Item 1A. Risk Factors
Risk Factors
The following risk factors and the forward-looking
statements elsewhere in this prospectus should be read carefully in connection with evaluating the business of the Company. A wide
range of events and circumstances could materially affect our overall performance and our results of operations, and therefore, an investment
in us is subject to risks and uncertainties. In addition to the important factors affecting specific business operations and the financial
results of those operations identified elsewhere in this prospectus, the following important factors, among others, could adversely affect
our operations. While each risk is described separately below, some of these risks are interrelated and it is possible that certain risks
could trigger the applicability of other risks described below. Also, the risks and uncertainties described below are not the only ones
that we face. Additional risks and uncertainties not presently known to us, or that are currently deemed immaterial, could also potentially
impair our overall performance, the performance of particular businesses and our results of operations. These risk factors may be amended,
supplemented or superseded from time to time in filings and reports that we file with the SEC in the future.
Risks Related to the Covid-19 Pandemic
A novel strain of coronavirus, the COVID-19
virus, may adversely affect our business operations and financial condition.
In December 2019, an outbreak of the COVID-19 virus
was reported in Wuhan, China. On March 11, 2020, the World Health Organization declared the COVID-19 virus a global pandemic and on March
13, 2020, President Donald J. Trump declared the virus a national emergency in the United States. This highly contagious disease has spread
to most of the countries in the world and throughout the United States, creating a serious impact on customers, workforces and suppliers,
disrupting economies and financial markets, and potentially leading to a world-wide economic downturn. It has caused a disruption of the
normal operations of many businesses, including the temporary closure or scale-back of business operations and/or the imposition of either
quarantine or remote work or meeting requirements for employees, either by government order or on a voluntary basis. The pandemic may
adversely affect our operations, our employees and our employee productivity. It may also impact the ability of our subcontractors, partners,
and suppliers to operate and fulfill their contractual obligations, and result in an increase in costs, delays or disruptions in performance.
Our employees are working remotely and using various
technologies to perform their functions. In reaction to the spread of COVID-19 in the United States, many businesses have instituted social
distancing policies, including the closure of offices and worksites and deferring planned business activity. The disruption and volatility
in the global and domestic capital markets may increase the cost of capital and limit our ability to access capital. Both the health and
economic aspects of the COVID-19 virus are highly fluid and the future course of each is uncertain. For these reasons and other reasons
that may come to light if the coronavirus pandemic and associated protective or preventative measures expand, we may experience a material
adverse effect on our business operations, revenues and financial condition, and development; however, its ultimate impact is highly uncertain
and subject to change.
Risks Related to Our Financial Condition and Need
for Additional Financing
We have not generated any revenues and have
experienced significant losses to date and we expect to continue incur losses for the foreseeable future. Consequently, we will require
additional financing in the future to maintain and expand operations into advanced stages of product development and fabrication, and
failure to obtain such financing would have a material adverse effect on our business, operating results, financial condition and prospects.
8
We have experienced and continue to experience negative
cash flows from operations. We have not generated any revenue since inception and do not expect to generate any substantial amounts of
revenue for the foreseeable future. We had a net loss of $7,907,902 and $7,353,062 for our fiscal years ended August 31, 2021 and 2020.
As of August 31, 2021, we had cash and short-term investments of $12,127,456 and working capital of $12,148,285. Based on management’s
assessment, the Company has sufficient cash to meet its current funding requirements over the next twelve months following the date of
this annual report, to meet our projected product development and fabrication goals during this period. However, our current cash reserves
may not be sufficient to permit us to maintain or expand our operations beyond this period.
We are currently in the advanced stages of our research
and early stages of product development and have come to the point where larger, faster, and more precise equipment is necessary for development
to continue and to be able to come to market with a commercially viable product. We expect that we will need to raise substantial additional
capital to accomplish our manufacturing and product sales objectivesin future years.
We anticipate seeking additional funding through financial
or strategic investors. If adequate funds are not available on reasonable terms, or at all, it would result in a material adverse effect
our business, operating results, financial condition and prospects. In particular, the Company may be required to delay; reduce the scope
of or terminate its research and development programs; sell rights to its technology or other technologies or products based upon these
technologies; or license the rights to these technologies or products on terms that are less favorable to us than might otherwise be available.
If we raise additional funds by issuing equity or
debt securities, further dilution to stockholders may result and new investors could have rights superior to existing stockholders.
Even if financing is available to us, because
we cannot currently estimate the amount of funds or time required to commercialize our technologies, we may secure less funding than is
actually required to effectuate our business plan.
As noted above, we are currently in the advanced stages
of our research and early stages of product development. We have come to the point where larger, faster, and more precise equipment is
necessary for all facets of technology and product development to continue and to be able to come to market with a commercially viable
product. We, however, cannot accurately predict the amount of funding or the time required to successfully commercialize our technology.
The actual cost and time required to commercialize these technologies may vary significantly depending on, among other things, the results
of our research and product development efforts; the cost of developing, acquiring, or licensing various enabling technologies, changes
in the focus and direction of our research and product development programs; competitive and technological advances; the cost of filing,
prosecuting, defending and enforcing claims with respect to patents; the regulatory approval process; process manufacturing; marketing
and other costs associated with commercialization of these technologies. Because of this uncertainty, even if financing is available to
us, we may secure insufficient funding to effectuate our business plan.
