What changed in this filing

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Item 9A. Controls and Procedures

2023-03-09 compared with 2022-03-09 · 210 added, 244 removed, 783 unchanged (37% of the section changed)

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Officer, to allow timely decisions regarding required disclosure.

of Material Weakness in Internal Control Over Financial Reporting

previously disclosed, the Company’s management, including its Chief Executive Officer and Acting Interim Chief Financial Officer

identified a material weakness in the Company’s internal control over financial reporting during the three months ended June 30,

2021 and the three months ended September 30, 2021.

The Company’s controls over proper classification of cash and cash equivalents

failed to operate during those two quarters and the Company failed to properly account for investments that were not eligible for classification

as cash equivalents.

The misclassification was identified by management during procedures related to the year ending December 31, 2021.

As a result, the Company filed restatements of its quarterly reports on Form 10-Q for each of the Quarters ended June 30, 2021 and September

address the material weakness described above, the Company has expanded its quarterly controls to include procedures around cash equivalents

that are consistent with its year end procedures.

The enhanced controls were implemented immediately upon identification of the material

weakness and the Company’s management, including its Chief Executive Officer and Acting Interim Chief Financial Officer, determined

that we fully remediated the material weakness as of December 31, 2021.

We will continue to monitor the effectiveness of these controls

and will make any further changes management determines necessary.

Annual Report on Internal Control over Financial Reporting

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in Internal Control Over Financial Reporting

than the remediation of the material weakness described above, there

were no changes to controls during the three months ended December 31, 2022 that have materially affected or are reasonably likely to

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EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Company has adopted a Code of Ethics applicable to its Chief Executive Officer, Chief Operating Officer, Treasurer and

Chief Financial Officer, Vice Presidents and other employees of the Company with important roles in the financial reporting process.

This Code of Ethics was adopted by the entire Board of Directors of the Company, including all of its Audit Committee members, in March

2004 in accordance with the requirements of the Sarbanes Oxley Act.

The Code of Ethics is available on the Company’s

website at www.SmartGlass.com and was also filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December

The Company intends to satisfy the disclosure requirement under Item 10 of Form 8-K regarding any amendment to, or waiver from,

a provision of this Code of Ethics by posting such information on the website specified above.

Company has adopted a Code of Ethics applicable to its Chief Executive Officer, Chief Operating Officer, Treasurer and Chief Financial

Officer, Vice Presidents and other employees of the Company with important roles in the financial reporting process.

This Code of Ethics

was adopted by the entire Board of Directors of the Company, including all of its Audit Committee members, in March 2004 in accordance

with the requirements of the Sarbanes Oxley Act.

The Code of Ethics is available on the Company’s website at www.SmartGlass.com

and was also filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

intends to satisfy the disclosure requirement under Item 10 of Form 8-K regarding any amendment to, or waiver from, a provision of this

Code of Ethics by posting such information on the website specified above.

other information required by this Item 10 is incorporated by reference to the Company’s definitive Proxy Statement to be filed

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independent registered public accounting firm is CohnReznick LLP, Melville, NY, Auditor Firm ID No:

The information required by this Item 14 is incorporated by reference to the Company’s definitive Proxy Statement to be filed with

the Commission on or before April 30, 2022.

The information required by

this Item 14 is incorporated by reference to the Company’s definitive Proxy Statement to be filed with the Commission on or before

April 28, 2023.

FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

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Supplemental Data” of this Report.

of Independent Registered Public Accounting Firm (PCAOB ID 596 )

Report of Independent Registered Public Accounting Firm

Financial Statements:

Balance Sheets, December 31, 2021 and 2020

Statements of Operations, Years ended December 31, 2021 and 2020

Statements of Shareholders’ Equity, Years ended December 31, 2021 and 2020

Statements of Cash Flows, Years ended December 31, 2021 and 2020

to Consolidated Financial Statements

Consolidated Balance Sheets, December 31, 2022 and 2021

Consolidated Statements of Operations, Years ended December 31, 2022 and 2021

Consolidated Statements of Shareholders’ Equity, Years ended December 31, 2022 and 2021

Consolidated Statements of Cash Flows, Years ended December 31, 2022 and 2021

Notes to Consolidated Financial Statements

other schedules have been omitted because they are not applicable, or not required, or the required information is disclosed elsewhere

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33-5573NY), declared effective by the Commission on July 8, 1986, and incorporated herein by reference.

Restated and amended Stockholder

Protection Rights Agreement between Research Frontiers Incorporated and Continental Stock Transfer & Trust Company, as Rights

Agent, dated February 11, 2023 - Filed herewith.

