Overview
Lightwave Logic, Inc. is a development
stage company moving toward commercialization of next generation electro-optic photonic devices made on its P2IC™ technology
platform which we have detailed as: 1) Polymer Stack™, 2) Polymer Plus™, and 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.
Our differentiation at the modulator
device level is in higher speed, lower power consumption, simplicity of manufacturing, small footprint (size), and reliability. We have
demonstrated higher speed and lower power consumption in packaged devices, and during 2022, we continued to make advances in techniques
to translate material properties to efficient, reliable modulator devices with commercial foundries. We are currently focused on testing
and demonstrating the simplicity of manufacturability and reliability of our devices, including in conjunction with the silicon photonics
manufacturing ecosystem. In 2022 we discussed the addition of several silicon-based foundry partners to help scale in volume our polymer
modulator devices. Silicon-based foundries are large semiconductor fabrication plants developed for the electronics IC business, that
are now engaging with silicon photonics to increase their wafer throughput. Partnering with silicon-based foundries not only demonstrates
that our polymer technology can be transferred into standard production lines using standard equipment, it also allows us to efficiently
utilize our capital. The foundry partnerships will allow us to scale our high-performance polymer optical engines quickly and efficiently.
Our extremely strong and broad patent
portfolio allows us to optimize our business model in three areas: 1) Traditional focus on product development, 2) Patent licensing and
3) Technology transfer to foundries. We are continually looking to strengthen our patent portfolio both by internal inventions and acquisition
of intellectual property.
We are initially targeting applications
in fiber optic data communications and telecommunications markets and are exploring other applications that include automotive/LIDAR,
sensing, displays etc., for our polymer technology platform. Our goal is to have our unique polymer technology platform become ubiquitous.
Unless the context otherwise requires,
all references to the “Company,” “we,” “our” or “us” and other similar terms means Lightwave
Logic, Inc. Also, this Form 10-K Annual Report includes the names of various government agencies and the trade names of other companies.
Unless specifically stated otherwise, the use or display by us of such other parties’ names and trade names in this report is not
intended to and does not imply a relationship with, or endorsement or sponsorship of us by, any of these other parties.
Materials Development
Our Company designs and synthesizes
organic chromophores for use in its own proprietary electro-optic polymer systems and photonic device designs. A polymer system
is not solely a material, but also encompasses various technical enhancements necessary for its implementation. These include host polymers,
poling methodologies, and molecular spacer systems that are customized to achieve specific optical properties. Our organic electro-optic
polymer systems compounds are mixed into solution form that allows for thin film application. Our proprietary electro-optic polymers are
designed at the molecular level for potentially superior performance, stability, and cost-efficiency. We believe our proprietary and unique
polymers have the potential to replace more expensive, higher power consuming, slower-performance materials such as semiconductor modulator
devices that are used in fiber-optic communication networks today.
Our patented and patent pending
molecular architectures are based on a well-understood chemical and quantum mechanical occurrence known as aromaticity. Aromaticity
provides a high degree of molecular stability that enables our core molecular structures to maintain stability under a broad range of
operating conditions.
We expect our patented and patent-pending
optical materials along with trade secrets and licensed materials, to be the core of and the enabling technology for future generations
of optical devices, modules, sub-systems, and systems that we will develop or potentially out-license to electro-optic device manufacturers,
contract manufacturers, original equipment manufacturers, etc. Our Company contemplates future applications that may address the needs
of semiconductor companies, optical network companies, Web 2.0/3.0 media companies, high performance computing companies, telecommunications
companies, aerospace companies, automotive companies, as well as for example, government agencies.
Device Design and Development
Electro-optic Modulators
Our Company designs its own proprietary
electro-optical modulation devices. Electro-optical modulators convert data from electric signals into optical signals that can then be
transmitted over high-speed fiber-optic cables. Our modulators are electro-optic, meaning they work because the optical properties of
the polymers are affected by electric fields applied by means of electrodes. Modulators are key components that are used in fiber optic
telecommunications, data communications, and data centers networks etc., to convey the high data flows that have been driven by applications
such as pictures, video streaming, movies etc., that are being transmitted through the Internet. Electro-optical modulators are expected
to continue to be an essential element as the appetite and hunger for data increases every year as well as the drive towards lower power
consumption, and smaller footprint (size).
