Company Quick10K Filing
Lightwave Logic
Price0.70 EPS-0
Shares85 P/E-9
MCap60 P/FCF-13
Net Debt-2 EBIT-6
TEV57 TEV/EBIT-9
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-09-30 Filed 2020-11-09
10-Q 2020-06-30 Filed 2020-08-10
10-Q 2020-03-31 Filed 2020-05-11
S-1 2020-01-28 Public Filing
10-K 2019-12-31 Filed 2020-03-16
10-Q 2019-09-30 Filed 2019-11-12
10-Q 2019-06-30 Filed 2019-08-09
10-Q 2019-03-31 Filed 2019-05-10
S-1 2019-01-30 Public Filing
10-K 2018-12-31 Filed 2019-03-18
10-Q 2018-09-30 Filed 2018-11-09
10-Q 2018-06-30 Filed 2018-08-09
10-Q 2018-03-31 Filed 2018-05-10
10-K 2017-12-31 Filed 2018-03-16
10-Q 2017-09-30 Filed 2017-11-14
10-Q 2017-06-30 Filed 2017-08-14
10-Q 2017-03-31 Filed 2017-05-15
10-K 2016-12-31 Filed 2017-03-17
10-Q 2016-09-30 Filed 2016-11-14
10-Q 2016-06-30 Filed 2016-08-15
10-Q 2016-03-31 Filed 2016-05-16
10-K 2015-12-31 Filed 2016-03-18
10-Q 2015-09-30 Filed 2015-11-16
10-Q 2015-06-30 Filed 2015-08-12
10-Q 2015-03-31 Filed 2015-05-15
10-K 2014-12-31 Filed 2015-03-24
10-Q 2014-09-30 Filed 2014-11-14
10-Q 2014-06-30 Filed 2014-08-14
10-Q 2014-03-31 Filed 2014-05-14
10-K 2013-12-31 Filed 2014-03-31
10-Q 2013-09-30 Filed 2013-11-14
10-Q 2013-06-30 Filed 2013-08-14
10-Q 2013-03-31 Filed 2013-05-15
10-K 2012-12-31 Filed 2013-04-01
10-Q 2012-09-30 Filed 2012-11-13
10-Q 2012-06-30 Filed 2012-08-14
10-Q 2012-03-31 Filed 2012-05-15
10-K 2011-12-31 Filed 2012-04-02
10-Q 2011-09-30 Filed 2011-11-14
10-Q 2011-06-30 Filed 2011-08-15
10-Q 2011-03-31 Filed 2011-05-16
10-K 2010-12-31 Filed 2011-03-31
10-Q 2010-09-30 Filed 2010-11-15
10-Q 2010-06-30 Filed 2010-08-16
10-Q 2010-03-31 Filed 2010-05-17
10-K 2009-12-31 Filed 2010-04-15
8-K 2020-11-02
8-K 2020-05-14
8-K 2020-05-14
8-K 2020-04-23
8-K 2019-09-26
8-K 2019-09-05
8-K 2019-05-16
8-K 2019-04-08
8-K 2019-01-21
8-K 2018-10-23
8-K 2018-07-31
8-K 2018-06-11
8-K 2018-05-17
8-K 2018-02-05

LWLG 10Q Quarterly Report

Part I – Financial Information
Item 1 Financial Statements
Note 1 – Nature of Business and Summary of Significant Accounting Policies
Note 2 – Management’S Plans
Note 3 – Prepaid Expenses and Other Current Assets
Note 4 – Property and Equipment
Note 5 – Intangible Assets
Note 6 – Long Term Equipment Purchase Payable
Note 7 – Commitments
Note 8 – Ppp Advance
Note 9 – Income Taxes
Note 10 – Stockholders’ Equity
Note 11 – Stock Based Compensation
Note 12 – Related Party
Note 13 – Retirement Plan
Item 2Management’S Discussion and Analysis of Financial Condition and Results of Operations
Item 4Controls and Procedures
Part II – Other Information
Item 1Arisk Factors
Item 2Unregistered Sales of Equity Securities and Use of Proceeds
Item 6 Exhibits
EX-31.1 lwlg_ex31z1.htm
EX-31.2 lwlg_ex31z2.htm
EX-32.1 lwlg_ex32z1.htm
EX-32.2 lwlg_ex32z2.htm

Lightwave Logic Earnings 2020-09-30

Balance SheetIncome StatementCash Flow
10.08.06.04.02.00.02012201420172020
Assets, Equity
0.1-0.3-0.8-1.2-1.7-2.12012201420172020
Rev, G Profit, Net Income
2.31.50.7-0.0-0.8-1.62012201420172020
Ops, Inv, Fin

Lightwave Logic, Inc.
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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, 2020

 

OR

 

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 0-52567

Lightwave Logic, Inc.

