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 June 30, 2024

☐	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 August 9, 2024 was 120,716,365.

TABLE OF CONTENTS

			Page

Part I	Financial Information

	Item 1	Financial Statements	2

	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

	Item 3	Quantitative and Qualitative Disclosures About Market Risk	45

	Item 4	Controls and Procedures	45

Part II	Other Information

	Item 1	Legal Proceedings	46

	Item 1A	Risk Factors	46

	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	47

	Item 3	Defaults Upon Senior Securities	47

	Item 4	Mine Safety Disclosures	47

	Item 5	Other Information	47

	Item 6	Exhibits	47

		Signatures	44

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: inability to generate significant revenue or to manage growth; lack of available funding; lack of a market for or market acceptance of our products; competition from third parties; general economic and business conditions; intellectual property rights of third parties; changes in the price of our stock and dilution; regulatory constraints and potential legal liability; ability to maintain effective internal controls; security breaches, cybersecurity attacks and other significant disruptions in our information technology systems; changes in technology and methods of marketing; delays in completing various engineering and manufacturing programs; changes in customer order patterns and qualification of new customers; 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; other risks to which our Company is subject; 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 Part I Item 1.A “Risk Factors” contained in our Company’s Annual Report on Form 10-K for the year ended December 31, 2023, and Part II, Item 1.A “Risk Factors” 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

CONTENTS

		Page

BALANCE SHEETS		2

STATEMENTS OF COMPREHENSIVE LOSS		3

STATEMENTS OF STOCKHOLDERS’ EQUITY		4

STATEMENTS OF CASH FLOWS		6

NOTES TO FINANCIAL STATEMENTS		7-19

LIGHTWAVE LOGIC, INC.

BALANCE SHEETS


	June 30, 2024			December 31, 2023
		(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	29,195,815		$	31,432,087
Accounts Receivable		8,065			30,376
Prepaid expenses and other current assets		760,891			1,237,621
TOTAL CURRENT ASSETS		29,964,771			32,700,084

PROPERTY AND EQUIPMENT - NET		5,811,905			4,990,790

OTHER ASSETS
Intangible assets - net		1,278,700			1,254,501
Operating Lease - Right of Use - Building		2,743,457			2,838,210
TOTAL OTHER ASSETS		4,022,157			4,092,711

TOTAL ASSETS	$	39,798,833		$	41,783,585


LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	917,970		$	1,447,596
Accrued bonuses and accrued expenses		216,778			599,430
Accounts payable and accrued expenses - related parties		152,260			313,483
Deferred revenue		31,541			39,875
Deferred lease liability		17,408			38,297
Operating lease liability		155,946			144,120
TOTAL CURRENT LIABILITIES		1,491,903			2,582,801

LONG TERM LIABILITIES
Operating lease liability		2,685,037			2,766,970
TOTAL LONG TERM LIABILITIES		2,685,037			2,766,970

TOTAL LIABILITIES		4,176,940			5,349,771

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, 120,706,365 and 118,137,309 issued and outstanding at June 30, 2024 and December 31, 2023		120,707			118,137
Additional paid-in-capital		175,608,888			164,619,363
Deferred compensation		(536,714	)		(432,293	)
Accumulated deficit		(139,570,988	)		(127,871,393	)

TOTAL STOCKHOLDERS' EQUITY		35,621,893			36,433,814

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	39,798,833		$	41,783,585

See accompanying notes to these financial statements

LIGHTWAVE LOGIC, INC.

STATEMENTS OF COMPREHENSIVE LOSS

FOR THE SIX MONTHS ENDING JUNE, 2024 AND 2023

(UNAUDITED)


	For the Three			For the Three			For the Six			For the Six
	Months Ending			Months Ending			Months Ending			Months Ending
	June 30, 2024			June 30, 2023			June 30, 2024			June 30, 2023

NET SALES	$	19,355		$	—		$	49,772		$	—

COST AND EXPENSE
Cost of sales		—			—			5,175			—
Research and development		4,362,258			4,166,110			8,982,920			7,965,817
General and administrative		1,896,672			1,174,590			3,152,122			2,534,761
TOTAL COST AND EXPENSE		6,258,930			5,340,700			12,140,217			10,500,578

LOSS FROM OPERATIONS		(6,239,575	)		(5,340,700	)		(12,090,445	)		(10,500,578	)

