materials contributed to the prevention of moisture-related damage, an important feature.
In addition to flat glass, we have successfully
applied our LiquidElectricity™ Coatings to generate electricity on flexible glass and plastics. On glass surfaces, our electricity-generating
coatings could enable new and retrofit architectural applications such as windows for commercial towers, glass walls and curtain
walls, room dividers, and other related products. On flexible surfaces, our electricity-generating products present applications
in various industries, including: automotive, light and commercial trucks, recreational vehicles, marine, aerospace and defense,
agrivoltaics, and others.
Among our near-term product iterations, is
the electrification of glass surfaces. Our LiquidElectricity™ coatings and application processes could produce electricity-generating
windows for potential use in new construction and retrofit applications in commercial buildings, when applied using our proprietary
processes and subsequently fabricated into a window product.
In a recent demonstration in July 2020, LiquidElectricity™
Coatings applied to otherwise ordinary glass panes resulted in the fabrication of a 9 square-foot window array, our largest and
most transparent array, which displayed voltage and successfully powered a series of LED lights. In October 2020, we released video
footage of our electricity-generating coatings applied to glass, successfully powering LED lights while undergoing testing under
various simulated light conditions.
Currently, our LiquidElectricity™ Coatings
are under development with support from commercial contract firms who provide expertise in specialty chemistry and coatings processes,
and at one of the most respected and advanced solar-photovoltaic research institutions in the world, the U.S. Department of Energy’s
(“DOE”) National Renewable Energy Laboratory (“NREL”), through a Cooperative Research and
Development Agreement (“CRADA”).
Additionally, we work on specific advancements
to various aspects of manufacturing-related processes with NREL and Argonne National Laboratory. This ongoing work was initiated
after SolarWindow was awarded our first-ever DOE Grant for Advanced Manufacturing. Specifically, our work is conducted through
an Advanced Materials Manufacturing Cooperative Research and Development Agreement (“AMM CRADA”) from the DOE
Office of Energy Efficiency and Renewable Energy’s Advanced Manufacturing Office, and the Roll-to-Roll Advanced Materials
Manufacturing Consortium, led by Oak Ridge National Laboratory, partnering with Argonne National Laboratory, Lawrence Berkeley
National Laboratory, and NREL.
Beyond research and development, our commercial
strategy is to apply LiquidElectricity™ Coatings to existing third-party materials or product surfaces, to create electricity-generating
products which could become self-powered, or colloquially, “self-charging”. In furtherance of our strategy, over the
past year we have strengthened our management team, established the SolarWindow Innovation Group, and expanded our US operations
to Asia.
In October 2020, we announced the opening of
an office in Seoul, South Korea and the appointment of management and operations personnel in the US and South Korea to pursue
commercial partnerships for our Company so as to enable productization, manufacturing, and marketing of our technologies and products.
Our commercial development efforts in the US
and Asia include seeking technology, product licensing and joint venture arrangements with research institutions, commercial partners,
manufacturing and fabrication facilities, and organizations with established technical competencies, market reach, and distribution
networks in targeted industries.
Our proprietary electricity-generating coatings
and application processes are the subject of thirty (30) trademarks and over sixty (60) U.S. and international patents, either
granted or in-process. See Intellectual Property, below.
We believe that our efforts have already produced
a basis for these applications. Our planned productization and commercialization of SolarWindowTM technologies will
require significant further product development, fabrication, testing, and validation. In addition to our technology development
CRADA and AMM CRADA, and engagements with specialty contract groups, we anticipate the need for product development partnerships
with commercial partners in order to ascertain the viability of our technologies and products, currently under development.
Our technologies and products, currently under
development, use our proprietary chemistries and application processes in order to generate electricity on glass and plastics.
Our ongoing research and product development requires the commitment of significant resources to support the extensive invention,
design, engineering, testing, prototyping, and intellectual property initiatives carried-out by our contract engineers, scientists,
and consultants.
We cannot accurately predict the amount of
funding or the time required to successfully commercialize products. The actual cost and time required to commercialize our technology
may vary significantly depending on, among other things, the results of our product development efforts; the cost of developing,
acquiring, or licensing various enabling technologies; changes in the focus and direction of our business or product development
plans; competitive and technological advances; the cost of patent filing, prosecuting, defending and enforcing claims; demonstrating
compliance with regulations and standards; and manufacturing, marketing and other costs that may be associated with product fabrication.
Because of this uncertainty, even if financing is available to us, we may secure insufficient funding to effectuate our business
and/or product development plans.
The Market Opportunity for our LiquidElectricity™ Coatings
Based on our market research, there are no
commercially marketed electricity-generating products available for sale in the United States which provide the functionality,
features, esthetics, and adaptability of LiquidElectricity™ Coatings. Our markets include building window and glass applications,
referred to as “architectural flat glass” and “fabricated glass products.” Flat glass is extensively used
in the architecture industry in applications such as windows, partitions, and facades. One third-party glass industry report, published
in February 2020, by Grand View Research, Inc., projects that the global flat glass market is expected to reach $202.9 billion
by 2027, growing at a revenue-based compounded annual growth rate (“CAGR”) of 7.3%.
We are also targeting applications for our
LiquidElectricity™ Coatings in automotive, light and commercial trucks, recreational vehicles, marine, and aerospace and
defense sectors, among others. We believe that the rising demand for electric propulsion and autonomous piloting in these segments
presents a timely opportunity for our electricity-generating technologies.
Additionally, the agrivoltaics market for our
electricity-generating coatings includes the smart greenhouse market, valued at $1.37 billion in 2019 and projected to reach $3.23
billion by 2027, growing at a CAGR of 11.4% from 2020 to 2027. In addition to these smart greenhouses which monitor and control
the growth condition of plants and optimize the growing process of the plants, we believe that conventional greenhouse structures,
both new and existing, present commercial opportunities for the application of SolarWindow to these structures.
We believe that our addressable markets in
each of the forgoing segments are fractional, yet may present viable commercial opportunities.
Our Competitive Strengths
We believe that the following strengths of our LiquidElectricity™
Coatings and technologies should enable us to compete successfully in the alternative and renewable energy industries:
|
·
|
Performance in Natural and Artificial Light - We propose unique solutions for harvesting the light energy of natural
and artificial light sources to generate sustainable electricity;
|
|
·
|
Works on Glass and Plastics - Our LiquidElectricity™ Coatings are capable of generating electricity on flat glass
and flexible glass and plastics; and
|
|
·
|
Cost Effective - Our LiquidElectricity™ Coatings are engineered for manufacturing using earth abundant materials
at a low price point, and are suited for high-throughput manufacturing.
|
Our Business Strategy
As noted, our commercial development efforts
in the US and Asia include seeking opportunities for intellectual property in-licensing, out-licensing, cross-licensing, and acquisition.
We also seek technology, product licensing and joint venture arrangements with research institutions, commercial partners, manufacturing
and fabrication facilities, and organizations with established technical competencies, market reach, and distribution networks
in targeted industries. Key elements of our business strategy to implement the forgoing include:
|
·
|
Strategic Commercial Partnerships – We have expanded our US operations with a commercial
development office in Seoul, South Korea and the appointment of management and operations personnel in the US and South Korea to
pursue commercial partnerships for our Company so as to enable productization, manufacturing, and marketing of our technologies
and products. Our target partnerships include supply chain glass, plastics, window, automotive, greenhouse manufacturing and other
related companies;
|
|
·
|
Innovative Research and Continuous Product and Technology Enhancement - We seek partnerships
with product development groups, manufacturers of specialty chemicals, advanced-manufacturing companies, and others with proven
technology expertise and developing additional applications and markets for LiquidElectricity™ Coatings. We are currently
working with scientists at NREL for the ongoing development of our coatings and applications processes, and on the AMM CRADA which
focuses on high-speed roll-to-roll manufacturing processes development. We work to engage additional firms and institutions with
important technical and product development competencies as needed; and
|
|
·
|
Management Team Development – Augment our management team with experienced and effective
talent in order to, among other competencies, advance our product development and innovation programs, monetize and leverage our
intellectual property, develop and implement sales and marketing plans, enhance the Company’s brand positioning in industry
and capital markets, and raise capital in order to effectuate our business plan.
|
Competition for Our Technology and Products
The solar PV industry is highly competitive
and such competition is increasing as the number of participants in the industry continues to grow. Although we are not aware of
other products utilizing technology substantially similar to our technology, numerous solar cell technologies have been developed,
or are being developed, by a number of companies, from which products may be derived and ultimately compete with the our products.
Such technologies include, but are not necessarily
limited to, the use of organic materials, advanced crystalline silicon thin film concepts, amorphous silicon, cadmium telluride,
copper-indium-gallium-selenide, titanium dioxide, and copper indium di-selenide, and others to generate electricity from sunlight.
Given sufficient time, investment and advances in manufacturing technologies, any of these competing technologies may achieve lower
manufacturing costs, superior performance, or greater market acceptance than our products, currently under development. Among the
companies purporting to be developing such technologies, are Ubiquitous Energy, ONYX Solar Next Energy Technologies, Solarmer Energy,
and Ubiquitous Energy.
We face competition from many companies, major
universities and research institutions in the United States and abroad. Many of these companies, universities and research institutions
have substantially greater resources, experience in conducting research, experience in obtaining regulatory approvals for their
products, operating experience, research and development and marketing capabilities name recognition and production capabilities.
We will face competition from companies marketing existing products or developing new products which may render our technologies
(and hence future products) obsolete.
These companies, universities and research institutions may have
numerous competitive advantages, including:
|
•
|
Significantly greater name recognition;
|
|
•
|
established distribution networks;
|
|
•
|
more advanced technologies and product development;
|
|
•
|
additional lines of products, and the ability to offer rebates, higher discounts or incentives to gain a competitive advantage;
|
|
•
|
processes that are operational and manufacturing prototype or final products;
|
|
•
|
greater experience in conducting research and development, manufacturing, obtaining regulatory approval for products, and marketing
approved products; and
|
|
•
|
significantly greater financial and human resources for product development, sales and marketing, and patent litigation.
|
If our competitors were to:
|
·
|
succeed in developing products that are more effective in producing electrical energy at a lower cost than our technology,
some or all of our products or our technology could be rendered obsolete and non-competitive;
|
|
·
|
succeed in bringing their products or services to market earlier than ours, our revenues
could be adversely affected. See “Risk Factors.”
|
Accordingly, in addition to our research and
development efforts, we have undertaken a public relations, advertising, and market access outreach programs designed to establish
our “brand” name recognition early on in our corporate development; we intend to continue to develop and market our
brand name pending commercialization of products, if any, we may derive from our research and development efforts. We believe our
strategy ultimately will facilitate the marketing, distribution and public acceptance of any products we may derive from our research
and development efforts, if and when any applicable regulatory approval is received.
Our commercial success will depend on our ability
and the ability of our manufacturing partners, licensee or sub-licensees, if any, to compete effectively in product development
areas such as, but not limited to: safety, reliability, availability, price, marketing, distribution and patent position.
Our competitive position in the market will
also depend on our ability to attract and retain qualified personnel, to obtain patent protection, develop proprietary products
and processes, protect our intellectual property rights, and to secure sufficient capital resources required during the often-substantial
period between technology development and commercial sales.
An important factor will be the timing of market
introduction of any LiquidElectricity™ Coatings products we develop. Accordingly, the speed with which we can develop products,
complete safety approvals and ultimately supply commercial quantities of any products we develop to the market is important.
Proprietary Assets
Intellectual Property
The success of our business depends, in part,
on our ability to maintain and protect our proprietary technologies, information, processes, and know-how. We rely primarily on
patent, trademark, copyright and trade secrets laws in the U.S. and similar laws in other countries, confidentiality agreements
and procedures and other contractual arrangements to protect our technologies and products.
As of November 30, 2020, our proprietary electricity-generating
coatings and application processes are the subject of more than 30 trademarks and over 60 U.S. and international patents, granted
or in-process. Our patent filings include five (5) granted patents in the United States, while all in-process patent filings include
U.S. and foreign jurisdictions. In preparation for productization and future commercial sales, our 30 trademarks have been established
for the Company’s use in commerce. Our issued patents are scheduled to expire between November, 2032 and March, 2033, and
may or may not be basis for filing continuations. We continually assess opportunities to seek patent protection for those aspects
of our technology, designs, and methodologies and processes that we believe may provide us with significant competitive advantages
or additional commercial opportunities.
We believe that many elements of LiquidElectricity™
Coatings and related processes, technologies and products involve proprietary know-how, technology, or data that are not covered
by patents or patent applications, including but not limited to technical processes, equipment, design architecture, algorithms,
and procedures. Accordingly, we rely on trade secret protection and confidentiality agreements to safeguard our interests with
respect to proprietary know-how that is not patentable and processes for which patents are difficult to enforce.
Our commercial success will depend in part
on our ability to obtain and maintain patent and other proprietary protection for our technology, inventions and improvements;
to preserve the confidentiality of our trade secrets; to defend and enforce our proprietary rights, including any patents we now
own or that we may own in the future; and to operate without infringing on the valid and enforceable patents and other proprietary
rights of third parties.
Government Regulation
Our technology may be subject to certain government
regulations and standards. Our ability to remain viable will depend on favorable government decisions at various stages of the
technology’s development by various agencies. From time to time, legislation is introduced that could significantly change
the statutory or regulatory provisions governing our research and product development processes, as well as approval of the manufacturing
and marketing of any products derived from such research and development activities.
The production and marketing of our technology
derived products would be subject to existing and future safety & health regulations and standards in the United States and
South Korea.
Current safety & health requirements and
standards for electrical products can include, but may not be limited to, Occupational Safety and Health Administration regulations,
National Electrical Code as approved as an American National Standard by the American National Standards Institute or ANSI/NFPA-70,
certification by Underwriters Laboratories and the Society of Automotive Engineers, and compliance with State, Federal, and local
building codes. These regulations are subject to change, and our ability to remain viable is contingent upon successfully satisfying
regulatory requirements as stipulated by these agencies and/or others as the development of our technology evolves. We may be additionally
required to comply with similar regulations and standards in South Korea.
Employees and Consultants
The Company utilizes the services of full-time
employees as well as part-time employees and consultants on a contract basis. As of the date of this prospectus, we had one (3)
full-time employees, two (2) full-time consultants and five (5) part-time employees and consultants. Our personnel are located
in the United States, Canada and South Korea.
Our full-time consultants are Jatinder S. Bhogal,
our Chief Executive Officer, and John Rhee, our Director and President and President, CEO and Director of SolarWindow Asia Co.,
Ltd., and our full-time employees are James Whitaker our Principal R&D Scientist, Alexandra Musk-Steuart our Vice president
of Brand and Business Development, and Patrick Sargent our Vice President of Product Development & Engineering.
We have employer sponsored health and dental
plans available to form W-2 based employees. Additionally, from time-to-time, the Company grants stock options to employees on
a discretionary basis. None of our employees are covered by a collective bargaining agreement. We believe our relations
with our employees are good.
Other Information
Our website address is www.solarwindow.com. We
make available free of charge through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports
on Form 8-K and amendments to those reports filed or furnished pursuant to the Securities Exchange Act of 1934, as amended, as
soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information accessible
through our website is not a part of this prospectus.
The public may also read and copy any materials
we file with the United States Securities and Exchange Commission (“SEC”) on the SEC’s website at www.sec.gov
which site contains reports, proxy and information statements, and other information regarding issuers, such as us, that file electronically
with the SEC. All statements made in any of our filings, including all forward-looking statements, are made as of the date of the
document(s) in which the statement is included, and we do not assume or undertake any obligation to update any of those statements
or documents unless we are required to do so by law.
Our executive office is located at 430 Park
Avenue, Suite 702, New York, New York 10022. Our telephone number is (800) 213-0689; our email is info@solarwindow.com. Our website
is www.solarwindow.com. Information contained on our web site (or any other website) does not constitute part of this prospectus.
Our operations are conducted primarily from
our offices in the Republic of South Korea, located at JA-1022HO 10F, 338, Gwanggyojungang-ro, Suji-gu, Yongin-si, Gyeonggi-do,
Republic of Korea.
Our research and development activities are
conducted at the U.S. Department of Energy’s National Renewable Energy Laboratories in Golden, Colorado pursuant to a Cooperative
Research and Development Agreement.
Stockholder Communications
Stockholders who wish to communicate with the
Board may do so by addressing their correspondence to the Board at SolarWindow Technologies, Inc., Attention: Jatinder S. Bhogal
or Justin Frere, 430 Park Avenue, Suite 702, New York, NY 10022. The Board will review and respond to all correspondence received,
as appropriate.
OUR MANAGEMENT
Directors And Executive Officers
The following table sets forth the names and ages of all of our directors
and executive officers as of the date of this prospectus. We have a Board comprised of five members. Each director holds office
until a successor is duly elected or appointed. Executive officers serve at the discretion of the Board and are appointed by the
Board. Also provided herein are brief descriptions of the business experience of each of the directors and officers during the
past five years, and an indication of directorships held by each director in other companies subject to the reporting requirements
under the Federal securities law.
Name
|
|
Age
|
|
Current Position with Us
|
|
Director or Officer Since
|
Jatinder Bhogal
|
|
54
|
|
Chief Executive Officer (principal executive officer) Chairman and Director
|
|
August 7, 2017
|
Justin Frere, CPA
|
|
48
|
|
Treasurer, Interim Chief Financial Officer and Secretary (principal financial officer and principal accounting officer)
|
|
July 5, 2019
|
John Rhee
|
|
53
|
|
Director and President of SolarWindow Technologies, Inc. and Director, President and CEO of SolarWindow Asia Co., Ltd.
|
|
July 1, 2020
|
Gary Parmar, CPA, CA, ICD.D (1)
|
|
49
|
|
Director, Audit Committee Chair
|
|
June 14, 2019
|
Robert C. Levine
|
|
71
|
|
Director
|
|
December 7, 2018
|
Joseph Sierchio
|
|
71
|
|
Director
|
|
October 1, 2020
|
(1) Chairman of the Audit
Committee
Business Experience
Set forth below are the names of all of our
directors and executive officers, all positions and offices held by each person, the period during which each has served as such,
and the principal occupations and employment of such persons during at least the last five years, and other director positions
held currently or during the last five years:
Jatinder S. Bhogal. Mr. Jay (Jatinder)
S. Bhogal brings 20 years of experience helping to finance and build companies in diversified industries, including: online media,
health services, medical devices, drug discovery, vaccine production, renewable and alternative energy, fossil fuels, and others.
Numerous breakthrough technologies supported by Mr. Bhogal have grown from inception to achieve $300 million-plus market capitalization.
As a private investor, director, and executive, Mr. Bhogal has incubated and directed ventures and projects in collaboration with
leading research institutions and government agencies, including: United States Department of Energy’s National Renewable
Energy Laboratory, University of California Berkeley, Dartmouth College, NASA’s International Space Station National Laboratory
Initiative (on board the Space Shuttle ‘Endeavour’ with USDA; mission STS-126), and others. Mr. Bhogal serves as our
Chief Executive Officer and Chairman. Mr. Bhogal served as the Chief Operating Officer of RenovaCare, Inc. from June 11, 2018 to
July 1, 2020.
Justin Frere, CPA. Mr. Frere has served
as the Company’s Controller since August of 2011 and was appointed Secretary and Interim Chief Financial Officer on July
5, 2019 and July 22, 2020, respectively. Mr. Frere has over 20 years of experience as a hands-on CFO/Controller level finance and
administration professional with extensive operational and analytical experience as a consultant, CFO and controller for numerous
public entities. From 2001 through present, Mr. Frere has been principal of Frontline Accounting performing CFO/controller, and
financial analyst services for various public and private domestic and international clients. Mr. Frere has been the primary party
responsible for accounting, drafting and filing SEC Forms and interacting with auditors and the SEC in support of public company
reporting. Mr. Frere started his career at KPMG in their assurance practice. Mr. Frere earned a Bachelor of Science in accounting
and finance from California Polytechnic State University in San Luis Obispo and MBA from San Diego State University.
Robert C. Levine. Mr. Levine has been
with Avison Young since 1994 and is one of the founding partners of Avison Young which has 120 offices in 25 countries and 5,000
real estate professionals. Since 2008, Avison Young has been one of the fastest growing commercial real estate companies in the
world. Having recently retired from the Board of Directors of Avison Young after 10 years’ service, Mr. Levine remains on
Avison Young’s Executive Committee. Mr. Levine has 40 years of experience in commercial real estate sales, leasing, and advisory
roles and has worked with many leading developers, equity partners, and renowned investors. Having consummated many billions of
dollars in transactions, he has been responsible for the sale of numerous landmark and Class-A office buildings, shopping centers,
industrial properties, and major development sites.
Gary P. Parmar, CPA, CA, ICD.D. Mr.
Parmar is a Partner and Regional Leader of Technology Media Telecommunications with MNP, a leading Canadian national accounting,
tax and business consulting firm. Based in Kelowna, Gary provides accounting, tax, financial planning and business management advice
to private enterprises and family-owned businesses, helping them increase profits, grow their operations and achieve their goals.
With more than 20 years of experience, Gary understands his clients’ unique challenges and delivers creative solutions that
help them maximize wealth while keeping taxes to a minimum. His services include assisting with tax planning regarding incorporation,
income management, succession planning, business management, the purchase and sale of businesses and estate planning. Gary’s
clients rely on him to help them structure their businesses to facilitate various types of projects and transactions, as well as
assess the validity of deals and arrange financing. A trusted advisor, he provides ongoing management consulting to assist with
job costing, managing working capital and maximizing profitability. Committed to building and nurturing long-term relationships,
Gary has worked with a broad range of clients, including real estate developers, builders, agricultural producers, professionals
and companies in the technology, media telecommunications industries. A Chartered Professional Accountant (CPA) who qualified as
a Chartered Accountant (CA), Gary has a Bachelor of Commerce degree from the University of Alberta, where he majored in accounting.
John Rhee. Mr. Rhee has more than 20
years of experience helping businesses in a variety of industries in the areas of strategic financing, mergers and acquisitions
and portfolio management. Since 2013, Mr. Rhee has served as Chairman and Managing Director of Stratis Impact a Private Equity
firm located in Hong Kong. From 2009 to 2013, Mr. Rhee served the Korean Ministry of Culture as a Senior Adviser and from 2004
to 2010 in various roles including Executive Director for Investment at Softbank. Mr. Rhee holds a J.D from Yale Law School and
undergraduate degree from Cornell University.