(Exact name of registrant as specified in its charter)

Nevada

 

82-0497368

(State or other jurisdiction of incorporation or organization)

 

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

 

 

 

369 Inverness Parkway, Suite 350 Englewood, CO

 

80112

(Address of principal executive offices)

 

(Zip Code)

(720) 340-4949

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Title of each class

Trading Symbol(s)

Name of exchange on which registered

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, 2020 was 95,192,065.


TABLE OF CONTENTS

i


Index

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 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, 2019 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.

ii


Index

PART I – FINANCIAL INFORMATION

Item 1 Financial Statements

LIGHTWAVE LOGIC, INC.

FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(UNAUDITED)

Page

 

Balance Sheets

2

 

Statements of Operations

3

 

Statement of Stockholders’ Equity

4

 

Statements of Cash Flows

6

 

Notes to Financial Statements

7

1


Index

LIGHTWAVE LOGIC, INC.

BALANCE SHEETS

 

 

September 30,

2020

 

 

December 31,

2019

 

 

 

(Unaudited)

 

 

(Audited)

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,200,311

 

 

$

2,236,344

 

Prepaid expenses and other current assets

 

 

627,383

 

 

 

372,549

 

 

 

 

2,827,694

 

 

 

2,608,893

 

 

 

 

 

 

 

 

 

 

PROPERTY AND EQUIPMENT - NET

 

 

1,935,437

 

 

 

2,416,503

 

 

 

 

 

 

 

 

 

 

OTHER ASSETS

 

 

 

 

 

 

 

 

Intangible assets - net

 

 

916,483

 

 

 

939,481

 

Operating Lease - Right of Use - Building

 

 

743,542

 

 

 

859,979

 

 

 

 

1,660,025

 

 

 

1,799,460

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

6,423,156

 

 

$

6,824,856

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Accounts payable

 

$

275,172

 

 

$

88,423

 

Current portion of equipment purchase

 

 

185,078

 

 

 

630,329

 

Accounts payable and accrued expenses - related parties

 

 

70,901

 

 

 

14,805

 

Deferred lease liability

 

 

41,778

 

 

 

41,778

 

PPP advance

 

 

410,700

 

 

 

 

Operating lease liability

 

 

164,323

 

 

 

156,524

 

Accrued expenses

 

 

53,023

 

 

 

65,769

 

 

 

 

1,200,975

 

 

 

997,628

 

 

 

 

 

 

 

 

 

 

LONG TERM LIABILITIES

 

 

 

 

 

 

 

 

Deferred lease liability

 

 

132,298

 

 

 

163,632

 

Operating lease liability

 

 

579,219

 

 

 

703,455

 

Long term portion of equipment purchase

 

 

 

 

 

52,427

 

 

 

 

711,517

 

 

 

919,514

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

1,912,492

 

 

 

1,917,142

 

 

 

 

 

 

 

 

 

 

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,

 

 

 

 

 

 

 

 

93,916,931 and 87,409,600 issued and outstanding at

 

 

 

 

 

 

 

 

September 30, 2020 and December 31, 2019

 

 

93,917

 

 

 

87,410

 

Additional paid-in-capital

 

 

73,781,668

 

 

 

69,076,240

 

Accumulated deficit

 

 

(69,364,921

)

 

 

(64,255,936

)

 

 

 

 

 

 

 

 

 

TOTAL STOCKHOLDERS’ EQUITY

 

 

4,510,664

 

 

 

4,907,714

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

6,423,156

 

 

$

6,824,856

 

See accompanying notes to these financial statements.

2


Index

LIGHTWAVE LOGIC, INC.

STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS AND NINE MONTHS ENDING SEPTEMBER 30, 2020 AND 2019

(UNAUDITED)

 

 

For the Three

Months Ending

September 30,

2020

 

 

For the Three

Months Ending

September 30,

2019

 

 

For the Nine

Months Ending

September 30,

2020

 

 

For the Nine 

Months Ending

September 30,

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET SALES

 

$

 

 

$

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COST AND EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

1,145,314

 

 

 

1,134,372

 

 

 

3,392,555

 

 

 

3,355,887

 

General and administrative

 

 

444,182

 

 

 

441,575

 

 

 

1,625,410

 

 

 

1,514,231

 

 

 

 

1,589,496

 

 

 

1,575,947

 

 

 

5,017,965

 

 

 

4,870,118

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS FROM OPERATIONS

 

 

(1,589,496

)

 

 

(1,575,947

)

 

 

(5,017,965

)

 

 

(4,870,118

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

303

 

 

 

63

 

 

 

628

 

 

 

187

 

Commitment fee

 

 

(28,690

)

 

 

(33,328

)

 

 

(91,648

)

 

 

(373,888

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

$

(1,617,883

)

 

$

(1,609,212

)

 

$

(5,108,985

)

 

$

(5,243,819

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted Loss per Share

 

$

(0.02

)

 

$

(0.02

)

 

$

(0.06

)

 

$

(0.06

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted Weighted Average Number of Shares

 

 

92,768,633

 

 

 

84,083,452

 

 

 

90,641,901

 

 

 

82,341,821

 

See accompanying notes to these financial statements.

3


Index

LIGHTWAVE LOGIC, INC.

STATEMENT OF STOCKHOLDERS’ EQUITY

 

 

NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2020

 

 

 

 

 

 

 

Number of

Shares

 

 

Common

Stock

 

 

Additional

Paid-in

Capital

 

 

Accumulated

Deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT DECEMBER 31, 2019 (AUDITED)

 

 

87,409,600

 

 

$

87,410

 

 

$

69,076,240

 

 

$

(64,255,936

)

 

$

4,907,714

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued to institutional investor

 

 

6,375,000

 

 

 

6,375

 

 

 

4,065,176

 

 

 

 

 

 

4,071,551

 

Common stock issued for commitment shares

 

 

132,331

 

 

 

132

 

 

 

91,516

 

 

 

 

 

 

91,648

 

Options issued for services

 

 

 

 

 

 

 

 

474,090

 

 

 

 

 

 

474,090

 

Warrants issued for services

 

 

 

 

 

 

 

 

74,646

 

 

 

 

 

 

74,646

 

Net loss for the nine months ending September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

(5,108,985

)

 

 

(5,108,985

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT SEPTEMBER 30, 2020 (UNAUDITED)

 

 

93,916,931

 

 

$

93,917

 

 

$

73,781,668

 

 

$

(69,364,921

)

 

$

4,510,664

 

 

 

NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2019

 

 

 

 

 

 

 

Number of

Shares

 

 

Common

Stock

 

 

Additional

Paid-in

Capital

 

 

Accumulated

Deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT DECEMBER 31, 2018 (AUDITED)

 

 

79,176,330

 

 

$

79,177

 

 

$

62,356,854

 

 

$

(57,528,969

)

 

$

4,907,062

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued to institutional investor

 

 

5,450,000

 

 

 

5,450

 

 

 

4,160,135

 

 

 

 

 

 

4,165,585

 

Common stock issued for commitment shares

 

 

485,385

 

 

 

485

 

 

 

373,403

 

 

 

 

 

 

373,888

 

Options issued for services

 

 

 

 

 

 

 

 

500,591

 

 

 

 

 

 

500,591

 

Warrants issued for services

 

 

 

 

 

 

 

 

57,005

 

 

 

 

 

 

57,005

 

Net loss for the nine months ending September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

(5,243,819

)

 

 

(5,243,819

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT SEPTEMBER 30, 2019 (UNAUDITED)

 

 

85,111,715

 

 

$

85,112

 

 

$

67,447,988

 

 

$

(62,772,788

)

 

$

4,760,312

 

See accompanying notes to these financial statements.

4


Index

LIGHTWAVE LOGIC, INC.

