UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________

FORM 10-Q

____________________

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________to _____________

Commission File Number 001-40766

Lightwave Logic, Inc.

(Exact name of registrant as specified in its charter)

Nevada

(State or other jurisdiction of

incorporation or organization)

82-0497368

(I.R.S. Employer Identification No.)

369 Inverness Parkway, Suite 350

Englewood, CO

(Address of principal executive offices)

80112

(Zip Code)

(720) 340-4949

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Stock, $0.001 par value per share	LWLG	The NASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ☒

The number of shares of the registrant’s common stock outstanding as of November 9, 2022 was 112,577,460.

TABLE OF CONTENTS

			Page

Part I	Financial Information

	Item 1	Financial Statements	1

	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

	Item 3	Quantitative and Qualitative Disclosures About Market Risk	35

	Item 4	Controls and Procedures	35

Part II	Other Information

	Item 1	Legal Proceedings	36

	Item 1A	Risk Factors	36

	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	37

	Item 3	Defaults Upon Senior Securities	37

	Item 4	Mine Safety Disclosures	37

	Item 5	Other Information	37

	Item 6	Exhibits	37

		Signatures	38

Forward-Looking Statements

This report on Form 10-Q contains, and our officers and representatives may from time to time make, “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “project,” “estimate,” “expect,” “continuing,” “ongoing,” “strategy,” “future,” “likely,” “may,” “should,” “could,” “will” and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding expected operating results, such as anticipated revenue; anticipated levels of capital expenditures for our current fiscal year; our belief that we have, or will have, sufficient liquidity to fund our business operations during the next 12 months; strategy for gaining customers, growth, product development, market position, financial results and reserves.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: lack of available funding; general economic and business conditions; deterioration in global economic and financial market conditions generally including as a result of pandemic health issues caused by COVID-19 and its recent variants and their effects, competition from third parties; intellectual property rights of third parties; regulatory constraints; changes in technology and methods of marketing; delays in completing various engineering and manufacturing programs; changes in customer order patterns; changes in product mix; success in technological advances and delivering technological innovations; shortages in components; production delays due to performance quality issues with outsourced components; and other factors beyond the Company’s control.

The ultimate correctness of these forward-looking statements depends upon a number of known and unknown risks and events. We discuss our known material risks under Item 1.A “Risk Factors” contained in our Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and under Part II, Item 1.A. “Risk Factors” contained in this report on Form 10-Q. Many factors could cause our actual results to differ materially from the forward-looking statements. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

The forward-looking statements speak only as of the date on which they are made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

PART I – FINANCIAL INFORMATION

Item 1

Financial Statements

LIGHTWAVE LOGIC, INC.

FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(UNAUDITED)

		Page

Balance Sheets		2

Statements of Comprehensive Loss		3

Statement of Stockholders’ Equity		4

Statements of Cash Flow		6

Notes to Financial Statements		7

LIGHTWAVE LOGIC, INC.

BALANCE SHEETS


	September 30, 2022			December 31, 2021
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	25,021,642		$	23,432,612
Prepaid expenses and other current assets		647,074			232,308
Loan receivable		588,180			—
TOTAL CURRENT ASSETS		26,256,896			23,664,920

PROPERTY AND EQUIPMENT - NET		2,651,182			2,179,075

OTHER ASSETS
Intangible assets - net		836,976			848,133
Operating Lease - Right of Use - Building		403,892			536,447
TOTAL OTHER ASSETS		1,240,868			1,384,580

TOTAL ASSETS	$	30,148,946		$	27,228,575


LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	582,782		$	215,734
Accrued bonuses and accrued expenses		113,999			1,118,080
Accounts payable and accrued expenses - related parties		163,557			32,189
Deferred lease liability		41,778			41,778
Operating lease liability		187,069			178,192
TOTAL CURRENT LIABILITIES		1,089,185			1,585,973

LONG TERM LIABILITIES
Deferred lease liability		48,741			80,075
Operating lease liability		216,823			358,255
TOTAL LONG TERM LIABILITIES		265,564			438,330

TOTAL LIABILITIES		1,354,749			2,024,303
STOCKHOLDERS' EQUITY

Preferred stock, $0.001 par value, 1,000,000 authorized, No shares issued or outstanding		—			—
Common stock $0.001 par value, 250,000,000 authorized, 112,374,427 and 110,555,459 issued and outstanding at September 30, 2022 and December 31, 2021		112,375			110,556
Additional paid-in-capital		130,654,002			114,696,597
Deferred compensation		(207,557	)		—
Accumulated deficit		(101,764,623	)		(89,602,881	)

TOTAL STOCKHOLDERS' EQUITY		28,794,197			25,204,272

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	30,148,946		$	27,228,575

See accompanying notes to these financial statements.

LIGHTWAVE LOGIC, INC.

STATEMENTS OF COMPREHENSIVE LOSS

FOR THE THREE MONTHS AND NINE MONTHS ENDING SEPTEMBER 30, 2022 AND 2021

(UNAUDITED)


	For the Three			For the Three			For the Nine			For the Nine
	Months Ending			Months Ending			Months Ending			Months Ending
	September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021

NET SALES	$	—		$	—		$	—		$	—

COST AND EXPENSE
Research and development		3,587,692			3,600,793			8,994,047			7,761,101
General and administrative		1,144,624			649,361			3,017,191			1,841,066
TOTAL COST AND EXPENSE		4,732,316			4,250,154			12,011,238			9,602,167

LOSS FROM OPERATIONS		(4,732,316	)		(4,250,154	)		(12,011,238	)		(9,602,167	)

OTHER INCOME (EXPENSE)
Paycheck Protection Program loan forgiveness		—			—			—			410,700
Interest income		29,125			2,032			57,545			2,444
Commitment fee		(73,170	)		—			(181,027	)		(1,333,628	)
Other Expense		(27,022	)		—			(27,022	)		—


NET LOSS	$	(4,803,383	)	$	(4,248,122	)	$	(12,161,742	)	$	(10,522,651	)

LOSS PER SHARE
Basic	$	(0.04	)	$	(0.04	)	$	(0.11	)	$	(0.10	)
Diluted	$	(0.04	)	$	(0.04	)	$	(0.11	)	$	(0.10	)

WEIGHTED AVERAGE NUMBER OF SHARES
Basic		112,111,706			107,730,515			111,536,100			103,910,690
Diluted		112,111,706			107,730,515			111,536,100			103,910,690

See accompanying notes to these financial statements.

LIGHTWAVE LOGIC, INC.

