SolarWindow (WNDW) 10-Q2024 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended February 29, 2024

For the transition period from ___________ to ___________

Commission file number 333-127953

SOLARWINDOW TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

(800) 213-0689

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in 12b-2 of the Exchange Act).

Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act: None

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 53,198,399 shares of common stock, par value $0.001, were outstanding on April 10, 2024.

SOLARWINDOW TECHNOLOGIES, INC.

FORM 10-Q

For the Quarterly Period Ended February 29, 2024

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

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

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

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

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

SOLARWINDOW TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 – Organization

Organization

SolarWindow Technologies, Inc. was incorporated in the State of Nevada on May 5, 1998 (“SWT” and together with its controlled subsidiary companies, SolarWindow Asia (USA) Corp., and SolarWindow Asia Co. Ltd, collectively, the “Company”). SolarWindow® technology harvests light energy from the sun and from artificial light sources using a transparent and ultra-lightweight coating of organic photovoltaic (“OPV”) solar cells applied to glass and plastics, thereby generating electricity. The Company’s ticker symbol is WNDW.

On August 24, 2020, SolarWindow Technologies, Inc. formed wholly owned SolarWindow Asia (USA) Corp., a Nevada Corporation, as the holding company for SolarWindow Asia Co. Ltd., (the “Korean Subsidiary”) a company formed in the Republic of Korea for the purpose of expansion into the Asian markets. On January 13, 2023, the Board formally elected to dissolve the Korean Subsidiary. SWT has retained accountant and is now in the process of interviewing and retaining special legal counsel in South Korea to assist in the dissolution of the Korean Subsidiary.

Liquidity

The Company has not generated any revenue since inception and has sustained recurring losses and negative cash flows from operations since inception. We expect to incur losses as we continue to develop and further refine and promote our technologies and potential product applications. As of February 29, 2024, the Company had $5,199,165 of cash, cash equivalents and short-term investments, and working capital of $5,146,326. The Company believes that it currently has sufficient cash to meet its funding requirements over the next twelve months following the issuance of this Annual Report on Form 10-K. However, the Company has experienced and continues to experience negative cash flows from operations, as well as an ongoing requirement for additional capital investment. The Company expects that it may need to raise additional capital to commercialize its electricity generating coatings and application methodology. If additional funding is required, the Company expects to seek to obtain that funding through financial or strategic investors. There can be no assurance as to the availability of such financings nor is it possible to determine at this time the terms and conditions upon which such financing and capital might be available.

NOTE 2 – Interim Statement Presentation

Basis of Presentation and Use of Estimates

The accompanying unaudited interim consolidated financial statements of the Company as of February 29, 2024, and for the three and six months ended February 29, 2024 and February 28, 2023 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. These Consolidated Financial Statements should therefore be read in conjunction with the Consolidated Financial Statements and Notes thereto for the fiscal year ended August 31, 2023, included in our Annual Report on Form 10-K filed with the SEC on November 21, 2023.

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying disclosures. Actual results may differ from those estimates. The accompanying unaudited interim consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments (including normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s consolidated financial position as of February 29, 2024, results of operations, stockholders’ equity and cash flows for the three and six months ended February 29, 2024 and February 28, 2023. 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.

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the accounting period. The Company considers its accounting policies relating to stock-based compensation to be the most significant accounting policy that involves management estimates and judgments. The Company has made accounting estimates based on the facts and circumstances available as of the reporting date. Actual amounts could differ from these estimates, and such differences could be material.

These consolidated financial statements presented are those of SWT and its wholly owned subsidiaries, SolarWindow Asia (USA) Corp., and the Korean Subsidiary. All significant intercompany balances and transactions have been eliminated.

As more fully described in Note 3, on January 13, 2023, the Board determined that it is in the best interests of the Company to discontinue operations in South Korea and to dissolve the Korean Subsidiary. In accordance with applicable accounting guidance, the results of the Korean Subsidiary are presented as discontinued operations in the Consolidated Statements of Operations and Comprehensive Loss and, as such, have been excluded from continuing operations. The Consolidated Statements of Cash Flows are presented on a consolidated basis for both continuing operations and discontinued operations.

