What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-06 compared with 2024-03-07 · 58 added, 79 removed, 106 unchanged (56% of the section changed)

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financial statements and the notes related thereto.

Accounting Estimates

Accounting Policies and Estimates

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

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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.

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.

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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which they are earned, resulting in deferred revenue.

receivables are stated less allowance for doubtful accounts.

The allowance represents estimated uncollectible receivables usually due

to licensees’ potential insolvency.

receivables are stated less allowance for credit losses.

The allowance represents estimated uncollectible receivables usually due to

licensees’ potential insolvency.

The allowance includes amounts for certain licensees where risk of default has been specifically

The Company evaluates the collectability of its receivables on at least a quarterly basis and records appropriate allowances

for uncollectible accounts when necessary.

Company has historically used the Black-Scholes option-pricing model to determine the estimated fair value of each option grant.

Black-Scholes model includes assumptions regarding dividend yields, expected volatility, expected lives, and risk-free interest rates.

These assumptions reflect our best estimates, but these items involve uncertainties based on market conditions generally outside of our

As a result, if other assumptions had been used in the current period, stock-based compensation expense could have been materially

Furthermore, if management uses different assumptions in future periods, stock-based compensation expense could be materially

impacted in future years.

occasion, the Company may issue to consultants either options or warrants to purchase shares of common stock of the Company at specified

share prices.

These options or warrants may vest based upon specific services being performed or performance criteria being met.

In accounting

for equity instruments that are issued to other than employees for acquiring, or in conjunction with selling, goods or services, the

Company is required to record consulting expenses based upon the fair value of such options or warrants on the earlier of the service

period or the period that such options or warrants vest as determined using a Black-Scholes option pricing model and are marked to market

quarterly using the Black-Scholes option valuation model.

for credit losses when necessary.

of Operations

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technology for the marine industry in yachts and other watercraft, in trains, in museums, and in larger architectural projects.

the Company’s license agreements typically provide for the payment of royalties by a licensee on product sales within 45 days after

the end of the quarter in which a sale of a licensed product occurs (with some of the Company’s more recent license agreements

providing for payments on a monthly basis), and because of the time period which typically will elapse between a customer order and the

sale of the licensed product and installation in a home, office building, automobile, aircraft, boat or any other product, there could

be a delay between when economic activity between a licensee and its customer occurs and when the Company gets paid its royalty resulting

from such activity.

ended December 31, 2024 Compared to the Year ended December 31, 2023

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.

Company’s fee income from licensing activities for the year ended December 31, 2024 was $1,335,531 compared to $909,598 for

the year ended December 31, 2023.

This increase in fee income in 2024 by $425,933, an increase of 47%, was primarily the result of

higher royalties from the automotive and aircraft markets, an increase by 48%, as compared to 2023.

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 $152,237 for the year ended December 31, 2024 to $2,207,397 from $2,359,634 for the year ended December 31, 2023.

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.

The decrease is the result of lower credit loss expense ($70,000), lower marketing and investor relations costs ($59,000), lower patent

costs ($45,000) as well as lower legal and professional fees ($37,000), partially offset by higher foreign taxes withheld on payments

received from foreign licensees ($34,000).

Operating expenses for the years ended December 31, 2024 and 2023 include $84,000 and $137,000,

respectively, of non-cash charges for stock options granted to employees and directors.

and development expenditures decreased by $13,259 for the year ended December 31, 2024 to $570,007 from $583,266 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

This decrease was the result of lower materials costs ($15,000), lower allocated insurance costs ($14,000) partially offset

by higher allocated facility costs ($17,000).

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

of $5,000 and $8,000 in 2024 and 2023, respectively.

Company’s net investment income for the year ended December 31, 2024 was $95,339 as compared to net investment income of $124,938

for the year ended December 31, 2023.

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

interest rates paid on investments.

This difference was primarily due to changes in interest rates paid on money market accounts and

gain on sale of investments of $57,149 during the year ended December 31, 2023, as well as lower cash balances available for investment.

Company recorded $35,152 of other income during the year ended December 31, 2024 relating to an Employee Retention Credit, a

refundable payroll tax credit available under the Coronavirus Aid, Relief, and Economic Security Act (“Cares Act”) that

was designed to keep employees on the payroll during the COVID-19 pandemic.

income tax benefit or expense was recorded for the years ended December 31, 2024 and 2023.

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Condition, Liquidity and Capital Resources

Company has primarily utilized its cash, cash equivalents, marketable securities, and proceeds from sales of our common stock, proceeds

from the exercise of options and warrants, and royalty fees collected to fund its research and development, for marketing initiatives,

and for other working capital purposes.

The Company’s working capital and capital requirements depend upon numerous factors, including,

but not limited to, the results of research and development activities, competitive and technological developments, the timing and costs

of patent filings, and the development of new licensees and changes in the Company’s relationship with existing licensees.

degree of dependence of the Company’s working capital requirements on each of the foregoing factors cannot be quantified;

research and development activities and related costs would increase such requirements;

the addition of new licensees may provide additional

working capital or working capital requirements, and changes in relationships with existing licensees would have a favorable or negative

impact depending upon the nature of such changes.

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

options and warrants, and royalty fees collected to fund its research and development, for marketing initiatives, and for other working

capital purposes.

The Company’s working capital and capital requirements depend upon numerous factors, including, but not limited

to, the results of research and development activities, competitive and technological developments, the timing and costs of patent filings,

and obtaining new licensees and changes in the Company’s relationship with existing licensees.

The degree of dependence of the

Company’s working capital requirements on each of the foregoing factors cannot be quantified;

increased research and development

activities and related costs would increase such requirements;

the addition of new licensees may provide additional working capital or

working capital requirements, and changes in relationships with existing licensees would have a favorable or negative impact depending

upon the nature of such changes.

2024, the Company’s cash and cash equivalents balance decreased by $481,772 principally as a result of cash used for operations

of $788,819 and for the purchase of property and equipment of $1,623, partially offset by cash generated from the issuance of capital

stock and warrants of $300,000 as well as cash generated from the exercise of options of $8,670.

At December 31, 2024, the Company had

cash and cash equivalents of $2.0 million, working capital of $2.5 million and total shareholders’ equity of $2.6 million.

on current operations, we 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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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.

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.

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.

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

Company has operating leases for certain facilities and equipment with a weighted average remaining lease term of 1.3 years as of December

Company has an operating lease for its facility with a remaining lease term of 7.0 years, including renewal options as of December 31,

The maturities over time of the operating lease obligations as of December 31, 2024 were as follows:

December 31, 2024

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