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 theSecurities 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, the terms "we," "us," "our," "Company" "our Company," and "SolarWindow" refer toSolarWindow Technologies, Inc. , aNevada corporation. OverviewSolarWindow Technologies, Inc. is a developer of transparent electricity-generating coatings ("LiquidElectricity™ Coatings"). When applied in ultra-thin layers to rigid glass, and flexible glass and plastic surfaces our LiquidElectricity™ Coatings transform otherwise ordinary surfaces into photovoltaic devices capable of generating electricity from natural sun, artificial light, and low, shaded, or reflected light conditions while maintaining transparency. We have overcome major technical challenges and achieved many important milestones resulting in an expansion of the potential applications of LiquidElectricity™ Coatings. Potential applications of LiquidElectricity™ Coatings span multiple industries, including architectural, automotive, agrivoltaic, aerospace, commercial transportation and marine. Our LiquidElectricity™ Coatings and SolarWindow™ products are under development with support from commercial contract firms and at theU.S. Department of Energy's National Renewable Energy Laboratory , throughCooperative Research and Development Agreements. 13
Research and Related Agreements
We are a party to certain agreements related to the development of our technology.
OnMarch 18, 2011 , we entered into the NREL CRADA withAlliance for Sustainable Energy , the operator of the NREL under itsU.S. Department of Energy contract to advance the commercial development of our technology. Under terms of the NREL CRADA, NREL researchers make use of our exclusive intellectual property ("IP"), newly developed IP, and NREL's background IP in order to work towards specific product development goals, established by the Company. Under the terms of the NREL CRADA, we agreed to reimburseAlliance 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
· further improving our technology efficiency and transparency;
· optimizing electrical power (current and voltage) output;
· optimizing the application of the active layer coatings and application
processes which make it possible for LiquidElectricity™ Coatings to generate
electricity on glass surfaces;
· developing improved electricity-generating coatings by enhancing performance,
processing, reliability, and durability;
· optimizing LiquidElectricity™ Coating performance on flexible substrates; and
· developing high speed and large area roll-to-roll (R2R) and sheet-to-sheet
(S2S) coating application methods required for commercial-scale building integrated photovoltaic ("BIPV") products and windows. OnDecember 28, 2015 , we entered into another modification to the NREL CRADA (the "Modification"). Under the Modification, (i) the date of completion was extended toDecember 2017 ; and (ii) the Company and the NREL will work jointly towards achieving specific product development goals and objectives for the purpose of preparing to commercialize our OPV-based transparent electricity-generating coatings for various applications, including BIPV, glass and flexible plastics.
Over the course of our collaborative research and development efforts with the NREL under the CRADA, both parties have agreed to modifications to extend the date of completion. The Company and NREL have entered into ten such No Cost Time Extensions ("NCTE"). Under the terms of each NCTE, all terms and conditions of the NREL CRADA remain in full force and effect without change. The current NCTE was executed onDecember 6, 2021 and extends the date of completion toDecember 31, 2024 . As ofFebruary 28, 2022 , the Company had a capitalized asset balance of$138,846 related to deferred research and development costs for advances toAlliance for Sustainable Energy for work to be performed under the NREL CRADA. Results of Operations Our quarterly periods end onNovember 30 ,February 28 ,May 31 , andAugust 31 . Our operating results for the fiscal quarter endedFebruary 28, 2022 may not be indicative of the results that may be expected for the fiscal year endingAugust 31, 2022 because of the COVID-19 pandemic and other potential beneficial or detrimental unforeseen occurrences. In addition, our quarterly results of operations have varied in the past and are likely to do so again in the future. As such, we believe that period-to-period comparisons of our results of operations should not be relied upon as an indication of our future performance. 14
The following table presents the components of our consolidated results of operations for the periods indicated:
2022 compared to 2021 Three Months Ended February 28, Increase / Percentage 2022 2021 (Decrease) Change Operating expenses:
Selling, general & administrative$ 746,379 $ 464,370 $
282,009 61 % Research and development 221,902 224,275 (2,373 ) -1 % Stock compensation 410,789 1,463,904 (1,053,115 ) -72 % Total Operating expense$ 1,379,070 $ 2,152,549 $ (773,479 ) -36 % 2022 compared to 2021 Six Months Ended February 28, Increase / Percentage 2022 2021 (Decrease) Change Operating expenses:
Selling, general & administrative$ 1,476,680 $ 930,330 $
546,348 59 % Research and development 563,390 467,432 95,958 21 % Stock compensation 689,652 3,302,436 (2,612,782 ) -79 % Total Operating expense$ 2,729,722 $ 4,700,198 $ (1,970,476 ) -42 %
Comparison of the three and six months ended
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 endedFebruary 28, 2022 compared to the three months endedFebruary 28, 2021 , SG&A costs increased due primarily to a$243,489 increase in personnel costs and$75,529 increase in professional fees offset by a decrease of$37,008 in other administrative costs. During the six months endedFebruary 28, 2022 compared to the six months endedFebruary 28, 2021 , SG&A costs increased due primarily to a$430,670 increase in personnel costs and$178,082 increase in professional fees offset by a decrease of$62,404 in other administrative costs. Research and Development
Research and Development ("R&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&D cost allocations. Payments under these agreements include salaries and benefits for R&D personnel, allocated overhead, contract services and other costs. R&D costs are expensed when incurred, except for non-refundable advance payments for future research and development activities which are capitalized and recognized as expense as the related services are performed. During the three months endedFebruary 28, 2022 compared to the three months endedFebruary 28, 2021 , R&D costs increased as a result of a$29,112 decrease in CRADA costs,$4,839 decrease in other R&D related costs offset by an increase of$31,578 in personnel costs. During the six months endedFebruary 28, 2022 compared to the six months endedFebruary 28, 2021 , R&D costs increased as a result of a$19,409 decrease in CRADA costs offset by a$115,368 increase in personnel costs. Stock Based Compensation The Company grants stock options to its Directors, employees and consultants. Stock compensation represents the expense associated with the amortization of our stock options. Expense associated with equity-based transactions is calculated and expensed in our financial statements as required pursuant to various accounting rules and is non-cash in nature. Stock based compensation expense decreased primarily due to current year expense excluding compensation related to the prior year which included expense related to 2,500,000 stock purchase options granted in the fourth quarter of fiscal year endedAugust 31, 2020 to each of Mr.Jatinder S. Bhogal , former CEO and Chairman and Mr.John Rhee , President, CEO and Chairman. 15
Liquidity and Capital Resources
Our primary cash needs are for personnel, professional and R&D related fees and other administrative costs. Our principal source of liquidity is cash. As ofFebruary 28, 2022 , the Company had cash of$9,371,030 . We have financed our operations primarily from the sale of equity and debt securities. The following table presents a summary of our cash flows for the periods indicated: Six Months Ended February 28, 2022 compared 2022 2021 to 2021
Net cash used in operating activities$ (2,161,263 ) $ (1,316,951 ) $ (844,312 ) Net cash used in investing activities 4,415,765 (5,069,486 ) 9,485,251 Net cash provided by financing activities - 719,400 (719,400 ) Effect of exchange rate changes on cash (10,928 ) (7,222 ) (3,706 )
Net increase (decrease) in cash and cash equivalents
Operating Activities - Operating activities consist of net loss adjusted for certain non-cash items, including depreciation, stock-based compensation expense, realized gains or losses on disposal of property and equipment, and the effect of changes in working capital. The increase in cash used in operating activities over the prior period is mainly due to an increase in R&D Costs, personnel costs and professional fees offset by a decrease in other administrative costs. Investing Activities - We have used cash primarily for liquid short-term investments, purchases of furniture, equipment, leasehold improvements to our Korean offices and computers. Net investment activities for capital expenditures were$584,235 during the six months endedFebruary 28, 2022 , compared to$71,647 during the three months endedFebruary 28, 2021 . During 2021, we purchased a twelve-month term deposit in the amount of$5,000,000 which matured onOctober 1, 2021 . Financing Activities - Cash flows from financing activities totaled$719,400 in 2021 as a result of the exercise of 200,000 Series S Warrants with a strike price of$3.42 per share and the exercise of 10,000 stock options at a strike price of$3.54 per share. Indebtedness None.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Other Contractual Obligations InSeptember 2020 , the Company, through its wholly owned direct and indirect subsidiaries,SolarWindow Asia (USA) Corp. andSolarWindow Asia Co., Ltd. , entered a lease for office space inSouth Korea . The office lease expires onSeptember 23, 2022 . Monthly rent is approximately$1,200 . OnFebruary 26, 2021 ,SolarWindow Asia Co., Ltd. entered into an apartment lease for the purposes of housing foreign personnel. The apartment lease expired onMarch 7, 2022 , and was renewed onMarch 7, 2022 for an additional year. Monthly rent is approximately$950 . The Company paid a security deposit of approximately$8,700 . 16
The Company has made deposits towards "in-process" equipment which require additional payments to complete. For additional information, see "Note 4 - Equipment" located in the footnotes to our financial statements.
Recent accounting pronouncements not yet adopted
See Note 2 to our consolidated financial statements, "Interim Statement Presentation - Accounting Pronouncements."
Recently adopted accounting pronouncements
See Note 2 to our consolidated financial statements, "Interim Statement Presentation - Accounting Pronouncements."
Critical Accounting Policies and Significant Judgments' and Use of Estimates
Management's discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance withU.S. generally accepted accounting principles. The preparation of these consolidated financial statements required the use of estimates and judgments that affect the reported amounts of our assets, liabilities, and expenses. Management bases estimates on historical experience and other assumptions it believes to be reasonable under the circumstances and evaluates these estimates on an on-going basis. Actual results may differ from these estimates. There have been no significant changes to the critical accounting policies and estimates included in our Annual Report on Form 10-K for the fiscal year endedAugust 31, 2021 . Related Party Transactions
See Note 7 to our consolidated financial statements for a discussion of our related party transactions.
Corporate InformationSolarWindow Technologies, Inc. , aNevada corporation, was incorporated in 1998. The Company's executive offices are located at9375 E Shea Blvd. , Suite 107-B,Scottsdale AZ 85260. The Company's telephone number is (800) 213-0689. Our Internet address is www.solarwindow.com. We make available 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, theSecurities and Exchange Commission ("SEC"). The information accessible through our website is not a part of this Quarterly Report on Form 10-Q.
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