STATEMENT OF STOCKHOLDERS’ EQUITY

(UNAUDITED)


	NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2022

					Additional
	Number of		Common		Paid-in		Deferred			Accumulated
	Shares		Stock		Capital		Compensation			Deficit			Total

BALANCE AT DECEMBER 31, 2021		110,555,459	$	110,556	$	114,696,597	$	—		$	(89,602,881	)	$	25,204,272

Common stock issued to institutional investor		1,325,000		1,325		10,707,968		—			—			10,709,293
Common stock issued for commitment shares		19,672		19		181,008		—			—			181,027
Exercise of options		268,200		268		229,672		—			—			229,940
Cashless exercise of 4,375 options		2,596		3		35,015		—			—			35,018
Exercise of warrants		175,000		175		240,575		—			—			240,750
Options issued for services		—		—		4,288,172		—			—			4,288,172
Restricted stock awards issued for future services		28,500		29		274,995		(275,024	)		—			—
Deferred compensation		—		—		—		67,467			—			67,467
Net loss for the nine months ending September 30, 2022		—		—		—		—			(12,161,742	)		(12,161,742	)

BALANCE AT SEPTEMBER 30, 2022 (UNAUDITED)		112,374,427	$	112,375	$	130,654,002	$	(207,557	)	$	(101,764,623	)	$	28,794,197

	NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2021

					Additional
	Number of		Common		Paid-in		Deferred		Accumulated
	Shares		Stock		Capital		Compensation		Deficit			Total

BALANCE AT DECEMBER 31, 2020		97,775,789	$	97,776	$	76,649,170	$	—	$	(70,971,500	)	$	5,775,446

Common stock issued to institutional investor		8,062,500		8,063		13,965,186		—		—			13,973,249
Common stock issued for commitment shares		454,138		454		1,333,174		—		—			1,333,628
Exercise of options		1,196,250		1,196		1,004,679		—		—			1,005,875
Cashless exercise of 443,752 options		250,920		251		2,217,952		—		—			2,218,203
Exercise of warrants		627,000		627		394,973		—		—			395,600
Options issued for services		—		—		788,196		—		—			788,196
Warrants issued for services		—		—		11,001		—		—			11,001
Net loss for the nine months ending September 30, 2021		—		—		—		—		(10,522,651	)		(10,522,651	)

BALANCE AT SEPTEMBER 30, 2021 (UNAUDITED)		108,366,597	$	108,367	$	96,364,331	$	—	$	(81,494,151	)	$	14,978,547

See accompanying notes to these financial statements.

LIGHTWAVE LOGIC, INC.

STATEMENT OF STOCKHOLDERS’ EQUITY (CONTINUED)

(UNAUDITED)

	THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2022

					Additional
	Number of		Common		Paid-in		Deferred			Accumulated
	Shares		Stock		Capital		Compensation			Deficit			Total

BALANCE AT JUNE 30, 2022 (UNAUDITED)		111,887,124	$	111,888	$	125,040,332	$	(231,803	)	$	(96,961,240	)	$	27,959,177

Common stock issued to institutional investor		450,000		450		4,003,150		—			—			4,003,600
Common stock issued for commitment shares		7,353		7		73,163		—			—			73,170
Exercise of options		29,950		30		47,735		—			—			47,765
Options issued for services		—		—		1,489,622		—			—			1,489,622
Deferred compensation		—		—		—		24,246			—			24,246
Net loss for the three months ending September 30, 2022		—		—		—		—			(4,803,383	)		(4,803,383	)

BALANCE AT SEPTEMBER 30, 2022 (UNAUDITED)		112,374,427	$	112,375	$	130,654,002	$	(207,557	)	$	(101,764,623	)	$	28,794,197

	THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2021

					Additional
	Number of		Common		Paid-in		Deferred		Accumulated
	Shares		Stock		Capital		Compensation		Deficit			Total

BALANCE AT JUNE 30, 2021 (UNAUDITED)		107,335,110	$	107,336	$	94,095,566	$	—	$	(77,246,029	)	$	16,956,873

Exercise of options		486,250		486		385,889		—		—			386,375
Cashless exercise of 203,125 options		118,237		118		1,354,247		—		—			1,354,365
Exercise of warrants		427,000		427		267,923		—		—			268,350
Options issued for services		—		—		259,947		—		—			259,947
Warrants issued for services		—		—		759		—		—			759
Net loss for the three months ending September 30, 2021		—		—		—		—		(4,248,122	)		(4,248,122	)

BALANCE AT SEPTEMBER 30, 2021 (UNAUDITED)		108,366,597	$	108,367	$	96,364,331	$	—	$	(81,494,151	)	$	14,978,547

See accompanying notes to these financial statements.

LIGHTWAVE LOGIC, INC.

STATEMENTS OF CASH FLOW

FOR THE NINE MONTHS ENDING SEPTEMBER 30, 2022 AND 2021

(UNAUDITED)


	For the Nine			For the Nine
	Months Ending			Months Ending
	September 30, 2022			September 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(12,161,742	)	$	(10,522,651	)
Adjustments to reconcile net loss to net cash used in operating activities
Warrants issued for services		—			11,001
Stock options issued for services		4,288,172			788,196
Amortization of deferred compensation		67,467			—
Cashless option exercise		118,224			3,530,191
Common stock issued for services and fees		181,027			1,333,628
Depreciation and amortization of patents		758,285			642,150
Paycheck Protection Program loan forgiveness		—			(410,700	)
(Increase) decrease in assets
Prepaid expenses and other current assets		(414,766	)		220,616
(Decrease) increase in liabilities
Accounts payable		367,048			18,259
Accrued bonuses and accrued expenses		(1,004,081	)		108,802
Accounts payable and accrued expenses- related parties		131,368			12,342
Deferred lease liability		(31,334	)		(31,333	)
Net cash used in operating activities		(7,700,332	)		(4,299,499	)

CASH FLOWS FROM INVESTING ACTIVITIES
Cost of intangibles		(47,705	)		(15,400	)
Purchase of property and equipment		(1,171,530	)		(846,576	)
Issuance of loan		(588,180	)		—
Net cash used in investing activities		(1,807,415	)		(861,976	)

CASH FLOWS FROM FINANCING ACTIVITIES
Exercise of options and warrants		470,690			1,401,475
Cashless option exercise tax payments		(83,206	)		(1,311,988	)
Issuance of common stock, institutional investor		10,709,293			13,973,249
Repayment of equipment purchase payable		—			(13,107	)
Net cash provided by financing activities		11,096,777			14,049,629

NET INCREASE IN CASH AND CASH EQUIVALENTS		1,589,030			8,888,154

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		23,432,612			3,306,590

CASH AND CASH EQUIVALENTS - END OF PERIOD	$	25,021,642		$	12,194,744

See accompanying notes to these financial statements.

