| Summary of Significant Accounting Policies | (2) Summary of Significant Accounting Policies (a) Cash and Cash Equivalents The Company considers securities purchased
with original maturities of three months or less to be cash equivalents. Cash equivalents consist of short-term investments in
money market accounts at December 31, 2019 and 2018. Cash and cash equivalents are maintained at
financial institutions and, at times, balances may exceed federally insured limits. We have never experienced any losses related
to these balances. FDIC insurance coverage is $250,000 per depositor at each financial institution, and our non-interest bearing
cash balances may again exceed federally insured limits. Amounts on deposit in excess of federally insured limits at December 31,
2019 and 2018 are approximately $6.3 million and $2.7 million, respectively. (b) Royalties Receivable Royalties receivable from licensees are recorded
at the amounts specified within the license agreements when the collectability of the receivable is reasonably assured. The allowance
for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing
royalties receivable. The Company determines the allowance based on historical write off experience as well as the current status
of the Company’s customers. The Company reviews its allowance for doubtful accounts periodically. Past due accounts are reviewed
individually for collectability. Account balances are charged off against the allowance after all means of collection have been
exhausted and the potential for recovery is considered remote. As of December 31, 2019, two companies accounted for 14% and 13%,
respectively, of the Company’s outstanding receivables. As of December 31, 2018, three companies accounted for 30%, 22% and
16%, respectively, of the Company’s outstanding receivables. (c) Fixed Assets Fixed assets are carried at cost less accumulated
depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful
lives of the assets. (d) Revenue Recognition/Fee Income In May 2014, the FASB issued guidance on revenue
recognition (“ASC 606”). The standard provides a single comprehensive revenue recognition model for all contracts with
customers and supersedes existing revenue recognition guidance. The revenue standard contains principles that an entity will apply
to determine the measurement of revenue and timing of when it is recognized. The underlying principle is that an entity will recognize
revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange
for those goods or services. The ASC 606 guidance was adopted by the Company
beginning January 1, 2018. ASC 606 was applied using the modified retrospective method, with the cumulative effect of the initial
adoption being recognized as an adjustment to opening retained earnings at January 1, 2018. The policies described below refer
to those in effect as of January 1, 2018. ASC 606 follows a five-step approach to determining
revenue recognition including: 1) Identification of the contract; 2) Identification of the performance obligations; 3) Determination
of the transaction price; 4) Allocation of the transaction price and 5) Recognition of revenue. The Company determined that its license agreements
provide for three performance obligations which include: (i) the Grant of Use to its Patent Portfolio “Grant of Use”,
(ii) Stand-Ready Technical Support (“Technical Support”) including the transfer of trade secrets and other know-how,
production of materials, scale-up support, analytical testing, etc., and (iii) access to new Intellectual Property (“IP”)
that may be developed some time during the course of the contract period (“New Improvements”). Given the nature of
IP development, such New Improvements are on an unspecified basis and can occur and be made available to licensees at any time
during the contract period. When a contract includes more than one performance
obligation, the Company needs to allocate the total consideration to each performance obligation based on its relative standalone
selling price or estimate the standalone selling price if it is not observable. A standalone selling price is not available for
our performance obligations since we do not sell any of the services separately and there is no competitor pricing that is available.
