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SolarWindow Technologies, Inc. - Quarter Report: 2015 February (Form 10-Q)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For quarterly period ended February 28, 2015

 

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

 

For the transition period from ___________ to ___________

 

Commission file number 333-127953

 

SOLARWINDOW TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

 

Nevada

 

59-3509694

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

   

10632 Little Patuxent Parkway, Suite 406

 

 

Columbia, Maryland

 

21044

(Address of principal executive offices)

 

(Zip Code)

 

(800) 213-0689

(Registrant’s telephone number, including area code)

 

NewEnergy Technologies, Inc.

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes x No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨

Smaller reporting company

x

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in 12b-2 of the Exchange Act). Yes ¨ No x

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 25,424,305 shares of common stock, par value $0.001, were outstanding on April 13, 2015.

 

 

 

SOLARWINDOW TECHNOLOGIES, INC.

(FORMERLY NEW ENERGY TECHNOLOGIES, INC.)

FORM 10-Q

 

For the Quarterly Period Ended February 28, 2015

 

Table of Contents

 

PART I FINANCIAL INFORMATION

   
     

Item 1.

Consolidated Financial Statements (Unaudited)

  3  
     

 

Consolidated Balance Sheets

 

3

 
       

 

Consolidated Statements of Operations

   

4

 
       

 

Consolidated Statements of Stockholders’ Equity (Deficit)

   

5

 
       

 

Consolidated Statements of Cash Flows

   

6

 
       

 

Notes to Consolidated Financial Statements

   

7

 
       

Item 2.

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

   

15

 
       

Item 4.

Controls and Procedures

   

19

 
       

PART II OTHER INFORMATION

       
       

Item 6.

Exhibits

   

20

 
       

Signatures

   

21

 
       

Certifications

       

 

 
2

 

PART I — FINANCIAL INFORMATION

 

Item 1. Consolidated Financial Statements (Unaudited)

 

SOLARWINDOW TECHNOLOGIES, INC.

(FORMERLY NEW ENERGY TECHNOLOGIES, INC.)

CONSOLIDATED BALANCE SHEETS

FEBRUARY 28, 2015 AND AUGUST 31, 2014

 

    February 28,     August 31,  
    2015     2014  

 

  (Unaudited)      

ASSETS

Current assets

       

Cash and cash equivalents

 

$

167,068

   

$

785,237

 

Deferred research and development costs

   

150,000

     

150,000

 

Prepaid expenses and other current assets

   

29,022

     

14,257

 

Total current assets

   

346,090

     

949,494

 
               

Equipment, net of accumulated depreciation of $22,318 and $18,128, respectively

   

35,967

     

24,597

 

Total assets

 

$

382,057

   

$

974,091

 
               

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 
               

Current liabilities

               

Accounts payable

 

$

249,452

   

$

144,239

 

Interest payable

   

304,955

     

193,151

 

Convertible promissory note, net of discount of $2,206,732 and $2,313,680, respectively

   

793,268

     

686,320

 

Total current liabilities

   

1,347,675

     

1,023,710

 
               

Commitments and contingencies

               
               

Stockholders' equity (deficit)

               

Preferred stock: $0.10 par value; 1,000,000 shares authorized, no shares issued and outstanding

   

-

     

-

 

Common stock: $0.001 par value; 300,000,000 shares authorized, 24,970,518 and 24,306,612 shares issued and outstanding at February 28, 2015 and August 31, 2014, respectively

   

24,970

     

24,306

 

Additional paid-in capital

   

24,735,877

     

20,872,345

 

Retained earnings (deficit)

 

(25,726,465

)

 

(20,946,270

)

Total stockholders' equity (deficit)

 

(965,618

)

 

(49,619

)

Total liabilities and stockholders' equity (deficit)

 

$

382,057

   

$

974,091

 

 

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

 

 
3

 

SOLARWINDOW TECHNOLOGIES, INC.             

(FORMERLY NEW ENERGY TECHNOLOGIES, INC.)           

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)       

FOR THE THREE AND SIX MONTHS ENDED FEBRUARY 28, 2015 AND 2014       

 

    Three Months Ended
February 28,
    Six Months Ended
February 28,
 
   

2015

   

2014

   

2015

   

2014

 
                                 

Revenue

 

$

-

   

$

-

   

$

-

   

$

-

 
                                 

Operating expense

                               

Selling, general and administrative

   

662,473

     

508,581

     

1,221,950

     

1,084,592

 

Research and development

   

153,359

     

137,779

     

339,493

     

300,262

 

Total operating expense

   

815,832

     

646,360

     

1,561,443

     

1,384,854

 
                                 

Loss from operations

 

(815,832

)

 

(646,360

)

 

(1,561,443

)

 

(1,384,854

)

                                 

Other income (expense)

                               

Interest expense

 

(56,077

)

 

(52,317

)

 

(111,804

)

 

(83,386

)

Interest expense - accretion of debt discount

 

(649,038

)

 

(356

)

 

(3,106,948

)

 

(364

)

Total other income (expense)

 

(705,115

)

 

(52,673

)

 

(3,218,752

)

 

(83,750

)

                                 

Net loss

 

$

(1,520,947

)

 

$

(699,033

)

 

$

(4,780,195

)

 

$

(1,468,604

)

                                 

Basic and Diluted Loss per Common Share

 

$

(0.06

)

 

$

(0.03

)

 

$

(0.19

)

 

$

(0.06

)

                                 

Weighted average number of common shares outstanding - basic and diluted

   

24,931,888

     

24,923,050

     

24,620,165

     

24,251,364

 

 

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

 

 
4

 

SOLARWINDOW TECHNOLOGIES, INC. 

(FORMERLY NEW ENERGY TECHNOLOGIES, INC.)