OTHER INCOME (EXPENSE)
Interest income		251,730			103,685			505,066			156,973
Commitment fee		(28,982	)		(220,732	)		(105,959	)		(582,426	)
Loss on disposal of property and equipment		—			—			(3,166	)		—
Other expense		(2,857	)		—			(5,091	)		(7,734	)


NET LOSS	$	(6,019,684	)	$	(5,457,747	)	$	(11,699,595	)	$	(10,933,765	)

LOSS PER SHARE
Basic	$	(0.05	)	$	(0.05	)	$	(0.10	)	$	(0.10	)
Diluted	$	(0.05	)	$	(0.05	)	$	(0.10	)	$	(0.10	)

WEIGHTED AVERAGE NUMBER OF SHARES
Basic		120,179,570			114,857,638			119,552,430			114,089,465
Diluted		120,179,570			114,857,638			119,552,430			114,089,465

See accompanying notes to these financial statements

LIGHTWAVE LOGIC, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

SIX-MONTH PERIOD ENDED JUNE 30, 2024


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

BALANCE AT DECEMBER 31, 2023		118,137,309	$	118,137	$	164,619,363	$	(432,293	)	$	(127,871,393	)	$	36,433,814

Common stock issued to institutional investor		1,950,000		1,950		7,493,650		—			—			7,495,600
Common stock issued for commitment shares		25,431		26		105,934		—			—			105,960
Common stock sales at the market by investment banking company		127,150		127		499,756		—			—			499,883
Exercise of options		355,000		355		230,645		—			—			231,000
Exercise of warrants		19,000		19		14,231		—			—			14,250
Options issued for services		—		—		2,337,460		—			—			2,337,460
Restricted stock awards issued for future services		92,475		93		307,849		(307,942	)		—			—
Deferred compensation		—		—		—		203,521			—			203,521
Net loss for the six months ending June 30, 2024		—		—		—		—			(11,699,595	)		(11,699,595	)

BALANCE AT JUNE 30, 2024 (UNAUDITED)		120,706,365	$	120,707	$	175,608,888	$	(536,714	)	$	(139,570,988	)	$	35,621,893

SIX-MONTH PERIOD ENDED JUNE 30, 2023


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

BALANCE AT DECEMBER 31, 2022		112,882,793	$	112,883	$	134,406,825	$	(133,324	)	$	(106,833,361	)	$	27,553,023

Common stock issued to institutional investor		2,575,400		2,575		14,947,834		—			—			14,950,409
Common stock issued for commitment shares		95,630		96		582,330		—			—			582,426
Common stock sales at the market by investment banking company		75,000		75		643,454		—			—			643,529
Exercise of options		306,285		306		305,995		—			—			306,301
Exercise of warrants		150,000		150		150,350		—			—			150,500
Options issued for services		—		—		3,389,804		—			—			3,389,804
Restricted stock awards issued for future services		99,616		100		519,896		(519,996	)		—			—
Deferred compensation		—		—		—		133,854			—			133,854
Net loss for the six months ending June 30, 2023		—		—		—		—			(10,933,765	)		(10,933,765	)

BALANCE AT JUNE 30, 2023 (UNAUDITED)		116,184,724	$	116,185	$	154,946,488	$	(519,466	)	$	(117,767,126	)	$	36,776,081

See accompanying notes to these financial statements

LIGHTWAVE LOGIC, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

THREE-MONTH PERIOD ENDED JUNE 30, 2024


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

BALANCE AT MARCH 31, 2024 (UNAUDITED)		119,795,941		119,796		170,998,846		(368,094		(133,551,304	)		37,199,244

Common stock issued to institutional investor		700,000		700		2,342,550		—		—			2,343,250
Common stock issued for commitment shares		7,949		8		28,975		—		—			28,983
Common stock sales at the market by investment banking company		50,000		50		169,380		—		—			169,430
Exercise of options		60,000		60		50,340		—		—			50,400
Exercise of warrants		—		—		—		—		—			—
Options issued for services		—		—		1,710,948		—		—			1,710,948
Restricted stock awards issued for future services		92,475		93		307,849		(307,942		—			—
Deferred compensation		—		—		—		139,322		—			139,322
Net loss for the three months ending June 30, 2024		—		—		—		—		(6,019,684	)		(6,019,684	)

