Item 1. Business
Background
We have developed transparent electricity-generating
liquid coatings (the “SolarWindow™ Coatings”) that can be applied to glass and plastic surfaces to generate
electricity. These coatings generate electricity when exposed to natural sun or artificial light; and when exposed to low, shaded,
or reflected light.
When these electricity-generating coatings
are applied to glass and fabricated into a window, these windows could become electricity-generating windows, which could potentially
be used on any of the estimated 5.6 million commercial buildings, in the United States alone, which consume almost $150 billion
in electricity annually.
Over the years, we have achieved numerous important
milestones and overcome major technical challenges in the development of our SolarWindow™ technology, including the ability
to generate electricity on glass while remaining transparent. In September 2014, we demonstrated SolarWindow™ Coatings to
members of the U.S. Congress during the first ever National Lab Day, which was cosponsored by the U.S. Department of Energy.
We have scaled-up the SolarWindow™ technology
from a single solar cell – only one-quarter the size of a grain of rice – to a working array of solar cells which form
a one-foot by one-foot working prototype – our largest-ever SolarWindow™ module.
In early 2017, our SolarWindow™ transparent
electricity-generating coatings on glass were successfully processed through the rigorous autoclave system for window glass lamination
at a commercial window fabricator. Layered with SolarWindow™ electricity-generating liquid coatings, glass modules were subjected
to the extremely high heat and pressure of autoclave equipment located at the fabricator’s facility. Despite the SolarWindow™
modules being subjected to the harsh pressure and temperature conditions, subsequent performance testing confirmed that the modules
continued to produce power. This validated that our SolarWindow™ Coatings can be processed in an industrial window fabrication
autoclave manufacturing process.
Our technological advancements over the
past two years now enable us to fabricate a pane of glass coated with our SolarWindow™ technology by simply applying our
transparent, electricity-generating coatings onto glass surfaces at room temperature and pressure; this process represents a significant
technical achievement which may provide a manufacturing advantage over expensive and cumbersome high temperature and high positive
or negative pressure-sensitive manufacturing methods common to conventional solar photovoltaic (“PV”) manufacturing.
Our current focus is on the commercialization
of products derived from our SolarWindow™ technology. We continue to develop our SolarWindow™ technology and products
with the Alliance for Sustainable Energy, LLC (the “Alliance”) under the Stevenson-Wydler Cooperative Research
and Development Agreement (“CRADA”). The Alliance is the Manager and Operator of the National Renewable Energy
Laboratory (“NREL”) under the U.S. Department of Energy (“DOE”).
In March 2018 the Company was awarded its first-ever
Advanced Materials Manufacturing Cooperative Research and Development Agreement (“AMM CRADA”) from the DOE Office
of Energy Efficiency and Renewable Energy’s (“EERE”) Advanced Manufacturing Office (“AMO”).
The purpose of this project is to develop and demonstrate a unique high-throughput process methodology for semitransparent organic
photovoltaic (“OPV”) modules compatible with high process speeds for many different advanced material manufacturing
process systems.
On August 2, 2017, we entered into a Process
Integration and Production Agreement (the “PIPA Agreement”) with Triview Glass Industries, LLC (“Triview”).
On September 27, 2019, the Company was notified that Triview, effective on September 27, 2019, would cease operations and would
not be able to fulfill its commitment to support SolarWindow and meet its obligations to integrate SolarWindow™ processes
into its manufacturing operations and build electricity-generating glass products under the PIPA Agreement. The Company does not
believe that the termination of its relationship with Triview will result in any material adverse effect on the Company’s
operations. The Company remains focused and continues to:
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Pursue commercial manufacturing partnerships to establish and integrate SolarWindow™
coatings and processes into glass fabrication processes, and
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Develop manufacturing lines for the full-scale fabrication of specific SolarWindow™
electricity-generating products.
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To advance the technical and product development,
and subsequent commercialization of SolarWindow™ technologies and products, we are seeking technology and product licensing
and joint venture arrangements with additional research institutions, commercial partners, glass manufacturing and fabrication
facilities, and organizations with established technical competencies, market reach, and mature distribution networks in the building
development, solar PV, building-integrated PV, and alternative and renewable energy market industries.
As of the date of this filing, our proprietary
SolarWindow™ electricity-generating coatings and associated technologies are the subject of over sixty (60) pending U.S.
and international patent, and thirty (30) trademark filings.
More information about the Company can be read at www.solarwindow.com
Our Important Business and Technology Development Milestones
and Achievements
We have been researching, developing, designing
and testing our SolarWindow™ technology, as well as developing prototype fabrications of our SolarWindow™ modules,
for commercial application of flat and insulated electricity-generating glass products for tall towers and other commercial buildings
since November 2006.