STATEMENT OF STOCKHOLDERS’ EQUITY (CONTINUED)

 

 

THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2020

 

 

 

 

 

 

 

Number of

Shares

 

 

Common

Stock

 

 

Additional

Paid-in

Capital

 

 

Accumulated

Deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT JUNE 30, 2020 (UNAUDITED)

 

 

91,874,367

 

 

$

91,875

 

 

$

72,302,294

 

 

$

(67,747,038

)

 

$

4,647,131

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued to institutional investor

 

 

2,000,000

 

 

 

2,000

 

 

 

1,307,625

 

 

 

 

 

 

1,309,625

 

Common stock issued for commitment shares

 

 

42,564

 

 

 

42

 

 

 

28,648

 

 

 

 

 

 

28,690

 

Options issued for services

 

 

 

 

 

 

 

 

119,132

 

 

 

 

 

 

119,132

 

Warrants issued for services

 

 

 

 

 

 

 

 

23,969

 

 

 

 

 

 

23,969

 

Net loss for the three months ending September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

(1,617,883

)

 

 

(1,617,883

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT SEPTEMBER 30, 2020 (UNAUDITED)

 

 

93,916,931

 

 

$

93,917

 

 

$

73,781,668

 

 

$

(69,364,921

)

 

$

4,510,664

 

 

 

THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2019

 

 

 

 

 

 

 

Number of

Shares

 

 

Common

Stock

 

 

Additional

Paid-in

Capital

 

 

Accumulated

Deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT JUNE 30, 2019 (UNAUDITED)

 

 

83,192,958

 

 

$

83,193

 

 

$

65,904,260

 

 

$

(61,163,576

)

 

$

4,823,877

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued to institutional investor

 

 

1,875,000

 

 

 

1,875

 

 

 

1,344,500

 

 

 

 

 

 

1,346,375

 

Common stock issued for commitment shares

 

 

43,757

 

 

 

44

 

 

 

33,284

 

 

 

 

 

 

33,328

 

Options issued for services

 

 

 

 

 

 

 

 

149,768

 

 

 

 

 

 

149,768

 

Warrants issued for services

 

 

 

 

 

 

 

 

16,176

 

 

 

 

 

 

16,176

 

Net loss for the three months ending September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

(1,609,212

)

 

 

(1,609,212

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT SEPTEMBER 30, 2019 (UNAUDITED)

 

 

85,111,715

 

 

$

85,112

 

 

$

67,447,988

 

 

$

(62,772,788

)

 

$

4,760,312

 

See accompanying notes to these financial statements.

5


Index

LIGHTWAVE LOGIC, INC.

STATEMENTS OF CASH FLOW

FOR THE NINE MONTHS ENDING SEPTEMBER 30, 2020 AND 2019

(UNAUDITED)

 

 

For the Nine

Months Ending

September 30,

2020

 

 

For the Nine

Months Ending

September 30,

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net loss

 

$

(5,108,985

)

 

$

(5,243,819

)

Adjustments to reconcile net loss to net cash used in operating activities

 

 

 

 

 

 

 

 

Warrants issued for services

 

 

74,646

 

 

 

57,005

 

Stock options issued for services

 

 

474,090

 

 

 

500,591

 

Common stock issued for services and fees

 

 

91,648

 

 

 

373,888

 

Depreciation and amortization of patents

 

 

589,358

 

 

 

499,197

 

Decrease (increase) in assets

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(254,834

)

 

 

269,630

 

Increase (decrease) in liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

 

186,749

 

 

 

(39,051

)

Accounts payable and accrued expenses- related parties

 

 

56,096

 

 

 

24,201

 

Deferred lease liability

 

 

(31,334

)

 

 

(25,394

)

PPP advance

 

 

410,700

 

 

 

 

Accrued expenses

 

 

(12,746

)

 

 

29,354

 

 

 

 

 

 

 

 

 

 

Net cash used in operating activities

 

 

(3,524,612

)

 

 

(3,554,398

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Cost of intangibles

 

 

(39,564

)

 

 

(52,022

)

Purchase of property and equipment

 

 

(45,730

)

 

 

(215,513

)

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

(85,294

)

 

 

(267,535

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Issuance of common stock, institutional investor

 

 

4,071,551

 

 

 

4,165,585

 

Repayment of equipment purchase payable

 

 

(497,678

)

 

 

(350,500

)

 

 

 

 

 

 

 

 

 

Net cash provided by financing activities

 

 

3,573,873

 

 

 

3,815,085

 

 

 

 

 

 

 

 

 

 

NET DECREASE IN CASH AND CASH EQUIVALENTS

 

 

(36,033

)

 

 

(6,848

)

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD

 

 

2,236,344

 

 

 

2,174,625

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS - END OF PERIOD

 

$

2,200,311

 

 

$

2,167,777

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosure of Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Operating Lease - Right of Use - Building and Operating lease liability

 

$

 

 

$

885,094

 

Equipment acquisition funded by liability

 

 

 

 

 

774,081

 

See accompanying notes to these financial statements.