BALANCE AT JUNE 30, 2024 (UNAUDITED)		120,706,365	$	120,707	$	175,608,888	$	(536,714	$	(139,570,988	)	$	35,621,893

THREE-MONTH PERIOD ENDED JUNE 30, 2023



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

BALANCE AT MARCH 31, 2023 (UNAUDITED)		114,103,523	$	114,104	$	142,608,263	$	(579,822	)	$	(112,309,379	)	$	29,833,166

Common stock issued to institutional investor		1,554,945		1,555		9,449,477		—			—			9,451,032
Common stock issued for commitment shares		29,971		30		220,702		—			—			220,732
Common stock sales at the market by investment banking company		75,000		75		643,454		—			—			643,529
Exercise of options		296,285		296		299,005		—			—			299,301
Exercise of warrants		125,000		125		131,625		—			—			131,750
Options issued for services		—		—		1,593,962		—			—			1,593,962
Deferred compensation		—		—		—		60,356			—			60,356
Net loss for the three months ending June 30, 2023		—		—		—		—			(5,457,747	)		(5,457,747	)

BALANCE AT JUNE 30, 2023 (UNAUDITED)		116,184,724	$	116,185	$	154,946,488	$	(519,466	)	$	(117,767,126	)	$	36,776,081

See accompanying notes to these financial statements

LIGHTWAVE LOGIC, INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)


	For the Six			For the Six
	Months Ending			Months Ending
	June 30, 2024			June 30, 2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(11,699,595	)	$	(10,933,765	)
Adjustments to reconcile net loss to net cash used in operating activities
Stock options issued for services		2,337,460			3,389,804
Amortization of deferred compensation		203,521			133,854
Common stock issued for commitment shares		105,960			582,426
Depreciation and amortization of patents		804,737			531,046
Amortization of right of use asset		94,753			92,812
Loss on disposal of property and equipment		3,166			581
(Increase) decrease in assets
Accounts receivable		22,311			—
Prepaid expenses and other current assets		476,730			(162,748	)
(Decrease) increase in liabilities
Accounts payable		(529,626	)		(369,688	)
Accrued bonuses, accrued expenses and other liabilities		(382,652	)		(325,386	)
Accounts payable and accrued expenses-related parties		(161,223	)		115,879
Deferred revenue		(8,334	)		50,000
Deferred lease liability		(20,889	)		(20,889	)
Operating lease liability		(70,107	)		(87,934	)

Net cash used in operating activities		(8,823,788	)		(7,004,008	)

CASH FLOWS FROM INVESTING ACTIVITIES
Cost of intangibles		(67,445	)		(177,245	)
Purchase of property and equipment		(1,585,772	)		(978,560	)
Repayment of loan		—			642,120
Sale of property and equipment		—			590

Net cash used in investing activities		(1,653,217	)		(513,095	)

CASH FLOWS FROM FINANCING ACTIVITIES
Exercise of options and warrants		245,250			456,801
Issuance of common stock, institutional investor		7,495,600			14,950,409
Common stock sales at the market by investment banking company		499,883			643,529

Net cash provided by financing activities		8,240,733			16,050,739

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(2,236,272	)		8,533,636

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		31,432,087			24,102,151

CASH AND CASH EQUIVALENTS - END OF PERIOD	$	29,195,815		$	32,635,787

See accompanying notes to these financial statements

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2024 AND 2023

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, 2023, as filed with the Securities and Exchange Commission on February 29, 2024 (the “2023 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 2023 Annual Report. The interim operating results for the three and six months ending June 30, 2024 may not be indicative of operating results expected for the full year.

Nature of Business

Lightwave Logic, Inc. (the “Company”) is a technology company focused on the development 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 3) 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. The Company's first revenue stream is from a technology material supply and licensing agreement that incorporates the Company's patented electro-optic polymer materials for use in manufacturing photonic devices. 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 additional revenue from material supply and licensing agreements, technology transfer agreements and the production and direct sale of its own photonic devices.

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.

Lightwave Logic, Inc. was organized under the laws of the State of Nevada in 1997, and it commenced with its current business plan in 2004.

Revenue Recognition and Deferred Revenue

The rights and benefits to the Company’s patented electro-optic polymer materials are conveyed to the customer through technology license and material supply agreements where the Company provides the licensee a supply of its proprietary polymers for use in the licensee’s manufacturing of photonic devices (the “Licensed Product”) as well as non-exclusive, royalty-bearing license to intellectual property rights in the Company’s patented polymer technology. The Company receives license and royalty payments under such commercial agreements, some of which are nonrefundable upfront payments for license fees. These advances are initially recorded as deferred revenue on the Company’s balance sheets. The Company believes that the licenses provided and materials transferred under such agreements are not distinct from each other for financial reporting purposes and as such, they are accounted for as a single performance obligation. Advance payments for license fees and minimum annual royalties are recognized on a pro-rata basis over the related contract term. Royalties from licensee’s sale of the Licensed Product that exceed the minimum annual royalty are recognized when cumulative royalties exceed the minimum royalty. Milestone license fees are recognized when the licensee reaches the milestone of selling a contractually specified number of units of the Licensed Product.