To date we have achieved a number of important
milestones in the development of our technology, including:
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awarded its first-ever advanced materials manufacturing CRADA by the DOE Office of Energy Efficiency
and Renewable Energy’s (EERE) Advanced Manufacturing Office (AMO). The Company was awarded the CRADA after submitting a proposal
outlining its process technologies and fabrication methods to the DOE’s Roll-to-Roll Advanced Materials Manufacturing Consortium,
led by Oak Ridge National Laboratory (ORNL) and partnering with Argonne National Laboratory (ANL), Lawrence Berkeley National Laboratory
(LBNL), and the National Renewable Energy Laboratory (NREL). The CRADA will be carried out with the DOE by SolarWindow, ANL, and
NREL. We refer to this CRADA as our Advanced Manufacturing Materials or “AMM CRADA” which focuses on high-speed roll-to-roll
manufacturing processes of our SolarWindow™ technology.
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set a new performance record for power efficiency with a 34% increase in performance over previous
generations of its transparent electricity-generating glass. Performance results are based on independent testing and certification
of SolarWindow™ devices by the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL) Device Performance
Measurement Laboratory;
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processed our SolarWindow™ transparent electricity-generating glass modules through the rigorous
autoclave system for window glass lamination at a commercial window fabricator;
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completed important freeze/thaw performance testing necessary for the commercialization of our
transparent electricity-generating coatings; modules were subjected to more than 200 freeze/thaw cycles, which yielded favorable
performance results of the edge sealing processes and minimal impact on the device electrical performance;
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expanded product development and successfully applied our electricity-generating coatings onto flexible glass – as thin
as a business card (only 0.1-millimeter-thick) – that is flexible enough to be bent without breaking or cracking; This thin
glass substrate can be used to make curved PV panels or can be used in laminated glass, therefore significantly expanding the potential
product range for our coatings;
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entered into the NREL CRADA, which is still in effect, that focuses on continued development and
improvement of the underlying OPV materials and module/integration science and engineering;
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filed over ninety (90) patent and trademark applications for our electricity-generating coating
and technology development efforts;
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expanded the potential use of our SolarWindow™ coatings to include applications for commercial
and military aircraft, and the safety and security of military pilots and troops;
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generated electricity on flexible plastic and glass using novel see-through SolarWindow™
coatings;
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developed new SolarWindow™ coatings with increased transparency, and use of new and improved
colors;
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produced the largest OPV module for the same type of device structure ever fabricated at NREL in
the institute’s history;
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successfully collected and transported electricity using a virtually ‘invisible’ conductive
wiring system developed for SolarWindow™;
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completed successful performance tests on the suitability of our transparent electricity-generating
coatings for glass and flexible plastics for glass-to-glass lamination processes, and
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demonstrated that our SolarWindow™ coatings and materials can be incorporated into manufacturing
processes using methods and techniques that do not require high temperature or a vacuum deposition methods typical for conventional
PV or thin-film cell or module fabrication.
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On September 16, 2010, we publicly unveiled
a working four-inch by four-inch prototype of our proprietary SolarWindow™ technology. Scientists at the event powered lights
on a scale-model house by exposing our transparent SolarWindow™ to artificial light from fluorescent lamps, mimicking lighting
typically installed inside offices.
Researchers also repeatedly opened and
closed window shades, successfully powering LED lights each time SolarWindow™ was exposed to natural light. This demonstration
mimicked outdoor exposure such as sunlight on the exterior façade of commercial buildings – our initial target market
and, we believe, a promising early application of the technology.
Scientists at the debut event not only
demonstrated the ability to generate “voltage” to power lighting, but also revealed the capability of SolarWindowTM
to produce “current” needed to power mechanical devices and appliances. Researchers successfully powered the mechanical
rotor blades of a small helicopter using only a single, small-scale SolarWindow™ prototype exposed to a solar simulator.
In February 2012, we successfully developed
the largest OPV device fabricated at NREL at that time, measuring 170cm2, approximately 14 times larger than previous
devices of the same type device and structure ever produced at NREL. In March 2012, we, in collaboration with NREL researchers,
successfully collected and transported electricity using a virtually 'invisible' conductive wiring system developed for SolarWindow™.
The ability to transport electricity on glass windows while remaining transparent is especially important to the eventual deployment
of an aesthetically pleasing commercial product.
On March 8, 2014, we made public never-before-seen
images of our largest area, high-performance SolarWindow™ arrays. These SolarWindow™ arrays measure over 232 cm²
– a significant achievement for size, improving upon our previous achievements at NREL, and produced with highly-uniform,
colored tints preferred by commercial window manufacturers for installation on skyscrapers, worldwide. Among the most important
criteria for developing SolarWindow™ coating applications for today's skyscrapers is providing a set of neutral colors that
remain see-through and are uniform in fabrication. We revealed the Company’s largest-area transparent, OPV SolarWindow™
array that addresses tall-tower and commercial building glass requirements and that also bears the promise of scale-up and manufacturability
at large commercial sizes. This SolarWindow™ array is over 35% larger than our previously-fabricated, 170 cm² working
module achievement. That prior module was already 14 times larger than the then-previous largest-area OPV module for the same type
device structure ever fabricated at the NREL.