Rights Agreement dated as of February 18, 2003 between Research Frontiers Incorporated and Continental Stock Transfer & Trust Company, as Rights Agent, which includes as Exhibit A thereto the Form of Rights Certificate.

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Subsidiary of the Registrant - SPD Enterprises, Inc.

of CohnReznick LLP - Filed herewith.

13a-14(a)/15d-14(a) Certification of Joseph M.

Consent of CohnReznick LLP - Filed herewith.

Rule 13a-14(a)/15d-14(a) Certification of Joseph M.

Harary - Filed herewith.

1350 Certification of Joseph M.

Section 1350 Certification of Joseph M.

Harary - Filed herewith.

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Alexander Kaganowicz

William Graham Settle

of Independent Registered Public Accounting Firm

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December 31, 2022 and 2021, and the related consolidated statements of operations, shareholders’ equity and cash flows for

each of the years in the two-year period ended December 31, 2021, and the related notes (collectively referred to as the “financial

statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the

Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year

period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.

each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the

“financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the

financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of

the two years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the

United States of America.

financial statements are the responsibility of the Company’s management.

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provide a reasonable basis for our opinion.

critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated

or required to be communicated to the audit committee and that:

(i) related to accounts or disclosures that are material to the financial

statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter

does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit

matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

described in Note 1 to the financial statements, the Company has incurred recurring losses since inception and expects to continue to

incur losses as a result of costs and expenses related to its research and continued development of its technology.

The Company has funded

most of its activities through sales of its common stock to investors, and upon the exercise of options and warrants.

The Company’s

projected cash flow shortfall based on its current operations adjusted for any non-recurring cash expenses for the next 12 months, is

approximately $385,000 per quarter.

Based on the Company’s current expectations of its cash flow, the Company’s working capital

would support the Company’s activities for approximately 22 months subsequent to December 31, 2021.

Management performs

a liquidity analysis quarterly to determine the Company’s ability to continue as a going concern.

The determination of the projected

cash flow shortfall required management to make assumptions and estimates about the future undiscounted cashflows associated with operations.

principal considerations for our determination that performing procedures relating to the liquidity analysis of the Company is a critical

audit matter, is the significant judgment required of management when determining the projected cash flow shortfall, which in turn led

to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s significant assumptions

related to projected operating results.

the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial

The procedures include, among others, testing management’s process for determining the cash flow shortfall, which include

(i) evaluating the reasonableness of the projected operating results, (ii) testing the completeness and accuracy of historical

data used to determine the projected operating results, and (iii) evaluating the significant assumptions used by management related to

the projected operating results.

Evaluating management’s assumptions related to projected operating results involved evaluating

whether the assumptions used by management were reasonable considering (i) the current and past performance of the Company, (ii) the

consistency with external market and industry data and (iii) whether these assumptions were consistent with evidence obtained in other

areas of the audit.

audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be

communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and

(2) involved our especially challenging, subjective, or complex judgments.

We determined that there were no critical matters.

CohnReznick LLP

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31, 2022 and 2021

and cash equivalents

receivable, net of reserves of $ 1,016,678 in 2021 and $ 972,202 in 2020

expenses and other current assets

December 31, 2022

December 31, 2021

Current assets:

lease ROU assets

and other assets

and Shareholders’ Equity

portion of operating lease liability

expenses and other

Cash and cash equivalents

Marketable securities

Royalties receivable, net of reserves of $ 1,158,450 in 2022 and $ 1,016,678 in 2021, respectively

Prepaid expenses and other current assets

Total current assets

Fixed assets, net

Operating lease ROU assets

Deposits and other assets

Liabilities and Shareholders’ Equity

Current liabilities:

lease liability, net of current portion

Shareholders’

Current portion of operating lease liability

Accounts payable

Accrued expenses and other

Total current liabilities

Operating lease liability, net of current portion

Total liabilities

Shareholders’ equity:

Common stock, par value $ 0.0001 per share;

authorized 100,000,000 shares, issued and outstanding 31,650,396 in 2021 and 31,575,786 in 2020

paid-in capital

authorized 100,000,000 shares, issued and outstanding 33,150,396 in 2022 and

31,650,396 in 2021

Additional paid-in capital

Accumulated deficit

( 122,356,477 )

( 119,687,128 )

shareholders’ equity

liabilities and shareholders’ equity

Total shareholders’ equity

Total liabilities and shareholders’ equity

accompanying notes to consolidated financial statements.

