UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended February 29,November 30, 2020

 

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________ to ___________

 

Commission file number 333-127953

 

SOLARWINDOW TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

 

Nevada 

59-3509694

(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

   
300 Main Street,430 Park Avenue, Suite 6702  
Vestal,New York, NY 1385010022
(Address of principal executive offices) (Zip Code)

 

(800) 213-0689

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer

Non-accelerated filer 

Smaller reporting company

Emerging growth company

x

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in 12b-2 of the Exchange Act). Yes o No x

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001WNDWOTC Pink

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 52,959,32352,964,990 shares of common stock, par value $0.001, were outstanding on April 28, 2020.January 6, 2021.

SOLARWINDOW TECHNOLOGIES, INC.

FORM 10-Q

For the Quarterly Period Ended November 30, 2020

Table of Contents

PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets1
Consolidated Statements of Operations2
Consolidated Statements of Comprehensive Income3
Consolidated Statements of Stockholders’ Equity4
Consolidated Statements of Cash Flows5
Notes to Consolidated Financial Statements6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations15
Item 3. Quantitative and Qualitative Disclosures About Market Risk20
Item 4. Controls and Procedures20
PART II OTHER INFORMATION
Item 1A. Risk Factors21
Item 6. Exhibits21
Signatures22
Certifications

PART I — FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

SOLARWINDOW TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

  November 30, August 31,
  2020 2020
ASSETS (Unaudited)  
Current assets        
Cash and cash equivalents $8,549,510  $14,151,523 
Short-term investments  5,000,000   - 
Deferred research and development costs  463,614   574,731 
Prepaid expenses and other current assets  20,962   56,147 
Total current assets  14,034,086   14,782,401 
         
Operating lease right-of-use asset  -   42,212 
Property and equipment, net of accumulated depreciation of $88,498 and $93,323, respectively  1,360,503   1,349,495 
Security deposit  13,537   2,200 
Total assets  15,408,126   16,176,308 
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
         
Current liabilities        
Accounts payable and accrued expenses  64,256   53,428 
Related party payables  71,967   113,186 
Current maturities of operating lease  -   24,828 
Total current liabilities  136,223   191,442 
         
Non-current operating lease  -   17,737 
Total long term liabilities  -   17,737 
Total liabilities  136,223   209,179 
         
Commitments and contingencies        
         
Stockholders' equity        
Preferred stock: $0.10 par value; 1,000,000 shares authorized, no shares issued and outstanding  -   - 
Common stock: $0.001 par value; 300,000,000 shares authorized, 52,959,323 shares issued and outstanding at November 30, 2020 and August 31, 2020  52,959   52,959 
Additional paid-in capital  77,877,741   76,039,209 
Accumulated other comprehensive income (loss)  3,277   - 
Retained deficit  (62,662,074)  (60,125,039)
Total stockholders' equity  15,271,903   15,967,129 
Total liabilities and stockholders' equity $15,408,126  $16,176,308 

(The accompanying notes are an integral part of these consolidated financial statements)

1

SOLARWINDOW TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

  Three Months Ended November 30,
  2020 2019
     
Revenue $-  $- 
         
Operating expenses        
Selling, general and administrative  1,999,785   620,781 
Research and development  547,864   579,000 
Total operating expenses  2,547,649   1,199,781 
         
Loss from operations  (2,547,649)  (1,199,781)
         
Other income (expense)        
Interest income  19,389   94,503 
Loss on disposal of assets  (8,775)  - 
Total other income (expense)  10,614   94,503 
         
Net loss $(2,537,035) $(1,105,278)
         
Basic and Diluted Loss per Common Share $(0.05) $(0.02)
         
Weighted average number of common shares outstanding - basic and diluted  52,959,323   52,959,323 

(The accompanying notes are an integral part of these consolidated financial statements)

2

SOLARWINDOW TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

  Three Months Ended November 30,
  2020 2019
     
Net income (loss) $(2,537,035) $(1,105,278)
Other comprehensive income (loss):        
Foreign currency translation adjustments  3,277   - 
Comprehensive income (loss) $(2,533,758) $(1,105,278)

(a) Amounts include gains from the strengthening of the South Korean Won against the U.S. dollar.

(The accompanying notes are an integral part of these consolidated financial statements)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

SOLARWINDOW TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

          

Accumulated

Other

 Total '
  Common Stock Additional Retained Comprehensive Stockholders
FOR THE THREE MONTHS ENDED NOVEMBER 30, 2020 Shares Amount Paid-in Capital Deficit Income Equity
Balance, August 31, 2020  52,959,323   52,959   76,039,209   (60,125,039)  -   15,967,129 
Stock based compensation due to common stock purchase options  -   -   1,838,532   -   -   1,838,532 
Foreign currency translation adjustments  -   -   -   -   3,277   3,277 
Net loss for the three months ended November 30, 2020  -   -   -   (2,537,035)  -   (2,537,035)
   52,959,323  $52,959  $77,877,741  $(62,662,074) $3,277  $15,271,903 

          

Accumulated

Other

 Total '
  Common Stock Additional Retained Comprehensive Stockholders
FOR THE THREE MONTHS ENDED NOVEMBER 30, 2019 Shares Amount Paid-in Capital Deficit Income Equity
Balance, August 31, 2019  52,959,323  $52,959  $71,166,300  $(52,771,977) $-  $18,447,282 
Stock based compensation due to common stock purchase options  -   -   420,970   -   -   420,970 
Net loss for the three months ended November 30, 2019  -   -   -   (1,105,278)  -   (1,105,278)
Balance, November 30, 2019  52,959,323  $52,959  $71,587,270  $(53,877,255) $-  $17,762,974 

(The accompanying notes are an integral part of these consolidated financial statements)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

SOLARWINDOW TECHNOLOGIES, INC.

FORM 10-Q

For the Quarterly Period Ended February 29, 2020

Table of Contents

PART I FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Balance Sheets1
Statements of Operations2
Statements of Stockholders’ Equity3
Statements of Cash Flows4
Notes to Financial Statements5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations14
Item 4. Controls and Procedures22
PART II OTHER INFORMATION
Item 1A. Risk Factors23
Item 6. Exhibits23
Signatures24
Certifications

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

SOLARWINDOW TECHNOLOGIES, INC.

BALANCE SHEETSCONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

  February 29, August 31,
  2020 2019
ASSETS (Unaudited)  
Current assets        
Cash $15,140,054  $16,604,011 
Deferred research and development costs  665,209   580,879 
Prepaid expenses and other current assets  126,378   46,832 
Total current assets  15,931,641   17,231,722 
         
Operating lease right-of-use asset  54,098   65,646 
Equipment, net of accumulated depreciation of $81,760 and $68,858, respectively  1,361,058   1,368,929 
Security deposit  2,200   2,200 
Total assets  17,348,997  $18,668,497 
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
         
Current liabilities        
Accounts payable and accrued expenses  81,303  $97,549 
Related party payables  122,444   57,933 
Current maturities of operating lease  23,855   23,169 
Total current liabilities  227,602   178,651 
         
Non-current operating lease  30,463   42,564 
Total long term liabilities  30,463   42,564 
Total liabilities  258,065   221,215 
         
Commitments and contingencies        
         
Stockholders' equity        
Preferred stock: $0.10 par value; 1,000,000 shares authorized, no shares issued and outstanding  -   - 
Common stock: $0.001 par value; 300,000,000 shares authorized, 52,959,323 shares issued and outstanding at February 29, 2020 and August 31, 2019  52,959   52,959 
Additional paid-in capital  72,021,926   71,166,300 
Retained deficit  (54,983,953)  (52,771,977)
Total stockholders' equity  17,090,932   18,447,282 
Total liabilities and stockholders' equity $17,348,997  $18,668,497 
  Three Months Ended November 30,
  2020 2019
Cash flows from operating activities        
Net loss $(2,537,035) $(1,105,278)
Adjustments to reconcile net loss to net cash flows used in operating activities        
Depreciation  5,782   6,684 
Stock based compensation expense  1,838,532   420,970 
Loss on disposal of assets  8,775   - 
Changes in operating assets and liabilities:        
Deferred research and development costs  111,117   (77,706)
Prepaid expenses and other assets  35,185   20,047 
Accounts payable and accrued expenses  10,792   25,700 
Operating lease assets and liabilities  (353)  68 
Related party payable  (41,219)  61,047 
Security deposits  (10,890)  - 
Net cash flows used in operating activities  (579,314)  (648,468)
         
Cash flows used in investing activity        
Purchaseof short-term investments  (5,000,000)  - 
Capital expenditures  (27,726)  (5,031)
Proceeds from the sale of assets  2,161   - 
Net cash flows used in investing activity  (5,025,565)  (5,031)
         
Effect of exchange rate changes on cash and cash equivalents  2,866   - 
Net increase (decrease) in cash and cash equivalents  (5,602,013)  (653,499)
Cash and cash equivalents at beginning of period  14,151,523   16,604,011 
Cash and cash equivalents at end of period $8,549,510  $15,950,512 
         
Supplemental disclosure of cash flow information:        
Interest paid in cash $-  $- 
Income taxes paid in cash $-  $- 

 

(The accompanying notes are an integral part of these financial statements)


SOLARWINDOW TECHNOLOGIES, INC.