In September 2014, we demonstrated SolarWindow™
electricity-generating coatings to Congress during the first ever National Lab Day on Capitol Hill. National Lab Day was cosponsored
by the U.S. Department of Energy. On April 8, 2015, Engineers and research scientists at the University of North Carolina Charlotte
Energy Production and Infrastructure Center (“UNCC-EPIC”) have independently reviewed and validated our proprietary
Power & Economic Model. The Model calculates a financial payback of less than one year for our transparent electricity-generating
SolarWindow™ Technology. The UNCC-EPIC team of engineering and science experts independently validated the modeling assumptions,
reference data, and technical basis important to calculating our one-year financial payback for SolarWindow™ systems. UNCC-EPIC
validation also confirmed our methodology for modeling the performance of competing PV technologies.
In May 2015 we announced plans to replace
traditional electrical wiring connections with a simplified next-generation system for collecting the power produced by its transparent
electricity-generating windows. In addition to reducing costs, ease of electrical installation will be important to window fabricators,
glass installers (i.e., glaziers), electricians, and maintenance personnel. The replacement of today's cumbersome methods with
our easy power connection system ('module interconnects') is also important for new construction and retrofit applications of SolarWindow™
electricity-generating window modules on skyscrapers and tall towers.
On August 20, 2015, we featured a first-ever
demonstration of our working, electricity-generating window unit, during our webcast. Webcast participants witnessed clean electricity
being generated on a demonstration window unit. Its glass is tinted in a high-demand, high transparency, very light green modules
framed in aluminum, popular with architects and developers of commercial towers – our target market. Participants also heard
us explain exactly how we plan to: generate revenue, work towards product development and getting SolarWindow ™ ready for
commercial manufacturing, build shareholder value, expand our name recognition and branding plans, increase investor outreach,
engage media, and outlined important next steps for commercialization and bring SolarWindow™ products to market.
On May 17, 2017, we announced the successful
processing of our SolarWindow™ transparent electricity-generating coatings on glass through the rigorous autoclave system
for window glass lamination at a commercial window fabricator. Layered with SolarWindow™ electricity-generating liquid coatings,
glass modules were subjected to the extremely high heat and pressure of autoclave equipment located at the fabricator’s facility.
Despite the SolarWindow™ modules being subjected to the harsh pressure and temperature conditions, subsequent performance
testing confirmed that the modules continued to produce power.
Product Development Utilizing our SolarWindowTM Technology
We are currently developing seven (7) products
(collectively, the “SolarWindow™ Products”) based on our SolarWindow™ technology:
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SolarWindow™ – Commercial – A flat glass product for installation in new commercial
towers under construction and replacement windows;
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SolarWindow™ – Structural Glass – Structural glass walls and curtains for tall
structures;
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SolarWindow™ – Architectural Glass – Textured and decorative interior glass walls,
room dividers, etc.;
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SolarWindow™ – Residential – A window glass for installation in new residential
homes under construction and replacement windows;
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SolarWindow™ – Flex – Flexible glass and plastic films which may be applied directly to different surfaces;
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SolarWindow™ - PowerWrap™ - A proprietary product under development that plans to feature
multiple colors and high-power production; and
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SolarWindow™ Retrofit Veneer - Transparent, tinted, and flexible veneers that installers
can apply directly on to existing, previously installed, window glass.
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Currently, we are concentrating on the
development and deployment of SolarWindow™-Commercial, Structural, Architectural, and Retrofit Veneer glass products.
The SolarWindow™ Retrofit Veneer
products are transparent, tinted, flexible and rigid veneers that installers can apply directly over the inside of existing windows.
This expanded product line broadens our market reach beyond new and replacement installations, to include windows currently installed
on the estimated five million commercial buildings constructed in the U.S. alone. The SolarWindow™ Retrofit Veneer products
will be developed concurrently with the other SolarWindow™ products currently under development.
Although our efforts have already produced
the basis for these prototype applications, commercialization of the SolarWindowTM technology will require significant
further product development, fabrication, testing, and validation, much of which will be supported by our technology development
CRADA and our AMM CRADA grant. This and additional work should enable us to ascertain whether the SolarWindowTM technology
can serve as the basis for a commercially viable technology or product, and, ultimately, be manufactured.
Our Industry and Market Opportunity
Overview
From a total glass market perspective, global
production of flat glass is forecast to rise 4 percent per year through 2021 to 11 billion square meters.
According to the International Energy Outlook
2017 (IEO2017) released by the U.S. Energy Information Administration (EIA), world energy consumption is projected to increase
by 28% by 2040.