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Research and development

Total expenses

Operating loss

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( 1,838,815 )

PPP loan forgiveness

Net investment income

Net investment loss

$ ( 2,669,349 )

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ended December 31, 2022 and 2021

Paid-in Capital

Balance, January 1, 2021

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$ ( 117,840,776 )

Exercise of options and warrants

Exercise of options

Exercise of options, shares

Share-based compensation

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( 119,687,128 )

Exercise of options

( 119,687,128 )

Share based compensation

Issuance of common stock and warrants

( 2,669,349 )

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$ ( 122,356,477 )

$ 127,150,027

$ ( 122,356,477 )

accompanying notes to consolidated financial statements.

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$ ( 1,846,352 )

Adjustments to reconcile net loss to net cash

used in operating activities:

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

Depreciation and amortization

Unrealized loss on marketable

Realized loss on marketable securities

Unrealized loss on marketable securities

Share-based compensation

Other income - PPP loan

ROU asset amortization

Change in assets and liabilities:

Royalty receivables

Prepaid expenses and other

current assets

Accounts payable and accrued

cash used in operating activities

Prepaid expenses and other assets

Accounts payable and accrued expenses

Operating lease liability

Net cash used in operating activities

( 2,182,745 )

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Purchases of fixed assets

Purchases of marketable

Purchases of marketable securities

( 3,433,633 )

Sales of marketable securities

from sale of fixed asset

cash used in investing activities

Net cash used in investing activities

( 2,784,710 )

Cash flows from financing activities:

Net proceeds from exercise

of options and warrants

from PPP loan

cash provided by financing activities

Net decrease in cash and cash equivalents

( 4,502,741 )

Net proceeds from exercise of options and warrants

Proceeds from issuance of common stock and warrants

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

( 4,502,741 )

Cash and cash equivalents

at beginning of year

Cash and cash equivalents

at end of year

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

accompanying notes to consolidated financial statements.

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homes and buildings;

automotive windows, sunroofs, sun visors, sunshades, rear-view mirrors, instrument panels and navigation systems;

automotive windows, sunroofs, sun visors, sunshades, rear-view mirrors, instrument panels, heads up displays and

navigation systems;

aircraft windows;

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and flat panel displays for electronic products.

SPD-Smart light control

film is now being developed for, or used in, architectural, automotive, marine, aerospace and appliance applications.

light control film is now being developed for, or used in, architectural, automotive, marine, aerospace and appliance applications.

Company has primarily utilized its cash, cash equivalents, and investments generated from sales of our common stock, proceeds from the

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As of December 31, 2022, we had working capital of approximately

$ 3.7 million, cash and cash equivalents and marketable securities of approximately $ 3.0 million, shareholders’ equity of approximately

$ 3.8 million and an accumulated deficit of approximately $ 119.7 million.

Our 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.

Based on our current expectations

of our cash flow shortfall for the next 12 months, our working capital would support our activities for the next 22 months.

$ 4.6 million, cash and cash equivalents of approximately $ 4.2 million, shareholders’ equity of approximately $ 4.8 million and an

accumulated deficit of approximately $ 122.4 million.

Our quarterly projected cash flow shortfall, based on our current operations, adjusted

for any non-recurring cash expenses 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 at least 12 months from the issuance of these financial statements.

the event that we are unable to generate sufficient cash from our operating activities or raise additional funds, we may be required

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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.

2020 revenues have been negatively impacted 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

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results of operations, and cash flows.

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

The 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

The Company recorded $ 202,052

as other income for the year ended December 31, 2020 representing

the PPP Loan which was expected to be forgiven in 2021.

Final PPP Loan forgiveness was received in 2021.

amounts in the accompanying December 31, 2021 statements of cash flows have been reclassified to conform with the December 31, 2022 presentation.

Summary of Significant Accounting Policies

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Amounts on deposit in excess of federally insured limits

at December 31, 2021 and 2020 are approximately $ 0 and $ 4.5 million, respectively.

at December 31, 2022 and 2021 are approximately $ 2.7 million and $ 0 , respectively.

Marketable Securities

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measurement date.

December 31, 2021 all investments are Level 1 and were classified as trading and consisted of the following:

December 31, 2022, the Company invested only in investments qualified as cash and cash equivalents.

During the year ended December 31,

2022, the Company incurred a realized loss on the sale of marketable securities of $ 60,143 .

At December 31, 2021 all investments are

Level 1 and were classified as trading and consisted of the following:

Schedule of Unrealized Loss on Investments

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in the Company’s existing royalties receivable.

