SOLARWINDOW TECHNOLOGIES, INC. 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. 15
Research and Related Agreements
We are a party to certain agreements related to the development of our SolarWindow™ 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 the SolarWindow™ 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 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"). Under the Modification, (i) the date of completion was
extended to December 2019 ; and (ii) the Company and the NREL will work jointly
towards achieving specific product development goals and objectives for the
purpose of preparing to commercialize our OPV-based SolarWindow™ transparent
electricity-generating coatings for various applications, including BIPV, glass
and flexible plastics.
Over the course of our collaborative research and development efforts with the
NREL under the CRADA, both parties have agreed to modifications to extend the
date of completion. The Company and NREL have entered into eight such No Cost
Time Extensions ("NCTE"). Under the terms of each NCTE, all terms and conditions
of the NREL CRADA remain in full force and effect without change. The current
NCTE was executed on September 15, 2020 and extends the date of completion to
December 31, 2021 . As of November 30, 2020 , the Company had a capitalized asset
balance of $463,614 related to deferred research and development costs for
advances to Alliance for Sustainable Energy for work to be performed underthe NREL CRADA.
OnMarch 15, 2018 the Company was awarded its first-ever AMM CRADA by theDOE EERE AMO.SolarWindow was awarded the AMM CRADA after submitting a proposal outlining its coating technologies and fabrication methods to theDOE'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 theDOE bySolarWindow , ANL, and NREL. OnSeptember 15, 2020 , we entered into NCTE that extends the date of completion toDecember 31, 2021 pursuant to which researchers work towards specific product development goals outlined in the AMM CRADA. 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 onNovember 30 ,February 28 ,May 31 , andAugust 31 . Our operating results for the fiscal quarter endedNovember 30, 2020 may not be indicative of the results that may be expected for the fiscal year endingAugust 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 %
Comparison of the three 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
ended November 30, 2020 compared to the three months ended November 30, 2019 ,
SG&A costs increased due primarily to a $92,000 increase in personnel costs and
$69,459 increase in other administrative costs offset by a decrease of $144,061
in professional fees.
Research and Development
Research and Development ("R&D") costs represent costs incurred to develop our
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 ended
November 30, 2020 compared to the three months ended November 30, 2019 , R&D
costs decreased as a result of a $51,177 decrease in CRADA costs and $42,502
decrease in other R&D related costs offset by a $6,587 increase in personnel
costs.
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 the 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 fourth quarter of last fiscal year.
Other Income (Expense)
A summary of our other income (expense) for the three months ended November 30,
2020 and 2019 follows:
Three Months Ended 2021
November 30, 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)
Interest income relates to the interest earned on our cash and cash equivalents and short-term investments. We experienced a decrease over the prior year due to a decrease in the rate of interest earned. The loss on disposal of fixed assets relates to the closing of theVestal, New York office and related disposal of office equipment and furniture.
Liquidity and Capital Resources
Our primary cash needs are for personnel, professional and development related fees and insurance. Our principal sources of liquidity are cash and cash equivalents and short-term investments. As ofNovember 30, 2020 andAugust 31, 2020 , we had cash and cash equivalents and short-term investments of$13,549,510 and$14,151,523 , respectively. We have financed our operations primarily from the sale of equity and debt securities. We expect the cost of funding theSouth Korea office to be approximately$850,000 over the twelve months endingAugust 31, 2021 . The following table presents a summary of our cash flows for the periods indicated: Three Months Ended 2021 November 30, compared to 2020 2019 2020
Net cash used in operating 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
Operating Activities Operating activities consist of net loss adjusted for certain non-cash items, including depreciation, non-cash lease expense, stock-based compensation expense, realized gains or losses on disposal of property and equipment, and the effect of working capital changes. The decrease over the prior period is mainly due to the increase in net loss, and the timing of accounts payable. The increase in net loss was primarily due to an increase in stock based compensation resulting from the grant of options to our CEO and South Korean subsidiary President, and higher personnel and SG&A costs partially offset by a decrease in professional fees. 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 endedNovember 30, 2020 , compared to$5,031 during the three months endedNovember 30, 2019 . Also, during the three months endedNovember 30, 2020 , we purchased a twelve month term deposit in the amount of$5,000,000 . Indebtedness None.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Other Contractual Obligations InSeptember 2020 , the Company, through its wholly owned subsidiaries,SolarWindow Asia (USA) Corp. andSolarWindow Asia Co., Ltd. , entered a lease for office space inSouth Korea . The lease has a term of one year fromSeptember 23, 2020 throughSeptember 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 consolidated financial statements, "Summary of significant accounting policies - Recent accounting pronouncements not yet adopted."
Recently adopted accounting pronouncements
See Note 2 to our consolidated financial statements, "Summary of significant accounting policies - Recently adopted 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, 2020 . Related Party Transactions
See Note 7 to our consolidated financial statements for a discussion of our related party transactions.
19 Corporate InformationSolarWindow Technologies, Inc. , aNevada corporation, was incorporated in 1998. The Company's executive offices are located at430 Park Avenue , Suite 702,New York, NY 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, 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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