In order to obtain the required financing, we
may enter in transactions that may dilute the ownership interest of our current stockholders.
In order to raise sufficient capital to meet its financial
obligations, we may enter into financing transactions that would result in dilution of the ownership interests of our current stockholders
or which may involve the sale of our securities at prices that are at a discount to current market price of our stock as reported on the
OTCPINK. Such sales will be made at prices determined by our Board based on factors deemed appropriate at the time; accordingly, such
sales by us could be made at prices less than the price of the shares of our common stock purchased, in which case, investors could experience
dilution of their investment.
9
Adverse conditions in the alternative energy
or the global economy more generally could have adverse effects on our results of operations and consequently the price of our common
stock.
Our business is exposed to significant financial risks,
most of which are beyond our control, related to interest rates, State & Federal subsidies, the modified accelerated cost recovery
system, taxes, and general economic conditions both domestic and internationally. These risks may affect our ability to effect (i) borrowings
or to raise capital through the offer and sale of equity-based securities and (ii) the execution of our business plan and product commercialization
efforts by thwarting consumer demand for our products, and thereby adversely impacting our potential revenue and profitability.
An increase in raw material prices could have
negative consequences on our long-term profitability.
We face exposure to fluctuations in energy, raw materials,
chemicals, and glass and plastic film prices. If we are not able to hedge, compensate or pass on our increased costs through a supply-chain
or to customers, this could have an adverse impact on our financial results and stability, and deployment of our products.
Risks Related to Our Technology, Products and Operations
The development of our technology is subject
to the risks of failure inherent to the development of any novel technology.
Ultimately, the development and commercialization
of our technology is subject to a number of risks that are particular to the development and commercialization of any novel technology.
These risks include, but are not limited to, the following:
The success of our research and development
activities is uncertain. If such efforts are not successful, we will be unable to generate revenues from our operations and we may have
to cease doing business.
Commercialization of our technology will require significant
further research, development and testing as we must ascertain whether our technology can form the basis for a commercially viable technology
or product. If our research and development fails to prove the commercial viability of our technology, we may need to abandon our business
model and/or cease doing business, in which case our shares may have no value and you may lose your investment. We anticipate remaining
engaged in technology and product development for (a) specific product(s) through at least December 31, 2022.
If we ultimately do not obtain the necessary
regulatory and safe operation approvals for the commercialization of our technology, we will not achieve profitable operations and your
investment may be lost.
In order to commercialize our technology, we may need
to obtain regulatory approval from various local, state, federal or international agencies; or approval from global safety certifying
organizations that will certify safe operation of our products. At this time, we do not have a product to be submitted for regulatory
or safe operating approval. The process for obtaining these approvals may be time consuming and costly, and there is no guaranty that
we will be able to obtain such approvals. The failure to obtain any necessary approvals could delay or prevent us from achieving revenue
or profitability, which could result in the partial or total loss of your investment.
10
We are operating in highly fragmented and competitive
market and our competitors have several competitive advantages over us.
Our commercial success will depend on our ability
to compete effectively in product development areas such as, but not limited to, building integration, safety, efficacy, ease of use,
customer compliance, price, marketing and distribution. Our competitors may succeed in developing products that are more effective than
any products derived from our research and development efforts or that would render such products obsolete and non-competitive. The alternative
and renewable energy industry is characterized by intense competition, rapid product development and technological change.
Most of the competition that we encounter is expected
to come from companies, research institutions and universities who are researching and developing technologies and products similar to,
or are competitive with, any technology we may develop.
These companies, research institutions and universities
may have several competitive advantages over us, including:
• Significantly greater name recognition;
• established distribution networks;
• more advanced technologies and product development;
• processes that are operational and manufacturing prototype or final products;
As a result, we may not be able to compete effectively
against these companies or their products.
Any products developed from our technology will
face competition from other companies producing solar power and/or energy harvesting or storage products.
The solar power market is intensely competitive and
rapidly evolving. Some of our competitors are better capitalized, have more employees, and have established market positions than SolarWindow.
There are a number of companies that produce solar power and alternative energy products, which may be competitive with those that we
are seeking to develop. Additionally, some of our competitors may be developing or currently producing products based on new solar power
and alternative energy technologies that may have a cost basis similar to, or lower than, our projected product costs.
Accordingly, If we fail to attract and retain
customers and establish a successful distribution network for our products, we may be unable to achieve adequate sales and market
share; or, if our competitors’ products, services or technologies become more accepted
than ours, or if they are successful in bringing their products or services to market earlier than us our revenues could be
adversely affected.
As noted above, some of our current and potential competitors have
significantly greater resources and better competitive positions in certain markets than we do. These factors may allow our
competitors to respond more effectively than us to new or emerging technologies and changes in market requirements. Our competitors
may develop products, features, or services that are similar to ours or that achieve greater market acceptance, may undertake more
far-reaching and successful product development efforts or marketing campaigns, or may adopt more aggressive pricing policies. See
“Our Business.”
11
Mergers of, or other strategic
transactions by, our competitors could weaken our competitive position or reduce our revenue.