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

FOR THE SIX MONTHS ENDED FEBRUARY 28, 2015 AND YEAR ENDED AUGUST 31, 2014 

 

    Common Stock     Additional
Paid-in
    Retained Earnings     Total Stockholders' Equity  
     

 Shares

     

 Amount

    Capital     (Deficit)     (Deficit)  

Balance, August 31, 2013

 

24,194,713

   

$

24,194

   

$

17,441,034

   

$

(17,053,889

)

 

$

411,339

 
                                         

Stock based compensation related to restricted stock issuance

   

30,000

     

30

     

86,970

     

-

     

87,000

 

Stock based compensation due to common stock purchase options

   

-

     

-

     

701,396

     

-

     

701,396

 

Reversal of stock based compensation due to forfeiture of stock options

   

-

     

-

   

(356,973

)

   

-

   

(356,973

)

Exercise of stock options

   

81,899

     

82

   

(82

)

   

-

     

-

 

Discount on convertible promissory note due to detachable warrants

   

-

     

-

     

1,137,149

     

-

     

1,137,149

 

Discount on convertible promissory note due to beneficial conversion feature

   

-

     

-

     

1,862,851

     

-

     

1,862,851

 

Net loss for the year ended August 31, 2014

   

-

     

-

     

-

   

(3,892,381

)

 

(3,892,381

)

Balance, August 31, 2014

   

24,306,612

     

24,306

     

20,872,345

   

(20,946,270

)

 

(49,619

)

                                         

Stock based compensation related to restricted stock issuance

   

60,000

     

60

     

83,940

     

-

     

84,000

 

Stock based compensation due to common stock purchase options

   

-

     

-

     

278,954

     

-

     

278,954

 

Exercise of Series H warrants

   

603,906

     

604

     

500,638

     

-

     

501,242

 

Discount on convertible promissory note due to detachable warrants

   

-

     

-

     

3,000,000

     

-

     

3,000,000

 

Net loss for the six months ended February 28, 2015

   

-

     

-

     

-

   

(4,780,195

)

 

(4,780,195

)

Balance, February 28, 2015

   

24,970,518

   

$

24,970

   

$

24,735,877

   

$

(25,726,465

)

 

$

(965,618

)

 

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

 

 
5

 

SOLARWINDOW TECHNOLOGIES, INC.

(FORMERLY NEW ENERGY TECHNOLOGIES, INC.)

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) 

FOR THE SIX MONTHS ENDED FEBRUARY 28, 2015 AND 2014

 

    Six Months Ended
February 28,
 
  2015     2014  

Cash flows from operating activities

       

Net loss

 

$

(4,780,195

)

 

$

(1,468,604

)

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

               

Depreciation

   

4,190

     

2,893

 

Stock based compensation expense

   

362,954

     

366,572

 

Reversal of stock based compensation expense due to forfeiture of stock options

   

-

   

(356,972

)

Accretion of debt discount

   

3,106,948

     

364

 

Changes in operating assets and liabilities:

               

Decrease (increase) in prepaid expenses and other current assets

 

(14,765

)

   

8,479

 

Increase (decrease) in accounts payable

   

105,213

     

42,988

 

Increase (decrease) in accrued liabilities

   

111,804

     

83,386

 

Net cash used in operating activities

 

(1,103,851

)

 

(1,320,894

)

               

Cash flows from investing activity

               

Purchase of equipment

 

(15,560

)

 

(1,942

)

Net cash used in investing activity

 

(15,560

)

 

(1,942

)

               

Cash flows from financing activities

               

Proceeds from the issuance of common stock, exercise of warrants and stock options, net

   

501,242

     

-

 

Proceeds from promissory notes

   

-

     

3,000,000

 

Net cash provided by financing activities

   

501,242

     

3,000,000

 
               

Increase (decrease) in cash and cash equivalents

 

(618,169

)

   

1,677,164

 
               

Cash and cash equivalents at beginning of period

   

785,237

     

347,493

 
               

Cash and cash equivalents at end of period

 

$

167,068

   

$

2,024,657

 
               

Supplemental disclosure of cash flow information:

               

Interest paid in cash

 

$

-

   

$

-

 

Income taxes paid in cash

 

$

-

   

$

-

 
               

Supplemental disclosure of non-cash transactions:

               

Debt discount recorded for value of warrants issued

 

$

3,000,000

   

$

1,137,149

 

Debt discount recorded for beneficial conversion feature

 

$

-

   

$

1,862,851

 

 

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

 

 
6

 

SOLARWINDOW TECHNOLOGIES, INC.

(FORMERLY NEW ENERGY TECHNOLOGIES, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – Basis of Presentation, Organization, Recent Accounting Pronouncements and Going Concern

 

Basis of Presentation

 

The unaudited financial statements of SolarWindow Technologies, Inc. as of February 28, 2015, and for the three and six months ended February 28, 2015 and 2014, have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting and include the Company’s wholly-owned subsidiaries, Sungen Energy, Inc. (“Sungen”), Kinetic Energy Corporation (“KEC”), and New Energy Solar Corporation (“New Energy Solar”). Accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United States for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended August 31, 2014, as filed with the Securities and Exchange Commission as part of the Company’s Form 10-K. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the interim financial information have been included. The Company did not record an income tax provision during the periods presented due to net taxable losses. The results of operations for any interim period are not necessarily indicative of the results of operations for the entire year.

 

Organization

 

SolarWindow Technologies, Inc. (the “Company”) was incorporated in the State of Nevada on May 5, 1998, under the name “Octillion Corp.” On December 2, 2008, the Company amended its Articles of Incorporation to effect a change of name to New Energy Technologies, Inc. Effective as of March 9, 2015, the Company amended its Articles of Incorporation to change its name to SolarWindow Technologies, Inc. The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Kinetic Energy Corporation (“KEC”), and New Energy Solar Corporation (“New Energy Solar”).

 

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

 

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

 

On March 16, 2011, pursuant to a consent signed by the Company’s shareholders owning a majority of the Company’s then issued and outstanding shares of common stock, the Company filed a Certificate of Amendment to its Certificate of Incorporation increasing its authorized shares of common stock, $0.001 par value, from 100,000,000 to 300,000,000.

 

The Company has been developing two (2) sustainable electricity generating systems. These novel technologies are branded as SolarWindow™ and MotionPower™. On March 2, 2015, the Company announced its exclusive focus on SolarWindow™.

 

The Company’s SolarWindow™ technology provides the ability to harvest light energy from the sun and artificial sources and generate electricity from a see-through, semi-transparent, coating of organic photovoltaic solar cells. The Company’s SolarWindow™ transparent electricity generating coatings are the subject of patent pending technologies. Initially being developed for application on glass surfaces, SolarWindow™ coatings could potentially be used on any of the more than 85 million commercial and residential buildings in the United States alone.