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2024 AND 2023

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

Revenue associated with the sale of the Company’s patented electro-optic polymer materials for incorporation into the customers’ commercial photonic devices or for their device development and evaluation activities will be recognized at the time title passes, which is typically at the time of shipment or at the time of delivery, depending upon the contractual agreement between the parties.

Cost of Sales

Cost of sales consists of labor costs, material costs and manufacturing overhead costs associated with the production of materials transferred to the customer under the technology license and material supply agreement at the Company’s facility.

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 non-employees. 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.

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 2024 and 2023, 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 (Loss)

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).

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2024 AND 2023

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

Recently Issued Accounting Pronouncements Not Yet Adopted

As of June 30, 2024, 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 June 30, 2024 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 2023 financial statement in order to conform to the 2024 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 $1,840,000 of expenditures per month over the next 12 months. Our current cash position enables us to finance our operations through October 2025. On February 28, 2023, the Company entered into a purchase agreement with an institutional investor to sell up to $30,000,000 of common stock over a 36-month period (described in Note 10). Pursuant to the purchase agreement, the Company received $0 in July and August 2024 and the remaining available amount of $6,358,348 is available to the Company per the agreement. On December 9, 2022, the Company entered into a sales agreement with an investment banking company whereby the Company may offer and sell shares of its common stock having an aggregate offering price of up to $35,000,000 from time to time through or to the investment banking company, as sales agent or principal (described in Note 10). There were no sales of shares of the Company’s common stock pursuant to the sales agreement in June and July 2024. The remaining available amount of $32,921,834 is available to the Company per the agreement. The Company's first commercial agreement occurred in May 2023 from a material supply and license agreement that incorporates the Company's patented electro-optic polymer materials for use in manufacturing photonic devices (described in Note 3). For the three and six months ended June 30, 2024, we recognized $19,355 and $36,022 in revenue, respectively, related to this 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 increasing our revenue stream from the commercialization of our electro-optic polymer technology. We currently have no debt to service.

NOTE 3 – REVENUE

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (Topic 606). The standard establishes the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows from a contract with a customer.

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2024 AND 2023

NOTE 3 – REVENUE (CONTINUED)

The Company's first commercial agreement occurred in May 2023, in the form of a four-year material supply and license agreement (the “License Agreement”) that incorporates the Company's patented electro-optic polymer materials for use in manufacturing of photonic devices (the “Licensed Product”). The licensee shall pay the Company a running royalty with a minimum royalty paid on an annual basis over the term of the License Agreement. Additional future revenue will be generated from royalties from the licensee’s sale of Licensed Product that exceed the minimum royalty payments and milestone license fees. The License Agreement is a non-exclusive material supply and license agreement.

During 2024, the Company performed device processing work for a customer.

Timing of Revenue Recognition and Contract Balances

Revenues related to the initial license fee and a minimum annual royalty are recognized over time commencing with the License Agreement in May 2023. An up-front license fee in the amount of $50,000 was paid during the period ending December 31, 2023. $31,541 of this amount is recorded in current liabilities on the Company’s balance sheet as of June 30, 2024. For the three and six months ended June 30, 2024, the Company recognized $19,355 and $36,022, respectively, in revenue related to this agreement.

In March 2024, the Company completed device processing work on the devices supplied by a customer. Revenue for this contract was recognized at the time of shipment of the devices back to the customer and amounted to $0 and $13,750 for the three and six months ended June 30, 2024, respectively.

Contract balances are as follows:

Schedule of contract balances
	June 30, 2024		December 31, 2023

Accounts receivable, net	$	8,065	$	30,376
Short-term contract assets	$	—	$	—
Long-term contract assets	$	—	$	—
Short-term liability deferred revenue	$	31,541	$	39,875

Significant changes in the contract balances for the period ended June 30, 2024 are as follows:


	Six Months Ended June 30, 2024
	Assets			Liabilities
Balance at December 31, 2023	$	30,376		$	(39,875	)
Revenue recognized that was previously included in deferred revenue		—			8,334
Decreases/increases due to cash received		(63,884	)		—
Billed receivables recorded		33,508			—
Transferred to receivables from unbilled receivables		(19,624	)		—
Unbilled receivables recorded		27,689			—
Balance at June 30, 2024	$	8,065		$	(31,541	)

A rollforward of contract balances is not disclosed for the period ended June 30, 2024 since there were no contracts as of December 31, 2022.