STATEMENTS OF OPERATIONS (UNAUDITED)

  Three Months Ended February 29, 2020 Three Months Ended February 28, 2019 Six Months Ended February 29, 2020 Six Months Ended February 28, 2019
         
Revenue $-  $-  $-  $- 
                 
Operating expenses                
Selling, general and administrative  565,142   436,219   1,185,923   943,067 
Research and product development  615,401   472,597   1,194,401   860,509 
Total operating expenses  1,180,543   908,816   2,380,324   1,803,576 
                 
Loss from operations  (1,180,543)  (908,816)  (2,380,324)  (1,803,576)
                 
Other income (expense)                
Interest income  73,845   81,980   168,348   81,980 
Interest expense  -   -   -   (128,239)
Accretion of debt discount  -   -   -   (663,918)
Total other income (expense)  73,845   81,980   168,348   (710,177)
                 
Net loss $(1,106,698) $(826,836) $(2,211,976) $(2,513,753)
                 
Basic and Diluted Loss per Common Share $(0.02) $(0.02) $(0.04) $(0.06)
                 
Weighted average number of common shares outstanding - basic and diluted  52,959,323   52,959,323   52,959,323   44,877,131 

(The accompanying notes are an integral part of these financial statements)


SOLARWINDOW TECHNOLOGIES, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

  Common Stock        
FOR THE SIX MONTHS ENDED FEBRUARY 29, 2020 Shares Amount Additional Paid-in Capital Common Stock Issuable Retained Deficit Total Stockholders' Equity
Balance, August 31, 2019  52,959,323  $52,959  $71,166,300  $-  $(52,771,977) $18,447,282 
                         
Stock based compensation due to common stock purchase options  -   -   420,970   -   -   420,970 
Net loss for the three months ended November 30, 2019  -   -   -   -   (1,105,278)  (1,105,278)
Balance, November 30, 2019  52,959,323   52,959   71,587,270   -   (53,877,255)  17,762,974 
                         
Stock based compensation due to common stock purchase options  -   -   434,656   -   -   434,656 
Net loss for the three months ended February 29, 2020  -   -   -   -   (1,106,698)  (1,106,698)
Balance, February 29, 2020  52,959,323  $52,959  $72,021,926  $-  $(54,983,953) $17,090,932 

  Common Stock        
FOR THE SIX MONTHS ENDED FEBRUARY 28, 2019 Shares Amount Additional Paid-in Capital Common Stock Issuable Retained Deficit Total Stockholders' Equity (Deficit)
Balance, August 31, 2018  36,292,656  $36,293  $42,223,599  $-  $(45,884,299) $(3,624,407)
                         
November 2018 Private Placement units issued for cash  13,200,000   13,200   19,786,800   -   -   19,800,000 
November 2018 Private Placement units issued in exchange for convertible debt  3,466,667   3,466   5,196,534           5,200,000 
Stock based compensation due to common stock purchase options  -   -   385,734   -   -   385,734 
   Net loss for three months ended November 30, 2018  -   -   -   -   (1,686,916)  (1,686,916)
Balance, November 30, 2018  52,959,323   52,959   67,592,667   -   (47,571,215)  20,074,411 
                         
Stock based compensation due to common stock purchase options  -   -   355,227   -   -   355,227 
   Net loss for the three months ended February 28, 2019  -   -   -   -   (826,836)  (826,836)
Balance, February 28, 2019  52,959,323  $52,959  $67,947,894  $-  $(48,398,052) $19,602,801 

(The accompanying notes are an integral part of these financial statements)


SOLARWINDOW TECHNOLOGIES, INC.

STATEMENTS OF CASH FLOWS (UNAUDITED)

  Six Months Ended February 29, 2020 Six Months Ended February 28, 2019
     
Cash flows from operating activities        
Net loss $(2,211,976) $(2,513,753)
Adjustments to reconcile net loss to net cash flows used in operating activities        
Depreciation  12,902   8,443 
Stock based compensation expense  855,626   740,961 
Accretion of debt discount  -   663,918 
Changes in operating assets and liabilities:        
Deferred research and development costs  (84,330)  (134,591)
Prepaid expenses and other assets  (79,546)  (139,195)
Accounts payable and accrued expenses  (16,246)  16,876 
Operating lease assets and liabilities  133   - 
Related party payable  64,511   - 
Interest payable  -   128,239 
Net cash flows used in operating activities  (1,458,926)  (1,229,102)
         
Cash flows used in investing activity        
Purchase of equipment  (5,031)  (565,850)
Net cash flows used in investing activity  (5,031)  (565,850)
         
Cash flows from financing activities        
Proceeds from the issuance of equity securities  -   19,800,000 
Net cash flows from financing activities  -   19,800,000 
         
Change in cash  (1,463,957)  18,005,048 
         
Cash at beginning of period  16,604,011   696,826 
         
Cash at end of period $15,140,054  $18,701,874 
         
Supplemental disclosure of cash flow information:        
Interest paid in cash $-  $- 
Income taxes paid in cash $-  $- 
         
Supplemental disclosure of non-cash transactions:        
Common stock issued for conversion of note payable $-  $5,200,000 

(The accompanying notes are an integral part of theseconsolidated financial statements)

 

4

5

 

SOLARWINDOW TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 1 – Basis of Presentation and Organization

 

Basis of Presentation

 

The accompanying unaudited interim consolidated financial statements of SolarWindow Technologies, Inc. (the “Company”) as of February 29,November 30, 2020, and for the three months ended February 29,November 30, 2020 and February 28, 2019, and the six months ended February 29, 2020 and February 28, 2019 have been prepared in accordance with accounting principles generally accepted in the United States (“U.S.”) of America, or U.S. GAAP, for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted.

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting periods. Actual results may differ from those estimates. The interim consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended August 31, 2019.2020. The accompanying unaudited interim consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments (including normal recurring adjustments) necessary for the fair presentation of the Company’s consolidated financial position as of February 29,November 30, 2020, results of operations, stockholders’ equity and cash flows for the three months ended February 29,November 30, 2020 and February 28, 2019 and six months ended February 29, 2020 and February 28, 2019. The Company did not record an income tax provision during the periods presented due to net taxable losses. The results of operations for any interim period are not necessarily indicative of the results of operations for the entire year.

 

Organization

 

SolarWindow Technologies, Inc. was incorporated in the State of Nevada on May 5, 1998. Products derived from the Company’s SolarWindow™ technology harvest light energy from the sun and from artificial light sources, by generating electricity from a transparent coating of organic photovoltaic (“OPV”) solar cells, applied to glass and plastics, thereby creating a “photovoltaic” effect. The Company’s ticker symbol is WNDW.

 

Photovoltaics are commonly known as “solar panels” providing a method to generate electricity using solar cells to convert energy from light into a flow of electrons. Conventional PV power is generated by solar modules composed of interconnected mono- or poly-crystalline cells containing PV and electricity-conducting materials. These materials are usually opaque (i.e., non-transparent) and only effectively generate electricity with sun light. The Company’s researchers have replaced these materials with a very thin layers of specially developed compounds that allows our SolarWindow™ technology to remain see-through or “transparent” while generating electricity when exposed to either sun or artificial light. SolarWindow™ coatings generate electricity when exposed to direct, diffused, filtered, low, or reflected natural or artificial light. The company has filed patent applications related to the application and fabrication of SolarWindow™ devices using these compounds.

Liquidity and Management’s Plan

 

The Company does not have any commercialized products, has not generated any revenue since inception and has sustained recurring losses and negative cash flows from operations since inception. Due to the “start-up” nature of our business, we expect to incur losses as we continue development of our products and technologies. As of February 29,November 30, 2020, the Company had $15,140,054$13,549,510 of cash and cash equivalents and short term investments on hand and working capital of $15,704,039.$13,897,863. The Company believes that it currently has sufficient cash to meet its funding requirements over the next twelve months following the issuance of this Quarterly Report on Form 10-Q. However, the Company has experienced and continues to experience negative cash flows from operations, as well as an ongoing requirement for substantial additional capital investment. The Company expects that it may need to raise additional capital to accomplish its business plan over the next several years.plan. If additional funding is required, the Company expects to seek to obtain that funding through private equityfinancial or convertible debt.strategic investors. There can be no assurance as to the availability or terms upon which such financing and capital might be available.

5

NOTE 2 – Summary of Significant Accounting Policies

 

Information regarding the Company’s significant accounting policies is contained in Note 2, “Summary of significant accounting policies,” to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended August 31, 2020. Presented below and in the following notes is supplemental information that should be read in conjunction with “Notes to Financial Statements” in the Annual Report.

6

Fiscal quarter

The Company’s quarterly periods end on November 30, February 28, May 31, and August 31. The Company’s first quarter in fiscal 2021 and 2020 ended on November 30, 2020 and 2019, respectively.

Principles of consolidation

On August 24, 2020, the Company formed wholly owned SolarWindow Asia (USA) Corp. as the holding company for SolarWindow Asia Co. Ltd., a company formed in the Republic of Korea for the purpose of expansion into the Asian markets. As of August 31, 2020, the Company had not capitalized the Korean subsidiaries and there were no transactions related to these entities during the year ended August 31, 2020. During our fiscal quarter ended November 30, 2020, the Company capitalized SolarWindow Asia Co. Ltd. with a transfer of $831,000.

These consolidated financial statements presented are those of SolarWindow Technologies, Inc. and its wholly owned subsidiaries, SolarWindow Asia (USA) Corp., and SolarWindow Asia Co. Ltd. All significant intercompany balances and transactions have been eliminated.

Use of Estimatesestimates

 

The preparation of the Company’sconsolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and use assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and expenses. Thesethe reported amounts of revenues and expenses during the accounting period. The Company considers its accounting policies relating to stock based compensation to be the most significant accounting policy that involves management estimates and assumptions are affected by management’s applicationjudgments. The Company has made accounting estimates based on the facts and circumstances available as of accounting policies. On an on-going basis, the Company evaluates its estimates.reporting date. Actual results and outcomes mayamounts could differ materially from these estimates, and assumptions.such differences could be material.

 

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and highly liquid investments with original maturities of three months or less from the date of purchase.

  November 30, 2020 August 31, 2020
Cash and cash equivalents  8,549,510   14,151,523 
Short-term investment  5,000,000   - 
Cash and cash equivalents  13,549,510   14,151,523 

Short-term investments

 

The Company considers cashdetermines the balance sheet classification of its investments at the time of purchase and evaluates the classification at each balance sheet date. Money market funds, certificates of deposit, and time deposits to be cash and all highly liquid investment instruments with original maturities of 90 days or less when purchased, to be cash equivalents. Cash depositsgreater than three months but no more than twelve months are carried at cost, which approximates their fair value.

The Company had $15,140,054 of cash deposits as of February 29, 2020, including $241,447 in domestic bank accountsvalue and $14,898,607 held in Canadian bank accounts in excess of Canadian Deposit Insurance Corporation insured limits.

Equipment

Fixed assets are carried at cost, less accumulated depreciation. Major improvements are capitalized, while repair and maintenance are expensed when incurred. Renewals and betterments that materially extend the life of the assets are capitalized. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in that period.

Depreciation is computed on a straight-line basis over estimated useful lives of the related assets. The estimated useful lives of depreciable assets are:

Estimated
Useful Lives (years)
Computer equipment and software3
Equipment, furniture and fixtures5

Patent and Trademark Costs

Costs related to filing and pursuing patent applications are recorded as general and administrative expense and expensed as incurred since recoverability of such expenditures is uncertain.

