NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 – Organization
Organization
SolarWindow Technologies, Inc. was incorporated in the State of Nevada on May 5, 1998 (“SWT,”
and together with its controlled subsidiary companies, collectively, the “Company”). SolarWindow® technology harvests
light energy from the sun and from artificial light sources using a transparent and ultra-lightweight coating of organic photovoltaic
(“OPV”) solar cells applied to glass and plastics, thereby generating electricity. The Company’s ticker symbol
is WNDW.
On August 24, 2020, the SolarWindow Technologies,
Inc. formed wholly owned SolarWindow Asia (USA) Corp., a Nevada Corporation, as the holding company for SolarWindow Asia Co. Ltd., (the
“Korean Subsidiary”) a company formed in the Republic of Korea for the purpose of expansion into the Asian markets.
During the three months ended May 31, 2022, the
Company recognized an impairment of all assets related to the Korean Subsidiary totaling $674,200.
The impairment was recognized due to the Company’s inability to obtain from the management of the
Korean Subsidiary the complete financial statements
and related documentation for the three months ended May 31, 2022 thereby placing into doubt the recoverability of assets located in
South Korea. Any amounts that become recoverable will be recognized accordingly. For additional information see Note 4 below. SWT has
retained counsel in South Korea to provide legal services on behalf of SWT with respect to the recovery of these assets.
Liquidity and Management’s Plan
The Company has not generated any revenue since
inception and has sustained recurring losses and negative cash flows from operations since inception. We expect to incur losses as we
continue to develop and further refine and promote our technologies and potential product applications. As of May 31, 2022, the Company
had $8,632,495 of cash and cash equivalents on hand and working capital of $8,806,466. The Company believes that it currently has sufficient
cash to meet its funding requirements over the next twelve months following the issuance of this Quarterly Report on Form 10-Q. However,
the Company has experienced and continues to experience negative cash flows from operations, as well as an ongoing requirement for substantial
additional capital investment. The Company expects that it may need to raise additional capital to accomplish its business plan. If additional
funding is required, the Company expects to seek to obtain that funding through financial or strategic investors. There can be no assurance
as to the availability or terms upon which such financing and capital might be available.
NOTE 2 – Interim Statement Presentation
Basis
of Presentation and Use of Estimates
The
accompanying unaudited interim consolidated financial statements of the Company as of May 31, 2022, and for the three and nine months
ended May 31, 2022 and 2021 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”)
for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by U.S. generally accepted
accounting principles (“U.S. GAAP”) for complete financial statements. These Consolidated Financial Statements should
therefore be read in conjunction with the Consolidated Financial Statements and Notes thereto for the fiscal year ended August 31,
2021 included in our Annual Report on Form 10-K filed with the SEC on November 4, 2021.
The accompanying unaudited interim Consolidated
Financial Statements have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions that
affect amounts reported in the Consolidated Financial Statements and accompanying disclosures. Actual results may differ from those estimates.
The accompanying unaudited interim consolidated financial statements have been prepared on the same basis as the audited financial statements
and include all adjustments (including normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation
of the Company’s consolidated financial position as of May 31, 2022, results of operations, stockholders’ equity and cash
flows for the three and nine months ended May 31, 2022 and 2021. The Company did not record an income tax provision during the periods
presented due to net taxable losses. The results of operations for any interim period are not necessarily indicative of the results of
operations for the entire year.
The preparation of consolidated financial statements
in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and
expenses during the accounting period. The Company considers its accounting policies relating to stock-based compensation to be the
most significant accounting policy that involves management estimates and judgments. The Company has made accounting estimates based
on the facts and circumstances available as of the reporting date. Actual amounts could differ from these estimates, and such differences
could be material.
These consolidated financial statements presented
are those of SolarWindow Technologies, Inc. and its wholly owned subsidiaries, SolarWindow Asia (USA) Corp., and SolarWindow Asia Co.
Ltd. All significant intercompany balances and transactions have been eliminated.
Information regarding the Company’s significant
accounting policies is contained in Note 2, “Summary of significant accounting policies,” to the consolidated financial
statements in the Company’s Annual Report on Form 10-K for the year ended August 31, 2021. Presented below and in the
following notes is supplemental information that should be read in conjunction with “Notes to Financial Statements” in
the Annual Report.
