UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended February 28, 2019

 

o TRANSITION 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.)

      

 

 

9375 East Shea Blvd., Suite 107-B

 

 

Scottsdale, Arizona

 

85260

(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

x

Non-accelerated filer

¨

Smaller reporting company

¨

 

 

Emerging growth company

¨

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 52,959,323 shares of common stock, par value $0.001, were outstanding on April 4, 2019.

 

 
 
 
 

 

SOLARWINDOW TECHNOLOGIES, INC.

FORM 10-Q

 

For the Quarterly Period Ended February 28, 2019

 

Table of Contents

 

PART I FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1.

Consolidated Financial Statements (Unaudited)

3

 

 

Consolidated Balance Sheets

3

 

 

Consolidated Statements of Operations

4

 

 

Consolidated Statements of Stockholders’ Equity (Deficit)

5

 

 

Consolidated Statements of Cash Flows

6

 

 

Notes to Consolidated Financial Statements

7

 

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

16

 

 

Item 4.

Controls and Procedures

25

 

 

PART II OTHER INFORMATION

 

 

Item 6.

Exhibits

26

 

 

Signatures

27

 

 

Certifications

 

 

 
2
 
 

 

PART I — FINANCIAL INFORMATION

 

Item 1. Consolidated Financial Statements (Unaudited)

 

SOLARWINDOW TECHNOLOGIES, INC.

 

 

 

 

 

CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

February 28,

 

 

August 31,

 

 

 

2019

 

 

2018

 

 

(Unaudited)

 

 

 

ASSETS

Current assets

 

 

 

 

 

 

Cash

 

$ 18,701,874

 

 

$ 696,826

 

Deferred research and development costs

 

 

268,566

 

 

 

133,975

 

Prepaid expenses and other current assets

 

 

198,014

 

 

 

58,819

 

Total current assets

 

 

19,168,454

 

 

 

889,620

 

 

 

 

 

 

 

 

 

 

Equipment, net of accumulated depreciation of $57,244 and $50,509, respectively

 

 

597,021

 

 

 

39,614

 

Total assets

 

$ 19,765,475

 

 

$ 929,234

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$ 110,492

 

 

$ 93,616

 

Interest payable to related party

 

 

52,182

 

 

 

-

 

Total current liabilities

 

 

162,674

 

 

 

93,616

 

 

 

 

 

 

 

 

 

 

Bridge note payable to related party

 

 

-

 

 

 

600,000

 

Convertible promissory note payable to related party, net of discount of $- and $663,918, respectively

 

 

-

 

 

 

2,336,082

 

Interest payable to related party

 

 

-

 

 

 

1,523,943

 

Total long term liabilities

 

 

-

 

 

 

4,460,025

 

Total liabilities

 

 

162,674

 

 

 

4,553,641

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity (deficit)

 

 

 

 

 

 

 

 

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 and 36,292,656 shares issued and outstanding at February 28, 2019 and August 31, 2018, respectively

 

 

52,959

 

 

 

36,293

 

Additional paid-in capital

 

 

67,947,894

 

 

 

42,223,599

 

Retained deficit

 

 

(48,398,052 )

 

 

(45,884,299 )

Total stockholders' equity (deficit)

 

 

19,602,801

 

 

 

(3,624,407 )

Total liabilities and stockholders' equity (deficit)

 

$ 19,765,475

 

 

$ 929,234

 

 

 

 

 

 

 

 

 

 

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

 

 
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SOLARWINDOW TECHNOLOGIES, INC.

 

 

 

 

 

 

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended February 28,

 

 

Six Months Ended February 28,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$ -

 

 

$ -

 

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

436,219

 

 

 

615,467

 

 

 

943,067

 

 

 

2,456,693

 

Research and product development

 

 

472,597

 

 

 

523,532

 

 

 

860,509

 

 

 

942,295

 

Total operating expenses

 

 

908,816

 

 

 

1,138,999

 

 

 

1,803,576

 

 

 

3,398,988

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(908,816 )

 

 

(1,138,999 )

 

 

(1,803,576 )

 

 

(3,398,988 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

81,980

 

 

 

-

 

 

 

81,980

 

 

 

-

 

Interest expense

 

 

-

 

 

 

(122,731 )

 

 

(128,239 )

 

 

(216,747 )

Accretion of debt discount

 

 

-

 

 

 

(227,733 )

 

 

(663,918 )

 

 

(572,880 )

Total other income (expense), net

 

 

81,980

 

 

 

(350,464 )

 

 

(710,177 )

 

 

(789,627 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$ (826,836 )

 

$ (1,489,463 )

 

$ (2,513,753 )

 

$ (4,188,615 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted Loss per Common Share

 

$ (0.02 )

 

$ (0.04 )

 

$ (0.06 )

 

$ (0.12 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding - basic and diluted

 

 

52,959,323

 

 

 

36,135,080

 

 

 

44,877,131

 

 

 

35,743,320

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

  

 
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SOLARWINDOW TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (Unaudited)

FOR THE SIX MONTHS ENDED FEBRUARY 28, 2019

  

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Total

Stockholders'

 

 

 

Common Stock

 

 

Paid-in

 

 

Retained

 

 

Equity

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

(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

 

 

-

 

 

 

-

 

 

 

740,961

 

 

 

-

 

 

 

740,961

 

Net loss for six months ended February 28, 2019

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,513,753 )

 

 

(2,513,753 )

Balance, February 28, 2019 (Unaudited)

 

 

52,959,323

 

 

$ 52,959

 

 

$ 67,947,894

 

 

$ (48,398,052 )

 

$ 19,602,801

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 
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SOLARWINDOW TECHNOLOGIES, INC.