Assets Recognized for the Costs to Obtain a Contract

There are no assets recognized for the costs to obtain the License Agreement.

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2024 AND 2023

NOTE 4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:


	June 30, 2024		December 31, 2023

Insurance	$	389,267	$	237,791
License		202,076		241,936
Investor relations		60,140		6,313
Prototype devices		54,763		161,267
Rent		36,525		36,525
Other		18,120		53,373
Materials fabrication		—		475,936
Deposit for equipment		—		20,000
Lease incentive receivable		—		4,480
	$	760,891	$	1,237,621

NOTE 5 – 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 loan and interest were repaid in February and March 2023. The Company recorded $0 and $11,125 of interest income for the three and six months ended June 30, 2023 and used the average exchange rate for the conversion of the EUR denominated interest income for the period.

NOTE 6 – PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

Schedule of property and equipment
	June 30, 2024		December 31, 2023

Office equipment	$	154,500	$	146,196
Lab equipment		10,311,859		8,937,847
Furniture		74,119		74,119
Leasehold improvements		415,691		396,111
Software		125,943		111,077
		11,082,112		9,665,350
Less: Accumulated depreciation		5,270,207		4,674,560

	$	5,811,905	$	4,990,790

Depreciation expense for the three months ending June 30, 2024 and 2023 was $395,928 and $236,419, respectively. Depreciation expense for the six months ending June 30, 2024 and 2023 was $761,491 and $492,344, respectively. During the three months ending June 30, 2024, the Company retired fully depreciated property and equipment with the cost of $5,869. During the six months ending June 30, 2024, the Company retired property and equipment with a cost of $169,010 and accumulated depreciation of $165,844 for a loss of $3,166. During the three and six months ending June 30, 2023, the Company sold equipment for proceeds of $590 and a loss of $581.

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2024 AND 2023

NOTE 7 – 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 consists of the following:

Schedule of intangible assets
	June 30, 2024		December 31, 2023

Patents	$	1,981,196	$	1,913,751
Less: Accumulated amortization		702,496		659,250

	$	1,278,700	$	1,254,501

Amortization expense for the three months ending June 30, 2024 and 2023 was $22,311 and $19,351, respectively. Amortization expense for the six months ending June 30, 2024 and 2023 was $43,246 and $38,702, respectively. There were no patent costs written off for the three and six months ending June 30, 2024 and 2023.

NOTE 8 – COMMITMENTS

On October 30, 2017, the Company entered into a lease agreement (the “Lease”) to lease approximately 13,420 square feet of office, chemistry, clean room 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. This extension did not require a lease modification as the additional option period was included in the original computation as of January 1, 2019. 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 $36,525 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. $17,408 of this amount is recorded on the Company’s balance sheet as deferred lease liability as of June 30, 2024.

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2024 AND 2023

NOTE 8 – 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 non-lease 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.

On November 22, 2022, the Company entered into an amendment to the Lease (“the Amended Lease”) to lease an additional approximately 9,684 square feet of adjacent office and warehouse space. The term of the Amended Lease is one hundred twenty (128) months, with an effective date of June 1, 2023. Base rent through January 31, 2024 of the Amended Lease term is approximately $30,517 per month. The base rent for the next full year of the Amended Lease term is approximately $377,288, with an increase in annual base rent of approximately 3% in each subsequent year of the lease term. Commencing on June 1, 2023, 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 Amended Lease also provides an allowance of up to $43,216 to be used solely for the cost of renovations to the additional lease premises. As of June 1, 2023, the operating lease right-of-use asset and operating lease liability amounted to $2,945,322. As of June 30, 2024, the operating lease right-of-use asset and operating lease liability amounted to $2,743,457 and $2,840,983, respectively.

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 Amended Lease for office, chemistry, clean room and research and development space. The aggregate minimum future lease payments under the Amended Lease, including the extended term are as follows:


YEARS ENDING
DECEMBER 31,	AMOUNT

2024	$	188,644
2025		387,666
2026		399,199
2027		411,174
2028		423,612
Thereafter		2,357,571
		4,167,866
Less discounted interest		(1,326,883	)

TOTAL	$	2,840,983

Rent expense totaling $75,510 and $25,170 is included in research and development and general and administrative expenses, respectively, for the three months ended June 30, 2024. Rent expense totaling $151,021 and $50,340 is included in research and development and general and administrative expenses, respectively, for the six months ended June 30, 2024. Rent expense totaling $39,414 and $13,138 is included in research and development and general and administrative expenses, respectively, for the three months ended June 30, 2023. Rent expense totaling $75,556 and $25,185 is included in research and development and general and administrative expenses, respectively, for the six months ended June 30, 2023.