Joseph Sierchio. Mr. Sierchio
has been engaged in the practice of law as the principal of Sierchio Law LLP, our general corporate counsel since August 2019;
prior thereto Mr. Sierchio provided legal services to the Company as a partner of Satterlee Stephens LLP, our counsel, from September
2016 to August 2019. Since 1975, Mr. Sierchio has continuously practiced corporate and securities law in New York City, representing,
in the United States, domestic and foreign private and public corporations, investors, brokerage firms, and entrepreneurs. Mr.
Sierchio is admitted in all New York state courts and federal courts in the Eastern, Northern, and Southern Districts of the State
of New York as well as the federal Court of Appeals for the Second Circuit. Mr. Sierchio was invited to join the Board due to his
experience representing corporations (public and private) and individuals in numerous and various organizational, compliance, administrative,
governance, finance (equity and debt private and public offerings), regulatory and legal matters as well as his familiarity with
the Company’s business and operations. Mr. Sierchio also served as a director of RenovaCare, Inc. from August 26, 2010 to
June 22, 2018. Mr. Sierchio earned his J.D. at Cornell University Law School in 1974, and a B.A., with Highest Distinction in Economics
from Rutgers College at Rutgers University in 1971, and where he was also named a Henry Rutgers Scholar.
All of our directors are elected annually to
serve for one year or until their successors are duly elected and qualified.
Family Relationships and Other Matters
There are no family relationships among or between
any of our officers and directors.
Legal Proceedings
None of or directors or officers are involved
in any legal proceedings as described in Regulation S-K (§229.401(f)).
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Because we do not have a class of equity securities
registered pursuant to section 12 of the Exchange Act, we are not required to make the disclosures required by Item 405 of Regulation
SK.
CORPORATE GOVERNANCE
General
We believe that good
corporate governance is important to ensure that our company is managed for the long-term benefit of our stockholders. We periodically
review our corporate governance policies and practices and compare them to those suggested by various authorities in corporate
governance and the practices of other public companies. As a result, we have adopted policies and procedures that we believe are
in the best interests of SolarWindow and our stockholders.
Corporate Governance Guidelines; Code of Conduct and Ethics
Our Corporate Governance
Guidelines assist our board of directors in the exercise of its duties and responsibilities and to serve the best interests of
SolarWindow and our stockholders. These guidelines, which provide a framework for the conduct of our board’s business addresses
the role of a director, Board composition, Board meetings, access to management, Board compensation and other topics.
We have adopted a Code of Ethics that applies
to all of our officers, directors and employees, including our principal executive officer, principal financial officer and principal
accounting officer. The Code of Ethics is designed to deter wrongdoing, and to promote, among other things, honest and ethical
conduct, full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to the
SEC, compliance with applicable governmental laws, rules and regulations, the prompt internal reporting of violations of the Code
of Ethics, and accountability for adherence to the Code of Ethics.
We have posted a copy
of our Corporate Governance Guidelines and Code of Ethics and Business Conduct on the Investor section of our website at https://www.solarwindow.com/investors/corporate-governance/.
Our full Board of Directors must approve in advance any waivers of the Code of Ethics. We will post any amendments or waivers from
our Code of Ethics that apply to our executive officers and directors on the “Corporate Governance” section of our
website.
Board Independence
We are not listed
on a major U.S. securities exchange and, therefore, are not subject to the corporate governance requirements of any such exchange,
including those related to the independence of directors. However, Our Board considers that a director is independent when the
director is not an officer or employee of the Company, does not have any relationship which would, or could reasonably appear to,
materially interfere with the independent judgment of such director, and the director otherwise meets the independence requirements
under the listing standards of FINRA and the rules and regulations of the SEC. Our Board has reviewed the materiality of any relationship
that each of our directors has with the Company, either directly or indirectly. Based on this review, our Board has affirmatively
determined that two of our five directors, including Robert C. Levine and Gary Parmar, qualify as “independent” directors.
Board Leadership Structure
We currently have two
executive officers and five directors; two of which are independent. At present, Mr. Bhogal serves as our Chief Executive Officer
and Chairman of the Board and Mr. Frere serves as our Interim Chief Financial Officer and Secretary.
Our Bylaws provide our Board with flexibility
to combine or separate the positions of Chairman of the Board and Chief Executive Officer in accordance with its determination
that utilizing one or the other structure would be in the best interests of our Company and its stockholders. Our Board believes
that the current leadership structure, which consists of a Chief Executive Officer and Chairman is appropriate. Our Board also
considered that our Audit Committee, which oversees critical matters such as the integrity of our financial statements, consist
entirely of independent directors. Our Board has reviewed our current Board leadership structure, our size, the nature of our business,
the regulatory framework under which we operate, our stockholder base, our peer group and other relevant factors, and has determined
that this structure is currently the most appropriate Board leadership structure for our company.
Board Committees
Audit Committee
Our Board has established a separately-designated
independent Audit Committee of the Board in accordance with Section 3(a)(58)(A) of the Exchange Act for the purpose of overseeing
our accounting and financial reporting processes and the audits of our annual financial statements. Our Audit Committee currently
consists of Mr. Parmar (Chair), Mr. Levine. The functions of the Audit Committee include the retention of our
independent registered public accounting firm, reviewing and approving the planned scope, proposed fee arrangements and results
of the Company’s annual audit, reviewing the adequacy of the Company’s accounting and financial controls and reviewing
the independence of the Company’s independent registered public accounting firm. The Board has determined that each of the
members of the Audit Committee is independent as determined under Rule 10A-3 of the Exchange Act. Our Board has determined that
Mr. Gary Parmar is an audit committee financial expert (as that term is defined in Item 407 of Regulation S-K under the Exchange
Act). The Audit Committee is governed by a written charter approved by the Board, a copy of which is available on our website at
https://www.solarwindow.com/investors/corporate-governance/.
Compensation Committee
The Board does not currently have a standing
Compensation Committee. The full Board establishes our overall compensation policies and reviews recommendations submitted by our
management.
Nominating Committee
The Board does not currently have a standing
Nominating Committee. We do not maintain a policy for considering nominees. Our Bylaws provide that the number of Directors shall
be fixed from time to time by the Board, but in no event shall be less than the minimum required by law. The Board should be large
enough to maintain our required expertise but not too large to function inefficiently. Director nominees are recommended, reviewed
and approved by the entire Board. The Board believes that this process is appropriate due to the number of directors on the Board
and the opportunity to benefit from a variety of opinions and perspectives in determining director nominees by involving the full
Board.
While the Board is solely responsible for the
selection and nomination of Directors, the Board may consider nominees recommended by stockholders as deemed appropriate. The Board
evaluates each potential nominee in the same manner regardless of the source of the potential nominee’s recommendation. Although
we do not have a policy regarding diversity, the Board does take into consideration the value of diversity among Board members
in background, experience, education and perspective in considering potential nominees for recommendation to the Board for selection.
Stockholders who wish to recommend a nominee should send nominations to Mr. Jatinder S. Bhogal, CEO or Mr. Justin Frere, Interim
CFO and Secretary, 430 Park Avenue, Suite 702, New York, NY 10022, that includes all information relating to such person that is
required to be disclosed in solicitations of proxies for the election of directors. The recommendation must be accompanied by a
written consent of the individual to stand for election if nominated by the Board and to serve if elected.
Compensation Consultants
We have not historically relied upon the advice
of compensation consultants in determining Named Executive Officer compensation. Instead, the full Board reviews compensation levels
and makes adjustments based on their personal knowledge of competition in the market place, publicly available information and
informal surveys of human resource professionals.
Board of Directors Meetings, Committees of the Board of Directors,
and Annual Meeting Attendance
During the fiscal year ended August 31,
2020, all directors attended at least 75% or more of the aggregate of the meetings of the Board. The Board met two (2) times and
acted by written consent Ten (10) times during the fiscal year ended August 31, 2020; the Audit Committee was established in July
2019, met one (1) time and did not act by written consent during the fiscal year ended August 31, 2020. We did not have an
annual meeting of stockholders during the fiscal year ended August 31, 2020 or 2019.
The Audit Committee is the only standing committee
of the Board of Directors. The full Board is responsible for performing the functions of: (i) the Compensation Committee and (ii)
the Nominating Committee.
Board Role in Risk Oversight
Risk is inherent in every business, and how
well a business manages risk can ultimately determine its success. We face a number of risks, including strategic risks, enterprise
risks, financial risks, and regulatory risks. While our management is responsible for day-to-day management of various risks we
face, the Board, as a whole, is responsible for evaluating our exposure to risk and to satisfy itself that the risk management
processes designed and implemented by management are adequate and functioning as designed. The Board reviews and discusses policies
with respect to risk assessment and risk management. The Board also has oversight responsibility with respect to the integrity
of our financial reporting process and systems of internal control regarding finance and accounting, as well as its financial statements.
EXECUTIVE AND DIRECTOR COMPENSATION
Our Board is responsible for establishing the
compensation and benefits for our executive officers. The Board reviews the performance and total compensation package for our
executive officers, and considers the modification of existing compensation and the adoption of new compensation plans. The board
has not retained any compensation consultants.
The goals of our executive compensation program
are to attract, motivate and retain individuals with the skills and qualities necessary to support and develop our business within
the framework of our small size and available resources. We designed our executive compensation program to achieve the following
objectives:
|
·
|
attract and retain executives experienced in developing and delivering products such as our own;
|
|
·
|
motivate and reward executives whose experience and skills are critical to our success;
|
|
·
|
reward performance; and
|
|
·
|
align the interests of our executive officers and stockholders by motivating executive officers
to increase stockholder value.
|
Summary Compensation Table
The following table summarizes the total compensation
paid to or earned by each named executive officer for Fiscal 2020 and Fiscal 2019:
Name and Principal Position
|
Year Ended August 31,
|
Salary ($)
|
Option Awards ($)
|
All Other Compensation ($) (1)
|
Total ($)
|
Jatinder S. Bhogal (2) Chief Executive Officer and Director
|
2020
|
255,833
|
3,850,000
|
5,833
|
4,111,666
|
John A. Conklin (3)
Former Chief Technology Officer
|
2020
|
275,000
|
-
|
24,125
|
299,125
|
2019
|
275,000
|
117,500
|
35,233
|
427,733
|
Justin Frere (4) Interim Chief Financial Officer and Secretary
|
2020
|
96,000
|
-
|
-
|
96,000
|
Steve Yan-Klassen (5)
Former Chief Financial Officer
|
2020
|
20,421
|
-
|
-
|
20,421
|
2019
|
15,497
|
117,500
|
-
|
132,997
|
John Rhee, President and Director of SolarWindow Technologies, Inc. and President, CEO and Director of SolarWindow Asia Co., Ltd. (6)
|
2020
|
-
|
3,765,000
|
-
|
3,765,000
|
(1) The amounts in this column represent employer sponsored
and paid health coverage, vacation pay and health insurance premium reimbursement for Mr. Conklin who maintained private insurance
coverage and was reimbursed an agreed upon amount each month to offset his out-of-pocket medical insurance premiums through December
31, 2019 and prior to the Company established Health benefit plans. With regard to Mr. Bhogal, the amount in this column represents
fees for his service on the Board during fiscal 2020.
(2) On August 7, 2017, the Company appointed Jatinder
Bhogal to the Board of Directors. Mr. Bhogal has provided consulting services to the Company since 2011. Pursuant to Mr. Bhogal’s
consulting agreements in effect prior to July 1, 2020, Mr. Bhogal received compensation of $18,750 per month. Effective July 1,
2020, the Company, Mr. Bhogal, and Vector Asset Management, Inc., a Canadian entity wholly-owned by Mr. Bhogal (“VAMI”),
entered into an Executive Consulting Agreement (the “ECA”) whereby Mr. Bhogal, in addition to Mr. Bhogal’s current
role as a Director, will serve the Company as its President and Chief Executive Officer (Principle Executive Officer). Pursuant
to the ECA, which has an initial term of three years with one year extensions thereafter unless otherwise terminated, VAMI 1)
will be paid an annual fee of $410,000 (the “Annual Base Fee”); 2) is eligible for a discretionary performance-based
annual bonus of up to 40% of the then annual base fee in effect; 3) received a stock option grant to purchase up to 2,500,000
shares of the Company’s common stock with an exercise price of $2.60 per share, exercisable on, among other methods, a cashless
basis prior to up-listing to a national exchange and exercisable for cash thereafter. The stock option vests as to 50% on July
1, 2020 and as to the remaining 50% on July 1, 2021. The Stock Option is subject to the terms and conditions of the Stock Option
Grant and Grant Agreement dated June 29, 2020 with an effective date of July 1, 2020. The aggregate grant date fair value of the
stock option award, determined in accordance with FASB ASC Topic 718, was $1.54 per share. For additional information, see “NOTE
7 – Stock Options” and “NOTE 9 - Transactions with Related Persons” of our notes to financial statements
for the years ended August 31, 2020 and 2019.
(3) On December 27, 2017, the Company and Mr. Conklin
entered into an employment agreement (the “2018 Employment Agreement”) pursuant to which Mr. Conklin is paid
an annual salary of $275,000, received a grant of 1,008,000 stock options and was entitled to a medical insurance premium reimbursement
stipend of $2,166 per month up until the company established an employer based medical insurance plan that became effective on
January 1, 2020. On October 22, 2018, Mr. Conklin resigned as Chief Financial Officer commensurate with the appointment of Steve
Yan-Klassen as the Company’s Chief Financial Officer. Effective July 1, 2020, Mr. John Conklin resigned as the Company’s
President and Chief Executive Officer and as a Director and assumed a new executive role with the Company as its Chief Technology
Officer. Effective November 19, 2020, Mr. John Conklin resigned as the Company’s Chief Technology Officer and no longer has
any affiliation with the Company.
(4) Mr. Frere has served as the Company’s Controller
since August of 2011 and was appointed Secretary on July 5, 2019. Effective July 23, 2020, Mr. Frere was appointed to also serve
as the Company’s Interim Chief Financial Officer (principal financial officer) and Interim Treasurer. Mr. Frere is providing
his services on an as needed basis; Mr. Frere’s engagement is at will and can be terminated by either party on notice. Mr.
Frere’s aggregate fee for his services is $8,000 per month.
(5) Effective October 22, 2018, the Company appointed
Steve Yan-Klassen to serve as our Chief Financial Officer. Mr. Yan-Klassen had no employment agreement. Mr. Yan-Klassen received
an annual salary of $31,500 Canadian dollars. Mr. Yan-Klassen resigned effective July 22, 2020 to pursue other business and no
longer has any affiliation with the Company.
(6) On July 1, 2020, the Company appointed John Rhee
to the Board of Directors. On August 31, 2020, the Company and Mr. John Rhee entered into an Executive Services Consulting Agreement
and effective March 1, 2021 entered into Amendment No. 1 to the Executive Services Consulting Agreement (the “ESCA”).
Pursuant to the ESCA, Mr. Rhee will provide executive consulting services to the Company, and it’s directly and indirectly
owned subsidiaries, in connection with the Company’s efforts to establish an operating presence in the Republic of Korea.
The Initial Term of the ESCA is three years, but may be extended annually thereafter. Mr. Rhee’s engagement pursuant to the
ESCA is an “at-will” engagement. It was initially acknowledged that Mr. Rhee’s engagement was on a part-time
basis; however, his time, efforts, professional attention, knowledge, and experience necessary to carry on fully his duties and
responsibilities under the ESCA has proven to require full-time effort. Pursuant to the ESCA, which has an initial term of
three years, Mr. Rhee 1) will be paid a monthly base fee of $22,000; 2) received a stock option grant to purchase up to 2,500,000
shares of the Company’s common stock with exercise prices as follows: as to 1,000,000 options, $3.66 per share; as to 800,000
options, $6.00 per share and as to 700,000 options, $8.00 per share, exercisable on, among other methods, a cashless basis prior
to up-listing to a national exchange and exercisable for cash thereafter. The stock option vests as to 500,000 on the date of grant;
as to the next 800,000 shares on the six-month anniversary of the date of grant; as to the next 700,000 shares on the 12-month
anniversary of the date of grant; and as to the last 500,000 shares on the eighteen month anniversary of the date of grant. The
Stock Option is subject to the terms and conditions of the Non-Statutory Stock Option Agreement dated August 31, 2020. The aggregate
grant date weighted average fair value of the stock option award, determined in accordance with FASB ASC Topic 718, was $1.51 per
share. For additional information, see “NOTE 7 – Stock Options” of our notes to financial statements for the
years ended August 31, 2020 and 2019.
Outstanding Equity Awards at
The following table sets forth information regarding equity awards
that have been previously awarded to each of the Named Executives and which remained outstanding as of February 23, 2021.
Option Awards
|
Name
|
# of securities underlying unexercised options exercisable
|
# of securities underlying unexercised options not currently exercisable
|
Option exercise price ($)
|
Option expiration date
|
Jatinder S. Bhogal (1)
|
1,025,500
|
32,500
|
3.54
|
7/5/2029
|
90,000
|
-
|
4.87
|
11/21/2027
|
1,250,000
|
1,250,000
|
2.60
|
7/2/2026
|
John A. Conklin (2)
|
40,000
|
-
|
4.87
|
11/21/2027
|
12,500
|
-
|
3.54
|
7/5/2025
|
Justin Frere (3)
|
17,500
|
32,500
|
3.54
|
7/5/2025
|
Steve Yan-Klassen (4)
|
10,000
|
-
|
3.54
|
7/5/2025
|
John Rhee (5)
|
500,000
|
-
|
3.66
|
8/31/2023
|
800,000
|
-
|
6.00
|
8/31/2023
|
-
|
700,000
|
8.00
|
8/31/2023
|
-
|
500,000
|
3.66
|
8/31/2023
|
(1) On November 21, 2017, pursuant the grant of stock
options to our Board and certain personnel for their services, we granted a stock option to purchase 90,000 shares of our common
stock. On July 5, 2019, pursuant to a grant of stock options to our Board and executives for their services, we granted a stock
option to purchase 1,008,000 and 50,000 shares of our common stock. On July 1, 2020, pursuant to an Executive Consulting Agreement
and Stock Option Grant and Grant Agreement both dated June 29, 2020 we granted a stock option to purchase 2,500,000 shares of our
common stock.
(2) On January 1, 2018, pursuant to the 2018 Employment
Agreement, we granted a stock option to purchase 1,008,000 shares of our common stock. On November 21, 2017, pursuant the grant
of stock options to our Board for their services, we granted a stock option to purchase 40,000 shares of our common stock. On July
5, 2019, pursuant to a grant of stock options to our Board and executives for their services, we granted a stock option to purchase
50,000 shares of our common stock to each Mr. Conklin and Mr. Yan-Klassen. On December 18, 2020, Mr. John Conklin and the Company
entered into an Amendment to the Separation, Consulting and Release of Claims Agreement dated November 24, 2020. Pursuant to the
Amendment, no further payments are due to Mr. Conklin and all stock options granted under his employment agreement totaling 1,008,000
are cancelled.
(3) On November 21, 2017, pursuant the grant of stock
options to our Board and certain personnel for their services, we granted a stock option to purchase 20,000 shares of our common
stock. On July 5, 2019, pursuant to a grant of stock options to our Board and executives for their services, we granted a stock
option to purchase 50,000 shares of our common stock.
(4) On July 5, 2019, pursuant to a grant of stock options
to our Board and executives for their services, we granted a stock option to purchase 50,000 shares of our common stock.
(5) On August 31, 2020, pursuant to an Executive Services
Consulting Agreement and Non-Statutory Stock Option Agreement, we granted a stock option to purchase 2,500,000 shares of our common
stock.
Employee directors, which includes Mr. Bhogal,
are eligible to receive stock option compensation but do not receive cash compensation in addition to their monthly salary for
services rendered as a director.
Option Exercises and Stock Vested
The following table sets forth information regarding option exercises
and stock vested by each of the Named Executives from the beginning of fiscal 2021 through February 23, 2021.
|
Option Awards
|
Stock Awards
|
Name
|
Number of shares acquired on exercise (#)
|
Value realized on exercise ($)
|
Number of shares acquired on vesting ($)
|
Value realized on vesting
|
Justin Frere (1)
|
6,943
|
110,600
|
-
|
-
|
(1) On November 21, 2017, pursuant the grant of stock options
to our Board and certain personnel for their services, we granted a stock option to purchase 20,000 shares of our common stock.
On January 13, 2021, Mr. Frere exercised the remaining 10,000 stock options on a cashless basis and received 6,943 shares of restricted
common stock.
Potential Payments upon Termination or Change in Control
There are no understandings or agreements known
by management at this time which would result in a change in control.
On June 29, 2020, we entered into the Executive
Consulting Agreement with Mr. Jatinder S. Bhogal. Pursuant to the terms of the ECA, Mr. Bhogal will receive an annual fee of $410,000,
is eligible for a discretionary performance-based annual bonus of up to 40% of the then Annual Base Fee in effect, and a grant
to purchase 2,500,000 stock options. Additionally, in the event that Mr. Bhogal’s employment is terminated without cause,
he will be entitled to receive the Annual Base Fee in effect at termination paid over the subsequent 12 months. In the event that,
following a change of control, the ECA is terminated by the Company without cause prior to the later of (a) June 29, 2021, or (b)
within twelve (12) months of the change of control, then VAMI shall be entitled to receive an amount equal to the Annual Base Fee
in effect on the termination date multiplied by 1.5, which amount is payable in a lump sum within thirty (30) days; and if the
termination without cause occurs prior to June 29, 2021, the remaining unvested 1,250,000 stock options shall vest as of the date
of such termination. Upon termination, the portion of the stock option, if any, which is vested and exercisable at the time of
such termination may be exercised prior to the first to occur of (a) the expiration of the two-year period which commences on the
date of termination and expires on the second anniversary of such date of termination or (b) the expiration date of the term of
this stock option. There shall be no further vesting after the date termination. As of August 31, 2020, in the event of termination
for reasons other than cause, death or disability or for good reason the cash severance due to Mr. Bhogal would be $410,000.