 

 

 

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended February 28,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$ (2,513,753 )

 

$ (4,188,615 )

Adjustments to reconcile net loss to net cash flows used in operating activities

 

 

 

 

 

 

 

 

Depreciation

 

 

8,443

 

 

 

7,817

 

Stock based compensation expense

 

 

740,961

 

 

 

1,897,154

 

Accretion of debt discount

 

 

663,918

 

 

 

572,880

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Decrease (increase) in deferred research and development costs

 

 

(134,591 )

 

 

(10,625 )

Decrease (increase) in prepaid expenses and other current assets

 

 

(139,195 )

 

 

(52,496 )

Increase (decrease) in accounts payable and accrued expenses

 

 

16,876

 

 

 

(81,888 )

Increase (decrease) in interest payable

 

 

128,239

 

 

 

216,747

 

Net cash flows used in operating activities

 

 

(1,229,102 )

 

 

(1,639,026 )

 

 

 

 

 

 

 

 

 

Cash flows used in investing activity

 

 

 

 

 

 

 

 

Purchase of equipment

 

 

(565,850 )

 

 

(2,581 )

Net cash flows used in investing activity

 

 

(565,850 )

 

 

(2,581 )

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from the issuance of equity securities

 

 

19,800,000

 

 

 

2,812,426

 

Net cash flows from financing activities

 

 

19,800,000

 

 

 

2,812,426

 

 

 

 

 

 

 

 

 

 

Change in cash and cash equivalents

 

 

18,005,048

 

 

 

1,170,819

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 

696,826

 

 

 

670,853

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$ 18,701,874

 

 

$ 1,841,672

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Interest paid in cash

 

$ -

 

 

$ -

 

Income taxes paid in cash

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash transactions:

 

 

 

 

 

 

 

 

Discount on convertible promissory note due to to warrants issued/modified

 

$ -

 

 

$ 1,074,265

 

Common stock issued for conversion of note payable

 

$ 5,200,000

 

 

$ -

 

 

 

 

 

 

 

 

 

 

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

 
 
6
 
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SOLARWINDOW TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

 

NOTE 1 – Basis of Presentation and Organization

 

Basis of Presentation

 

The unaudited financial statements of SolarWindow Technologies, Inc. (the “ Company ”) as of February 28, 2019, and for the three and six months ended February 28, 2019 and 2018, have been prepared in accordance with generally accepted accounting principles (“ GAAP ”) in the United States for interim financial reporting and include the Company’s wholly-owned subsidiaries, Kinetic Energy Corporation (“ KEC ”), and New Energy Solar Corporation (“ New Energy Solar ”). Accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United States for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended August 31, 2018, as filed with the Securities and Exchange Commission as part of the Company’s Form 10-K. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the interim financial information have been included. 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, under the name “Octillion Corp.” On December 2, 2008, the Company amended its Articles of Incorporation to effect a change of name to New Energy Technologies, Inc. Effective as of March 9, 2015, the Company amended its Articles of Incorporation to change its name to SolarWindow Technologies, Inc. to align the company name with its brand identity, SolarWindow™. Products derived from the Company’s SolarWindow™ technology are intended to harvest light energy from the sun and artificial sources and generate 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 changed to WNDW.

 

Until the fourth quarter of the 2015 fiscal year, the Company was developing two sustainable electricity generating systems. These novel technologies are branded as SolarWindow™ and MotionPower™. On March 2, 2015, the Company announced its exclusive focus on SolarWindow™.

 

The Company’s SolarWindow™ technology harvests light energy from the sun and artificial sources to generate electricity from a transparent coating of organic photovoltaic solar cells applied to glass or plastics, creating a “photovoltaic” effect. Photovoltaics are best known as “solar panels” providing a method to generate electricity using solar cells to convert energy from the sun 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., not see-through) and only effectively generate electricity with sun light. The Company’s researchers have replaced these materials with a very thin layer of specially developed compounds that allow our SolarWindow™ technology to remain see-through or “transparent,” while generating electricity when exposed to either sun or artificial light. SolarWindow™ coatings are capable of generating electricity when exposed to direct, diffused, filtered, low, or reflected natural or artificial light.

 

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. On November 26, 2018, the Company completed a self-directed offering resulting in $19,800,000 of proceeds. Simultaneously, the 2013 Note and March 2015 Loan were converted in the amount of $5,200,000, including outstanding debt principal and unpaid interest. As of February 28, 2019, the Company had $18,701,874 of cash on hand and current liabilities of $162,674. The Company believes that, as a result of the recent financing, 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. If additional funding is required, the Company expects to seek to obtain that funding through private equity or convertible debt. There can be no assurance as to the availability or terms upon which such financing and capital might be available.

 

 
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NOTE 2 – Summary of Significant Accounting Policies

 

Principles of Consolidation

 

Kinetic Energy Corporation (KEC) was incorporated on June 19, 2008, in the State of Nevada and holds the patents related to the Company’s MotionPower™ technology. The Company’s business activities related to the MotionPower™ technology are conducted through KEC.

 

New Energy Solar was incorporated on February 9, 2009, in the State of Florida and entered into agreements with The University of South Florida Research Foundation (“USF”) to sponsor research related to the Company’s SolarWindow™ technology. On February 18, 2015, the Company terminated the license agreement entered into with USF which originated on June 21, 2010.

 

These consolidated financial statements presented are those of SolarWindow Technologies, Inc. and its wholly owned subsidiaries, KEC, and New Energy Solar. All significant intercompany balances and transactions have been eliminated.

 

Use of Estimates

 

The preparation of the Company’s consolidated financial statements requires management to make estimates and use assumptions that affect the reported amounts of assets, liabilities and expenses. These estimates and assumptions are affected by management’s application of accounting policies. On an on-going basis, the Company evaluates its estimates. Actual results and outcomes may differ materially from these estimates and assumptions.

 

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

Computers

 

3 years

Equipment

 

5 years

 

During the six months ended February 28, 2019, the Company purchased $565,850 of equipment. During the three months ended February 28, 2019, the Company made a payment totaling $553,995 towards the purchase of manufacturing equipment with an estimated total cost of $1,846,650. That equipment is currently being manufactured to our particular specifications and will provide a significant increase in our ability to develop and showcase prototype products and components at or near “full size”.

 
 
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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.

 

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 cash equivalents, accounts payable and interest 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 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.

 

Net Income (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). See “NOTE 7 - Net Loss Per Share” for further discussion.

 
 
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Recent Accounting Standards

 

In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a free-standing equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have a material accounting effect. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company adopted ASU No. 2017-11 at the beginning of the current fiscal year with no impact on its Consolidated Financial Statements.