The Company determines the allowance based on historical write-off experience

as well as the current status of the Company’s customers.

The Company determines the allowance based on historical write-off experience as

well as the current status of the Company’s customers.

The Company reviews its allowance for doubtful accounts periodically.

Past due accounts are reviewed individually for collectability.

Account balances are charged off against the allowance after all means

of collection have been exhausted and the potential for recovery is considered remote.

As of December 31, 2021, two companies accounted

and 11 % of the Company’s outstanding receivables.

As of December 31, 2020, three companies accounted for 16 %,

due accounts are reviewed individually for collectability.

Account balances are charged off against the allowance after all means of

collection have been exhausted and the potential for recovery is considered remote.

As of December 31, 2022, one company accounted for

14 % of the Company’s outstanding receivables.

As of December 31, 2021, two companies accounted for 14 % and 11 % of the Company’s

outstanding receivables.

assets are carried at cost less accumulated depreciation and amortization.

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Revenue Recognition/Fee Income

Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers.

The standard provides a single comprehensive

revenue recognition model for all contracts with customers and supersedes existing revenue recognition guidance.

The revenue standard

contains principles that an entity will apply to determine the measurement of revenue and timing of when it is recognized.

The underlying

principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity

expects to be entitled to in exchange for those goods or services.

Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”).

The standard provides

a single comprehensive revenue recognition model for all contracts with customers and supersedes existing revenue recognition guidance.

The revenue standard contains principles that an entity will apply to determine the measurement of revenue and timing of when it is recognized.

The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount

that the entity expects to be entitled to in exchange for those goods or services.

606 follows a five-step approach to determining revenue recognition including:

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3) Determination of the transaction price;

4) Allocation of the transaction price and 5) Recognition of

4) Allocation of the transaction price;

and 5) Recognition of

Company determined that its license agreements provide for three performance obligations which include:

(i) the Grant of Use to its Patent

Portfolio (“Grant of Use”), (ii) Stand-Ready Technical Support (“Technical Support”) including the transfer of trade

secrets and other know-how, production of materials, scale-up support, analytical testing, etc., and (iii) access to new Intellectual

Property (“IP”) that may be developed some time during the course of the contract period (“New Improvements”).

Portfolio (“Grant of Use”), (ii) Stand-Ready Technical Support (“Technical Support”) including the transfer of

trade secrets and other know-how, production of materials, scale-up support, analytical testing, etc., and (iii) access to new Intellectual

Property (“IP”) that may be developed sometime during the course of the contract period (“New Improvements”).

Given the nature of IP development, such New Improvements are on an unspecified basis and can occur and be made available to licensees

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each model produced with SPD-SmartGlass, and changes in pricing or exchange rates.

of December 31, 2021, the Company has four license agreements that are in their initial multiyear term (“Initial Term”) with

of December 31, 2022, the Company has one license agreement that are in its initial multiyear term (“Initial Term”) with

continuing performance obligations going forward.

The Initial Term of three of these agreements will end as of December 31, 2022 and

one will end as of December 31, 2024, The Company currently expects all four of these agreements will renew annually at the end of the

Initial Term.

As of December 31, 2021, the aggregate amount of the revenue to be recognized upon the satisfaction of the remaining performance

obligations for the four license agreements is $ 273,000 .

The revenue for these remaining performance obligations for each of the four license agreements is expected to be recognized evenly

throughout their remaining period of the Initial Term.

The Initial Term of this agreement will end as of December 31, 2024, The Company

currently expects this agreement will renew annually at the end of the Initial Term.

As of December 31, 2022, the aggregate amount

of the revenue to be recognized upon the satisfaction of the remaining performance obligations for this license agreements is $ 123,000 .

The revenue for the remaining performance obligations for this license agreement is expected to be recognized evenly throughout the

remaining period of the Initial Term.

the years ended December 31, 2022 and 2021, the Company entered into a number of license agreements covering its light control technology.

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During 2022, four licensees accounted for 28 %, 23 %, 13 % and 11 % of fee income recognized during the year.

During 2020, five licensees

During 2021, four licensees

accounted for 20 %, 18 %, 18 % and 12 % of fee income recognized during the year.

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The Company’s dilutive loss per share equals basic loss per share for each of the years in the

two-year period ended December 31, 2021 because all potentially dilutive securities ( i.e ., options

and warrants) were antidilutive in those periods.