Fair Value Measurements

The Company measures fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The Company utilizes a three-tier hierarchy which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1. Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access. The Company has no assets or liabilities measured and recorded on a recurring or nonrecurring basis with Level 1 inputs.

Level 2. Valuations based on quoted prices for similar assets or liabilities, quoted prices for identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. The Company has no assets or liabilities measured and recorded on a recurring or nonrecurring basis with Level 2 inputs.

6

Level 3. Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company has no assets or liabilities measured and recorded on a recurring or nonrecurring basis with Level 3 inputs.

Fair Value of Financial Instruments

The carrying value of cash and accounts payable approximate their fair value because of the short-term nature of these instruments and their liquidity. It is not practical to determine the fair value of the Company’s notes payable due to the complex terms. Management is of the opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.

Research and Product Development

Research and product development costs represent costs incurred to develop the Company’s technology, including salaries and benefits for research and product development personnel, allocated overhead and facility occupancy costs, supplies, equipment purchase and repair and other costs. Research and product development costs are expensed when incurred, except for nonrefundable advance payments for future research and development activities which are capitalized and recognized as expense as the related services are performed.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with Accounting Standards Codification (“ASC”) 718, Stock Based Compensation.  ASC 718 requires all stock-based payments to directors, employees and consultants, including grants of stock options, to be recognized in the consolidated statementsbalance sheets in short-term investments. As of operations based on their fair values. The Company usesNovember 30, 2020, the Black-Scholes option pricing model (the “Black-Scholes Model”) to determine the weighted-average fair value of options granted and recognizes the compensation expense of stock-based awards on a straight-line basis over the vesting period of the award. If a stock-based award contains performance-based conditions, at the point that it becomes probable that the performance conditions will be met, the Company records a cumulative catch-up of the expense from the grant date to the current date, and then amortizes the remainder of the expense over the remaining service period. Management evaluates when the achievementshort-term investment consists of a performance-based condition is probable based on the expected satisfaction of the performance conditions as of the reporting date.

The determination of the fair value of stock-based payment awards utilizing the Black-Scholes option pricing model requires the use of the following assumptions: expected volatility of our common stock, which is based on our own calculated historical rate; expected life of the option award, which we elected to calculate using the simplified method; expected dividend yield, which is 0%, as we have not paid and do not have any plans to pay dividends on our common stock; and the risk-free interest rate, which is based on the U.S. Treasury rate in effectfixed-term deposit with a twelve month maturity at the time of grant with maturities equalpurchase on October 1, 2020.

Recent accounting pronouncements not yet adopted

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes. The guidance removes certain exceptions for recognizing deferred taxes for equity method investments, performing intra period allocation, and calculating income taxes in interim periods. The ASU also adds guidance to the stock option award’s expected life. The Company evaluates the assumptions usedreduce complexity in certain areas, including recognizing deferred taxes for goodwill and allocating taxes to value the awards at each grant datemembers of a consolidated group, among others. This guidance is effective for interim and if factors change and different assumptions are utilized, stock-based compensation expense may differ significantly from what has been recorded in the past. If there are any modifications or cancellationsannual reporting periods beginning after December 15, 2020. Early adoption of the underlying unvested securities, the Company maystandard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. The transition requirements are dependent upon each amendment within this update and will be requiredapplied either prospectively or retrospectively. The adoption of ASU 2019-12 is not expected to accelerate, increase or cancel any remaining unearned stock-based compensation expense. Forfeitures are accounted for as they occur. See “NOTE 4 – Common Stock and Warrants” and “NOTE 5 - Stock Options” for additional informationhave a material impact on the Company’s stock-based compensation plans.consolidated financial position, results of operations, or cash flows.

 

Income Taxes

The Company accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credits and loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carry-forwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized. The Company reports a liability for unrecognized tax benefits resulting from uncertain income tax positions, if any, taken or expected to be taken in an income tax return. Estimated interest and penalties are recorded as a component of interest expense or other expense, respectively.

7

7

 

Segment Reporting

The Company’s business is considered to be operating in one segment based upon the Company’s organizational structure, the way in which the operations are managed and evaluated, the availability of separate financial results and materiality considerations.

Net Loss Per Share

The computation of basic earnings per share (“EPS”) is based on the weighted average number of shares that were outstanding during the period, including shares of common stock that are issuable at the end of the reporting period. The computation of diluted EPS is based on the number of basic weighted-average shares outstanding plus the number of common shares that would be issued assuming the exercise of all potentially dilutive common shares outstanding using the treasury stock method. The computation of diluted net income per share does not assume conversion, exercise or contingent issuance of securities that would have an antidilutive effect on earnings per share. Therefore, when calculating EPS if the Company experienced a loss, there is no inclusion of dilutive securities as their inclusion in the EPS calculation is antidilutive. Furthermore, options and warrants will have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options or warrants (they are in the money).

Following is the computation of basic and diluted net loss per share for the three months ended February 29, 2020 and February 28, 2019 and the six months ended February 29, 2020 and February 28, 2019:

  Three Months Ended February 29, 2020 Three Months Ended February 28, 2019 Six Months Ended February 29, 2020 Six Months Ended February 28, 2019
         
Basic and Diluted EPS Computation                
Numerator:                
Loss available to common stockholders' $(1,106,698) $(826,836) $(2,211,976) $(2,513,753)
Denominator:                
Weighted average number of common shares outstanding  52,959,323   52,959,323   52,959,323   44,877,131 
Basic and diluted EPS $(0.02) $(0.02) $(0.04) $(0.06)
                 
The shares listed below were not included in the computation of diluted losses per share because to do so would have been antidilutive for the periods presented:                
Stock options  2,935,334   1,271,334   2,935,334   1,271,334 
Warrants  19,483,518   19,483,517   19,483,518   19,483,517 
Total shares not included in the computation of diluted losses per share  22,418,852   20,754,851   22,418,852   20,754,851 

Recent Accounting StandardsRecently adopted accounting pronouncements

 

The Company reviews new accounting standards as issued. Although some of these accounting standards issued or effective after the end of the Company’s previous fiscal year may be applicable, the Company has not identified any standards that the Company believes merit further discussion. The Company believes that none of the new standards will have a significant impact on the consolidated financial statements.

 

8

NOTE 3 -– Property and Equipment

  February 29, 2020 August 31, 2019
  (Unaudited)  
Computers, office equipment and software $23,709  $18,678 
Furniture and fixtures  12,634   12,634 
Product development and manufacturing equipment  113,820   113,820 
In-process equipment  1,292,655   1,292,655 
Total equipment  1,442,818   1,437,787 
Accumulated depreciation  (81,760)  (68,858)
Equipment, net $1,361,058  $1,368,929 

 

DuringProperty and equipment consists of the six months ended February 29, 2020, the Company purchased $5,031 of equipment. During the six months ended February 28, 2019, the Company purchased $565,850 of equipment. following:

  November 30, August 31,
  2020 2019
Computers, office equipment and software $14,800  $23,709 
Furniture and fixtures  27,726   12,634 
Product development and manufacturing equipment  113,820   113,820 
In-process equipment  1,292,655   1,292,655 
Total property and equipment  1,449,001   1,442,818 
Accumulated depreciation  (88,498)  (93,323)
Property and equipment, net $1,360,503  $1,349,495 

During the three months ended February 29,November 30, 2020 and February 28,2019, the company purchased $27,726 and $5,031 of property and equipment, respectively. During the three months ended November 30, 2020 and 2019, the Company recognized depreciation expense of $6,218$5,782 and $4,454,$6,684, respectively. During

As a result of the sixclosure of the Vestal New York office, during the three months ended February 29,November 30, 2020, and February 28, 2019, the Company recognized depreciation expensedisposed of $12,902office equipment, computers and $8,443, respectively

During the year ended August 31, 2019, the Company made payments totaling $1,292,655 towards the purchase of manufacturing equipmentfurniture with an estimated totalhistorical cost totaling $21,543 and net book value of $1,803,000. That equipment is currently being fabricated to our particular design specifications and will provide a significant increase in our ability to develop and showcase prototype products and components at or near “commercial size.” Contingent on entering into an agreement with a manufacturing partner for our cleanroom process equipment,10,936. The Company received $2,161 of proceeds from the remaining $510,345 is planned to be paid upon completionsale of the equipment fabrication and factory acceptance sometime before December, 2020.assets resulting in a loss of $8,775.

NOTE 4 – Common Stock and Warrants

 

Common Stock

 

At February 29,November 30, 2020, the Company had 300,000,000 authorized shares of common stock with a par value of $0.001 per share, 52,959,323 shares of common stock outstanding and 906,0856,001,169 shares reserved for issuance under the Company’s 2006 Long-Term Incentive Plan (the “2006 Plan”) as adopted and approved by the Company’s Board on October 10, 2006 that provides for the grant of stock options to employees, directors, officers and consultants (Seeconsultants. See “NOTE 5 - Stock Options”). for additional information.