As a consequence, the best method for determining standalone selling price of our Grant of Use performance obligation is through
a comparison of the average royalty rate for comparable license agreements as compared to our license agreements. Comparable license
agreements must consider several factors including: (i) the materials that are being licensed, (ii) the market application for
the licensed materials, and (iii) the financial terms in the license agreements that can increase or decrease the risk/reward nature
of the agreement. Based on the royalty rate comparison referred
to above, any pricing above and beyond the average royalty rate would relate to the Technical Support and New Improvements performance
obligations. The Company focuses a significant portion of its time and resources to provide the Technical Support and New Improvements
services to its licensees, which further supports the conclusions reached using the royalty rate analysis. The Technical Support and New Improvements
performance obligations are co-terminus over the term of the license agreement. For purposes of determining the transaction price,
and recognizing revenue, the Company combined the Technical Support and New Improvements performance obligations because they have
the same pattern of transfer and the same term. We maintain a staff of scientists and other professionals whose primary job responsibilities
throughout the year are: (i) being available to respond to Technical Support needs of our licensees, and (ii) developing improvements
to our technology which are offered to our licensees as New Improvements. Since the costs incurred to satisfy the Technical Support
and New Improvements performance obligations are incurred evenly throughout the year, the value of the Technical Support and New
Improvements services are recognized throughout the initial contract period as these performance obligations are satisfied. If
the agreement is not terminated at the end of the initial contract period, it will renew on the same terms as the initial contract
for a one-year period. Consequently, any fees or minimum annual royalty obligations relating to this renewal contract will be allocated
similarly to the initial contract over the additional one-year period. We recognize revenue when or as the performance
obligations in the contract are satisfied. For performance obligations that are fulfilled at a point in time, revenue is recognized
at the fulfillment of the performance obligation. Since the IP is determined to be a functional license, the value of the Grant
of Use is recognized in the first period of the contract term in which the license agreement is in force. The value of the Technical
Support and New Improvements obligations is allocated throughout the contract period based on the satisfaction of its performance
obligations. If the agreement is not terminated at the end of the contract period, it will renew on the same terms as the original
agreement for a one-year period. Consequently, any fees or minimum annual royalties (“MAR”) relating to this renewal
contract will be allocated similarly over that additional year. The Company’s license agreements have
a variable royalty fee structure (meaning that royalties are a fixed percentage of sales that vary from period to period) and frequently
include a minimum annual royalty commitment. In instances when sales of licensed products by its licensees exceed the MAR, the
Company recognizes fee income as the amounts have been earned. Typically, the royalty rate for such sales is 10-15% of the selling
price. While this is variable consideration, it is subject to the sales/usage royalty exception to recognition of variable consideration
in ASC 606 10-55-65 and therefore is not recognized until the subsequent sales or usage occurs or the MAR period commences. Because of the immediate recognition of the
Grant of Use performance obligation: (i) the first period of the contract term will generally have a higher percent allocation
of the transaction price under ASC 606 than under the accounting guidance used prior to the adoption of ASC 606, and (ii) the remaining
periods will have less of the transaction price recognized under ASC 606 than under the accounting guidance used prior to the adoption
of ASC 606. After the initial period in the contract term, the revenue for the remaining periods will be based on the satisfaction
of the technical support and New Improvements obligations. Since most of our license agreements start as of January 1st, the revenue
recognized for the contract under ASC 606 in our first quarter will tend to be higher than the accounting guidance used prior to
the adoption of ASC 606. In 2018, the Company reported $64,823 lower revenue under ASC 606 as compared to the accounting guidance
used prior to the adoption of ASC 606 due to the higher percent of the transaction price being recognized in the first period of
multiyear contracts that were executed prior to fiscal 2018. Certain of the contract fees are accrued by,
or paid to, the Company in advance of the period in which they are earned resulting in deferred revenue. Such excess amounts are
recorded as deferred revenue and are recognized as revenue in future periods as earned. The Company operates in a single business segment
which is engaged in the development and marketing of technology and devices to control the flow of light. Our revenue source comes
from the licensing of this technology and all of these license agreements have similar terms and provisions. The majority of the
Company’s licensing fee income comes from the activities of several licensees participating in the automotive market. The
Company currently believes that the automotive market will be the largest source of its royalty income over the next several years.
The Company’s royalty income from this market may be influenced by numerous factors including various trends affecting demand
in the automotive industry and the rate of introduction of new technology in OEM product lines. In addition to these macro factors,
the Company’s royalty income from the automotive market could also be influenced by specific factors such as whether the
Company’s SPD-SmartGlass technology appears as standard equipment or as an option on a particular vehicle, the number of
additional vehicle models that SPD-SmartGlass appears on, the size of each window on a vehicle and the number of windows on a vehicle
that use SPD SmartGlass, fluctuations in the total number of vehicles produced by a manufacturer, and in the percentage of cars
within each model produced with SPD-SmartGlass, and changes in pricing or exchange rates. As of December 31, 2019, the Company has four
license agreements that are in their initial multiyear term (“Initial Term”) with continuing performance obligations
going forward. The Initial Term of one of these agreements will end as of December 31, 2020, one will end as of December 31, 2021,
one will end as of December 31, 2022, and one will end as of December 31, 2024. The Company currently expects all four of these
agreements will renew annually at the end of the Initial Term. As of December 31, 2019, the aggregate amount of the revenue to
be recognized upon the satisfaction of the remaining performance obligations for the four license agreements is $579,369. The revenue
for these remaining performance obligations for each of the four license agreements is expected to be recognized evenly throughout
their remaining period of the Initial Term. For the years ended December 31, 2019 and 2018,
the Company entered into a number of license agreements covering its light control technology. The Company received minimum annual
royalties under certain license agreements and recorded fee income based on ASC 606 revenue recognition each quarter. In instances
when sales of licensed products by its licensees exceed minimum annual royalties, the Company recognized additional fee income
as the amounts have been earned. Certain of the fees are accrued by, or paid to, the Company in advance of the period in which
they are earned resulting in deferred revenue. Such excess amounts are recorded as deferred revenue and are typically recognized
as fee income when earned. As of December 31, 2019 and 2018, deferred revenue balances were $7,734 and $50,570, respectively. Fee income represents amounts earned by the
Company under various license and other agreements relating to technology developed by the Company. During 2019, three licensees
accounted for 38%, 12% and 10% of fee income recognized for the year. During 2018, four licensees accounted for 35%, 13%, 11%,
and 10% of fee income recognized during the year. (e) Basic and Diluted Loss Per Common Share Basic loss per share excludes any dilution.