 

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718) Scope of Modification Accounting. The amendments in this Update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for public business entities for reporting periods for which financial statements have not yet been issued. The Company adopted ASU 2017-09 at the beginning of the current fiscal year with no impact on its Consolidated Financial Statements.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842)”, which supersedes ASC Topic 840, Leases, and creates a new topic, ASC 842, Leases. The new guidance requires the recognition of lease assets and liabilities for operating leases with terms of more than 12 months. Presentation of leases within the consolidated statements of operations and consolidated statements of cash flows will be generally consistent with the current lease accounting guidance. The ASU is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. The Company early adopted ASU No. 2016-02 at the beginning of the current fiscal year with no impact on its Consolidated Financial Statements.

 

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 financial statements.

 

NOTE 3 - Debt

 

As of August 31, 2018, the Company had the following outstanding debt balances which were converted to Units (defined below) during the six months ended February 28, 2019:

 

 

 

Issue

 

Maturity

 

 

 

 

Debt 

 

 

 

 

 

Interest

 

 

 

Date

 

Date

 

Principal

 

 

Discount

 

 

Balance

 

 

Payable

 

As of August 31, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 2015 Loan as amended

 

3/4/2015

 

12/31/2019

 

$ 600,000

 

 

$ -

 

 

$ 600,000

 

 

$ 186,797

 

2013 Note as amended

 

10/7/2013

 

12/31/2019

 

 

3,000,000

 

 

 

(663,918 )

 

 

2,336,082

 

 

 

1,337,146

 

 

 

 

 

 

 

$ 3,600,000

 

 

$ (663,918 )

 

$ 2,936,082

 

 

$ 1,523,943

 

 

March 2015 Loan as Amended

 

On March 4, 2015, the Company entered into a Bridge Loan Agreement with 1420468 Alberta Ltd. (which has since been merged with and into Kalen Capital Corporation, a British Columbia corporation wholly-owned by our Chairman, Harmel S. Rayat (the “ Investor ”)). Pursuant the Bridge Loan Agreement, the Company borrowed $600,000 at an annual interest rate of 7% (the “ March 2015 Loan ”), compounded quarterly, with a default rate of 15%.

 
 
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On November 3, 2017, the Company entered into the Third Amendment related to the March 2015 Loan pursuant to which the Company and the Investor amended the March 2015 loan to extend the maturity date to December 31, 2019. As consideration for the note extension, the interest rate was increased to 10.5%. On November 26, 2018, $798,566 of the March 2015 Loan was converted in exchange for 532,377 Units pursuant to the November 2018 Private Placement except for $7,922 of accrued interest which the Company agreed to repay from proceeds from the November 2018 Private Placement, See “Note 4 – Private Placements” for additional information.

 

During the three months ended February 28, 2019 and 2018, the Company recognized $0 and $18,846, respectively, of interest expense. During the six months ended February 28, 2019 and 2018, the Company recognized $19,691 and $33,282, respectively, of interest expense.

 

2013 Note as Amended

 

On October 7, 2013, the Company sold to the Investor an unsecured Convertible Promissory Note (the “ 2013 Note ”) in the amount of $3,000,000 with 7% interest compounded quarterly. According to the terms of the amended 2013 Note, the Investor may elect to convert principal and accrued interest into units of the Company’s equity securities, with each Unit consisting of (a) one share of common stock; and (b) one Stock Purchase Warrant for the purchase of one share of common stock. The conversion price for each Unit is the lesser of (i) $1.37; or (ii) 70% of the 20 day average closing price of the Company’s common stock prior to conversion, subject to a floor of $1.00 with the exercise price of each Warrant being equal to 60% of the 20 day average closing price of the Company’s common stock prior to conversion. If issued, the Warrant included in the Units would have been exercisable for a period of five years. As of February 28, 2018, if the investor had elected to convert the entirety of amounts owing under the 2013 Note, the Company would have been obligated to issue a warrant for the purchase of 3,004,655 shares of common stock. On November 26, 2018, $4,401,434 of the 2013 Note was further amended and converted in exchange for 2,934,290 Units pursuant to the November 2018 Private Placement except for $44,260 of accrued interest which the Company agreed to repay from proceeds from the November 2018 Private Placement, See “Note 4 – Private Placements” for additional information.

 

On November 3, 2017, the Company entered into the Third Amendment related to the 2013 Note pursuant to which the Company and the Investor amended the 2013 Note to extend the maturity date to December 31, 2019. As consideration for the note extension, the interest rate was increased to 10.5% and all outstanding warrants held by the Investor had their maturity date extended to December 31, 2022, resulting in an additional debt discount of $1,074,265 as of November 3, 2017. The modification did not result in a gain or loss due to the related party nature of the transaction.

 

During the three months ended February 28, 2019 and 2018, the Company recognized $0 and $103,885, respectively, of interest expense. Interest expense amounted to $108,548 and $183,465 during the six months ended February 28, 2019 and 2018, respectively. Accretion of the debt discount related to the 2013 Note as amended amounted to $0 and $227,733 during the three months ended February 28, 2019 and 2018, respectively and $663,918 and $572,880 during the six months ended February 28, 2019 and 2018, respectively.The full $663,918 of the remaining debt discount balance related to warrant expiration date extensions was amortized in total due to the conversion of the notes as described above.

 

NOTE 4 – Private Placements

 

November 2018 Private Placement

 

On November 26, 2018, the Company completed a self-directed offering (the “ November 2018 Private Placement ”) to accredited investors of 16,666,667 units of the Company’s equity securities (each a “ Unit ” and collectively, the “Units”) at a price of $1.50 per Unit with each Unit comprised of (a) one share of unregistered common stock; and (b) one warrant to purchase one share of common stock at a price, subject to certain adjustments, of $1.70 per share for a period of seven (7) years (the “ Series T Warrant ”). The Unit price represents an approximately 20% discount to the closing price of the Company's common stock on October 29, 2018, the date the Investor and the Board agreed to enter into a significant financing arrangement. Pursuant to the November 2018 Private Placement, the Company issued 13,200,000 Units in exchange for cash of $19,800,000 and 3,466,667 Units for the conversion of $5,200,000 of the principal and unpaid interest owed under the 2013 Note and the March 2015 Loan. The interest payable remaining under the notes totals $52,182, which the Company agreed to repay from proceeds received under the November 2018 Private Placement. Of the 13,200,000 Units issued in exchange for cash, Kalen Capital Corporation purchased 13,100,000 Units.

