Item1A. Risk Factors
Risk Factors
The following risk factors and the forward-looking
statements elsewhere in this annual report 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 annual report, 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 business, results of operations and potential profitability. 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or superseded from time to time in filings and reports that we file with the SEC in the future.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 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.
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 $2,396,395 and $4,948,533 for our fiscal years ended August 31, 2023 and 2022,
respectively. As of August 31, 2023, we had cash and short-term investments of $5,992,610 and working capital of $6,017,272. Based on
management’s assessment, the Company has sufficient cash and short-term investments 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 and short-term investments 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 objectives in 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, intellectual property and prospects. In particular, the Company may be required
to delay; reduce the scope of or terminate its research and development programs; abandon its pursuit of filed but unissued patents; 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.
Because we cannot currently estimate the amount
of funds or time required to commercialize our technologies, even if financing is available to us, 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.
To obtain financing as needed, we may enter
into 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
Pink market. 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.
Adverse conditions in the alternative energy
industry or the global economy 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 for 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 in the development of any novel technology.
Ultimately, the development and commercialization
of our technology is subject to a variety of risks that are particular to the development and commercialization of any novel technology,
the occurrence of any one of which may adversely affect our operations. 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 efforts fail 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 the foreseeable future.
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.
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.
We are operating in a 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 or have more employees than we do; and, unlike us, some have established
market positions for their products. 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.”
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.
The alternative and renewable energy industry is rapidly
evolving and highly competitive. Our failure to refine or advance our technologies, and to develop and introduce new products on a timely
basis could cause our products to become uncompetitive or obsolete, which could prevent us from achieving market share and sales. 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; however, 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 can 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.
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 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, without limitation, the following:
· 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, on a going forward basis,
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.
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 their 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.
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 processes and/or technologies into industry, our product innovations can rapidly become obsolete. LiquidElectricity®
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.
Currently, 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.
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 International
Expansion
In fiscal year 2021, we expanded our operations
to Asia with a business and corporate development operations office in the Republic of Korea, which, on January 13, 2023, the Board decided
to exit.
In September 2020, the Company
established SolarWindow Asia Co. Ltd., its indirectly, wholly owned South Korean subsidiary (the “Korean Subsidiary”).
The Company experienced difficulties in Korea that ultimately resulted in the Board electing to shut down the Korean Subsidiary. The Company
has engaged Korea-based legal counsel and accountants to assist it in winding down the Korea operations and gathering the data necessary
to meet its financial reporting requirements. The Company may incur significant future costs related to the closure, and/or potential
unknown liabilities which may remain undisclosed by its former Chairman and Chief Executive Officer. Currently, the company is not able
to determine when the closure of its Korea Subsidiary will be final.
The Company has limited experience in intellectual
property, manufacturing, regulatory compliance, and sales in international markets, which may adversely affect our business, results of
operations or financial condition should the Company pursue establishing operations in international markets.
International expansion would
expose the Company to risks which could have a material impact on our overall operations and ultimate success. These 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;
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 may expand 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 new markets, 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
Our products or the application thereof 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
dealing with, among other matters, harmful or hazardous materials.
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, foreign laws, regulations, and standards (“Laws & Regulations”).
If violations of these Laws & Regulations occur, whether unintentional or otherwise, 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.
These Laws & Regulations could become more stringent
over time, imposing greater compliance costs, and increasing risks and penalties associated with violations. There can be no guarantee
that we will not be required to pay significant fines or compensation because 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 and require unplanned capital investment. 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, unplanned
capital investments, and/or implement costly curative measures.
Our periodic and other reports filed with various
securities regulators subject us to additional compliance expense as well potential liability for any alleged violations of the securities
laws and regulations to which we are or may be subject (the “Securities Laws & Regulations”).
As a public company filing periodic and other reports,
whether on a mandatory or voluntary basis, with foreign, federal, or state securities regulators (collectively, “Securities Regulators”),
we incur significant accounting, legal and administrative expenses in connection with our efforts to fully comply with the Securities
Laws & Regulations. This expense may increase significantly should there be any changes in the Securities Laws & Regulations that
impose greater obligations or requirements on us to fully comply. Such costs may adversely impact our other operations including but not
limited to, our research and development efforts.
Moreover, should there be a violation of the Securities
Laws & Regulations, we may be subject to fines, penalties and other sanctions that could adversely impact our ability to continue
our research, product development and commercialization efforts.
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.
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 because 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.
We may not be able to protect our intellectual
property rights throughout the world.
Filing, prosecuting, and defending patents on all
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 foreign 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, we also rely on a combination of copyright,
trade secret, nondisclosure and confidentiality agreements, know-how and continuing technological innovation to maintain a 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 of America.
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 technological 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, infringes 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.
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 of America and other countries. Our ability 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.
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
attract, hire, assimilate and retain engineers and scientists, sales and marketing personnel, and other qualified personnel, especially
in the OPV space 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, 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.
Due to the fact each of our three directors
conducts 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 three directors, none of whom provides
their full-time efforts to our business activities. While our directors intend to devote as much time as necessary to the success and
development of our technology, 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, 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. If their outside interests begin to take precedence over their positions 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.