6


Index

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020 AND 2019

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 Accounting Policies included in the 2019 Annual Report on Form 10K. 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 Company’s Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission. The interim operating results for the three and nine months ending September 30, 2020 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 datacom and telecom devices, sales of non-linear optical polymers, and product development agreements prior to moving into full-scale production.

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.

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States. In mid-March 2020 the Governor of Colorado declared a health emergency and issued an order to close all nonessential businesses. The Company temporarily curtailed most of its business operations from mid-March 2020 through May 1, 2020. The Company is currently operating under the guidelines of the State of Colorado Department of Public Health and Environment and the Governor of Colorado’s Executive Order, Safer-at Home, as amended.

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 Company estimates the fair value of stock-based 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 amendments in this Update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. Prior to this Update, Topic 718 applied only to share-based transactions to employees.

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 2020 and 2019, 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.

7


Index

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020 AND 2019

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

Comprehensive Income

The Company follows FASB ASC 220.10, “Reporting Comprehensive Income.” Comprehensive income 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, comprehensive income (loss) is equal to net income (loss).

Recently Issued Accounting Pronouncements Not Yet Adopted

As of September 30, 2020, 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, 2020 and for the period then ended, there are no recently adopted accounting standards that have a material effect on the Company’s financial statements.

NOTE 2 – MANAGEMENT’S PLANS

Our future expenditures and capital requirements will depend on numerous factors, including: the impact of the COVID-19 pandemic; 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. From late March through May 1, 2020, the Company curtailed most operations due to the COVID-19 pandemic. On April 24, 2020, the Company received $410,700 in loan funding from the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Paycheck Protection Program, administered by the U.S. Small Business Administration (See Note 8). We expect that we will incur approximately $600,000 of expenditures per month over the next 12 months. Our current cash position enables us to finance our operations through January 2021 before we will be required to replenish our cash reserves pursuant to the Lincoln Park financing. Subject to any additional impact of the COVID-19 pandemic, we expect our Lincoln Park financing (described in Note 10) to provide us with sufficient funds to maintain our operations over that period of time and until May 2022. Our cash requirements are expected to increase at a rate consistent with the Company’s path to revenue growth as we expand our activities and operations with the objective of commercializing our electro-optic polymer technology. We currently have no debt to service other than the loan under the Paycheck Protection Program. The loan is eligible for forgiveness as part of the CARES Act if certain requirements currently in effect are met. The Company has submitted a loan forgiveness application under the provisions of the CARES Act that allow for forgiveness; and believes the Company has met the requirements for the loan to be entirely forgiven pursuant to loan forgiveness standards currently in effect.

8


Index

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020 AND 2019

NOTE 3 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:

 

 

September 30,

2020

 

 

December 31,

2019

 

 

 

 

 

 

 

 

Other

 

$

221,393

 

 

$

58,756

 

Insurance

 

147,553

 

 

89,828

 

Research & Development Credit

 

 

126,066

 

 

 

158,612

 

Prototype Devices

 

 

95,846

 

 

 

27,810

 

Rent

 

 

36,525

 

 

 

36,525

 

Prepaid Material

 

 

 

 

 

1,018

 

 

 

 

 

 

 

 

 

 

 

 

$

627,383

 

 

$

372,549

 

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

 

 

September 30,

2020

 

 

December 31,

2019

 

 

 

 

 

 

 

 

Office equipment

 

$

84,751

 

 

$

84,751

 

Lab equipment

 

 

3,773,822

 

 

 

3,733,057

 

Furniture

 

 

33,128

 

 

 

33,128

 

Leasehold Improvements

 

 

234,366

 

 

 

229,401

 

 

 

 

4,126,067

 

 

 

4,080,337

 

Less: Accumulated depreciation

 

 

2,190,630

 

 

 

1,663,834

 

 

 

 

 

 

 

 

 

 

 

 

$

1,935,437

 

 

$

2,416,503

 

Depreciation expense for the nine months ending September 30, 2020 and 2019 was $526,796 and $438,417. Depreciation expense for the three months ending September 30, 2020 and 2019 was $172,415 and $180,098. During the three and nine months ending September 30, 2020 and 2019, the Company did not retire property and equipment.

NOTE 5 – 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.