Polymer Photonic Integrated Circuits
Our Company also designs its own
proprietary 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 footprint needed to increase
the number of photonic functions residing on a semiconductor chip to create a progression like what was seen in the computer integrated
circuits, commonly referred to as Moore’s Law. One type of integration is to combine several instances of the same photonic functions
such as a plurality of modulators to create a multi-channel polymer PIC. The number of channels can be varied depending on application.
For example, the number of photonic components could increase by a factor of 4, 8, or 16. Another type of integration is to combine different
types of devices including from different technology bases such as the combination of a semiconductor laser with a polymer modulator.
Our P2IC™ platform encompasses both these types of architecture.
Current semiconductor photonic technology
today is struggling to reach faster device speeds. Our modulator devices, enabled by our electro-optic polymer material systems, work
at extremely high frequencies (wide bandwidths) and possess inherent advantages over current crystalline electro-optic material contained
in most modulator devices such as bulk lithium niobate (LiNbO3), indium phosphide (InP), silicon (Si), and gallium arsenide GaAs). Our
advanced electro-optic polymer platform is creating a new class of modulators such as the Polymer Stack ™, Polymer Plus™,
Polymer Slot™, and associated PIC platforms that can address higher data rates in a lower cost, lower power consuming manner, smaller
footprint (size) with much simpler data encoding techniques. Our electro-optic polymer material will boost the performance of standard
PIC platforms such as silicon photonics and indium phosphide.
Our electro-optic polymers can be
integrated with other materials platforms because they can be applied as a thin film coating in a fabrication clean room such as may be
found in semiconductor foundries using standard clean room tooling. This approach we call Polymer Plus™. Our polymers are unique
in that they are stable enough to seamlessly integrate into existing CMOS, Indium Phosphide (InP), Gallium Arsenide (GaAs), and other
semiconductor manufacturing lines. Of relevance are the integrated silicon photonics platforms that combine optical and electronic
functions. These include a miniaturized modulator for ultra-small footprint applications in which we term the Polymer Slot™. This
design is based on a slot modulator fabricated into semiconductor wafers that include both silicon and indium phosphide.
Our Company has a fabrication facility
in Colorado to apply standard fabrication processes to our electro-optic polymers which create modulator devices. While our internal fabrication
facility is capable of manufacturing modulator devices, we have partnered with commercial silicon-based fabrication companies that are
called foundries who can scale our technology with volume quickly and efficiently. The process recipe for fabrication plants or foundries
is called a ‘process development kit’ or PDK. We are currently working with commercial foundries to implement our electro-optic
polymers into accepted PDKs by the foundries. Our work with the foundries is being focused with the Polymer Plus™ and the Polymer
Slot™ polymer modulators.
Glossary
Glossary of select technology terms
to provide you with a better understanding our Company’s technology and devices:
Electro-optic devices -
Electro-optic devices convert data from electric signals into optical signals for use in communications systems and in optical interconnects
for high-speed data transfer.
Electro-optic material -
Electro-optic material is the core active ingredient in high-speed fiber-optic telecommunication systems. Electro-optic materials
are materials that are engineered at the molecular level. Molecular level engineering is commonly referred to as “nanotechnology.”
Electro-optic modulators
- Electro-optic (E/O) modulators are electro-optic devices that perform electric-to-optic conversions within the infrastructure
of the internet. Data centers may also benefit from this technology through devices that could significantly increase bandwidth and speed
while decreasing costs. Polymer E/O modulators can be designed and fabricated with multiple structures such as Ridge waveguide (Polymer™
Stack) and slot waveguide (Polymer Slot™). The waveguides allow the light to be efficiently coupled into and out of the modulators,
and provide a basis for integrating modulators together.
Gbaud - The rate of symbol
changes in data transmission in billions of symbol changes per second. Each symbol can support one or more bits, the number of bits depending
on the modulation format.
NRZ – See PAM2.