If one or more of our
competitors were to merge or partner with another of our competitors, the change in the competitive landscape could adversely affect
our ability to compete effectively. A potential result of such expansion is that certain of our current or potential competitors may
be acquired by third parties with greater available resources and the ability to further invest in product improvements and initiate
or withstand substantial price competition. Our competitors also may establish or strengthen cooperative relationships with our
current or future value-added resellers, third-party consulting firms or other parties with whom we have relationships, thereby
limiting our ability to promote our products. Disruptions in our business caused by these events could reduce our revenue.
Technological changes could render our products
uncompetitive or obsolete, which could prevent us from achieving market share and sales.
Our failure to refine or advance our technologies,
and to develop and introduce new products could cause our products to become uncompetitive or obsolete, which could prevent us from achieving
market share and sales. The alternative and renewable energy industry is rapidly evolving and highly competitive. We will need to invest
significant financial resources in additional technology research & development, and product development to keep pace with technological
advances in the industry and to compete in the future; we may be unable to secure such financing. We believe that a variety of competing
solar and alternative or renewable energy technologies may be in development by other companies that could result in lower manufacturing
costs and/or higher product performance than those expected for our products. Our development efforts may be hindered or rendered obsolete
by the technological advances of others, and other technologies may prove more advantageous for the commercialization of transparent electricity-generating
products.
To the extent we are able to develop and commercialize
products, if such products do not gain market acceptance, we may not achieve sales and market share.
The development of a successful market for our products
may be adversely affected by a number of factors, some of which are beyond our control, including:
· customer, architectural and engineering acceptance of our products;
If our products fail to gain market acceptance, we
will be unable to achieve sales, market share, or profitability.
If organic solar photovoltaic light energy harvesting
technologies are not suitable for widespread adoption or sufficient demand for such products does not develop or takes longer to develop
than we anticipate, we may not be able to profitably exploit our technology.
The market for OPV solar-energy related products is
emerging and rapidly evolving, and the market for energy harvesting products is generally unproven and not well established. The success
of products for these markets is uncertain.
12
If our OPV solar power or light energy harvesting
technologies prove unsuitable for widespread commercial deployment or if demand for such power products fails to develop sufficiently,
we would be unable to achieve sales and market share. In addition, demand for such products in the particular markets and geographic regions
we target may not develop or may develop more slowly than we anticipate. Many factors will influence the widespread adoption of organic
solar photovoltaic light energy capture and conversion products, including:
· fluctuations in the prices of fossil fuels or their derivatives;
Our growth and success depend on our ability
to develop new products and services and adapt to market and customer needs.
The sectors in which we operate experience rapid and
significant changes due to the introduction of innovative technologies. Introducing new technology products and innovative services, which
we must do on an ongoing basis to meet customers' needs, requires a significant commitment to research and development, which may not
result in success. The company is pre-revenue and may suffer if it invests in technologies that do not function as expected or are not
accepted in the marketplace; its products, systems or service offers are not brought to market in a timely manner; or products become
obsolete or are not responsive to our customers' needs or requirements.
Our business model and strategy are based on
growth through in-licensing, out-licensing, cross-licensing, acquisitions, joint ventures and mergers that may be difficult to execute.
Our business model and strategy are based on growth
through in-licensing, out-licensing, cross-licensing, acquisitions, joint ventures and mergers. External growth transactions are inherently
risky because of the difficulties that may arise in integrating people, operations, technologies and products, and the related acquisition,
administrative and other costs.
As noted above, we plan to make acquisitions,
which could require significant management attention, disrupt our business, result in dilution to our stockholders, and adversely affect
our financial results.
As part of our business strategy, we intend to make
acquisitions to add specialized employees, complementary companies, products, or technologies. However, we have not made any acquisitions
to date, and, as a result, our ability to acquire and integrate larger or more significant companies, products, or technologies in a successful
manner is unproven. In the future, we may not be able to find suitable acquisition candidates, and we may not be able to complete
acquisitions on favorable terms, if at all. Any acquisitions that we consummate may not achieve our goals, and could be viewed negatively
by investors. In addition, if we fail to successfully integrate any acquisitions, or the technologies associated with such acquisitions,
into our company, the revenue and operating results of the combined company could be adversely affected. Any integration process may require
significant time and resources, and we may not be able to manage the process successfully. We may not successfully evaluate or utilize
the acquired technology or personnel, or accurately forecast the financial impact of an acquisition transaction, including accounting
charges. We may have to pay cash, incur debt, or issue equity securities to pay for any such acquisition, any of which could adversely
affect our financial results. The sale of equity or issuance of debt to finance any such acquisitions could result in dilution to our
stockholders. The incurrence of indebtedness would result in increased fixed obligations and could also include covenants or other restrictions
that would impede our ability to manage our operations.
13
We may be the subject of product liability claims
and other adverse effects due to defective products, design faults or harm caused to persons and property.
Our products may not operate properly or could contain
design or fabrication faults or defects, which could give rise to disputes in respect of its performance, degradation and reliability
giving rise to liability. Product liability related to defective products could lead to a loss of revenue, claims under warranty, and
legal proceedings. Such disputes could result in a fall-off in demand or harm our reputation for product performance, safety, and/or quality.
Our products will be subject to environmental,
occupational safety & health regulations, including but not limited to Underwriter Laboratory (UL) Certification, European Conformity
(CE) Certification, electrical codes, and other state and federal, European Union (EU), and other Country regulations.