 

 
7

 

The Company’s MotionPower™ technology, harvests “kinetic” or “motion” energy from vehicles when they slow down before coming to a stop and converts this captured energy into electricity. The Company’s MotionPower™ technology is the subject of fifty-nine (59) patent filings.

 

The Company’s SolarWindow™ product development programs involve ongoing research and development efforts, and the commitment of significant resources to support the extensive invention, design, engineering, testing, prototyping, and intellectual property initiatives carried-out by its contract engineers, scientists, and consultants.

 

Recent Accounting Pronouncements

 

The Company reviews new accounting standards as issued. Although some of these accounting standards issued or effective after the end of the Company’s previous fiscal year may be applicable to the Company, it has not identified any standards that it believes merit further discussion or will have a significant impact on its financial statements.

 

Going Concern

 

The Company does not have any commercialized products and has not generated any revenue since inception. The Company has an accumulated deficit of $25,726,465 as of February 28, 2015, and does not have positive cash flow from operating activities. Included in the deficit are non-cash expenses totaling $9,208,014 relating to the issuance of stock for services, compensatory stock options, warrants granted for value and accretion of debt discounts. The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplates continuation of the Company as a going concern, which is dependent upon the Company’s ability to establish itself as a profitable business.

 

In its report with respect to the Company’s financial statements for the year ended August 31, 2014, the Company’s independent auditors expressed substantial doubt about the Company’s ability to continue operations as a going concern. Because the Company has not generated revenues from its operations and does not expect to do so in the near future, its ability to continue as a going concern is wholly dependent upon its ability to obtain additional financing. Currently, the Company is seeking additional financing but has no commitments to obtain any such financing, and there can be no assurance that financing will be available in amounts or on terms acceptable to the Company, if at all.

 

As of February 28, 2015, the Company had cash of $167,068. On March 4, 2015, subsequent to its quarter end, the Company entered into a bridge loan agreement pursuant to which the Company borrowed $600,000. Based upon its current and near term anticipated level of operations and expenditures, the Company believes that cash on hand should be sufficient to enable it to continue operations through June 2015.

 

If adequate funds are not available on reasonable terms, or at all, it would result in a material adverse effect on the Company’s business, operating results, financial condition and prospects. In particular, the Company may be required to delay, reduce the scope of or terminate its research programs, sell rights to its SolarWindow™ technology and/or MotionPowerTM technology or other technologies or products based upon such technologies, or license the rights to such technologies or products on terms that are less favorable to the Company than might otherwise be available.

 

In view of these conditions, the ability of the Company to continue as a going concern is in substantial doubt and dependent upon achieving a profitable level of operations and on the ability of the Company to obtain necessary financing to fund ongoing operations. These consolidated financial statements do not give effect to any adjustments which will be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and discharge its liabilities in other than the normal course of business and at amounts different from those reflected in the accompanying consolidated financial statements.

 

 
8

 

NOTE 2 - Convertible Promissory Note

 

On October 7, 2013 (the “Closing Date”), the Company entered into a Bridge Loan Agreement (the “2013 Loan Agreement”) with Kalen Capital Corporation (the “Investor”), a private corporation owning in excess of 10% of the Company’s issued and outstanding shares of common stock. Pursuant to the 2013 Loan Agreement, the Company received proceeds of $3,000,000 and issued a 7% unsecured Convertible Promissory Note (the “2013 Note”) due on October 6, 2014, with interest compounded quarterly and issued a Series I Stock Purchase Warrant (the “Series I Warrant”) allowing the holder to purchase up to 921,875 shares of the Company’s common stock at an initial exercise price of $1.37 for a period of five (5) years. The Series I Warrant is exercisable on a “cashless basis.” According to the original terms of the 2013 Loan Agreement, the Investor may have elected, in its sole discretion, to convert all or any portion of the outstanding principal amount of the 2013 Note, and any or all accrued and unpaid interest thereon into units, with each unit consisting of (a) one share of common stock; (b) one Series J Stock Purchase Warrant for the purchase of one share of common stock (the “Series J Warrant”); and (c) one Series K Stock Purchase Warrant for the purchase of one share of common stock (the “Series K Warrant”).

 

On November 10, 2014, the Company entered into an Amended Bridge Loan Agreement (the “2015 Loan Agreement”) with Investor pursuant to which the Company and Investor amended the 2013 Loan Agreement by amending the 2013 Note to extend the maturity date to December 31, 2015 (the “Amended Note”). According to the terms of the 2015 Loan Agreement, the Investor may elect, in its sole discretion, to convert all or any portion of the outstanding principal amount of the Amended Note, and any or all accrued and unpaid interest thereon into units of the Company’s equity securities (collectively, the “Units”), with each Unit consisting of (a) one share of common stock; and (b) one Series L Stock Purchase Warrant for the purchase of one share of common stock (the “Series L Warrant”). The conversion price for each Unit is the lesser of (i) $1.37; or (ii) 70% of the 20 day average closing price of the Company’s common stock prior to conversion, subject to a floor of $1.00 with the exercise price of each Series L Warrant included in the Units issued upon conversion being equal to sixty percent (60%) of the 20 day average closing price of the Company’s common stock prior to conversion. The Series L Warrant will be exercisable for a period of five years from the date of issuance and will be exercisable on a cashless basis.

 

In order to induce Investor to enter into the 2015 Loan Agreement and extend the maturity date of the 2013 Note, the Company issued a Series J Warrant to purchase 3,110,378 shares of its common stock at an exercise price of $1.12 and a Series K Warrant to purchase 3,110,378 shares of its common stock at an exercise price of $1.20. Each of the Series J Warrant and Series K Warrant is exercisable through November 9, 2019 and contains a provision allowing the Investor to exercise the warrant on a cashless basis as further set forth therein.