 
 
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The Series T Warrants were accounted for pursuant to ASC 470-20-25-2. The relative fair value of the common stock was estimated to be $13,687,151. The relative fair value of the Series T Warrants was estimated to be $11,312,849 as determined based on the relative fair value allocation of the proceeds received. The Series T Warrants were valued using the Black-Scholes option pricing model using the following variables: market price of common stock - $2.94 per share; estimated volatility – 85.85%; 7-year risk free interest rate – 2.97%; expected dividend rate - 0% and expected life - 7 years.

 

NOTE 5 – Common Stock and Warrants

 

Common Stock

 

At February 28, 2019, 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 2,570,085 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 (See “NOTE 6 - Stock Options”).

 

During the six months ended February 28, 2019, the Company completed the November 2018 Private Placement of 16,666,667 units at a price of $1.50 per unit. Each unit consisted of one share of common stock and one Series T Stock Purchase Warrant to purchase one (1) share of common stock at an exercise price of $1.70 per share for a period of seven (7) years (See “NOTE 4 – Private Placements”).

 

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 28, 2019 and August 31, 2018 is as follows:

 

 

 

Shares of Common Stock Issuable from Warrants Outstanding as of

 

 

Weighted

Average

 

 

 

 

 

 

 

 

February 28,

 

 

August 31,

 

 

Exercise

 

 

Date of

 

 

 

Description

 

2019

 

 

 

2018

 

 

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

 

 

 

-

 

 

$ 1.70

 

 

November 26, 2018

 

November 26, 2025

 

Total

 

 

19,483,517

 

 

 

2,816,850

 

 

 

 

 

 

 

 

 

 

 

NOTE 6 - Stock Options

 

Stock option grants pursuant to the 2006 Plan vest either immediately or over one to five years and expire ten years after the date of grant. Stockholders previously approved 5,000,000 shares for grant under the 2006 Plan, of which 2,570,085 remain available for grant, 1,305,001 have been exercised in total with 629,677 net shares (due to the cashless exercise feature) issued pursuant to such exercises of vested options from inception of the 2006 Plan through August 31, 2018. 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.

 
 
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A summary of the Company’s stock option activity for the three and six months ended February 28, 2019 and related information follows:

 

 

 

Number of Shares Subject to Option Grants

 

 

Weighted Average Exercise Price ($)

 

 

Weighted Average Remaining Contractual Term

 

Aggregate Intrinsic Value ($)

 

Outstanding at August 31, 2018

 

 

1,291,334

 

 

 

5.22

 

 

 

 

 

 

Forfeitures and cancellations

 

 

(20,000 )

 

 

4.87

 

 

 

 

 

 

Outstanding at February 28, 2019

 

 

1,271,334

 

 

 

5.23

 

 

8.58 years

 

 

-

 

Exercisable at February 28, 2019

 

 

557,334

 

 

 

5.08

 

 

8.25 years

 

 

-

 

 

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 28, 2019. 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 $2.25 on February 28, 2019 and no outstanding options have an exercise price below $2.25 per share, as of February 28, 2019, there is no intrinsic value to the Company’s outstanding stock options.

 

Three and six months Ended February 28, 2019

 

Due to his resignation from the Board of Directors on October 22, 2018, Joseph Sierchio 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 these options in the amount of $58,367.

 

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 Consolidated Statements of Operations for the three and six months ended February 28, 2019 and 2018:

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

February 28,

 

 

February 28,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Stock Compensation Expense:

 

 

 

 

 

 

 

 

 

 

 

 

SG&A

 

$ 118,409

 

 

$ 181,201

 

 

$ 253,852

 

 

$ 580,676

 

R&D

 

 

236,817

 

 

 

178,980

 

 

 

487,109

 

 

 

293,778

 

Total

 

$ 355,226

 

 

$ 360,181

 

 

$ 740,961

 

 

$ 874,454

 

 

As of February 28, 2019, the Company had $4,025,889 of unrecognized compensation cost related to unvested stock options which is expected to be recognized over a period of 3.0 years.

 
 
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The following table summarizes information about stock options outstanding and exercisable at February 28, 2019:

 

 

 

 

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 ($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.28

 

 

 

7,500

 

 

 

7.72

 

 

 

3.28

 

 

 

7,500

 

 

 

7.72

 

 

 

3.28

 

3.46

 

 

 

35,000

 

 

 

6.85

 

 

 

3.46

 

 

 

25,000

 

 

 

6.85

 

 

 

3.46

 

4.87

 

 

 

187,500

 

 

 

8.73

 

 

 

4.87

 

 

 

187,500

 

 

 

8.73

 

 

 

4.87

 

5.35

 

 

 

1,008,000

 

 

 

8.85

 

 

 

5.35

 

 

 

294,000

 

 

 

8.85

 

 

 

5.35

 

5.94

 

 

 

33,334

 

 

 

1.82

 

 

 

5.94

 

 

 

33,334

 

 

 

1.82

 

 

 

5.94

 

Total

 

 

 

1,271,334

 

 

 

8.58

 

 

 

5.23

 

 

 

557,334

 

 

 

8.25

 

 

 

5.08

 

 

NOTE 7 - Net Loss Per Share

 

During the three and six months ended February 28, 2019 and 2018, the Company recorded a net loss. Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. The Company has not included the effects of warrants, stock options and convertible debt on net loss per share because to do so would be antidilutive.

 

Following is the computation of basic and diluted net loss per share for the three and six months ended February 28, 2019 and 2018:

 

 

 

Three Months Ended

February 28,

 

 

Six Months Ended

February 28,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Basic and Diluted EPS Computation

 

 

 

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Loss available to common stockholders'

 

$ (826,836 )

 

$ (1,489,463 )

 

$ (2,513,753 )

 

$ (4,188,615 )

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

 

 

52,959,323

 

 

 

36,135,080

 

 

 

44,877,131

 

 

 

35,743,320

 

Basic and diluted EPS

 

$ (0.02 )

 

$ (0.04 )

 

$ (0.06 )

 

$ (0.12 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

1,271,334

 

 

 

2,811,334

 

 

 

1,271,334

 

 

 

2,811,334

 

Warrants

 

 

19,483,517

 

 

 

2,909,850

 

 

 

19,483,517

 

 

 

2,909,850

 

Convertible debt

 

 

-

 

 

 

3,004,655

 

 

 

-

 

 

 

3,004,655

 

Warrants issuable upon conversion of debt (See "NOTE 3 - Debt" above)

 

 

-

 

 

 

3,004,655

 

 

 

-

 

 

 

3,004,655

 

Total shares not included in the computation of diluted losses per share

 

 

20,754,851

 

 

 

11,730,494

 

 

 

20,754,851

 

 

 

11,730,494

 

 

NOTE 8 - Related Party Transactions

 

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.

 
 
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The law firm of Sierchio & Partners, LLP, of which Joseph Sierchio, one of the Company’s directors, was a principal, had provided counsel to the Company since its inception. Beginning in September 2016, Mr. Sierchio became a partner at Satterlee Stephens LLP (“Satterlee”). Concurrently with Mr. Sierchio’s move to Satterlee, the Company engaged with Satterlee to provide legal counsel with Mr. Sierchio maintaining his role as the Company’s primary attorney. Mr. Sierchio resigned from the Board effective October 22, 2018, but maintains his role and the Company’s primary attorney. Fees billed by Satterlee during the three months ended February 28, 2019 and 2018, totaled $27,699 and $71,767, respectively, and $52,699 and $145,834 during the six months ended February 28, 2019 and 2018. At February 28, 2019, the Company had accrued payables owing to Satterlee totaling $15,000 which is included in accounts payable and accrued expenses on the consolidated balance sheets.

 

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 on December 1, 2018 (Amendment No. 2). 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 receives compensation of $18,750 per month. During the three months ended February 28, 2019 and 2018, the Company recognized $56,250 and $15,000 of expense in connection with the Consulting Agreement. During the six months ended February 28, 2019 and 2018, the Company recognized $71,250 and $30,000 of expense in connection with the Consulting Agreement.

 

On November 26, 2018, the Company completed the November 2018 Private Placement to accredited investors of 16,666,667 Units of the Company’s equity securities at a price of $1.50 per Unit with each Unit comprised of (a) one share of common stock; and (b) one Series T Warrant to purchase one share of common stock at a price of $1.70 per share for a period of seven (7) years. The Investor participated in the November 2018 Private Placement by purchasing 13,100,000 Units in exchange for cash of $19,650,000 and converting $5,200,000 owing under the March 2015 Loan and 2013 Note into 3,466,667 Units.

 

On November 3, 2017, the Company entered into the Third Amendment to the 2013 Bridge Loan Agreement and the Third Amendment to the 2015 Bridge Loan Agreement with the Investor pursuant to which the Company and the Investor agreed to extend the maturity date to December 31, 2019. Pursuant to the Third Amendment to the 2013 Bridge Loan Agreement and the Third Amendment to the 2015 Bridge Loan Agreement, the rate of interest increased to 10.5% and the following warrants, held by the Investor, had their maturity date extended to December 31, 2022: a) Series M Warrant to purchase 246,000 shares; b) Series N Warrant to purchase 767,000 shares; c) Series P Warrant to purchase 213,500 shares; d) Series R Warrant to purchase 468,750; and e) Series S-A Warrant to purchase 300,000 shares. As a result of extending the expiration date of the above warrants to December 31, 2022, the Company recognized an additional debt discount to the 2013 Note of $1,074,265 as of November 3, 2017. For additional information related to our warrants, please see “NOTE 5 – Common Stock and Warrants”. For additional information related to our debt, please see “NOTE 3 – Debt”.

 

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.

 

NOTE 9 – Subsequent Events

 

Management has reviewed material events subsequent to the period ended February 28, 2019 and through the date of filing of financial statements in accordance with FASB ASC 855 “Subsequent Events”.

 

There are no material events subsequent to the period ended February 28, 2019 and through to the date of filing of this 10-Q.

 
 
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I tem 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 reports filed 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,” “our Company,” and “SolarWindow” refer to SolarWindow Technologies, Inc., a Nevada corporation, and its consolidated subsidiaries.

 

Overview

 

We are a pre-revenue company developing proprietary SolarWindow™ transparent electricity generating coatings. SolarWindow™ coatings is an OPV device comprised of ultra-thin layers that can be applied to glass, flexible glass and plastic surfaces. Our SolarWindow™ transparent electricity-generating coatings and technology is capable of harvesting light energy from the sun and artificial sources and could potentially be used on any of the more than 85 million commercial and residential buildings in the United States alone. Our SolarWindow™ technology is the subject of sixty (60) pending U.S. and international patent filings.

 

The development of our SolarWindow™ technology continues to advance under the Stevenson-Wydler Cooperative Research and Development Agreement (the “ NREL CRADA ”) with the Alliance for Sustainable Energy, LLC (the “ Alliance for Sustainable Energy ”), which is the operator of The National Renewable Energy Laboratory (“ NREL ”); and the award of the Company’s first-ever advanced materials manufacturing Cooperative Research and Development Agreement (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 this project is to develop and demonstrate a unique high-throughput process methodology for semi-transparent organic photovoltaic (OPV) modules compatible with high process speeds for many different advanced material manufacturing systems.

 
 
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On August 2, 2017, we entered into a Process Integration and Production Agreement with TriView Glass Industries, LLC (“Triview”). Triview is a glass fabricator operating a manufacturing facility in City of Industry, California. The purpose and primary goals of agreement are to:

 

 

1. establish commercial scale manufacturing methodologies and processes to fabricate products based on WNDW technologies; and

 

 

 

 

2. integrate SolarWindow™ process technologies into the Triview manufacturing process, to fabricate specific transparent electricity-generating SolarWindow™ Products.

 

The Company has validated our SolarWindow™ coatings under rigorous autoclave testing for window glass lamination at Triview. Layered with SolarWindow™ electricity-generating liquid coatings, glass modules were subjected to the extremely high heat and pressure in the autoclave equipment located at the fabricator’s facility. Despite the SolarWindow™ modules being subjected to the harsh pressure and temperature conditions, subsequent performance testing confirmed that the modules continued to produce power. This is an important milestone for the commercialization of SolarWindow products, showing that our PV layers are compatible with (the commonly-used) autoclave production equipment.

 

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 milestones includes: 

 

 

· SolarWindow has been awarded a Grant by the U.S. Department of Energy, for Advanced Manufacturing. The Company was awarded the CRADA after submitting a proposal outlining its process technologies and fabrication methods to the DOE’s Roll-to-Roll Advanced Materials Manufacturing Consortium, led by Oak Ridge National Laboratory (ORNL) and partnering with Argonne National Laboratory (ANL), Lawrence Berkeley National Laboratory (LBNL), and the National Renewable Energy Laboratory (NREL). The CRADA will be carried out with the DOE by SolarWindow, ANL, and NREL;

 

 

 

 

· 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;

 

 

 

 

· our SolarWindow™ transparent electricity-generating glass modules were successfully processed under rigorous conditions in an autoclave system used for window glass lamination at a commercial window fabricator;

 

 

 

 

· We have 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;

 

 

 

 

· We have expanded product development range/activities 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;

 

 

 

 

· filed over sixty (60) U. S. and international patent and thirty (30) trademark applications for our electricity-generating coating and SolarWindow™ technology development efforts;

 

 

 

 

· 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;

 

 

 

 

· generated electricity on flexible plastic using novel see-through SolarWindow™ coatings;

 

 

 

 

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

 

 

 

 

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

 

 

 

 

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

 

 
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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; and

 

 

 

 

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

 

In addition to SolarWindow™-Commercial, Structural, and Architectural products, we are also developing SolarWindow™ Retrofit Veneer products as transparent, tinted, flexible and rigid veneers that installers can apply directly over the inside of existing windows. This expanded product line broadens our market reach beyond new and replacement installations, to include windows currently installed on the estimated five million commercial buildings constructed in the U.S. alone. As noted, the SolarWindow™ Retrofit Veneer products will be developed concurrently with the other SolarWindow™ products currently under development.

 

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.

 

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

 

We plan to market any SolarWindow™ Products we commercialize through co-marketing and co-promotion, licensing, and distribution arrangements with third party collaborators, such as Triview, to advance the technical development and subsequent commercialization of our SolarWindow™ products. 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. Other than out agreement with Triview, we have not yet entered into any other such arrangements for these services.

 
 
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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.

 

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.

 

Process Integration and Production Agreement with TriView Glass Industries

 

On August 2, 2017, we entered into the PIPA Agreement with Triview. Triview is a glass fabricator operating a manufacturing facility in City of Industry, California. The purpose and primary goals of agreement are to:

 

 

· establish commercial scale manufacturing methodologies and processes to fabricate products based on WNDW technologies; and

 

· integrate SolarWindow™ technologies into the Triview’s manufacturing process, to fabricate specific SolarWindow™ transparent electricity-generating glass products.

 

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. 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.

 
 
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On March 6, 2013, we entered into Phase II of our NREL CRADA with Alliance for Sustainable Energy. 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 a modification of the CRADA (the “ Modification ”) to the NREL CRADA with Alliance for Sustainable Energy, previously entered into between us and NREL. The purpose of the Modification was to extend the date pursuant to which NREL’s researchers work towards specific product development goals.

 

On November 21, 2017, the Company entered into a No Cost Time Extension (“NCTE”) under the NREL CRADA with the Alliance for Sustainable Energy. On November 8, 2018, we entered into an extension of the NCTE which extended the completion date to December 31, 2019. Under the terms of the NCTE, all terms and conditions of the CRADA remain in full force and effect without change. Specifically, we are preparing to commercialize our OPV-based SolarWindow™ transparent electricity-generating coatings for BIPV, and glass and flexible plastic applications. Under Modification, NREL and the Company will work jointly towards achieving specific commercialization goals and objectives. As of February 28, 2019, the Company made $268,566 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 consolidated balance sheets.

 

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 its first-ever advanced materials manufacturing collaborative research and development agreement (CRADA) by the U.S. Department of Energy (DOE) Office of Energy Efficiency and Renewable Energy’s (EERE) Advanced Manufacturing Office (AMO). SolarWindow was awarded the 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 Oak Ridge National Laboratory and partnering with Argonne National Laboratory (ANL), Lawrence Berkeley National Laboratory, and the National Renewable Energy Laboratory (NREL). The CRADA will be carried out with the DOE by SolarWindow, ANL, and NREL.

 

The purpose of this project is to develop and demonstrate a unique high-throughput process methodology for semitransparent organic photovoltaic (OPV) modules compatible with high process speeds for many different advanced material manufacturing systems.

 
 
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Results of Operations

 

Three and six months ended February 28, 2019 compared with the three and six months ended February 28, 2018

 

Operating Expenses

 

A summary of our operating expense for the three and six months ended February 28, 2019 and 2018 follows:

 

 

 

Three Months Ended February 28,

 

 

Increase /

 

 

Percentage

 

 

 

2019

 

 

2018

 

 

(Decrease)

 

 

Change

 

Operating expense

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

$ 317,810

 

 

$ 434,266

 

 

$ (116,456 )

 

 

-27

 

Research and product development

 

 

235,780

 

 

 

344,552

 

 

 

(108,772 )

 

 

-32

 

Stock compensation

 

 

355,226

 

 

 

360,181

 

 

 

(4,955 )

 

 

-1

 

Total operating expense

 

$ 908,816

 

 

$ 1,138,999

 

 

$ (230,183 )

 

 

-20

 

 

 

 

Six Months Ended February 28,

 

 

Increase /

 

 

 

 

 

2019

 

 

2018

 

 

(Decrease)

 

 

% Change

 

Operating expense

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

$ 689,215

 

 

$ 853,317

 

 

$ (164,102 )

 

 

-19

 

Research and product development

 

 

373,400

 

 

 

648,517

 

 

 

(275,117 )

 

 

-42

 

Stock compensation

 

 

740,961

 

 

 

1,897,154

 

 

 

(1,156,193 )

 

 

-61

 

Total operating expense

 

$ 1,803,576

 

 

$ 3,398,988

 

 

$ (1,595,412 )

 

 

-47

 

 

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 28, 2019 compared to the three months ended February 28, 2018, SG&A costs decreased due primarily to an approximate $120,000 reduction in investor communications related fees. During the six months ended February 28, 2019 compared to the six months ended February 28, 2018, SG&A costs decreased due primarily to an approximately $190,000 reduction in investor communications related fees offset by an approximately $55,000 increase in professional fees.

 

Research and Product Development

 

Research and Product Development (“ R&PD ”) 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 cost allocations. Payments under these agreements include salaries and benefits for R&PD personnel, allocated overhead, contract services and other costs. R&PD 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 and six months ended February 28, 2019 compared to the three and six months ended February 28, 2018, R&PD costs decreased primarily as a result of a decrease in consulting, personnel and CRADA costs.