Information regarding the Company’s significant accounting policies is contained in Note 2, “Summary of significant accounting policies,” to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended August 31, 2023. Presented below and in the following notes is supplemental information that should be read in conjunction with “Notes to Financial Statements” in the Annual Report.

Fiscal quarter

The Company’s quarterly periods end on November 30, February 29, May 31, and August 31. The Company’s second quarter in fiscal 2024 and 2023 ended on February 29, 2024 and February 28, 2023, respectively.

Cash and Highly Liquid Investments

Cash includes cash on hand and highly liquid investments with original maturities of three months or less from the date of purchase. The Company had $5,199,165 of cash and short-term deposits as of February 29, 2024, including $100,268 held in the US and covered by FDIC insurance, and $5,098,897 held in Canadian banks with $5,025,205 in excess of Canadian Deposit Insurance Corporation insured limits.

Short-term investments

The Company determines the balance sheet classification of its investments at the time of purchase and evaluates the classification at each balance sheet date. Money market funds, certificates of deposit, and time deposits with maturities of greater than three months but no more than twelve months are carried at cost, which approximates fair value and are recorded in the consolidated balance sheets in short-term investments. Time Deposits pay the interest earned at the time of maturity or redemption. During the six months ended February 29, 2024, $4,900,000 of time deposits matured and $600,000 was redeemed. During the three and six months ended February 29, 2024, the Company received $264,246 and $270,161, respectively, of earned interest on the time deposits originally purchased in February 2023. On February 28, 2024, the Company purchased new time deposits, which consist of a 12-month $2,500,000 fixed-term deposit earning interest of 5.2%, a 12-month $500,000 fixed-term deposit earning interest of 4.50% and a 6-month $1,000,000 fixed-term deposit earning interest of 5.10%.

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, the Company has not identified any standards that the Company believes merit further discussion.

Recent accounting pronouncements not yet adopted

None.

Recently adopted accounting pronouncements

None.

NOTE 3 – Discontinued Operations

On January 13, 2023, the Board determined that it is in the best interests of the Company to discontinue operations in South Korea and to dissolve the Korean Subsidiary. The Company is working to dispose the Korean Subsidiary other than by sale in accordance with Accounting Standards Codification (“ASC”) 360-10-45-15, Long-Lived Assets to Be Disposed of Other Than by Sale

In accordance with ASC 205-20, Discontinued Operations, the results of the Korean Subsidiary are presented as discontinued operations in the Consolidated Statements of Operations and Comprehensive Loss, and, as such, have been excluded from continuing operations. Further, the Company reclassified the assets and liabilities of the Korean Subsidiary as assets and liabilities of discontinued operations in the Consolidated Balance Sheet as of August 31, 2022. The Consolidated Statements of Cash Flows are presented on a consolidated basis for both continuing operations and discontinued operations.

The following table summarizes the significant items included in income from discontinued operations, net of tax in the Consolidated Statement of Operations and Comprehensive Loss for the three and six months ended February 29, 2024 and February 28, 2023:

The following table summarizes the carrying value of the significant classes of assets and liabilities classified as discontinued operations as of February 29, 2024 and August 31, 2023:

The cash flows related to discontinued operations have not been segregated and are included in the consolidated statements of cash flows for all periods presented.

NOTE 4 - Net Income (Loss) Per Share

The computation of basic earnings per share (“EPS”) is based on the weighted average number of shares that were outstanding during the period, including shares of common stock that are issuable at the end of the reporting period. The computation of diluted EPS is based on the number of basic weighted-average shares outstanding plus the number of common shares that would be issued assuming the exercise of all potentially dilutive common shares outstanding using the treasury stock method. The computation of diluted net income per share does not assume conversion, exercise or contingent issuance of securities that would have an antidilutive effect on earnings per share. Therefore, when calculating EPS if the Company experienced a loss, there is no inclusion of dilutive securities as their inclusion in the EPS calculation is antidilutive. Furthermore, options and warrants will have a dilutive effect under the treasury stock method only when the average market price of the common stock during the period exceeds the exercise price of the options or warrants (they are in the money).