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2022 AND 2021

NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Financial Statements

The accompanying unaudited financial statements have been prepared by Lightwave Logic, Inc. (the “Company”). These statements include all adjustments (consisting only of its normal recurring adjustments) which management believes necessary for a fair presentation of the statements and have been prepared on a consistent basis using the accounting polices described in the Summary of Significant Accounting Policies included in the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission on March 1, 2022 (the “2021 Annual Report”). Certain financial information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although the Company firmly believes that the accompanying disclosures are adequate to make the information presented not misleading. The financial statements should be read in conjunction with the financial statements and notes thereto included in the 2021 Annual Report. The interim operating results for the three and nine months ending September 30, 2022 may not be indicative of operating results expected for the full year.

Nature of Business

Lightwave Logic, Inc. is a technology company focused on the development of next generation photonic devices and non-linear optical polymer materials systems for applications in high speed fiber-optic data communications and optical computing markets. Currently the Company is in various stages of photonic device and materials development and evaluation with potential customers and strategic partners. The Company expects to obtain a revenue stream from technology licensing agreements, technology transfer agreements and the production and direct sale of its own electro-optic device components.

The Company’s current development activities are subject to significant risks and uncertainties, including failing to secure additional funding to operationalize the Company’s technology now under development.

Stock-based Payments

The Company accounts for stock-based compensation under the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 718, "Compensation - Stock Compensation", which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date. The fair value of restricted stock awards is estimated by the market price of the Company’s common stock at the date of grant. Restricted stock awards are being amortized to expense over the vesting period. The Company estimates the fair value of option and warrant awards on the date of grant using the Black-Scholes model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods using the straight-line method. In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting (the “2018 Update). The amendments in the 2018 Update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. Prior to the 2018 Update, Topic 718 applied only to share- based transactions to employees. Consistent with the accounting requirement for employee share-based payment awards, nonemployee share-based payment awards within the scope of Topic 718 are measured at grant-date fair value of the equity instruments that an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied.

The Company has elected to account for forfeiture of stock-based awards as they occur.

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2022 AND 2021

NOTE 1- NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Loss Per Share

The Company follows FASB ASC 260, “Earnings per Share”, resulting in the presentation of basic and diluted earnings per share. Because the Company reported a net loss in 2022 and 2021, common stock equivalents, including stock options and warrants were anti-dilutive; therefore, the amounts reported for basic and dilutive loss per share were the same.

Comprehensive Income

The Company follows FASB ASC 220.10, “Reporting Comprehensive Income (Loss).” Comprehensive income (loss) is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net income (loss). Since the Company has no items of other comprehensive income (loss), comprehensive income (loss) is equal to net income (loss).

Recently Issued Accounting Pronouncements Not Yet Adopted

As of September 30, 2022, there are no recently issued accounting standards not yet adopted which would have a material effect on the Company’s financial statements.

Recently Adopted Accounting Pronouncements

As of September 30, 2022 and for the period then ended, there are no recently adopted accounting standards that have a material effect on the Company’s financial statements.

Reclassifications

Certain reclassifications have been made to the 2021 financial statement in order to conform to the 2022 financial statement presentation.

NOTE 2 – MANAGEMENT’S PLANS

Our future expenditures and capital requirements will depend on numerous factors, including: the progress of our research and development efforts; the rate at which we can, directly or through arrangements with original equipment manufacturers, introduce and sell products incorporating our polymer materials technology; the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; market acceptance of our products and competing technological developments; and our ability to establish cooperative development, joint venture and licensing arrangements. We expect that we will incur approximately $1,380,000 of expenditures per month over the next 12 months. Our current cash position enables us to finance our operations through March 2024. On July 2, 2021, the Company filed a $100,000,000 universal shelf registration statement with the U.S. Securities and Exchange Commission which became effective on July 9, 2021. On October 4, 2021, the Company entered into a purchase agreement with the institutional investor to sell up to $33,000,000 of common stock over a 36-month period (described in Note 10). Pursuant to the purchase agreement, the Company received $970,225 in October and November 2022 and a remaining available amount of $4,943,057 is available to the Company per the agreement. Our cash requirements are expected to increase at a rate consistent with the Company’s path to revenue as we expand our activities and operations with the objective of commercializing our electro-optic polymer technology. We currently have no debt to service.

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2022 AND 2021

NOTE 3 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:


	September 30, 2022		December 31, 2021

Insurance	$	310,392	$	123,877
Legal		80,720		—
Equipment deposit		66,140		—
Licence		60,442		38,865
Investor expenses		20,250		—
Rent		36,525		36,525
Other		59,538		33,041
Prototype Devices		13,067		—

Prepaid expenses and other current assets	$	647,074	$	232,308

NOTE 4 – LOAN RECEIVABLE

On September 7, 2022, the Company entered into a convertible loan agreement (the “Loan”) with an entity and issued a loan on September 12, 2022 in the amount of EUR 600,000 bearing interest at 7% per annum with a maturity date of March 31, 2023. The Company recorded $2,164 of interest income for the three months ended September 30, 2022. The exchange rates used for the conversion of the EUR denominated loan are the September 30, 2022 reporting period end date exchange rate for the loan principal resulting in a balance of $588,180 and interest receivable resulting in a balance of $2,143 and the average exchange rate for the period ending September 30, 2022 for interest income.

NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

Schedule of property and equipment
	September 30, 2022		December 31, 2021

Office equipment	$	119,404	$	95,516
Lab equipment		6,099,120		4,952,933
Furniture		33,128		33,128
Leasehold Improvements		184,843		254,350
		6,436,495		5,335,927
Less: Accumulated depreciation		3,785,313		3,156,852

	$	2,651,182	$	2,179,075

Depreciation expense for the nine months ending September 30, 2022 and 2021 was $699,423 and $576,948. Depreciation expense for the three months ending September 30, 2022 and 2021 was $246,507 and $203,421. During the three and nine months ending September 30, 2022, the Company retired $70,963 of leasehold improvements. During the three and nine months ending September 30, 2021, the Company did not retire property and equipment.

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2022 AND 2021

NOTE 6 – INTANGIBLE ASSETS

This represents legal fees and patent fees associated with the prosecution of patent applications. The Company has recorded amortization expense on patents granted, which are amortized over the remaining legal life. Maintenance patent fees are paid to a government patent authority to maintain a granted patent in force. Some countries require the payment of maintenance fees for pending patent applications. Maintenance fees paid after a patent is granted are expensed, as these are considered ongoing costs to “maintain a patent”. Maintenance fees paid prior to a patent grant date are capitalized to patent costs, as these are considered “patent application costs”. No amortization expense has been recorded on the remaining patent applications since patents have yet to be granted.

Patents consist of the following:

Schedule of Patents
	September 30, 2022		December 31, 2021

Patents	$	1,393,354	$	1,345,649
Less: Accumulated amortization		556,378		497,516

Intangible assets - net	$	836,976	$	848,133

Amortization expense for the nine months ending September 30, 2022 and 2021 was $58,862 and $65,202. Amortization expense for the three months ending September 30, 2022 and 2021 was $15,229 and $21,314. There were no patent costs written off for the three and nine months ending September 30, 2022 and 2021.