 

For accounting purposes, the modification to the 2013 Loan Agreement did not result in a gain or loss, as an extinguishment under accounting principles generally accepted in the United States, due to the related party nature of the transaction. As described above, the Amended Bridge Loan Agreement resulted in the issuance of a Series J Warrant and a Series K Warrant. Prior to the Amended Bridge Loan Agreement, the Series J and Series K Warrants were to be issued to the Investor only upon the Investor’s election to convert the 2013 Note (according to the original terms of the 2013 note). Also as a result of the Amended Bridge Loan Agreement, the principal amount of the Amended Note and accrued interest thereon is convertible into Units. As such, the fair value of the Series L Warrant, representing the value exchanged for the modification of the conversion option associated with the 2013 Loan Agreement, was recognized as a discount to the Amended Note with a corresponding increase in additional paid-in capital. The fair value of the Series L Warrant was $1.16. The fair value of the Series L Warrant was calculated using the Black-Scholes option pricing model and the following assumptions: market price of common stock - $1.28 per share; estimated volatility - 138%; risk free interest rate - 1.57%; expected dividend rate - 0% and expected life - 5 years. Based on the terms of the Amended Note, 3,142,359 Series L warrants were issuable on November 10, 2014 with a fair value of $3,645,137 (3,142,359 Series L warrants x $1.16 per share). The debt discount is limited to the face value of the Amended Note. As a result, on November 10, 2014, the Company recorded a debt discount of $3,000,000 which is being accreted over the term of the Amended Note using the effective interest method.

 

Together with the 2013 Loan Agreement, the Company entered into (a) a Lock-Up Agreement whereby the Investor agreed not to sell any shares of common stock owned by the Investor, including any shares issued upon conversion of the Note or upon exercise of any warrants held by Investor, whether issued pursuant to this 2013 Loan Agreement or otherwise, for a period of one (1) year from the Closing Date (as defined in the 2013 Loan Agreement) and (b) a Registration Rights Agreement that requires the Company to prepare and file a registration statement on Form S-1 no later than the 90th day prior to the expiration of the Lock-Up Agreement covering the resale of all shares of common stock issuable upon conversion of any portion of the 2013 Note and the shares of common stock issuable upon exercise of the Series I, Series J and Series K Warrants. The Lock-Up Agreement expired on October 6, 2014.

 

 
9

 

Interest expense related to the 2013 Loan Agreement as amended amounted to $56,077 and $111,804 during the three and six months ended February 28, 2015. Interest expense related to the 2013 Loan as amended amounted to $52,317 and $83,386 during the three and six months ended February 28, 2014. Interest expense from the accretion of the debt discount related to the 2013 Loan Agreement as amended amounted to $649,038 and $3,106,948 during the three and six months ended February 28, 2015. Interest expense from the accretion of the debt discount related to the 2013 Loan Agreement as amended amounted to $356 and $364 during the three and six months ended February 28, 2014. The remaining debt discount related to the Series L Warrants and totaling $2,206,732 will be amortized through December 31, 2015 with $663,462 amortized during the quarter ended May 31, 2015, $663,462 amortized during the quarter ended August 31, 2015, $656,250 amortized during the quarter ended November 30, 2015 and $223,558 amortized during the quarter ended February 29, 2016.

 

NOTE 3 – Common Stock and Warrants

 

Common Stock

 

At February 28, 2015, the Company had 300,000,000 authorized shares of common stock with a par value of $0.001 per share, 24,970,518 shares of common stock outstanding and 3,315,831 shares reserved for issuance under the Company’s 2006 Long-Term Incentive Plan (the “2006 Plan”) as adopted and approved by the Company’s Board of Directors (the “Board”) on October 10, 2006 that provides for the grant of stock options to employees, directors, officers and consultants (See “NOTE 4 - Stock Options”).

 

During the six months ended February 28, 2015, the Company had the following common stock related transactions:

 

 

·

The Company issued 603,906 shares of common stock as a result of the exercise of Series H Warrants for which the Company received $501,242.

     
 

·

On January 26, 2015, the Company issued 20,000 shares of common stock to each of the Company’s three directors pursuant to the 2006 Plan (60,000 shares total) valued at $1.40 per share, the closing price of the Company’s common stock on the day the stock was granted (See “NOTE 6 - Related Party Transactions” below for additional information).

 

During the year ended August 31, 2014, the Company had the following common stock related transactions:

 

 

·

On November 11, 2013 and November 13, 2013, the Company issued pursuant to the Plan a total of 81,899 shares of unrestricted common stock as a result of the cashless exercise of a stock option resulting in the issuance of 190,000 shares of common stock.

     
 

·

On January 28, 2014, the Company issued 10,000 shares of common stock to each of the Company’s three directors pursuant to the 2006 Plan (30,000 shares total) valued at $2.90 per share, the closing price of the Company’s common stock on the day the stock was issued (See “NOTE 6 - Related Party Transactions” below for additional information).

 

 
10

 

Warrants

 

Each of the Company’s warrants outstanding entitles the holder to purchase one share of the Company’s common stock for each warrant share held. A summary of the Company’s warrants outstanding and exercisable as of February 28, 2015 and August 31, 2014 is as follows:

 

  Shares of Common Stock Issuable from Warrants Outstanding as of      

Description

  February 28,
2015
    August 31,
2014
    Exercise Price  

Expiration

Series G

 

625,000

   

625,000

   

$

0.64

 

April 17, 2015

Series H

   

1,151,220

     

1,755,126

   

$

0.83

 

February 1, 2016

Series I

   

921,875

     

921,875

   

$

1.37

 

October 7, 2018

Series J

   

3,110,378

     

-

   

$

1.12

 

November 9, 2019

Series K

   

3,110,378

     

-

   

$

1.20

 

November 9, 2019

Total

   

8,918,851

     

3,302,001

           

 

The Series G Warrant was issued on April 17, 2012, as a condition to the Investor entering into a $1 million loan agreement during 2012 (the “2012 Loan”). A Series H Warrant to purchase 825,435 shares was issued in connection with the 2012 Loan conversion. Series H Warrants to purchase 925,785 shares were issued on February 1, 2013, in connection with the self-directed registered offering of 1,875,000 units. The Series I Warrant was issued on October 7, 2013, in connection with the 2013 Loan Agreement. The Series J Warrant and Series K Warrant were issued on November 10, 2014 as a condition to the Investor entering into the 2015 Loan Agreement. In addition, there are a total of 3,248,878 shares issuable upon issuance of a Series L Warrant issuable as described above. Additional disclosure related to the warrants is more fully described above under “NOTE 2 - Convertible Promissory Notes.”