 

Stock Compensation

 

The Company grants stock options to its Directors, employees and consultants and issues stock to its Directors. Stock compensation represents the expense associated with the amortization of our stock options and issuance of common stock. 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 compensation expense was flat during the three months ended February 28, 2019 compared to the three months ended February 28, 2018. Stock compensation expense decreased during the six months ended February 28, 2019 compared to the six months ended February 28, 2018 due to no stock or option grants occurring in 2018 compared to the 2017 grant of 255,000 options with vesting related expense of $493,057 and issuance of 210,000 shares of common stock to our directors valued at $1,022,700.

 
 
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Other Income (Expense)

 

A summary of our other income (expense) for the three and six months ended February 28, 2019 and 2018 follows:

 

 

 

Three Months Ended February 28,

 

 

Increase /

 

 

 

2019

 

 

2018

 

 

(Decrease)

 

Other income (expense)

 

 

 

 

 

 

 

 

 

Interest income

 

$ 81,980

 

 

$ -

 

 

$ 81,890

 

Interest expense

 

 

-

 

 

 

(122,731 )

 

 

(122,731 )

Accretion of debt discount

 

 

-

 

 

 

(227,733 )

 

 

(227,733 )

Total other income (expense)

 

$ 81,980

 

 

$ (350,464 )

 

 

 

 

 

 

 

Six Months Ended February 28,

 

 

Increase /

 

 

 

2019

 

 

2018

 

 

(Decrease)

 

Other income (expense)

 

 

 

 

 

 

 

 

 

Interest income

 

$ 81,980

 

 

$ -

 

 

$ 81,980

 

Interest expense

 

 

(128,239 )

 

 

(216,747 )

 

 

(88,508 )

Accretion of debt discount

 

 

(663,918 )

 

 

(572,880 )

 

 

91,038

 

Total other income (expense)

 

$ (710,177 )

 

$ (789,627 )

 

 

 

 

 

“Interest income” relates to the interest earned on our cash. “Interest expense” relates to the stated interest of our convertible promissory notes and bridge note. “Accretion of debt discount” represents the accretion of the discount applied to our notes as a result of the issuance and modification of detachable warrants and the beneficial conversion feature contained in our notes. On November 26, 2018, the investor converted all outstanding debt 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. See “NOTE 3 – Debt” and “NOTE 4 – Private Placements” to our Consolidated Financial Statements for additional information.

 

Liquidity and Capital Resources

 

Our principal source of liquidity is cash in the bank. As of February 28, 2019, the Company had $18,701,874 of cash compared to $696,826 as of August 31, 2018. We have financed our operations primarily from the sale of equity and debt securities. On November 26, 2018, the Company completed a self-directed offering resulting in $19,800,000 of proceeds. Simultaneously, the 2013 Note and March 2015 Loan were converted in the amount of $5,200,000, including outstanding debt principal and unpaid interest.

 
 
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Summary of Consolidated cash Flows

 

Presented below is a table that summarizes the cash provided or used in our activities and the amount of the respective increases or decreases in cash provided by (used in) those activities between the fiscal periods:

 

 

 

Six Months Ended February 28,

 

 

2019

compared to

 

 

 

2019

 

 

2018

 

 

2018

 

Operating activities

 

$ (1,229,102 )

 

$ (1,639,026 )

 

$ 409,924

 

Investing activities

 

 

(565,850 )

 

 

(2,581 )

 

 

(563,269 )

Financing activities

 

 

19,800,000

 

 

 

2,812,426

 

 

 

16,987,574

 

Net increase (decrease) in cash and cash equivalents

 

$ 18,005,048

 

 

$ 1,170,819

 

 

$ 16,834,229

 

 

Operating Activities

 

Net cash used in operating activities totaled $1,229,102 for the six months ended February 28, 2019 as compared to $1,639,026 for the six months ended February 28, 2018. The $409,924 decrease in cash used in operating activities was primarily the result of lower R&PD costs and investor communications related fees offset by an increase in professional fees.

 

Investing Activities

 

Net cash used in investing activities totaled $565,850 for the six months ended February 28, 2019 as compared to $2,581 for the six months ended February 28, 2018. During the six months ended February 28, 2019, the Company purchased $565,850 of equipment, including a payment of $553,995 towards the purchase of manufacturing equipment with an estimated total cost of $1,846,650. That equipment is currently being fabricated to meet our process and product fabrication standards and requirements.

 

Financing Activities

 

Net cash provided by financing activities totaled $19,800,000 for the six months ended February 28, 2019, compared to $2,812,426 for the six months ended February 28, 2018. During the six months ended February 28, 2019, the Company received proceeds of $19,800,000 from the November 2018 Private Placement whereas during the six months ended February 28, 2018, the Company received proceeds of $257,250 from the exercise of 80,000 Series O Warrants and 2,555,176 from the September 29, 2017 private placement.

 

Other Contractual Obligations

 

None.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Recently Issued Accounting Pronouncements

 

See Note 2 to our Consolidated Financial Statements for more information regarding recent accounting pronouncements and their impact to our consolidated results of operations and financial position.

 

Critical Accounting Policies

 

The preparation of financial statements in accordance with generally accepted accounting principles in the U.S. (“GAAP”) requires the use of estimates and assumptions that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental disclosures including information about contingencies, risk and financial condition.

 
 
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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. Our selection and disclosure of our critical accounting policies and estimates has been reviewed by our Board. Following is a review of the more significant assumptions and estimates and the accounting policies and methods used in the preparation of our consolidated financial statements. For all of these estimates, we caution that future events rarely develop exactly as forecast, and the best estimates routinely require adjustment. See Note 2 - Summary of Significant Accounting Policies to the Notes to Consolidated Financial Statements which discusses the significant accounting policies that we have adopted.

 

Stock Based Compensation

 

We account for stock based compensation arrangements through the measurement and recognition of compensation expense for all stock based payment awards to employees and directors based on estimated fair values. We use the Black-Scholes option valuation model to estimate the fair value of our stock options and warrants at the date of grant. The Black-Scholes option valuation model requires the input of subjective assumptions to calculate the value of options and warrants. We use historical company data among other information to estimate the expected price volatility and the expected forfeiture rate and not comparable company information, due to the lack of comparable publicly traded companies that exist in our industry.