NOTE 7 – COMMITMENTS

On October 30, 2017, the Company entered into a lease agreement to lease approximately 13,420 square feet of office, laboratory and research and development space located in Colorado for the Company’s principal executive offices and research and development facility. The term of the lease is sixty- one (61) months, beginning on November 1, 2017 and ending on November 30, 2022. During January 2022, the term was extended for an additional twenty-four (24) months.

Base rent for the first year of the lease term is approximately $168,824, with an increase in annual base rent of approximately 3% in each subsequent year of the lease term. As specified in the lease, the Company paid the landlord (i) all base rent for the period November 1, 2017 and ending on October 31, 2019, in the sum of $347,045; and (ii) the estimated amount of tenant’s proportionate share of operating expenses for the same period in the sum of $186,293. Commencing on November 1, 2019, monthly installments of base rent and one-twelfth of landlord’s estimate of tenant’s proportionate share of annual operating expenses shall be due on the first day of each calendar month. The lease also provides that (i) on November 1, 2019 landlord shall pay the Company for the cost of the cosmetic improvements in the amount of $3.00 per rentable square foot of the premises, and (ii) on or prior to November 1, 2019, the Company shall deposit with Landlord the sum of $36,524 as a security deposit which shall be held by landlord to secure the Company’s obligations under the lease. On October 30, 2017, the Company entered into an agreement with the tenant leasing the premise from the landlord (“Original Lessee”) whereby the Original Lessee agreed to pay the Company the sum of $260,000 in consideration of the Company entering into the lease and landlord agreeing to the early termination of the Original Lessee’s lease agreement with landlord. The consideration of $260,000 was received on November 1, 2017.

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2022 AND 2021

NOTE 7 – COMMITMENTS (CONTINUED)

Due to the adoption of the new lease standard, the Company has capitalized the present value of the minimum lease payments commencing November 1, 2019, including the additional option period using an estimated incremental borrowing rate of 6.5%. The minimum lease payments do not include common area annual expenses which are considered to be nonlease components.

As of January 1, 2019 the operating lease right-of-use asset and operating lease liability amounted to $885,094 with no cumulative-effect adjustment to the opening balance of retained earnings/accumulated deficit. The Company has elected not to recognize right-of-use assets and lease liabilities arising from short-term leases.

There are no other material operating leases.

The Company is obligated under the operating lease for office and laboratory space. The aggregate minimum future lease payments under the operating leases, including the extended term are as follows:


YEARS ENDING
DECEMBER 31,	AMOUNT

2022	$	52,662
2023		213,781
2024		182,624
Total operating lease obligation		449,067
Less discounted interest		(45,175	)

TOTAL	$	403,892

Rent expense amounting to $103,796 and $34,599 is included in research and development and general and administrative expenses for the nine months ended September 30, 2022. Rent expense amounting to $100,399 and $33,466 is included in research and development and general and administrative expenses for the nine months ended September 30, 2021. Rent expense amounting to $34,599 and $11,533 is included in research and development and general and administrative expenses for the three months ended September 30, 2022. Rent expense amounting to $33,466 and $11,155 is included in research and development and general and administrative expenses for the three months ended September 30, 2021.

NOTE 8 – PAYCHECK PROTECTION PROGRAM ADVANCE

On April 24, 2020, the Company received $410,700 in loan funding from the Paycheck Protection Program, established pursuant to the Coronavirus Aid, Relief, and Economic Security Act enacted on March 27, 2020 and administered by the U.S. Small Business Administration. The unsecured loan is evidenced by a promissory note of the Company dated April 23, 2020 in the principal amount of $410,700, to Community Banks of Colorado, a division of NBH Bank, the lender. The loan proceeds have been used to cover payroll costs, rent and utility costs. The loan was eligible for forgiveness as part of the CARES Act if certain requirements were met. The loan was forgiven by the Small Business Administration in its entirety on January 22, 2021.

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2022 AND 2021

NOTE 9 – INCOME TAXES

There is no income tax benefit for the losses for the nine months ended September 30, 2022 and 2021 since management has determined that the realization of the net deferred tax asset is not assured and has created a valuation allowance for the entire amount of such benefits.

The Company’s policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. As of January 1, 2022, the Company had no unrecognized tax benefits, or any tax related interest or penalties. There were no changes in the Company’s unrecognized tax benefits during the period ended September 30, 2022. The Company did not recognize any interest or penalties during 2021 related to unrecognized tax benefits. With few exceptions, the U.S. and state income tax returns filed for the tax years ending on December 31, 2018 and thereafter are subject to examination by the relevant taxing authorities.

NOTE 10 – STOCKHOLDERS’ EQUITY

Preferred Stock

Pursuant to the Company’s Articles of Incorporation, the Company’s board of directors is empowered, without stockholder approval, to issue series of preferred stock with any designations, rights and preferences as they may from time to time determine. The rights and preferences of this preferred stock may be superior to the rights and preferences of the Company’s common stock; consequently, preferred stock, if issued could have dividend, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the common stock. Additionally, preferred stock, if issued, could be utilized, under special circumstances, as a method of discouraging, delaying or preventing a change in control of the Company’s business or a takeover from a third party.

Common Stock, Options and Warrants

In January 2019, the Company signed a purchase agreement with the institutional investor to sell up to $25,000,000 of common stock. The Company registered 9,500,000 shares pursuant to a registration statement filed on January 30, 2019 which became effective February 13, 2019. The Company issued 350,000 shares of common stock to the institutional investor as an initial commitment fee valued at $258,125, fair value, and 812,500 shares of common stock are reserved for additional commitment fees to the institutional investor in accordance with the terms of the purchase agreement. The Company registered an additional 6,000,000 shares pursuant to a registration statement filed on January 24, 2020 which became effective February 4, 2020. The Company registered an additional 8,000,000 shares pursuant to a registration statement filed on November 20, 2020 which became effective November 20, 2020. During the period January 2019 through September 30, 2022 the institutional investor purchased 22,337,500 shares of common stock for proceeds of $23,773,924 and the Company issued 772,666 shares of common stock as additional commitment fee, valued at $1,575,509, fair value, leaving 39,834 in reserve for additional commitment fees. During the three and nine month periods ending September 30, 2022, the institutional investor did not purchase any shares of common stock. All the registered shares under the purchase agreement have been issued as of September 30, 2022.