9


Index

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020 AND 2019

NOTE 5 – INTANGIBLE ASSETS (CONTINUED)

Patents consist of the following:

 

 

September 30,

2020

 

 

December 31,

2019

 

 

 

 

 

 

 

 

Patents

 

$

1,306,641

 

 

$

1,267,077

 

Less: Accumulated amortization

 

 

390,158

 

 

 

327,596

 

 

 

 

 

 

 

 

 

 

 

 

$

916,483

 

 

$

939,481

 

Amortization expense for the nine months ending September 30, 2020 and 2019 was $62,562 and $60,780. Amortization expense for the three months ending September 30, 2020 and 2019 was $20,842 and $20,206. There were no patent costs written off for the three and nine months ending September 30, 2020 and 2019.

NOTE 6 – LONG TERM EQUIPMENT PURCHASE PAYABLE

Outstanding long term equipment purchase payable is comprised of the following:

Final Year

of Maturity

 

 

Classification

 

 

Interest

Rate

 

 

September 30,

2020

 

 

December 31,

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

 

0.00

%

 

$

185,078

 

 

$

630,329

 

2021

 

 

Long term

 

 

0.00

%

 

 

 

 

 

52,427

 

 

 

 

 

 

 

 

 

 

$

185,078

 

 

$

682,756

 

NOTE 7 – COMMITMENTS

On October 30, 2017, the Company entered into a new lease to lease approximately 13,420 square feet of office, laboratory and research and development space located in Colorado for the Company’s new 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. The term shall be extended for an additional twenty-four (24) months, subject to certain conditions, waivable solely by Landlord in its sole and absolute discretion. 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. The lease contains an option to extend the term to October 31, 2024. 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.

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.

10


Index

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020 AND 2019

NOTE 7 – COMMITMENTS (CONTINUED)

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 an 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

 

 

 

 

 

2020

 

$

49,632

 

2021

 

 

201,501

 

2022

 

 

207,563

 

2023

 

 

213,781

 

2024

 

 

182,624

 

 

 

 

855,101

 

Less discounted interest

 

 

(111,559

)

 

 

 

 

 

TOTAL

 

$

743,542

 

Rent expense amounting to $97,077 and $32,359 is included in research and development and general and administrative expenses for the nine months ended September 30, 2020. Rent expense amounting to $84,582 and $28,194 is included in research and development and general and administrative expenses for the nine months ended September 30, 2019. Rent expense amounting to $32,359 and $10,786 is included in research and development and general and administrative expenses for the three months ended September 30, 2020. Rent expense amounting to $27,764 and $9,254 is included in research and development and general and administrative expenses for the three months ended September 30, 2019.

NOTE 8 – PPP ADVANCE

On April 24, 2020, the Company received $410,700 in loan funding from the Paycheck Protection Program, established pursuant to the recently enacted Coronavirus Aid, Relief, and Economic Security Act 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 is eligible for forgiveness as part of the CARES Act if certain requirements currently in effect are met. The Company has submitted a loan forgiveness application under the provisions of the CARES Act that allow for forgiveness and believes the Company has met the requirements for the loan to be entirely forgiven pursuant to loan forgiveness standards currently in effect.

NOTE 9 – INCOME TAXES

There is no income tax benefit for the losses for the nine months ended September 30, 2020 and 2019 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, 2020, 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, 2020. The Company did not recognize any interest or penalties during 2019 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, 2016 and thereafter are subject to examination by the relevant taxing authorities.

11


Index

LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020 AND 2019

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

2016 Purchase Agreement

In January 2016, the Company signed a Purchase Agreement with an institutional investor to sell up to $20,000,000 of common stock. The Company also entered into a registration rights agreement with the institutional investor whereby the Company agreed to file a registration statement related to the transaction with the U.S. Securities and Exchange Commission registering 5,000,000 shares of the Company’s common stock. The registration statement was filed on March 25, 2016. The registration statement became effective April 7, 2016. The Company registered an additional 5,000,000 shares pursuant to a registration statement filed on April 19, 2017 which became effective June 15, 2017. The Company registered an additional 5,000,000 shares pursuant to a registration statement filed on May 2, 2018 which became effective May 11, 2018. Under the Purchase Agreement and at Company’s sole discretion, the institutional investor has committed to invest up to $20,000,000 in common stock over a 36-month period. The Company issued 350,000 shares of restricted common stock to the institutional investor as an initial commitment fee valued at $237,965, fair value, and 650,000 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 three month period ending March 31, 2019, the institutional investor purchased 1,550,000 shares of common stock for proceeds of $1,011,585 and the Company issued 32,879 shares of common stock as additional commitment fee, valued at $24,162, fair value. The 2016 Purchase Agreement expired in April 2019.

