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, 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 November 12, 2024 was 122,372,981.

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	47

	Item 4	Controls and Procedures	47

Part II	Other Information

	Item 1	Legal Proceedings	48

	Item 1A	Risk Factors	48

	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	49

	Item 3	Defaults Upon Senior Securities	49

	Item 4	Mine Safety Disclosures	49

	Item 5	Other Information	49

	Item 6	Exhibits	49

		Signatures	50

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

LIGHTWAVE LOGIC, INC.

FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

(UNAUDITED)

CONTENTS

	PAGE

BALANCE SHEETS	2

STATEMENTS OF COMPREHENSIVE LOSS	3

STATEMENTS OF STOCKHOLDERS’ EQUITY	4

STATEMENTS OF CASH FLOWS	5

NOTES TO FINANCIAL STATEMENTS	6-19

LIGHTWAVE LOGIC, INC.

BALANCE SHEETS

UNAUDITED


	September 30, 2024			December 31, 2023

ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	26,882,467		$	31,432,087
Accounts Receivable		26,814			30,376
Prepaid expenses and other current assets		562,084			1,237,621
TOTAL CURRENT ASSETS		27,471,365			32,700,084

PROPERTY AND EQUIPMENT - NET		5,774,568			4,990,790

OTHER ASSETS
Intangible assets - net		1,295,293			1,254,501
Operating Lease - Right of Use - Building		2,694,971			2,838,210
TOTAL OTHER ASSETS		3,990,264			4,092,711

TOTAL ASSETS	$	37,236,197		$	41,783,585


LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	449,750		$	1,447,596
Accrued bonuses and accrued expenses		299,436			599,430
Accounts payable and accrued expenses - related parties		176,745			313,483
Contract liability		27,375			39,875
Deferred lease liability		6,964			38,297
Operating lease liability		162,054			144,120
TOTAL CURRENT LIABILITIES		1,122,324			2,582,801

LONG TERM LIABILITIES
Operating lease liability		2,642,303			2,766,970
TOTAL LONG TERM LIABILITIES		2,642,303			2,766,970

TOTAL LIABILITIES		3,764,627			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, 121,471,478 and 118,137,309 issued and outstanding at September 30, 2024 and December 31, 2023		121,471			118,137
Additional paid-in-capital		178,728,926			164,619,363
Deferred compensation		(506,926	)		(432,293	)
Accumulated deficit		(144,871,901	)		(127,871,393	)

TOTAL STOCKHOLDERS' EQUITY		33,471,570			36,433,814

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	37,236,197		$	41,783,585

See accompanying notes to these financial statements.

LIGHTWAVE LOGIC, INC.

STATEMENTS OF COMPREHENSIVE LOSS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

(UNAUDITED)


	For the Three			For the Three			For the Nine			For the Nine
	Months Ended			Months Ended			Months Ended			Months Ended
	September 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023

NET SALES	$	22,916		$	—		$	72,688		$	—

COST AND EXPENSE
Cost of sales		1,236			—			6,411			—
Research and development		3,828,301			4,040,941			12,811,221			12,006,758
General and administrative		1,490,481			1,345,335			4,642,603			3,879,515
TOTAL COST AND EXPENSE		5,320,018			5,386,276			17,460,235			15,886,273

LOSS FROM OPERATIONS		(5,297,102	)		(5,386,276	)		(17,387,547	)		(15,886,273	)

OTHER INCOME (EXPENSE)
Interest income		222,404			246,987			727,470			403,960
Commitment fee		(15,875	)		(25,302	)		(121,834	)		(607,728	)
Loss on disposal of property and equipment and intangible assets		(210,274	)		—			(213,440	)		(581	)
Other expense		(66	)		—			(5,157	)		(7,734	)


NET LOSS	$	(5,300,913	)	$	(5,164,591	)	$	(17,000,508	)	$	(16,098,356	)

LOSS PER SHARE
Basic	$	(0.04	)	$	(0.04	)	$	(0.14	)	$	(0.14	)
Diluted	$	(0.04	)	$	(0.04	)	$	(0.14	)	$	(0.14	)

WEIGHTED AVERAGE NUMBER OF SHARES
Basic		120,901,708			116,491,837			120,005,472			114,899,056
Diluted		120,901,708			116,491,837			120,005,472			114,899,056

See accompanying notes to these financial statements.