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2022 AND 2021

NOTE 10 – STOCKHOLDERS’ EQUITY (CONTINUED)

Common Stock, Options and Warrants (Continued)

On July 2, 2021, the Company filed a $100,000,000 universal shelf registration statement with the U.S. Securities and Exchange Commission which became effective on July 9, 2021. On October 4, 2021, the Company entered into a purchase agreement with the institutional investor to sell up to $33,000,000 of common stock over a 36-month period. Concurrently with entering into the purchase agreement, the Company also entered into a registration rights agreement which provides the institutional investor with certain registration rights related to the shares issued under the purchase agreement. Pursuant to the purchase agreement, the Company issued 30,312 shares of common stock to the institutional investor as an initial commitment fee valued at $279,174, fair value, and 60,623 shares of common stock are reserved for additional commitment fees to the institutional investor in accordance with the terms of the purchase agreement. During the period October 4, 2021 through September 30, 2022, the institutional investor purchased 2,552,511 shares of common stock for proceeds of $27,086,717 and the Company issued 49,758 shares of common stock as additional commitment fee, valued at $627,690, fair value, leaving 10,865 in reserve for additional commitment fees. During the nine month period ending September 30, 2022, pursuant to the purchase agreement, the institutional investor purchased 1,325,000 shares of common stock for proceeds of $10,709,293 and the Company issued 19,672 shares of common stock as additional commitment fee, valued at $181,027, fair value. During the three month period ending September 30, 2022, pursuant to the purchase agreement, the institutional investor purchased 450,000 shares of common stock for proceeds of $4,003,600 and the Company issued 7,353 shares of common stock as additional commitment fee, valued at $73,170, fair value. During October and November 2022, pursuant to the purchase agreement, the institutional investor purchased 150,000 shares of common stock for proceeds of $970,225 and the Company issued 1,783 shares of common stock as additional commitment fee, valued at $12,651, fair value, leaving 9,082 in reserve for additional commitment fees.

Restricted Stock Awards

On January 18, 2022, the Compensation Committee of the Board of Directors approved grants totaling 28,500 Restricted Stock Awards to the Company’s five outside directors. Each RSA had a grant date fair value of $9.65 which shall be amortized on a straight-line basis over the vesting period into director’s compensation expenses within the Consolidated Statement of Comprehensive Loss. Such RSAs were granted under the 2016 Equity Incentive Plan (“2016 Plan”) and vest in total 9,504 shares on December 31, 2022, 9,498 shares on December 31, 2023 and 9,498 shares on December 31, 2024. Upon the occurrence of a Change in Control, 100% of the unvested Restricted Stock shall vest as of the date of the Change in Control. Upon vesting, the restrictions on the shares lapse.

NOTE 11 – STOCK BASED COMPENSATION

During 2007, the Board of Directors of the Company adopted the 2007 Employee Stock Plan (“2007 Plan”) that was approved by the shareholders. Under the 2007 Plan, the Company is authorized to grant options to purchase up to 10,000,000 shares of common stock to directors, officers, employees and consultants who provide services to the Company. The 2007 Plan is intended to permit stock options granted to employees under the 2007 Plan to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended (“Incentive Stock Options”). All options granted under the 2007 Plan, which are not intended to qualify as Incentive Stock Options are deemed to be non-qualified options (“Non-Statutory Stock Options”). Effective June 24, 2016, the 2007 Plan was terminated. As of September 30, 2022, options to purchase 2,895,000 shares of common stock have been issued and are outstanding.

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2022 AND 2021

NOTE 11 – STOCK BASED COMPENSATION (CONTINUED)

During 2016, the Board of Directors of the Company adopted the 2016 Plan that was approved by the shareholders at the 2016 annual meeting of shareholders on May 20, 2016. Under the 2016 Plan, the Company is authorized to grant awards of incentive and non-qualified stock options and restricted stock to purchase up to 3,000,000 shares of common stock to employees, directors and consultants. Effective May 16, 2019, the number of shares of the Company’s common stock available for issuance under the 2016 Plan was increased from 3,000,000 to 8,000,000 shares. As of September 30, 2022, options to purchase 4,347,298 shares of common stock have been issued and are outstanding and 28,500 restricted shares of common stock have been granted. As of September 30, 2022, 2,390,125 shares of common stock remain available for grants under the 2016 Plan.

Both plans are administered by the Company’s Board of Directors or its compensation committee which determines the persons to whom awards will be granted, the number of awards to be granted, and the specific terms of each grant. Subject to the provisions regarding Ten Percent Shareholders, (as defined in the 2016 Plan), the exercise price per share of each option cannot be less than 100% of the fair market value of a share of common stock on the date of grant. Options granted under the 2016 Plan are generally exercisable for a period of 10 years from the date of grant and may vest on the grant date, another specified date or over a period of time.

The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of an award, with the following assumptions for 2022: no dividend yield in all years, expected volatility, based on the Company’s historical volatility, 74.7% to 76.3%, risk-free interest rate between 1.87% to 3.84% and expected option life of 10 years. The expected life is based on the estimated average of the life of options using the “simplified” method, as prescribed in FASB ASC 718, due to insufficient historical exercise activity during recent years.

As of September 30, 2022, there was $2,685,819 of unrecognized compensation expense related to non-vested market-based share awards that is expected to be recognized through July 2024.

Share-based compensation was recognized as follows:


	For the Nine		For the Nine
	Months Ending		Months Ending
	September 30, 2022		September 30, 2021

2007 Employee Stock Option Plan	$	—	$	—
2016 Equity Incentive Plan		4,288,172		788,196
2016 Equity Incentive Plan restricted stock awards		67,467		—
Warrants		—		11,001

Total share-based compensation	$	4,355,639	$	799,197

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2022 AND 2021

NOTE 11 – STOCK BASED COMPENSATION (CONTINUED)

The following tables summarize all stock option and warrant activity of the Company during the nine months ended September 30, 2022:


	Non-Qualified Stock Options and Warrants Outstanding and Exercisable

	Number of			Exercise		Weighted Average
	Shares			Price		Exercise Price

Outstanding, December 31, 2021		7,886,248			$0.51 - $16.81	$	1.02

Granted		793,500			$5.81 - $10.86	$	9.41
Expired		(26,875	)		$1.50 - $1.69	$	1.68
Exercised		(447,575	)		$0.64 - $5.81	$	1.06

Outstanding, September 30, 2022		8,205,298			$0.51 - $16.81	$	1.83

Exercisable, September 30, 2022		7,693,505			$0.51 - $16.81	$	1.47

The aggregate intrinsic value of options and warrants outstanding and exercisable as of September 30, 2022 was $46,370,301. The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and warrants and the closing stock price of $7.34 for the Company’s common stock on September 30, 2022. During the nine month period ending September 30, 2022, 268,200 options were exercised for proceeds of $229,940 and 4,375 options were exercised via cashless method. During the nine month period ending September 30, 2022, 175,000 warrants were exercised for proceeds of $240,750.