It is based upon the weighted average number of common shares outstanding during the period. Dilutive loss per share reflects the
potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common
stock. The Company’s dilutive loss per share equals basic loss per share for each of the years in the two-year period ended
December 31, 2019 because all common stock equivalents ( i.e., (f) Research and Development Costs Research and development costs are charged
to expense as incurred. (g) Patent Costs The Company expenses costs relating to the
development or acquisition of patents due to the uncertainty of the recoverability of these items. (h) Use of Estimates The preparation of the Company’s consolidated
financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported
amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during this period. Actual results could differ from those estimates. (i) Income Taxes Income taxes are accounted for under the asset
and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating
loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to be recovered
or settled. In accordance with ASC Topic 740 (FIN 48),
we recognize tax benefits only for tax positions that are more likely than not to be sustained upon examination by tax authorities.
The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon ultimate
settlement. Unrecognized tax benefits are tax benefits claimed in tax returns that do not meet these recognition and measurement
standards. We classify accrued interest and penalties related to any unrecognized tax benefits in our income tax provision. At
December 31, 2019 and 2018, we do not have accrued interest and penalties related to any unrecognized tax benefits. We do not believe
we have any uncertain tax positions as of December 31, 2019 and 2018. The tax years subject to examination by major
tax jurisdictions include the years 2014 and forward by the U.S. Internal Revenue Service and certain states. The Company is not
currently being audited by any tax jurisdiction. (j) Equity-Based Compensation We recognize all stock-based compensation as
an expense in the consolidated financial statements and such costs are measured at the fair value of the award at the date of grant.
In addition to reflecting compensation expense for new share-based payment awards, expense is also recognized to reflect the remaining
vesting period of awards that had been granted in prior periods. Tax benefits related to stock option exercises are reflected as
financing cash inflows. The exercise prices for stock options granted
are generally set at the average for the high and low trading prices of the Company’s common stock on the trading date immediately
prior to the date of grant, and the related numbers of shares granted are fixed at the date of grant. In order to determine the fair value of stock
options on the date of grant, the Company uses the Black-Scholes option-pricing model. Inherent in this model are assumptions related
to expected stock-price volatility, option term, risk-free interest rate and dividend yield. While the risk-free interest rate
and dividend yield are less subjective assumptions that are based on factual data derived from public sources, the expected stock-price
volatility and option term assumptions require a greater level of judgment. In connection with employee and director stock
options, the Company charged to compensation expense $790,339 and $69,309 during the years ended December 31, 2019 and 2018, respectively.
As of December 31, 2019, these awards were fully vested. In lieu of higher cash compensation, the Company has granted warrants
and non-employee options to consultants. These warrants and non-employee options vested fully on the date of grant. During the
year ended December 31, 2019, the Company charged $51,273 to expense in connection with options granted to a consultant. There
were no such charges for the year ended December 31, 2018. (k) Restricted Stock Compensation cost for restricted stock is measured
using the quoted market price of the Company’s common stock at the date the common stock is granted. The compensation cost
is recognized over the period between the issue date and the vesting period for such shares. Restricted stock is included in total
common shares outstanding upon the lapse of any vesting conditions. (l) Impairment of Long-Lived Assets The Company reviews long-lived assets to determine
whether an event or change in circumstances indicates the carrying value of the asset may not be recoverable. The Company bases
its evaluation on such impairment indicators as the nature of the assets, the future economic benefit of the assets and any historical
or future profitability measurements, as well as other external market conditions or factors that may be present. In 2019, the
Company incurred a loss from the impairment of a fixed asset of $50,666 in value of an automobile which was subsequently sold to
an employee at fair market value. There was no impairment of long-lived assets recorded during 2018. (m) Fair Value Measurements The fair value of a financial instrument is
the amount at which the instrument could be exchanged in a current transaction between willing parties. The carrying amounts of
all financial instruments classified as a current asset or current liability are deemed to approximate fair value because of the
short maturity of those instruments. Accounting Standards Codification (“ASC”)
Topic 820 “Fair Value Measurements and Disclosures” (“ASC Topic 820”) establishes a framework for measuring
fair value in generally accepted accounting principles and expands disclosures about fair value measurements. ASC Topic 820 applies
other previously issued accounting pronouncements that require or permit fair value measurements but does not require any new fair
value measurements. ASC Topic 820 defines fair value as the price
that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date. ASC Topic 820 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions
developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions
about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). We value financial instruments using a three-tier
fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable
inputs such as quoted prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than quoted
prices for similar assets or liabilities in active markets that are either directly or indirectly observable; and Level 3, defined
as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. In addition to assets and liabilities that
are recorded at fair value on a recurring basis, the Company records assets and liabilities at fair value on a non-recurring basis
as required by GAAP. Assets measured at fair value on a non-recurring basis include goodwill, tangible assets, and intangible assets.