 

Warrants

 

Each of the Company’s warrants outstanding entitles the holder to purchase one share of the Company’s common stock for each warrant share held. Other than the Series O Warrants and Series P Warrants, all of the following warrants may be exercised on a cashless basis. A summary of the Company’s warrants outstanding and exercisable as of February 29,November 30, 2020 and August 31, 2019 is as follows:

 

  Shares of Common Stock Issuable from Warrants Outstanding as of Weighted
Average
    
  February 29, August 31, Exercise    
Description 2020 2019 Price Date of Issuance Expiration
Series M  246,000   246,000  $2.34  December 7, 2015 December 31, 2022
Series N  767,000   767,000  $3.38  December 31, 2015 December 31, 2022
Series P  213,500   213,500  $3.70  March 25, 2016 December 31, 2022
Series R  468,750   468,750  $4.00  June 20, 2016 December 31, 2022
Series S-A  300,000   300,000  $2.53  July 24, 2017 December 31, 2022
Series S  821,600   821,600  $3.42  September 29, 2017 September 29, 2022
Series T  16,666,667   16,666,667  $1.70  November 26, 2018 November 26, 2025
Total  19,483,517   19,483,517         

9

8

 

  Shares of Common Stock Issuable from Warrants Outstanding as of 

Weighted

Average

    
  November 30, August 31, Exercise Date of  
Description 2020 2019 Price Issuance Expiration
Series M  246,000   246,000  $2.34  December 7, 2015 December 31, 2022
Series N  767,000   767,000  $3.38  December 31, 2015 December 31, 2022
Series P  213,500   213,500  $3.70  March 25, 2016 December 31, 2022
Series R  468,750   468,750  $4.00  June 20, 2016 December 31, 2022
Series S-A  300,000   300,000  $2.53  July 24, 2017 December 31, 2022
Series S  821,600   821,600  $3.42  September 29, 2017 September 29, 2022
Series T  16,666,667   16,666,667  $1.70  November 26, 2018 November 26, 2025
Total  19,483,517   19,483,517         

NOTE 5 - Stock Options

 

Stockholders previously approved 15,000,000 shares for grant under the 2006 Plan. The 2006 Plan was adopted in order to attract and retain the best available personnel for positions of substantial authority and to provide additional incentive to employees and directors to promote the success of the Company’s business. The 2006 Plan provides for the grant of incentive stock options, non-qualified stock options, restricted stock, restricted stock units, stock appreciation rights, and other types of awards to employees, consultants, and directors. Stock option grants pursuant to the 2006 Plan vest either immediately or over onezero to five years and expire from six to ten years after the date of grant. Stockholders previously approved 5,000,000 shares for grant underwith the 2006 Plan, of which 906,085 remain available for grant, 1,305,001 have been exercised in total with 629,677 net shares (dueexercise price equal to a cashless exercise feature) issued pursuant to such exercises of vested options from inceptionthe fair value of the 2006 Plan through February 29, 2020.underlying stock on the date of grant. All shares approved for grant and subsequently forfeited are available for future grant. The Company does not repurchase shares to fulfill the requirements of options that are exercised and therefore issues new shares when options are exercised. The 2006 Plan was approved by stockholders on February 7, 2011 and expires according to its terms on February 7, 2021.

 

The Company employsmeasures share-based compensation cost on the following key weighted-average assumptions in determininggrant date, based on the fair value of the award, and recognizes the expense on a straight-line basis over the requisite service period for awards expected to vest. The Company estimated the grant date fair value of stock options using a Black-Scholes valuation model using the Black-Scholes Model and the simplified method to estimate the expected term of “plain vanilla” options:following weighted-average assumptions:

 

 Three Months Ended November 30,
      Six Months Ended February 29, 2020    2020 2019
Expected dividend yield           
Expected stock price volatility  82.9486.23%   89.44%  82.9486.23%
Risk-free interest rate  1.401.69%   0.19%  1.401.69%
Expected term (in years)  4.55.75 
Expected term (in years)(simplified method)  4.00  4.55.75
Exercise price  $2.32and$3.54   $3.42  $2.32and$3.54
Weighted-average grant date fair-value per share  $1.61and$1.55 
Weighted-average grant date fair-value  $2.16  $1.61and$1.55

 

9

A summary of the Company’s stock option activity for the sixthree months ended February 29,November 30, 2020 and related information follows:

 

 Number of Shares Subject to Option Grants Weighted Average Exercise Price ($) Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value ($) Number of Shares Subject to Option Grants Weighted Average Exercise Price ($) Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value ($)
Outstanding at August 31, 2018  1,291,334   5.22         
Outstanding at August 31, 2019  2,777,334   4.31         
Grants  1,506,000   3.54           5,158,000   4.06         
Forfeitures and cancellations  (20,000)  4.87           (130,600)  3.54         
Outstanding at August 31, 2019  2,777,334   4.31         
Outstanding at August 31, 2020  7,804,734   4.16         
Grants  158,000   2.36           50,000   3.42         
Outstanding at February 29, 2020  2,935,334   4.21   7.91   - 
Exercisable at February 29, 2020  1,909,534   4.22   8.38   - 
Forfeitures and cancellations  (37,500)  3.54         
Outstanding at November 30, 2020  7,817,234   4.16   5.29   27,557,385 
Exercisable at November 30, 2020  3,956,434   3.66   6.30   15,789,872 

 

The aggregate intrinsic value in the table above represents the total pretax intrinsic value for all “in-the-money” options (i.e. the difference between the Company’s closing stock price on the last trading day of the period covered by this report and the exercise price, multiplied by the number of shares) that would have been received by the option holders had all in-the-money option holders exercised their vested options on February 29,November 30, 2020. The intrinsic value of the option changes based upon the fair market value of the Company’s common stock. Since the closing stock price was $2.15$7.65 on February 29,November 30, 2020 and no6,386,567 outstanding options have an exercise price below $2.15$7.65 per share, as of February 29,November 30, 2020, there is no$25,886,685 and $14,070,872 of intrinsic value to the totality of the Company’s outstanding stock options.options and vested options, respectively.

 

Three Months Ended November 30, 2020

10

 

On October 19, the Company’s Board granted 50,000 options to Joseph Sierchio, Director, with an exercise price of $3.42, exercisable on a cashless basis any time prior to the Company’s listing of any of its securities for trading on a national stock exchange, six year term and vesting at the rate of 12,500 on the date of grant and 12,500 each anniversary thereafter.

Three and Six Months Ended February 29, 2020November 30, 2019

On October 9, 2019, the Company granted 153,000 options to an employee with ana ten-year term, exercise price of $2.32 per share and vesting at the rate of 1/36th36th per month and ten-year term.month. Additionally, on September 16, 2019, the Board granted 5,000 options with a six-year term to a consultant with an exercise price of $3.54 per share and vesting at the rate of 1/20th20th per quarter and six-year term.quarter.

 

Three and Six Months Ended February 28, 2019

Due to his resignation from the Board of Directors on October 22, 2018, Joseph Sierchio, the Company’s current counsel, forfeited 20,000 unvested stock options with an exercise price of $4.87 which resulted in the Company reversing previously recorded stock compensation expense related to the vesting of said options in the amount of $58,367. During the three and six months ended February 28, 2019, the Company did not grant any stock options.

The following table sets forth the share-based compensation cost resulting from stock option grants, including those previously granted and vesting over time, that were recorded in the Company’s Statements of Operations for the three months ended February 29,November 30, 2020 and February 28, 2019 and the six months ended February 29, 2020 and February 28, 2019:

 

 Three Months Ended November 30,
 Three Months Ended February 29, 2020 Three Months Ended February 28, 2019 Six Months Ended February 29, 2020 Six Months Ended February 28, 2019 2020 2019
Stock Compensation Expense:                        
SG&A $172,219  $118,409  $344,439  $253,852  $1,533,824  $172,219 
R&D  262,436   236,817   511,187   487,109   304,708   248,751 
Total $434,655  $355,226  $855,626  $740,961  $1,838,532  $420,970 

 

As of February 29,November 30, 2020, the Company had $3,825,677$5,297,826 of unrecognized compensation cost related to unvested stock options which is expected to be recognized over a period of 4.503.75 years.

 

10

The following table summarizes information about stock options outstanding and exercisable at February 29,November 30, 2020:

 

  Stock Options Outstanding Stock Options Exercisable
Range of
Exercise
Prices
 Number of Shares
Subject to
Outstanding Options
 Weighted
Average
Contractual
Life (Years)
 Weighted
Average
Exercise
Price ($)
 Number
of Shares Subject
to Options
Exercise
 Weighted Average
Remaining
Contractual
Life (Years)
 Weighted
Average
Exercise
Price ($)
             
 2.32   153,000   9.62   2.32   17,000   9.62   2.32 
 3.28   7,500   6.71   3.28   7,500   6.71   3.28 
 3.46   35,000   5.85   3.46   35,000   5.85   3.46 
 3.54   1,511,000   8.03   3.54   1,083,200   9.08   3.54 
 4.87   187,500   7.73   4.87   187,500   7.73   4.87 
 5.35   1,008,000   7.84   5.35   546,000   7.84   5.35 
 5.94   33,334   0.82   5.94   33,334   0.82   5.94 
 Total   2,935,334   7.91   4.21   1,909,534   8.38   4.22 
  Stock Options Outstanding Stock Options Exercisable
Range of
Exercise
Prices
 Number of Shares
Subject to
Outstanding Options
 Weighted
Average
Contractual
Life (years)
 Weighted
Average
Exercise
Price ($)
 Number
of Shares Subject
To Options
Exercise
 Weighted Average
Remaining
Contractual
Life (Years)
 Weighted
Average
Exercise
Price ($)
 2.32   153,000   8.86   2.32   55,250   8.86   2.32 
 2.60   2,500,000   5.59   2.60   1,250,000   5.59   2.60 
 3.28   7,500   5.96   3.28   7,500   5.96   3.28 
 3.42   50,000   5.89   3.42   12,500   5.89   3.42 
 3.46   35,000   5.10   3.46   35,000   5.10   3.46 
 3.54   1,342,900   7.61   3.54   1,140,350   8.14   3.54 
 3.66   1,000,000   2.75   3.66   500,000   2.75   3.66 
 4.87   187,500   6.98   4.87   187,500   6.98   4.87 
 5.35   1,008,000   7.09   5.35   735,000   7.09   5.35 
 5.94   33,334   0.06   5.94   33,334   0.06   5.94 
 6.00   800,000   2.75   6.00   -   2.75   6.00 
 8.00   700,000   2.75   8.00   -   2.75   8.00 
 Total   7,817,234   5.29   4.16   3,956,434   6.30   3.66 

 

NOTE 6 – Lease

On May 1, 2019, the Company leased office space in Vestal, New York and entered into a Professional Building Lease Agreement (the “Lease”). The Lease has an initial term of three years through May 1, 2022 with monthly rent due of $2,200 for the first two years and $2,266 during year three. On November 30, 2020, the Company terminated the Lease and entered into a lease termination agreement (the “Termination Agreement”). Pursuant to the terms of the Termination Agreement, the Company made a payment of $26,400 and delivered the premises in good order including the removal of furniture and fixtures which the Company disposed, See “NOTE 3 – Property and Equipment” for additional information related to the disposal of the furniture and fixtures. All related assets and liabilities were written off with $418 of unrecognized interest expense charged to rent expense.

As of November 30, 2020, the Company has not entered into any leases which have not yet commenced which would entitle the Company to significant rights or create additional obligations.

The components of Lease expenses are as follows:

  Three Months Ended November 30, 2020
  2020 (a) 2019
Operating lease cost $32,648  $6,666 
Short-term lease costs  -   - 
Total net lease costs $32,648  $6,666 

(a) Represents 3 months of rent expense at $2,222 per month, $26,400 lease termination fee and ($418) of unrecognized interest expense.