Compensation of Directors
Our directors play a critical role in guiding
our strategic direction and overseeing the management of our Company. Ongoing developments in corporate governance and financial
reporting have resulted in an increased demand for such highly qualified and productive public company directors. The many responsibilities
and risks and the substantial time commitment of being a director of a public company require that we provide adequate incentives
for our directors’ continued performance by paying compensation commensurate with our directors’ workload. Our non-employee
directors are compensated based upon their respective levels of Board participation and responsibilities, including service on
Board Committees. Our employee directors receive no separate compensation for their service as directors. Our Board determines
the non-employee directors’ compensation for serving on the Board and its committee(s). In establishing director compensation,
the Board is guided by the following goals:
|
·
|
compensation should consist of a combination of cash and equity awards that are designed to fairly
pay the directors for work required for a company of our size and scope;
|
|
·
|
compensation should align the directors’ interests with the long-term interests of stockholders;
and
|
|
·
|
compensation should assist with attracting and retaining qualified directors.
|
For their services as directors, non-employee
directors received cash compensation of $1,750 per quarter during 2019 and 2020, pro-rated to the date they join the Board of Directors.
Beginning on September 1, 2019, the audit committee chairperson receives an additional $750 per quarter.
During fiscal 2019, the Company’s Board
granted 50,000 stock options to each of our non-employee directors and an additional 2,000 stock options to our three Audit Committee
Board members with an additional 1,008,000 stock option awarded to Jatinder S. Bhogal for a total issuance of 1,264,000 stock options
(of 1,506,000 total stock options granted in fiscal 2019) with a weighted average value of $2.40 per share using the Black-Scholes
Option Pricing Model, or $3,051,540 in aggregate. No equity-based grants were awarded to the Board in fiscal 2020.
Director Compensation Table
The following table sets forth the compensation
earned and paid to each non-employee director for service as a director during Fiscal 2020 and Fiscal 2019:
Name
|
|
Fees Earned or Paid in Cash ($)
|
|
Option Awards ($) (1)
|
|
Total ($)
|
Dr. Alastair Livesey
|
|
|
5,833
|
|
|
|
-
|
|
|
|
5,833
|
|
Robert C. Levine
|
|
|
7,000
|
|
|
|
-
|
|
|
|
7,000
|
|
Steve Horovitz
|
|
|
5,833
|
|
|
|
-
|
|
|
|
5,833
|
|
Gary Parmar
|
|
|
10,000
|
|
|
|
-
|
|
|
|
10,000
|
|
Harmel S. Rayat (7)
|
|
|
1
|
|
|
|
-
|
|
|
|
1
|
|
John Rhee (8)
|
|
|
1,167
|
|
|
|
-
|
|
|
|
1,167
|
|
Total 2020 director compensation
|
|
|
29,834
|
|
|
|
-
|
|
|
|
29,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Alastair Livesey (2)
|
|
|
7,000
|
|
|
|
117,500
|
|
|
|
124,500
|
|
Joseph Sierchio (3)
|
|
|
2,692
|
|
|
|
-
|
|
|
|
2,692
|
|
Jatinder S. Bhogal(4)
|
|
|
7,000
|
|
|
|
2,566,940
|
|
|
|
2,573,940
|
|
Robert C. Levine (5)
|
|
|
4,919
|
|
|
|
122,200
|
|
|
|
127,119
|
|
Steve Horovitz (5)(6)
|
|
|
2,625
|
|
|
|
122,200
|
|
|
|
124,825
|
|
Gary Parmar (5)
|
|
|
1,527
|
|
|
|
122,200
|
|
|
|
123,727
|
|
Harmel S. Rayat (7)
|
|
|
1
|
|
|
|
-
|
|
|
|
1
|
|
Total 2019 director compensation
|
|
|
25,764
|
|
|
|
3,051,040
|
|
|
|
3,076,804
|
|
(1) The amounts in this column represent the aggregate
grant date fair value of stock option awards granted by the Board, determined in accordance with FASB ASC Topic 718. All awards
are amortized over the vesting life of the award. No options were granted in fiscal 2020. See “NOTE 7 – Stock Options”
of our notes to financial statements contained in this annual report.
(2) During Fiscal 2019 Dr. Livesey received 50,000 stock
options with an exercise price of $3.54 per share, a fair value of $2.35 per share and five-year vesting. Dr. Livesey resigned
from the Board effective July 1, 2020.
(3) Mr. Sierchio resigned from the Board effective October
22, 2018 and was re-appointed on October 1, 2020.
(4) Mr. Bhogal became a director of the Company effective
August 7, 2017. On July 1, 2020, Mr. Bhogal became the President and CEO of the Company. Effective March 1, 2021, Mr. Bhogal resigned
as President while maintaining his position as CEO. During Fiscal 2019, Mr. Bhogal received a) 50,000 stock options with an exercise
price of $3.54 per share, a fair value of $2.35 per share and five-year vesting; and b) 1,008,000 stock options with an exercise
price of $3.54 per share, a fair market value of $2.43 per share and immediate vesting of the entire award.
(5) During Fiscal 2019, Mr. Levine, Mr. Horovitz and
Mr. Parmar each received 52,000 stock options with an exercise price of $3.54 per share, a fair value of $2.35 per share and five-year
vesting.
(6) Mr. Horovitz resigned from the Board effective July
1, 2020.
(7) Mr. Rayat became a director of the Company effective
March 15, 2018. Mr. Rayat’s annual compensation for serving as Chairman of the Board of Directors is $1.00 per year. Mr.
Rayat resigned from the Board effective October 1, 2020
(8) Mr. Rhee became a director of the Company effective
July 1, 2020. On August 31, 2020, the Company and Mr. John Rhee entered into the ESCA. Pursuant to the ESCA, Mr. Rhee received
a stock option grant of 2,500,000 shares. Those shares were granted in conjunction with the ESCA and not for Mr. Rhee’s service
on the Board. See the “Summary Compensation Table” above for additional information.
Director Compensation - Equity
The following table shows the total number of unvested and total
option awards held by each of our non-employee directors as of November 30, 2020:
Name
|
|
Vested Stock Options Outstanding (#)
|
|
Unvested Stock Options Outstanding (#)
|
Robert C. Levine
|
|
|
15,600
|
|
|
|
36,400
|
|
Gary Parmar
|
|
|
15,600
|
|
|
|
36,400
|
|
John Rhee (1)
|
|
|
500,000
|
|
|
|
2,000,000
|
|
Total
|
|
|
531,200
|
|
|
|
2,072,800
|
|
(1) Mr. Rhee received a stock option grant of 2,500,000
shares pursuant to the ESCA. See the “Summary Compensation Table” and “Director Compensation Table” above
for additional information.
Limitation on Directors' Liabilities; Indemnification of Officers and Directors
Our Amended and Restated Bylaws designate the
relative duties and responsibilities of our officers and establish procedures for actions by directors and stockholders and other
items. Our bylaws also contain extensive indemnification provisions, which will permit us to indemnify our officers and directors
to the maximum extent provided by Nevada law. For additional information, see Exhibit 4.34 to this Annual Report.
Directors' and Officers' Liability Insurance
We have obtained directors' and officers' liability
insurance, which expires on December 22, 2021.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information
as of February 23, 2021 by (i) all persons who are known by us to beneficially own more than 5% of our outstanding shares of common
stock, (ii) each director, director nominee, and Named Executive Officer; and (iii) all executive officers and directors as a group.
To our knowledge, no other person beneficially owns more than 5% of our common stock.
Name and Address of Beneficial Owner (1)
|
|
Number of shares Beneficially Owned (2)
|
|
% of Class
Owned (2)
|
Directors and Officers
|
|
|
|
|
|
|
|
|
Jatinder S. Bhogal (3)
|
|
|
2,455,500
|
|
|
|
4.42
|
|
Justin Frere (4)
|
|
|
24,443
|
|
|
|
*
|
|
Gary Parmar (5)
|
|
|
18,200
|
|
|
|
*
|
|
Robert C. Levine (6)
|
|
|
77,533
|
|
|
|
*
|
|
John Rhee (7)
|
|
|
1,300,000
|
|
|
|
2.39
|
|
Joseph Sierchio (8)
|
|
|
246,567
|
|
|
|
*
|
|
All Directors and Officers as a Group (6 people)
|
|
|
4,122,243
|
|
|
|
7.23
|
|
5% Stockholders
|
|
|
|
|
|
|
|
|
Kalen Capital Corporation (9)
The Kalen Capital Building
688 West Hastings St.
Suite 700
Vancouver, BC V6B 1P1
|
|
|
54,200,848
|
|
|
|
75.54
|
|
* less than 1%
(1) Beneficial ownership is determined in accordance
with SEC rules and generally includes voting or investment power with respect to securities. Each of the beneficial owners listed
above has direct ownership of and sole voting power and investment power with respect to the shares of our common stock and except
as indicated the address of each beneficial owner is 430 Park Avenue, Suite 702, New York, NY 10022.
(2) Calculated pursuant to rule 13d-3(d) of the Exchange
Act. Beneficial ownership is calculated based on 53,186,799 shares of common stock issued and outstanding as of February 23, 2021.
Under Rule 13d-3(d) of the Exchange Act, shares not outstanding which are subject to options, warrants, rights or conversion privileges
exercisable within 60 days are deemed outstanding for the purpose of calculating the number and percentage owned by such person,
but are not deemed outstanding for the purpose of calculating the percentage owned by each other person listed.
(3) Includes 90,000 shares of common stock and 2,365,500
shares of common stock reserved for issuance upon the exercise of vested stock options, including 2,500 shares issuable upon exercise
of options expected to vest on or before February 28, 2021. Does not include 1,282,500 shares of common stock reserved for issuance
upon exercise of stock options granted under the 2006 Plan that have not yet vested.
(4) Includes 6,943 shares of common stock and 17,500
shares of common stock reserved for issuance upon the exercise of vested stock options granted under the 2006 Plan. Does not include
32,500 shares of common stock reserved for issuance upon exercise of stock options granted under the 2006 Plan that have not yet
vested.
(5) Includes 18,200 shares of common stock reserved for
issuance upon the exercise of vested stock options granted under the 2006 Plan. Does not include 33,800 shares of common stock
reserved for issuance upon exercise of stock options granted under the 2006 Plan that have not yet vested.
(6) Includes 26,000 shares of common stock, 33,333 shares
of common stock reserved for issuance upon the exercise of a Series T Warrant and 18,200 shares of common stock reserved for issuance
upon the exercise of vested stock options granted under the 2006 Plan. Does not include 33,800 shares of common stock reserved
for issuance upon exercise of stock options granted under the 2006 Plan that have not yet vested.
(7) Includes 1,300,000 shares of common stock reserved
for issuance upon the exercise of vested stock options granted under the 2006 Plan. Does not include 1,200,000 shares of common
stock reserved for issuance upon exercise of stock options granted under the 2006 Plan that have not yet vested.
(8) Includes 196,567 shares of common stock and 50,000
shares of common stock reserved for issuance upon the exercise of vested stock options granted under the 2006 Plan. Does not include
70,000 shares of common stock reserved for issuance upon exercise of stock options granted under the 2006 Plan that have not yet
vested.
(9) Kalen Capital Corporation is a private Alberta corporation
wholly owned by Mr. Harmel Rayat. In such capacity, Mr. Rayat may be deemed to have beneficial ownership of these shares. The number
of shares reflected above is as of the date of this prospectus based upon the review of our transfer records and information provided
to us by Kalen Capital Corporation and includes: (a) 35,638,931 shares owned by Kalen Capital Corporation and its wholly owned
subsidiary; (b) up to 246,000 shares issuable upon exercise of a Series M Warrant; (c) up to 767,000 shares issuable upon exercise
of a Series N Warrant; (d) up to 213,500 shares issuable upon exercise of a Series P Warrant; (e) up to 468,750 shares issuable
upon exercise of a Series R Warrant; (f) up to 300,000 shares issuable upon exercise of a Series S-A Warrant; and (g) 16,566,667
shares issuable upon exercise of a Series T Warrant.
CERTAIN RELATIONSHIPS, RELATED PARTY AND OTHER TRANSACTIONS
The Board establishes policies and procedures,
and sets standards regarding operations and governance. Accordingly, the Company adopted a policy and procedures pertaining to
related-party transactions (“RPTs”) as they relate to the Company’s employees, officers and directors.
The Board recognizes that RPTs must be managed
to prevent the risk of perceived or actual conflicts of interest. The Company’s RPT policy and procedures addresses these
transactions as they may occur. The Board is responsibe for reviewing and approving RPTs in accordance with the adopted policy
and procedures. The Board may review the RPT policy and procedures from time to time and accordingly recommend amendments for consideration
and/or implementation.
The Board will review and approve all RPTs
over $25,000 with the option to review and approve all RPTs if, in their judgment, it would be in the best interests of the Company
for the proposed transaction to be reviewed.
Under SEC rules (Section 404 (a) of Regulation
S-K), a related person is a director, officer, nominee for director, or 5% stockholder of our outstanding shares of common stock
since the beginning of the previous fiscal year, and their immediate family members. Immediate family members include spouses,
parents, stepparents, children stepchildren, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, and brothers- and
sisters-in-law and anyone residing in such person’s home (other than a tenant)
The Board has determined that, barring additional
facts or circumstances, a related person does not have a direct or indirect material interest in the following categories of transactions:
|
·
|
any transaction with another company for which a related person’s only relationship is as
an employee (other than an executive officer), director, or beneficial owner of less than 10% of that company’s shares, if
the amount involved does not exceed the greater of $1 million or 2% of that company’s total annual revenue;
|
|
·
|
compensation to executive officers determined by the Board;
|
|
·
|
compensation to directors determined by the Board;
|
|
·
|
transactions in which all security holders receive proportional benefits; and
|
|
·
|
banking-related services involving a bank depository of funds, transfer agent, registrar, trustee
under a trust indenture, or similar service.
|
The Board reviews transactions involving related
persons who are not included in one of the above categories and makes a determination whether the related person has a material
interest in a transaction and may approve, ratify, rescind, or take other action with respect to the transaction in its discretion.
The Board reviews all material facts related to the transaction and takes into account, among other factors it deems appropriate,
whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same
or similar circumstances; the extent of the related person’s interest in the transaction; and, if applicable, the availability
of other sources of comparable products or services. An interested related party who serves on the Board shall recuse their self
from the review and approval of a RPT in which they have an interest in the transaction.
Our employees are expected to disclose personal
interests that may conflict with ours and they may not engage in personal activities that conflict with their responsibilities
and obligations to us. Periodically, we inquire as to whether or not any of our Directors have entered into any transactions,
arrangements or relationships that constitute related party transactions. If any actual or potential conflict of interest is reported,
our Board will review the transaction and relationship disclosed and make a determination regarding appropriatness and recommend
modifications to the RPT if the transaction is deemed to present a conflict of interest.
Transactions with Related Persons
The following is a description of each transaction
since the beginning of our 2019 fiscal year, and each currently proposed transaction, in which:
|
·
|
we have been or are to be a participant;
|
|
·
|
the amount involved exceeds the lesser of $120,000 or 1% of the average of our total assets for
the last two completed fiscal years; and
|
|
·
|
any of our directors, executive officers or holders of more than 5% of any class of our capital
stock at the time of the transactions in issue, or any immediate family member of or person sharing the household with any of these
individuals, had or will have a direct or indirect material interest.
|
On August 7, 2017, the Company appointed Jatinder
Bhogal to the Board of Directors. Mr. Bhogal has provided consulting services to the Company through his wholly owned company,
Vector Asset Management, Inc., pursuant to a Consulting Agreement dated February 1, 2014, as amended on November 11, 2016 and December
1, 2018 (Amendment No. 2). On July 1, 2020 the Company and VAMI entered into an Executive Consulting Agreement, which supersedes
the foregoing agreements and pursuant to which Mr. Bhogal, in addition to continuing to serve as a director of the Company will
also serve as the Company’s President and Chief Executive Officer. Pursuant to the Consulting Agreements in effect prior
to December 1, 2018, Mr. Bhogal received compensation of $5,000 per month. Beginning with Amendment No. 2, Mr. Bhogal received
compensation of $18,750 per month and pursuant to the ECA, Mr. Bhogal receives 34,167 per month. Mr. Bhogal also incurs expenses
on behalf of the Company which are reimbursed according to the Company’s expense report policy. The Company recognized cash
compensation expense in connection with the Consulting Agreements and ECA of $255,833 and $183,750 during the years ended August
31, 2020 and 2019, respectively and $102,500 and $56,250 during the three months ended November 30, 2020 and 2019, respectively.
As of November 30, 2020 and August 31, 2020, the Company recognized a related party payable to Mr. Bhogal of $34,167 and $48,758,
respectively.
During the year ended August 31, 2020 and 2019,
Talia Jevan Properties, Inc., a British Columbia corporation wholly-owned by the Investor, made advances on behalf of the Company
totaling $210,415 and $15,497, respectively.. The Company repaid Talia Jevan Properties $172,661 and $0 during the years ended
August 31, 2020 and 2019, respectively and $53,250 during the three months ended November 30, 2020. As of August 31, 2020 and November
30, 2020, the Company owed Talia Jevan Properties, Inc. $53,251 and $0, respectively.
Joseph Sierchio, one of the Company’s
directors, has maintained his role as the Company’s General Counsel since its inception as Principal of the law firm of Sierchio
& Partners, LLP, and then as a Partner with Satterlee Stephens LLP and beginning in August 2019, as Principal of Sierchio Law,
LLP pursuant to an engagement letter which provides for an annual fee of $175,000 in exchange for general counsel services. Mr.
Sierchio resigned from the Board effective October 22, 2018, and was reappointed on October 1, 2020. Fees for legal services billed
by firms associated with Mr. Sierchio while he was a Director, totaled $3,480, and $29,167 during the year ended August 31, 2019
and the three months ended November 30, 2020, respectively.
On November 26, 2018, the Company completed
the November 2018 Private Placement to accredited investors of 16,666,667 Units of the Company’s equity securities at a price
of $1.50 per Unit with each Unit comprised of (a) one share of common stock; and (b) one Series T Warrant to purchase one share
of common stock at a price of $1.70 per share for a period of seven (7) years. The Investor participated in the November 2018 Private
Placement by purchasing 13,100,000 Units in exchange for cash of $19,650,000 and converting $5,200,000 owing under the March 2015
Loan and 2013 Note into 3,466,667 Units.
All related party transactions are recorded
at the exchange amount established and agreed to between related parties and are in the normal course of business.
Director Independence
Please refer to “Director Independence” under the section
titled “CORPORATE GOVERNANCE” in “MANAGEMENT.”
THE SELLING STOCKHOLDERS
The following table presents information regarding
the Selling Stockholders. The Selling Stockholders may sell up to 1,167,200 shares of common stock (including shares issuable upon
exercise of outstanding warrants or conversion of outstanding convertible notes). The percentage of outstanding shares beneficially
owned is based on 53,186,799 shares of common stock issued and outstanding as of the date of this prospectus. Information
with respect to beneficial ownership is based upon information provided to us by the Selling Stockholders. Except as may be otherwise
described below, to the best of our knowledge, the named Selling Stockholders beneficially owns and has sole voting and investment
authority as to all of the shares set forth opposite its name. None of the Selling Stockholders are known to us to be a registered
broker-dealer or an affiliate of a registered broker-dealer. The Selling Stockholders have acquired their shares solely for investment
and not with a view to or for resale or distribution of such securities.
Selling Stockholder
|
|
# of Shares Beneficially Owned prior to the Offering
|
|
Approximate
% of Issued and Outstanding Shares Beneficially Owned Prior to
the Offering (1)
|
|
# of Shares Registered and to be Sold in this Offering (2)
|
|
Estimated No. of Shares Beneficially Owned After this Offering
|
|
Approximate
% of Issued and Outstanding Shares Beneficially Owned after this
Offering (2)
|
Mackie Research Capital Corp ITF Cindy Bains
|
|
643,000
|
|
1.20
|
(3)
|
643,000
|
|
-
|
|
-
|
Willamette Ventures LLP
|
|
322,000
|
|
*
|
(4)
|
322,000
|
|
-
|
|
-
|
Michael Emmott
|
|
3,200
|
|
*
|
(5)
|
3,200
|
|
-
|
|
-
|
Narinder Thouli
|
|
82,667
|
|
*
|
(6)
|
82,667
|
|
-
|
|
-
|
Robert C. Levine
|
|
59,333
|
|
*
|
(7)
|
59,333
|
|
-
|
|
-
|
Cynthia A. Eck
|
|
30,000
|
|
*
|
(8)
|
30,000
|
|
-
|
|
-
|
George F. Johnson, Jr. & Kathy Johnson JT TEN
|
|
3,000
|
|
*
|
(9)
|
3,000
|
|
-
|
|
-
|
Gilbert F. Mueller
|
|
2,500
|
|
*
|
(10)
|
2,500
|
|
-
|
|
-
|
Jerald Shapiro
|
|
17,500
|
|
*
|
(11)
|
17,500
|
|
-
|
|
-
|
Louis R. Jeffrey
|
|
5,000
|
|
*
|
(12)
|
5,000
|
|
-
|
|
-
|
Raymond Szulc
|
|
2,500
|
|
*
|
(10)
|
2,500
|
|
-
|
|
-
|
Total
|
|
1,167,200
|
|
2.17
|
|
1,167,200
|
|
-
|
|
-
|
* Less than 1%
_____
(1) Calculated pursuant to Rule 13d-3(d) of the
Exchange Act. Beneficial ownership is calculated based on 53,186,799 shares of common stock issued and outstanding as of the
date of this prospectus. Under Rule 13d-3(d) of the Exchange Act, shares not outstanding which are subject to options, warrants,
rights or conversion privileges exercisable within 60 days are deemed outstanding for the purpose of calculating the number and
percentage owned by such person, but are not deemed outstanding for the purpose of calculating the percentage owned by each other
person listed. Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any
contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote,
or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of
shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power
to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person
has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information
is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the number
of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage
of outstanding shares of any person as shown in this table does not necessarily reflect the person's actual ownership or voting
power with respect to the number of shares of common stock actually outstanding as of the date of this prospectus. Please
refer to “Plan of Distribution.”