Non-Qualified Stock Options and Warrants Outstanding
	Number Outstanding	Weighted Average	Weighted Average
Range of	Currently Exercisable	Remaining	Exercise Price of Options and
Exercise Prices	at September 30, 2022	Contractual Life	Warrants Currently Exercisable

$0.51 - $16.81	7,693,505	4.89 Years	$1.47

The fair value of restricted stock awards is estimated by the market price of the Company’s common stock at the date of grant. Restricted stock activity during the nine and three month period ending September 30, 2022 and 2021 are as follows:


	Restricted Stock Awards
	Nine month period ended
	September 30, 2022				September 30, 2021

			Weighted Average				Weighted Average
	Number of		Grant Date Fair		Number of		Grant Date Fair
	Shares		Value per Share		Shares		Value per Share

Non-vested, beginning of period		—	$	—		—	$	—

Granted		28,500		9.65		—		—
Vested		—		—		—		—
Cancelled and forfeited		—		—		—		—

Non-vested, end of period		28,500	$	9.65		—	$	—

Restricted stock awards are being amortized to expense over the vesting period. As of September 30, 2022 and 2021, the unamortized value of the RSAs was $207,557 and $0, respectively.

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2022 AND 2021

NOTE 12 – RELATED PARTY

At September 30, 2022 the Company had fees and travel expense accruals to directors in the amount of $52,291, a legal accrual to a related party of $46,500, travel and office expense accruals of officers in the amount of $37,096, fees and travel expense accruals of advisory committee members in the amount of $14,558 and accounting service fee accrual and expense reimbursement to related parties of $13,112. At December 31, 2021 the Company had office expense accruals of officers in the amount of $24,000, a legal accrual to related party of $6,130 and accounting service fee accrual and expense reimbursements to related parties of $2,059.

NOTE 13 – RETIREMENT PLAN

The Company established a 401(k) retirement plan covering all eligible employees beginning November 15, 2013. For the nine months ending September 30, 2022 and 2021, a contribution of $40,585 and $40,894 was charged to expense for all eligible non-executive participants. For the three months ending September 30, 2022 and 2021, a contribution of $13,498 and $12,463 was charged to expense for all eligible non-executive participants.

Item 2

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management. This information should also be read in conjunction with our audited historical financial statements which are included in our 2021 Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission on March 1, 2022 (“2021 Form 10-K”).

Overview

Lightwave Logic, Inc. is a development stage company moving toward commercialization of next generation electro-optic photonic devices made on its P²IC™ technology platform which we have detailed as: 1) Polymer Stack™, 2) Polymer Plus™, and Polymer Slot™. Our unique polymer technology platform uses in-house proprietary high-activity and high-stability organic polymers. Electro-optical devices called modulators convert data from electric signals into optical signals for multiple applications.

Our differentiation at the modulator device level is in higher speed, lower power consumption, simplicity of manufacturing, small footprint (size), and reliability. We have demonstrated higher speed and lower power consumption in packaged devices, and during 2022, we continue to make advances in techniques to translate material properties to efficient, reliable modulator devices. We are currently focused on testing and demonstrating the simplicity of manufacturability and reliability of our devices, including in conjunction with the silicon photonics manufacturing ecosystem. In 2022 we discussed the addition of a number of silicon-based foundry partners to help scale in volume our polymer modulator devices. Silicon-based foundries are large semiconductor fabrication plants developed for the electronics IC business, that are now engaging with silicon photonics to increase their wafer throughput. Partnering with silicon-based foundries not only demonstrates that our polymer technology can be transferred into standard production lines using standard equipment, and also allows us to efficiently utilize our capital.

Our extremely strong and broad patent portfolio allows us to optimize our business model in three areas: 1) Traditional focus on product development, 2) Patent licensing, 3) Technology transfer to foundries.

We are initially targeting applications in data communications and telecommunications markets and are exploring other applications that include automotive/LIDAR, sensing, displays etc., for our polymer technology platform. Our goal is to have our unique polymer technology platform become ubiquitous.

Materials Development

Our Company designs and synthesizes organic chromophores for use in its own proprietary electro-optic polymer systems and photonic device designs. A polymer system is not solely a material, but also encompasses various technical enhancements necessary for its implementation. These include host polymers, poling methodologies, and molecular spacer systems that are customized to achieve specific optical properties. Our organic electro-optic polymer systems compounds are mixed into solution form that allows for thin film application. Our proprietary electro-optic polymers are designed at the molecular level for potentially superior performance, stability, and cost-efficiency. We believe our proprietary and unique polymers have the potential to replace more expensive, higher power consuming, slower-performance materials such as semiconductor modulator devices that are used in fiber-optic communication networks today.

Our patented and patent pending molecular architectures are based on a well-understood chemical and quantum mechanical occurrence known as aromaticity. Aromaticity provides a high degree of molecular stability that enables our core molecular structures to maintain stability under a broad range of operating conditions.

We expect our patented and patent-pending optical materials along with trade secrets and licensed materials, to be the core of and the enabling technology for future generations of optical devices, modules, sub-systems, and systems that we will develop or potentially out-license to electro-optic device manufacturers, contract manufacturers, original equipment manufacturers, etc. Our Company contemplates future applications that may address the needs of semiconductor companies, optical network companies, Web 2.0/3.0 media companies, high performance computing companies, telecommunications companies, aerospace companies, automotive companies, as well as for example, government agencies.

Device Design and Development

Electro-optic Modulators

Our Company designs its own proprietary electro-optical modulation devices. Electro-optical modulators convert data from electric signals into optical signals that can then be transmitted over high-speed fiber-optic cables. Our modulators are electro-optic, meaning they work because the optical properties of the polymers are affected by electric fields applied by means of electrodes. Modulators are key components that are used in fiber optic telecommunications, data communications, and data centers networks etc., to convey the high data flows that have been driven by applications such as pictures, video streaming, movies etc., that are being transmitted through the Internet. Electro-optical modulators are expected to continue to be an essential element as the appetite and hunger for data increases every year as well as the drive towards lower power consumption, and smaller footprint (size).

Polymer Photonic Integrated Circuits

Our Company also designs its own proprietary polymer photonic integrated circuits (otherwise termed a polymer PIC). A polymer PIC is a photonic device that integrates several photonic functions on a single chip. We believe that our technology can enable the ultra-miniaturization needed to increase the number of photonic functions residing on a semiconductor chip to create a progression like what was seen in the computer integrated circuits, commonly referred to as Moore’s Law. One type of integration is to combine several instances of the same photonic functions such as a plurality of modulators to create a multi-channel polymer PIC. The number of channels can be varied depending on application. For example, the number of photonic components could increase by a factor of 8 or 16. Another type of integration is to combine different types of devices including from different technology bases such as the combination of a semiconductor laser with a polymer modulator. Our P²IC™ platform encompasses both these types of architecture.