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

NOTE 5 – Property and Equipment

Property and equipment consists of the following:

During the three months ended February 29, 2024 and February 28, 2023, the Company recognized straight-line depreciation expense of $3,054 and $3,594, respectively. During the six months ended February 29, 2024 and February 28, 2023, the Company recognized straight-line depreciation expense of $6,648 and $7,521, respectively.

During the year ended August 31, 2019, the Company made deposits for in-process equipment totaling $1,292,655 towards the purchase of manufacturing equipment. The Company is currently evaluating configuration options in order to optimize the equipment for manufacturing of the Company’s initial product. Completion of the equipment may require additional payments of up to approximately $510,000.

NOTE 6 – Common Stock and Warrants

Common Stock

At February 29, 2024, the Company had 300,000,000 authorized shares of common stock with a par value of $0.001 per share, and 53,198,399 shares of common stock outstanding.

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. The following warrants may be exercised on a cashless basis. A summary of the Company’s warrants outstanding and exercisable as of February 29, 2024 and August 31, 2023 is as follows:

On February 5, 2024, the Board modified the terms of the Series T warrants to extend the expiration date for an additional five (5) years. No other term was modified. The modification was not was not linked to any other financing arrangements. The Company calculated the incremental fair value of the modification at $400,000 which is presented on the Consolidated Statement of Operations as a deemed dividend.

NOTE 7 - Stock Options

The Company measures share-based compensation cost on the grant date, based on the fair value of the award, and recognizes the expense on a straight-line basis over the requisite service period for awards expected to vest. The Company estimates the grant date fair value of stock options using a Black-Scholes valuation model. A summary of the Company’s stock option activity for the six months ended February 29, 2024 and February 28, 2023 and related information follows:

A summary of the Company’s stock option activity for the six months ended February 29, 2024 and related information follows:

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 29, 2024. 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 $0.35 on February 29, 2024, and no outstanding options have an exercise price below $0.35 per share, as of February 29, 2024, there is no intrinsic value in the Company’s outstanding stock options and vested options.

Three and Six Months Ended February 29, 2024

Modification – On February 5, 2024, the Board granted replacement options with a five (5) year life in amounts equal to and on substantially the same terms as certain previous grants totaling 3,623,000 options, including 1) 90,000 options with a strike price of $4.87; 2) 1,033,000 options with a strike price of $3.54; and 3) 2,500,000 options with a strike price of $2.60 (collectively, the “New Grant”). The New Grant was issued to replace grants issued in prior years (the "Old Grant"), and extend their expiration by five (5) years, as additional consideration for the September 1, 2023 Consulting Agreement entered into between the Company, Vector Asset Management, Inc., and Jatinder S. Bhogal. The exercise price of the New Grant is identical to the Old Grant. The intent of the Company was to reinstate and extend the Old Grant. However, because the original stock plan expired, in order to extend the Old Grant, the Company needed to issue the New Grant. The Company accounted for the New Grant as a modification based on the substance of the issuance. The difference in the fair value, as calculated using the Black-Scholes Model, was $26,750 which was recorded to selling, general and administrative expense.

Forfeitures and cancellations – These totaled 24,400 and included 1) 23,400 options owned by a prior Director that expired unexercised; and 2) 1,000 options owned by a prior consultant that expired unexercised.

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 Statements of Operations for the three and six months ended February 29, 2024 and February 28, 2023:

As of February 29, 2024, the Company had $22,090 of unrecognized compensation cost related to unvested stock options which is expected to be recognized during the three months ended May 31, 2024, or 0.25 years.

The following table summarizes information about stock options outstanding and exercisable at February 28, 2024:

NOTE 8 - Transactions with Related Persons

A related party with respect to the Company is generally defined as any person (and, if a natural person, inclusive of his or her immediate family) (i) 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.

Joseph Sierchio, one of the Company’s directors, has maintained his role as the Company’s general counsel since its inception, and, beginning in August 2020, as Principal of Sierchio Law, LLP pursuant to an engagement letter which provides for an annual fee of $175,000 in exchange for general counsel services, and the reimbursement of expenses. Beginning November 2023, Mr. Sierchio began serving as general counsel on an hourly basis at the rate of $750 per hour. Fees for legal services and expense reimbursement billed by Sierchio Law, LLP totaled $80,685 and $43,750 for the three months ended February 29, 2024 and February 28, 2023, respectively, and $124,435 and $87,500 for the six months ended February 29, 2024 and February 28, 2023, respectively. As of February 29, 2024, the Company recognized a related party payable to Sierchio Law, LLP of $51,734, including $49,234 related to legal services and $2,500 related to the quarterly board fee for the three months ended February 29, 2024. As of August 31, 2023, the Company recognized a related party payable to Sierchio Law, LLP of $17,083, including $14,583 related to legal services and $2,500 related to the quarterly board fee for the three months ended August 31, 2023.

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

NOTE 9 – Commitments and Contingencies

On June 9, 2022, the Company was served the Notice of Civil Claim dated May 16, 2022 (the “Notice of Claim”), and related Notice of Application (the “Application”) and Order Made After Application (the “Order”). The Notice of Claim, the Application and Order are collectively referred to herein as the “Complaint.” Please refer to our Form 10-K filed on November 21, 2023 and Exhibit 99.0 thereto.

NOTE 10 – Subsequent Events

Management has reviewed material events subsequent of the period ended February 29, 2024 and through the date of filing of financial statements in accordance with FASB ASC 855 “Subsequent Events”. In managements opinion, no material subsequent events have occurred as of the date of this quarterly report.

On April 8, 2024 (“Date of Grant”), the Company’s Board granted options to purchase up to 750,000 shares of common stock, including 675,000 to its executive officers and directors as follows: an option to purchase up to 75,000 shares of the Company’s common stock to Mr. Justin Frere, Interim CFO, and 200,000 to Timothy Bullinger, Robert Levine and Joseph Sierchio (each a member of the Board of Directors). The option grants are subject to the acceptance of the options by the grantee and execution of a stock option agreement reflecting the same. The pertinent terms of the option include (1) an exercise price of $0.33 per share (based on the per share closing price of the Company’s common stock on April 5, 2024), (2) a term of five years, subject to earlier termination upon the occurrence of certain events, (3) vesting as to fifty (50%) percent of the underlying shares on the date of grant and vesting as to the balance of the underlying shares on the one year anniversary of the Date of Grant, and (4) various payment methodologies, including a net exercise option.

The Company calculated the value of the options at $247,500 based on inputs to the Black-Scholes valuation model, including exercise price of $0.33, volatility of 331%, term (based on the simplified method) of 3.0 years, 4.60% rate on a 3-year Treasury Note.

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 filings 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, the terms “we,” “us,” “our,” “Company” “our Company,” and “SolarWindow” refer to SolarWindow Technologies, Inc., a Nevada corporation.

Overview

We are a developer of semi-transparent electricity-generating coatings, and methods for their application to various materials (collectively, “LiquidElectricity® Coatings”). When applied in ultra-thin layers to rigid glass, and flexible glass and plastic surfaces our LiquidElectricity® Coatings transform otherwise ordinary surfaces into photovoltaic devices capable of generating electricity from natural sun, artificial light, and low, shaded, or reflected light conditions while maintaining transparency.

We have overcome major technical challenges and achieved many important milestones resulting in an expansion of the potential applications of LiquidElectricity® Coatings which span multiple industries, including architectural, automotive, agrivoltaic, aerospace, commercial transportation and marine. Our LiquidElectricity® Coatings are under development with support from commercial contract firms and at the U.S. Department of Energy’s National Renewable Energy Laboratory (“NREL”), through Cooperative Research and Development Agreements (“CRADA”).

Research and Related Agreements

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

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

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

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

On December 28, 2015, we executed another modification to the NREL CRADA (the “Modification”). Under the Modification, (i) the date of completion was extended to December 2017; and (ii) the Company and the NREL will work jointly towards achieving specific product development goals and objectives for the purpose of preparing to commercialize our OPV-based transparent electricity-generating coatings for various applications, including BIPV, glass and flexible plastics.