The United States is the world’s largest
consumer of electricity, according to the U.S. Energy Information Administration, with nearly 70% of the nation’s electricity
generated by coal and natural gas; 50% of the total U.S. electrical generation relies on coal, a fossil fuel. The environmental
impact and rising costs of these non-renewable fuels, along with the potential doubling of global electricity consumption in the
coming years, illustrate the need for more creative, sustainable methods for generating electrical power. A forecast of U.S. electricity
demand shows an expected increase is usage of 40% by 2032.
We believe that the SolarWindow™ Products
will uniquely address a growing market opportunity for technologies able to generate sustainable electricity, without taking up
the large amount of land needed for utility scale solar farms or requiring large roof-top area that simply doesn’t exist
on a skyscraper. Rising energy costs, increasing electricity consumption, and the need for a cleaner alternative to today’s
non-renewable energy sources, all contribute to the growing demand for clean, renewable alternative energy sources. Renewable energy,
especially solar and wind has reached a key tipping point whereby many renewable energy projects can compete directly with fossil
fuel power plants without subsidies. Legislation or fiscal support may no longer be needed to drive the growth and commercialization
of renewable energy including PV solar power. Building integrated photovoltaic (BIPV) allows solar modules to be added to a building
at marginal extra costs. Our goal is that integrating SolarWindow™ products into buildings may present an opportunity of
a marginal cost above a regular commercial window cost because the cost of installing windows is already factored into the building
or renovation costs.
The Market Opportunity for our SolarWindow™ Technology
and Products
Based on our initial market research, there
are no commercially marketed OPV transparent glass window products similar to our SolarWindow™ device technology capable
of generating electricity available for sale in the United States. We believe our SolarWindow™ technology, as well as the
products that may be derived from our SolarWindow™ technology, could be uniquely positioned as first-to-market, if our commercial
launch is timely.
Unprecedented levels of government initiatives,
heightened residential demand for green construction, and improvements in sustainable materials are driving green building. Although
percentages vary from country to country, buildings are responsible for about 30–45% of the global energy demand in developed
countries. Governments (both locally at e.g. State level and nationally) are putting increased focus on legislation and policies
to improve their energy efficiency, according to the United States Environmental Protection Agency. In North America, initiatives
such as the environmental building rating system (LEED) run by the U.S. Green Building Council are helping to transform the market
for added-value glazing, and this trend is expected to continue. We anticipate similar opportunities in Europe, through the development
of a European Union-wide energy labeling system for windows.
Our SolarWindow™ Products are under development
for building window glass application, often referred to as “architectural flat glass” and “fabricated glass
products.” In 2010, an industry report on flat glass by Pilkington, a major global glass manufacturer, noted that the ten
largest cities in the United States had more than 444 million square feet of architectural flat glass. We believe that this market
is growing in volume, with global growth reported to be approximately 4-5% annually, with Europe, China and North America accounting
for over 70% of global demand, according to the same report. Market research reports estimate the flat glass market was valued
at USD 108.51 billion in 2018, and it is expected to reach a value of USD 180.79 billion by 2024, at a compound annual growth rate
(CAGR) of 9.33%, over the forecast period, 2019 - 2024.
Our Competitive Strengths
We believe that the following strengths of our
SolarWindow™ technology should enable us to compete successfully in the alternative and renewable energy industries:
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our products development goals are unique solutions for generating sustainable electricity on glass
and flexible materials;
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SolarWindow™ transparent electricity-generating technology re-purposes passive windows as
energy generators;
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we believe that there are no commercially available transparent OPV products for sale that directly
compete with our technologies and products, and therefore, SolarWindow™ products may be positioned as ‘first-to-market;’
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our SolarWindow™ Products are anticipated to have a low price point which may help deliver
greater energy cost savings when compared to alternatives;
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Modeled payback time for SolarWindow™ technology shows a much shorter payback period than
the payback period associated with rooftop solar PV modules mounted on the same skyscraper building, indicating an economically
viable decision;
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our SolarWindow™ Products are being designed to be attractive, ‘active’ energy
producing products that address a growing energy demand;
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our products have unique characteristics, not easily achievable by other companies or their renewable
energy technologies. Our SolarWindow™ Products generate electricity while remaining transparent, and are able to produce
electricity from natural sunlight and artificial light;
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our SolarWindow™ Products are designed for application on the glass facades of commercial
skyscrapers and are not confined to installation on limited rooftop space. The installation of typical roof-rack PV modules is
often constrained by limited roof-top areas on commercial skyscrapers. In contrast, our SolarWindowTM Products are being
designed to be applied to the entire glass façades of skyscrapers.