The number of options and warrants that were not included because their effect is antidilutive

was 2,599,701

and 2,697,251

two-year period ended December 31, 2022 because all potentially dilutive securities (i.e ., options and warrants) were antidilutive

in those periods.

The number of options and warrants that were not included because their effect is antidilutive was 4,146,951 and 2,599,701

for 2022 and 2021, respectively.

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tax bases and operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates

expected to be recovered or settled.

Deferred tax assets and liabilities are measured using enacted tax rates expected

to be recovered or settled.

accordance with ASC Topic 740, we recognize tax benefits only for tax positions that are more likely than not to be sustained upon examination

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Schedule of Fixed Assets

Estimated useful life

Equipment and furniture

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The difference between the total income taxes at the federal statutory rate for each of the years ended

December 31, 2021 and 2020 and the fact that no income tax benefit was recorded in each of these years is attributable to the

change in the valuation allowance recorded in each year.

December 31, 2022 and 2021 and the fact that no income tax benefit was recorded in each of these years is attributable to the change

in the valuation allowance recorded in each year.

Tax Cuts and Jobs Act of 2017 (“TCIA”) amended IRC Section 174 to require capitalization of all research and development

(“R&D”) costs incurred in tax years beginning after December 31, 2021.

These costs are required to be amortized over

five years if the R&D activities are performed in the U.S., or over 15 years if the activities were performed outside the U.S.

tax reporting purposes, the Company capitalized $ 609,000 of R&D expenses incurred as of December 31, 2022.

August 16, 2022, the Inflation Reduction Act (“IRA”) was signed into law in the United States.

Among other provisions,

the IRA includes a 15 %

corporate minimum tax rate which applies to certain large corporations and a 1 %

excise tax on corporate stock repurchases made after December 31, 2022.

We do not expect the IRA to have a material impact on our

consolidated financial statements.

tax effects of temporary differences that give rise to significant portions of the deferred tax assets at December 31, 2022 and 2021

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Allowance for bad debts

Net operating loss carryforwards

Net operating loss carry-forwards

Stock option expense

Research and other credits

temporary differences

Total gross deferred tax

Lease liability

Total gross deferred tax assets

Deferred tax liabilities:

Lease liability

Other temporary differences

Total gross deferred tax liabilities

Valuation allowance

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( 15,753,000 )

tax assets, net

reconciliation of the income tax expense (benefit) computed at the federal statutory tax rates to income tax expense (benefit)

is as follows:

Net deferred tax

reconciliation of the income tax expense (benefit) computed at the federal statutory tax rates to income tax expense (benefit) is as

Schedule of Reconciliation Income Tax Expenses Benefit

Income tax provision at federal

statutory rate

Income tax provision at federal statutory rate

$ ( 561,000 )

$ ( 388,000 )

Permanent differences

Expired carryforwards and other

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December 31, 2022, the Company had net operating loss carryforwards for federal income tax purposes of approximately $ 63,370,000 .

Net operating loss carryforwards accumulated through December 31, 2017 of approximately $ 57,118,000

in varying amounts from 2022 through 2037.

Net operating losses generated in 2018, 2019, 2020 and 2021, totaling

approximately $ 8,835,000 ,

will carry forward indefinitely, but cannot offset more than 80

percent of taxable income.

Research and other credit carryforwards of approximately $ 945,000

are available to the Company to reduce income taxes payable in future years principally through 2040.

The Company’s ability to

utilize its net operating loss carryforwards and its current year tax credits in future periods could be subject to the 382

The Company will need to complete an analysis to determine whether its net operating losses are subject to the 382

operating loss carryforwards accumulated through December 31, 2017 of approximately $ 52,927,000 will expire in varying amounts from 2023

through 2037 .

Net operating losses generated since 2018, totaling approximately $ 10,443,000 , will carry forward indefinitely, but cannot

offset more than 80 percent of taxable income.

Research and other credit carryforwards of approximately $ 891,000 are available to the

Company to reduce income taxes payable in future years principally through 2040.

The Company’s ability to utilize its net operating

loss carryforwards and its current year tax credits in future periods could be subject to the 382 limitation.

The Company will need to

complete an analysis to determine whether its net operating losses are subject to the 382 limitation.

Shareholders’ Equity

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options and warrants.

During 2020, the Company received proceeds of $ 284,207 and issued 321,524 shares of common stock in connection

with the exercise of outstanding options and warrants.

In addition, during February 2023, the Company received proceeds of $ 484,503 and issued 358,891 common shares in connection

with the exercise of outstanding warrants.

