What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-09 compared with 2022-03-09 · 63 added, 80 removed, 145 unchanged (50% of the section changed)

76 unchanged sentences

recommended containment and mitigation measures worldwide.

As a result, the Company expects operations at its facility to continue to

be affected in some capacity as the COVID-19 virus continues to proliferate and the federal, state and local governments under which

we operate continue to adopt new rules.

The Company has put in place enhanced procedures, such as restricting international and domestic

travel, adopting a variety of steps designed to ensure social distancing in our facilities, including working remotely where available,

and increasing our cleaning and sanitizing procedures in our facilities, in an effort to protect its employees and communities.

were negatively impacted in 2020 and 2021 due to delays in manufacture of products using our technology.

Most of the products using our

technology are manufactured by licensees overseas in Europe and Asia who have been similarly affected by the pandemic.

The disruption

caused by public health crises, such as COVID-19, could result in lower levels of sale activity for products using our technology resulting

in lower level of royalties owed to us from the sale of these products.

The duration of the potential business disruptions and related

financial impact cannot be reasonably estimated at this time, but could materially adversely affect our business, financial condition,

results of operations, and cash flows.

Net of amounts previously reserved which were fully written off in 2020, the Company increased

its allowance for uncollectible royalty receivables in 2020 until the collectability from certain licensees can be better ascertained

in the regions affected by COVID-19.

connection with the COVID-19 crisis, Congress passed, and the president signed, the Coronavirus Aid, Relief, and Economic Security Act

(“CARES Act”) which, among other things, provides relief for businesses impacted by the pandemic.

The Company applied for

and received $202,052 in proceeds from the Paycheck Protection Program (“PPP Loan”) made available under the CARES Act.

PPP Loan is intended to offer businesses hurt by the COVID-19 pandemic economic assistance with the potential for the principal to be

forgiven based on certain expenses incurred during the first 24 weeks after the issuance of the PPP Loan.

The Company recorded $202,052

as other income for the year ended December 31, 2020 representing the PPP Loan amount that was expected to be forgiven under applicable

Final PPP Loan forgiveness was received in 2021.

were negatively impacted since 2020 due to delays in manufacture of products using our technology.

Most of the products using our technology

are manufactured by licensees overseas in Europe and Asia who have been similarly affected by the pandemic.

The disruption caused by

public health crises, such as COVID-19, could result in lower levels of sale activity for products using our technology resulting in

lower level of royalties owed to us from the sale of these products.

The duration of the potential business disruptions and related financial

impact cannot be reasonably estimated at this time, but could materially adversely affect our business, financial condition, results

of operations, and cash flows.

of Operations

37 unchanged sentences

ended December 31, 2022 Compared to the Year ended December 31, 2021

Company’s fee income from licensing activities increased by $434,584 for the year ended December 31, 2021 to $1,263,034

as compared to $828,450 for the year ended December 31, 2020.

Higher fees in the automotive, architectural and display markets were partially

offset by lower fees in the aircraft market.

Higher fee income in the architectural and automotive markets was predominantly from one-time

settlements from two licensees for royalty payments due, as well as for a current special government contract in the automotive area.

expenses decreased by $255,686 for the year ended December 31, 2021 to $2,521,849 from $2,777,535 for the year ended December

The decrease was the result of lower non-cash compensation expense between the two years of $104,000 relating to charges to

operations for stock options granted to employees and directors.

In addition, the Company incurred lower cash payroll and compensation

costs ($243,000), as well as lower bad debts ($37,000), depreciation ($42,000) and investor relations costs ($19,000), partially

offset by higher legal costs related to the collection efforts on outstanding royalties receivable ($136,000) and higher professional

fees ($72,000).

and development expenditures decreased by $48,304 for the year ended December 31, 2021 to $580,000 from $628,304 for the year ended December

This decrease was the result of lower payroll and related costs ($35,000) as well as lower allocated insurance costs ($9,000).

Included in the lower payroll and related costs is lower non-cash compensation costs related to stock options granted to employees ($7,000)

between the two periods.

Company’s net investment income (loss) for the year ended December 31, 2021 was $(7,537) as compared to $34,473 for the year ended

December 31, 2020.

The difference was due to higher cash balances available for investment in 2020 as well as changes in market value

of investments and a change from investments in money market funds to mutual funds.

Company recorded $202,052 of other income for the year ended December 31, 2020 representing the entire PPP Loan estimated to be

forgiven through such date.

Company’s fee income from licensing activities for the year ended December 31, 2022 was $536,686 compared to $1,263,034 for

the year ended December 31, 2021.

This decrease in fee income was the result of the timing of payments and new and amended license

agreements entered into in 2021 and was predominantly from one-time settlements from two licensees for royalty payments due, as well

as for a current special government contract in the automotive area.

Without these one-time events, fee income in 2022 would have

been comparable to fee income in 2021.

The Company expects revenue in all market segments to further increase as new

car models and other products using the Company’s SPD-SmartGlass technology are introduced into the market.

expenses increased by $33,840 for the year ended December 31, 2022 to $2,555,689 from $2,521,849 for the year ended December 31, 2021.

The increase is the result of higher bad debt expense ($80,000) as well as higher payroll and related costs ($80,000) and higher insurance

costs ($13,000) partially offset by lower legal ($80,000) and patent ($57,000) costs.

Operating expenses include non-cash charges for

options granted to employees and directors of $216,000 and $207,000 in 2022 and 2021, respectively

and development expenditures increased by $29,127 for the year ended December 31, 2022 to $609,127 from $580,000 for the year ended December

This increase was the result of higher allocated insurance costs ($12,000) as well as higher payroll and related costs ($10,000)

and higher allocated facility costs ($3,000).