Our products will be subject to extensive and increasingly
stringent environmental, occupational safety and health regulations and certifications, including but not limited to, Underwriter Laboratory
(UL) Certification, electrical codes, and other state and federal, EU laws, regulations, and standards (“Laws & Regulations”).
There can be no guarantee that we will not be required to pay significant fines or compensation as a result of past, current or future
breaches of Laws & Regulations. This exposure exists even if we are not responsible for the breaches, in cases where they were committed
in the past by companies or businesses that were not part of ours that may be exposed to the risk of claims for breaches of these Laws
& Regulations. Such claims could adversely affect our financial position and reputation. If we fail to conduct our business in full
compliance with the applicable Laws & Regulations, the judicial or regulatory authorities could require us to conduct investigations
and/or implement costly curative measures.
We lack sales and marketing experience and will
likely rely on third party marketers.
We have limited experience in sales, marketing or
distribution of photovoltaic and energy capture and conversion and generating products. We expect to market and sell or otherwise commercialize
our technology (or any of its derivatives) through distribution and supply-chain channels, co-marketing, co-promotion or licensing arrangements
with third parties. Therefore, any revenues received by us will be dependent on the efforts of third parties. If any such parties breach
or terminate their agreements with us or otherwise fail to conduct marketing activities successfully and in a timely manner, the commercialization
of our technology (or any of its derivatives) would be delayed or terminated, which would adversely affect our ability to generate revenues
and our profitability.
We may not be able to integrate our process
and/or technologies into a manufacturing process necessary to produce a manufacturable product.
Without sufficient capital, human resources, the appropriate
process equipment, or required supply chain, the Company may not be capable of integrating its process and/or technologies into a manufacturing
process necessary to produce a manufacturable product. The innovation of our processes and technologies is a crucial strategic concern,
with mounting pressure to meet anticipated power, financial, and ROI and IRR for our manufacturers, or sales and distribution channels.
If we are unable to integrate our process and/or technologies into industry, our product innovations can rapidly become obsolete. LiquidElectricityTM
Coatings and related processes and supply chains are highly complex and continuously exposed to a variety of risks such as microeconomics,
macroeconomic, face geopolitical pressures, regulatory requirements, environmental risk and responsibilities, construction risk, and emerging
markets. Integration of our processes is critical to product development and revenue generation. If the process cannot be integrated into
industry, products, or brought to market in a timely manner, the Company, its potential products, and ability to operate may be threatened.
At this time, the integration of our technologies into industrial manufacturing processes is uncertain.
While there are numerous reasons for selecting a manufacturing
partner, there is considerable risk in selecting a manufacturing partner that is the correct fit for the Company. The level and severity
of risk to the Company is associated with cost, resources and resource management, quality control, scaled production, complicated supply
chain, location, corporate culture, management philosophy, market experience, and an adaptable business model. Based on these risks, the
Company may not be able to integrate our process or technology into an existing manufacturing process with an acceptable level of risk.
14
Our technology and products will be subject
to environmental, occupational safety & hygiene, Underwriter laboratory, electrical codes, and other state and federal, European Union
(EU), and other Country regulations.
Our technologies and products will be subject to extensive
and increasingly stringent environmental, occupational safety & health, Underwriter Laboratory, electrical codes, and other state
and federal, EU laws, regulations, and standards (“Laws & Regulations”). There can be no guarantee that we will
not be required to pay significant fines or compensation as a result of past, current or future breaches of Laws & Regulations. This
exposure exists even if we are not responsible for the breaches, in cases where they were committed in the past by companies or businesses
that were not part of ours that may be exposed to the risk of claims for breaches of these Laws & Regulations. Such claims could adversely
affect our financial position and reputation, despite the efforts and investments made to comply at all times with all applicable Laws
& Regulations. If we fail to conduct our business in full compliance with the applicable Laws & Regulations, the judicial or regulatory
authorities could require us to conduct investigations and/or implement costly curative measures.
Our insurance coverage
may not be adequate to protect us from all business risks.
We may be subject, in the
ordinary course of business, to losses resulting from products liability, accidents, acts of God, and other claims against us, for which
we may have no insurance coverage. As a general matter, the policies that we do have may include significant deductibles or self-insured
retentions, and we cannot be certain that our insurance coverage will be sufficient to cover all future losses or claims against us. A
loss that is uninsured or which exceeds policy limits may require us to pay substantial amounts, which could adversely affect our financial
condition and operating results.
Risks Related to the
Expansion of Our Operations Abroad
We have recently expanded our operations to
Asia with a business and corporate development operations office in the Republic of Korea, where we intend to strengthen our business
presence. This is a region where we have limited experience in intellectual property, manufacturing, regulatory compliance, and sales,
thus exposing us to certain risks inherent in doing business internationally, which may adversely affect our business, results of operations
or financial condition.
Having established an office
in the Republic of Korea, where we are working to strengthen our business presence and potentially expand into other Asian countries,
we face risks which previously were of little or no importance to us but which now could have a material impact on our overall operations
and ultimate success. These new risks, include:
· fluctuations in currency exchange rates;
· enhanced difficulties of integrating any foreign acquisitions;
· political, social, or economic instability;
· difficulties in staffing and managing international operations;
15
Changes in regulatory, geopolitical,
social, economic, or monetary policies and other factors, if any, may have a material adverse effect on our business in the future, or
may require us to exit a particular market or significantly modify our current business practices. Abrupt political change, terrorist
activity and armed conflict pose a risk of general economic disruption in affected countries, which could also result in an adverse effect
on our business and results of operations.