PAM2 – 2 level Pulse
Amplitude Modulation, a modulation format in which the optical power in each symbol can assume either of two different levels, low or
high, representing, respectively, a 0 or a 1. PAM2 supports 1 bit per symbol so the bit rate is equal to the baud rate or symbol rate.
For example, a modulator capable of supporting 100 Gbaud can transmit 100 Gbps with PAM2 modulation. This modulation format is often called
NRZ (Non Return to Zero).
PAM4 - 4 level Pulse Amplitude
Modulation, a modulation format in which the optical power in each symbol can assume any one of 4 different levels. PAM4 supports 2 bits
per symbol so the bit rate is equal to two times the baud rate or symbol rate. For example, a modulator capable of supporting 100 Gbaud
can transmit 200 Gbps with PAM4 modulation.
PAM8 - 8 level Pulse Amplitude
Modulation, a modulation format in which the optical power in each symbol can assume any one of 8 different levels. PAM4 supports 3 bits
per symbol so the bit rate is equal to three times the baud rate or symbol rate. For example, a modulator capable of supporting 100 Gbaud
can transmit 300 Gbps with PAM8 modulation.
Photonic Devices - Photonic
devices are components for creating, manipulating, or detecting light. This can include modulators, laser diodes, light-emitting diodes,
solar and photovoltaic cells, displays and optical amplifiers. Other examples are devices for modulating a beam of light and for combining
and separating beams of light of different wavelength.
Polymers - Polymers, also
known as plastics, are large carbon-based molecules that bond many small molecules together to form a long chain. Polymer materials can
be engineered and optimized using nanotechnology to create a system in which unique surface, electrical, chemical, and electro-optic characteristics
can be controlled. Materials based on polymers are used in a multitude of industrial and consumer products, from automotive parts to home
appliances and furniture, as well as scientific and medical equipment.
Our Business Opportunity
Lightwave Logic, Inc. is developing
next generation proprietary photonic devices that are based on our advanced electro-optical polymer material systems. Current legacy technology
is based on inorganic crystalline materials, which has allowed for the proliferation of data over fiber optic cables. However, there are
inherent molecular deficiencies that have prevented this technology from scaling down in price and up in functionality, especially in
terms of $/Gbps. This is primarily due to a closed valence structure that does not allow for the molecular improvements. The valence or
valency of an element is a measure of its combining power with other atoms when it forms chemical compounds or molecules. Also, the physical
properties of a crystal do not allow for its implementation into highly miniaturize slot structures that are in simple terms the pathways
that light travels through in the device.
Organic polymer materials on the
other hand, have free electrons that allow for limitless potential to combine with other molecular structures, which allows for multiple
options and combinations to improving performance characteristics. Importantly, because they can be applied to optical structures in thin-film
liquid form, it is possible to imbue electro-optic ability to highly miniaturized slot structures. Organic polymer materials are also
vastly cheaper to manufacture in comparison to growing exotic crystals that are prone to contamination and further must be sliced into
thin wafers. Our Company believes that the combination of less expensive manufacturing cost, ease of application, and better scalability,
together with a lower cost of ownership due to lower heat dissipation (requiring less cooling), will create enormous demand for our products.
Many companies’ early attempts
at developing commercially reliable organic polymers were stymied due to the difficulty of creating organic molecules that could remain
electro-optically active after being subjected to the high heat of semiconductor manufacturing temperatures (such as silicon CMOS, InP,
GaAs etc.). These early attempts also encountered difficulty synthesizing materials that could withstand photochemical bleaching (loss
of sensitivity to specific frequencies) and material degradation due to high operating temperatures.
Over the last several years, our
Company has made various scientific breakthroughs that have allowed for the synthesis of proprietary organic polymer materials that can
withstand extremely high process temperatures that exceed 1750C. Additionally, these materials have demonstrated photochemical
stability, even after being subjected to high intensity light for over 5,000 hours and exhibited little electro optic degradation even
after being continuously exposed at 1100C. This operating temperature exceeds the maximum commercial operating temperatures
of approximately 850C, found in large data centers. After successfully achieving material test results that either met or exceeded
commercial requirements (subsequently confirmed by an outside entity), in late 2016, the Company began production of its first photonic
prototype device, a ridge waveguide modulator which is called a Polymer Stack™.