11

Supplemental balance sheet information related to the Lease is as follows:

  November 30, August 31,
  2020 2019
Operating lease right-of-use asset $-  $42,212 
         
Current maturities of operating lease $-  $24,828 
Non-current operating lease  -   17,736 
Total operating lease liabilities $-  $42,564 
         
Weighted Average remaining lease term (in years):  -   1.67 
Discount rate:  -   5.85%

In September 2020, the Company, through its wholly owned subsidiaries, SolarWindow Asia (USA) Corp. and SolarWindow Asia Co., Ltd., entered a lease for office space in South Korea. The lease has a term of one year from September 23, 2020 through September 23, 2021 with monthly payments of approximately $1,200.

NOTE 7 - Transactions with Related Party TransactionsPersons

 

A related party with respect to the Company is generally defined as any person (i) (and, if a natural person, inclusive of his or her immediate family) that holds 10% or more of the Company’s securities, (ii) that is part of the Company’s management, (iii) that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

 

11

On August 7, 2017, the Company appointed Jatinder Bhogal to the Board of Directors. Mr. Bhogal has provided consulting services to the Company through his wholly owned company, Vector Asset Management, Inc., pursuant to a Consulting Agreement dated February 1, 2014, as amended on November 11, 2016 and December 1, 2018 (Amendment No. 2). On July 1, 2020 the Company and VAMI entered into an Executive Consulting Agreement, which supersedes the foregoing agreements and pursuant to which Mr. Bhogal, in addition to continuing to serve as a director of the Company will also serve as the Company’s President and Chief Executive Officer. Pursuant to the Consulting Agreements in effect prior to December 1, 2018, Mr. Bhogal received compensation of $5,000 per month. Beginning with Amendment No. 2, Mr. Bhogal receivesreceived compensation of $18,750 per month and pursuant to the ECA, Mr. Bhogal receives $34,167 per month. Mr. Bhogal also incurs expenses on behalf of the Company which are reimbursed according to the Company’s expense report policy. The Company recognized cash compensation expense in connection with the Consulting AgreementAgreements and ECA of $56,250$102,500 and $56,250 during the three months ended February 29,November 30, 2020 and February 28, 2019, respectively. As of November 30, 2020, the Company recognized a related party payable to Mr. Bhogal of $34,167.

During the three months ended November 30, 2020 and 2019, the Company received advances of $0 and $73,005, respectively, from Talia Jevan Properties, Inc., a British Columbia corporation wholly-owned by our former Chairman and $112,500majority shareholder, Harmel S. Rayat. The Company repaid Talia Jevan Properties $53,251 and $71,250$0 during the sixthree months ended February 29,November 30, 2020 and February 28,2019. As of November 30, 2020, there were no balances owing to Talia Jevan Properties, Inc.

Joseph Sierchio, one of the Company’s directors, has maintained his role as the Company’s General Counsel since its inception as Principal of the law firm of Sierchio & Partners, LLP, and then as a Partner with Satterlee Stephens LLP and beginning in August 2020, as Principal of Sierchio Law, LLP pursuant to an engagement letter which provides for an annual fee of $175,000 in exchange for general counsel services. Mr. Sierchio resigned from the Board effective October 22, 2018, and was reappointed on October 1, 2020. During the three months ended November 30, 2020 and 2019, respectively.the Company recognized $43,750 and $43,750 of fees for legal services billed by Sierchio Law, LLP.

 

All related party transactions are recorded at the exchange amount established and agreed to between related parties and are in the normal course of business.

 

12

NOTE 78LeaseCommitments and Contingencies

 

On May 1,In September 2020, the Company, through its wholly owned subsidiaries, SolarWindow Asia (USA) Corp. and SolarWindow Asia Co., Ltd., entered a lease for office space in South Korea. The lease has a term of one year from September 23, 2020 through September 23, 2021 with monthly payments of approximately $1,200.

During 2019 the Company leased office space in Vestal, New Yorkmade payments totaling $1,292,655 towards the purchase of manufacturing equipment with an estimated total cost of $1,803,000. The remaining $510,345 will be paid upon the completion of the equipment once the final specifications have been determined pending optimization of the Company’s product iteration specific to this equipment. For additional information, see “Note 3 – Property and entered into a Professional Building Lease Agreement (the “Lease”). The Lease has an initial term of three years through May 1, 2022 with monthly rent due of $2,200 for the first two years and $2,266 during year three. The Company has the sole option to renew the lease for an additional two years through May 1, 2024. The amounts disclosedEquipment” located in the Balance Sheets pertainingfootnotes to our financial statements.

COVID-19

In December 2019, an outbreak of the COVID-19 virus was reported in Wuhan, China. On March 11, 2020, the World Health Organization declared the COVID-19 virus a global pandemic and on March 13, 2020, President Donald J. Trump declared the virus a national emergency in the United States. This highly contagious disease has spread to most of the countries in the world and throughout the United States, creating a serious impact on customers, workforces and suppliers, disrupting economies and financial markets, and potentially leading to a world-wide economic downturn. It has caused a disruption of the normal operations of many businesses, including the temporary closure or scale-back of business operations and/or the imposition of either quarantine or remote work or meeting requirements for employees, either by government order or on a voluntary basis. The pandemic may adversely affect our operations, our employees and our employee productivity. It may also impact the ability of our subcontractors, partners, and suppliers to operate and fulfill their contractual obligations, and result in an increase in costs, delays or disruptions in performance. Our employees are working remotely and using various technologies to perform their functions. In reaction to the right-of-use assetspread of COVID-19 in the United States, many businesses have instituted social distancing policies, including the closure of offices and lease liabilityworksites and deferring planned business activity. The disruption and volatility in the global and domestic capital markets may increase the cost of capital and limit our ability to access capital. Both the health and economic aspects of the COVID-19 virus are measured basedhighly fluid and the future course of each is uncertain. For these reasons and other reasons that may come to light if the coronavirus pandemic and associated protective or preventative measures expand, we may experience a material adverse effect on only the initial, three-year term.our business operations, revenues and financial condition; however, its ultimate impact is highly uncertain and subject to change.

NOTE 9 - Net Income (Loss) Per Share

 

The Company’s existing Leasecomputation of basic earnings per share (“EPS”) is based on the weighted average number of shares that were outstanding during the period, including shares of common stock that are issuable at the end of the reporting period. The computation of diluted EPS is based on the number of basic weighted-average shares outstanding plus the number of common shares that would be issued assuming the exercise of all potentially dilutive common shares outstanding using the treasury stock method. The computation of diluted net income per share does not subject to any restrictionsassume conversion, exercise or covenants which preclude its ability to pay dividends, obtain financing, or enter into additional Lease’s.

Ascontingent issuance of February 29, 2020,securities that would have an antidilutive effect on earnings per share. Therefore, when calculating EPS if the Company has not entered into any leases whichexperienced a loss, there is no inclusion of dilutive securities as their inclusion in the EPS calculation is antidilutive. Furthermore, options and warrants will have not yet commenced which would entitlea dilutive effect under the Company to significant rightstreasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options or create additional obligations.

The Company used its estimated incremental borrowing rate aswarrants (they are in the basis to calculate the present value of future lease payments at lease commencement. The incremental borrowing rate represents the rate the Company would have to pay to borrow funds on a collateralized basis over a similar term and in a similar economic environment.money).

The components of Lease expenses are as follows:

  Three Months Ended February 29, 2020 Six Months Ended February 29, 2020
Operating lease cost $6,666  $13,332 
Short-term lease costs  -   - 
Total net lease costs $6,666  $13,332 

Supplemental balance sheet information related to the Lease is as follows:

  As of February 29, 2020 As of August 31, 2019
     
Operating lease right-of-use asset $54,098  $65,646 
         
Current maturities of operating lease $23,855  $23,169 
Non-current operating lease  30,463   42,564 
Total operating lease liabilities $54,318  $65,733 
         
Weighted Average remaining lease term (in years):  2.17   2.9 
Discount rate:  5.85%  5.85%

 

12

13

 

The Company’s future lease payments, which are presented as current maturitiesFollowing is the computation of operating leasesbasic and non-current operating leases liabilities ondiluted net loss per share for the Company’s balance sheets as of February 29,three months ended November 30, 2020 are as follows:and 2019:

 

  Amount
2020 $13,200 
2021  26,664 
2022  18,128 
Total lease payments  57,992 
Less: Imputed interest  (3,674)
Total lease obligation  54,318 
Less: current lease obligations  23,855 
Long term lease obligations $30,463 
  Three Months Ended November 30,
  2020 2019
Basic and Diluted EPS Computation        
Numerator:        
Loss available to common stockholders' $(2,537,035) $(1,105,278)
Denominator:        
Weighted average number of common shares outstanding  52,959,323   52,959,323 
Basic and diluted EPS $(0.05) $(0.02)
         
The shares listed below were not included in the computation of diluted losses per share because to do so would have been antidilutive for the periods presented:        
Stock options  7,817,234   2,935,334 
Warrants  19,483,517   19,483,517 
Total shares not included in the computation of diluted losses per share  27,300,751   22,418,851 

 

NOTE 810 – Subsequent Events

 

Management has reviewed material events subsequent toof the period ended February 29,November 30, 2020 and through the date of filing of financial statements in accordance with FASB ASC 855 Subsequent Events“Subsequent Events”. In managements opinion, no material subsequent events have occurred as of the date of this quarterly report.

 

On April 14,December 18, 2020, one of our Directors exercised 16,667 stock options on a cashless basis resulting in the issuance of 5,667 shares of restricted common stock.

On December 18, 2020, Mr. John Conklin and the Company filed Form 8-K disclosing its reliance on the Securities and Exchange Commission’s Release No. 34-88318 under Section 36 of the Securities Exchange Act of 1934 Granting Exemptions From Specified Provisions of the Exchange Act and Certain Rules Thereunder dated March 4, 2020 to delay the filing of its Quaterly Financial Report on Form 10-Q for the period ended February 29, 2020 as a result of COVID-19 and its impact on the Company’s ability to timely file Form 10-Q.