We plan to continue expanding our operations
abroad where we have limited operating experience and may be subject to increased business and economic risks that could affect our financial
results.
As we move forward with our
strategy of expanding into Asian markets, and internationally, we may enter new international markets where we have limited or no experience
in marketing, selling, and deploying our products. Our operations and performance will become significantly more dependent on worldwide
economic conditions. Uncertainty about global economic conditions ultimately could have a material negative effect on demand for our products
and services and, accordingly, on our business, results of operations and financial condition. In addition to the risks inherent in doing
business internationally, as noted above, if we are unable to expand internationally and manage the complexity of our global operations
successfully, our financial results could be adversely affected.
Risks Related to Compliance with Laws and
Regulations
Compliance with environmental regulations or
dealing with harmful or hazardous materials involved in our research and development, may require us to divert our limited capital resources.
Our research and product development programs involve
the handling of chemicals. These chemicals have the potential to be harmful or hazardous to human health and/or the environment. Accordingly,
we may become subject to federal, state and local laws and regulations governing the use, handling, storage and disposal of dangerous
and hazardous materials. If violations of environmental, and/or safety & health laws or standards occur, we could be held liable for
damages, penalties and costs of remedial actions. These expenses or this liability could have a significant negative impact on our business,
financial condition and results of operations. We may unintentionally violate environmental, and/or safety & health laws or standards
in the future as a result of human error, equipment failure or other causes. Environmental, and safety & health laws and standards
could become more stringent over time, imposing greater compliance costs and increasing risks and penalties associated with violations.
We may be subject to potentially conflicting and changing regulatory agendas of political, business, environmental, or safety & health
groups. Changes to or restrictions on permitting requirements or processes, harmful or hazardous material storage, or chemical handling
might require an unplanned capital investment or relocation of our research or product development programs. Failure to comply with new
or existing laws or regulations, or failing to plan for possible changes in these laws could harm our business, financial condition and
results of operations. Currently, we do not have any insurance coverage with respect to damages or liabilities we may incur as a result
of these activities.
Risks Related to our Intellectual Property
Our ability to operate profitably is directly
related to our ability to develop, protect and perfect rights in and to our proprietary technology.
We rely on a combination of trademark, trade secret,
nondisclosure, know-how, copyright and patent law to protect our technology, which may afford only limited protection.
We may initiate claims or litigation against third
parties for infringement of our proprietary rights or to establish the validity, scope or enforceability of our proprietary rights. Any
such claims could be time consuming, result in costly litigation, or force us to enter into royalty or license agreements rather than
dispute the merits of such claims, requiring us to pay royalties and/or license fees to third parties. There is always a risk that patents,
if issued, may be subsequently invalidated, either in whole or in part and this could diminish or extinguish protection for any technology
we may license or may adversely affect our ability to fully commercialize our technologies.
16
We generally require our employees, consultants, advisors
and collaborators to execute appropriate agreements with us, regarding the confidential information developed or made known to such persons
during the course of their engagement by us. These agreements provide that any proprietary technologies developed during such engagement
are owned by us and that confidential information pertaining to such technologies will be kept confidential and not disclosed to third
parties except in specific circumstances. These agreements also provide for the assignment to us by any such person of any patents issued
with respect to any such technologies. If these provisions are breached, we may not be able to fully perfect our rights to the technologies
in question, and in some instances, we may not have an appropriate remedy available for the damages that we may incur as a result of any
such breach.
Our proprietary rights may not adequately protect
our technologies and products.
Our commercial success will depend, in part, on our
ability to obtain patents and/or maintain adequate protection for our technologies and products in the United States and other countries.
We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary technologies
and products are covered by valid and enforceable patents or are effectively maintained as trade secrets.
We intend to apply for additional patents for our
technologies, applications, processes, and products, as we deem appropriate. We may, however, fail to apply for patents on important technologies,
products, or processes in a timely manner, if at all. Our existing patents and any future patents we obtain may not be sufficiently broad
to prevent others from practicing our technologies or from developing competing products, processes, or technologies. In addition, the
patent positions of alternative energy technology companies are highly uncertain and involve complex legal and factual questions for which
important legal principles and regulations or policies remain unresolved. As a result, the validity and enforceability of our patents
cannot be predicted with certainty. In addition, we cannot guarantee that:
· we were the first to file patent applications for these inventions;
· any of our pending patent applications will result in issued patents;
· any of our patents will be valid or enforceable;
The actual protection afforded by a patent varies
on a product-by-product basis, from country to country and depends on many factors, including the type of patent, the scope of its coverage,
the availability of regulatory related extensions, the availability of legal remedies in a particular country and the validity and enforceability
of the patents. Our ability to maintain and solidify our proprietary position for our products will depend on our success in obtaining
effective claims and enforcing those claims once granted. Our issued patents and those that may be issued in the future, or those licensed
to us, may be challenged, invalidated, unenforceable or circumvented, and the rights granted under any issued patents may not provide
us with proprietary protection or competitive advantages against competitors with similar products. We also rely on trade secrets to protect
some of our technology, especially where it is believed that patent protection is inappropriate or unobtainable. However, trade secrets
are difficult to maintain. While we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors or scientific
and other advisors may unintentionally or willfully disclose our proprietary information to competitors. Enforcement of claims that a
third party has illegally obtained and is using trade secrets is expensive, time consuming and uncertain. In addition, non-U.S. courts
are sometimes less willing than U.S. courts to protect trade secrets. If our competitors independently develop equivalent knowledge, methods
and know-how, we may not be able to assert our trade secrets against them and our business could be harmed.