(2) The Selling Stockholders may offer and sell,
from time to time, any or all of our common stock issued to them and registered for resale. Because the Selling Stockholders may
offer all or only some portion of the 1,167,200 shares of common stock registered, no exact number can be given as to the amount
or percentage of these shares of common stock that will be held by the Selling Stockholders upon termination of the offering. We
can only make estimates and assumptions. The number of shares listed in the category entitled “% of Issued and Outstanding
Shares Beneficially Owned After This Offering,” in the table above, represent an estimate of the number of shares of common
stock that will be held by the Selling Stockholders after the offering. To arrive at this estimate, we have assumed that the Selling
Stockholders will sell all of the shares to be registered pursuant to this offering and will not be acquiring any additional shares. Please
refer to “Plan of Distribution.”
(3) Includes 200,000 shares of common stock and
443,000 shares of common stock issuable upon the exercise of a Series S Warrant.
(4) Includes 161,000 shares of common stock and
161,000 shares of common stock issuable upon the exercise of a Series S Warrant.
(5) Represents 1,600 shares of common stock and
1,600 shares of common stock issuable upon the exercise of a Series S Warrant.
(6) Includes 16,000 shares of common stock issuable
upon the exercise of a Series S Warrant and 66,667 shares of common stock issuable upon the exercise of a Series T Warrant.
(7) Represents 26,000 shares of common stock and
33,333 shares of common stock issuable upon the exercise of a Series T Warrant.
(8) Represents 30,000 shares of common stock.
(9) Represents 3,000 shares of common stock.
(10) Represents 2,500 shares of common stock.
(11) Represents 17,500 shares of common stock.
(12) Represents 5,000 shares of common stock.
Other than the relationships described in the
table and footnotes and elsewhere in this prospectus, the Selling Stockholders have not had or have any material relationship with
us or any of our affiliates within the past three years. Based upon representations made by the Selling Stockholders to us, we
do not believe that any of the Selling Stockholders is a broker-dealer or an affiliate of a broker-dealer.
We may require the Selling Stockholders to suspend
the sales of the securities offered by this prospectus upon the occurrence of any event that makes any statement in this prospectus
or the related registration statement untrue in any material respect or that requires the changing of statements in these documents
in order to make statements in those documents not misleading.
PLAN OF DISTRIBUTION
We are registering
the Shares covered by this prospectus to permit the Selling Stockholders to conduct public secondary trading of these Shares from
time to time after the date of this prospectus. We will not receive any of the proceeds of the sale of the Shares offered by this
prospectus. We may receive up to an aggregate of approximately $2,355,819 from the exercise of the Warrants, assuming the exercise
in full of all of the Warrants for cash.
The aggregate proceeds
to the Selling Stockholders from the sale of the Shares will be the purchase price of the Shares less any discounts and commissions.
We will not pay any brokers’ or underwriters’ discounts and commissions in connection with the registration and sale
of the Shares covered by this prospectus. The Selling Stockholders reserve the right to accept and, together with their respective
agents, to reject, any proposed purchases of Shares to be made directly or through agents.
The Shares offered
by this prospectus may be sold from time to time to purchasers:
|
·
|
directly by the selling security holders, or
|
|
·
|
through underwriters, broker-dealers or agents, who may receive compensation in the form of discounts,
commissions or agent’s commissions from the Selling Stockholders or the purchasers of the Shares.
|
Any underwriters,
broker-dealers or agents who participate in the sale or distribution of the Shares may be deemed to be “underwriters”
within the meaning of the Shares Act. As a result, any discounts, commissions or concessions received by any such broker-dealer
or agents who are deemed to be underwriters will be deemed to be underwriting discounts and commissions under the Shares Act. Underwriters
are subject to the prospectus delivery requirements of the Shares Act and may be subject to certain statutory liabilities under
the Shares Act and the Exchange Act. We will make copies of this prospectus available to the Selling Stockholders for the purpose
of satisfying the prospectus delivery requirements of the Shares Act. To our knowledge, there are currently no plans, arrangements
or understandings between the Selling Stockholders and any underwriter, broker-dealer or agent regarding the sale of the Shares
by the selling security holders.
The Shares may be
sold in one or more transactions at:
|
·
|
prevailing market prices at the time of sale;
|
|
·
|
prices related to such prevailing market prices;
|
|
·
|
varying prices determined at the time of sale; or
|
These sales may be effected in one or more
transactions:
|
·
|
on any national securities exchange or quotation service on which the Shares may be listed or quoted at the time of sale, including
NYSE;
|
|
·
|
in the over-the-counter market;
|
|
·
|
in transactions otherwise than on such exchanges or services or in the over-the-counter market;
|
|
·
|
any other method permitted by applicable law; or
|
|
·
|
through any combination of the foregoing.
|
These transactions may include block transactions
or crosses. Crosses are transactions in which the same broker acts as an agent on both sides of the trade.
At the time a particular
offering of the Shares is made, a prospectus supplement, if required, will be distributed, which will set forth the name of the
selling security holders, the aggregate amount of Shares being offered and the terms of the offering, including, to the extent
required, (1) the name or names of any underwriters, broker-dealers or agents, (2) any discounts, commissions and other
terms constituting compensation from the Selling Stockholders and (3) any discounts, commissions or concessions allowed or
reallowed to be paid to broker-dealers. We may suspend the sale of Shares by the Selling Stockholders pursuant to this prospectus
for certain periods of time for certain reasons, including if the prospectus is required to be supplemented or amended to include
additional material information.
The Selling Stockholders
will act independently of us in making decisions with respect to the timing, manner, and size of each resale or other transfer.
There can be no assurance that the Selling Stockholders will sell any or all of the Shares under this prospectus. Further, we cannot
assure you that the Selling Stockholders will not transfer, distribute, devise or gift the Shares by other means not described
in this prospectus. In addition, any Shares covered by this prospectus that qualify for sale under Rule 144 of the Shares Act may
be sold under Rule 144 rather than under this prospectus. The Shares may be sold in some states only through registered or licensed
brokers or dealers. In addition, in some states the Shares may not be sold unless they have been registered or qualified for sale
or an exemption from registration or qualification is available and complied with.
The Selling Stockholders
and any other person participating in the sale of the Shares will be subject to the Exchange Act. The Exchange Act rules include,
without limitation, Regulation M, which may limit the timing of purchases and sales of any of the Shares by the Selling Stockholders
and any other person. In addition, Regulation M may restrict the ability of any person engaged in the distribution of the Shares
to engage in market-making activities with respect to the particular Shares being distributed. This may affect the marketability
of the Shares and the ability of any person or entity to engage in market-making activities with respect to the Securities.
The Selling Stockholders
have agreed to indemnify us in certain circumstances against certain liabilities, including certain liabilities under the Shares
Act. The Selling Stockholders may indemnify any broker or underwriter that participates in transactions involving the sale of the
Shares against certain liabilities, including liabilities arising under the Shares Act.
For additional information
regarding expenses of registration, see the section titled “Use of Proceeds” appearing elsewhere in this prospectus.
For additional information regarding the exercise
of terms of our Warrants, see the section titled “Description of Our Securities.”
DESCRIPTION OF OUR SECURITIES
Our authorized capital stock consists of 300,000,000
shares of common stock, par value $0.001 per share, and 1,000,000 shares of preferred stock, par value $0.10 per share. As of the
date of this prospectus there were 53,186,799 shares of our common stock issued and outstanding and no shares of preferred
stock issued and outstanding.
Common Stock
Subject to any special voting rights of any
series of preferred stock that we may issue in the future, each holder is entitled to one vote for each share held on all matters
to be voted upon by the stockholders, including the election of directors. The shares of common stock do not have cumulative voting
rights. This means that the holders of more than 50% of the shares of common stock can elect all of our directors, subject to the
rights of any outstanding series of preferred stock. The holders of common stock are entitled to receive a pro-rata share
of dividends, if any, as may be declared from time to time by the board out of funds legally available for the payment of dividends,
subject to any preferential dividend rights of any outstanding series of preferred stock.
The holders of common stock are entitled to
receive a pro-rata share of dividends, if any, as may be declared from time to time by the board out of funds legally available
for the payment of dividends, subject to any preferential dividend rights of any outstanding series of preferred stock.
In the event of our liquidation, dissolution,
or winding up, the holders of common stock are entitled to share pro-rata in all assets remaining after payment of our liabilities
and subject to the prior rights of any outstanding series of preferred stock. Shares of common stock have no preemptive, conversion,
or other subscription rights. There are no redemption or sinking fund provisions applicable to our common stock.
Preferred Stock
Our Board is authorized, subject to certain
limitations prescribed by law, without further stockholder approval, to issue from time to time up to an aggregate of 1,000,000
shares of preferred stock in one or more series and to fix or alter the designations, preferences, rights and any qualifications,
limitations or restrictions of the shares of each such series thereof, including the dividend rights, dividend rates, conversion
rights, voting rights and terms of redemption of shares constituting any series or designations of such series The rights of holders
of our common stock may be subject to, and adversely affected by, the rights of the holders of any preferred stock that may be
issued in the future. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change of control
and may adversely affect the voting and other rights of holders of our common stock.
Warrants
Each of the Company’s warrants outstanding
entitles the holder to purchase one share of the Company’s common stock for each warrant share held. Other than the Series
P Warrants, all of the following warrants may be exercised on a cashless basis. A summary of the Company’s warrants outstanding
and exercisable as of August 31, 2020 and 2019 is as follows:
|
|
Shares of Common Stock Issuable from Warrants Outstanding as of
|
|
Weighted Average
|
|
|
|
|
Description
|
|
November 30,
|
|
August 31,
|
|
Exercise
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Price
|
|
Date of Issuance
|
|
Expiration
|
Series M
|
|
|
246,000
|
|
|
|
246,000
|
|
|
$
|
2.34
|
|
|
December 7, 2015
|
|
December 31, 2022
|
Series N
|
|
|
767,000
|
|
|
|
767,000
|
|
|
$
|
3.38
|
|
|
December 31, 2015
|
|
December 31, 2022
|
Series P
|
|
|
213,500
|
|
|
|
213,500
|
|
|
$
|
3.70
|
|
|
March 25, 2016
|
|
December 31, 2022
|
Series R
|
|
|
468,750
|
|
|
|
468,750
|
|
|
$
|
4.00
|
|
|
June 20, 2016
|
|
December 31, 2022
|
Series S-A
|
|
|
300,000
|
|
|
|
300,000
|
|
|
$
|
2.53
|
|
|
July 24, 2017
|
|
December 31, 2022
|
Series S
|
|
|
821,600
|
|
|
|
821,600
|
|
|
$
|
3.42
|
|
|
September 29, 2017
|
|
September 29, 2022
|
Series T
|
|
|
16,666,667
|
|
|
|
16,666,667
|
|
|
$
|
1.70
|
|
|
November 26, 2018
|
|
November 26, 2025
|
Total
|
|
|
19,483,517
|
|
|
|
19,483,517
|
|
|
|
|
|
|
|
|
|
Options
Stock option grants pursuant to the 2006 Plan
vest either immediately or over zero to five years and expire from six to ten years after the date of grant. Stockholders previously
approved 15,000,000 shares for grant under the 2006 Plan, of which, as of November 30, 2020, 5,734,277 remain available for grant,
1,305,001 have been exercised in total with 629,677 net shares (due to a cashless exercise feature) issued pursuant to such exercises
of vested options from inception of the 2006 Plan. All shares approved for grant and subsequently forfeited are available for future
grant. The Company does not repurchase shares to fulfill the requirements of options that are exercised and therefore issues new
shares when options are exercised. The 2006 Plan was approved by stockholders on February 7, 2011 and was to expire according to
its terms on February 7, 2021 which expiration was extended by the Board to February 7, 2023.
A summary of the Company’s stock option
activity for the three months ended November 30, 2020 and the years ended August 31, 2020 and 2019 and related information follows:
|
|
Number of Shares Subject to Option Grants
|
|
Weighted Average Exercise Price ($)
|
|
Weighted Average Remaining Contractual Term (in years)
|
|
Aggregate Intrinsic Value ($)
|
Outstanding at August 31, 2018
|
|
|
1,291,334
|
|
|
|
5.22
|
|
|
|
|
|
|
|
|
|
Grants
|
|
|
1,506,000
|
|
|
|
3.54
|
|
|
|
|
|
|
|
|
|
Forfeitures and cancellations
|
|
|
(20,000
|
)
|
|
|
4.87
|
|
|
|
|
|
|
|
|
|
Outstanding at August 31, 2019
|
|
|
2,777,334
|
|
|
|
4.31
|
|
|
|
|
|
|
|
|
|
Grants
|
|
|
5,158,000
|
|
|
|
4.06
|
|
|
|
|
|
|
|
|
|
Forfeitures and cancellations
|
|
|
(130,600
|
)
|
|
|
3.54
|
|
|
|
|
|
|
|
|
|
Outstanding at August 31, 2020
|
|
|
7,804,734
|
|
|
|
4.16
|
|
|
|
|
|
|
|
|
|
Grants
|
|
|
50,000
|
|
|
|
3.42
|
|
|
|
|
|
|
|
|
|
Forfeitures and cancellations
|
|
|
(37,500
|
)
|
|
|
3.54
|
|
|
|
|
|
|
|
|
|
Outstanding at November 30, 2020
|
|
|
7,817,234
|
|
|
|
4.16
|
|
|
|
5.29
|
|
|
|
27,557,385
|
|
Exercisable at November 30, 2020
|
|
|
3,956,434
|
|
|
|
3.66
|
|
|
|
6.30
|
|
|
|
15,789,872
|
|
Debt
As of November 30, 2020 and August
31, 2020, the Company had no debt balances
Shares Eligible for Resale
The market for our common stock has historically
been volatile; there is no assurance that an orderly and liquid trading market for our common stock will develop or be sustained
after the completion of this offering. Future sales of substantial amounts of common stock, including shares of common stock issued
upon exercise of outstanding options and exercise of the warrants offered in this prospectus in the public market after this offering
or the anticipation of those sales could adversely affect market prices prevailing from time to time and could impair our ability
to raise capital through sales of our equity securities.
Rule 144
As of the date of this prospectus there were 53,191,933
shares of our common stock issued and outstanding, of which 31,410,748 shares are deemed “restricted securities”
or “control securities” within the meaning of Rule 144. Absent registration under the Securities Act, the sale of such
shares is subject to Rule 144, as promulgated under the Securities Act.
In general, under Rule 144, subject to the
satisfaction of certain other conditions, a person deemed to be one of our affiliates, who has beneficially owned restricted shares
of our common stock for at least one year is permitted to sell in a brokerage transaction, within any three-month period, a number
of shares that does not exceed the greater of 1% of the total number of outstanding shares of the same class, or, if our common
stock is quoted on a stock exchange, the average weekly trading volume during the four calendar weeks preceding the sale, if greater.
Rule 144 also permits a person who presently
is not and who has not been an affiliate of ours for at least three months immediately preceding the sale and who has beneficially
owned the shares of common stock for at least nine months to sell such shares without restriction other than the requirement that
there be current public information as set forth in Rule 144. To the extent that Rule 144 is otherwise available, this provision
is currently applicable to all of the restricted shares. If a non-affiliate has held the shares for more than one year, such person
may make unlimited sales pursuant to Rule 144 without restriction.
The possibility that substantial amounts of
our common stock may be sold under Rule 144 into the public market may adversely affect prevailing market prices for the common
stock and could impair our ability to raise capital in the future through the sale of equity securities. Please refer to “Risk
Factors.”
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES LAW VIOLATIONS
Our bylaws provide for indemnification
of directors and officers to the fullest extent permitted or authorized by current or future legislation or judicial or administrative
decision against all fines, liabilities, costs and expenses, including attorneys’ fees, arising out of his or her status
as a director, officer, agent, employee, or representative.
Section 78.138 of the Nevada Revised Statutes ( the “NRS”) provides
that except as might otherwise be specifically provided in the NRS or a company’s articles of incorporation n that
a director or officer of the Company shall not be personally liable to the Company or its stockholders or creditors for damages
resulting from any action or failure to act in his or her capacity as a director or officer, if his or her act or omission did
not constitute a breach of his or her fiduciary duties and did not involve intentional misconduct, fraud or a knowing violation
of law. Nevada law provides that, to the extent a director, officer, employee or agent has been successful on the merits or
otherwise in the defense of an action, suit or proceeding, the Company shall indemnify such person against expenses incurred in
connection with the defense.
Section 78.7502(1) of the NRS authorizes
a Nevada corporation to indemnify any director, officer, employee, or corporate agent “who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, except an action by or in the right of the corporation” due to his or her corporate role. Section 78.7502(1)
extends this protection “against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was unlawful.”
Section 78.7502(2) of the NRS also authorizes
indemnification of the reasonable defense or settlement expenses of a corporate director, officer, employee or agent who is sued,
or is threatened with a suit, by or in the right of the corporation. The party must have been acting in good faith and with the
reasonable belief that his or her actions were in or not opposed to the corporation's best interests. Unless the court rules that
the party is reasonably entitled to indemnification, the party seeking indemnification must not have been found liable to the corporation.
Section 78.751(2) authorizes a corporation’s
articles of incorporation, bylaws or agreement to provide that directors’ and officers’ expenses incurred in defending
a civil or criminal action must be paid by the corporation as incurred, rather than upon final disposition of the action, upon
receipt by the director or officer to repay the amount if a court ultimately determines that he is not entitled to indemnification.
Section 78.751(3)(a) provides that the rights to indemnification and advancement of expenses shall not be deemed exclusive of any
other rights under any bylaw, agreement, stockholder vote or vote of disinterested directors. Section 78.751(3)(b) extends the
rights to indemnification and advancement of expenses to former directors, officers, employees and agents, as well as their heirs,
executors, and administrators. Our bylaws require us to indemnify our directors to the fullest extent permitted under Nevada law
or any other applicable law in effect.
We may purchase and maintain insurance on behalf
of any person who is or was a director, officer or employee of ours, or is or was serving at our request as a director, officer,
employee or agent of another company, partnership, joint venture, trust or other enterprise against liability asserted against
him and incurred by him in any such capacity, or arising out of his status as such, whether or not we would have the power to indemnify
him against liability under the provisions of this section. We currently maintain such insurance.
The above discussion of our Bylaws and the
referenced sections of the Nevada Revised Statutes are not intended to be exhaustive and are qualified in its entirety by such
Bylaws and statute.
Insofar as indemnification for liabilities
arising under the Securities Act of 1933, as amended, may be permitted to directors, officers or persons controlling us pursuant
to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.
LEGAL MATTERS
The validity of the shares of common stock
offered hereby have been passed upon for SolarWindow Technologies, Inc. by Sierchio Law, LLP, 430 Park Avenue Suite 702, New York,
New York 10022. Joseph Sierchio, the principal of Sierchio Law, LLP is one of our directors and the beneficial owner of 246,567
shares of our common stock.
EXPERTS
Our consolidated financial statements for the
fiscal year ended August 31, 2020, appearing herein, have been audited by PKF O’Connor Davies, LLP, our independent
registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance
upon such report given on the authority of such firm as experts in accounting and auditing.
Our consolidated financial statements for the
fiscal year ended August 31, 2019, appearing herein, have been audited by Marcum LLP, our former independent registered
public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such
report given on the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file periodic reports with the SEC, including
quarterly reports and annual reports which include our audited financial statements. The
registration statement, including the attached exhibits and schedules, contains additional relevant information about us and our
capital stock. The rules and regulations of the SEC allow us to omit from this prospectus certain information included in
the registration statement. For further information about us and the Securities, you should refer to the registration statement
and the exhibits and schedules filed with the registration statement. With respect to the statements contained in this prospectus
regarding the contents of any agreement or any other document, in each instance, the statement is qualified in all respects by
the complete text of the agreement or document, a copy of which has been filed as an exhibit to the registration statement.
Our SEC
filings are available over the Internet at the SEC’s website at http://www.sec.gov. Our website address is www.quantumscape.com.
The information on, or that can be accessed through, our website is not part of this prospectus.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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Page
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Consolidated Balance Sheets as of November 30, 2020 (Unaudited) and August 31, 2020
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F-1
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Consolidated Statements of Operations (Unaudited) for the Three Months Ended November 28, 2020 and 2019
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F-2
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Consolidated Statements of Stockholders’ Equity (Unaudited) for the Three Months Ended November 28, 2020 and the Year ended August 31, 2020
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F-3
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Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended November 30, 2020 and 2019
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F-4
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Notes to Unaudited Consolidated Financial Statements for the Three the Ended November 30, 2020 and 2019
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F-5
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Report of Independent Registered Public Accounting Firm, PKF O’Connor Davies, LLP, for the year Ended August 31, 2020
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F-15
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Report of Independent Registered Public Accounting Firm, Marcum LLP, for the year Ended August 31, 2019
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F-16
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Consolidated Balance Sheets as of August 31, 2020 and 2019
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F-17
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Consolidated Statements of Operations for the Years Ended August 31, 2020 and 2019
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F-18
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Consolidated Statements of Stockholders' Equity for the Years Ended August 31, 2020 and 2019
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F-19
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Consolidated Statements of Cash Flows for the Years Ended August 31, 2020 and 2019
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F-20
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Notes to Consolidated Financial Statements for the Years Ended August 31, 2020 and 2019
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F-21
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SOLARWINDOW TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
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November 30,
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August 31,
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2020
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2020
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ASSETS
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(Unaudited)
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Current assets
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Cash and cash equivalents
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$
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8,549,510
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$
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14,151,523
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Short-term investments
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5,000,000
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-
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Deferred research and development costs
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463,614
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574,731
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Prepaid expenses and other current assets
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20,962
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56,147
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Total current assets
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14,034,086
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14,782,401
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Operating lease right-of-use asset
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-
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42,212
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Property and equipment, net of accumulated depreciation of $88,498 and $93,323, respectively
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1,360,503
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1,349,495
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Security deposit
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13,537
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2,200
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Total assets
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15,408,126
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16,176,308
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities
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Accounts payable and accrued expenses
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64,256
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53,428
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Related party payables
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71,967
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113,186
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Current maturities of operating lease
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-
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24,828
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Total current liabilities
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136,223
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191,442
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Non-current operating lease
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-
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17,737
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Total long term liabilities
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-
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17,737
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Total liabilities
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136,223
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209,179
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Commitments and contingencies
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Stockholders' equity
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Preferred stock: $0.10 par value; 1,000,000 shares authorized, no shares issued and outstanding
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-
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-
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Common stock: $0.001 par value; 300,000,000 shares authorized, 52,959,323 shares issued and outstanding at November 30, 2020 and August 31, 2020
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52,959
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52,959
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Additional paid-in capital
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77,877,741
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76,039,209
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Accumulated other comprehensive income (loss)
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3,277
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-
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Retained deficit
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(62,662,074
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)
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(60,125,039
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Total stockholders' equity
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15,271,903
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15,967,129
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Total liabilities and stockholders' equity
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$
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15,408,126
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$
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16,176,308
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(The accompanying notes are an integral part of these consolidated financial statements)
SOLARWINDOW TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
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Three Months Ended November 30,
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2020
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2019
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Revenue
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$
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-
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$
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-
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Operating expenses
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Selling, general and administrative
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1,999,785
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620,781
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Research and development
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547,864
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579,000
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Total operating expenses
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2,547,649
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1,199,781
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Loss from operations
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(2,547,649
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(1,199,781
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Other income (expense)
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Interest income
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19,389
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94,503
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Loss on disposal of assets
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(8,775
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-
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Total other income (expense)
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10,614
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94,503
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Net loss
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$
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(2,537,035
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$
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(1,105,278
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Basic and Diluted Loss per Common Share
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$
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(0.05
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$
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(0.02
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Weighted average number of common shares outstanding - basic and diluted
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52,959,323
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52,959,323
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(The accompanying notes are an integral part of these consolidated financial statements)
SOLARWINDOW TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
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Three Months Ended November 30,
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2020
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2019
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Net income (loss)
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$
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(2,537,035
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$
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-
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Other comprehensive income (loss):
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Foreign currency translation adjustments
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3,277
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-
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Comprehensive income (loss)
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$
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(2,533,758
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$
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-
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(a) Amounts include gains from the strengthening of the South Korean Won against the U.S. dollar.