September 16, 2022, the Company entered into subscription agreements from a group of private accredited investors to sell them 2.0

million shares of common stock of the Company at a price of $ 2.30 per share (which represents the closing market price of the

Company’s common stock on September 14, 2022 which was the date that the transaction was agreed to).

As of December 31,

2022, the Company received $ 3,450,000 under these subscription agreements and has issued 1,500,000 common shares and issued

1,500,000 warrants.

In addition, the Company expects to receive the remaining $ 1,150,000 under these subscription agreements in

The shares were issued to the investors in a private placement and, along with the shares issued in

connection with the exercise of any warrants in the future, are not registered and therefore currently subject to at least a

six-month holding period by the investor.

Options and Warrants

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for stock options is summarized below:

options are exercisable at December 31, 2021.

Schedule of Option Activity

Number of Shares

Weighted Average

Weighted Average Remaining

Contractual Term

Aggregate Intrinsic

Subject to Option

Exercise Price

Number of Shares Subject to Option

Weighted Average Exercise Price

Weighted Average Remaining Contractual Term (Years)

Aggregate Intrinsic Value

Balance at January 1, 2021

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Balance at December 31, 2022

options are exercisable at December 31, 2022.

Warrants and Non-Employee Options

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Schedule of Warrant Activity

Number of Shares Underlying

Weighted Average

Number of Shares Underlying Warrants Granted

Weighted Average Exercise Price

Balance at January 1, 2021

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at the Company.

In October 2021, the Company entered into an amendment to the license agreement with VariGuard modifying its scope

In October 2021, the Company entered into an amendment to the license agreement with VariGuard modifying its scope and

Company has an employment agreement with its chief executive officer which provides for an annual base salary of $ 500,000 for calendar

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as of December 31, 2022.

Operating leases are included in right of use lease assets, other current liabilities and long-term lease

liabilities on the consolidated balance sheet.

Right of use lease assets and liabilities are recognized at each lease’s

commencement date based on the present value of its lease payments over its respective lease term.

The Company does not have an

established incremental borrowing rate as it does not have any debt.

The Company uses the stated borrowing rate for a lease when

readily determinable.

When the interest rate implicit in its lease agreements is not readily determinable, the Company uses

an interest rate based on the marketplace for public debt.

The weighted average discount rate associated with operating leases as of

December 31, 2021 is 5.5 %.

to the Company’s adoption of the new lease accounting guidance on January 1, 2019, the Company recorded new right of use lease

assets of approximately $ 900,000 and associated lease liabilities of approximately $ 1.1 million.

Operating leases are included in right of use lease assets, other current liabilities and long-term lease liabilities

on the consolidated balance sheet.

Right of use lease assets and liabilities are recognized at each lease’s commencement date based

on the present value of its lease payments over its respective lease term.

The Company does not have an established incremental borrowing

rate as it does not have any debt.

The Company uses the stated borrowing rate for a lease when readily determinable.

When the interest

rate implicit in its lease agreements is not readily determinable, the Company uses an interest rate based on the marketplace for public

The weighted average discount rate associated with operating leases as of December 31, 2022 is 5.5 %.

of operating lease liabilities as of December 31, 2022 were as follows:

Schedule of Minimum Annual Future Rental Commitments

Total lease payments

imputed lease

Present value of lease liabilities

lease payments

imputed lease interest

value of lease liabilities

February 2013, the Company’s Board of Directors adopted a Stockholders’ Rights Plan (the “Rights Plan”) and declared

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of Common Stock issued after the Record Time and prior to the Separation Time.

The Rights Plan was readopted and extended in December

2022 until February 11, 2033.

Time” shall mean the earlier of the Close of Business on the tenth Business Day (or such later date as the Board of Directors may

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(other than the acquiring person) to purchase $ 80 worth of common stock of the acquiring company for $ 40 .

The Rights will expire at the

close of business on February 11, 2023 , unless the Rights Plan is extended by the Company’s Board of Directors or unless the Rights

are earlier redeemed by the Company at a price of $ .0001 per Right.

The Rights are not exercisable during the time when they are redeemable

by the Company.

During 2022, the Company extended

to expiration of The Rights to the close of business on February 11, 2033 , unless the Rights Plan is extended by the Company’s

Board of Directors or unless the Rights are earlier redeemed by the Company at a price of $ 0.0001 per Right.

The Rights are not exercisable

during the time when they are redeemable by the Company.

above description highlights some of the features of the Company’s Rights Plan and is not a complete description of the Rights

1 unchanged sentence

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 9A. Controls and Procedures