17
We may not be able to protect our intellectual
property rights throughout the world.
Filing, prosecuting and defending patents on all of
our products in every jurisdiction would be prohibitively expensive. Competitors may use our technologies in jurisdictions where we have
not obtained patent protection to develop their own products. These products may compete with our products and may not be covered by any
patent claims or other intellectual property rights.
The laws of some non-U.S. countries do not protect
intellectual property rights to the same extent as the laws of the United States, and many companies have encountered significant problems
in protecting and defending such rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing
countries, do not favor the enforcement of patents and other intellectual property protection, which could make it difficult for us to
stop the infringement of our patents. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost
and divert our efforts and attention from other aspects of our business.
If we fail to protect our intellectual property
rights, our competitors may take advantage of our ideas and compete directly against us.
Our success will depend, to a significant degree,
on our ability to secure and protect intellectual property rights and enforce patent and trademark protections relating to our technology.
While we believe that the protection of patents and trademarks is important to our business (and as a result we have 31 U.S. trademark
filings and 71 U.S. and International patent filings), we also rely on a combination of copyright, trade secret, nondisclosure and confidentiality
agreements, know-how and continuing technological innovation to maintain our competitive position. From time to time, litigation may be
advisable to protect our intellectual property position. However, these legal means afford only limited protection and may not adequately
protect our rights or permit us to gain or keep any competitive advantage. Any litigation in this regard could be costly, and it is possible
that we will not have sufficient resources to fully pursue litigation or to protect our intellectual property rights. This could result
in the rejection or invalidation of our existing and future patents. Any adverse outcome in litigation relating to the validity of our
patents, or any failure to pursue litigation or otherwise to protect our patent position, could materially harm our business and financial
condition. In addition, confidentiality agreements with our employees, consultants, customers, and key vendors may not prevent the unauthorized
disclosure or use of our technology. It is possible that these agreements will be breached or that they will not be enforceable in every
instance, and that we will not have adequate remedies for any such breach. Enforcement of these agreements may be costly and time consuming.
Furthermore, the laws of foreign countries may not protect our intellectual property rights to the same extent as the laws of the United
States.
We may be accused of infringing the intellectual
property rights of others.
We cannot guarantee that we will not become the subject
of infringement claims or legal proceedings by third parties with respect to our current or future technology developments. Any such claims
could be time consuming, result in costly litigation and could ultimately lead to a determination that our technology, or any of its derivatives,
infringe on a third party's patent rights.
We may need to curtail or cease operations if,
in the future, we are unable to obtain additional licenses pursuant to our collaborative development agreements required to maintain our
rights to market products, if any, developed by us.
We may not retain all rights to developments, inventions,
patents and other proprietary information resulting from any collaborative arrangements, whether in effect as of the date hereof or which
may be entered into at some future time with third parties. As a result, we may be required to license such developments, inventions,
patents or other proprietary information from such third parties, possibly at significant cost to us. Our failure to obtain and maintain
any such licenses could have a material adverse effect on our business, financial condition and results of our operations. In particular,
the failure to obtain a license could prevent us from using or commercializing our technology.
18
Our proprietary rights may not adequately protect
our technologies and products.
Our commercial success will depend, in part, on
our ability to obtain patents and/or regulatory exclusivity and maintain adequate protection for our technologies and products in the
United States and other countries. We will be able to protect our proprietary rights from unauthorized use by third parties only to the
extent that our proprietary technologies and products are covered by valid and enforceable patents or are effectively maintained as trade
secrets.
We intend to apply for additional patents covering
both our technologies and products, as we deem appropriate. We may, however, fail to apply for patents on important technologies or products
in a timely fashion, if at all. Our existing patents and any future patents we obtain may not be sufficiently broad to prevent others
from practicing our technologies or from developing competing products and technologies. In addition, the patent positions of alternative
energy technology companies are highly uncertain and involve complex legal and factual questions for which important legal principles
remain unresolved. As a result, the validity and enforceability of our patents cannot be predicted with certainty. In addition, we cannot
guarantee that:
· we were the first to file patent applications for these inventions;
· any of our pending patent applications will result in issued patents;
· any of our patents will be valid or enforceable;
The actual protection afforded by a patent varies
on a product-by-product basis, from country to country and depends on many factors, including the type of patent, the scope of its coverage,
the availability of regulatory related extensions, the availability of legal remedies in a particular country and the validity and enforceability
of the patents. Our ability to maintain and solidify our proprietary position for our products will depend on our success in obtaining
effective claims and enforcing those claims once granted. Our issued patents and those that may be issued in the future, or those licensed
to us, may be challenged, invalidated, unenforceable or circumvented, and the rights granted under any issued patents may not provide
us with proprietary protection or competitive advantages against competitors with similar products. We also rely on trade secrets to protect
some of our technology, especially where it is believed that patent protection is inappropriate or unobtainable. However, trade secrets
are difficult to maintain. While we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors or scientific
and other advisors may unintentionally or willfully disclose our proprietary information to competitors. Enforcement of claims that a
third party has illegally obtained and is using trade secrets is expensive, time consuming and uncertain. In addition, non-U.S. courts
are sometimes less willing than U.S. courts to protect trade secrets. If our competitors independently develop equivalent knowledge, methods
and know-how, we would not be able to assert our trade secrets against them and our business could be harmed.