2019 Purchase Agreement

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. During the period January 2019 through September 30, 2020, the institutional investor purchased 12,525,000 shares of common stock for proceeds of $8,698,925 and the Company issued 282,722 shares of common stock as additional commitment fee, valued at $217,153, fair value, leaving 529,778 in reserve for additional commitment fees. During the nine month period ending September 30, 2020, the institutional investor purchased 6,375,000 shares of common stock for proceeds of $4,071,551 and the Company issued 132,331 shares of common stock as additional commitment fee, valued at $91,648, fair value. During the three month period ending September 30, 2020, the institutional investor purchased 2,000,000 shares of common stock for proceeds of $1,309,625 and the Company issued 42,564 shares of common stock as additional commitment fee, valued at $28,690, fair value. During October through November 2020, the institutional investor purchased 1,250,000 shares of common stock for proceeds of $733,375 and the Company issued 25,134 shares of common stock as additional commitment fee, valued at $17,614, fair value, leaving 504,644 in reserve for additional commitment fees.

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LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020 AND 2019

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 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 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, 2020, options to purchase 4,450,000 shares of common stock have been issued and are outstanding.

During 2016, the Board of Directors of the Company adopted the 2016 Equity Incentive Plan (“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, 2020, options to purchase 3,702,500 shares of common stock have been issued and are outstanding and 4,297,500 shares of common stock remain available for grants under the 2016 Plan.

Both plans are administered by the 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, 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 2020: no dividend yield in all years, expected volatility, based on the Company’s historical volatility, 64% to 78%, risk-free interest rate between 0.30% to 1.82% and expected option life of 4.6 to 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, 2020, there was $213,732 of unrecognized compensation expense related to non-vested market-based share awards that is expected to be recognized through August 2022.

Share-based compensation was recognized as follows:

 

 

For the Nine

Months Ending

September 30,

2020

 

 

For the Nine 

Months Ending

September 30,

2019

 

 

 

 

 

 

 

 

 

 

2007 Employee Stock Option Plan

 

$

 

 

$

 

2016 Equity Incentive Plan

 

 

474,090

 

 

 

500,591

 

Warrants

 

 

74,646

 

 

 

57,005

 

 

 

 

 

 

 

 

 

 

Total share-based compensation

 

$

548,736

 

 

$

557,596

 

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LIGHTWAVE LOGIC, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2020 AND 2019

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, 2020:

 

 

 

Non-Qualified Stock Options and Warrants

Outstanding and Exercisable

 

 

 

 

Number of

Shares

 

 

Exercise

Price

 

Weighted Average

Exercise Price

 

 

 

 

 

 

 

 

 

 

 

Outstanding, December 31, 2019

 

 

16,302,517

 

 

$0.57 - $1.69

 

$

0.85

 

 

 

 

 

 

 

 

 

 

 

 

Granted

 

 

592,500

 

 

$0.51 - $0.83

 

$

0.76

 

Expired

 

 

(2,941,199

)

 

$0.85 - $1.02

 

$

0.90

 

Forfeited

 

 

(8,750

)

 

$1.10

 

$

1.10

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding, September 30, 2020

 

 

13,945,068

 

 

$0.51 - $1.69

 

$

0.83

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable, September 30, 2020

 

 

13,459,872

 

 

$0.51 - $1.69

 

$

0.83

 

The aggregate intrinsic value of options and warrants outstanding and exercisable as of September 30, 2020 was $2,825. 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 $0.575 for the Company’s common stock on September 30, 2020. No options or warrants were exercised during the nine and three month period ending September 30, 2020 and 2019.

Non-Qualified Stock Options and Warrants Outstanding

Range of

Exercise Prices

 

Number Outstanding

Currently Exercisable

at September 30, 2020

 

Weighted Average

Remaining

Contractual Life

 

Weighted Average

Exercise Price of Options and

Warrants Currently Exercisable

 

 

 

 

 

 

 

$0.51 - $1.69

 

13,459,872

 

3.87 Years

 

$0.83

NOTE 12 – RELATED PARTY

At September 30, 2020 the Company had a legal accrual to related party of $64,501, travel and office expense accruals of officers in the amount of $5,840 and accounting service fee accrual to a related party of $560. At December 31, 2019 the Company had a legal accrual to related party of $10,152 and travel and office expense accruals of officers in the amount of $4,653.