Current semiconductor photonic technology today is struggling to reach faster device speeds. Our modulator devices, enabled by our electro-optic polymer material systems, work at extremely high frequencies (wide bandwidths) and possess inherent advantages over current crystalline electro-optic material contained in most modulator devices such as bulk lithium niobate (LiNbO3), indium phosphide (InP), silicon (Si), and gallium arsenide GaAs). Our advanced electro-optic polymer platform is creating a new class of modulators such as the Polymer Stack ™ , Polymer Plus™, Polymer Slot™, and associated PIC platforms that can address higher data rates in a lower cost, lower power consuming manner, smaller footprint (size) with much simpler data encoding techniques.

Our electro-optic polymers can be integrated with other materials platforms because they can be applied as a thin film coating in a fabrication clean room such as may be found in semiconductor foundries using standard clean room tooling. This approach we call Polymer Plus™. Our polymers are unique in that they are stable enough to seamlessly integrate into existing CMOS, Indium Phosphide (InP), Gallium Arsenide (GaAs), and other semiconductor manufacturing lines. Of particular relevance are the integrated silicon photonics platforms that combine optical and electronic functions. These include a miniaturized modulator for ultra-small footprint applications in which we term the Polymer Slot™. This design is based on a slot modulator fabricated into semiconductor wafers that include both silicon and indium phosphide.

Our Company has a fabrication facility in Colorado to apply standard fabrication processes to our electro-optic polymers which create modulator devices. While our internal fabrication facility is capable of manufacturing modulator devices, we have partnered with commercial silicon-based fabrication companies that are called foundries who can scale our technology with volume quickly and efficiently. The process recipe for fabrication plants or foundries is called a ‘process development kit’ or PDK. We are currently working with commercial foundries to implement our electro-optic polymers into accepted PDKs by the foundries. Our work with the foundries is being focused with the Polymer Plus™ and the Polymer Slot™ polymer modulators.

Business Strategy

Our business strategy anticipates that our revenue stream will be derived from one or some combination of the following: (i) technology licensing for specific product application; (ii) joint venture relationships with significant industry leaders; and (iii) the production and direct sale of our own electro-optic device components. Our objective is to be a leading provider of proprietary technology and know-how in the electro-optic device market. In order to meet this objective, we intend to continue to:

	·	Further the development of proprietary organic electro-optic polymer material systems
	·	Develop photonic devices based on our P²IC^TMtechnology
	·	Develop proprietary intellectual property
	·	Grow our commercial device development capabilities
	·	Partner with silicon-based foundries who can scale volume quickly
	·	Grow our product reliability and quality assurance capabilities
	·	Grow our optoelectronic packaging and testing capabilities
	·	Grow our commercial material manufacturing capabilities
	·	Maintain/develop strategic relationships with major telecommunications and data communications companies to further the awareness and commercialization of our technology platform
	·	Add high-level personnel with industrial and manufacturing experience in key areas of our materials and device development programs.

Create Organic Polymer-Enabled Electro-Optic Modulators

We intend to utilize our proprietary optical polymer technology to create an initial portfolio of commercial electro-optic polymer product devices with applications for various markets, including telecommunications, data communications and data centers. These product devices will be part of our proprietary photonics integrated circuit (PIC) technology platform.

We expect our initial modulator products will operate at data rates at least 50 Gbaud (capable of 50 Gbps with standard data encoding of NRZ and 100 Gbps with more complex PAM-4 encoding). Our devices are highly linear, enabling the performance required to take advantage of the more advance complex encoding schemes. We are currently developing our polymer technology to operate at the next industry node of 100Gbaud using a single channel.

Our Proprietary Products in Development

As part of a two-pronged marketing strategy, our Company is developing several optical devices, which are in various stages of development and that utilize our polymer optical materials. They include:

Ridge Waveguide Modulator, Polymer Stack ™

Our ridge electro-optic waveguide modulator was designed and fabricated in our in-house laboratory. The fabrication of our first in-house device is significant to our entire device program and is an important starting point for modulators that are being developed for target markets. We have multiple generations of new materials that we will soon be optimizing for this specific design. In September 2017 we announced that our initial alpha prototype ridge waveguide modulator, enabled by our P²IC™ polymer system, demonstrated bandwidth performance levels that will enable 50 Gbaud modulation in fiber-optic communications. This device demonstrated true amplitude (intensity) modulation in a Mach-Zehnder modulator structure incorporating our polymer waveguides. This important achievement will allow users to utilize arrays of 4 x 50 Gbaud (4x 100 Gbps) polymer modulators using PAM-4 encoding to access 400 Gbps data rate systems. These ridge waveguide modulators are currently being packaged with our partner into prototype packages.

These prototype packages will enable potential customers to evaluate the performance at 50 Gbaud. Once a potential customer generates technical feedback on our prototype, we expect to be asked to optimize the performance to their specifications. Assuming this is successful, we expect to enter a qualification phase where our prototypes will be evaluated more fully.

In parallel, we are developing modulators for scalability to higher data rates above 50 Gbaud. In September 2018, we showed in conference presentations the potential of our polymer modulator platform to operate at over 100 GHz bandwidth. This preliminary result corresponds to 100 Gbaud data rates using a simple NRZ data encoding scheme or 200 Gbps with PAM-4 encoding. With 4 channel arrays in our P²IC™ platform, the Company thus has the potential to address both 400 Gbps and 800 Gbps markets. While customers may start the engagement at 50 Gbaud, we believe potential customers recognize that scalability to higher speeds is an important differentiator of the polymer technology.

We believe the ridge waveguide modulator Polymer Stack™ represents our first commercially viable device and targets the fiber optics communications market. We have completed internal market analysis and are initially targeting interconnect reach distances of greater than 10km. In these markets, the system network companies are looking to implement modulator-based transceivers that can handle aggregated data rates 100 Gbps and above. The market opportunity for greater than 10km is worth over $1B over the next decade

Ridge Waveguide Modulator, Polymer Plus™

Using the ridge waveguide design, we are developing a more compact modulator to be implemented directly with existing integrated photonics platforms such as silicon photonics and Indium Phosphide. As our electro-optic polymers are applied in liquid form, they can be deposited as a thin film coating in a fabrication clean room such as may be found in semiconductor foundries. This approach we call Polymer Plus™. The advantage of this approach is that it allows existing semiconductor integrated photonics platforms such as silicon photonics and indium phosphide to be upgraded with higher speed modulation functionality with the use of polymers in a straight-forward and simple approach. Further, our polymers are unique in that they are stable enough to seamlessly integrate into existing CMOS, Indium Phosphide (InP), Gallium Arsenide (GaAs), and other semiconductor manufacturing lines.