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the electricity generated by our technologies is compatible for use with existing energy infrastructure
for generating useable electricity. Our SolarWindow™ products are under development for seamless applications and integration
for use in order to avoid burdening potential customers with special energy management systems;
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our SolarWindow™ Products are being designed and developed for high volume and speed production using low-cost manufacturing
processes and methods; and
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our market strategy focuses on deployment using glass fabrication companies in an existing large global market with total glass
market focus (Annealed & Tempered Glass, Glass Fabrication Processing, and Glazing Installation).
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Our Business Strategy
Our goal is to complete the product development
phase for our SolarWindow™ technologies in parallel with work directed towards the commercial launch of SolarWindow™
Products. Key elements of our business strategy include:
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partnering with window and glass companies that are capable of building SolarWindow™ Products
that meet our performance, aesthetics; and strict environmental, energy, and budget specifications;
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partnering with research institutions, product development firms, and others with proven technology
expertise. We are currently working with scientists at NREL for the ongoing development of our SolarWindow™ Products and
on the AMM CRADA which focuses on high-speed roll-to-roll manufacturing processes development. We will seek to engage additional
firms and institutions with important technical and product development competencies as needed;
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identifying partnerships for technology out-licensing and in-licensing opportunities. We
are actively engaged in identifying potential industry or commercial partnerships for the out-licensing of our technologies, or,
if warranted, the in-licensing of certain enabling technologies that could help accelerate our product development programs by
reducing our need for internal research and development;
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fostering commercial partnerships and joint ventures with industry partners. We are continuously
working to develop commercial partnerships and joint ventures with third-parties, which could help us accelerate the development
of our sales and distribution pipeline for any products which we develop;
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developing pricing and power production models that capitalize on available energy subsidies in
order to make our products affordable and attractive to end-users. In developing pricing strategies for our future potential products,
we would seek to provide our customers with access, to the extent available, to various subsidies, government incentives, tax credits,
and other related financial mechanisms;
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developing cost-effective, efficient, and strategic facility planning for supply-chain management
and manufacturing processes. Our SolarWindow™ technology and Products would require manufacturing systems and supply-chain
management expertise. We have begun to strategize and work towards addressing these needs in a cost-effective and efficient manner.
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identifying and potentially acquiring strategic technologies and/or companies that complement our
SolarWindow™ technologies;
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raising capital in new, engaging, and innovative ways in order to continue execute on, and potentially
accelerate, our path to commercialization and building shareholder value;
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formalizing strategic relationships and partnerships with glass, energy, architectural and engineering,
building and construction industries that can assist us with commercial and market outreach;
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working with strategic partners to design and build SolarWindow™ products and processes that
can assist with commercial production; and
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identifying and developing additional applications and markets for our SolarWindow™ products.
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Competition for SolarWindow™ 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 SolarWindow™ 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 SolarWindow™ 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 sun light.
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 SolarWindow™ Products, currently under development.
We face competition from many companies, major
universities and research institutions in the United States and abroad. Many of our competitors 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.
The descriptions of the products and technologies
being developed or marketed by our competitors listed below have been taken from publicly available documents or reports filed
by these companies:
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Ubiquitous Energy is a company that began at the Massachusetts Institute of Technology and is initially
moving toward the electronics (tablet & E-reader, cell phone) market. Their first product seems to be a very clear, high visible
light transmission (“VLT”), low efficiency charging system for the electronics market;
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Solarmer is developing organic photovoltaic or OPV technology, targeting portable power, off-grid
power, and building integrated photovoltaics (BIPV) markets. Solarmer will utilize its materials, devices, and roll-to-roll process
technology to manufacture OPV modules with strategic partners throughout the world. Solarmer sells and provides OPV modules to
product developers and system integrators who will integrate them into various products;
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ONYX Solar is a new type of solar company, while they are not an OPV material company, the company
is considered a competitor in the space for generating power under low light conditions. Their current technology is mixture of
semitransparent amorphous Si, Crystalline Si and possibly Copper, Indium, Gallium, Selenide (CIS or CIGS) and is also working on
OPV. They are currently in production, and are generating revenue; and
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Sharp Corporation has developed mass-production technology for stacked triple-junction thin-film
solar cells by turning a conventional two-active-layer structure (amorphous silicon plus microcrystalline silicon) into a triple-junction
structure with amorphous silicon (two active layers) and microcrystalline silicon (single active layer). The triple junction cells
being based on microcrystalline are unlikely to be transparent.
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These companies may have numerous competitive advantages, 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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If our competitors were to succeed in developing
products that are more effective in producing electrical energy at a lower cost than our SolarWindow™ technology, some or
all of our SolarWindow™ Products or our technology could be rendered obsolete and non-competitive. 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 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, and to secure sufficient capital resources for the often substantial period between technology development and commercial
sales.
An important factor will be the timing of market
introduction of any SolarWindowTM products we develop. Accordingly, the speed with which we can develop our SolarWindow™
products, complete safety approvals processes and ultimately supply commercial quantities of any products we develop to the market
is expected to be an important competitive factor.