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2024 AND 2023

NOTE 9 – INCOME TAXES

There is no income tax benefit for the losses for the three and six months ended June 30, 2024 and 2023 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, 2024, 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 three and six-month period ended June 30, 2024. The Company did not recognize any interest or penalties during 2023 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, 2020 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

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.

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2024 AND 2023

NOTE 10 – STOCKHOLDERS’ EQUITY (CONTINUED)

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 June 30, 2023, the institutional investor purchased 3,632,456 shares of common stock for proceeds of $33,000,000 and the Company issued 60,623 shares of common stock as additional commitment fee, valued at $694,531 fair value. All of the registered shares under the purchase agreement have been issued as of December 31, 2023.

On February 28, 2023, the Company entered into a purchase agreement with an institutional investor to sell up to $30,000,000 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 50,891 shares of common stock to the institutional investor as an initial commitment fee valued at $279,391 fair value, and 101,781 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 February 28, 2023 through June 30, 2024, the institutional investor purchased 4,820,455 shares of common stock for proceeds of $23,641,652 and the Company issued 80,210 shares of common stock as additional commitment fee, valued at $461,986, fair value, leaving 21,571 in reserve for additional commitment fees. During the three-month period ending June 30, 2024, pursuant to the purchase agreement, the institutional investor purchased 700,000 shares of common stock for proceeds of $2,343,250 and the Company issued 7,949 shares of common stock as additional commitment fee, valued at $28,983 fair value. During July and August 2024, pursuant to the purchase agreement, the institutional investor didn’t purchase any shares of the Company’s common stock.

On December 9, 2022, the Company entered into a sales agreement with an investment banking company. In accordance with the terms of this sales agreement, the Company may offer and sell shares of its common stock having an aggregate offering price of up to $35,000,000 from time to time through or to the investment banking company, as sales agent or principal. Sales of shares of the Company’s common stock, if any, may be made by any method deemed to be an “at the market offering”. The sales agent will be entitled to compensation under the terms of the sales agreement at a commission rate equal to 3% of the gross proceeds of the sales price of common stock that they sell. During the three-month period ending June 30, 2024, pursuant to the sales agreement, the investment banking company sold 50,000 shares of the Company’s common stock for proceeds of $169,430 after a payment of the commission in the amount of $5,240 to the investment banking company. During the six-month period ending June 30, 2024, pursuant to the sales agreement, the investment banking company sold 127,150 shares of the Company’s common stock for proceeds of $499,883 after a payment of the commission in the amount of $15,461 to the investment banking company. During July and August 2024, pursuant to the sales agreement, the investment banking company did not sell any shares of the Company’s common stock.

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2024 AND 2023

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 June 30, 2024, options to purchase 2,063,000 shares of common stock have been issued and are outstanding.

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. Effective May 25, 2023, the number of shares of the Company’s common stock available for issuance under the 2016 Plan was increased from 8,000,000 to 13,000,000 shares and awards of restricted stock units are authorized for issuance. As of June 30, 2024, options to purchase 6,905,057 shares of common stock have been issued and are outstanding and 221,649 restricted shares of common stock are issued. As of June 30, 2024, 4,167,059 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 2024: no dividend yield in all years, expected volatility, based on the Company’s historical volatility, 76.3% to 77.1%, risk-free interest rate between 3.91% to 4.28% and expected option life of 10 years. Prior to May 2018, 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. Starting in May 2018, the expected life is based on the legal contractual life of options.

As of June 30, 2024, there was $3,777,227 of unrecognized compensation expense related to non-vested market-based share awards that is expected to be recognized through June 2027.

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2024 AND 2023

NOTE 11 – STOCK BASED COMPENSATION (CONTINUED)

Share-based compensation was recognized as follows:

Schedule of share-based compensation
	For the Six		For the Six
	Months Ending		Months Ending
	June 30, 2024		June 30, 2023

2007 Employee Stock Option Plan	$	—	$	—
2016 Equity Incentive Plan		2,337,460		3,389,804

SEC Form 10-Q filed by Lightwave Logic Inc.