 

New Accounting Standards

 

For a discussion of our New Accounting Standards, refer to Note 2. Summary of Significant Accounting Policies to our Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

 

Related Party Transactions

 

For a discussion of our Related Party Transactions, refer to “Note 8 - Related Party Transactions” to our Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.

 

Corporate Information

 

SolarWindow Technologies, Inc., a Nevada corporation, was incorporated in 1998. The Company’s executive offices are located at 9375 East 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 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 SEC. The information accessible through our website is not a part of this Quarterly Report on Form 10-Q.

 

Special Note Regarding Forward-Looking Statements

 

This Quarterly Report on Form 10-Q contains or incorporates a number 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 on our current plans or assessments which we believe to be reasonable as of the date hereof.

 
 
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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, changes in regulations and taxes.

 

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.

 

Forward-looking statements are not guarantees of performance. You should understand that the following important factors, in addition to those discussed under the section entitled "Risk Factors" in the Annual Report and in the documents incorporated by reference, could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements. You should also understand that many factors described under one heading below may apply to more than one section in which we have grouped them. 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.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

The Company maintains “disclosure controls and procedures,” as such term is defined under Rule 13a-15(e) of the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any control and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective.

 

As required by SEC Rule 13a-15(b), the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of February 28, 2019. Based on this evaluation, the Company’s Principal Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were ineffective as of February 28, 2019 because of the following material weakness in our internal control over financial reporting:

 

 

· Ineffective control environment due to an insufficient number of independent board members, insufficient oversight of work performed, and the lack of compensating controls over financial reporting due to limited personnel;

 

· Ineffective design, implementation, and documentation of internal controls impacting financial statement accounts and general controls over technology pertaining to user access and segregation of duties, banking and disbursements, and financial accounting system applications; and

 

· Ineffective monitoring controls related to the financial close and reporting process, including management’s risk assessment process and its identification, evaluation, and timely remediation of control deficiencies

 

Changes in Internal Control Over Financial Reporting

 

The Company began implementing internal controls during our fiscal year ended August 31, 2018 and continues to take actions to remediate the material weaknesses in our internal controls over financial reporting, including implementing additional processes and controls designed to address the underlying causes associated with the above mentioned material weaknesses. The Company’s internal control implementation and remediation efforts include the following:

 

 

· On June 6, 2018, we engaged the services of a risk and compliance consulting firm to assist in our evaluation and implementation of internal controls and remediation of identified control deficiencies.

 

· On October 22, 2018, we appointed Steve Yan-Klassen, CPA, CMA as our CFO in a effort to provide Sr. financial oversight and increased segregation of duties.

 

· Performing more extensive reviews of critical estimates, journal entries, complex calculations and the financial close and reporting process.

 

· Realigning certain roles to provide better segregation of duties and implementing stronger user access controls.

 

To the extent reasonably possible, we will utilize the services of a risk and compliance consulting firm to assist us in our remediation plan and we will utilize internal resources to implement additional internal controls as deemed necessary. We have and will continue to take the necessary steps to implement additional review and approval procedures as applicable to strengthen our controls over the financial reporting and disclosure process. In addition, we continue to create and implement new information technology policies and procedures related to controls over information technology operations and security. To the extent necessary, we may hire additional staff or reassign duties of existing staff in connection with our remediation efforts.

 

 
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PART II – OTHER INFORMATION

 

Item 6. Exhibits

 

Exhibit No.

Description of Exhibit

 

4.1 Form of Series T Stock Purchase Warrant dated November 26, 2018 (Incorporated by reference to Form 8-K filed on November 29, 2018)

 

4.2 Form of Subscription Agreement for Units Dated November 26, 2018 (Incorporated by reference to Form 8-K filed on November 29, 2018)

 

10.1 Amendment to the March 2015 Loan Agreement dated November 26, 2018 (Incorporated by reference to Form 8-K filed on November 29, 2018)

 

10.2 Amendment to the 2013 Note as amended dated November 26, 2018 (Incorporated by reference to Form 8-K filed on November 29, 2018)

 

31.1 Certification 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*

 

31.2 Certification 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*

 

32.1 Certification 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.INS

XBRL Instance Document**

101.SCH

XBRL Taxonomy Extension Schema Document**

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document**

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document**

101.LAB

XBRL Taxonomy Extension Label Linkbase Document**

101.PRE

XBRL 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.

 

 
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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.
       

Date: April 9, 2019

By: /s/ Steve Yan-Klassen

 

 

Steve Yan-Klassen  
   

Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

 

 

 
27

 

EXHIBIT 31.1

 

CERTIFICATION PURSUANT TO RULE 13A-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, John A. Conklin, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of SolarWindow Technologies, Inc. (the “Registrant”);

 

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4. As the registrant’s certifying officer I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

 

 

 

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

 

 

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

 

 

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

 

 

5. As the registrant's certifying officer I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

 

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
  
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

  

 

Date: April 9, 2019

By: /s/ John A. Conklin
John A. Conklin
Chief Executive Officer and Director

(Principal Executive Officer)

 

EXHIBIT 31.2

 

CERTIFICATION PURSUANT TO RULE 13A-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Steve Yan-Klassen, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of SolarWindow Technologies, Inc. (the “Registrant”);

 

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4. As the registrant’s certifying officer I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

 

 

 

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

 

 

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

 

 

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

 

 

5. As the registrant's certifying officer I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

 

 

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

 

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

 

 

Date: April 9, 2019 By: /s/ Steve Yan-Klassen

 

 

Steve Yan-Klassen  
    Chief Financial Officer  
    (Principal Financial Officer and Principal Accounting Officer)  

 

 

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

The undersigned, as the Chief Executive Officer and the Chief Financial Officer of SolarWindow Technologies, Inc., respectively, certifies that, to the best of their knowledge and belief, the Quarterly Report on Form 10-Q for the three and six months ended February 28, 2019 that accompanies this certification fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the quarterly report fairly presents, in all material respects, the financial condition and results of operations of SolarWindow Technologies, Inc. at the dates and for the periods indicated. The foregoing certification is made pursuant to 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) and shall not be relied upon for any other purpose.

 

 

Date: April 9, 2019 By: /s/ John A. Conklin
John A. Conklin
Chief Executive Officer and Director

(Principal Executive Officer)

   

 

Date: April 9, 2019

By:

/s/ Steve Yan-Klassen

Steve Yan-Klassen

Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)