Over the course of our collaborative research and development efforts with the NREL under the CRADA, both parties have agreed to modifications to extend the date of completion. The Company and NREL have entered into eleven such No Cost Time Extensions (“NCTE”). Under the terms of each NCTE, all terms and conditions of the NREL CRADA remain in full force and effect without change. The current NCTE was executed on December 6, 2021, and extends the date of completion to December 31, 2024. As of February 29, 2024, the Company had a capitalized asset balance of $89,422 related to deferred research and development costs for advances to Alliance for Sustainable Energy for work to be performed under the NREL CRADA.

Results of Operations

Our operating results for the three and six months ended February 29, 2024 may not be indicative of the results that may be expected for the fiscal year. Our quarterly results of operations have varied in the past and are likely to do so again in the future. As such, we believe that period-to-period comparisons of our results of operations should not be relied upon as an indication of our future performance.

The following table presents the components of our consolidated results of operations for the periods indicated:

Comparison of the three and six months ended February 29, 2024 to the three and six months ended February 28, 2023

Selling, general and administrative

Selling, general and administrative (“SG&A”) costs include all expenditures incurred other than research and development related costs, including costs related to personnel, professional fees, travel and entertainment, public company costs, insurance, and other office related costs. During the three months ended February 29, 2024, compared to the three months ended February 28, 2023, SG&A costs decreased by $14,391 primarily due to higher professional and consulting fees ($46,000), offset by decreases in personnel costs ($15,000) and other administrative costs ($45,000). During the six months ended February 29, 2024, compared to the six months ended February 28, 2023, SG&A costs increased by $100,926 primarily due to higher professional and consulting fees ($179,000), offset by decreases in personnel costs ($31,000) and other administrative costs ($47,000).

Research and development

Research and Development (“R&D”) costs represent costs incurred to develop our SolarWindow® technology and are incurred pursuant to our research agreements and agreements with other third-party providers and certain internal R&D cost allocations. Payments under these agreements include salaries and benefits for R&D personnel, allocated overhead, contract services and other costs. R&D costs are expensed when incurred, except for non-refundable advance payments for future research and development activities which are capitalized and recognized as expense as the related services are performed. During the three months ended February 29, 2024, compared to the three months ended February 28, 2023, R&D costs decreased primarily as a result of a decrease in CRADA costs. During the six months ended February 29, 2024, compared to the six months ended February 28, 2023, R&D costs decreased primarily as a result of a decrease in CRADA costs.

Stock-based compensation

The Company grants stock options to its directors, employees and consultants. Stock compensation represents the expense associated with the amortization of our stock options. Expense associated with equity-based transactions is calculated and expensed in our financial statements as required pursuant to various accounting rules and is non-cash in nature. Stock based compensation expense increased during the three months ended February 29, 2024 compared to February 28, 2023 primarily due to the modification of certain option grants resulting in a one-time expense of $26,750. During the six months ended February 29, 2024 compared to February 28, 2023, stock-based compensation expense decreased due to the tapering off of the vesting period of prior granted options combined with no new option grants over the past few years.

Net loss from continuing operations

Consolidated net loss from continuing operations decreased $48,747 to $441,560 for the three months ended February 29, 2024 as compared to a net loss from continuing operations of $490,307 in the same period of the prior year. Consolidated net loss from continuing operations decreased $108,282 to $941,062 for the six months ended February 29, 2024 as compared to a net loss from continuing operations of $1,049,344 in the same period of the prior year. The decrease for the three-and-six-month periods ended February 29, 2024 compared to 2023 is primarily due to increased professional fees offset by lower personnel and other administrative costs, and increased interest income.

Net loss from discontinued operations

Net loss from discontinued operations of $5,471 in the three months ended February 29, 2024 is comprised of costs related to accounting fees. Net loss from discontinued operations of $37,390 in the three months ended February 28, 2023 is comprised of costs related to legal fees ($28,293) and administrative fees ($9,097).