(The accompanying notes are an integral part of these consolidated financial statements)
SOLARWINDOW TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
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Common Stock
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Additional
Paid-in
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Retained
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Accumulated
Other
Comprehensive
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Total
Stockholders'
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FOR THE THREE MONTHS ENDED NOVEMBER 30, 2020
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Shares
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Amount
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Capital
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Deficit
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Income
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Equity
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Balance, August 31, 2020
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52,959,323
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52,959
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76,039,209
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(60,125,039
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-
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15,967,129
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Stock based compensation due to common stock purchase options
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-
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-
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1,838,532
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-
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-
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1,838,532
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Foreign currency translation adjustments
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-
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-
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-
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-
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3,277
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3,277
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Net loss for the three months ended November 30, 2020
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-
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-
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-
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(2,537,035
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-
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(2,537,035
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52,959,323
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$
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52,959
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$
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77,877,741
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$
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(62,662,074
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)
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$
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3,277
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$
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15,271,903
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Common Stock
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Additional
Paid-in
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Retained
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Accumulated
Other
Comprehensive
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Total
Stockholders'
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FOR THE THREE MONTHS ENDED NOVEMBER 30, 2019
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Shares
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Amount
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Capital
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Deficit
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Income
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Equity
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Balance, August 31, 2019
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52,959,323
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$
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52,959
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$
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71,166,300
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$
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(52,771,977
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)
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$
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-
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$
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18,447,282
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Stock based compensation due to common stock purchase options
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-
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-
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420,970
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-
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-
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420,970
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Net loss for the three months ended November 30, 2019
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-
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-
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-
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(1,105,278
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)
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-
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(1,105,278
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)
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Balance, November 30, 2019
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52,959,323
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$
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52,959
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$
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71,587,270
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$
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(53,877,255
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)
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$
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-
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$
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17,762,974
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(The accompanying notes are an integral part of these consolidated financial statements)
SOLARWINDOW TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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Three Months Ended November 30,
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2020
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2019
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Cash flows from operating activities
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Net loss
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$
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(2,537,035
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)
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$
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(1,105,278
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)
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Adjustments to reconcile net loss to net cash flows used in operating activities
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Depreciation
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5,782
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6,684
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Stock based compensation expense
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1,838,532
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420,970
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Loss on disposal of assets
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8,775
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-
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Changes in operating assets and liabilities:
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Deferred research and development costs
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111,117
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(77,706
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)
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Prepaid expenses and other assets
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35,185
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20,047
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Accounts payable and accrued expenses
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10,792
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25,700
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Operating lease assets and liabilities
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(353
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)
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68
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Related party payable
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(41,219
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)
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61,047
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Security deposits
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(10,890
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)
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-
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Net cash flows used in operating activities
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(579,314
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)
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(648,468
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)
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Cash flows used in investing activity
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Purchaseof short-term investments
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(5,000,000
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)
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-
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Capital expenditures
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(27,726
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)
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(5,031
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)
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Proceeds from the sale of assets
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2,161
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-
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Net cash flows used in investing activity
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(5,025,565
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)
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(5,031
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)
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Effect of exchange rate changes on cash and cash equivalents
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2,866
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-
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Net increase (decrease) in cash and cash equivalents
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(5,602,013
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)
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(653,499
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)
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Cash and cash equivalents at beginning of period
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14,151,523
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16,604,011
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Cash and cash equivalents at end of period
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$
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8,549,510
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$
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15,950,512
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Supplemental disclosure of cash flow information:
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Interest paid in cash
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$
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-
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$
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-
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Income taxes paid in cash
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$
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-
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|
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$
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-
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|
(The accompanying notes are an integral part of these consolidated financial statements)
SOLARWINDOW TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 – Basis of Presentation
and Organization
Basis of Presentation
The accompanying unaudited interim consolidated
financial statements of SolarWindow Technologies, Inc. (the “Company”) as of November 30, 2020, and for the
three months ended November 30, 2020 and 2019 have been prepared in accordance with accounting principles generally accepted in
the United States (“U.S.”) of America, or U.S. GAAP, for interim financial information and with the instructions
to Form 10-Q and Article 8 of Regulation S-X. Certain information or footnote disclosures normally included in financial statements
prepared in accordance with GAAP have been condensed or omitted.
The preparation of financial statements
in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts
of expenses during the reporting periods. Actual results may differ from those estimates. The interim consolidated financial statements
should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report
on Form 10-K for the year ended August 31, 2020. The accompanying unaudited interim consolidated financial statements
have been prepared on the same basis as the audited financial statements and include all adjustments (including normal recurring
adjustments) necessary for the fair presentation of the Company’s consolidated financial position as of November 30, 2020,
results of operations, stockholders’ equity and cash flows for the three months ended November 30, 2020 and 2019. The Company
did not record an income tax provision during the periods presented due to net taxable losses. The results of operations for any
interim period are not necessarily indicative of the results of operations for the entire year.
Organization
SolarWindow Technologies, Inc. was incorporated
in the State of Nevada on May 5, 1998. Products derived from the Company’s SolarWindow™ technology harvest light energy
from the sun and from artificial light sources, by generating electricity from a transparent coating of organic photovoltaic (“OPV”)
solar cells, applied to glass and plastics, thereby creating a “photovoltaic” effect. The Company’s ticker symbol
is WNDW.
Liquidity and Management’s Plan
The Company does not have any commercialized
products, has not generated any revenue since inception and has sustained recurring losses and negative cash flows from operations
since inception. Due to the “start-up” nature of our business, we expect to incur losses as we continue development
of our products and technologies. As of November 30, 2020, the Company had $13,549,510 of cash and cash equivalents and short term
investments on hand and working capital of $13,897,863. The Company believes that it currently has sufficient cash to meet its
funding requirements over the next twelve months following the issuance of this Quarterly Report on Form 10-Q. However, the Company
has experienced and continues to experience negative cash flows from operations, as well as an ongoing requirement for substantial
additional capital investment. The Company expects that it may need to raise additional capital to accomplish its business plan.
If additional funding is required, the Company expects to seek to obtain that funding through financial or strategic investors.
There can be no assurance as to the availability or terms upon which such financing and capital might be available.
NOTE 2 – Summary of Significant
Accounting Policies
Information regarding the Company’s
significant accounting policies is contained in Note 2, “Summary of significant accounting policies,” to the consolidated
financial statements in the Company’s Annual Report on Form 10-K for the year ended August 31, 2020. Presented
below and in the following notes is supplemental information that should be read in conjunction with “Notes to Financial
Statements” in the Annual Report.
Fiscal quarter
The Company’s quarterly periods end
on November 30, February 28, May 31, and August 31. The Company’s first quarter in fiscal 2021 and 2020 ended on
November 30, 2020 and 2019, respectively.
Principles of consolidation
On August 24, 2020, the Company formed
wholly owned SolarWindow Asia (USA) Corp. as the holding company for SolarWindow Asia Co. Ltd., a company formed in the Republic
of Korea for the purpose of expansion into the Asian markets. As of August 31, 2020, the Company had not capitalized the Korean
subsidiaries and there were no transactions related to these entities during the year ended August 31, 2020. During our fiscal
quarter ended November 30, 2020, the Company capitalized SolarWindow Asia Co. Ltd. with a transfer of $831,000.
These consolidated financial statements
presented are those of SolarWindow Technologies, Inc. and its wholly owned subsidiaries, SolarWindow Asia (USA) Corp., and SolarWindow
Asia Co. Ltd. All significant intercompany balances and transactions have been eliminated.
Use of estimates
The preparation of consolidated financial
statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported
amounts of revenues and expenses during the accounting period. The Company considers its accounting policies relating to stock
based compensation to be the most significant accounting policy that involves management estimates and judgments. The Company
has made accounting estimates based on the facts and circumstances available as of the reporting date. Actual amounts could differ
from these estimates, and such differences could be material.
Cash and Cash Equivalents
Cash and cash equivalents include cash
on hand and highly liquid investments with original maturities of three months or less from the date of purchase.
|
|
November 30, 2020
|
|
August 31, 2020
|
Cash and cash equivalents
|
|
$
|
8,549,510
|
|
|
$
|
14,151,523
|
|
Short-term investment
|
|
|
5,000,000
|
|
|
|
-
|
|
Cash and cash equivalents
|
|
$
|
13,549,510
|
|
|
$
|
14,151,523
|
|
Short-term investments
The Company determines the balance sheet
classification of its investments at the time of purchase and evaluates the classification at each balance sheet date. Money market
funds, certificates of deposit, and time deposits with maturities of greater than three months but no more than twelve months
are carried at cost, which approximates fair value and are recorded in the consolidated balance sheets in short-term investments.
As of November 30, 2020, the short-term investment consists of a fixed-term deposit with a twelve month maturity at the time of
purchase on October 1, 2020.
Recent accounting pronouncements not
yet adopted
In December 2019, the Financial Accounting
Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes – Simplifying the Accounting
for Income Taxes. The guidance removes certain exceptions for recognizing deferred taxes for equity method investments, performing
intra period allocation, and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain
areas, including recognizing deferred taxes for goodwill and allocating taxes to members of a consolidated group, among others.
This guidance is effective for interim and annual reporting periods beginning after December 15, 2020. Early adoption
of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been
issued. The transition requirements are dependent upon each amendment within this update and will be applied either prospectively
or retrospectively. The adoption of ASU 2019-12 is not expected to have a material impact on the Company’s consolidated financial
position, results of operations, or cash flows.
Recently adopted accounting pronouncements
The Company reviews new accounting standards
as issued. Although some of these accounting standards issued or effective after the end of the Company’s previous fiscal
year may be applicable, the Company has not identified any standards that the Company believes merit further discussion. The Company
believes that none of the new standards will have a significant impact on the consolidated financial statements.
NOTE 3 – Property and Equipment
Property and equipment consists of the
following:
|
|
November 30,
|
|
August 31,
|
|
|
2020
|
|
2020
|
Computers, office equipment and software
|
|
$
|
14,800
|
|
|
$
|
23,709
|
|
Furniture and fixtures
|
|
|
27,726
|
|
|
|
12,634
|
|
Product development and manufacturing equipment
|
|
|
113,820
|
|
|
|
113,820
|
|
In-process equipment
|
|
|
1,292,655
|
|
|
|
1,292,655
|
|
Total property and equipment
|
|
|
1,449,001
|
|
|
|
1,442,818
|
|
Accumulated depreciation
|
|
|
(88,498
|
)
|
|
|
(93,323
|
)
|
Property and equipment, net
|
|
$
|
1,360,503
|
|
|
$
|
1,349,495
|
|
During the three months ended November
30, 2020 and 2019, the company purchased $27,726 and $5,031 of property and equipment, respectively. During the three months ended
November 30, 2020 and 2019, the Company recognized depreciation expense of $5,782 and $6,684, respectively.
As a result of the closure of the Vestal
New York office, during the three months ended November 30, 2020, the Company disposed of office equipment, computers and furniture
with an historical cost totaling $21,543 and net book value of 10,936. The Company received $2,161 of proceeds from the sale of
the assets resulting in a loss of $8,775.
NOTE 4 – Common Stock and Warrants
Common Stock
At November 30, 2020, the Company had 300,000,000
authorized shares of common stock with a par value of $0.001 per share, 52,959,323 shares of common stock outstanding and 5,734,277
shares reserved for issuance under the Company’s 2006 Long-Term Incentive Plan (the “2006 Plan”) as adopted
and approved by the Company’s Board on October 10, 2006 that provides for the grant of stock options to employees, directors,
officers and consultants. See “NOTE 5 - Stock Options” for additional information.
Warrants
Each of the Company’s warrants outstanding
entitles the holder to purchase one share of the Company’s common stock for each warrant share held. Other than the Series
O Warrants and Series P Warrants, all of the following warrants may be exercised on a cashless basis. A summary of the Company’s
warrants outstanding and exercisable as of November 30, 2020 and August 31, 2019 is as follows:
|
Shares of Common Stock
Issuable from Warrants
Outstanding as of
|
|
Weighted
Average
|
|
|
|
|
Description
|
|
November 30,
|
|
August 31,
|
|
Exercise
Price
|
|
Date of
|
|
Expiration
|
2020
|
|
2019
|
Issuance
|
|
Series M
|
|
246,000
|
|
246,000
|
|
$ 2.34
|
|
December 7, 2015
|
|
December 31, 2022
|
Series N
|
|
767,000
|
|
767,000
|
|
$ 3.38
|
|
December 31, 2015
|
|
December 31, 2022
|
Series P
|
|
213,500
|
|
213,500
|
|
$ 3.70
|
|
March 25, 2016
|
|
December 31, 2022
|
Series R
|
|
468,750
|
|
468,750
|
|
$ 4.00
|
|
June 20, 2016
|
|
December 31, 2022
|
Series S-A
|
|
300,000
|
|
300,000
|
|
$ 2.53
|
|
July 24, 2017
|
|
December 31, 2022
|
Series S
|
|
821,600
|
|
821,600
|
|
$ 3.42
|
|
September 29, 2017
|
|
September 29, 2022
|
Series T
|
|
16,666,667
|
|
16,666,667
|
|
$ 1.70
|
|
November 26, 2018
|
|
November 26, 2025
|
Total
|
|
19,483,517
|
|
19,483,517
|
|
|
|
|
|
|
NOTE 5 - Stock Options
Stockholders previously approved 15,000,000
shares for grant under the 2006 Plan. The 2006 Plan was adopted in order to attract and retain the best available personnel for
positions of substantial authority and to provide additional incentive to employees and directors to promote the success of the
Company’s business. The 2006 Plan provides for the grant of incentive stock options, non-qualified stock options, restricted
stock, restricted stock units, stock appreciation rights, and other types of awards to employees, consultants, and directors. Stock
option grants pursuant to the 2006 Plan vest either immediately or over zero to five years and expire from six to ten years after
the date of grant with the exercise price equal to the fair value of the underlying stock on the date of grant. All shares approved
for grant and subsequently forfeited are available for future grant. The Company does not repurchase shares to fulfill the requirements
of options that are exercised and therefore issues new shares when options are exercised. The 2006 Plan was approved by stockholders
on February 7, 2011 and expires according to its terms on February 7, 2021.
The Company measures share-based compensation
cost on the grant date, based on the fair value of the award, and recognizes the expense on a straight-line basis over the requisite
service period for awards expected to vest. The Company estimated the grant date fair value of stock options using a Black-Scholes
valuation model using the following weighted-average assumptions:
|
|
Three Months Ended November 30,
|
|
|
2020
|
|
2019
|
Expected dividend yield
|
|
|
–
|
|
|
|
–
|
|
Expected stock price volatility
|
|
|
89.44
|
%
|
|
|
82.94 – 86.23%
|
|
Risk-free interest rate
|
|
|
0.19
|
%
|
|
|
1.40 – 1.69%
|
|
Expected term (in years)(simplified method)
|
|
|
4.00
|
|
|
|
4.5 – 5.75
|
|
Exercise price
|
|
$
|
3.42
|
|
|
|
$2.32 and $3.54
|
|
Weighted-average grant date fair-value
|
|
$
|
2.16
|
|
|
|
$1.61 and $1.55
|
|
A summary of the Company’s stock
option activity for the three months ended November 30, 2020 and related information follows:
|
|
Number of
Shares
Subject to
Option
Grants
|
|
Weighted
Average
Exercise
Price ($)
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value ($)
|
Outstanding at August 31, 2019
|
|
|
2,777,334
|
|
|
|
4.31
|
|
|
|
|
|
|
|
|
|
Grants
|
|
|
5,158,000
|
|
|
|
4.06
|
|
|
|
|
|
|
|
|
|
Forfeitures and cancellations
|
|
|
(130,600
|
)
|
|
|
3.54
|
|
|
|
|
|
|
|
|
|
Outstanding at August 31, 2020
|
|
|
7,804,734
|
|
|
|
4.16
|
|
|
|
|
|
|
|
|
|
Grants
|
|
|
50,000
|
|
|
|
3.42
|
|
|
|
|
|
|
|
|
|
Forfeitures and cancellations
|
|
|
(37,500
|
)
|
|
|
3.54
|
|
|
|
|
|
|
|
|
|
Outstanding at November 30, 2020
|
|
|
7,817,234
|
|
|
|
4.16
|
|
|
|
5.29 years
|
|
|
|
27,557,385
|
|
Exercisable at November 30, 2020
|
|
|
3,956,434
|
|
|
|
3.66
|
|
|
|
6.30 years
|
|
|
|
15,789,872
|
|
The aggregate intrinsic value in the table
above represents the total pretax intrinsic value for all “in-the-money” options (i.e. the difference between the Company’s
closing stock price on the last trading day of the period covered by this report and the exercise price, multiplied by the number
of shares) that would have been received by the option holders had all in-the-money option holders exercised their vested options
on November 30, 2020. The intrinsic value of the option changes based upon the fair market value of the Company’s common
stock. Since the closing stock price was $7.65 on November 30, 2020 and 6,386,567 outstanding options have an exercise price below
$7.65 per share, as of November 30, 2020, there is $25,886,685 and $14,070,872 of intrinsic value to the totality of the Company’s
outstanding stock options and vested options, respectively.
Three Months Ended November 30,
2020
On October 19, the Company’s Board
granted 50,000 options to Joseph Sierchio, Director, with an exercise price of $3.42, exercisable on a cashless basis any time
prior to the Company’s listing of any of its securities for trading on a national stock exchange, six year term and vesting
at the rate of 12,500 on the date of grant and 12,500 each anniversary thereafter.
Three Months Ended November 30,
2019
On October 9, 2019, the Company granted
153,000 options to an employee with a ten-year term, exercise price of $2.32 per share and vesting at the rate of 1/36th per
month. Additionally, on September 16, 2019, the Board granted 5,000 options with a six-year term to a consultant with an exercise
price of $3.54 per share and vesting at the rate of 1/20th per quarter.
The following table sets forth the share-based
compensation cost resulting from stock option grants, including those previously granted and vesting over time, that were recorded
in the Company’s Statements of Operations for the three months ended November 30, 2020 and 2019:
|
|
Three Months Ended November 30,
|
|
|
2020
|
|
2019
|
Stock Compensation Expense:
|
|
|
|
|
|
|
|
|
SG&A
|
|
$
|
1,533,824
|
|
|
$
|
172,219
|
|
R&D
|
|
|
304,708
|
|
|
|
248,751
|
|
Total
|
|
$
|
1,838,532
|
|
|
$
|
420,970
|
|
As of November 30, 2020, the Company had
$5,297,826 of unrecognized compensation cost related to unvested stock options which is expected to be recognized over a period
of 3.75 years.
The following table summarizes information
about stock options outstanding and exercisable at November 30, 2020:
|
|
Stock Options Outstanding
|
|
Stock Options Exercisable
|
Range of
Exercise
Prices
|
|
Number of Shares
Subject to
Outstanding Options
|
|
Weighted
Average
Contractual
Life (years)
|
|
Weighted
Average
Exercise
Price ($)
|
|
Number
of Shares Subject
To Options
Exercise
|
|
Weighted Average
Remaining
Contractual
Life (Years)
|
|
Weighted
Average
Exercise
Price ($)
|
2.32
|
|
|
153,000
|
|
|
|
8.86
|
|
|
|
2.32
|
|
|
|
55,250
|
|
|
|
8.86
|
|
|
|
2.32
|
|
2.60
|
|
|
2,500,000
|
|
|
|
5.59
|
|
|
|
2.60
|
|
|
|
1,250,000
|
|
|
|
5.59
|
|
|
|
2.60
|
|
3.28
|
|
|
7,500
|
|
|
|
5.96
|
|
|
|
3.28
|
|
|
|
7,500
|
|
|
|
5.96
|
|
|
|
3.28
|
|
3.42
|
|
|
50,000
|
|
|
|
5.89
|
|
|
|
3.42
|
|
|
|
12,500
|
|
|
|
5.89
|
|
|
|
3.42
|
|
3.46
|
|
|
35,000
|
|
|
|
5.10
|
|
|
|
3.46
|
|
|
|
35,000
|
|
|
|
5.10
|
|
|
|
3.46
|
|
3.54
|
|
|
1,342,900
|
|
|
|
7.61
|
|
|
|
3.54
|
|
|
|
1,140,350
|
|
|
|
8.14
|
|
|
|
3.54
|
|
3.66
|
|
|
1,000,000
|
|
|
|
2.75
|
|
|
|
3.66
|
|
|
|
500,000
|
|
|
|
2.75
|
|
|
|
3.66
|
|
4.87
|
|
|
187,500
|
|
|
|
6.98
|
|
|
|
4.87
|
|
|
|
187,500
|
|
|
|
6.98
|
|
|
|
4.87
|
|
5.35
|
|
|
1,008,000
|
|
|
|
7.09
|
|
|
|
5.35
|
|
|
|
735,000
|
|
|
|
7.09
|
|
|
|
5.35
|
|
5.94
|
|
|
33,334
|
|
|
|
0.06
|
|
|
|
5.94
|
|
|
|
33,334
|
|
|
|
0.06
|
|
|
|
5.94
|
|
6.00
|
|
|
800,000
|
|
|
|
2.75
|
|
|
|
6.00
|
|
|
|
-
|
|
|
|
2.75
|
|
|
|
6.00
|
|
8.00
|
|
|
700,000
|
|
|
|
2.75
|
|
|
|
8.00
|
|
|
|
-
|
|
|
|
2.75
|
|
|
|
8.00
|
|
Total
|
|
|
7,817,234
|
|
|
|
5.29
|
|
|
|
4.16
|
|
|
|
3,956,434
|
|
|
|
6.30
|
|
|
|
3.66
|
|
NOTE 6 – Lease
On May 1, 2019, the Company leased office
space in Vestal, New York and entered into a Professional Building Lease Agreement (the “Lease”). The Lease
has an initial term of three years through May 1, 2022 with monthly rent due of $2,200 for the first two years and $2,266 during
year three. On November 30, 2020, the Company terminated the Lease and entered into a lease termination agreement (the “Termination
Agreement”). Pursuant to the terms of the Termination Agreement, the Company made a payment of $26,400 and delivered the
premises in good order including the removal of furniture and fixtures which the Company disposed, See “NOTE 3 – Property
and Equipment” for additional information related to the disposal of the furniture and fixtures. All related assets and liabilities
were written off with $418 of unrecognized interest expense charged to rent expense.