Proprietary Assets
SolarWindowTM Technology
Our SolarWindow™ technology is the subject
of over ninety (90) US and International patent and trademark filings.
Government Regulation
Our SolarWindow™ 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 SolarWindow™
technology derived products would be subject to existing and future safety & health regulations and standards.
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 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 SolarWindow™ technology evolves.
Employees
As of August 31, 2019, we had four full time
employees, including Mr. John A. Conklin, President and Chief Executive Officer, Patrick Sargent, Vice President of Product Development
and Engineering, Anthony Conklin, Manager, Strategic Programs & Operations and Briana Erickson, Manager of Business Operations
& Communication. Our Chief Financial Officer, Steve Yan-Klassen and our Secretary and Controller, Justin Frere, are contracted
on a part-time basis.
On November 1, 2019 the Company hired Dr, James
B. Whitaker as our Principal Research & Development Scientist. Dr. Whitaker will lead our team scientists at the U.S. Department
of Energy’s (DOE) National Renewable Energy Laboratory (NREL) through our Cooperative Research and Development Agreements
with NREL to develop new and improved, lower cost, and more efficient SolarWindow™ coatings and technologies; and optimize
processes required for our goal of integrating our process into industry. Dr. Whitaker has been a Post-Doctoral Fellow and Staff
Scientist at NREL since 2014; a Professor of Chemistry at Red Rocks Community College, a Graduate Research Assistant at Colorado
State University in the Chemistry Department from 2008—2013; an Alexander von Humboldt-Foundation Research Fellow at the
Free University in Berlin, and a Research Fellow at the International Center for Spectroelectrochemistry in the Leibniz Institute
for Solid State and Materials Research in Dresden, Germany in 2009. Dr. Whitaker has a B.A. in chemistry from Colorado College
and a Ph.D. in Inorganic Chemistry from Colorado State University. Dr. Whitaker has worked with the company on the development
of SolarWindow™ electricity-generating coating technology and process methods as a Staff Scientist at NREL since 2015..
Item 1A. Risk Factors
RISK FACTORS
The following risk factors and the forward-looking statements
elsewhere herein 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 Annual Report on Form 10-K, 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 Our Business
We have experienced significant losses,
have not generated any revenues and expect losses to continue for the foreseeable future.
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 $6,887,678 and
$6,854,547 for our fiscal years ended August 31, 2019 and 2018.
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 Form 10-K, we had 52,959,323
shares issued and outstanding, of which 31,333,372 are deemed “restricted” or “control” securities within
the meaning of Rule 144, as promulgated under the Securities Act (“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 stock sales could decrease our stock price and because
of the availability of resale shares to those interested in investing in our common stock.
We will require additional financing
in the future to 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 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. On November 26, 2018,
the Company completed a self-directed offering of equity securities resulting in proceeds of $19,800,000. Based on management’s
assessment, the Company had sufficient cash to meet its funding requirements through and beyond December 2020, to meet product
development and fabrication goals.
We have experienced and continue to experience
negative cash flows from operations. We expect that we will need to raise substantial additional capital to accomplish our business
plan in future years. We expect to seek additional funding through private equity or convertible debt. 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 SolarWindow™ technology and/or MotionPower™ 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.
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; however, we cannot
accurately predict the amount of funding or the time required to successfully commercialize the SolarWindow™ 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.
Due to the fact that all but one of our
seven 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 seven directors, only one
of whom is an employee. Mr. John A. Conklin, our President and Chief Executive Officer, does and will continue to provide his full-time
efforts to our business activities. While our six (6) other Directors intend to devote as much time as necessary to the success
and development of SolarWindow™ 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 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.
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 the SolarWindow™
technology will require significant further research, development and testing as we must ascertain whether the SolarWindow™
technology can form the basis for a commercially viable technology or product. If our research and development fails to prove the
commercial viability of the SolarWindow™ 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 we will remain engaged in technology
and product development through at least June 2020.
The development of the SolarWindow™
technology is subject to the risks of failure inherent to the development of any novel technology.
Ultimately, the development and commercialization
of the SolarWindow™ 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 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 SolarWindow™
Products;
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the SolarWindow™ technology (or any of its derivatives) may ultimately prove to be ineffective,
unsafe or otherwise fail to receive necessary regulatory approvals;
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the SolarWindow™ 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 SolarWindow™ 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 the SolarWindow™ 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 SolarWindow™ coatings (or any of its derivatives).
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If we ultimately do not obtain the necessary
regulatory approvals for the commercialization of the SolarWindow™ technology, we will not achieve profitable operations
and your investment may be lost.
In order to commercialize the SolarWindow™
technology, we may need to obtain regulatory approval from various local, state, federal or international agencies. At this time,
we do not have a product to be submitted for regulatory approval. The process for obtaining such regulatory 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
regulatory approvals could delay or prevent us from achieving revenue or profitability, which could result in the partial or total
loss of your investment.
