What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-05 compared with 2025-03-06 · 71 added, 48 removed, 116 unchanged (51% of the section changed)

30 unchanged sentences

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:

The Company determined that

its license agreements provide for three performance obligations:

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

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which they are earned, resulting in deferred revenue.

Certain license agreements contain minimum annual royalty provisions and prepaid

royalty structures.

In periods where sales volumes increase rapidly or supply transitions occur, royalty income attributable to such

sales may be absorbed by previously paid minimum royalties and not recognized until thresholds are exceeded.

As a result, our reported

revenues in a particular period may not directly correspond to underlying product sales volumes, which could increase volatility in our

reported results.

receivables are stated less allowance for credit losses.

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Company’s royalty income from this market may be influenced by numerous factors including various trends affecting demand in the

automotive industry and the rate of introduction of new technology in OEM product lines and the impact of COVID-19.

In addition to these

macro factors, the Company’s royalty income from the automotive market could also be influenced by specific factors such as whether

the Company’s SPD-SmartGlass technology appears as standard equipment or as an option on a particular vehicle, the number of additional

vehicle models that SPD-SmartGlass appears on, the size of each window on a vehicle and the number of windows on a vehicle that use SPD-SmartGlass,

fluctuations in the total number of vehicles produced by a manufacturer, and in the percentage of cars within model like produced with

SPD-SmartGlass, and changes in pricing or exchange rates.

Certain license fees, which are paid to the Company in advance of the accounting

period in which they are earned resulting in the recognition of deferred revenue for the current accounting period, which will be recognized

as fee income in future periods.

Also, licensees offset some or all of their royalty payments on sales of licensed products for a given

period by applying these advance payments towards such earned royalty payments.

automotive industry and the rate of introduction of new technology in OEM product lines.

In addition to these macro factors, the Company’s

royalty income from the automotive market could also be influenced by specific factors such as whether the Company’s SPD-SmartGlass

technology appears as standard equipment or as an option on a particular vehicle, the number of additional vehicle models that SPD-SmartGlass

appears on, the size of each window on a vehicle and the number of windows on a vehicle that use SPD-SmartGlass, fluctuations in the

total number of vehicles produced by a manufacturer, and in the percentage of cars within model like produced with SPD-SmartGlass, and

changes in pricing or exchange rates.

Certain license fees, which are paid to the Company in advance of the accounting period in which

they are earned resulting in the recognition of deferred revenue for the current accounting period, which will be recognized as fee income

in future periods.

Also, licensees offset some or all of their royalty payments on sales of licensed products for a given period by applying

these advance payments towards such earned royalty payments.

2025 and 2024, the Company received royalty revenues from sales of SPD-SmartGlass products for various car models that were accretive

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ended December 31, 2025 Compared to the Year ended December 31, 2024

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 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 materials costs ($15,000), lower allocated insurance costs ($14,000) partially offset

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

Company’s fee income from licensing activities for the year ended December 31, 2025 was $1,121,248 compared to $1,335,531 for the

year ended December 31, 2024.

This decrease in fee income in 2025 by $214,283, a decrease of 16%, was primarily the result of lower royalties

from the automotive and aircraft markets.

The Company expects revenue in all market segments to increase as new car models and other

products using the Company’s SPD-SmartGlass technology are introduced into the market.

royalty income during 2025 was negatively impacted by the bankruptcy and replacement of a European licensee supplying Ferrari.

underlying Ferrari vehicle sales were strong in 2025, royalty income recognition was reduced due to (i) the cessation of operations by

the former licensee and (ii) the application of minimum annual royalty credits under the replacement licensee agreement.

the third and fourth quarters of 2025, these minimum thresholds were exceeded, allowing additional Ferrari-related royalty income to

be recognized.

expenses increased by $437,287 for the year ended December 31, 2025 to $2,644,684 from $2,207,397 for the year ended December 31,

The increase is the result of higher credit loss expense ($129,000), higher directors fees and expenses ($162,000, consisting

of non-cash costs of stock options granted to directors), higher marketing and investor relations costs ($68,000) as well as higher

film purchase costs ($40,000) and higher professional fees ($37,000).

Operating expenses for the years ended December 31, 2025 and

2024 include $354,000 and $84,000, respectively, of non-cash charges for stock options granted to employees, directors and

and development expenditures increased by $38,725 for the year ended December 31, 2025 to $608,732 from $570,007 for the year ended December

This increase was the result of higher occupancy costs ($47,000) as well as higher employee compensation costs ($12,000) partially

offset by lower insurance costs ($25,000).

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

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for the year ended December 31, 2024.

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.

This difference was primarily due to lower cash balances available for investment.

Company recorded $47,357 and $35,152 of other income during the years ended December 31, 2025 and 2024, respectively, 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, 2025 and 2024.

a consequence of the factors discussed above, the Company’s net loss was $2,045,584 ($0.06 per common share) for the year ended

December 31, 2024, which was $596,982, (31%) lower than the net loss of $1,908,364 ($0.06 per common share) for the year ended December

December 31, 2025, as compared to the net loss of $1,311,382 ($0.04 per common share) for the year ended December 31, 2024.

Condition, Liquidity and Capital Resources

February 18, 2026, the Company entered into subscription agreements from a group of private accredited investors, which included family

members of a director of the Company, as well as the owner of a licensee of the Company licensed to produce SPD-SmartGlass products including

for the retrofit architectural glass market.

investors purchased 1.1 million shares of common stock of the Company at a price of $1.00 per share (which represents the closing market

price of the Company’s common stock on February 13, 2026 which was the date that the transaction was agreed to).

The Company received $1.1 million in proceeds from the sale of common stock to the investors.

For each share received, the investor also received

one warrant (expiring on February 28, 2031) to purchase one share of common stock at an exercise price of $1.10 for warrant exercises

occurring on or before February 28, 2027, $1.20 for warrant exercises occurring between March 1, 2027 through February 29, 2028, $1.30

for warrant exercises occurring between March 1, 2028 through February 28, 2029, and $1.50 for warrant exercises occurring after February

28, 2029 and prior to the expiration of the warrants.

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.

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

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2025, the Company’s cash and cash equivalents balance decreased by $1,329,887 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.

of $1,329,161 and for the purchase of property and equipment of $726.

At December 31, 2025, the Company had cash and cash equivalents

of $0.7 million, working capital of $0.9 million and total shareholders’ equity of $1.0 million.

Based on current operations, we

expect to have sufficient working capital for a period of at least 12 months from the date of this filing.

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

the next five years.

the foreseeable future.

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

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

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.

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 foreseeable future.

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

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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