Fiscal quarter
The Company’s quarterly periods end on November 30,
February 28, May 31, and August 31. The Company’s third quarter in fiscal 2022 and 2021 ended on May 31, 2022 and 2021, respectively.
Cash and Highly Liquid Investments
As of May 31, 2022, the Company’s cash,
includes $1,192,917 in domestic bank accounts and $7,439,578 held in Canadian bank accounts.
Schedule of cash and cash cash equivalents | |
May 31, | |
August 31, |
| |
2022 | |
2021 |
Cash | |
$ | 8,632,495 | | |
$ | 7,127,456 | |
Short-term investments | |
| - | | |
| 5,000,000 | |
Cash and cash equivalents | |
$ | 8,632,495 | | |
$ | 12,127,456 | |
Short-term investments
The Company determines the balance sheet classification
of its investments at the time of purchase and evaluates the classification at each balance sheet date. Money market funds, certificates
of deposit, and time deposits with maturities of greater than three months but no more than twelve months are carried at cost,
which approximates fair value and are recorded in the consolidated balance sheets in short-term investments. As of August 31, 2021, the
short-term investments consist of a fixed-term deposit with a twelve-month maturity at the time of purchase which matured on October 1,
2021.
Accounting Pronouncements
The Company reviews new accounting standards as
issued. Although some of these accounting standards issued or effective after the end of the Company’s previous fiscal year may
be applicable, the Company has not identified any standards that the Company believes merit further discussion.
Recent accounting pronouncements not yet adopted
None.
Recently adopted accounting pronouncements
In December 2019, the Financial Accounting Standards
Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes – Simplifying the Accounting for Income
Taxes. The guidance removes certain exceptions for recognizing deferred taxes for equity method investments, performing intra period
allocation, and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including
recognizing deferred taxes for goodwill and allocating taxes to members of a consolidated group, among others. This guidance is effective for
interim and annual reporting periods beginning after December 15, 2020. Early adoption of the standard is permitted, including adoption
in interim or annual periods for which financial statements have not yet been issued. The transition requirements are dependent upon each
amendment within this update and applied either prospectively or retrospectively. The Company adopted ASU 2019-12 beginning September
1, 2021 with no impact on its Financial Statements.
NOTE 3 - Net Income (Loss) Per Share
The computation of basic earnings per share (“EPS”)
is based on the weighted average number of shares that were outstanding during the period, including shares of common stock that are issuable
at the end of the reporting period. The computation of diluted EPS is based on the number of basic weighted-average shares outstanding
plus the number of common shares that would be issued assuming the exercise of all potentially dilutive common shares outstanding using
the treasury stock method. The computation of diluted net income per share does not assume conversion, exercise or contingent issuance
of securities that would have an antidilutive effect on earnings per share. Therefore, when calculating EPS if the Company experienced
a loss, there is no inclusion of dilutive securities as their inclusion in the EPS calculation is antidilutive. Furthermore, options and
warrants will have a dilutive effect under the treasury stock method only when the average market price of the common stock during the
period exceeds the exercise price of the options or warrants (they are in the money).
Following is the computation of basic and diluted
net loss per share for the three and nine months ended May 31, 2022 and 2021:
Schedule of earning per shares | |
| | | |
| | | |
| | | |
| | |
| |
Three Months Ended May 31, | |
Nine Months Ended May 31, |
| |
2022 | |
2021 | |
2022 | |
2021 |
Basic and diluted EPS Computation | |
| |
| |
| |
|
Numerator: | |
| |
| |
| |
|
Loss available to common stockholders' | |
$ | (1,636,485 | ) | |
$ | (1,806,401 | ) | |
$ | (4,340,444 | ) | |
$ | (6,492,706 | ) |
Denominator: | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average number of common shares outstanding | |
| 53,198,399 | | |
| 53,196,799 | | |
| 53,198,399 | | |
| 53,076,883 | |
Basic and diluted EPS Computation | |
$ | (0.03 | ) | |
$ | (0.03 | ) | |
$ | (0.08 | ) | |
$ | (0.12 | ) |
| |
| | | |
| | | |
| | | |
| | |
The shares listed below were not included in the computation of diluted losses per share because to do so would be antidilutive for the periods presented: | |
| | | |
| | | |
| | | |
| | |
Stock options | |
| 6,781,800 | | |
| 6,740,400 | | |
| 6,781,800 | | |
| 6,740,400 | |
Warrants | |
| 19,281,917 | | |
| 19,283,517 | | |
| 19,281,917 | | |
| 19,283,517 | |
Total shares not included in the computation of diluted loss per share | |
| 26,063,717 | | |
| 26,023,917 | | |
| 26,063,717 | | |
| 26,023,917 | |
NOTE 4 – Property and Equipment
Property and equipment consists of the following:
Schedule of property and equipment | |
May 31, | |
August 31, |
| |
2022 | |
2021 |
Computers, office equipment and software | |
$ | 17,387 | | |
$ | 14,800 | |
Furniture and fixtures | |
| - | | |
| 47,660 | |
Equipment | |
| 131,183 | | |
| 113,820 | |
Leasehold improvements | |
| - | | |
| 28,678 | |
In-process equipment | |
| 1,292,655 | | |
| 1,292,655 | |
Total property and equipment | |
| 1,441,225 | | |
| 1,497,613 | |
Accumulated depreciation | |
| (114,030 | ) | |
| (110,271 | ) |
Property and equipment, net | |
$ | 1,327,195 | | |
$ | 1,387,342 | |
During the nine months ended May 31, 2022 and
2021, the Company purchased $601,598 and $71,647 of property and equipment, respectively. During the three months ended May 31, 2022 and
2021, the Company recognized straight-line depreciation expense of $3,057 and $9,183, respectively. During the nine months ended May 31,
2022 and 2021, the Company recognized straight-line depreciation expense of $18,865 and $21,637, respectively.
During the year ended August 31, 2019, the Company
made deposits for in-process equipment totaling $1,292,655 towards the purchase of manufacturing equipment with an estimated total cost
of $1,803,000. Due to the termination of the Triview Process Integration and Production Agreement on September 27, 2019, subsequent COVID-19
pandemic and move into the Asian markets, the Company placed on hold finalizing the equipment. The Company is currently evaluating configuration
options in order to optimize the equipment for manufacturing of the Company’s initial product. Completion of the equipment will
require additional payments up to approximately $510,000.
During the quarter ended February 28, 2022, the
Company’s Korean subsidiary agreed to purchase equipment consisting of a roll-2-roll coating system for use in Korea. In February
2022, the Company paid approximately $581,000 as a deposit. During the quarter ended May 31, 2022, the Company impaired the value of all
property and equipment recorded on the books of the Korean Subsidiary, including $58,122 of furniture and fixtures and leasehold improvements
net of accumulated depreciation, and $558,344 related to the roll-2-roll equipment deposit.
NOTE 5 – Common Stock and Warrants
Common Stock
At May 31, 2022, the Company had 300,000,000 authorized
shares of common stock with a par value of $0.001 per share, and 53,198,399 shares of common stock outstanding.
Warrants
Each of the Company’s warrants outstanding
entitles the holder to purchase one share of the Company’s common stock for each warrant share held. Other than the Series O Warrants
and Series P Warrants, all of the following warrants may be exercised on a cashless basis. A summary of the Company’s warrants outstanding
and exercisable as of May 31, 2022 and August 31, 2021 is as follows:
Schedule of warrants | |
| | | |
| | | |
| | | |
| |
|
| |
Shares of Common Stock
Issuable from Warrants
Outstanding as of | |
Weighted
Average | |
| |
|
| |
May 31, | |
August 31, | |
Exercise | |
Date of | |
|
Description | |
2022 | |
2021 | |
Price | |
Issuance | |
Expiration |
Series M | |
| 246,000 | | |
| 246,000 | | |
$ | 2.34 | | |
December 7, 2015 | |
December 31, 2022 |
Series N | |
| 767,000 | | |
| 767,000 | | |
$ | 3.38 | | |
December 31, 2015 | |
December 31, 2022 |
Series P | |
| 213,500 | | |
| 213,500 | | |
$ | 3.70 | | |
March 25, 2016 | |
December 31, 2022 |
Series R | |
| 468,750 | | |
| 468,750 | | |
$ | 4.00 | | |
June 20, 2016 | |
December 31, 2022 |
Series S-A | |
| 300,000 | | |
| 300,000 | | |