The recent outbreak of the novel coronavirus COVID-19, which was declared a pandemic by the World Health Organization on March 11, 2020, has led to adverse impacts on the U.S. and global economies and created uncertainty regarding potential impactsentered into an Amendment to the Company’s employeesSeparation, Consulting and R&D activities. The COVID-19 pandemic has impacted and could further impact the Company’s operations and the operationsRelease of the Company’s vendors as a result of quarantines, facility closures, and travel and logistics restrictions. The extent to which the COVID-19 pandemic impacts the Company’s business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limitedClaims Agreement dated November 24, 2020. Pursuant to the duration, spread, severity,Amendment, no further payments are due to Mr. Conklin and impact of the COVID-19 pandemic, the effects of the COVID-19 pandemic on the Company’s customers, suppliers, and vendors and the remedial actions and stimulus measures adopted by local, state and federal governments, and to what extent normal economic and operating conditions can resume. Even after the COVID-19 pandemic has subsided, the Company may continue to experience adverse impacts to its business as a result of any economic recession or depression that has occurred or may occur in the future. Therefore, the Company cannot reasonably estimate the impact at this time.all stock options granted under his employment agreement totaling 1,008,000 are cancelled.

 

13

14

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

This Report on Form 10-Q contains forward-looking statements which involve assumptions and describe our future plans, strategies, and expectations, and are generally identifiable by use of words such as “may,” “will,“ “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project,” or the negative of these words or other variations on these words or comparable terminology. These statements are expressed in good faith and based upon a reasonable basis when made, but there can be no assurance that these expectations will be achieved or accomplished.

 

Such forward-looking statements include statements regarding, among other things, (a) the potential markets for our technologies, our potential profitability, and cash flows, (b) our growth strategies, (c) expectations from our ongoing research and development activities, (d) anticipated trends in the technology industry, (e) our future financing plans, and (f) our anticipated needs for working capital. This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied by any forward-looking statements. These statements may be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as in this Form 10-Q generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the matters described in this Form 10-Q generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. In addition to the information expressly required to be included in this filing, we will provide such further material information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading.

Although forward-looking statements in this report reflect the good faith judgment of our management, forward-looking statements are inherently subject to known and unknown risks, business, economic and other risks and uncertainties that may cause actual results to be materially different from those discussed in these forward-looking statements. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, other than as may be required by applicable law or regulation. Readers are urged to carefully review and consider the various disclosures made by us in our filings with the Securities and Exchange Commission which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect our actual results may vary materially from those expected or projected.

 

Except where the context otherwise requires and for purposes of this Form 10-Q only, “we” “us“ “our“ “Company“the terms “we,” “us,” “our, Company“” “Company” “our Company,” and “SolarWindow” refer to SolarWindow Technologies, Inc., a Nevada corporation.

 

Overview

 

We areSolarWindow Technologies, Inc. is a pre-revenue company developing proprietary SolarWindow™developer of transparent electricity generating coatings. SolarWindow™electricity-generating coatings are an OPV device comprised of(“LiquidElectricity™ Coatings”). When applied in ultra-thin layers that can be applied to rigid glass, and flexible glass and plastic surfaces.surfaces our LiquidElectricity™ Coatings transform otherwise ordinary surfaces into photovoltaic devices capable of generating electricity from natural sun, artificial light, and low, shaded, or reflected light conditions while maintaining transparency.

 

Our SolarWindow™ transparent electricity-generating coatingsWe have overcome major technical challenges and technology is capable of harvesting light energy from the sun and artificial sources and could potentially be used on anyachieved many important milestones resulting in an expansion of the more than 85 millionpotential applications of LiquidElectricity™ Coatings. Potential applications of LiquidElectricity™ Coatings span multiple industries, including architectural, automotive, agrivoltaic, aerospace, commercial transportation and residential buildings inmarine. Our LiquidElectricity™ Coatings and SolarWindow™ products are under development with support from commercial contract firms and at the U.S. alone.

Our SolarWindow™ technology is the subjectDepartment of over sixty (60) U. S. and international patent, and thirty (30) trademark application filings for our electricity-generating coating, applications using SolarWindow™ electricity-generating coatings, and SolarWindow™ technology and product development efforts.

14

The development of our SolarWindow™ technology continues to advance under the Stevenson-WydlerEnergy’s National Renewable Energy Laboratory, through Cooperative Research and Development Agreement (the “CRADA”) with the Alliance for Sustainable Energy, LLC (the “Alliance for Sustainable Energy”), which is the operator of The National Renewable Energy Laboratory (“NREL”). SolarWindow™ technology and product development continues under the initial NREL CRADA.

In addition, the Company was awarded an Advanced Materials Manufacturing Cooperative Research and Development Agreement (“AMM CRADA”) from the U.S. Department of Energy (“DOE”) Office of Energy Efficiency and Renewable Energy’s (“EERE”) Advanced Manufacturing Office (“AMO”). The purpose of AMM CRADA is to develop and demonstrate a unique high-throughput process methodology for semitransparent OPV modules compatible with high process speeds for many different advanced material manufacturing systems.

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 and the application of our coatings on to glass at room temperature and pressure.

A brief list of some of our more important milestones includes:

·SolarWindow™ coatings were successfully processed through a rigorous laminated commercial window glass fabrication autoclave system. Layered with SolarWindow™ electricity-generating liquid coatings, glass modules were subjected to the extremely high heat and pressure of autoclave equipment located at a commercial glass 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 is an important milestone for the commercialization of SolarWindow products, showing that our PV layers are compatible with autoclave production equipment.

·SolarWindow designed, developed, and demonstrated a diffractive optics-based laser multiplexing process to perform precision scribing across a substrate using a single laser system. This work is being accomplished through the AMM CRADA in collaboration with the EERE AMO, and the Advanced Materials Manufacturing Consortium.

·The Company has 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 NREL’s Device Performance Measurement Laboratory;

·Successfully 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;

·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;

·Entered into the NREL CRADA which is still in effect and continues to support our on-going R&D and product development to improve our device, materials, and processes;

·Expanded the use of our SolarWindow™ coatings to include two new product lines for commercial and military aircraft, and the safety and security of military pilots;

·Developed new SolarWindow™ coatings with increased transparency and improved color;

·Produced the largest OPV device ever fabricated at NREL in the institute’s history;

·Successfully collected and transported electricity using a virtually ‘invisible’ conductive wiring system developed for SolarWindow™;

We are currently developing “SolarWindow™ Products” derived from our SolarWindow™ technology designed to address several potential markets, including:

·SolarWindow™ – Commercial – A flat glass product for installation in new commercial towers under construction and replacement windows;

·SolarWindow™ – Structural Glass – Structural glass walls and curtains for tall structures;

·SolarWindow™– Architectural Glass – Textured and decorative interior glass walls, room dividers, etc.;

·SolarWindow™ – Residential – A window glass for installation in new residential homes under construction and replacement windows;

·SolarWindow™ – Flex – Flexible films which may be applied directly to different surfaces;

·SolarWindow™ - PowerWrap™ - A proprietary product under development that plans to feature multiple colors and high-power production; and

·SolarWindow™ Retrofit Veneer - Transparent, tinted, and flexible veneers that installers can apply directly on to existing, previously installed, window glass.

Our product development efforts have produced early working prototypes for several of these applications, which we are sharing with potential commercialization partners, who will work along-side us to ascertain whether the SolarWindowTM technology can form the basis for a commercially viable technology or product and which products will be first to market.

We also developed the capability to integrate transparent SolarWindow™ coatings on to flexible glass. This presents new product opportunities for curved and non-flat surfaces in automotive, aircraft, and military applications.

We plan to advance the technical and product development, and subsequent commercialization of our SolarWindow™ technologies and products through process integration with existing glass fabricators, research and development agreements, licensing, joint venture arrangements, and co-marketing and co-promotion and distribution arrangements with third party collaborators.

We are actively seeking additional technology and product licensing, joint venture arrangements, and manufacturing process integration relationships with commercial partners and industry; and organizations which have established technical competencies, market reach, and mature distribution networks in the solar PV, building-integrated PV, and alternative and renewable energy market industries. We believe that this approach could provide immediate access to existing distribution channels which can increase market penetration and commercial acceptance of our products and enable us to avoid expending significant funds for development of a large sales and marketing organization. At the time of this filing, we have not entered into any such arrangements for these services or relationships.

We do not currently have any commercial products and there is no assurance that we will successfully be able to design, develop, manufacture, or sell any commercial products in the future. Our product development programs involve ongoing R&D and product development efforts, and the commitment of significant resources to support the extensive invention, design, engineering, testing, prototyping, and intellectual property initiatives carried-out by our contract engineers, scientists, and consultants.Agreements.

 

16

15

 

We cannot accurately predict the amount of funding or the time required to successfully commercialize or fabricate SolarWindow™ products. The actual cost and time required to commercialize our SolarWindow™ technology may vary significantly depending on, among other things, the results of our product development efforts; the cost of developing, acquiring, or licensing various enabling technologies; changes in the focus and direction of our business or product development plans; competitive and technological advances; the cost of patent filing, prosecuting, defending and enforcing claims; demonstrating compliance with regulations and standards; and manufacturing, marketing and other costs that may be associated with product fabrication. Because of this uncertainty, even if financing is available to us, we may secure insufficient funding to effectuate our business and/or product development plans.

Research and Related Agreements

 

We are a party to certain agreements related to the development of our SolarWindow™ technology.

 

Stevenson-Wydler Cooperative Research and Development Agreement with the Alliance for Sustainable Energy

 

On March 18, 2011, we entered into the NREL CRADA with Alliance for Sustainable Energy, the operator of the NREL under its U.S. Department of Energy contract to advance the commercial development of the SolarWindow™ technology. Under terms of the NREL CRADA, NREL researchers will make use of our exclusive intellectual property (“IP”), newly developed IP, and NREL’s background IP in order to work towards specific product development goals, established by the Company. Under the terms of the NREL CRADA, we agreed to reimburse Alliance for Sustainable Energy for filing fees associated with all documented, out-of-pocket costs directly related to patent application preparation and filings, and maintenance of the patent applications.

On January 16, 2013, we entered into a modification to the NREL CRADA for the purpose of extending the date pursuant to which NREL’s researchers will make use of our exclusive IP and NREL’s background IP.