Research and development costs include non-cash charges for options granted to employees

of $16,000 and $10,000 in 2022 and 2021, respectively.

Company’s net investment loss for the year ended December 31, 2022 was $44,219 as compared to $7,537 for the year ended December

This difference was primarily due to changes in market interest rates and the sale of marketable securities to convert them

into cash and cash equivalents resulting in a loss.

income tax benefit or expense was recorded for the years ended December 31, 2022 and 2021.

a consequence of the factors discussed above, the Company’s net loss was $1,846,352 ($0.06 per common share) for the year

ended December 31, 2021 as compared to $2,340,864 ($0.07 per common share) for the year ended December 31, 2020.

a consequence of the factors discussed above, the Company’s net loss was $2,669,349 ($0.08 per common share) for the year ended

December 31, 2022 as compared to $1,846,352 ($0.06 per common share) for the year ended December 31, 2021.

Condition, Liquidity and Capital Resources

10 unchanged sentences

impact depending upon the nature of such changes.

2021, the Company’s cash and cash equivalents balance decreased by $4,502,741 principally as a result of cash used for purchases

of marketable securities of $3,433,633 as well as cash used for operations of $1,804,293 and cash used for the purchase of property and

equipment of $1,077 partially offset by cash generated from the sale of marketable securities of $650,000 and the exercise of options

and warrants of $86,262.

At December 31, 2021, the Company had cash and cash equivalents of $269,964, marketable securities of $2,755,111,

working capital of $3,651,706 and total shareholders’ equity of $3,783,923.

Our quarterly projected cash flow shortfall,

based on our current operations, adjusted for any non-recurring cash expenses for the next 12 months, is approximately $385.000 per quarter.

We may eliminate some operating expenses in the future, which will further reduce our cash flow shortfall if needed.

We currently expect

to have sufficient working capital for the next 22 months of operations.

2022, the Company’s cash and cash equivalents balance increased by $3,960,952 principally as a result of cash generated from the

sale of common stock and warrants of $3,450,000 as well as cash generated from the sale of marketable securities of $2,694,968 partially

offset by cash used for operations of $2,182,745 and cash used for the purchase of property and equipment of $1,271.

At December 31,

2022, the Company had cash and cash equivalents of $4.2 million, working capital of $4.6 million and total shareholders’ equity

of $4.8 million.

Our quarterly projected cash flow shortfall, based on our current operations, adjusted for any non-recurring cash expenses

for the next 12 months and adjusted for additional royalties expected to be received for use of our products in new production, for the

next 12 months, is approximately $200,000 per quarter.

We may eliminate some operating expenses in the future, which will further reduce

our cash flow shortfall if needed.

Based on these assumptions, we currently expect to have sufficient working capital for more than the

next 5 years of operations.

Company expects to use its cash to fund its research and development of SPD light valves, its expanded marketing initiatives, and for

other working capital purposes.

The Company believes that its current cash and cash equivalents would fund its operations until late

There can be no assurances that expenditures will not exceed the anticipated amounts or that additional financing, if required,

will be available when needed or, if available, that its terms will be favorable or acceptable to the Company.

The eventual success of

the Company and generation of positive cash flow will be dependent upon the extent of commercialization of products using the Company’s

technology by the Company’s licensees and payments of continuing royalties on account thereof.

To date the Company has not generated

sufficient revenue from its licensees to fully fund its operations.

2020, the Company’s cash and cash equivalents balance decreased by $1,819,255 principally as a result of cash used for operations

of $2,252,691 and cash used for the purchase of property and equipment of $56,536 partially offset by cash generated from the exercise

of options and warrants of $284,207 and cash proceeds from a PPP Loan of $202,052.

At December 31, 2020, the Company had

cash and cash equivalents of $4,772,705, working capital of $5,201,443 and total shareholders’ equity of $5,327,005.

The Company believes that its current cash and cash equivalents would fund its operations for more than

the next five years.

There can be no assurances that expenditures will not exceed the anticipated amounts or that additional financing,

if required, will be available when needed or, if available, that its terms will be favorable or acceptable to the Company.

success of the Company and generation of positive cash flow will be dependent upon the extent of commercialization of products using

the Company’s technology by the Company’s licensees and payments of continuing royalties on account thereof.

Company has not generated sufficient revenue from its licensees to fully fund its operations.

2021, the Company’s cash and cash equivalents balance decreased by $4,502,741 principally as a result of cash used for the purchase

of marketable securities of $3,433,633 and cash used for operations of $1,804,293 and cash used for the purchase of property and equipment

of $1,077 partially offset by cash generated from the exercise of options and warrants of $86,262 and cash generated from the sale of

marketable securities of $650,000.

At December 31, 2021, the Company had cash and cash equivalents of $3.0 million, working capital of

$3.7 million and total shareholders’ equity of $3.8 million.

Company does not believe that inflation has a significant impact on its business.

The Company has operating leases

for certain facilities, vehicles and equipment with a weighted average remaining lease term of 3.2 years as of December 31, 2021.

maturities over time of the operating lease obligations as of December 31, 2021 were as follows:

lease payments

Company has operating leases for certain facilities and equipment with a weighted average remaining lease term of 2.2 years as of December

The maturities over time of the operating lease obligations as of December 31, 2022 were as follows:

December 31, 2022

Total lease payments

Note 8 to our Consolidated Financial Statements for further discussion of the Company’s lease obligations.

12 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis