SolarWindow Technologies (WNDW) Risk Analysis

Our articles of incorporation and applicable Nevada law provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney's fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on our behalf. We will also bear the expenses of such litigation for any of our directors, officers, employees, or agents, upon such person's promise to repay us if it is ultimately determined that any such person shall not have been entitled to indemnification. This indemnification policy could result in substantial expenditures by us, which we will be unable to recoup. The provisions of the Nevada Revised Statutes and our bylaws may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. The provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder's investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. We believe that these amended and restated certificate of incorporation provisions, amended and restated bylaw provisions, indemnification agreements and the insurance are necessary to attract and retain qualified persons as directors and officers. We have been advised that, in the opinion of the SEC, indemnification for liabilities arising under federal securities laws is against public policy as expressed in the Securities Act of 1933, as amended (the "Securities Act") and is, therefore, unenforceable. In the event that a claim for indemnification against these types of liabilities, other than the payment by us of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding, is asserted by a director, officer or controlling person in connection with the securities being registered, we will (unless in the opinion of our counsel, the matter has been settled by controlling precedent) submit to a court of appropriate jurisdiction, the question whether indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The legal process relating to this matter, if it were to occur, is likely to be very costly and may result in us receiving negative publicity, either of which factors is likely to materially reduce the market and price for our Common Stock.

We are not a fully reporting company under the Securities Exchange Act of 1934, as amended (the "Exchange Act"); therefore, we are subject only to the reporting requirements of Section 15(d) of the Exchange Act. Until our Common Stock is registered under the Exchange Act, we will be subject only to the reporting obligations imposed by Section 15(d) of the Exchange Act, which we refer to as Section 15(d). Section15(d) requires that issuers file periodic and current reports with the U.S. Securities and Exchange Commission (the "Commission" or the "SEC") when they have issued any class of securities for which a registration statement was filed and became effective pursuant to the Securities Act. The purpose of Section 15(d) is to ensure that investors who buy securities in registered offerings are provided with the same information on an ongoing basis that they would receive if the securities they purchased were listed on a securities exchange or the issuer were otherwise subject to periodic reporting obligations. However, companies that are required to report only under Section 15(d) are not subject to some of the Exchange Act reporting requirements. For example, companies that are required to report only under Section 15(d) are not subject to the short-swing profit reporting requirements contained in Section 16 of the Exchange Act, the beneficial ownership reporting requirements contained in Section 13 of the Exchange Act, the institutional investor reporting rules or the third-party tender offer rules, or the Exchange Act's proxy rules contained in Section 14 of the Exchange Act. The reporting obligations under Section15(d) of the Exchange Act are automatically suspended when: (i) any class of securities of the issuer reporting under Section 15(d) is registered under Section 12 of the Exchange Act; or (ii) at the beginning of the issuer's fiscal year, other than the year in which the applicable registration statement became effective, if the class of securities covered by the registration statement is held of record by fewer than 300 persons. In the latter case, the Company would no longer be subject to periodic reporting obligations so long as the number of holders remained below 300 unless we filed a registration statement with the Securities and Exchange Commission under Section 12 of the Exchange Act. If our obligation to file reports under Section 15(d) is suspended (other than due to our having registered our Common Stock under Section 12 of the Exchange Act), then investors will have reduced visibility with respect to the Company, its financial condition, and results of operations. Until our Common Stock is listed on an exchange, we expect to remain eligible for quotation on the OTCID Market or on another over-the-counter quotation system. In those venues, however, an investor may find it difficult to obtain accurate quotations for our Common Stock. In addition, if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our Common Stock, which may further affect the liquidity of your shares. This would also make it more difficult for us to raise additional capital or attract qualified employees or partners.

OTCID is viewed by most investors as a less desirable, and less liquid, marketplace. As a result, an investor may find it more difficult to purchase, dispose of or obtain accurate quotations as to the value of our Common Stock. Unless and until we file an application for listing of our shares on the national stock exchange, or even the OTCQB, and such an application is accepted (as to which there is no assurance), we expect that our stock will continue to trade on the OTCID.

"Penny stocks" are those securities that are not listed on a national securities exchange and are priced under $5. There are exclusions for securities of issuers that have net tangible assets greater than $2 million if they have been in operation at least three years or greater than $5 million if in operation less than three years. Securities of issuers with average revenue of at least $6 million for the last three years are also not considered penny stocks. More specifically, under Rule 240.3a51-1 a stock is excluded from the penny stock definition if it meets one of the following tests: 1) a price of over $5 per share, 2) the issuer has average revenue of at least $6 million for the last 3 years, or 3) the issuer has net Tangible assets in excess of $2 million if the issuer has been in continuous operations for at least 3 years or $5 million if less than 3 years. The value of our net tangible assets for the fiscal years ended August 31, 2025, and 2024 was approximately $6,615,000 and $4,958,000, respectively. Accordingly, we do not believe our stock is a penny stock. And if we continue to satisfy at least one of the foregoing exemptions, our Common Stock should continue to be deemed "penny stock exempt." However, because our stock is not registered for trading on a national stock exchange should we no longer satisfy at least one of the exemption criteria described above, our Common Stock would be considered a "penny stock." The penny stock rules are designed to prevent deceptive or manipulative practices. It provides that a broker cannot sell a penny stock to any person unless it has approved that person's account for penny stock transactions and the broker/dealer has received in writing from customer agreement to the transaction; approving an account includes, among other things, reviewing the customer's financial data and determining the customer's suitability, including the capability to evaluate the risks of trading in penny stocks. Some types of transactions in penny stocks are exempt from these rules. Exempt transactions include those with an established customer (a customer of more than one year or one who has made at least three separate penny stock purchases) and transactions in which the customer is an institutional investor. In addition, the penny stock regulations require that prior to any non-exempt buy/sell transaction in a penny stock, a disclosure schedule proscribed by the SEC relating to the penny stock market must be delivered by a broker-dealer to the purchaser of such penny stock. This disclosure must include the dollar amount of commissions payable to both the broker-dealer and the registered representative and current price quotations for our Common Stock. The regulations also require that monthly statements be sent to holders of penny stock that disclose recent price information for the penny stock and information of the limited market for penny stocks. Because of these requirements, many brokerage firms will not process transactions involving low price stocks, especially those that come within the definition of a "penny stock." Accordingly, these requirements may adversely affect the market liquidity of our Common Stock. Should our Common Stock be deemed a "penny stock," you may find it difficult to deposit, transfer, sell or purchase the shares of our Common Stock in open market transactions.

Our Common Stock currently trades on the OTCID under the symbol "WNDW;" there is limited and sporadic trading in our Common Stock. Accordingly, there can be no assurance as to the liquidity of any markets that may develop for our Common Stock, or the ability of the holders of our Common Stock to sell our Common Stock, or the prices at which holders may be able to sell our Common Stock. Further, many brokerage firms will not process transactions involving low price stocks, especially those that come within the definition of a "penny stock." If we cease to be quoted, holders of our Common Stock may find it more difficult to dispose of, or to obtain accurate quotations as to the market value of our Common Stock, and the market value of our Common Stock would likely decline.

The trading price of our Common Stock has been, and is likely to continue to be, highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. From December 31, 2019, through the date of this annual report, the stock price of our Common Stock has ranged from a low of $0.01 to a high of $39.20 per share. In addition to the factors discussed in these "Risk Factors" and elsewhere in this report, factors that may cause volatility in our share price include: - changes in projected operational and financial results;- issuance of new or updated research or reports by securities analysts;- market rumors or press reports;- announcements of significant transactions;- announcements related to our stock repurchase program;- the use by investors or analysts of third-party data regarding our business that may not reflect our actual performance;- fluctuations in the valuation of companies perceived by investors to be comparable to us;- fluctuations in the trading volume of our shares, or the size of our public float relative to the total number of shares of our Common Stock that are issued and outstanding;- share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; and - general economic and market conditions. In addition, in recent years, broad stock market indices in general, and small cap companies in particular, have experienced substantial price fluctuations. In a volatile market, we may experience wide fluctuations in the market price of our Common Stock. These fluctuations may have a negative effect on the market price of our Common Stock. Such volatile fluctuations may also make us more susceptible to possible class action lawsuits, which are often initiated following price declines.

The trading market for our Common Stock, which is highly volatile, may depend in part on the research and reports that securities or industry analysts publish about us or our business, markets, or competitors. Securities and industry analysts do not currently, and may never, publish research on us or our business. If no securities or industry analysts commence coverage of our company, the trading price for our stock would be negatively affected. If securities or industry analysts initiate coverage, and one or more of those analysts downgrade our stock or publish inaccurate or unfavorable research about our business or our market, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and any trading volume to decline.

Sales of substantial amounts of our Common Stock in the public market after the filing of a Form S-1, or pursuant to Rule 144, the perception that these sales could occur, could adversely affect the market price of our Common Stock, and could materially impair our ability to raise capital through equity offerings in the future. Resale Shares held by our existing stockholders may be sold in the public market in the future subject to the restrictions in Rule 144 and Rule 701 under the Securities Act. As of the date of this annual report, we have 65,779,045 shares of Common Stock outstanding. We cannot predict what effect, if any, market sales of securities held by our significant stockholders or any other stockholder or the availability of these securities for future sale will have on the market price of our Common Stock.

Generally, a "smaller reporting Company" or ("SRC") is a company that as of the last business day of its most recently completed second quarter: (i) Had a public float of less than $250 million; or (ii) Had annual revenues of less than $100 million and either: (A) No public float; or (B) A public float of less than $700 million. On February 28, 2025, we had a public float of $5,517,000. We are a SRC; and, for as long as we continue to be a SRC, we are exempt from various reporting requirements applicable to other public companies but not to a "SRC," including, for example, not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute compensation not previously approved. In this annual report we have utilized, and we may in future filings with the SEC continue to utilize, the modified disclosure requirements available to emerging growth companies. As a result, our stockholders may not have access to certain information they may deem important and may therefore find our stock a less attractive investment.

As of the date of this annual report, we have 65,779,045 shares issued and outstanding, of which 48,485,387 are deemed "restricted securities" or "control securities" within the meaning of Rule 144. The possibility that substantial amounts of our Common Stock may be sold into the public market, either under Rule 144, or pursuant to a resale registration statement, may adversely affect prevailing market prices for the Common Stock and could impair our ability to raise capital in the future through the sale of equity securities because of the perception that future re-sales could decrease our stock price and because of the availability of resale shares to those interested in investing in our Common Stock. Subject to compliance with our insider trading policies to the extent applicable, sales of such restricted securities or control securities may be made from time to time, at the discretion of the holders of such securities. We may not have knowledge of any such sales until some time after such sales are made.

As of the date of this annual report, KCC beneficially owns 50,705,598 shares (inclusive of 16,566,667 shares issuable upon exercise of outstanding warrants and 34,138,931 shares of Common Stock issued and outstanding), or approximately 61.58% of our outstanding Common Stock, on a fully diluted basis. Mr. Rayat has voting and disposition authority over these shares. As previously reported by the Company on Form 8-K dated February 28, 2024 as filed with the SEC on March 5, 2024, Mr. Rayat and the SEC jointly and voluntarily entered into a settlement agreement resolving the claims asserted against Mr. Rayat in the SEC's amended complaint as filed in Securities and Exchange Commission v. Harmel S. Rayat, RenovaCare, Inc., et. al., No. 1:21-cv-04777 (S.D.N.Y.) (the "SEC Case"). Pursuant to the agreed to terms of the settlement Mr. Rayat, on a "no admit no deny" basis, consented to the entry of a judgment, issued on February 27, 2024, by the US District Court for the Southern District of New York, (the "Judgment") permanently enjoining him from violating Section 17(a) of the Securities Act and Sections 10(b) and 20(b) of the Exchange Act, and Rule 10b-5 thereunder; prohibiting him from acting as an officer or director of a public company; barring him from participating in the offering of any penny stock; and ordering him to pay disgorgement of $1,270,352, prejudgment interest of $207,656, and a civil penalty of $1,270,352. Notwithstanding the issuance of the Judgment, Mr. Rayat continues to have voting and disposition authority over the shares of the Company's Common Stock owned by KCC; accordingly, Mr. Rayat can exercise control over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, and will have significant control over our management and policies. Mr. Rayat's interests may be different from yours. For example, he may support proposals and actions with which you may disagree, or which are not in your interest. This concentration of ownership could delay, prevent, or cause a change in control should Mr. Rayat sell all or a portion of his shares of our company or otherwise discourage a potential acquirer from attempting to obtain control of our company, which in turn could reduce the price of our Common Stock, possibly cause acceleration of vesting of outstanding options, result in limits to the utilization of our net operating loss, and may adversely affect your investment. In addition, Mr. Rayat could use his voting influence to maintain our existing management and Board of Directors in office, or support or reject other management and Board members proposals that are subject to stockholder approval, such as the adoption of employee stock plans and significant unregistered and registered financing transactions. The Company was not a party to, or defendant in, the SEC Case. The foregoing summary of the Judgement entered in the SEC Case is based upon the Company's review and understanding of the filed documents, including, but not limited to the Judgment and the SEC Litigation Release No. 25945 / February 27, 2024 Securities and Exchange Commission v. Harmel S. Rayat, RenovaCare, Inc., et al., No. 1:21-cv-04777 (S.D.N.Y.) (the "SEC Litigation Release"), pertaining to Mr. Rayat and is qualified in its entirety by reference to the SEC Litigation Release. The SEC Litigation Release may be found on the SEC website at: https://www.sec.gov/litigation/litreleases/lr-25945.

Mr. Rayat has voting control over 51.90% of our outstanding voting stock and therefore we currently meet the definition of a "controlled company" under the corporate governance standards for Nasdaq listed companies and for so long as we remain a controlled company under this definition, we are eligible to utilize certain exemptions from the corporate governance requirements of Nasdaq. As long as KCC owns at least 50% of the voting power of our Company, we will be a "controlled company" as defined under applicable rules. For so long as we are a controlled company under that definition, we are permitted to rely on certain exemptions from corporate governance rules, including: - an exemption from the rule that a majority of our Board must be independent directors;  - an exemption from the rule that the compensation of our chief executive officer must be determined or recommended solely by independent directors; and  - an exemption from the rule that our director nominees must be selected or recommended solely by independent directors. By relying on the "controlled company" exemption, a majority of the members of our Board might not be independent directors and our nominating and corporate governance and compensation committees might not consist entirely of independent directors. As a result, you will not have the same protection afforded to stockholders of companies that are subject to these corporate governance requirements. We would cease our reliance on the ‘controlled company" exemption in the future should we apply for listing on a national stock exchange.

As of August 31, 2025, we have granted options to purchase shares of our Common Stock to various persons and entities, under which we could be obligated to issue up to 5,425,000 shares of our Common Stock. The exercise prices of these options range from $0.33 to $6.21 per share. 5,088,000 of the options contain cashless exercise provisions. If issued, the shares underlying these options would increase the number of shares of our Common Stock currently outstanding and dilute the holdings and voting rights of our then-existing stockholders.

As of the date of this annual report, we had outstanding warrants to purchase shares of our Common Stock to various persons and entities, under which we could be obligated to issue up to 29,247,313 shares of Common Stock with exercise prices of $1.70 per share as to 16,666,667 warrants and $0.47 per share as to 12,580,646 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. The Company's unexercised warrants may be exercised on a cashless basis. If issued, the shares underlying these warrants would increase the number of shares of our Common Stock currently outstanding and dilute the holdings and voting rights of our then-existing stockholders.

Our Articles of Incorporation allow our Board to issue up to 1,000,000 shares of preferred stock. Currently, no shares of preferred stock are issued and outstanding. However, we can issue shares of our preferred stock in one or more series and can set the terms of the preferred stock without seeking any further approval from the holders of our Common Stock. Any preferred stock that we issue may rank ahead of our Common Stock in terms of dividend priority or liquidation premiums and may have greater voting rights than our Common Stock. In addition, such preferred stock may contain provisions allowing it to be converted into shares of Common Stock, which could dilute the value of our Common Stock to then current stockholders and could adversely affect the market price, if any, of our Common Stock.