 

On March 6, 2013, we entered into Phase II of our NREL CRADA. Under the terms of the agreement, researchers will additionally work towards:

 

·further improving SolarWindow™ technology efficiency and transparency;

 

·optimizing electrical power (current and voltage) output;

 

·optimizing the application of the active layer coatings which make it possible for SolarWindow™ coatings to generate electricity on glass surfaces;

 

·developing improved electricity-generating coatings by enhancing performance, processing, reliability, and durability;

 

·optimizing SolarWindow™ coating performance on flexible substrates; and

 

·developing high speed and large area roll-to-roll (R2R) and sheet-to-sheet (S2S) coating methods required for commercial-scale building integrated photovoltaic (“BIPV”) products and windows.

 

On December 28, 2015, we entered into another modification to the NREL CRADA (the “Modification”). TheUnder the Modification, (i) the date of completion was extended to December 2019; and (ii) the Company and the NREL will work jointly towards achieving specific product development goals and objectives for the purpose of preparing to commercialize our OPV-based SolarWindow™ transparent electricity-generating coatings for various applications, including BIPV, glass and flexible plastics.

Over the Modification wascourse of our collaborative research and development efforts with the NREL under the CRADA, both parties have agreed to modifications to extend the date of completion to December 2019 pursuant to which NREL’s researchers work towards specific product development goals.

On November 18, 2019, wecompletion. The Company and NREL have entered into aeight such No Cost Time ExtensionExtensions (“NCTE”) under the NREL CRADA.. Under the terms of theeach NCTE, all terms and conditions of the NREL CRADA remain in full force and effect without change, with a new completionchange. The current NCTE was executed on September 15, 2020 and extends the date of Marchcompletion to December 31, 2020. On February 26,2021. As of November 30, 2020, the Company entered into another NCTE whereby all termshad a capitalized asset balance of $463,614 related to deferred research and conditions of the NREL CRADA remain in full force and effect without change, with a new completion date of September 30, 2020. Specifically, we are preparing to commercialize our OPV-based SolarWindow™ transparent electricity-generating coatingsdevelopment costs for BIPV, and glass and flexible plastic applications. Under the Modification, NREL and the Company will work jointly towards achieving specific commercialization goals and objectives. As of February 29, 2020, the Company made $665,209 of advances to Alliance for Sustainable Energy for work to be performed under the NREL CRADA, which is capitalized as deferred research and development costs on our balance sheets.CRADA.

 

17

U.S. Department of Energy (DOE) Office of Energy Efficiency and Renewable Energy’s (EERE) Advanced Manufacturing Office (AMO) Cooperative Research and Development Agreement

 

On March 15, 2018 the Company was awarded it’sits first-ever AMM CRADA by the DOE EERE AMO. SolarWindow was awarded the AMM CRADA after submitting a proposal outlining its coating technologies and fabrication methods to the DOE’s Roll-to-Roll Advanced Materials Manufacturing Consortium, led by ORNL and partnering with ANL, LBNL, and NREL. The AMM CRADA will be carried out with the DOE by SolarWindow, ANL, and NREL.

 

On March 31,September 15, 2020, we entered into NCTE that extends the date of completion to October 18, 2020December 31, 2021 pursuant to which researchers work towards specific product development goals outlined in the AMM CRADA.

The purpose

16

Through the developments of AMM CRADA, the Company accomplished initiatives to improve and optimize its laser patterning system and methods of fabrication for our electricity-generating coatings on flexible plastics. Once optimized for industry, this advancement is expected to reduce process time, improve device performance, and reduce costs of SolarWindow™ electricity-generating plastic products. Another objective of the AMM CRADA is to develop and demonstrate a unique high-throughput process methodology for semitransparent OPV modules compatible with high process speeds for many different advanced material manufacturing systems.

 

Results of Operations

Our quarterly periods end on November 30, February 28, May 31, and August 31. Our operating results for the fiscal quarter ended November 30, 2020 may not be indicative of the results that may be expected for the fiscal year ending August 31, 2021 because of the COVID-19 pandemic and other potential beneficial or detrimental unforeseen occurrences. In addition, our quarterly results of operations have varied in the past and are likely to do so again in the future. As such, we believe that period-to-period comparisons of our results of operations should not be relied upon as an indication of our future performance.

The following table presents the components of our consolidated results of operations for the periods indicated:

  Three Months Ended 2021 compared to 2020
  November 30, Increase / Percentage
  2020 2019 (Decrease) Change
Operating expenses:                
Selling, general & administrative $465,961  $448,562  $17,399   4%
Research and development  243,156   330,249   (87,093)  -26%
Stock compensation  1,838,532   420,970   1,417,562   337%
Total Operating expense $2,547,649  $1,199,781  $1,347,868   112%

 

Three months ended February 29, 2020 compared withComparison of the three months ended February 28, 2019 andNovember 30, 2020 to the sixthree months ended February 29, 2020 compared with the six months ended February 28,November 30, 2019

 

Operating Expenses

A summary of our operating expense for the three months ended February 29, 2020 compared with the three months ended February 28, 2019 follows:

  Three Months Ended February 29, Three Months Ended February 28, Increase / Percentage
  2020 2019 (Decrease) Change
Operating expenses:                
Selling, general and administrative $392,922  $317,810  $75,112   24 
Research and product development  352,965   235,780   117,185   50 
Stock based compensation  434,656   355,226   79,430   22 
Total operating expenses $1,180,543  $908,816  $271,727   30 

A summary of our operating expense for the six months ended February 29, 2020 compared with the six months ended February 28, 2019 follows:

  Six Months Ended February 29, Six Months Ended February 28, Increase / Percentage
  2020 2019 (Decrease) Change
Operating expenses:                
Selling, general and administrative $841,484  $689,215  $152,269   22 
Research and product development  683,214   373,400   309,814   83 
Stock based compensation  855,626   740,961   114,665   15 
Total operating expenses $2,380,324  $1,803,576  $576,748   32 

18

Selling, General and Administrative

 

Selling, general and administrative (“SG&A”) costs include all expenditures incurred other than research and development related costs, including costs related to personnel, professional fees, travel and entertainment, public company costs, insurance and other office related costs. During the three months ended February 29,November 30, 2020 compared to the three months ended February 28,November 30, 2019, SG&A costs increased due primarily to an approximately $17,000a $92,000 increase in personnel costs $30,000 increase in professional costs and $28,000$69,459 increase in other administrative costs. During the six months ended February 29, 2020 compared to the six months ended February 28, 2019, SG&A costs increased due primarily to an approximately $68,000 increase in personnel costs, $37,000 increaseoffset by a decrease of $144,061 in professional costs and $47,000 increase in other administrative costs.fees.

 

Research and Product Development

 

Research and Product Development (“R&PD&D”) costs represent costs incurred to develop our SolarWindow™ technology and are incurred pursuant to our research agreements and agreements with other third-party providers and certain internal R&PD&D cost allocations. Payments under these agreements include salaries and benefits for R&PD&D personnel, allocated overhead, contract services and other costs. R&PD&D costs are expensed when incurred, except for non-refundable advance payments for future research and development activities which are capitalized and recognized as expense as the related services are performed. During the three months ended February 29,November 30, 2020 compared to the three months ended February 28,November 30, 2019, R&PD&D costs increased primarilydecreased as a result of an approximate $56,000 increasea $51,177 decrease in CRADA costs and $81,000 increase$42,502 decrease in personnelother R&D related costs offset by a decrease of $20,000 in other R&PD related costs. During the six months ended February 29, 2020 compared to the six months ended February 28, 2019, R&PD costs increased primarily as a result of an approximate $165,000 increase in CRADA costs, $129,000$6,587 increase in personnel costs and $16,000 in other R&PD related costs.

 

17

Stock Based Compensation

The Company grants stock options to its Directors, employees and consultants. Stock compensation represents the expense associated with the amortization of our stock options. Expense associated with equity-based transactions is calculated and expensed in our financial statements as required pursuant to various accounting rules and is non-cash in nature. Stock based compensation expense increased due primarily to differencesthe Company entering into an Executive Consulting Agreement with each of Mr. Jatinder S. Bhogal, President and CEO and Mr. John Rhee, Director, pursuant to which each party was granted 2,500,000 stock purchase options in the termsfourth quarter of option grants and the roll off of expense related to older grants offset by expense related to more recent grants.last fiscal year.

 

Other Income (Expense)

 

A summary of our other income (expense) for the three months ended February 29,November 30, 2020 compared with the three months ended February 28, 2019:and 2019 follows:

 

  Three Months Ended February 29, Three Months Ended February 28, Increase /
  2020 2019 (Decrease)
Other Income (expense):            
Interest income $73,845  $81,980  $8,135 
Total operating expenses $73,845  $81,980  $(8,135)
  

Three Months Ended

November 30,

 

2021

compared to

  2020 2019 2020
Other income (expense)            
Interest income $19,389  $94,503   (75,114)
Loss on disposal of assets  (8,775)  -   8,775 
Total other income (expense) $10,614  $94,503  $(66,339)
Total other income (expense) $21,228  $189,006  $17,550 

 

A summary of our otherInterest income (expense) for the six months ended February 29, 2020 compared with the six months ended February 28, 2019:

  Six Months Ended February 29, Six Months Ended February 28, Increase /
  2020 2019 (Decrease)
Other Income (expense):            
Interest income $168,348  $81,980  $86,368 
Interest expense  -   (128,239)  (128,239)
Accretion of debt discount  -   (663,918)  (663,918)
Total other income (expense) $168,348  $(710,177) $(878,525)

19

“Interest income” relates to the interest earned on our cash. “Interest expense”cash and cash equivalents and short-term investments. We experienced a decrease over the prior year due to a decrease in the rate of interest earned. The loss on disposal of fixed assets relates to the stated interest of our convertible promissory notes and bridge note. “Accretion of debt discount” represents the accretionclosing of the discount applied to those notes as a resultVestal, New York office and related disposal of the issuanceoffice equipment and modification of detachable warrants and the beneficial conversion feature contained therein. As a result of the financing received by the Company on November 26, 2018, all outstanding debt was converted resulting in the elimination of further interest expense and an increase in accretion due to the recognition of all remaining debt discount related to the 2013 Note.furniture.

 

Liquidity and Capital Resources

 

Our primary cash needs are for personnel, professional and development related fees and insurance. Our principal sourcesources of liquidity isare cash in the bank.and cash equivalents and short-term investments. As of February 29,November 30, 2020 the Company had $15,140,054 of cash compared to $16,604,011 as ofand August 31, 2019.2020, we had cash and cash equivalents and short-term investments of $13,549,510 and $14,151,523, respectively. We have financed our operations primarily from the sale of equity and debt securities. We expect the cost of funding the South Korea office to be approximately $850,000 over the twelve months ending August 31, 2021.