As of November 30, 2020, the
Company has not entered into any leases which have not yet commenced which would entitle the Company to significant rights or create
additional obligations.
The components of Lease expenses are as
follows:
|
|
Three Months Ended November 30,
|
|
|
2020 (a)
|
|
2019
|
Operating lease cost
|
|
$
|
32,648
|
|
|
$
|
6,666
|
|
Short-term lease costs
|
|
|
-
|
|
|
|
-
|
|
Total net lease costs
|
|
$
|
32,648
|
|
|
$
|
6,666
|
|
(a) Represents 3 months of rent
expense at $2,222 per month, $26,400 lease termination fee and ($418) of unrecognized interest expense.
Supplemental balance sheet information
related to the Lease is as follows:
|
|
November 30,
|
|
August 31,
|
|
|
2020
|
|
2020
|
Operating lease right-of-use asset
|
|
$
|
-
|
|
|
$
|
42,212
|
|
|
|
|
|
|
|
|
|
|
Current maturities of operating lease
|
|
$
|
-
|
|
|
$
|
24,828
|
|
Non-current operating lease
|
|
|
-
|
|
|
|
17,736
|
|
Total operating lease liabilities
|
|
$
|
-
|
|
|
$
|
42,564
|
|
|
|
|
|
|
|
|
|
|
Weighted Average remaining lease term (in years):
|
|
|
-
|
|
|
|
1.67
|
|
Discount rate:
|
|
|
-
|
|
|
|
5.85
|
%
|
In September 2020, the Company, through
its wholly owned subsidiaries, SolarWindow Asia (USA) Corp. and SolarWindow Asia Co., Ltd., entered a lease for office space in
South Korea. The lease has a term of one year from September 23, 2020 through September 23, 2021 with monthly payments of approximately
$1,200.
NOTE 7 - Transactions with Related
Persons
A related party with respect to the Company
is generally defined as any person (i) (and, if a natural person, inclusive of his or her immediate family) that holds 10% or more
of the Company’s securities, (ii) that is part of the Company’s management, (iii) that directly or indirectly controls,
is controlled by or is under common control with the Company, or (iv) who can significantly influence the financial and operating
decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or
obligations between related parties.
On August 7, 2017, the Company appointed
Jatinder Bhogal to the Board of Directors. Mr. Bhogal has provided consulting services to the Company through his wholly owned
company, Vector Asset Management, Inc., pursuant to a Consulting Agreement dated February 1, 2014, as amended on November 11, 2016
and December 1, 2018 (Amendment No. 2). On July 1, 2020 the Company and VAMI entered into an Executive Consulting Agreement, which
supersedes the foregoing agreements and pursuant to which Mr. Bhogal, in addition to continuing to serve as a director of the Company
will also serve as the Company’s President and Chief Executive Officer. Pursuant to the Consulting Agreements in effect prior
to December 1, 2018, Mr. Bhogal received compensation of $5,000 per month. Beginning with Amendment No. 2, Mr. Bhogal received
compensation of $18,750 per month and pursuant to the ECA, Mr. Bhogal receives $34,167 per month. Mr. Bhogal also incurs expenses
on behalf of the Company which are reimbursed according to the Company’s expense report policy. The Company recognized cash
compensation expense in connection with the Consulting Agreements and ECA of $102,500 and $56,250 during the three months ended
November 30, 2020 and 2019, respectively. As of November 30, 2020, the Company recognized a related party payable to Mr. Bhogal
of $34,167.
During the three months ended November
30, 2020 and 2019, the Company received advances of $0 and $73,005, respectively, from Talia Jevan Properties, Inc., a British
Columbia corporation wholly-owned by our former Chairman and majority stockholder, Harmel S. Rayat. The Company repaid Talia Jevan
Properties $53,251 and $0 during the three months ended November 30, 2020 and 2019. As of November 30, 2020, there were no balances
owing to Talia Jevan Properties, Inc.
Joseph Sierchio, one of the Company’s
directors, has maintained his role as the Company’s General Counsel since its inception as Principal of the law firm of Sierchio
& Partners, LLP, and then as a Partner with Satterlee Stephens LLP and beginning in August 2020, as Principal of Sierchio Law,
LLP pursuant to an engagement letter which provides for an annual fee of $175,000 in exchange for general counsel services. Mr.
Sierchio resigned from the Board effective October 22, 2018, and was reappointed on October 1, 2020. During the three months ended
November 30, 2020 and 2019, the Company recognized $43,750 and $43,750 of fees for legal services billed by Sierchio Law, LLP.
All related party transactions are recorded
at the exchange amount established and agreed to between related parties and are in the normal course of business.
NOTE 8 – Commitments and Contingencies
In September 2020, the Company, through
its wholly owned subsidiaries, SolarWindow Asia (USA) Corp. and SolarWindow Asia Co., Ltd., entered a lease for office space in
South Korea. The lease has a term of one year from September 23, 2020 through September 23, 2021 with monthly payments of approximately
$1,200.
During 2019 the Company made payments totaling
$1,292,655 towards the purchase of manufacturing equipment with an estimated total cost of $1,803,000. The remaining $510,345 will
be paid upon the completion of the equipment once the final specifications have been determined pending optimization of the Company’s
product iteration specific to this equipment. For additional information, see “Note 3 – Property and Equipment”
located in the footnotes to our financial statements.
COVID-19
In December 2019, an outbreak of the COVID-19
virus was reported in Wuhan, China. On March 11, 2020, the World Health Organization declared the COVID-19 virus a global pandemic
and on March 13, 2020, President Donald J. Trump declared the virus a national emergency in the United States. This highly contagious
disease has spread to most of the countries in the world and throughout the United States, creating a serious impact on customers,
workforces and suppliers, disrupting economies and financial markets, and potentially leading to a world-wide economic downturn.
It has caused a disruption of the normal operations of many businesses, including the temporary closure or scale-back of business
operations and/or the imposition of either quarantine or remote work or meeting requirements for employees, either by government
order or on a voluntary basis. The pandemic may adversely affect our operations, our employees and our employee productivity. It
may also impact the ability of our subcontractors, partners, and suppliers to operate and fulfill their contractual obligations,
and result in an increase in costs, delays or disruptions in performance. Our employees are working remotely and using various
technologies to perform their functions. In reaction to the spread of COVID-19 in the United States, many businesses have instituted
social distancing policies, including the closure of offices and worksites and deferring planned business activity. The disruption
and volatility in the global and domestic capital markets may increase the cost of capital and limit our ability to access capital.
Both the health and economic aspects of the COVID-19 virus are highly fluid and the future course of each is uncertain. For these
reasons and other reasons that may come to light if the coronavirus pandemic and associated protective or preventative measures
expand, we may experience a material adverse effect on our business operations, revenues and financial condition; however, its
ultimate impact is highly uncertain and subject to change.
NOTE 9 - Net Income (Loss) Per Share
The computation of basic earnings per share
(“EPS”) is based on the weighted average number of shares that were outstanding during the period, including shares
of common stock that are issuable at the end of the reporting period. The computation of diluted EPS is based on the number of
basic weighted-average shares outstanding plus the number of common shares that would be issued assuming the exercise of all potentially
dilutive common shares outstanding using the treasury stock method. The computation of diluted net income per share does not assume
conversion, exercise or contingent issuance of securities that would have an antidilutive effect on earnings per share. Therefore,
when calculating EPS if the Company experienced a loss, there is no inclusion of dilutive securities as their inclusion in the
EPS calculation is antidilutive. Furthermore, options and warrants will have a dilutive effect under the treasury stock method
only when the average market price of the common stock during the period exceeds the exercise price of the options or warrants
(they are in the money).
Following is the computation of basic and
diluted net loss per share for the three months ended November 30, 2020 and 2019:
|
|
Three Months Ended
November 30,
|
|
|
2020
|
|
2019
|
Basic and Diluted EPS Computation
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Loss available to common stockholders'
|
|
$
|
(2,537,035
|
)
|
|
$
|
(1,105,278
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
52,959,323
|
|
|
|
52,959,323
|
|
Basic and diluted EPS
|
|
$
|
(0.05
|
)
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
The shares listed below were not included in the computation of diluted losses per share because
to do so would have been antidilutive for the periods presented:
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
7,817,234
|
|
|
|
2,935,334
|
|
Warrants
|
|
|
19,483,517
|
|
|
|
19,483,517
|
|
Total shares not included in the computation of diluted losses per share
|
|
|
27,300,751
|
|
|
|
22,418,851
|
|
NOTE 10 – Subsequent Events
Management has reviewed material events
subsequent of the period ended November 30, 2020 and through the date of filing of financial statements in accordance with FASB
ASC 855 “Subsequent Events”. In managements opinion, no material subsequent events have occurred as of the date of
this quarterly report.
On December 18, 2020, one of our Directors
exercised 16,667 stock options on a cashless basis resulting in the issuance of 5,667 shares of restricted common stock.
On December 18, 2020, Mr. John Conklin
and the Company entered into an Amendment to the Separation, Consulting and Release of Claims Agreement dated November 24, 2020.
Pursuant to the Amendment, no further payments are due to Mr. Conklin and all stock options granted under his employment agreement
totaling 1,008,000 are cancelled.
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors and
Stockholders of SolarWindow Technologies, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance
sheet of SolarWindow Technologies, Inc. (the “Company”) as of August 31, 2020, and the related statements of operations,
stockholders’ equity, and cash flows for the year ended August 31, 2020 and the related notes (collectively referred to as
the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position
of the Company as of August 31, 2020 and the results of its operations and its cash flows for the year ended August 31, 2020, in
conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based
on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required
to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable
basis for our opinion.
/s/ PKF O’Connor Davies, LLP
We have served as the Company’s auditor
since May 28, 2020.
New York, New York
November 9, 2020
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Stockholders and Board of Directors
of
SolarWindow Technologies, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance
sheet of SolarWindow Technologies, Inc., (the “Company”) as of August 31, 2019, the related consolidated statements
of operations, stockholders’ equity and cash flows for the year ended August 31, 2019, and the related notes (collectively
referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of August 31, 2019 and the results of its operations and its cash flows for
the year ended August 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required
to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable
basis for our opinion.
/s/ Marcum llp
Marcum llp
We have served as the Company’s auditor from 2018 to 2020.
Melville, NY
November 18, 2019
SOLARWINDOW TECHNOLOGIES, INC.
BALANCE SHEETS
|
|
August 31,
|
|
|
2020
|
|
2019
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
14,151,523
|
|
|
$
|
16,604,011
|
|
Deferred research and development costs
|
|
|
574,731
|
|
|
|
580,879
|
|
Prepaid expenses and other current assets
|
|
|
56,147
|
|
|
|
46,832
|
|
Total current assets
|
|
|
14,782,401
|
|
|
|
17,231,722
|
|
|
|
|
|
|
|
|
|
|
Operating lease right-of-use asset
|
|
|
42,212
|
|
|
|
65,646
|
|
Equipment, net of accumulated depreciation of $93,323 and $68,858, respectively
|
|
|
1,349,495
|
|
|
|
1,368,929
|
|
Security deposit
|
|
|
2,200
|
|
|
|
2,200
|
|
Total assets
|
|
|
16,176,308
|
|
|
$
|
18,668,497
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
53,428
|
|
|
$
|
97,549
|
|
Related party payables
|
|
|
113,186
|
|
|
|
57,933
|
|
Current maturities of operating lease
|
|
|
24,828
|
|
|
|
23,169
|
|
Total current liabilities
|
|
|
191,442
|
|
|
|
178,651
|
|
|
|
|
|
|
|
|
|
|
Non-current operating lease
|
|
|
17,737
|
|
|
|
42,564
|
|
Total long term liabilities
|
|
|
17,737
|
|
|
|
42,564
|
|
Total liabilities
|
|
|
209,179
|
|
|
|
221,215
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity
|
|
|
|
|
|
|
|
|
Preferred stock: $0.10 par value; 1,000,000 shares authorized, no shares issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Common stock: $0.001 par value; 300,000,000 shares authorized, 52,959,323 shares issued and outstanding at August 31, 2020 and 2019
|
|
|
52,959
|
|
|
|
52,959
|
|
Additional paid-in capital
|
|
|
76,039,209
|
|
|
|
71,166,300
|
|
Retained deficit
|
|
|
(60,125,039
|
)
|
|
|
(52,771,977
|
)
|
Total stockholders' equity
|
|
|
15,967,129
|
|
|
|
18,447,282
|
|
Total liabilities and stockholders' equity
|
|
$
|
16,176,308
|
|
|
$
|
18,668,497
|
|
(The accompanying notes are an integral part of these financial statements)
SOLARWINDOW TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
|
|
Year Ended August 31,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
5,323,579
|
|
|
|
4,431,643
|
|
Research and product development
|
|
|
2,279,884
|
|
|
|
1,979,222
|
|
Total operating expenses
|
|
|
7,603,463
|
|
|
|
6,410,865
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(7,603,463
|
)
|
|
|
(6,410,865
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
250,401
|
|
|
|
315,344
|
|
Interest expense
|
|
|
-
|
|
|
|
(128,239
|
)
|
Accretion of debt discount
|
|
|
-
|
|
|
|
(663,918
|
)
|
Total other income (expense)
|
|
|
250,401
|
|
|
|
(476,813
|
)
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(7,353,062
|
)
|
|
$
|
(6,887,678
|
)
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Loss per Common Share
|
|
$
|
(0.14
|
)
|
|
$
|
(0.14
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding - basic and diluted
|
|
|
52,959,323
|
|
|
|
48,686,720
|
|
(The accompanying notes are an integral part of these financial statements)
SOLARWINDOW TECHNOLOGIES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED AUGUST 31, 2019 AND 2018
|
|
Common Stock
|
|
Additional
|
|
Retained
|
|
Total Stockholders'
|
|
|
Shares
|
|
Amount
|
|
Paid-in
Capital
|
|
Deficit
|
|
Equity (Deficit)
|
Balance, August 31, 2017
|
|
|
34,329,691
|
|
|
$
|
34,330
|
|
|
$
|
35,363,946
|
|
|
|
(39,029,752
|
)
|
|
|
(3,631,476
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 2017 Private Placement units issued for cash
|
|
|
821,600
|
|
|
|
822
|
|
|
|
2,554,354
|
|
|
|
-
|
|
|
|
2,555,176
|
|
Stock based compensation related to stock issuances
|
|
|
210,000
|
|
|
|
210
|
|
|
|
1,022,490
|
|
|
|
-
|
|
|
|
1,022,700
|
|
Exercise of warrants for cash
|
|
|
119,500
|
|
|
|
120
|
|
|
|
394,030
|
|
|
|
-
|
|
|
|
394,150
|
|
Exercise of warrants on a cashless basis
|
|
|
665,703
|
|
|
|
665
|
|
|
|
(665
|
)
|
|
|
-
|
|
|
|
-
|
|
Exercise of stock options on a cashless basis
|
|
|
146,162
|
|
|
|
146
|
|
|
|
(146
|
)
|
|
|
-
|
|
|
|
-
|
|
Stock based compensation due to common stock purchase options
|
|
|
-
|
|
|
|
-
|
|
|
|
1,815,325
|
|
|
|
-
|
|
|
|
1,815,325
|
|
Discount on convertible promissory note due warrant modifications
|
|
|
-
|
|
|
|
-
|
|
|
|
1,074,265
|
|
|
|
-
|
|
|
|
1,074,265
|
|
Net loss for the year ended August 31, 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,854,547
|
)
|
|
|
(6,854,547
|
)
|
Balance, August 31, 2018
|
|
|
36,292,656
|
|
|
|
36,293
|
|
|
|
42,223,599
|
|
|
|
(45,884,299
|
)
|
|
|
(3,624,407
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 2018 Private Placement units issued for cash
|
|
|
13,200,000
|
|
|
|
13,200
|
|
|
|
19,786,800
|
|
|
|
-
|
|
|
|
19,800,000
|
|
November 2018 Private Placement units issued in exchange for convertible debt
|
|
|
3,466,667
|
|
|
|
3,466
|
|
|
|
5,196,534
|
|
|
|
-
|
|
|
|
5,200,000
|
|
Stock based compensation due to common stock purchase options
|
|
|
-
|
|
|
|
-
|
|
|
|
3,959,367
|
|
|
|
-
|
|
|
|
3,959,367
|
|
Net loss for the year ended August 31, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,887,678
|
)
|
|
|
(6,887,678
|
)
|
Balance, August 31, 2019
|
|
|
52,959,323
|
|
|
$
|
52,959
|
|
|
$
|
71,166,300
|
|
|
|
(52,771,977
|
)
|
|
$
|
18,447,282
|
|
(The accompanying notes are an integral part of these financial statements)
SOLARWINDOW TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
|
|
Year Ended August 31,
|
|
|
2020
|
|
2019
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(7,353,062
|
)
|
|
$
|
(6,887,678
|
)
|
Adjustments to reconcile net loss to net cash flows used in operating activities
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
24,465
|
|
|
|
18,349
|
|
Stock based compensation expense
|
|
|
4,872,909
|
|
|
|
3,959,367
|
|
Security deposits
|
|
|
-
|
|
|
|
(2,200
|
)
|
Accretion of debt discount
|
|
|
-
|
|
|
|
663,918
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Deferred research and development costs
|
|
|
6,148
|
|
|
|
(446,904
|
)
|
Prepaid expenses and other assets
|
|
|
(9,315
|
)
|
|
|
11,987
|
|
Accounts payable and accrued expenses
|
|
|
(44,121
|
)
|
|
|
3,933
|
|
Operating lease assets and liabilities
|
|
|
266
|
|
|
|
87
|
|
Related party payable
|
|
|
55,253
|
|
|
|
57,933
|
|
Interest payable
|
|
|
-
|
|
|
|
76,057
|
|
Net cash flows used in operating activities
|
|
|
(2,447,457
|
)
|
|
|
(2,545,151
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows used in investing activity
|
|
|
|
|
|
|
|
|
Purchase of equipment
|
|
|
(5,031
|
)
|
|
|
(1,347,664
|
)
|
Net cash flows used in investing activity
|
|
|
(5,031
|
)
|
|
|
(1,347,664
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds from the issuance of equity securities
|
|
|
-
|
|
|
|
19,800,000
|
|
Net cash flows from financing activities
|
|
|
-
|
|
|
|
19,800,000
|
|
|
|
|
|
|
|
|
|
|
Change in cash
|
|
|
(2,452,488
|
)
|
|
|
15,907,185
|
|
|
|
|
|
|
|
|
|
|
Cash at beginning of period
|
|
|
16,604,011
|
|
|
|
696,826
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
14,151,523
|
|
|
$
|
16,604,011
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Interest paid in cash
|
|
$
|
-
|
|
|
$
|
52,182
|
|
Income taxes paid in cash
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash transactions:
|
|
|
|
|
|
|
|
|
Common stock issued for conversion of note payable
|
|
$
|
-
|
|
|
$
|
5,200,000
|
|
(The accompanying notes are an integral part of these financial statements)
SOLARWINDOW TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED AUGUST 31, 2020 AND
2019
NOTE 1 – Organization
SolarWindow Technologies, Inc. was incorporated
in the State of Nevada on May 5, 1998. Products derived from the Company’s SolarWindow™ technology harvest light energy
from the sun and from artificial light sources, by generating electricity from a transparent coating of organic photovoltaic (“OPV”)
solar cells, applied to glass and plastics, thereby creating a “photovoltaic” effect. The Company’s ticker symbol
is WNDW.
Photovoltaics are commonly known as “solar
panels” providing a method to generate electricity using solar cells to convert energy from light into a flow of electrons.
Conventional PV power is generated by solar modules composed of interconnected mono- or poly-crystalline cells containing PV and
electricity-conducting materials. These materials are usually opaque (i.e., non-transparent) and only effectively generate electricity
with sun light. The Company’s researchers have replaced these materials with very thin layers of specially developed compounds
that allow our SolarWindow™ technology to remain see-through or “transparent” while generating electricity when
exposed to either sun or artificial light. SolarWindow™ coatings generate electricity when exposed to direct, diffused, filtered,
low, or reflected natural or artificial light. The company has filed patent applications related to the application and fabrication
of SolarWindow™ devices using these compounds.
Liquidity and Management’s Plan
The Company does not have any commercialized
products, has not generated any revenue since inception and has sustained recurring losses and negative cash flows from operations
since inception. Due to the “start-up” nature of our business, we expect to incur losses as we continue development
of our products and technologies. As of August 31, 2020, the Company had $14,151,523 of cash on hand and working capital of $14,590,959.