Net loss from discontinued operations of $7,341 in the six months ended February 29, 2024 is primarily comprised of costs related to accounting fees. Net loss from discontinued operations of $204,510 in the six months ended February 28, 2023 is primarily comprised of costs related to legal fees ($92,171), SG&A ($96,095), and R&D ($16,253).

Comprehensive loss attributable to the common stockholders'

Comprehensive loss attributable to the common stockholders' of $844,800 and $1,347,700 for the three and six months ended February 29, 2024 includes a $400,000 deemed dividind related to the February 5, 2024 modification to the terms of the Series T warrants to extend the expiration date for an additional five (5) years.

Liquidity and Capital Resources

Our primary cash needs are for personnel, professional and R&D related fees and other administrative costs. Our principal sources of liquidity are cash and short-term investments. As of February 29, 2024, the Company had cash and short-term deposits of $5,199,165. We have financed our operations primarily from the sale of equity and debt securities.

The following table presents a summary of our cash flows for the periods indicated:

Operating Activities - Operating activities consist of net loss adjusted for certain non-cash items, including depreciation, stock-based compensation expense and the effect of changes in working capital. The amount of cash used during the six months ended February 29, 2024 compared to cash used during the six months ended February 28, 2023 decreased $220,238 due to an approximate decrease in cash layouts related to personnel ($30,000), R&D ($133,000), working capital and other costs ($148,000) offset by increased cash layouts for professional fees ($92,000).

Investing Activities - We have used cash primarily for liquid short-term investments, and purchases of office equipment and computers. During February 2023, we purchased $5,500,000 of twelve-month term deposits and $500,000 of a six-month term deposit. During the three months ended February 29, 2024, $5,500,000 of term deposits matured. The term deposits pay the interest earned at the time of maturity or redemption. During the three and six months ended February 29, 2024, the Company received $264,246 and $270,161, respectively, of earned interest.

On February 28, 2024, the Company purchased $4,000,000 of short-term investments, including a 12-month, non-cashable, $2,500,000 fixed-term deposit earning interest of 5.20%, a 12-month, cashable, $500,000 fixed term deposit earning interest of 4.50%, and a 6-month, non-cashable, $1,000,000 fixed term deposit earning interest of 5.10%. Funding of the short-term investments occurred on March 1, 2024.

Indebtedness

None.

Other Contractual Obligations

None.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Recent accounting pronouncements not yet adopted

See Note 2 to our consolidated financial statements, “Interim Statement Presentation - Accounting Pronouncements.”

Recently adopted accounting pronouncements

See Note 2 to our consolidated financial statements, “Interim Statement Presentation - Accounting Pronouncements.”

Critical Accounting Policies and Significant Judgments’ and Use of Estimates

Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements required the use of estimates and judgments that affect the reported amounts of our assets, liabilities, and expenses. Management bases estimates on historical experience and other assumptions it believes to be reasonable under the circumstances and evaluates these estimates on an on-going basis. Actual results may differ from these estimates. There have been no significant changes to the critical accounting policies and estimates included in our Quarterly Report on Form 10-Q for the three and six months ended February 29, 2024.

Related Party Transactions

See Note 8 to our consolidated financial statements for a discussion of our related party transactions.

Corporate Information

SolarWindow Technologies, Inc., a Nevada corporation, was incorporated in 1998. The Company’s executive offices are located at 9375 E Shea Blvd., Suite 107-B, Scottsdale AZ 85260. The Company’s telephone number is (800) 213-0689. Our Internet address is www.solarwindow.com. We make available free of charge through our Internet website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”). The information accessible through our website is not a part of this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates. We do not hold or issue financial instruments for trading purposes.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Our Acting Principal Executive Officer and Principal Financial Officer (“Management”), after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of February 29, 2024, have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management does not expect that the Company’s disclosure controls or the Company’s internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. We will conduct periodic evaluations of our internal controls to enhance, where necessary, our procedures and controls.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation described above that occurred during the six months ended February 29, 2024 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended August 31, 2023, which could materially affect our business, financial condition, financial results, or future performance. There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended August 31, 2023.

Item 6. Exhibits

*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.

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.

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