The following table presents a summary of our cash flows for the periods indicated:

  Three Months Ended
November 30,
 2021
compared to
  2020 2019 2020
Net cash used in operating activities $(579,314) $(648,468) $69,154 
Net cash used in investing activities  (5,025,565)  (5,031)  (5,020,534)
Effect of exchange rate changes on cash and cash equivalents  2,866       2,866 
Net (decrease) in cash and cash equivalents $(5,602,013) $(653,499) $(4,948,514)

 

Summary of Cash FlowsOperating Activities

 

Presented below is a table that summarizes the cash providedOperating activities consist of net loss adjusted for certain non-cash items, including depreciation, non-cash lease expense, stock-based compensation expense, realized gains or used in our activitieslosses on disposal of property and equipment, and the amounteffect of working capital changes. The decrease over the respective increases or decreasesprior period is mainly due to the increase in cash provided by (used in) those activities betweennet loss, and the fiscal periods:

  Six Months Ended February 29, Six Months Ended February 28, Increase /
  2020 2019 (Decrease)
Operating activities $(1,458,926) $(1,229,102) $(229,824)
Investing activities  (5,031)  (565,850)  560,819 
Financing activities  -   19,800,000   (19,800,000)
Net increase (decrease) in cash and cash equivalents $(1,463,957) $18,005,048  $(19,469,005)

Operating Activities

Net cash usedtiming of accounts payable. The increase in operating activities increased $229,824net loss was primarily due to increasesan increase in stock based compensation resulting from the grant of options to our CEO and South Korean subsidiary President, and higher personnel and R&PD costs.

Investing Activities

Net cash usedSG&A costs partially offset by a decrease in investing activities decreased due to fewer purchases of equipment.

Financing Activities

Net cash provided by financing activities decreased due to the Company being adequately financed for the foreseeable future as a result of the receipt of $19,800,000 from the November 2018 Private Placement.

Other Contractual Obligations

Other than our contractual obligations under the research agreements and office rent, as of February 29, 2020, we have no other obligations.professional fees.

 

20

18

 

Investing Activities

We have used cash primarily for short-term investments, investments in property and equipment, and, to a lesser extent, for the purchase of furniture and office equipment, including computers and software. Net investment activities for capital expenditures were $25,565 during the three months ended November 30, 2020, compared to $5,031 during the three months ended November 30, 2019. Also, during the three months ended November 30, 2020, we purchased a twelve month term deposit in the amount of $5,000,000.

Indebtedness

None.

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Recently Issued Accounting PronouncementsOther Contractual Obligations

In September 2020, the Company, through its wholly owned subsidiaries, SolarWindow Asia (USA) Corp. and SolarWindow Asia Co., Ltd., entered a lease for office space in South Korea. The lease has a term of one year from September 23, 2020 through September 23, 2021 with monthly payments of approximately $1,200.

During fiscal 2019 the Company made payments totaling $1,292,655 towards the purchase of manufacturing equipment with an estimated total cost of $1,803,000. The remaining $510,345 will be paid upon the completion of the equipment once the final specifications have been determined pending optimization of the Company’s product iteration specific to this equipment. For additional information, see “Note 3 – Property and Equipment” located in the footnotes to our financial statements.

Recent accounting pronouncements not yet adopted

 

See Note 2 to our Financial Statements for more information regarding recentconsolidated financial statements, “Summary of significant accounting policies – Recent accounting pronouncements and their impactnot yet adopted.”

Recently adopted accounting pronouncements

See Note 2 to our resultsconsolidated financial statements, “Summary of operations and financial position.significant accounting policies – Recently adopted accounting pronouncements.”

 

Critical Accounting Policies and Significant Judgments’ and Use of Estimates

 

We have preparedManagement’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in conformityaccordance with accounting principlesU.S. generally accepted in the United States. Ouraccounting principles. The preparation of these consolidated financial statements and related disclosures requires us to makerequired the use of estimates and assumptionsjudgments that affect the reported amounts of our assets, and liabilities, and disclosure of contingent assetsexpenses. Management bases estimates on historical experience and liabilities atother assumptions it believes to be reasonable under the date of the financial statements,circumstances and the reported amounts of revenue and expenses during the reporting periods. Theseevaluates these estimates can also affect supplemental disclosures including information about contingencies, risk and financial condition. Critical accounting estimates are defined as those that are reflective of significant judgments and uncertainties and potentially yield materially different results under different assumptions or conditions. Given current facts and circumstances, we believe that our estimates and assumptions are reasonable, adhere to GAAP and are consistently applied. The accounting estimates that require our most significant estimates include stock compensation. We evaluate our estimates and judgments on an ongoingon-going basis. Actual results may differ from these estimates under different assumptions or conditions. Ourestimates. There have been no significant changes to the critical accounting policies are more fully described above under the Notes to Financial Statements “NOTE 2 – Summary of Significant Accounting Policies”.

New Accounting Standards to be Adopted Subsequent to February 29, 2020

None.

New Accounting Standards

For a discussion of our New Accounting Pronouncements, refer to “Note 2. Summary of Significant Accounting Policies to our Financial Statements”and estimates included in this Quarterlyour Annual Report on Form 10-Q.10-K for the fiscal year ended August 31, 2020.

 

Related Party Transactions

 

ForSee Note 7 to our consolidated financial statements for a discussion of our Related Party Transactions, refer to “Note 6 - Related Party Transactions” to our Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.related party transactions.

 

19

Corporate Information

 

SolarWindow Technologies, Inc., a Nevada corporation, was incorporated in 1998. The Company’s executive offices are located at 300 Main Street,430 Park Avenue, Suite 6, Vestal,702, New York, NY 13850.10022. The Company’s telephone number is (800) 213-0689. Our Internet address is www.solarwindow.com. We make available free of charge through our Internet website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”). The information accessible through our website is not a part of this Quarterly Report on Form 10-Q.

 

Special Note Regarding Forward-Looking StatementsItem 3. Quantitative and Qualitative Disclosures About Market Risk

 

This Quarterly Report on Form 10-Q contains or incorporates a numberMarket risk represents the risk of “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based on current expectations, and are not strictly historical statements. In some cases, you can identify forward-looking statements by terminology such as “if,” “may,” “should,” “believe,” “anticipate,” “future,” “forward,” “potential,” “estimate,” “opportunity,” “goal,” “objective,” “growth,” “outcome,” “could,” “expect,” “intend,” “plan,” “strategy,” “provide,” “commitment,” “result,” “seek“ “pursue“ “ongoing“ “include” or in the negative of such terms or comparable terminology. These forward-looking statements inherently involve certain risks and uncertainties and are not guarantees of performance, results, or the creation of shareholder value, although they are based onloss that may impact our current plans or assessments which we believefinancial position due to be reasonable as of the date hereof.

21

We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all forward-looking statements.

Factors that could cause actual results, events and developments to differ include, without limitation: the ability of our Company to generate sufficient net income and cash flows, capital market conditions, efficiencies/cost avoidance, cost savings, income and margins, growth, economies of scale, combined operations, future economic performance, litigation, potential and contingent liabilities, management’s plans,adverse changes in regulationsfinancial market prices and taxes.

Forward-looking statements arerates. Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates. We do not guarantees of performance. You should understand that the foregoing factors, in addition to those discussed under the section entitled “Risk Factors” in our SEC filings and in any documents incorporated by reference, could affect our future results and could cause actual resultshold or other outcomes to differ materially from those expressed or implied in the forward-looking statements. As a result, you should consider all of the relevant factors, together with all of the other information presented herein, in evaluating our business and that of our subsidiaries.issue financial instruments for trading purposes.

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), as of the end of the period covered by this quarterly report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of February 29,November 30, 2020, that our disclosure controls and procedures were effective such that the information required to be disclosed in our SEC filings is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

22

20

 

PART II – OTHER INFORMATION

 

Item 1A. Risk Factors

 

COVID-19 Pandemic Impact and Risk

At this time, it is not possible to fully assess the impact of the COVID-19 pandemic on the Company’s operations and capital requirements. Should the COVID-19 pandemic continue, it may adversely affect the Company’s ability to (i) retain employees and consultants;, (ii) obtain additional financing on terms acceptableIn addition to the Company, if at all; (iii) delay regulatory submissions and approvals; (iv) delay, limitother information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended August 31, 2020, which could materially affect our business, financial condition, financial results, or precludefuture performance. There have been no material changes from the Company from securing manufacturing sites or partnerships; (v) delay, limit or precluderisk factors previously disclosed in our Annual Report on Form 10-K for the Company from achieving technology or product development goals, milestones, or objectives; and (vi) preclude or delay entry into joint venture or partnership arrangements. The occurrence of any one or more of such events may affect the Company’s ability to continue on its pathway to commercialization of its SolarWindow technology or products.year ended August 31, 2020.

The Company’s priority and commitment is to the health and security of its team members, their families and its partners, while its important work continues through this unprecedented event.

 

Item 6. Exhibits

 

Exhibit No.Description of Exhibit
  
10.1Stock Option Grant and Grant Agreement dated as of October 19, 2020 between SolarWindow Technologies, Inc., and Joseph Sierchio.*
31.1Certification of Principal Executive Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
  
31.2Certification of Principal Financial Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
  
32.1Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
  
101.INSXBRL Instance Document**
101.SCHXBRL Taxonomy Extension Schema Document**
101.CALXBRL Taxonomy Extension Calculation Linkbase Document**
101.DEFXBRL Taxonomy Extension Definition Linkbase Document**
101.LABXBRL Taxonomy Extension Label Linkbase Document**
101.PREXBRL Taxonomy Extension Presentation Linkbase Document**

____________________

 

*Filed herewith

 

** Furnished herewith. XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

23

21

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

SolarWindow Technologies, Inc.

SolarWindow Technologies, Inc.
By: /S/ Steve Yan-KlassenJatinder S. Bhogal
  Steve Yan-KlassenJatinder S. Bhogal
  Chief Executive Officer
(Principal Financial Officer)
Date:January 8, 2021
By:/S/ Justin Frere, CPA
Justin Frere, CPA
Interim Chief Financial Officer
  (Principal Financial Officer)
Date: May 1, 2020January 8, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2422