$ | 2.53 | | |
July 24, 2017 | |
December 31, 2022 |
Series S | |
| 620,000 | | |
| 620,000 | | |
$ | 3.42 | | |
September 29, 2017 | |
September 29, 2022 |
Series T | |
| 16,666,667 | | |
| 16,666,667 | | |
$ | 1.70 | | |
November 26, 2018 | |
November 26, 2025 |
Total | |
| 19,281,917 | | |
| 19,281,917 | | |
| | | |
| |
|
NOTE 6 - Stock Options
The Company measures share-based compensation
cost on the grant date, based on the fair value of the award, and recognizes the expense on a straight-line basis over the requisite service
period for awards expected to vest. The Company estimated the grant date fair value of stock options using a Black-Scholes valuation model
using the following weighted-average assumptions:
Schedule of assumption used | |
Nine Months Ended May 31, |
| |
2022 | |
2021 |
Expected dividend yield | |
| – | | |
| – | |
Expected stock price volatility | |
| 103.31 | % | |
| 89.44 | % |
Risk-free interest rate | |
| 1.16 | % | |
| 0.19 | % |
Expected term (in years)(simplified method) | |
| 5.75 | | |
| 4.00 | |
Exercise price | |
$ | 6.21 | | |
$ | 3.42 | |
Weighted-average grant date fair-value | |
$ | 4.92 | | |
$ | 2.16 | |
A summary of the Company’s stock option
activity for the nine months ended May 31, 2022 and related information follows:
Schedule of stock option
activity | |
| | | |
| | | |
| | | |
| | |
| |
Number of
Shares Subject to
Option Grants | |
Weighted
Average
Exercise
Price ($) | |
Weighted
Average
Remaining
Contractual
Term (years) | |
Aggregate
Intrinsic
Value ($) |
Outstanding at August 31, 2021 | |
| 6,740,400 | | |
| 3.97 | | |
| | | |
| | |
Grants | |
| 140,000 | | |
| 6.21 | | |
| | | |
| | |
Forfeitures and cancellations | |
| (98,600 | ) | |
| 4.43 | | |
| | | |
| | |
Outstanding at May 31, 2022 | |
| 6,781,800 | | |
| 4.01 | | |
| 3.64 | | |
| 122,430 | |
Exercisable at May 31, 2022 | |
| 6,590,600 | | |
| 4.00 | | |
| 3.58 | | |
| 115,843 | |
The aggregate intrinsic value in the table above
represents the total pretax intrinsic value for all “in-the-money” options (i.e. the difference between the Company’s
closing stock price on the last trading day of the period covered by this report and the exercise price, multiplied by the number of shares)
that would have been received by the option holders had all in-the-money option holders exercised their vested options on May 31, 2022.
The intrinsic value of the option changes based upon the fair market value of the Company’s common stock. Since the closing stock
price was $2.63 on May 31, 2022 and 2,653,000 outstanding options have an exercise price below $2.63 per share, as of May 31, 2022, there
is $122,430 and $115,843 of intrinsic value in the Company’s outstanding stock options and vested options, respectively.
Three and nine Months Ended May 31, 2022
Grants - On October 27, 2021, the Company’s
Board granted 140,000 options to its officers and directors, with an exercise price of $6.21, exercisable on a cashless basis any time
prior to the Company’s listing of any of its securities for trading on a national stock exchange, ten-year term and vesting as to
50% of the options on the six-month anniversary of the date of grant and as to the remaining 50% of the options on the twelve-month anniversary
from the date of grant.
Forfeitures and cancellations - As a result
of his resignation from the Board on November 10, 2021, Mr. Gary Parmar forfeited 58,600 unvested stock options, including 30,000 options
granted on October 27, 2021.
Three and nine Months Ended May 31, 2021
Grants - Pursuant to his appointment
to the Board, on October 19, 2020, the Company’s Board granted 50,000 options to Joseph Sierchio, director, with an exercise price
of $3.42, exercisable on a cashless basis any time prior to the Company’s listing of any of its securities for trading on a national
stock exchange, six-year term and vesting at the rate of 12,500 on the date of grant and 12,500 each anniversary thereafter.
Exercises – upon the exercise
of 56,667 stock options by three individuals between December 18, 2020 and February 23, 2021, the Company received $35,400 and issued
37,476 shares of restricted common stock. Of the 56,667 options exercised, 10,000 were exercised for cash at an exercise price of $3.54
and 46,667 were exercised on a cashless basis resulting in the issuance of 27,476 shares of restricted common stock.
