What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-07 compared with 2023-03-09 · 52 added, 75 removed, 133 unchanged (49% of the section changed)

19 unchanged sentences

financial statements and the notes related thereto.

Accounting Policies

following accounting policies are important to understanding our financial condition and results of operations and should be read as

Accounting Estimates

following accounting estimates are important to understanding our financial condition and results of operations and should be read as

an integral part of the discussion and analysis of the results of our operations and financial position.

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see Note 2 to our Consolidated Financial Statements, “Summary of Significant Accounting Policies.”

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

The Company determined that its license

agreements provide for three performance obligations:

(i) Grant of Use, (ii) Technical Support, and (iii) New Improvements.

preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires

us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities

at the date of the financial statements, and reported amounts of revenues and expenses during the reporting periods.

Actual results could

differ from these estimates.

An example of a critical estimate is the full valuation allowance for deferred taxes that was recorded based

on the uncertainty that such tax benefits will be realized in future periods.

Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers .

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

(i) Grant of Use, (ii) Technical Support,

and (iii) New Improvements.

best method for determining the standalone selling price of our Grant of Use performance obligation is through a comparison of the average

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quarterly using the Black-Scholes option valuation model.

preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires

us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities

at the date of the financial statements, and reported amounts of revenues and expenses during the reporting periods.

Actual results could

differ from these estimates.

An example of a critical estimate is the full valuation allowance for deferred taxes that was recorded based

on the uncertainty that such tax benefits will be realized in future periods.

Global Events

March 11, 2020, the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic and

recommended containment and mitigation measures worldwide.

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

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from such activity.

discussed in Note 1 to our Consolidated Financial Statements, the Company’s financial results has been impacted by the COVID-19

Most of the products using the Company’s technology are manufactured by licensees overseas in Europe and Asia who have

been similarly affected by the pandemic.

The disruption caused by 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.

ended December 31, 2023 Compared to the Year ended December 31, 2022

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.

Company’s fee income from licensing activities for the year ended December 31, 2023 was $909,598 compared to $539,686 for the year

ended December 31, 2022.

This increase in fee income in 2023 by $369,912, an increase of 69%, was primarily the result of higher royalties

from the automotive markets, an increase by 178%, as compared to 2022.

The Company expects revenue in all market segments to increase

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

expenses decreased by $196,055 for the year ended December 31, 2023 to $2,359,634 from $2,555,689 for the year ended December 31, 2022.

The decrease is the result of lower compensation and related costs ($65,000), as well as lower patent ($56,000), lower bad debts ($47,000),

lower director costs ($37,000) and lower investor relations costs ($18,000) partially offset by higher legal and professional fees ($30,000).

Operating expenses for the years ended December 31, 2023 and 2022 include $137,000 and $216,000, respectively, of non-cash charges for

options granted to employees and directors.

and development expenditures decreased by $25,861 for the year ended December 31, 2023 to $583,266 from $609,127 for the year ended December

This decrease was the result of lower allocated facility costs ($22,000) as well as lower compensation and related costs ($20,000)

partially offset by higher materials costs ($12,000) and higher allocated insurance costs ($5,000).

Research and development costs include

non-cash charges for options granted to employees of $8,000 and $16,000 in 2023 and 2022, respectively.

Company’s net investment income for the year ended December 31, 2023 was $124,938 as compared to a net investment loss of $44,219

for the year ended December 31, 2022.

This difference was primarily due to changes in market values of a marketable security and higher

interest rates paid on investments.

income tax benefit or expense was recorded for the years ended December 31, 2023 and 2022.

a consequence of the factors discussed above, the Company’s net loss was $1,908,364 ($0.06 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.

December 31, 2023, which was $760,985 (29%) lower than the net loss of $2,669,349 ($0.08 per common share) for the year ended December

Condition, Liquidity and Capital Resources

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impact depending upon the nature of such changes.

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.

2023, the Company’s cash and cash equivalents balance decreased by $1,754,958 principally as a result of cash generated from the

exercise of warrants of $484,502 as well as cash generated from the sale and maturities of marketable securities of $5,491,535 offset

by cash used for operations of $2,295,051 and cash used for the purchase of marketable securities of $5,434,386 and for the purchase

of property and equipment of $1,558.

At December 31, 2023, the Company had cash and cash equivalents of $2.5 million, working capital

of $3.3 million and total shareholders’ equity of $3.5 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 to $250,000 per quarter.

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 five 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

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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.

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.

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

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The maturities over time of the operating lease obligations as of December 31, 2023 were as follows:

December 31, 2022

Total lease payments

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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