The Company believes that it currently has sufficient cash to meet its funding requirements over the next twelve months following
the issuance of this Annual Report on Form 10-K. However, the Company has experienced and continues to experience negative cash
flows from operations, as well as an ongoing requirement for substantial additional capital investment. The Company expects that
it may need to raise additional capital to accomplish its business plan over the next several years. If additional funding is required,
the Company expects to seek to obtain that funding through financial or strategic investors. There can be no assurance as to the
availability or terms upon which such financing and capital might be available.
NOTE 2 – Summary of Significant
Accounting Policies
Principles of Consolidation
On July 5, 2019, the Board of Directors
voted to dissolve Kinetic Energy Corporation (“KEC”) and New Energy Solar (“NES”). KEC was incorporated
on June 19, 2008. NES was incorporated on February 9, 2009. Neither KEC nor NES had operating activity for the year ended August
31, 2019.
On August 24, 2020, the Company formed
wholly owned SolarWindow Asia (USA) Corp. as the holding company for SolarWindow Asia Co. Ltd., a company formed in the Republic
of Korea for the purpose of expansion into the Asian markets. As of August 31, 2020, the Company had not capitalized the Korean
subsidiaries and there were no transactions related to these entities during the year ended August 31, 2020.
As a result, the financial statements presented
are solely those of SolarWindow Technologies, Inc.
Use of Estimates
The preparation of the Company’s
financial statements requires management to make estimates and use assumptions that affect the reported amounts of assets, liabilities
and expenses. These estimates and assumptions are affected by management’s application of accounting policies. On an on-going
basis, the Company evaluates its estimates. Actual results and outcomes may differ materially from these estimates and assumptions.
Cash and Cash Equivalents
The Company considers cash deposits to
be cash and all highly liquid investment instruments with original maturities of 90 days or less when purchased, to be
cash equivalents. Cash deposits are carried at cost which approximates their fair value.
The Company had $14,151,523 of cash
deposits as of August 31, 2020, including $282,042 in domestic bank accounts and $13,869,481 held in Canadian bank accounts
in excess of Canadian Deposit Insurance Corporation insured limits.
Leases
The Company recognizes their leases with
a term of greater than a year on the balance sheet by recording right-of-use assets and lease liabilities. Leases can be classified
as either operating leases or finance leases. Operating leases will result in straight-line lease expense, while finance leases
will result in front-loaded expense. The Company’s lease consists of an operating lease for office space. The Company does
not recognize a lease liability or right-of-use asset on the balance sheet for short-term leases. Instead, the Company recognizes
short-term lease payments as an expense on a straight-line basis over the lease term. A short-term lease is defined as a lease
that, at the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying
asset that the lessee is reasonably certain to exercise.
Equipment
Fixed assets are carried at cost, less
accumulated depreciation. Major improvements are capitalized, while repair and maintenance are expensed when incurred. Renewals
and betterments that materially extend the life of the assets are capitalized. When assets are retired or otherwise disposed of,
the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in that
period.
Depreciation is computed on a straight-line basis over estimated
useful lives of the related assets. The estimated useful lives of depreciable assets are:
|
|
|
Estimated
|
|
|
|
|
Useful Lives
(in years)
|
|
Computer equipment and software
|
|
|
3
|
|
Equipment, furniture and fixtures
|
|
|
5
|
|
Patent and Trademark Costs
Costs related to filing and pursuing
patent applications are recorded as general and administrative expense and expensed as incurred since recoverability of such expenditures
is uncertain.
Fair Value Measurements
The Company measures fair value as the
price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between
market participants at the reporting date. The Company utilizes a three-tier hierarchy which prioritizes the inputs used in the
valuation methodologies in measuring fair value:
Level 1. Valuations based on quoted prices in active
markets for identical assets or liabilities that an entity has the ability to access. The Company has no assets or liabilities
measured and recorded on a recurring or nonrecurring basis with Level 1 inputs.
Level 2. Valuations based on quoted prices for similar
assets or liabilities, quoted prices for identical assets or liabilities in markets that are not active, or other inputs that are
observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. The Company
has no assets or liabilities measured and recorded on a recurring or nonrecurring basis with Level 2 inputs.
Level 3. Valuations based on inputs that are supported
by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company has no assets
or liabilities measured and recorded on a recurring or nonrecurring basis with Level 3 inputs.
Fair Value of Financial Instruments
The carrying value of cash and accounts
payable approximate their fair value because of the short-term nature of these instruments and their liquidity. It is not practical
to determine the fair value of the Company’s notes payable due to the complex terms. Management is of the opinion that the
Company is not exposed to significant interest or credit risks arising from these financial instruments.
Research and Product Development
Research and product development costs
represent costs incurred to develop the Company’s technology, including salaries and benefits for research and development
personnel, allocated overhead and facility occupancy costs, supplies, equipment purchase and repair and other costs. Research and
product development costs are expensed when incurred, except for nonrefundable advance payments for future research and development
activities which are capitalized and recognized as expense as the related services are performed.
Stock-Based Compensation
The Company accounts for stock-based compensation
in accordance with Accounting Standards Codification (“ASC”) 718, Stock Based Compensation. ASC 718 requires
all stock-based payments to directors, employees and consultants, including grants of stock options, to be recognized in the consolidated
statements of operations based on their fair values. The Company uses the Black-Scholes option pricing model (the “Black-Scholes
Model”) to determine the weighted-average fair value of options granted and recognizes the compensation expense of stock-based
awards on a straight-line basis over the vesting period of the award. If a stock-based award contains performance-based conditions,
at the point that it becomes probable that the performance conditions will be met, the Company records a cumulative catch-up of
the expense from the grant date to the current date, and then amortizes the remainder of the expense over the remaining service
period. Management evaluates when the achievement of a performance-based condition is probable based on the expected satisfaction
of the performance conditions as of the reporting date.
The determination of the fair value of
stock-based payment awards utilizing the Black-Scholes option pricing model requires the use of the following assumptions: expected
volatility of our common stock, which is based on our own calculated historical rate; expected life of the option award, which
we elected to calculate using the simplified method; expected dividend yield, which is 0%, as we have not paid and do not have
any plans to pay dividends on our common stock; and the risk-free interest rate, which is based on the U.S. Treasury rate in effect
at the time of grant with maturities equal to the stock option award’s expected life. The Company evaluates the assumptions
used to value the awards at each grant date and if factors change and different assumptions are utilized, stock-based compensation
expense may differ significantly from what has been recorded in the past. If there are any modifications or cancellations of the
underlying unvested securities, the Company may be required to accelerate, increase or cancel any remaining unearned stock-based
compensation expense. Forfeitures are accounted for as they occur. See “NOTE 6 – Common Stock and Warrants” and
“NOTE 7 - Stock Options” for additional information on the Company’s stock-based compensation plans.
Income Taxes
The Company accounts for income taxes using
the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the
future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and tax credits and loss carry-forwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carry-forwards are
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. A valuation allowance is established when necessary to reduce deferred tax
assets to amounts expected to be realized. The Company reports a liability for unrecognized tax benefits resulting from uncertain
income tax positions, if any, taken or expected to be taken in an income tax return. Estimated interest and penalties are recorded
as a component of interest expense or other expense, respectively.
Segment Reporting
The Company’s business is considered
to be operating in one segment based upon the Company’s organizational structure, the way in which the operations are managed
and evaluated, the availability of separate financial results and materiality considerations.
Net Income (Loss) Per Share
The computation of basic earnings per share
(“EPS”) is based on the weighted average number of shares that were outstanding during the period, including
shares of common stock that are issuable at the end of the reporting period. The computation of diluted EPS is based on the number
of basic weighted-average shares outstanding plus the number of common shares that would be issued assuming the exercise of all
potentially dilutive common shares outstanding using the treasury stock method. The computation of diluted net income per share
does not assume conversion, exercise or contingent issuance of securities that would have an antidilutive effect on earnings per
share. Therefore, when calculating EPS if the Company experienced a loss, there is no inclusion of dilutive securities as their
inclusion in the EPS calculation is antidilutive. Furthermore, options and warrants will have a dilutive effect under the treasury
stock method only when the average market price of the common stock during the period exceeds the exercise price of the options
or warrants (they are in the money).
Following is the computation of basic and
diluted net loss per share for the years ended August 31, 2020 and 2019:
|
|
Years Ended August 31,
|
|
|
2020
|
|
2019
|
Basic and Diluted EPS Computation
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Loss available to common stockholders'
|
|
$
|
(7,353,062
|
)
|
|
$
|
(6,887,678
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
52,959,323
|
|
|
|
48,986,720
|
|
Basic and diluted EPS
|
|
$
|
(0.14
|
)
|
|
$
|
(0.14
|
)
|
|
|
|
|
|
|
|
|
|
The shares listed below were not included in the computation of diluted losses per share because to do so would have been antidilutive for the periods presented:
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
7,804,734
|
|
|
|
2,777,334
|
|
Warrants
|
|
|
19,483,517
|
|
|
|
19,483,517
|
|
Total shares not included in the computation of diluted losses per share
|
|
|
27,288,251
|
|
|
|
22,260,851
|
|
Recent Accounting Standards
In August 2020, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update No. 2020-06, “Debt—Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting
for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies
accounting for convertible instruments by removing major separation models required under current U.S. GAAP. ASU 2020-06 removes
certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also
simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for the Company for fiscal years
beginning after August 31, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier
than fiscal years beginning after December 15, 2020 and adoption must be as of the beginning of the Company’s annual fiscal
year. The Company will early adopt ASU 2020-06 beginning with our fiscal year starting on September 1, 2021. We do not expect the
adoption of ASU 2020-06 to have a material impact on our consolidated financial statements.
In December 2019, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, “Income Taxes (Topic
740): Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects related to accounting
for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing
guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2020, with early adoption permitted. We do not expect the adoption of ASU 2019-12 to have a
material impact on our consolidated financial statements.
In June 2018, the FASB issued ASU 2018-07, Compensation-Stock
Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting, which simplifies the accounting for
share-based payments made to non-employees so the accounting for such payments is substantially the same as those made to employees.
Under this ASU, share based awards to non-employees will be measured at fair value on the grant date of the awards, entities will
need to assess the probability of satisfying performance conditions if any are present, and awards will continue to be classified
according to ASC 718 upon vesting which eliminates the need to reassess classification upon vesting, consistent with awards granted
to employees. The Company elected to early adopt ASU 2018-07 effective July 1, 2018. The adoption of this standard had no impact
on the Company’s consolidated financial statements.
In May 2017, the FASB issued ASU 2017-09, Compensation-Stock
Compensation (Topic 718) Scope of Modification Accounting. The amendments in this Update provide 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. The
amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning
after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for public business entities
for reporting periods for which financial statements have not yet been issued. The Company adopted ASU 2017-09 beginning September
1, 2018 with no impact on its Financial Statements.
In February 2016, the FASB issued ASU No.
2016-02, Leases (Topic 842)”, which supersedes ASC Topic 840, Leases, and creates a new topic, ASC 842, Leases. The new guidance
requires the recognition of lease assets and liabilities for operating leases with terms of more than 12 months. Presentation of
leases within the consolidated statements of operations and consolidated statements of cash flows will be generally consistent
with the current lease accounting guidance. The ASU is effective for reporting periods beginning after December 15, 2018, with
early adoption permitted. The Company early adopted ASU No. 2016-02 beginning September 1, 2018. The adoption of the standard did
not impact the Company’s consolidated net earnings and had no impact on cash flows. As of May 1, 2019, the Company entered
into an operating lease for office space. See “NOTE 8 – Lease” for additional information.
The Company reviews new accounting standards
as issued. Although some of these accounting standards issued or effective after the end of the Company’s previous fiscal
year may be applicable, the Company has not identified any standards that the Company believes merit further discussion. The Company
believes that none of the new standards will have a significant impact on the financial statements.
NOTE 3 – Equipment
Equipment consists of the following:
|
|
August 31,
|
|
|
2020
|
|
2019
|
Computers, office equipment and software
|
|
$
|
23,709
|
|
|
$
|
18,678
|
|
Furniture and fixtures
|
|
|
12,634
|
|
|
|
12,634
|
|
Product development and manufacturing equipment
|
|
|
113,820
|
|
|
|
113,820
|
|
In-process equipment
|
|
|
1,292,655
|
|
|
|
1,292,655
|
|
Total equipment
|
|
|
1,442,818
|
|
|
|
1,437,787
|
|
Accumulated depreciation
|
|
|
(93,323
|
)
|
|
|
(68,858
|
)
|
Equipment, net
|
|
$
|
1,349,495
|
|
|
$
|
1,368,929
|
|
During the years ended August 31,
2020 and 2019, the Company purchased $5,031 and $1,347,664, respectively, of equipment. During the years ended August 31, 2020
and 2019, the Company recognized depreciation expense of $24,465 and $18,349, respectively.
During the year ended August 31, 2019,
the Company made payments for in-process equipment totaling $1,292,655 towards the purchase of manufacturing equipment with an
estimated total cost of $1,803,000. That in-process equipment will provide a significant increase in our ability to develop and
showcase prototype products and components at or near “commercial size.” The remaining $510,345 will be paid upon the
completion of the equipment once the final specifications have been determined pending optimization of the Company’s product
iteration specific to this equipment.
NOTE 4 - Debt
As of August 31, 2018, the Company had
the following outstanding debt balances which were converted to Units (defined below) during the year ended August 31, 2019:
|
|
Issue
Date
|
|
Maturity
Date
|
|
Principal
|
|
Debt
Discount
|
|
Balance
|
|
Interest
Payable
|
As of August 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 2015 Loan as amended
|
|
3/4/2015
|
|
12/31/2019
|
|
$
|
600,000
|
|
|
$
|
-
|
|
|
$
|
600,000
|
|
|
$
|
186,797
|
|
2013 Note as amended
|
|
10/7/2013
|
|
12/31/2019
|
|
|
3,000,000
|
|
|
|
(663,918
|
)
|
|
|
2,336,082
|
|
|
|
1,337,146
|
|
|
|
|
|
|
|
$
|
3,600,000
|
|
|
$
|
(663,918
|
)
|
|
$
|
2,936,082
|
|
|
$
|
1,523,943
|
|
March 2015 Loan as Amended
On March 4, 2015, the Company entered into
a Bridge Loan Agreement with 1420468 Alberta Ltd. (which has since been merged with and into Kalen Capital Corporation, a British
Columbia corporation wholly-owned by our former Chairman, Harmel S. Rayat (the “Investor”)). Pursuant the Bridge
Loan Agreement, the Company borrowed $600,000 at an annual interest rate of 7% (the “March 2015 Loan”), compounded
quarterly, with a default rate of 15%.
On November 3, 2017, the Company entered
into the Third Amendment related to the March 2015 Loan pursuant to which the Company and the Investor amended the March 2015 loan
to extend the maturity date to December 31, 2019. As consideration for the note extension, the interest rate was increased to 10.5%.
On November 26, 2018, $798,566 of the March 2015 Loan was converted in exchange for 532,377 Units pursuant to the November 2018
Private Placement except for $7,922 of accrued interest which the Company agreed to repay from proceeds from the November 2018
Private Placement. See “Note 5 – November 2018 Private Placement” for additional information.
During the year ended August 31, 2019,
the Company recognized $19,691 of interest expense.
2013 Note as Amended
On October 7, 2013, the Company sold to
the Investor an unsecured Convertible Promissory Note (the “2013 Note”) in the amount of $3,000,000 with 7%
interest compounded quarterly. According to the terms of the amended 2013 Note, the Investor may elect to convert principal and
accrued interest into units of the Company’s equity securities, with each Unit consisting of (a) one share of common stock;
and (b) one Stock Purchase Warrant for the purchase of one share of common stock. The conversion price for each Unit is the lesser
of (i) $1.37; or (ii) 70% of the 20 day average closing price of the Company’s common stock prior to conversion, subject
to a floor of $1.00 with the exercise price of each Warrant being equal to 60% of the 20 day average closing price of the Company’s
common stock prior to conversion. On November 26, 2018, $4,401,434 of the 2013 Note was converted in exchange for 2,934,290 Units
pursuant to the November 2018 Private Placement except for $44,260 of accrued interest which the Company agreed to repay from proceeds
from the November 2018 Private Placement. See “Note 5 – November 2018 Private Placement” for additional information.
On November 3, 2017, the Company entered
into the Third Amendment related to the 2013 Note pursuant to which the Company and the Investor amended the 2013 Note to extend
the maturity date to December 31, 2019. As consideration for the note extension, the interest rate was increased to 10.5% and all
outstanding warrants held by the Investor had their maturity date extended to December 31, 2022, resulting in an additional debt
discount of $1,074,265 as of November 3, 2017. The modification did not result in a gain or loss due to the related party nature
of the transaction.
During the year ended August 31, 2019,
the Company recognized $108,548 of interest expense. Accretion of the debt discount related to the 2013 Note as amended amounted
to $663,918 during the year ended August 31, 2019.
NOTE 5 – November 2018 Private
Placement
On November 26, 2018, the Company completed
a self-directed offering (the “November 2018 Private Placement”) to accredited investors of 16,666,667 units
of the Company’s equity securities (each a “Unit” and collectively, the “Units”) at a price
of $1.50 per Unit with each Unit comprised of (a) one share of unregistered common stock; and (b) one warrant to purchase one share
of common stock at a price, subject to certain adjustments, of $1.70 per share for a period of seven (7) years (the “Series
T Warrant”). The Unit price represents an approximately 20% discount to the closing price of the Company's common stock
on October 29, 2018, the date the Investor and the Board agreed to enter into a significant financing arrangement. Pursuant to
the November 2018 Private Placement, the Company issued 13,200,000 Units in exchange for cash of $19,800,000 and 3,466,667 Units
for the conversion of $5,200,000 of the principal and unpaid interest owed under the 2013 Note and the March 2015 Loan. The interest
payable remaining under the notes totals $52,182, which the Company agreed to repay from proceeds received under the November 2018
Private Placement. Of the 13,200,000 Units issued in exchange for cash, Kalen Capital Corporation purchased 13,100,000 Units.
The Series T Warrants were accounted for
pursuant to ASC 470-20-25-2. The relative fair value of the common stock was estimated to be $13,687,151. The relative fair value
of the Series T Warrants was estimated to be $11,312,849 as determined based on the relative fair value allocation of the proceeds
received. The Series T Warrants were valued using the Black-Scholes option pricing model using the following variables: market
price of common stock - $2.94 per share; estimated volatility – 85.85%; 7-year risk free interest rate – 2.97%; expected
dividend rate - 0% and expected life - 7 years.
NOTE 6 – Common Stock and Warrants
Common Stock
At August 31, 2020, the Company had 300,000,000
authorized shares of common stock with a par value of $0.001 per share, 52,959,323 shares of common stock outstanding and 6,036,685
shares reserved for issuance under the Company’s 2006 Long-Term Incentive Plan (the “2006 Plan”) as adopted
and approved by the Company’s Board on October 10, 2006 that provides for the grant of stock options to employees, directors,
officers and consultants. See “NOTE 7 - Stock Options” for additional information.
During the year ended August 31, 2019,
the Company completed the November 2018 Private Placement of 16,666,667 units at a price of $1.50 per unit. Each unit consisted
of one share of common stock and one Series T Stock Purchase Warrant to purchase one (1) share of common stock at an exercise price
of $1.70 per share for a period of seven (7) years. See “NOTE 5 – November 2018 Private Placement” for additional
information.
Warrants
Each of the Company’s warrants outstanding
entitles the holder to purchase one share of the Company’s common stock for each warrant share held. Other than the Series
O Warrants and Series P Warrants, all of the following warrants may be exercised on a cashless basis. A summary of the Company’s
warrants outstanding and exercisable as of August 31, 2020 and 2019 is as follows:
|
|
Shares of Common Stock
|
|
|
|
|
|
|
|
|
|
Issuable from Warrants
|
|
|
Weighted
|
|
|
|
|
|
|
Outstanding as of August 31,
|
|
|
Average
|
|
Date Of
|
Description
|
|
2020
|
|
2019
|
|
|
Exercise Price
|
|
Issuance
|
|
Expiration
|
Series M
|
|
246,000
|
|
246,000
|
|
$
|
2.34
|
|
December 7, 2015
|
|
December 31, 2022
|
Series N
|
|
767,000
|
|
767,000
|
|
$
|
3.38
|
|
December 31, 2015
|
|
December 31, 2022
|
Series P
|
|
213,500
|
|
213,500
|
|
$
|
3.70
|
|
March 25, 2016
|
|
December 31, 2022
|
Series R
|
|
468,750
|
|
468,750
|
|
$
|
4.00
|
|
June 20, 2016
|
|
December 31, 2022
|
Series S-A
|
|
300,000
|
|
300,000
|
|
$
|
2.53
|
|
July 24, 2017
|
|
December 31, 2022
|
Series S
|
|
821,600
|
|
821,600
|
|
$
|
3.42
|
|
September 29, 2017
|
|
September 29, 2022
|
Series T
|
|
16,666,667
|
|
16,666,667
|
|
$
|
1.70
|
|
November 26, 2018
|
|
November 26, 2025
|
Total
|
|
19,483,517
|
|
19,483,517
|
|
|
|
|
|
|
|
NOTE 7 - Stock Options
Stock option grants pursuant to the 2006
Plan vest either immediately or over zero to five years and expire from six to ten years after the date of grant. Stockholders
previously approved 15,000,000 shares for grant under the 2006 Plan, of which 6,036,685 remain available for grant, 1,305,001 have
been exercised in total with 629,677 net shares (due to a cashless exercise feature) issued pursuant to such exercises of vested
options from inception of the 2006 Plan through August 31, 2020. All shares approved for grant and subsequently forfeited are available
for future grant. The Company does not repurchase shares to fulfill the requirements of options that are exercised and therefore
issues new shares when options are exercised. The 2006 Plan was approved by stockholders on February 7, 2011 and expires according
to its terms on February 7, 2021.