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 SolarWindow™ 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 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 for
our SolarWindow™ 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.
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 the SolarWindow™
technology, or any of its derivatives, infringe on a third party's patent rights.
If we fail to obtain additional licenses
in the future required to maintain our rights to market products developed, if any, we may need to curtail or cease operations.
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.
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. 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 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 and environmental 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 could harm our business, financial condition and results of operations. We do not have any insurance coverage
with respect to damages or liabilities we may incur as a result of these activities.
In seeking to acquire or develop technologies,
we are operating in highly competitive markets 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 may have several competitive
advantages, including:
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significantly greater name recognition;
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established relations with customers;
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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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greater experience in conducting research and development, manufacturing, obtaining regulatory
approval for products, and marketing approved products;
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has, or has greater access to, significantly greater financial and human resources (HR) for product
development, sales and marketing, and
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has the ability to endure potentially prolonged 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 SolarWindow™
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. If we fail to attract and retain customers and establish
a successful distribution network for our solar products, we may be unable to achieve adequate sales and market share. There are
a number of major multi-national corporations that produce solar power and alternative energy products, which may be competitive
with those that we are seeking to develop, including Heliatek, Dyetec Solar, Dysol, Solarmer Energy, BP Solar, Kyocera, Sharp,
GE, Mitsubishi, Solar World AG and Sanyo, Ubiquitous Energy, Oxford Photovoltaics, ONYX Solar, among others. We also expect that
future competition will include new entrants to the solar power market offering new technological solutions. Further, many of our
competitors are developing and are currently producing products based on new solar power and alternative energy technologies that
may have a cost basis similar to, or lower than, our SolarWindow™ Product projected costs.
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 research 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 rendered obsolete
by the technological advances of others, and other technologies may prove more advantageous for the commercialization of products.
To the extent we are able to develop
and commercialize products based upon or derived from the SolarWindow™ technology, 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 acceptance of our products;
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our failure to produce products that compete favorably against other alternative or renewable energy
and solar-photovoltaic power products on the basis of cost, quality, 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 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 the SolarWindow™ 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 yet established.
The success of products for these markets is uncertain.
If our SolarWindow™ OPV solar power or
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
energy technologies;
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performance 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 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 sources;
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fluctuations in the prices of oil, coal and natural gas;
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capital expenditures by customers, which tend to decrease when domestic or foreign economies
slow;
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continued deregulation of the electric power industry and broader energy industry initiatives;
and
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availability of government subsidies and incentives.
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Our growth and success, and that of the
SolarWindow™ technologies and products, 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 acquisitions, joint ventures and mergers that may be difficult to execute.
Our business model and strategy are based on
growth through 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.
We are dependent upon hiring and retaining
highly qualified management and technical personnel.
Competition for highly qualified management
and technical 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 SolarWindow™ technologies and products. A key risk is our ability to anticipate our need for certain key competences
and to implement human resource solutions to recruit or improve these competences. If we are not successful in hiring and retaining
qualified management and technical personnel our ability to execute on our business model and strategy will be adversely affected
and our ability to achieve profitability compromised.
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.
Despite our development, testing, fabrication,
and quality procedures, SolarWindow™ products might not operate properly or might contain design faults or defects, which
could give rise to disputes in respect of its performance, 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 SolarWindow™ technology and
products will be subject to environmental, occupational safety & hygiene, Underwriter Laboratory (UL) Certification, European
Conformity (CE) Certification, electrical codes, and other state and federal, European Union (EU), and other Country regulations.
Our SolarWindow™ 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 business faces significant financial
risks related to interest rate, State & Federal subsidies, modified accelerated cost recovery system, taxes, depreciation,
etc.
Our Power, and Financial and Revenue Modeling
and Estimates (the “Model”) are exposed to risks associated with the effect of changing interest rates, State
& Federal subsidies, modified accelerated cost recovery system (MACRS), taxes, depreciation and renewable energy tax credits.
These risks affect borrowings; return on investment (ROI), internal rate of return (IRR) or economic rate of return (ERR), etc.
and the ability to borrow or raise capital to secure deployment funding. If any of these Financial and Revenue Modeling and Estimation
parameters fail to exist, cease to be available, or diminish in any way, our Financial and Revenue Modeling and Estimates may not
be accurate or reveal profitability, or favorable ROI and/or IRR necessary for SolarWindow™ technology or related product
deployment.
Our financial model may prove to be inaccurate
and our SolarWindow™ technology or related products may not be cost effective.
Although our independently verified Model has
shown that our SolarWindow™ technology can provide a one-year payback, it is based upon a number of assumptions that may
not prove accurate. If the Model is inaccurate our SolarWindow™ technology or related product may not provide potential customers
with sufficient return on investment (“ROI”) or individual rate of return (“IRR”) to be a
cost-effective alternative to other available competing products.