 

During the six months ended February 28, 2015, the Company received $501,242 upon the exercise of Series H Warrants for 603,906 shares. No warrant exercises occurred during the six months ended February 28, 2014.

 

NOTE 4 - Stock Options

 

Stock option grants pursuant to the 2006 Plan vest either immediately or over one to five years and expire ten years after the date of grant. Stockholders previously approved 5,000,000 shares for grant under the 2006 Plan, of which 3,315,831 remain available for grant and 326,667 were issued pursuant to the exercise of vested options as of February 28, 2015. All shares approved for grant and subsequently forfeited are available for future grant. The Company does not repurchase shares to fulfill the requirements of options that are exercised. The Company issues new shares when options are exercised.

 

The Company employs the following key weighted-average assumptions in determining the fair value of stock options, using the Black-Scholes option pricing model and the simplified method to estimate the expected term of “plain vanilla” options:

 

    Six Months Ended February 28,
2015
    Year Ended
August 31,
2014
 

Expected dividend yield

 

-

     

 

Expected stock price volatility

   

137.5

%

   

154.0% – 154.5%

 

Risk-free interest rate

   

1.90

%

   

2.21% – 2.41%

 

Expected term (in years)

   

7.67

   

7.67

 

Exercise price

 

$

1.40

   

$

2.90

 

Weighted-average grant date fair-value

 

$

1.33

   

$

2.68

 

 

 
11

 

A summary of the Company’s stock option activity for the six months ended February 28, 2015 and the year ended August 31, 2014 and related information follows:

 

    Number of Shares Subject to Option Grants     Weighted Average Exercise
Price ($)
 

Weighted Average
Remaining
Contractual Term

  Aggregate
Intrinsic
Value ($)
 

Outstanding at August 31, 2013

 

970,838

   

2.03

           

Grants

   

805,000

     

2.90

           

Exercises

 

(190,000

)

   

1.65

           

Forfeitures

 

(260,001

)

   

1.69

           

Outstanding at August 31, 2014

   

1,325,837

     

2.68

           

Grants

   

15,000

     

1.40

           

Forfeitures

 

(73,335

)

   

2.46

           

Outstanding at February 28, 2015

   

1,267,502

     

2.68

 

7.87 years

 

$

12,300

 

Exercisable at February 28, 2015

   

658,002

     

2.49

 

6.90 years

 

$

11,475

 

Available for grant at February 28, 2015

   

3,315,831

                   

 

The aggregate intrinsic value in the table above represents the total pretax intrinsic value for all “in-the-money” options (i.e. the difference between the Company’s closing stock price on the last trading day of the period covered by this report and the exercise price, multiplied by the number of shares) that would have been received by the option holders had all in-the-money option holders exercised their vested options on February 28, 2015. The intrinsic value of the option changes based upon the fair market value of the Company’s common stock. Since the closing stock price was $1.51 on February 28, 2015 and 30,000 outstanding options have an exercise price below $1.51 per share, as of February 28, 2015, there is intrinsic value to the Company’s outstanding, in-the-money stock options.

 

The following table sets forth the share-based compensation cost resulting from stock option grants, including those previously granted and vesting over time, that were recorded in the Company’s Consolidated Statements of Operations for the three and six months ended February 28, 2015 and 2014:

 

    Three Months Ended     Six Months Ended  
    February 28,     February 28,  
    2015     2014     2015     2014  

Stock Compensation Expense:

               

SG&A - expense

 

$

111,850

   

$

239,556

   

$

265,983

   

$

279,572

 

SG&A - income due to forfeitures

   

-

   

(324,781

)

   

-

   

(356,973

)

R&D Expense

   

9,458

     

-

     

12,971

     

-

 

Net stock compensation cost

 

$

121,308

   

$

(85,225

)

 

$

278,954

   

$

(77,401

)

 

As of February 28, 2015, the Company had $440,698 of unrecognized compensation cost related to unvested stock options which is expected to be recognized over a period of 3.0 years.

 

 
12

 

The following table summarizes information about stock options outstanding and exercisable at February 28, 2015:

 

    Stock Options Outstanding     Stock Options Exercisable  

Range of

Exercise

Prices

  Number of Shares Subject to Outstanding Options     Weighted Average Contractual Life (years)     Weighted Average Exercise Price     Number of Shares Subject To Options Exercise     Weighted Average Remaining Contractual Life (Years)     Weighted Average Exercise Price  

$ 0.80

 

15,000

   

7.81

   

$

0.80

   

15,000

   

7.81

   

$

0.80

 

1.40

   

15,000

     

9.80

     

1.40

     

7,500

     

9.80

     

1.40

 

1.65

   

320,000

     

4.55

     

1.65

     

320,000

     

6.52

     

1.65

 

2.30

   

2,500

     

7.16

     

2.30

     

2,500

     

7.16

     

2.30

 

2.50

   

10,000

     

6.10

     

2.50

     

8,000

     

6.10

     

2.50

 

2.55

   

33,334

     

3.53

     

2.55

     

33,334

     

3.53

     

2.55

 

2.90

   

805,000

     

8.91

     

2.90

     

205,000

     

8.89

     

2.90

 

4.98

   

16,667

     

3.03

     

4.98

     

16,667

     

3.03

     

4.98

 

5.94

   

50,001

     

5.82

     

5.94

     

50,001

     

5.82

     

5.94

 

Total

   

1,267,502

     

7.87

   

$

2.68

     

658,002

     

6.90

   

$

2.49

 

 

NOTE 5 - Net Loss Per Share

 

During the three and six months ended February 28, 2015 and 2014, the Company recorded a net loss. Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. The Company has not included the effects of warrants, stock options and convertible debt on net loss per share because to do so would be antidilutive.