Due to our small size each of our officers and
consultants has a significant influence on our operations and access to sensitive information, which, if an officer or consultant goes
rogue, could result in significant damage to, without limitation, the Company’s operations, reputation, financial health, and security
of our intellectual property.
Due to our small size, each of our officers and consultants
exercises a significant degree of authority and influence on our operations, and has access to highly sensitive information, including
related to our intellectual property and access to the Company’s assets. While the Company has implemented various operating procedures
and a Code of Ethics and Business Conduct that each person affiliated with the Company is required to review and sign, the Company has
no direct control over individual persons actions can make no assurance that one of our officers and consultants will adhere to our operating
procedures or act in a manner that is consistent with our Code of Ethics. Nor can the Company provide assurance that an officers and a
consultant or a former officers and a consultant may take deliberate action(s) to harm the Company. The potential damages that may result
from these unintentional or intentional acts could be materially adverse and result in, but not limited to, loss of capital, loss of assets,
weakened intellectual property position because of leaked information, and reputational harm.
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 OTCPK 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
OTCPK (Current Information) which may make it more difficult for you to purchase or sell shares of the Company’s Common Stock” below.
Our common stock is
currently quoted on the OTCPK (Current Information) which may make it more difficult for you to purchase or sell shares of the Company’s
Common Stock.
The OTCPK (Current Information)
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 an application is accepted (as to which there is no assurance), we expect
that our stock will continue to trade on the OTCPK (Current Information).
Our
common stock is not registered for trading on any national stock exchange and thus, should the price of our stock on the OTCPK (Current
Information) 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 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.
More specifically, under Rule 240.3a51-1 a
stock is excluded from the penny stock definition if 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, 2023, and 2022 was approximately $7,563,000 and $9,539,000, respectively. Accordingly, we do not believe our stock
is a penny stock. And if 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 dollar 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.
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 OTC Pink
(Current Information) 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 the 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 November 10, 2023, the stock price of our common stock has ranged from a low of $0.01
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
in general, and smaller capitalization companies in particular, have experienced substantial price fluctuations. In a volatile market,
we may experience wide fluctuations in the market price of our common stock. These fluctuations may have a negative effect on the market
price of our common stock. Such volatile fluctuations may also make us more susceptible to possible class action lawsuits, which are often
initiated following price declines.
If securities or industry analysts do not publish,
or cease publishing, research or publish inaccurate or unfavorable research about our business or our market, or if they change their
recommendations regarding our stock adversely, our stock price and any trading volume could decline.
The trading market for our common stock , which is
highly volatile, may depend in part on the research and reports that securities or industry analysts publish about us or our business,
markets, or competitors. Securities and industry analysts do not currently, and may never, publish research on us or our business. If
no securities or industry analysts commence coverage of our company, the trading price for our stock would be negatively affected. If
securities or industry analysts initiate coverage, and one or more of those analysts downgrade our stock or publish inaccurate or unfavorable
research about our business or our market, our stock price would likely decline. If one or more of these analysts cease coverage of our
company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and any trading
volume to decline.
The sale or availability for sale of substantial
amounts of our common stock could adversely affect their market price.
Sales of substantial amounts of our common stock in
the public market after the filing of a Form S-1, or pursuant to Rule 144, the perception that these sales could occur, could adversely
affect the market price of our common stock, and could materially impair our ability to raise capital through equity offerings in the
future. Shares held by our existing stockholders may be sold in the public market in the future subject to the restrictions in Rule 144
and Rule 701 under the Securities Act.
As of the date of this annual report, we have 53,198,399
shares of common stock outstanding. We cannot predict what effect, if any, market sales of securities held by our significant stockholders
or any other stockholder or the availability of these securities for future sale will have on the market price of our common stock.
Adverse publicity
about us and/or our brands, including without limitation, through social media or in connection with brand damaging events and/or public
perception, could negatively impact our business.
Negative claims,
publicity or allegations made by Securities Regulators, involving us, our board of directors, our employees and consultants, our brands,
our products, services and experiences, consumer data, or any of our key employees, or suppliers, whether arising through social media
outlets or “short and distort” attacks could seriously damage our reputation and the image of our brands, regardless of whether
such claims are accurate or true.
Social media,
which accelerates and potentially amplifies the scope of negative publicity, can increase the challenges we face in attempting to respond
to negative claims. Negative attention or scrutiny on us can also possibly result in negative publicity.
Adverse publicity
could also damage our reputation and the image of our brands, undermine consumer confidence in us and reduce long-term demand for our
products, even if such adverse publicity is unfounded or not material to our operations. If our reputation, culture, or image is tarnished
or receives negative publicity (whether accurate or not), then our business, financial condition, results of operations and liquidity
could be materially adversely affected.
As a smaller reporting company within the meaning
of the Securities Act, we may utilize certain modified disclosure requirements, and we cannot be certain if these reduced requirements
will make our common stock less attractive to investors.
Generally, a “smaller
reporting Company” or (“SRC”) is a company that as of the last business day of its most recently completed second quarter:
(i) Had a public float of less than $250 million; or (ii) Had annual revenues of less than $100 million and either: (A) No public float;
or (B) A public float of less than $700 million. On February 28, 2023, we had a public float of $25,648,000.