Forfeitures and cancellations –
On December 18, 2020, Mr. John Conklin and the Company entered into an Amendment to the Separation, Consulting and Release of Claims Agreement
dated November 24, 2020. Pursuant to the Amendment, no further payments are due to Mr. Conklin and all stock options granted under his
employment agreement totaling 1,008,000 were cancelled. In addition, 37,500 unvested options granted to Mr. Conklin on July 5, 2019 were
also cancelled. 16,667 options expired and 4,500 options that were previously canceled as a result of an employee reduction in hours were
reinstated due to the continuation of that employee’s services.
The following table sets forth the share-based
compensation cost resulting from stock option grants, including those previously granted and vesting over time, that were recorded in
the Company’s Statements of Operations for the three and nine months ended May 31, 2022 and 2021:
Schedule of share-based
compensation | |
| | | |
| | | |
| | | |
| | |
| |
Three Months Ended May 31, | |
Nine Months Ended May 31, |
Stock compensation expense: | |
2022 | |
2021 | |
2022 | |
2021 |
Selling, general and administrative | |
$ | 191,122 | | |
$ | 761,654 | | |
$ | 838,309 | | |
$ | 3,617,132 | |
Research and development | |
| 21,233 | | |
| 141,544 | | |
| 63,698 | | |
| 588,502 | |
Total | |
$ | 212,355 | | |
$ | 903,198 | | |
$ | 902,007 | | |
$ | 4,205,634 | |
As of May 31, 2022, the Company had $391,608 of
unrecognized compensation cost related to unvested stock options which is expected to be recognized over a period of 2.525 years.
The following table summarizes information about
stock options outstanding and exercisable at May 31, 2022:
Schedule of stock options outstanding and exercisable | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
Stock Options Outstanding | |
Stock Options Exercisable |
Range of
Exercise
Prices | |
Number of
Shares
Subject to
Outstanding
Options | |
Weighted
Average
Contractual
Life
(years) | |
Weighted
Average
Exercise
Price ($) | |
Number
of Shares
Subject To
Options
Exercise | |
Weighted
Average
Remaining
Contractual
Life (Years) | |
Weighted
Average
Exercise
Price ($) |
2.32 | |
| 153,000 | | |
| 7.36 | | |
| 2.32 | | |
| 131,750 | | |
| 7.36 | | |
| 2.32 | |
2.60 | |
| 2,500,000 | | |
| 4.09 | | |
| 2.60 | | |
| 2,500,000 | | |
| 4.09 | | |
| 2.60 | |
3.42 | |
| 50,000 | | |
| 4.39 | | |
| 3.42 | | |
| 12,500 | | |
| 4.39 | | |
| 3.42 | |
3.46 | |
| 35,000 | | |
| 3.60 | | |
| 3.46 | | |
| 35,000 | | |
| 3.60 | | |
| 3.46 | |
3.54 | |
| 1,283,800 | | |
| 6.25 | | |
| 3.54 | | |
| 1,206,350 | | |
| 6.45 | | |
| 3.54 | |
3.66 | |
| 1,000,000 | | |
| 1.25 | | |
| 3.66 | | |
| 1,000,000 | | |
| 1.25 | | |
| 3.66 | |
4.87 | |
| 150,000 | | |
| 5.48 | | |
| 4.87 | | |
| 150,000 | | |
| 5.48 | | |
| 4.87 | |
6.00 | |
| 800,000 | | |
| 1.25 | | |
| 6.00 | | |
| 800,000 | | |
| 1.25 | | |
| 6.00 | |
6.21 | |
| 110,000 | | |
| 9.41 | | |
| 6.21 | | |
| 55,000 | | |
| 9.41 | | |
| 6.21 | |
8.00 | |
| 700,000 | | |
| 1.25 | | |
| 8.00 | | |
| 700,000 | | |
| 1.25 | | |
| 8.00 | |
Total | |
| 6,781,800 | | |
| 3.64 | | |
| 4.01 | | |
| 6,590,600 | | |
| 3.58 | | |
| 4.00 | |
NOTE 7 - Transactions with Related Persons
A related party with respect to the Company is
generally defined as any person (i) (and, if a natural person, inclusive of his or her immediate family) that holds 10% or more of the
Company’s securities, (ii) that is part of the Company’s management, (iii) that directly or indirectly controls, is controlled
by or is under common control with the Company, or (iv) who can significantly influence the financial and operating decisions of the Company.
A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.