LIGHTWAVE LOGIC, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

NINE-MONTH PERIOD ENDED SEPTEMBER 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	2,600,000		2,600		9,173,300		—			—			9,175,900
Common stock issued for commitment shares	31,132		31		121,802		—			—			121,833
Common stock sales at the market by investment banking company	202,150		202		714,699		—			—			714,901
Exercise of options	365,000		365		237,835		—			—			238,200
Exercise of warrants	19,000		19		14,231		—			—			14,250
Options issued for services	—		—		3,468,243		—			—			3,468,243
Restricted stock awards issued for future services	116,887		117		379,453		(379,570	)		—			—
Deferred compensation	—		—		—		304,937			—			304,937
Net loss for the nine months ended September 30, 2024	—		—		—		—			(17,000,508	)		(17,000,508	)

BALANCE AT SEPTEMBER 30, 2024	121,471,478	$	121,471	$	178,728,926	$	(506,926	)	$	(144,871,901	)	$	33,471,570

NINE-MONTH PERIOD ENDED SEPTEMBER 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	2,750,400		2,750		16,061,159		—			—			16,063,909
Common stock issued for commitment shares	99,407		100		607,628		—			—			607,728
Common stock sales at the market by investment banking company	172,115		172		1,378,302		—			—			1,378,474
Exercise of options	504,408		504		466,820		—			—			467,324
Exercise of warrants	169,000		169		164,581		—			—			164,750
Options issued for services	—		—		5,085,114		—			—			5,085,114
Restricted stock awards issued for future services	105,854		106		561,560		(561,666	)		—			—
Deferred compensation	—		—		—		198,253			—			198,253
Net loss for the nine months ended September 30, 2023	—		—		—		—			(16,098,356	)		(16,098,356	)

BALANCE AT SEPTEMBER 30, 2023	116,683,977	$	116,684	$	158,731,989	$	(496,737	)	$	(122,931,717	)	$	35,420,219

See accompanying notes to these financial statements.

LIGHTWAVE LOGIC, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2024


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

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

Common stock issued to institutional investor	650,000		650		1,679,650		—			—			1,680,300
Common stock issued for commitment shares	5,701		5		15,868		—			—			15,873
Common stock sales at the market by investment banking company	75,000		75		214,943		—			—			215,018
Exercise of options	10,000		10		7,190		—			—			7,200
Exercise of warrants	—		—		—		—			—			—
Options issued for services	—		—		1,130,783		—			—			1,130,783
Restricted stock awards issued for future services	24,412		24		71,604		(71,628	)		—			—
Deferred compensation	—		—		—		101,416			—			101,416
Net loss for the three months ended September 30, 2024	—		—		—		—			(5,300,913	)		(5,300,913	)

BALANCE AT SEPTEMBER 30, 2024	121,471,478	$	121,471	$	178,728,926	$	(506,926	)	$	(144,871,901	)	$	33,471,570

THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2023


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

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

Common stock issued to institutional investor	175,000		175		1,113,325		—			—			1,113,500
Common stock issued for commitment shares	3,777		4		25,298		—			—			25,302
Common stock sales at the market by investment banking company	97,115		97		734,848		—			—			734,945
Exercise of options	198,123		198		160,825		—			—			161,023
Exercise of warrants	19,000		19		14,231		—			—			14,250
Options issued for services	—		—		1,695,310		—			—			1,695,310
Restricted stock awards issued for future services	6,238		6		41,664		(41,670	)		—			—
Deferred compensation	—		—		—		64,399			—			64,399
Net loss for the three months ended September 30, 2023	—		—		—		—			(5,164,591	)		(5,164,591	)

BALANCE AT SEPTEMBER 30, 2023	116,683,977	$	116,684	$	158,731,989	$	(496,737	)	$	(122,931,717	)	$	35,420,219

See accompanying notes to these financial statements.

LIGHTWAVE LOGIC, INC.