The Company employs the following key weighted-average
assumptions in determining the fair value of stock options, using the Black-Scholes Model and the simplified method to estimate
the expected term of “plain vanilla” options:
|
|
Years Ended August 31,
|
|
|
2020
|
|
2019
|
Expected dividend yield
|
|
|
|
|
–
|
|
|
|
|
|
|
–
|
|
|
Expected stock price volatility
|
|
|
82.94
|
|
–
|
99.44
|
%
|
|
|
87.42
|
|
–
|
87.84
|
%
|
Risk-free interest rate
|
|
|
0.08
|
|
–
|
1.69
|
%
|
|
|
|
|
|
1.84
|
%
|
Expected term (in years)
|
|
|
1.87
|
|
–
|
5.75
|
|
|
|
4.5
|
|
–
|
5.0
|
|
Exercise price
|
|
$
|
2.32
|
|
–
|
8.00
|
|
|
$
|
|
|
|
3.54
|
|
Weighted-average grant date fair-value
|
|
$
|
1.15
|
|
–
|
1.84
|
|
|
$
|
2.35
|
|
–
|
2.43
|
|
A summary of the Company’s stock
option activity for the years ended August 31, 2020 and 2019 and related information follows:
|
|
Number of Shares Subject to Option Grants
|
|
Weighted Average Exercise Price ($)
|
|
Weighted Average Remaining Contractual Term (in years)
|
|
Aggregate Intrinsic Value ($)
|
Outstanding at August 31, 2018
|
|
|
1,291,334
|
|
|
|
5.22
|
|
|
|
|
|
|
|
|
|
Grants
|
|
|
1,506,000
|
|
|
|
3.54
|
|
|
|
|
|
|
|
|
|
Forfeitures and cancellations
|
|
|
(20,000
|
)
|
|
|
4.87
|
|
|
|
|
|
|
|
|
|
Outstanding at August 31, 2019
|
|
|
2,777,334
|
|
|
|
4.31
|
|
|
|
|
|
|
|
|
|
Grants
|
|
|
5,158,000
|
|
|
|
4.06
|
|
|
|
|
|
|
|
|
|
Forfeitures and cancellations
|
|
|
(130,600
|
)
|
|
|
3.54
|
|
|
|
|
|
|
|
|
|
Outstanding at August 31, 2020
|
|
|
7,804,734
|
|
|
|
4.16
|
|
|
|
5.54
|
|
|
|
3,030,518
|
|
Exercisable at August 31, 2020
|
|
|
3,853,734
|
|
|
|
3.64
|
|
|
|
6.54
|
|
|
|
1,526,908
|
|
The aggregate intrinsic value in the table
above represents the total pretax intrinsic value for all “in-the-money” options (i.e. the difference between the Company’s
closing stock price on the last trading day of the period covered by this report and the exercise price, multiplied by the number
of shares) that would have been received by the option holders had all in-the-money option holders exercised their vested options
on August 31, 2020. The intrinsic value of the option changes based upon the fair market value of the Company’s common stock.
Since the closing stock price was $3.66 on August 30, 2020 and 4,075,900 outstanding options have an exercise price below $3.66
per share, as of August 31, 2020, there is $3,030,518 and $1,526,908 of intrinsic value to the totality of the Company’s
outstanding stock options and vested options, respectively.
Year Ended August 31, 2020
On August 31, 2020, the Company’s
Board granted 2,500,000 options to John Rhee, Director and CEO of our Korean subsidiary with an exercise price of $3.66 as to 1,000,000
options, $6.00 as to 800,000 options and $8.00 as to 700,000 options, exercisable on a cashless basis any time prior to the Company’s
listing of any of its securities for trading on a national stock exchange, three year term and vesting at the rate of 500,000 on
the date of grant, 800,000 on the six month anniversary, 700,000 on the one-year anniversary and 500,000 on the eighteen month
anniversary.
On July 1, 2020, the Company’s Board
granted 2,500,000 options to Jatinder S. Bhogal with an exercise price of $2.60, exercisable on a cashless basis any time prior
to the Company’s listing of any of its securities for trading on a national stock exchange, six year term and immediate vesting
as to 1,250,000 options and July 1, 2021 as to 1,250,000 options.
On October 9, 2019, the Company granted
153,000 options to an employee with an exercise price of $2.32, vesting at the rate of 1/36th per month and ten-year
term.
On September 16, 2019, the Board granted
5,000 options to a consultant with an exercise price of $3.54, vesting at the rate of 1/20th per quarter and six-year
term.
During the year ended August 31, 2020,
there were 130,600 vested options forfeited.
Year Ended August 31, 2019
On July 5, 2019, the Company’s Board
granted 498,000 options to directors and employees with an exercise price of $3.54, vesting at the rate of 1/20th per
quarter and six year term. Additionally, on July 5, 2019, the Board granted to Jatinder S. Bhogal, Director, 1,008,000 stock purchase
options with an exercise price of $3.54, exercisable on a cashless basis, ten year term and immediate vesting of the entire grant.
Due to his resignation from the Board of
Directors on October 22, 2018, Joseph Sierchio forfeited 20,000 unvested stock options with an exercise price of $4.87 which resulted
in the Company reversing previously recorded stock compensation expense related to the vesting of said options in the amount of
$58,367.
The following table sets forth the share-based compensation
cost resulting from stock option grants, including those previously granted and vesting over time, that were recorded in the Company’s
Statements of Operations for the years ended August 31, 2020 and 2019:
|
|
Year Ended August 31,
|
|
|
2020
|
|
2019
|
Stock Compensation Expense:
|
|
|
|
|
|
|
|
|
SG&A
|
|
$
|
3,788,538
|
|
|
$
|
2,993,532
|
|
R&D
|
|
|
1,084,371
|
|
|
|
965,835
|
|
Total
|
|
$
|
4,872,909
|
|
|
$
|
3,959,367
|
|
As of August 31, 2020, the Company had
$7,116,483 of unrecognized compensation cost related to unvested stock options which is expected to be recognized over a period
of 4.00 years.
The following table summarizes information
about stock options outstanding and exercisable at August 31, 2020:
|
|
Stock Options Outstanding
|
|
|
|
Stock Options Exercisable
|
Range of
Exercise Prices
|
|
Number of Shares
Subject to
Outstanding Options
|
|
Weighted
Average
Contractual
Life (years)
|
|
Weighted
Average
Exercise
Price ($)
|
|
Number
of Shares Subject
To Options
Exercise
|
|
Weighted Average
Remaining
Contractual
Life (Years)
|
|
Weighted
Average
Exercise
Price ($)
|
|
2.32
|
|
|
|
153,000
|
|
|
|
9.11
|
|
|
|
2.32
|
|
|
|
42,500
|
|
|
|
9.11
|
|
|
|
2.32
|
|
|
2.60
|
|
|
|
2,500,000
|
|
|
|
5.84
|
|
|
|
2.60
|
|
|
|
1,250,000
|
|
|
|
5.84
|
|
|
|
2.60
|
|
|
3.28
|
|
|
|
7,500
|
|
|
|
6.21
|
|
|
|
3.28
|
|
|
|
7,500
|
|
|
|
6.21
|
|
|
|
3.28
|
|
|
3.46
|
|
|
|
35,000
|
|
|
|
5.35
|
|
|
|
3.46
|
|
|
|
35,000
|
|
|
|
5.35
|
|
|
|
3.46
|
|
|
3.54
|
|
|
|
1,380,400
|
|
|
|
7.78
|
|
|
|
3.54
|
|
|
|
1,125,900
|
|
|
|
8.43
|
|
|
|
3.54
|
|
|
3.66
|
|
|
|
1,000,000
|
|
|
|
3.00
|
|
|
|
3.66
|
|
|
|
500,000
|
|
|
|
3.00
|
|
|
|
3.66
|
|
|
4.87
|
|
|
|
187,500
|
|
|
|
7.23
|
|
|
|
4.87
|
|
|
|
187,500
|
|
|
|
7.23
|
|
|
|
4.87
|
|
|
5.35
|
|
|
|
1,008,000
|
|
|
|
7.34
|
|
|
|
5.35
|
|
|
|
672,000
|
|
|
|
7.34
|
|
|
|
5.35
|
|
|
5.94
|
|
|
|
33,334
|
|
|
|
0.31
|
|
|
|
5.94
|
|
|
|
33,334
|
|
|
|
0.31
|
|
|
|
5.94
|
|
|
6.00
|
|
|
|
800,000
|
|
|
|
3.00
|
|
|
|
6.00
|
|
|
|
-
|
|
|
|
3.00
|
|
|
|
6.00
|
|
|
8.00
|
|
|
|
700,000
|
|
|
|
3.00
|
|
|
|
8.00
|
|
|
|
-
|
|
|
|
3.00
|
|
|
|
8.00
|
|
|
Total
|
|
|
|
7,804,734
|
|
|
|
5.54
|
|
|
|
4.16
|
|
|
|
3,853,734
|
|
|
|
6.54
|
|
|
|
3.64
|
|
NOTE 8 – Lease
On May 1, 2019, the Company leased office
space in Vestal, New York and entered into a Professional Building Lease Agreement (the “Lease”). The Lease
has an initial term of three years through May 1, 2022 with monthly rent due of $2,200 for the first two years and $2,266 during
year three. The Company has the sole option to renew the lease for an additional two years through May 1, 2024. The amounts disclosed
in the Balance Sheets pertaining to the right-of-use asset and lease liability are measured based on only the initial, three-year
term.
The Company’s existing Lease is not
subject to any restrictions or covenants which preclude its ability to pay dividends, obtain financing, or enter into additional
Lease’s.
As of August 31, 2020, the Company
has not entered into any leases which have not yet commenced which would entitle the Company to significant rights or create additional
obligations.
The Company used its estimated incremental
borrowing rate as the basis to calculate the present value of future lease payments at lease commencement. The incremental borrowing
rate represents the rate the Company would have to pay to borrow funds on a collateralized basis over a similar term and in a similar
economic environment.
The components of Lease expenses are as
follows:
|
|
Year Ended August 31, 2020
|
|
|
2020
|
|
2019
|
Operating lease cost
|
|
$
|
26,664
|
|
|
$
|
8,888
|
|
Short-term lease costs
|
|
|
-
|
|
|
|
-
|
|
Total net lease costs
|
|
$
|
26,664
|
|
|
$
|
8,888
|
|
supplemental balance sheet information
related to the Lease is as follows:
|
|
As of August 31,
|
|
|
2020
|
|
2019
|
Operating lease right-of-use asset
|
|
$
|
42,212
|
|
|
$
|
65,646
|
|
|
|
|
|
|
|
|
|
|
Current maturities of operating lease
|
|
$
|
24,828
|
|
|
$
|
23,169
|
|
Non-current operating lease
|
|
|
17,736
|
|
|
|
42,564
|
|
Total operating lease liabilities
|
|
$
|
42,564
|
|
|
$
|
65,733
|
|
|
|
|
|
|
|
|
|
|
Weighted Average remaining lease term (in years):
|
|
|
1.67
|
|
|
|
2.9
|
|
Discount rate:
|
|
|
|
|
|
|
|
|
In September 2020, the Company, through
its wholly owned subsidiaries, SolarWindow Asia (USA) Corp. and SolarWindow Asia Co., Ltd., entered a lease for office space in
South Korea. The lease has a term of one year from September 23, 2020 through September 23, 2021 with monthly payments of approximately
$1,200.
The Company’s future lease payments, which
are presented as current maturities of operating leases and non-current operating leases liabilities on the Company’s balance
sheets as of August 31, 2020 are as follows:
|
|
Amount
|
2021
|
|
|
26,664
|
|
2022
|
|
|
18,128
|
|
Total lease payments
|
|
|
44,792
|
|
Less: Imputed interest
|
|
|
(2,228
|
)
|
Total lease obligation
|
|
|
42,564
|
|
Less: current lease obligations
|
|
|
24,828
|
|
Long term lease obligations
|
|
$
|
17,736
|
|
NOTE 9 - Transactions with Related Persons
A related party with respect to the Company
is generally defined as any person (i) (and, if a natural person, inclusive of his or her immediate family) that holds 10% or more
of the Company’s securities, (ii) that is part of the Company’s management, (iii) that directly or indirectly controls,
is controlled by or is under common control with the Company, or (iv) who can significantly influence the financial and operating
decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or
obligations between related parties.
On August 7, 2017, the Company appointed
Jatinder Bhogal to the Board of Directors. Mr. Bhogal has provided consulting services to the Company through his wholly owned
company, Vector Asset Management, Inc., pursuant to a Consulting Agreement dated February 1, 2014, as amended on November 11, 2016
and December 1, 2018 (Amendment No. 2). On July 1, 2020 the Company and VAMI entered into an Executive Consulting Agreement, which
supersedes the foregoing agreements and pursuant to which Mr. Bhogal, in addition to continuing to serve as a director of the Company
will also serve as the Company’s President and Chief Executive Officer. Pursuant to the Consulting Agreements in effect prior
to December 1, 2018, Mr. Bhogal received compensation of $5,000 per month. Beginning with Amendment No. 2, Mr. Bhogal received
compensation of $18,750 per month and pursuant to the ECA, Mr. Bhogal receives 34,167 per month. Mr. Bhogal also incurs expenses
on behalf of the Company which are reimbursed according to the Company’s expense report policy. The Company recognized cash
compensation expense in connection with the Consulting Agreements and ECA of $255,833 and $183,750 during the years ended August
31, 2020 and 2019, respectively. As of August 31, 2020, the Company recognized a related party payable to Mr. Bhogal of $48,758.
During the year ended August 31, 2020,
Talia Jevan Properties, Inc., a British Columbia corporation wholly-owned by the Investor, made advances on behalf of the Company
totaling $210,415 and $15,497 during the years ended August 31, 2020 and 2019, respectively. The Company repaid Talia Jevan Properties
$172,661 and $0 during the years ended August 31, 2020 and 2019, respectively. As of August 31, 2020, the Company owed Talia Jevan
Properties, Inc. $53,251.
The law firm of Sierchio & Partners,
LLP, of which Joseph Sierchio, one of the Company’s directors, was a principal, had provided counsel to the Company since
its inception. Beginning in September 2016, Mr. Sierchio became a partner at Satterlee Stephens LLP (“Satterlee”).
Concurrently with Mr. Sierchio’s move to Satterlee, the Company engaged with Satterlee to provide legal counsel with Mr.
Sierchio maintaining his role as the Company’s primary attorney. Mr. Sierchio resigned from the Board effective October 22,
2018, and was reappointed on October 1, 2020. Mr. Sierchio has maintained his role as the Company’s General Counsel. During
our fiscal year ended August 31, 2019 (from September 1, 2018 through October 22, 2018, the date of Mr. Sierchio’s resignation
from the Board), the Company recognized $3,480 of fees for legal services billed by firms associated with Mr. Sierchio.
On November 26, 2018, the Company completed
the November 2018 Private Placement to accredited investors of 16,666,667 Units of the Company’s equity securities at a price
of $1.50 per Unit with each Unit comprised of (a) one share of common stock; and (b) one Series T Warrant to purchase one share
of common stock at a price of $1.70 per share for a period of seven (7) years. The Investor participated in the November 2018 Private
Placement by purchasing 13,100,000 Units in exchange for cash of $19,650,000 and converting $5,200,000 owing under the March 2015
Loan and 2013 Note into 3,466,667 Units.
All related party transactions are recorded
at the exchange amount established and agreed to between related parties and are in the normal course of business.
NOTE 10 – Income Taxes
On December 22, 2017, the Tax Cuts and
Jobs Act (“The Act”) was enacted into law. The Act applies to corporations generally beginning with taxable years starting
after December 31, 2017 and reduces the corporate tax rate from a graduated set of rates with a maximum 35% tax rate to a flat
21% tax rate. Additionally, the Act introduced other changes that impacted corporations, including a net operating loss (“NOL”)
deduction annual limitation, an interest expense deduction annual limitation, elimination of the alternative minimum tax, and immediate
expensing of the full cost of qualified property. The Act also introduced an international tax reform that moved the U.S. toward
a territorial system, in which income earned in other countries will generally not be subject to U.S. taxation. However, the accumulated
foreign earnings of certain foreign corporations were subject to a one-time transition tax, which can be elected to be paid over
an eight-year tax transition period, using specified percentages, or in one lump sum. NOL and foreign tax credit (“FTC”)
carryforwards can be used to offset the transition tax liability. This change had no impact on the Company as it has not earned
taxable income in the past and it has significant NOL carryforwards.
Deferred income taxes reflect the net tax
effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Significant components of the Company’s deferred tax assets at August 31, 2020 and
2019 are as follows:
|
|
2020
|
|
2019
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
6,598,870
|
|
|
$
|
5,901,666
|
|
Capitalized research and development
|
|
|
1,069,124
|
|
|
|
1,014,380
|
|
Depreciation
|
|
|
1,762
|
|
|
|
(7,353
|
)
|
Stock based compensation
|
|
|
3,006,736
|
|
|
|
1,983,425
|
|
Research and development credit carry forward
|
|
|
657,737
|
|
|
|
599,646
|
|
Total deferred tax assets
|
|
|
11,334,229
|
|
|
|
9,491,764
|
|
Less: valuation allowance
|
|
|
(11,334,229
|
)
|
|
|
(9,491,764
|
)
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
The net increase in the valuation allowance
for deferred tax assets was $1,842,465 and $1,594,583 during the year ended August 31, 2020 and 2019, respectively. The Company
evaluates its valuation allowance requirements on an annual basis based on projected future operations. When circumstances change
and this causes a change in management’s judgment about the realizability of deferred tax assets, the impact of the change
on the valuation allowance is reflected in current operations.
For federal income tax purposes, the Company
has net U.S. operating loss carry forwards at August 31, 2020 available to offset future federal taxable income, if any, of $31,423,193.
These carryforwards may be subject to an annual limitation under Section 382 and 383 of the Internal Revenue Code of 1986, and
similar state provisions if the Company experienced one or more ownership changes which would limit the amount of NOL and tax credit
carryforwards that can be utilized to offset future taxable income and tax, respectively. In general, an ownership change, as defined
by Section 382 and 383, results from transactions increasing ownership of certain stockholders or public groups in the stock of
the corporation by more than 50 percentage points over a three-year period.
In addition, the Company has research and
development tax credit carry forwards of $657,737 at August 31, 2020, which are available to offset federal income taxes.
The utilization of the tax net operating
loss carry forwards may be limited due to ownership changes that have occurred as a result of sales of common stock.
The effects of state income taxes were
insignificant for the years ended August 31, 2020 and 2019.
The following is a reconciliation between
expected income tax benefit and actual, using the applicable statutory income tax rate of 21% for the year ended August 31, 2020
and 2019:
|
|
2020
|
|
2019
|
Income tax benefit at statutory rate
|
|
$
|
1,544,143
|
|
|
$
|
1,446,412
|
|
Permanent differences
|
|
|
240,231
|
|
|
|
69,190
|
|
Research and development credit
|
|
|
58,091
|
|
|
|
78,981
|
|
Change in valuation allowance
|
|
|
(1,842,465
|
)
|
|
|
(1,594,583
|
)
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The fiscal years 2018 through 2020 remain
open to examination by federal authorities and other jurisdictions in which the Company operates.
The Company does not have any uncertain
tax positions at August 31, 2020 and 2019 that would affect its effective tax rate. The Company does not anticipate a significant
change in the amount of unrecognized tax benefits over the next twelve months. Because the Company is in a loss carryforward position,
the Company is generally subject to US federal and state income tax examinations by tax authorities for all years for which a loss
carryforward is available. If and when applicable, the Company will recognize interest and penalties as part of income tax expense.
NOTE 11 – Commitments and Contingencies
The Company entered into an operating lease
for office space with a term from May 1, 2019 through May 1, 2022 with monthly rent due of $2,200 for the first two years and $2,266
during year three. For additional information, see “Note 8 – Lease” located in the footnotes to our financial
statements.
In September 2020, the Company, through
its wholly owned subsidiaries, SolarWindow Asia (USA) Corp. and SolarWindow Asia Co., Ltd., entered a lease for office space in
South Korea. The lease has a term of one year from September 23, 2020 through September 23, 2021 with monthly payments of approximately
$1,200.
During 2019 the Company made payments totaling
$1,292,655 towards the purchase of manufacturing equipment with an estimated total cost of $1,803,000. The remaining $510,345 will
be paid upon the completion of the equipment once the final specifications have been determined pending optimization of the Company’s
product iteration specific to this equipment. For additional information, see “Note 3 – Equipment” located in
the footnotes to our financial statements.
COVID-19
In December 2019, an outbreak of the COVID-19
virus was reported in Wuhan, China. On March 11, 2020, the World Health Organization declared the COVID-19 virus a global pandemic
and on March 13, 2020, President Donald J. Trump declared the virus a national emergency in the United States. This highly contagious
disease has spread to most of the countries in the world and throughout the United States, creating a serious impact on customers,
workforces and suppliers, disrupting economies and financial markets, and potentially leading to a world-wide economic downturn.
It has caused a disruption of the normal operations of many businesses, including the temporary closure or scale-back of business
operations and/or the imposition of either quarantine or remote work or meeting requirements for employees, either by government
order or on a voluntary basis. The pandemic may adversely affect our operations, our employees and our employee productivity. It
may also impact the ability of our subcontractors, partners, and suppliers to operate and fulfill their contractual obligations,
and result in an increase in costs, delays or disruptions in performance. Our employees are working remotely and using various
technologies to perform their functions. In reaction to the spread of COVID-19 in the United States, many businesses have instituted
social distancing policies, including the closure of offices and worksites and deferring planned business activity. The disruption
and volatility in the global and domestic capital markets may increase the cost of capital and limit our ability to access capital.
Both the health and economic aspects of the COVID-19 virus are highly fluid and the future course of each is uncertain. For these
reasons and other reasons that may come to light if the coronavirus pandemic and associated protective or preventative measures
expand, we may experience a material adverse effect on our business operations, revenues and financial condition; however, its
ultimate impact is highly uncertain and subject to change.
NOTE 12 – Subsequent Events
Management has reviewed material events
subsequent of the period ended August 31, 2020 and through the date of filing of financial statements in accordance with FASB ASC
855 “Subsequent Events”. In managements opinion, no material subsequent events have occurred as of the date of this
annual report.
From September 1 – October 26, 2020, the Company made
capital contributions of $78,000 to SolarWindow Asia Co., Ltd., a Korean foreign direct investment company. The Board has approved
an additional $753,000 for transfer to the Korean subsidiary.
On October 20, 2020, the Company settled all outstanding related
party payables to Talia Jevan Properties, Inc., by making a payment of $53,251.
On October 19, 2020, the Company granted 50,000 options to Joseph
Sierchio in connection with his appointment to the Board. The options have an exercise price of $3.42, vest as to 12,500 immediately
and 12,500 each anniversary thereafter and expires on October 19, 2026.
F-34
Solarwindow Technologies (PK) (USOTC:WNDW)
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