On August 7, 2017, the Company appointed Jatinder
Bhogal to the Board of directors. Mr. Bhogal has provided consulting services to the Company through his wholly owned company, Vector
Asset Management, Inc. (“VAMI”). On July 1, 2020 the Company and VAMI entered into an Executive Consulting Agreement (the
“ECA”) pursuant to which Mr. Bhogal served as a director of the Company and as its Chairman and Chief Executive Officer. Effective
January 18, 2022, Mr. Bhogal resigned all positions he held in the Company. Pursuant to the ECA, VAMI received $34,167 per month and was
eligible for an annual bonus. VAMI also incurred expenses on behalf of the Company which are reimbursed according to the Company’s
expense reimbursement policy. In connection with the ECA and the Separation and Release of Claims Agreement dated January 18, 2022 by
and among the Company, VAMI and Mr. Bhogal, the Company recognized cash compensation expense of $0 and $102,500 during the three months
ended May 31, 2022 and 2021, respectively, and $524,505 (includes bonus of $368,000) and $307,500 during the nine months ended May 31,
2022 and 2021, respectively. As of May 31, 2022, all amounts owed to VAMI are paid.
Joseph Sierchio, one of the Company’s directors,
has maintained his role as the Company’s General Counsel since its inception as Principal of the law firm of Sierchio & Partners,
LLP, and then as a Partner with Satterlee Stephens LLP and beginning in August 2020, as Principal of Sierchio Law, LLP pursuant to an
engagement letter which provides for an annual fee of $175,000 in exchange for general counsel services. Mr. Sierchio resigned from the
Board effective October 22, 2018, and was reappointed on October 1, 2020. Fees for legal services billed by Sierchio Law, LLP while serving
as a director totaled $43,750 and $43,750 for the three months ended May 31, 2022 and 2021, respectively and $131,250 and $116,667 during
the nine months ended May 31, 2022 and 2021, respectively. As of May 31, 2022, the Company recognized a related party payable related
to legal services of $14,583.
All related party transactions are recorded at
the exchange amount established and agreed to between related parties and are in the normal course of business.
NOTE 8 – Commitments and Contingencies
In September 2020, and February 2021, the Korean
Subsidiary entered into leases for office space and an apartment in South Korea. See “Note 9 - Leases” for additional information.
On June 9, 2022, the Company was served the Notice of Civil Claim dated
May 16, 2022, and related Notice of Application and Order Made After Application. See Part II, Item 1. Legal Proceedings to this quarterly report for additional information.
COVID-19
A novel strain of coronavirus (COVID-19) was
first identified in December 2019, and subsequently declared a global pandemic by the World Health Organization on March 11, 2020. As
a result of the outbreak, many companies have experienced disruptions in their operations and in markets served. The Company considered
the impact of COVID-19 on the assumptions and estimates used and determined that there was no material adverse impact on the Company’s
results of operations and financial position as of May 31, 2022. The full extent of the future impact of COVID-19 on the Company’s
plan of operations is uncertain. A prolonged outbreak could have a material adverse impact on the Company’s ability to identify
and implement business opportunities or continue to effectuate its business plan.
NOTE 9 – Leases
On February 26, 2021, the Korean Subsidiary entered
into an apartment lease for the purposes of housing foreign personnel. The apartment lease provided for a term of one year beginning March
7, 2021, and was renewed on March 7, 2022 for an additional year. Monthly rent is approximately $950. The Company paid a security deposit
of approximately $8,700.
In September 2020, the Korean Subsidiary entered
a lease for office space in South Korea. The office lease provided for an initial term of one-year from September 23, 2020 through September
23, 2021, which was renewed for an additional year, monthly rent of approximately $1,200 and a security deposit of approximately $13,000.
The Company’s policy is to record all leases
with a term of less than one year as an operating lease with rent expensed recorded on a straight-line basis and to not recognize lease
assets or lease liabilities.
As of May 31, 2022, the Company has
not entered into any leases other than those described above which have not yet commenced and would entitle the Company to significant
rights or create additional obligations.
NOTE 10 – Subsequent Events
Management has reviewed material events subsequent
of the period ended May 31, 2022 and through the date of filing of financial statements in accordance with FASB ASC 855 “Subsequent
Events.” In managements opinion, no material subsequent events have occurred as of the date of this quarterly report.
On June 9, 2022, the Company was served the Notice of Civil Claim dated May 16, 2022, and related Notice of Application
and Order Made After Application. See Part II, Item 1. Legal Proceedings
to this quarterly report for additional information.