 

Following is the computation of basic and diluted net loss per share for the three and six months ended February 28, 2015 and 2014:

 

    Three Months Ended     Six Months Ended  
    February 28,     February 28,  
    2015     2014     2015     2014  

Basic and Diluted EPS Computation

               

Numerator:

               

Loss available to common stockholders'

 

$

(1,520,947

)

 

$

(699,033

)

 

$

(4,780,195

)

 

$

(1,468,604

)

Denominator:

                               

Weighted average number of common shares outstanding

   

24,931,888

     

24,923,050

     

24,620,165

     

24,251,364

 

Basic and diluted EPS

 

$

(0.06

)

 

$

(0.03

)

 

$

(0.19

)

 

$

(0.06

)

                               

The shares listed below were not included in the computation of diluted losses per share because to do so would have been antidilutive for the periods presented:

   

 

                         
                               

Convertible debt

   

3,240,151

     

2,296,002

     

3,240,151

     

2,296,002

 

Warrants issuable upon conversion of debt (See "NOTE 2 - Convertible Promissory Note" above)

   

3,240,151

     

4,592,004

     

3,240,151

     

4,592,004

 

Warrants

   

8,918,851

     

3,302,001

     

8,918,851

     

3,302,001

 

Stock options

   

1,267,502

     

1,325,837

     

1,267,502

     

1,325,837

 

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

   

16,666,656

     

11,515,844

     

16,666,656

     

11,515,844

 

 

 
13

 

NOTE 6 - Related Party Transactions

 

A related party with respect to the Company is generally defined as any person (i) (and, if a natural person, inclusive of his or her immediate family) that holds 10% or more of the Company’s securities, (ii) that is part of the Company’s management, (iii) that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

 

For services rendered in the capacity of a Board member, non-employee Board members received $4,250 per quarter. New Board member compensation is pro rated in their first quarter. During the three and six months ended February 28, 2015, the Company incurred $8,500 and $17,000, respectively in cash based Board compensation. During the three and six months ended February 28, 2014, the Company incurred $8,500 and $21,250, respectively in cash based Board compensation.

 

The Company grants stock options and common stock for services rendered by certain individuals, including the Company’s non-employee directors and sole officer, Mr. Conklin. During the six months ended February 28, 2015, the Company's three directors each received 20,000 shares of restricted common stock valued at $1.40 per share, the fair market value of the Company’s common stock on the date of grant on December 15, 2014. In total, during the three and six months ended February 28, 2015, the Company recognized net compensation expense related to stock options and restricted stock issued to our non-employee directors and executive of $190,827 and $342,910, respectively. During the three and six months ended February 28, 2014 the Company recognized net compensation income due to the reversal of compensation expense for pre-vesting forfeitures to stock options off set by expense related to restricted stock issued to our non-employee directors and executive of $23,499 and $25,872, respectively.

 

The law firm of Sierchio & Company, LLP, of which Joseph Sierchio, one of the Company’s directors, is a principal, has provided counsel to the Company since its inception. In July 2008, the Company asked Mr. Sierchio to join the Company’s Board. During the three and six months ended February 28, 2015, the law firm of Sierchio & Company, LLP provided $34,785 and $86,695, respectively, of legal services. During the three and six months ended February 28, 2014, the law firm of Sierchio & Company, LLP provided $37,082 and $74,722, respectively, of legal services. At February 28, 2015, the Company owed Sierchio & Company, LLP $9,025 which is included in accounts payable.

 

On October 7, 2013, the Company entered into the 2013 Loan Agreement with Investor and on November 10, 2014, the Company and Investor entered into the 2015 Loan Agreement resulting in the extension of the 2013 Note’s maturity date to December 31, 2015 and the issuance of a Series J Warrant to purchase 3,110,378 shares of our common stock and a Series K Warrant to purchase 3,110,378 shares of our common stock (see “NOTE 2 - Convertible Promissory Note” above).

 

All related party transactions are recorded at the exchange amount established and agreed to between related parties and are in the normal course of business.

 

NOTE 7 – Subsequent Events

 

On March 4, 2015, the Company entered into a Bridge Loan Agreement (the “Loan Agreement”) with 1420468 Alberta Ltd. (the “Creditor”) pursuant to which the Company borrowed $600,000 at an annual interest rate of 7% (the “Loan”), compounded quarterly; following the occurrence of an event of default, as further specified in the Loan Agreement, the annual interest rate would increase to 15%. The Loan was evidenced by a promissory note with a maturity date of the earlier of: (a) the closing of any equity financing by the Company in excess of $600,000, or (b) September 4, 2015. As a condition to the Creditor’s entry into the Loan Agreement, the Company issued the Creditor a Series L Stock Purchase Warrant (the “Series L Warrant”) to purchase up to 500,000 shares of the Company's common stock, which are exercisable from September 5, 2015 through March 4, 2020, with an exercise price of $1.20; the Series L Warrant contains a provision allowing the Creditor to exercise the Series L Warrant on a cashless basis as further set forth therein.

 

On April 10, the Company issued 453,787 net shares pursuant to the cashless exercise of 625,000 Series G Warrants. The Company did not receive any funds from this exercise (For more information see “NOTE 3 – Common Stock and Warrants” above).

 

 

 
14

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

This Report on Form 10-Q contains forward-looking statements which involve assumptions and describe our future plans, strategies, and expectations, and are generally identifiable by use of words such as “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project,” or the negative of these words or other variations on these words or comparable terminology. These statements are expressed in good faith and based upon a reasonable basis when made, but there can be no assurance that these expectations will be achieved or accomplished.

 

Such forward-looking statements include statements regarding, among other things, (a) the potential markets for our technologies, our potential profitability, and cash flows, (b) our growth strategies, (c) expectations from our ongoing research and development activities, (d) anticipated trends in the technology industry, (e) our future financing plans, and (f) our anticipated needs for working capital. This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied by any forward-looking statements. These statements may be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as in this Form 10-Q generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the matters described in this Form 10-Q generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. In addition to the information expressly required to be included in this filing, we will provide such further material information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading.

 

Although forward-looking statements in this report reflect the good faith judgment of our management, forward-looking statements are inherently subject to known and unknown risks, business, economic and other risks and uncertainties that may cause actual results to be materially different from those discussed in these forward-looking statements. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, other than as may be required by applicable law or regulation. Readers are urged to carefully review and consider the various disclosures made by us in our reports filed with the Securities and Exchange Commission which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect our actual results may vary materially from those expected or projected.

 

Except where the context otherwise requires and for purposes of this Form 10-Q only, “we,” “us,” “our,” “Company,” “our Company,” and “SolarWindow” refer to SolarWindow Technologies, Inc., a Nevada corporation, and its consolidated subsidiaries.