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

(UNAUDITED)


	For the Nine			For the Nine
	Months Ended			Months Ended
	September 30, 2024			September 30, 2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(17,000,508	)	$	(16,098,356	)
Adjustments to reconcile net loss to net cash used in operating activities
Stock options issued for services		3,468,243			5,085,114
Amortization of deferred compensation		304,937			198,253
Common stock issued for commitment shares		121,833			607,728
Depreciation and amortization of patents		1,240,639			797,500
Amortization of right of use asset		143,239			138,502
Loss on disposal of property and equipment and intangible assets		213,440			581
Decrease in assets
Accounts receivable		3,562			—
Prepaid expenses and other current assets		675,537			87,058
(Decrease) increase in liabilities
Accounts payable		(997,846	)		(362,151	)
Accrued bonuses, accrued expenses and other liabilities		(299,994	)		(259,146	)
Accounts payable and accrued expenses-related parties		(136,738	)		(8,557	)
Contract liability		(12,500	)		50,000
Deferred lease liability		(31,333	)		(31,334	)
Operating lease liability		(106,733	)		(118,990	)

Net cash used in operating activities		(12,414,222	)		(9,913,798	)

CASH FLOWS FROM INVESTING ACTIVITIES
Cost of intangibles		(343,233	)		(215,061	)
Purchase of property and equipment		(1,935,416	)		(1,813,813	)
Repayment of loan		—			642,120
Sale of property and equipment		—			590

Net cash used in investing activities		(2,278,649	)		(1,386,164	)

CASH FLOWS FROM FINANCING ACTIVITIES
Exercise of options and warrants		252,450			632,074
Issuance of common stock, institutional investor		9,175,900			16,063,909
Common stock sales at the market by investment banking company		714,901			1,378,474

Net cash provided by financing activities		10,143,251			18,074,457

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(4,549,620	)		6,774,495

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

CASH AND CASH EQUIVALENTS - END OF PERIOD	$	26,882,467		$	30,876,646


Supplemental Disclosure of Non-cash investing and financing activities:
Amended Operating Lease - Right of Use - Building and Operating lease liability				$	2,703,527

See accompanying notes to these financial statements.

LIGHTWAVE LOGIC, INC.

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

(UNAUDITED)

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 nine months ending September 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 Company’s primary revenue stream is from the technology license and material supply agreements the terms of which are jointly agreed upon with the Company’s customers. Under these agreements, the Company conveys to the customers the rights and benefits to the Company’s patented electro-optic polymer materials by providing 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.

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. 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).

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

Recently Issued Accounting Pronouncements Not Yet Adopted

As of September 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 September 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

The Company’s future expenditures and capital requirements will depend on numerous factors, including: the progress of its research and development efforts; the rate at which the Company can, directly or through arrangements with original equipment manufacturers, introduce and sell products incorporating its polymer materials technology; the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; market acceptance of the Company’s products and competing technological developments; and the Company’s ability to establish cooperative development, joint venture and licensing arrangements. The Company expects that it will incur approximately $1,687,000 of expenditures per month over the next 12 months. The Company’s current cash position enables it to finance its operations through February 2026. 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 $1,916,730 in October and November 2024 and the remaining available amount of $2,761,318 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). Pursuant to the sales agreement, the Company received $817,455 in October and November 2024. The remaining available amount of $31,857,377 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 nine months ended September 30, 2024, the Company recognized $22,916 and $58,938 in revenue, respectively, related to this agreement. The Company’s cash requirements are expected to increase at a rate consistent with the Company’s path to revenue as it expands its activities and operations with the objective of increasing its revenue stream from the commercialization of its electro-optic polymer technology. The Company currently has 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.

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. $27,375 of this amount is recorded as a contract liability in current liabilities on the Company’s balance sheet as of September 30, 2024. For the three and nine months ended September 30, 2024, the Company recognized $22,916 and $58,938, 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 nine months ended September 30, 2024, respectively.

Contract balances are as follows:

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

Accounts receivable, net	$	26,814	$	30,376
Short-term contract assets	$	—	$	—
Long-term contract assets	$	—	$	—
Short-term contract liability	$	27,375	$	39,875

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


	Nine Months Ended September 30, 2024
	Assets			Liabilities
Balance at December 31, 2023	$	30,376		$	(39,875	)
Revenue recognized that was previously included in contract liability		—			12,500
Decreases/increases due to cash received		(63,884	)		—
Billed receivables recorded		63,884			—
Transferred to receivables from unbilled receivables		(50,000	)		—
Unbilled receivables recorded		46,438			—
Balance at September 30, 2024	$	26,814		$	(27,375	)

Assets Recognized for the Costs to Obtain a Contract

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

NOTE 4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:


	September 30, 2024		December 31, 2023

Insurance	$	272,543	$	237,791
License		157,957		241,936
Rent		36,525		36,525
Other		33,350		53,373

SEC Form 10-Q filed by Lightwave Logic Inc.