During July 2018, the Company issued a warrant to purchase 100,000 shares of common stock at a purchase price of $1.15 per share for professional services to be rendered over a twelve month period commencing July 1, 2018. The warrant was valued at $62,637, fair value upon issuance, using the Black-Scholes Option Pricing Formula. The expense is being recognized based on service terms of the agreement over a twelve month period. For the nine and three months ending September 30, 2019, the Company recognized $31,319 and $0 of expense.

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, 2020 and 2019, a contribution of $39,811 and $32,974 was charged to expense for all eligible non-executive participants. For the three months ending September 30, 2020 and 2019, a contribution of $13,875 and $11,817 was charged to expense for all eligible non-executive participants.

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Item 2Management’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 Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the Securities and Exchange Commission on March 16, 2020.

COVID-19

During this uncertain time, our critical priorities are the health and safety of our employees and contractors, all of whom began working from home and reduced travel to essential business needs starting in late March. We currently are operating under the guidelines of the State of Colorado Department of Public Health and Environment and the Governor of Colorado’s Executive Order, Safer-at Home, as amended. We began to incrementally bring certain employees back to work at our facilities on May 4, 2020 under the directives of the Governor’s Executive Order, and under the guidelines of the local and state health departments. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, local authorities, or that we determine are in the best interests of our employees and stockholders.

The COVID-19 pandemic has had and continues to have a significant impact on local, state, national and global economies. The actions taken by governments, as well as businesses and individuals, to limit the spread of the disease has significantly disrupted the Company’s normal activities. Numerous businesses, including some of our contractors, collaborative partners and suppliers, have either shut down or are operating on a limited basis with employees working from home, some employees have been furloughed or laid off and social distancing has been mandated through stay-at-home orders, and continues with the Safer-at-Home orders, as amended. The Company expects these actions to have a significant impact on the Company’s results of operations, particularly with respect to research and development, and financial position. The full extent of the impact to the Company due to the impact of the COVID-19 pandemic cannot be currently determined. The extent to which the COVID-19 pandemic will impact the Company will depend on future developments, which are highly uncertain and cannot be reasonably predicted, including the duration of the outbreak, the increase or reduction in governmental restrictions to businesses and individuals, the potential for a resurgence of the virus and other factors. The longer the COVID-19 pandemic continues, the greater the potential negative financial effect on the Company.

Overview

Lightwave Logic, Inc. is a development stage company moving toward commercialization of next generation electro-optic photonic devices made on its P2ICTM technology platform which uses in-house proprietary high-activity and high-stability organic polymers. Electro-optical devices convert data from electric signals into optical signals for multiple applications.

Our differentiation at the device level is in higher speed, lower power consumption, simplicity of manufacturing and reliability. We have demonstrated higher speed and lower power consumption in packaged devices, and during 2019, we developed new materials that promise to further lower power consumption. 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.

We are initially targeting applications in data communications and telecommunications markets and are exploring other applications for our polymer technology platform.

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 they have the potential to replace more expensive, higher power consuming, slower-performance materials and devices used in fiber-optic communication networks.

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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. Our Company contemplates future applications that may address the needs of semiconductor companies, optical network companies, Web 2.0 media companies, high performance computing companies, telecommunications companies, aerospace companies, and 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.

Polymer Photonic Integrated Circuits (P2ICTM)

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 4 channel polymer PIC. In this case, the number of photonic components would increase by a factor of 4. Another type 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 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 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 and associated PIC platforms that can address higher data rates in a lower cost, lower power consuming manner, with much simpler modulation 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. 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.

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; or (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:

Further the development of proprietary organic electro-optic polymer material systems  

Develop photonic devices based on our P2ICTM technology  

Continue to develop proprietary intellectual property  

Grow our commercial device development capabilities  

Grow our product reliability and quality assurance capabilities  

Grow our optoelectronic packaging and testing capabilities

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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  

Continue to 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.

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

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 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.

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.

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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, 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 with an associated third-party research. We are now designing 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 and beyond 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 and improve speed of access.

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.

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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. The 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. 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:

image provided by client

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 co