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 its financial results and stability, and deployment
of SolarWindow™ technologies or products.
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 the SolarWindow™ 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 the SolarWindow™ 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 SolarWindow™ processes and
technologies is a crucial strategic concern, with mounting pressure to meet anticipated power, financial, and return on investment
(ROI) for our manufacturers. If we are unable to integrate of process and/or technologies into industry, SolarWindow™ product
innovation can rapidly become obsolete. SolarWindow™ processes and supply chains are highly complex and continuously exposed
to a variety of risks such as macroeconomic, face geopolitical pressures, regulatory requirements, environmental risk and responsibilities,
and emerging markets. Integration of the company SolarWindow™ processes is critical to product development and revenue generation.
If the process cannot be integrated into industry and products brought to market in a timely manner, the Company, its potential
SolarWindow™ products, and ability to operate may be threatened. At this time, the integration of SolarWindow™ 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.
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.
Prior to February 26, 2018, our stock was included
for trading on the OTCQB; on February 23, 2018 we received an email notification from OTC Markets Group, Inc. (the “OTC
Markets”), which regulates the OTCQB, informing us that effective immediately, our stock would be quoted on the OTCPINK.
This action was taken by OTC Markets pursuant to Section 4.2 of the OTCQB Standards, which generally provide that the OTC Markets
may remove the Company’s securities from trading on the OTCQB market immediately and at any time, without notice, if OTC
Markets, in its sole and absolute discretion, believes that the continued inclusion of the Company’s securities would impair
the reputation or the integrity of OTC Markets or be detrimental to the interests of investors. Such concerns may include but are
not limited to promotion, spam or disruptive corporate actions even when adequate current information is available.
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 shareholders.
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In the event we do not submit an application
for listing on the OTCQB 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 a penny stock and is not traded on a national securities exchange, therefore you may find it difficult to sell the shares of
our common stock.
Our common stock is
subject to regulations of the SEC applicable to “penny stock.” Penny stock includes any non-NASDAQ equity security
that has a market price of less than $5.00 per share, subject to certain exceptions. Rules 15g-1 through 15g-9 under the Exchange
Act, imposes certain sales practice requirements on broker-dealers who sell our common stock to persons other than established
customers and “accredited investors” (as defined in Rule 501(c) of the Securities Act). For transactions covered by
this rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s
written consent to the transaction prior to the sale. This rule adversely affects the ability of broker-dealers to sell our common
stock and purchasers of our common stock to sell their shares of our common stock.
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.
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.
The trading price of our common stock
historically has been volatile and may not reflect its actual value.
The trading price of our common stock has,
from time to time, fluctuated widely and in the future may be subject to similar fluctuations. The trading price may be affected
by a number of factors including the risk factors set forth herein, as well as our operating results, financial condition, general
economic our control. 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.
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 Form 10-K we had 52,959,323
shares issued and outstanding, of which 31,333,372 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, a director of ours, beneficially owns approximately 75.77% 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 54,193,515
shares (inclusive of 18,561,918 shares issuable upon exercise of outstanding warrants, conversion of the Convertible Note and the
exercise of the warrants included upon conversion thereof), or approximately 75.77%, of our outstanding common stock, on a fully
diluted basis.
As a result, Mr. Rayat, having voting control
of 35,631,598 shares of our total issued and outstanding 52,959,323 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 directors in office, or support or reject other management and Board proposals that are
subject to stockholder approval, such as the adoption of employee stock plans and significant unregistered financing transactions.
The company is 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, 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 Sarbanes-Oxley, 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. For our year ended August 31, 2018, the Company was subject to Section 404(b) of the Sarbanes-Oxley
Act which requires that the management of public companies assess the effectiveness of the internal controls over financial reporting
and requires a publicly-held company’s auditor to attest to, and report on, management’s assessment of its internal
controls.
Under Section 404(b), our auditors are required
to render an opinion which significantly increases the audit effort throughout the current and subsequent fiscal reporting year.
Due to the end of our second quarter, February
28, 2019, non-affiliate valuation of the Company being less than $75,000,000, the Company is not subject to the attest requirements
of Section 404(b) of the Sarbanes-Oxley Act. However, should the second quarter non-affiliate valuation of the Company exceed $75,000,000
on February 28, 2020, the Company will again be subject to Section 404(b) of the Sarbanes-Oxley Act.
There are options to purchase shares
of our common stock currently outstanding.
As of the date of this Form 10-K 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
2,777,334 shares of our common stock. The exercise prices of these options range from $3.28 to $5.94 per share. 2,279,334 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 the date of this Form 10-K 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
of Directors (the “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 of directors 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 the Sarbanes-Oxley Act
of 2002, 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.