 

Overview

 

We are a pre-revenue developer of transparent electricity-generating SolarWindow™ coatings. Our SolarWindow™ technology provides the ability to harvest light energy from the sun and artificial sources and generate electricity from a see-through, semi-transparent, coating of OPV solar cells applied to glass and plastics. Our SolarWindow™ technology is the subject of a patent pending technology. Our MotionPower™ technology harvests “kinetic” or “motion” energy from vehicles when they slow down before coming to a stop and converts this captured energy into electricity. Our MotionPower™ technology is the subject of fifty-nine (59) patent filings.

 

We do not currently have any commercial products and there is no assurance that we will successfully be able to design, develop, manufacture, or sell any commercial products in the future.

 

 
15

 

Our product development programs involve ongoing research and development (“R&D”) and product development efforts, and the commitment of significant resources to support the extensive invention, design, engineering, testing, prototyping, and intellectual property initiatives carried-out by our contract engineers, scientists, and consultants.

 

Ultimately, we plan to market any SolarWindow™ technology products through co-marketing, co-promotion, licensing and distribution arrangements with third party collaborators. We believe that this approach could provide immediate access to pre-existing distribution channels, therefore potentially increasing market penetration and commercial acceptance of our products and enabling us to avoid expending significant funds for development of a large sales and marketing organization.

 

We cannot accurately predict the amount of funding or the time required to successfully commercialize our SolarWindow™ technology. The actual cost and time required to commercialize our SolarWindow™ technology may vary significantly depending on, among other things, the results of our R&D efforts, the cost of developing, acquiring, or licensing various enabling technologies, changes in the focus and direction of our R&D programs, competitive and technological advances, the cost of filing, prosecuting, defending and enforcing claims with respect to patents, the regulatory approval process and 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.

 

As of February 28, 2015, we had negative working capital of $1,001,585 and cash of $167,068. On March 4, 2015, subsequent to our quarter end, we entered into a bridge loan agreement pursuant to which we borrowed $600,000. Based upon our current level of operations and expenditures, we believe that cash on hand should be sufficient to enable us to continue operations through June 2015. Management recognizes that in order for us to meet our capital requirements, and continue to operate, additional financing will be necessary. We expect to raise additional funds through private or public equity investment in order to expand the range and scope of its business operations. We will seek access to private or public equity but there is no assurance that such additional funds will be available for us to finance our operations on acceptable terms, if at all. If we are unable to raise additional capital or generate positive cash flow, it is unlikely that we will be able to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Research and Related Agreements

 

We are a party to certain agreements related to the development of our SolarWindow™ technology.

 

Stevenson-Wydler Cooperative Research and Development Agreement with the Alliance for Sustainable Energy

 

In efforts to advance the commercial development of the SolarWindow™ technology, on March 18, 2011, we entered into a CRADA with Alliance for Sustainable Energy, LLC (“Alliance”), the operator of NREL under its U.S. Department of Energy contract. Under terms of the CRADA, NREL researchers will make use of our exclusive intellectual property (“IP”), newly developed IP, and NREL’s background IP in order to work towards specific product development goals. Under the terms of the CRADA, we agreed to reimburse Alliance for filing fees associated with all documented, out-of-pocket costs directly related to patent application preparation and filings, and maintenance of the patent applications.

 

On January 16, 2013, we entered into a modification to the CRADA for the purpose of extending the date pursuant to which NREL’s researchers will make use of our exclusive IP and NREL’s background IP. As part of the extension, we advanced $150,000 to Alliance as a retainer, which will be used once the development goals are met. Until such time, however, Alliance bills us monthly for R&D related costs as they are incurred.

 

 
16

 

On March 6, 2013, we entered into Phase II of our CRADA with Alliance. Under the terms of the agreement, researchers will additionally work towards:

 

 

·

Further improving SolarWindow™’s efficiency and transparency;

     
 

·

Optimizing electrical power (current and voltage) output;

     
 

·

Optimizing the application of the active layer coatings which make it possible for SolarWindow™ to generate electricity on glass surfaces;

     
 

·

Developing improved electricity-generating coatings by enhancing performance, processing, reliability, and durability;

     
 

·

Optimizing SolarWindow™ performance on flexible substrates; and

     
 

·

Developing high speed and large area roll-to-roll (R2R) and sheet-to-sheet (S2S) coating methods required for commercial-scale BIPV and windows.

 

Results of Operations

 

Three and Six Months Ended February 28, 2015 Compared with the Three and Six Months Ended February 28, 2014

 

Operating Expenses

 

A summary of our operating expense for the three and six months ended February 28, 2015 and 2014 follows:

 

    Three Months ended
February 28,
    Increase/  
    2015     2014     (Decrease)  

Operating expense

           

Selling, general and administrative

 

$

466,623

   

$

506,806

   

$

(40,183

)

Research and development

   

143,901

     

137,779

     

6,122

 

Stock compensation

   

205,308

     

1,775

     

203,533

 

Total operating expense

 

$

815,832

   

$

646,360

   

$

169,472

 

 

    Six Months ended
February 28,
    Increase/  
    2015     2014     (Decrease)  

Operating expense

           

Selling, general and administrative

 

$

871,966

   

$

1 ,074,993

   

$

(203,027

)

Research and development

   

326,523

     

300,262

     

26,261

 

Stock compensation

   

362,954

     

9,599

     

353,355

 

Total operating expense

 

$

1,561,443

   

$

1,384,854

   

$

176,589

 

 

Selling, General and Administrative

 

Selling, general and administrative costs include all expenditures incurred other than R&D related costs, including costs related to personnel, professional fees, travel and entertainment, public company costs, insurance and other office related costs. The decrease is primarily due to a decrease in costs related to fees paid to publicize our development activities and achievements within the industry and investor community offset by increases in patent related fees.

 

Research and Development

 

R&D costs represent costs incurred to develop our SolarWindow™ and MotionPower™ technologies and are incurred pursuant to our research agreements and agreements with other third party providers and certain internal R&D cost allocations. Payments under these agreements primarily include salaries and benefits for R&D personnel and contract services. R&D costs are expensed when incurred, except for non-refundable advance payments for future R&D activities which are capitalized and recognized as expense as the related services are performed. R&D costs increased during the three and six months ended February 28, 2015 compared to the three and six months ended February 28, 2014, as a result of increasing SolarWindow™ R&D activities.