Our First Product – The Ridge Waveguide Modulator
A ridge waveguide modulator is a
type of modulator where the waveguide is fabricated within a layer of our electro-optic polymer system. Various cladding materials and
electrodes are layered over the core polymer. The polymer materials are then part of an integrated photonics platform that can house other
photonic devices, such as lasers, waveguides etc.
In April 2017 we achieved bandwidth
suitable for 25Gbps data rates in an all-organic polymer ridge waveguide intensity modulator prototype, a significant improvement over
our initial 10Gbps device modulator prototype that was announced in 2016. This breakthrough was significant because a 25Gbps data rate
is important to the optical networking industry because this data rate is a key requirement for achieving 100 Gbps (using 4 channels
of 25 Gbps). In July 2017 we advanced our high-speed modulation performance to satisfy 28Gbps data rates for QSFP28 standards which are
also utilized for 100Gbps data center applications.
In September 2017 we achieved outstanding
performance of our ridge waveguide Mach-Zehnder modulators ahead of schedule, with bandwidth performance levels that will enable 50Gbaud
modulation in fiber-optic communications. This important achievement will allow users to utilize arrays of 4 x 50Gbaud polymer modulators
using PAM-4 encoding to access 400Gbps data rate systems. Pulse-Amplitude Modulation (PAM-4) is an encoding scheme that can double the
amount of data that can be transmitted.
We are now further optimizing our
high-performance modulators for additional specifications that are beginning to be required by the fiber communications industry for applications
such as networks running at data rates of 800Gbps. 800Gbps will require combining 4 channels of 200Gbps utilizing PAM4 encoding schemes
which will prove challenging for many existing modulator technologies. Furthermore, we are collaborating with industry partners to optimize
the packaging our modulators so that potential customers can evaluate our high-performance modulators in their systems. This effort will
also aid in addressing one of the most under-evaluated processes of developing high speed devices onto a new and novel technology platform
which is robustness and reliability. We have already made extensive progress with our polymer materials on this front, and now we are
integrating our robust polymer materials onto an integrated photonics platform to provide customers with a more miniaturized, higher performance
solution for their data rich systems.
While our initial focus is to address
data communications and telecommunications network applications along with cloud computing/data center needs, we believe that in the future
we will have additional opportunities to address other applications such as: backplane optical interconnects, photovoltaic cells, medical
applications, satellite reconnaissance, navigation systems, radar applications, optical filters, spatial light modulators; and all-optical
switches.
Electro-Optic Polymer Production – Our Approach vs. the BLA Approach
Our Electro-Optic Material Approach
Our core material expertise relates
to the production of high-performance, high-stability electro-optic polymers for high-speed (wide bandwidth) telecommunication and data
communications applications. More specifically, it lies in a less mainstream, yet firmly established, scientific phenomenon called aromaticity.
Aromaticity causes a high degree of molecular stability. It is a molecular arrangement wherein atoms combine into multi-membered rings
and share their electrons among each other. Aromatic compounds are stable because the electronic charge distributes evenly over a great
area preventing hostile moieties, such as oxygen and free radicals, from finding an opening to attack.
Previous and Current Competitive Organic Electro-Optic
Polymer Efforts
For the past several decades, diverse
corporate interests, including, to our knowledge, IBM, Lockheed Martin, DuPont, AT&T Bell Labs, Honeywell, Motorola, HP, 3M, and others
in addition to numerous universities and U.S. Government Agencies, have attempted to produce high-performance, high-stability electro-optic
polymers for high-speed (wide bandwidth) telecommunication applications. These efforts were largely unsuccessful due, in our opinion,
to the industry’s singular adherence to an industry pervasive engineering model known as the Bond Length Alternation ("BLA")
theory model, which none of our patented molecular designs rely upon. The BLA model, like all other current industry-standard molecular
designs, consists of molecular designs containing long strings of atoms called polyene chains. Longer polyene chains provide higher electro-optic
performance, but are also more susceptible to environmental threats, which result in unacceptably low-performing, thermally unstable electro-optic
polymers.