Risks Related to Our Personnel and Management
We are dependent upon hiring and retaining highly
qualified management and technical personnel.
Competition for highly qualified management, technical,
and scientific personnel (Personnel) is intense in our industry. Future success depends in part on our ability to hire, assimilate and
retain engineers and scientists, sales and marketing personnel, and other qualified personnel, especially in the area of OPV with focus
in our technologies and products. A key risk is our ability to anticipate our needs for certain key competences and to implement human
resource solutions to recruit and hire, or improve these competences. If we are not successful in hiring and retaining qualified Personnel
our ability to execute on our business model and strategy will be adversely affected and our ability to achieve profitability compromised.
19
Due to the fact that all but two of our five
directors conduct outside business activities and are not our employees, attention and efforts will not be focused solely on our business
activities which may hinder our achieving our business objectives.
Currently we have five directors, two of whom, Mr.
Jatinder S. Bhogal, our Chief Executive Officer and Mr. John Rhee, our President and CEO of SolarWindow Asia Co. Ltd.., provides their
full-time efforts to our business activities. While our three (3) other Directors intend to devote as much time as necessary to the success
and development of our technology, currently each has other business interests or employment obligations requiring their time and attention.
While each has generally agreed to provide such time and attention to our business activities as may be reasonably required, and have
done so to date, there can be no assurance that their priorities will not shift in the future and that the amount of time that each devotes
to our activities will be sufficient for us to meet our business objectives. In the event that their outside interests begin to take precedence
over their positions in with the Company, our business will suffer and may adversely impact our goal of achieving profitability through
the commercialization of SolarWindow. In this event, if effective corrective action is not taken, investors could lose all or part of
their investment.
Risks Related To Ownership of Our Common Stock
We are not a fully reporting company under the
Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act; therefore, we are subject only to the reporting requirements
of Section 15(d) of the Exchange Act.
We are not a fully reporting company under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”); therefore, we are subject only to the reporting requirements
of Section 15(d) of the Exchange Act. Until our Common Stock is registered under the Exchange Act, we will be subject only to the reporting
obligations imposed by Section 15(d) of the Exchange Act, which we refer to as Section 15(d). Section15(d) requires that issuers file
periodic and current reports with the U.S. Securities and Exchange Commission (the “Commission” or the “SEC”)
when they have issued any class of securities for which a registration statement was filed and became effective pursuant to the Securities
Act. The purpose of Section 15(d) is to ensure that investors who buy securities in registered offerings are provided with the same information
on an ongoing basis that they would receive if the securities they purchased were listed on a securities exchange or the issuer were otherwise
subject to periodic reporting obligations. However, companies that are required to report only under Section 15(d) are not subject to
some of the Exchange Act reporting requirements. For example, companies that are required to report only under Section 15(d) are not subject
to the short-swing profit reporting requirements contained in Section 16 of the Exchange Act, the beneficial ownership reporting requirements
contained in Section 13 of the Exchange Act, the institutional investor reporting rules or the third-party tender offer rules, or the
Exchange Act’s proxy rules contained in Section 14 of the Exchange Act.
The reporting obligations under Section15(d) of the
Exchange Act are automatically suspended when: (i) any class of securities of the issuer reporting under Section 15(d) is registered under
Section 12 of the Exchange Act; or (ii) at the beginning of the issuer’s fiscal year, other than the year in which the applicable
registration statement became effective, if the class of securities covered by the registration statement is held of record by fewer than
300 persons. In the latter case, the Company would no longer be subject to periodic reporting obligations so long as the number of holders
remained below 300 unless we filed a registration statement with the Securities and Exchange Commission under Section 12 of the Exchange
Act. If our obligation to file reports under Section 15(d) is suspended (other than due to our having registered our common stock under
Section 12 of the Exchange Act), then investors will have reduced visibility with respect to the Company, its financial condition and
results of operations.
Until our Common Stock is listed on an exchange, we
expect to remain eligible for quotation on the OTCPINK or on another over-the-counter quotation system. In those venues, however, an investor
may find it difficult to obtain accurate quotations for our common stock. In addition, if we fail to meet the criteria set forth in SEC
regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established
customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our common stock,
which may further affect the liquidity of your shares. This would also make it more difficult for us to raise additional capital or attract
qualified employees or partners. Please refer to “Our common stock is currently quoted on the OTCPINK which may make it more
difficult for you to purchase or sell shares of the Company’s Common Stock” below.
20
Our common stock is currently quoted on the
OTCPINK which may make it more difficult for you to purchase or sell shares of the Company’s Common Stock.
The OTCPINK is viewed by most investors as a less
desirable, and less liquid, marketplace. As a result, an investor may find it more difficult to purchase, dispose of or obtain accurate
quotations as to the value of, our common stock. Unless and until we file an application for listing of our shares on a national stock
exchange or the OTCQB and such application is accepted (as to which there is no assurance), we expect that our stock will continue to
trade on the OTCPINK.