 

 
17

 

Stock Compensation

 

Expense associated with equity based transactions is calculated and expensed in our financial statements as required pursuant to various accounting rules and is non-cash in nature. Stock compensation represents the expense associated with the amortization of our stock options, issuance of common stock and issuance of warrants to purchase our common stock. Stock compensation expense increased during the three and six months ended February 28, 2015 compared to the three and six months ended February 28, 2014 primarily due to the reversal in 2014 of stock based compensation due to the forfeiture of stock options of approximately $325,000 and $357,000 during the three and six months ended February 28, 2014, respectively.

 

Other Income (Expense)

 

A summary of our other income (expense) for the three and six months ended February 28, 2015 and 2014 follows:

 

    Three Months Ended         Six Months Ended      
    February 28,     Three Month     February 28,     Six Month  
    2015     2014     Change     2015     2014     Change  

Other income (expense)

                       

Interest expense

  $

(56,077

)

  $

(52,317

)

 

$

(3,760

)

 

$

(111,804

)

 

$

(83,386

)

 

$

(28,418

)

Interest expense - accretion of debt discount

 

(649,038

)

 

(356

)

 

(648,682

)

 

(3,106,948

)

 

(364

)

 

(3,106,584

)

Total other income (expense)

 

$

(705,115

)

 

$

(52,673

)

 

$

(652,442

)

 

$

(3,218,752

)

 

$

(83,750

)

 

$

(3,135,002

)

 

Interest Expense

 

“Interest expense” relates to the stated interest of our convertible promissory notes. “Interest expense - accretion of debt discount” represents the accretion of the discount applied to our notes as a result of the issuance of detachable warrants and the beneficial conversion feature contained in our notes calculated according to the effective interest method. The amounts under each column relate to the 2013 Note and amendment thereto. See “NOTE 2 – Convertible Promissory Note” to our Consolidated Financial Statements contained in this Form 10-Q.

 

Liquidity and Capital Resources

 

We have an accumulated deficit of $25,726,465 through February 28, 2015. Included in the deficit are non-cash expenses totaling $9,208,014 relating to the issuance of stock for services, compensatory stock options, warrants granted for value and accretion of debt discount. Due to the “start-up” nature of our business, we expect to incur losses as we continue development of our technologies.

 

These conditions raise substantial doubt about our ability to continue as a going concern. Management recognizes that in order for us to meet our capital requirements, and continue to operate, additional financing will be necessary. We expect to raise additional funds through private or public equity investment in order to maintain and/or expand the range and scope of our business operations. However, there is no assurance that such additional funds will be available for us on acceptable terms, if at all. If we are unable to raise additional capital when needed or generate positive cash flow, it is unlikely that we will be able to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

  

Our principal source of liquidity is cash in the bank. At February 28, 2015, we had a cash and cash equivalent balance of $167,068. On March 4, 2015, subsequent to our quarter end, the we entered into a bridge loan agreement pursuant to which we borrowed $600,000. We have financed our operations primarily from the sale of equity securities as follows:

 

 

·

$501,242 received during the first half of 2015 from the exercise of Series H Warrants;

 

 

 

 

·

$1,200,000 received in 2013 from the consummation of a self-directed registered offering of common stock and Series H Warrants on February 1, 2013; and

     
 

·

$3,000,000 received on October 7, 2013 from the issuance of an unsecured, convertible promissory note bearing an annual interest rate of 7% (the “2013 Note”) in that amount.

  

 
18

 

Net cash used in operating activities was $1,103,851 for the six months ended February 28, 2015, compared to net cash used in operating activities of $1,320,894 for the six months ended February 28, 2014.

 

Net cash used in investing activities was $15,560 for the six months ended February 28, 2015, compared to net cash used in investing activities of $1,942 for the six months ended February 28, 2014. The increase in cash used in investing activities reflects increases in amounts paid for R&D equipment.

 

Net cash provided by financing activities was $501,242 for the six months ended February 28, 2015, compared to $3,000,000 for the six months ended February 28, 2014. Cash provided by financing activities in 2014 was from the exercise of 603,906 Series H Warrants compared to the 2013 proceeds from the 2013 Note.

 

Other Contractual Obligations

 

In addition to our contractual obligations under the research agreements, as of February 28, 2015, we have lease payments of $1,150 each month under our month-to-month corporate and other office operating leases. In addition, we have future payments totaling $6,500 pursuant to agreements with third party providers that we utilize for investor and public relations and marketing and business development.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Recently Issued Accounting Pronouncements

 

See Note 1 to our Consolidated Financial Statements for more information regarding recent accounting pronouncements and their impact to our consolidated results of operations and financial position.

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), as of the end of the period covered by this quarterly report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of February 28, 2015, that our disclosure controls and procedures were effective such that the information required to be disclosed in our United States Securities and Exchange Commission (the “SEC”) reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 
19

 

PART II – OTHER INFORMATION

 

Item 6. Exhibits

 

Exhibit No.

 

Description of Exhibit

   

3.1

 

Certificate of Amendment to the Articles of Incorporation changing name to SolarWindow Technologies, Inc. (Incorporated by reference to Form 8-K filed on March 4, 2015)

   

4.1

 

Bridge Loan Agreement dated March 4, 2015 (Incorporated by reference to Form 8-K filed on March 10, 2015)

   

4.2

 

Form of Series L Warrant (Incorporated by reference to Form 8-K filed on March 10, 2015)

   

10.1

 

Form of Stock Award Agreement (Incorporated by reference to the Form 8-K filed on December 19, 2014)

   

31.1

 

Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

   

32.1

 

Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

   

101.INS

 

XBRL Instance Document**

 

 

 

101.SCH

 

XBRL Taxonomy Extension Schema Document**

 

 

 

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document**

 

 

 

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document**

 

 

 

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document**

 

 

 

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document**

____________________

*Filed herewith

 

** Furnished herewith. XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

 
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SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

SolarWindow Technologies, Inc.
(Registrant)

 
       
Date: April 14, 2015 By: /s/ John A. Conklin  
    John A. Conklin  
    President, Chief Executive Officer, Chief Financial Officer  
    (Principal Executive Officer, Principal Financial Officer,  
and Principal Accounting Officer)

 

 

21