A large majority of commercial silicon photonics platforms utilize large silicon photonics foundries such as those that manufacture IC products for a number of applications such as communications, computing, consumer, etc. In order to seamlessly integrate our polymer materials to upgrade for example, silicon photonics designs, partnering with a silicon foundry is necessary.

Advanced Modulator Structures

As part of supporting further improvement and scalability of our platform, we continue to explore more advanced device structures. Our functional polymer photonics slot waveguide modulator utilizes an existing modulator structure with one of our proprietary electro-optic polymer material systems as the enabling material layer and is functional as an operating prototype device.

Preliminary testing and initial data on our polymer photonics slot waveguide modulators demonstrated several promising characteristics. The tested polymer photonic chip had a 1-millimeter square footprint, enabling the possibility of sophisticated integrated optical circuits on a single silicon substrate. In addition, the waveguide structure was approximately 1/20 the length of a typical inorganic-based silicon photonics modulator waveguide.

With the combination of our proprietary electro-optic polymer material and the extremely high optical field concentration in the slot waveguide modulator which is called Polymer Slot™, the test modulators demonstrated less than 2.2 volts to operate. Initial speeds exceeded 30-35 GHz in the telecom, 1550 nanometer frequency band. This is equivalent to 4 x 10Gbps, inorganic, lithium niobate modulators that would require approximately 12-16 volts to move the same amount of information.

We are continuing our collaborative development of our polymer photonic slot waveguide modulators (Polymer Slot™) with a partner that has advanced device design capabilities. We are now designing Polymer Slot™ modulators to operate at data rates greater than 50 Gbaud.

Our Long-Term Device Development Goal - Multichannel Polymer Photonic Integrated Circuit (P²IC™)

Our P²IC™ platform is positioned to address markets with aggregated data rates of 100 Gbaud, 400 Gbaud, 800 Gbaud and beyond. Our P²IC™ platform will contain a number of photonic devices that may include, over and above polymer-based modulators, photonic devices such as lasers, multiplexers, demultiplexers, detectors, fiber couplers.

While our polymer-based ridge waveguide and slot modulators are currently under development to be commercially viable products, our long-term device development goal is to produce a platform for the 400 Gbps, 800 Gbps, and beyond fiber optic transceiver market. This has been stated in our photonics product roadmap that is publicly available on our website. The roadmap shows a progression in speed from 50 Gbaud based ridge waveguide modulators to 100 Gbaud based ridge waveguide modulators. The roadmap shows a progression in integration in which the modulators are arrayed to create a flexible, multichannel P²IC™ platform that spans 100 Gbps, 400 Gbps, 800 Gbps, and a scaling philosophy that will grow to 1.6 Tbps aggregated data-rate markets.

We showed bandwidths of polymer-based modulator devices at a major international conference (ECOC – European Conference on Optical Communications 2018) with bandwidths that exceeded 100GHz. We noted that to achieve 100Gbaud, the polymer-based modulator only needs to achieve 80GHz bandwidth. During ECOC 2019, we showed environmental stability. We continue to develop our polymer materials and device designs to optimize additional metrics. We are now optimizing the device parameters for very low voltage operation.

Our Target Markets

Cloud computing and data centers

Big data is a general term used to describe the voluminous amount of unstructured and semi-structured data a Company creates – data that would take too much time and cost too much money to load into a relational database for analysis. Companies are looking to cloud computing in their data centers to access all the data. Inherent speed and bandwidth limits of traditional solutions and the potential of organic polymer devices offer an opportunity to increase the bandwidth, reduce costs, improve speed of access, and to reduce power consumption both at the device as well as the system level.

Datacenters have grown to enormous sizes with hundreds of thousands and even millions of servers in a single datacenter. The number of so-called “hyperscale” datacenters are expected to continue to increase in number. Due to their size, a single “datacenter” may consist of multiple large warehouse-size buildings on a campus or even several locations distributed around a metropolitan area. Data centers are confronted with the problem of moving vast amounts of data not only around a single data center building, but also between buildings in distributed data center architecture. Links within a single datacenter building may be shorter than 500 meters, though some will require optics capable of 2 km. Between datacenter buildings, there is an increasing need for high performance interconnects over 10km in reach.

Our modulators are suitable for single-mode fiber optic links. We believe that our single mode modulator solutions will be competitive at 500m to 10km link distances, but it will be ideally suited at greater than 10km link distances.

Telecommunications/Data Communications

The telecommunications industry has evolved from transporting traditional analogue voice data over copper wire into the movement of digital voice and data. Telecommunication companies are faced with the enormous increasing challenges to keep up with the resulting tremendous explosion in demand for bandwidth. The metropolitan network is especially under stress now and into the near future. Telecommunications companies provide services to some data center customers for the inter-data center connections discussed above. 5G mobile upgrade, autonomous driving and IoT are expected to increase the need for data stored and processed close to the end user in edge data centers. This application similarly requires optics capable of very high speeds and greater than 10 km reach.

Industry issues of scaling

The key issues facing the fiber-optic communications industry are the economic progress and scalability of any PIC based technological platform. Our polymer platform is unique in that it is truly scalable. Scalable means being able to scale up for high-speed data rates, while simultaneously being able to scale down in cost, and lower power consumption. This allows a competitive cost per data rate or cost per Gbps metric to be achieved.

Fiber optic datacenter and high-performance computing customers want to achieve the metric of $1/Gbps @ 400Gbps (this essentially means a single mode fiber optic link that has a total cost of $400 and operates with a data rate of 400Gbps ➔ which also means that each transceiver at each end of the fiber optic link must be able to be priced at $200), but as industry tries to match this target, it is already falling behind as can be seen in the Figure below which plots generic typical PIC based technology:

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In the above figures that forecast $/Gbps to 2025 (where the left-hand graph is a linear vertical scale, and the right-hand graph is a log scale), it can be seen that the orange curve plots the customer expectation, while the other color curves show $/Gbps improvement over time for various high-speed data rate transceivers using PIC based technologies. A gap is appearing between what customer expect and what the technologists can produce.

Polymers play an important role in PICs over the next decade as they can reduce or close the gap between customer expectations and technical performance through effective scaling increase of high performance with low cost. This is shown below how polymers have the potential to scale to the needs of the customers over the next 5years.

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Some of the things needed to achieve the scaling performance of polymers in integrated photonics platforms is within sight today:

Increased r33 (which leads to very low Vpi in modulator devices) and we are currently optimizing our polymers for this.

Increase temperature stability so that the polymers can operate at broader temperature ranges effective, where we have made significant progress over the past few years.

Low optical loss in waveguides and active/passive devices for improved optical budget metrics which is currently an ongoing development program at our Company.

Higher levels of hermeticity for lower cost packaging of optical sub-assemblies within a transceiver module, where our advanced designs are being implemented into polymer-based packages.

SEC Form 10-Q filed by Lightwave Logic Inc.