Our common stock is
not registered for trading on any national stock exchange and thus, should the price of our stock on the OTCPINK fall below five dollars
per share and our net tangible assets fall below two million dollars our stock may be deemed a “penny stock,” in which case,
you may find it difficult to, deposit, transfer, sell or purchase the shares of our common stock in open market transactions.
“Penny stocks” are, generally speaking,
those securities that are not listed on a national securities exchange and are priced under $5. There are exclusions for securities of
issuers that have net tangible assets greater than $2 million if they have been in operation at least three years or greater than $5 million
if in operation less than three years. Securities of issuers with average revenue of at least $6 million for the last three years are
also not considered penny stocks.
Currently our common stock is considered “penny
stock exempt” by the OTCPINK. This means that our stock is exempt from the definition of a Penny Stock under SEC under Rule
240.3a51-1 because it meets one of the following tests: 1) A price of over $5 per share, 2) the issuer has Average Revenue of at
least $6 million for the last 3 years, or 3) the issuer has Net Tangible Assets in excess of $2 million if the issuer has been in continuous
operations for at least 3 years or $5 million if less than 3 years. The value of our net tangible assets for the fiscal years ended August
31, 2021 and 2020 was, approximately $13,605,000 and $15,559,000 respectively.
As long as we continue to satisfy at least one of
the foregoing exemptions, our common stock should continue to be deemed “penny stock exempt.” However, because our stock is
not registered for trading on a national stock exchange should we no longer satisfy at least one of the exemption criteria described above,
our common stock would be considered a “penny stock.”
The penny stock rules are designed to prevent deceptive
or manipulative practices. It provides that a broker cannot sell a penny stock to any person unless it has approved that person's account
for penny stock transactions and the broker/dealer has received in writing from customer agreement to the transaction; approving an account
includes, among other things, reviewing the customer's financial data and determining the customer's suitability, including the capability
to evaluate the risks of trading in penny stocks. Some types of transactions in penny stocks are exempt from these rules. Exempt transactions
include those with an established customer (a customer of more than one year or one who has made at least three separate penny stock purchases)
and transactions in which the customer is an institutional investor.
In addition, the penny stock regulations require that
prior to any non-exempt buy/sell transaction in a penny stock, a disclosure schedule proscribed by the SEC relating to the penny stock
market must be delivered by a broker-dealer to the purchaser of such penny stock. This disclosure must include the amount of commissions
payable to both the broker-dealer and the registered representative and current price quotations for our common stock. The regulations
also require that monthly statements be sent to holders of penny stock that disclose recent price information for the penny stock and
information of the limited market for penny stocks. Because of these requirements, many brokerage firms will not process transactions
involving low price stocks, especially those that come within the definition of a “penny stock.” Accordingly, these requirements
may adversely affect the market liquidity of our common stock.
21
Should our common stock be deemed a “penny stock,”
you may find it difficult to, deposit, transfer, sell or purchase the shares of our common stock in open market transactions.
Financial Industry Regulatory Authority (“FINRA”)
sales practice requirements may also limit a stockholder’s ability to buy and sell our common stock, which could depress the price
of our common stock.
In addition to the “penny stock” rules
described above, FINRA has adopted rules that require a broker-dealer to have reasonable grounds for believing that the investment is
suitable for that customer before recommending an investment to a customer. Prior to recommending speculative low-priced securities to
their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial
status, tax status, investment objectives, and other information. Under interpretations of these rules, FINRA believes that there is a
high probability that speculative low-priced securities will not be suitable for at least some customers. Thus, the FINRA requirements
make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy
and sell our shares of common stock, have an adverse effect on the market for our shares of common stock, and thereby depress the per
share price of, and liquidity for, our common stock.
There is a limited market for our common stock,
which may make it difficult for holders of our common stock to sell their stock.
Our common stock currently trades on the OTCPINK under
the symbol “WNDW;” there is limited and sporadic trading in our common stock. Accordingly, there can be no assurance as to
the liquidity of any markets that may develop for our common stock, the ability of holders of our common stock to sell our common stock,
or the prices at which holders may be able to sell our common stock. Further, many brokerage firms will not process transactions involving
low price stocks, especially those that come within the definition of a “penny stock.” If we cease to be quoted, holders of
our common stock may find it more difficult to dispose of, or to obtain accurate quotations as to the market value of our common stock,
and the market value of our common stock would likely decline.
The trading price of our common stock has been
and will likely continue to be volatile.
The trading price of our common stock has been, and
is likely to continue to be, highly volatile and could be subject to wide fluctuations in response to various factors, some of which are
beyond our control. From December 31, 2019 through October 29, 2021 the stock price of our common stock has ranged from a low price on
the OTCPINK of $1.05 to a high of $39.20 per share. In addition to the factors discussed in these “Risk Factors” and
elsewhere in this report, factors that may cause volatility in our share price include:
· changes in projected operational and financial results;
· issuance of new or updated research or reports by securities analysts;
· market rumors or press reports;
· announcements of significant transactions;
· announcements related to our stock repurchase program;
· general economic and market conditions.
In addition, in recent years, broad stock market indices