Such assets are reviewed quarterly for impairment indicators. If a triggering event has occurred, the assets are re-measured when
the estimated fair value of the corresponding asset group is less than the carrying value. The fair value measurements, in such
instances, are based on significant unobservable inputs (Level 3). As of December 31, 2019 and 2018, the fair
value of the Company’s financial assets and non-warrant liabilities including cash and cash equivalents, royalties receivable,
accounts payable and accrued expenses approximated carrying value due to the short-term maturity of these instruments. The carrying
value of the warrant liabilities was adjusted to fair value each reporting period (until these warrants were reclassified as equity)
using the Black-Scholes method to determine the fair value of the warrants. The issued warrants treated as warrant liabilities
have different exercise prices depending on the date of exercise. The lowest exercise price for these warrants was used in the
Black Scholes method to value the warrant liabilities since it was deemed a reasonable approximation of fair market value. The
Company’s warrant liability was considered a Level 3 financial instrument. The estimated fair value for warrant liabilities
for the years ended December 31, 2019 and 2018 using the Black-Scholes method was $0 and $501,414 respectively. (n) Recent Accounting Pronouncements New Accounting Standards In August 2018, the FASB issued ASU 2018-13,
“Fair Value Measurement: Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,”
which eliminates, amends and adds disclosure requirements for fair value measurement. The standard is effective for the interim
and annual periods beginning after December 15, 2019, with early adoption permitted. The Company will adopt this standard as of
January 1, 2020 and it is not expected to have a material impact on the consolidated financial statements. In June 2018, the FASB issued ASU 2018-07 “Compensation—Stock
Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” (“ASU 2018-07”), which
simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments
to employees, with certain exceptions. ASU 2018-07 is effective for us in the first quarter of fiscal 2020. Effective January 1, 2019, the Company adopted
the Financial Accounting Standards Board’s Standard, Leases (Topic 842)
● An entity need not reassess whether any expired or existing contracts are or contain leases.
● An entity need not reassess the lease classification for any expired or existing leases. Instead, any leases previously classified as operating leases will continue to be classified as operating leases, while any leases previously classified as capital leases will be classified as finance leases.
● An entity need not reassess initial direct costs for any leases. The Company used the above practical expedients
as the transition method in the application of the new lease standard at January 1, 2019. The Company applied a policy election
to exclude short-term leases from balance sheet recognition and elected certain practical expedients at adoption. As permitted,
the Company did not reassess whether existing contracts are or contain leases, the lease classification for any existing leases
or the initial direct costs for any existing leases which were not previously accounted for as leases, are or contain a lease.
At adoption on January 1, 2019, an operating lease liability of $1,134,000 and an operating lease right of use asset of $941,000
were recorded (most of this liability relating to the Company’s lease for its facilities in Woodbury, New York). The operating
lease liability was $193,000 more than the operating lease right of use asset due to unamortized lease incentive from periods prior
to the adoption of the new lease standard. There was no cumulative earnings effect adjustment. In June 2016, the FASB issued ASU 2016-13,
“Financial Instruments” – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”
(“ASU 2016-13”), which requires entities to use a new impairment model based on expected losses. Under this new model
an entity would recognize an impairment allowance equal to its current estimate of credit losses on financial assets measured
at amortized cost. ASU 2016-13 is effective for us beginning January 1, 2020 with early adoption permitted January 1, 2019. The
Company does not expect the adoption of this standard to have a material impact on the consolidated financial statements. |