As a result, high frequency modulators
engineered with electro-optic polymers designed on the BLA model or any other polyene chain design models are unstable over typical operating
temperature ranges, and often exhibit performance degradation within days, hours or even minutes. Similarly, lower frequency modulators
exhibit comparable failings, but to a lesser extent. These flaws, in most cases, have prevented commercial quality polymer-based modulators
from entering the commercial marketplace. The thermal stability of these devices does not generally meet the minimum Telcordia GR-468
operating temperature range (-40 degrees Celsius to +85 degrees Celsius) much less the harsher MILSPEC 883D (military specification) range
of -55 degrees Celsius to 150 degrees Celsius. While many new applications do not require meeting full military or Telcordia GR-468 specifications
for polymers, many potential customers prefer to see polymer operate at or near these conditions to convey confidence in the material
system. We understand from initial conversations with data center architects and designers that the temperature specifications that our
materials achieve are compliant with their equipment design needs.
We are aware of other academic and
commercial development efforts—some by larger companies with vastly more financial resources than we possess. However, we believe
that no one yet has developed organic polymer materials that have demonstrated the combination of thermal stability and photochemical
stability that can meet or exceed commercial specifications.
Our Electro-Optic Photonic P2IC™ Device Approach
Our electro-optic devices are built
around our proprietary organic polymer material systems that we believe will enable better performance than the current embedded legacy
technology built around inorganic materials. We also believe that the inherent flexibility of being able to apply our organic polymer
materials in liquid thin-film form will accelerate the move toward ultra-miniaturization of Polymer Photonic Integrated Circuits (P2ICTM)
by increasing the number of photonic circuits on a single chip. Polymer photonics (previously referred in industry as silicon organic
hybrid (SOH)) is the application of polymers on to a platform such as silicon where there are both active and passive photonic component
designs. In polymer photonics, polymer devices such as modulators, waveguides, and multiplexers can be fabricated on to a silicon platform
that acts as a package as well as a base for mounting lasers (which are needed to source the light).
Our initial device, a ridge waveguide
modulator, though highly miniaturized utilizes conventional design and fabrication techniques in the industry. Our future devices will
utilize silicon photonics (SiPh) technology, which can support highly miniaturized slot waveguides structures etched in large format,
low cost, and less expensive silicon wafers coated with our organic electro-optic polymers. The low-cost structure compares well to compound
semiconductor technologies such as GaAs (Gallium arsenide) and InP (Indium Phosphide), which suffer from small format wafers that do not
allow the economies of scale in high volume fabrication plants. The degree of miniaturization possible of the slot modulator using SiPh
is not technically feasible to accomplish with inorganic crystalline materials. Although this may not always remain the case, presently
there are nearly insurmountable technical difficulties that are inherent to a crystalline molecule.
Although we believe that our polymers
will be the key differentiating factor in Polymer photonic devices, we do not currently possess the technical skills and instrumentation
necessary to fabricate and test PICs at this dramatically reduced scale and intend to seek an external partner to assist with development.
Our Intellectual Property
Our research and development efforts
over the last 10+ years have yielded our Company an extensive patent portfolio as well as critical trade secrets, unpatented technology
and proprietary knowledge related to our optical polymer materials. Our intellectual property portfolio has expanded significantly over
the last year as we are developing our P2IC™ into prototypes. We actively filed technical utility patents over the past
few years, and are currently in the process of readying a number of other inventions for formal filings in 2023. We expect to continue
innovating with our P2IC platform for the next couple of years. We had a number of patents issued over the past few months
indicating that our technology is being recognized as being unique.
In 2018, we acquired the polymer
technology intellectual property assets of BrPhotonics Productos Optoelectrónicos S.A., a Brazilian corporation, which significantly
advanced our patent portfolio of electro-optic polymer technology with 15 polymer chemistry materials, devices, packaging and subsystems
patents and further strengthened our design capabilities to solidify our market position as we prepare to enter the 400Gbps integrated
photonics marketplace with a highly competitive, scalable alternative to installed legacy systems.
In
2022, we acquired the polymer technology and intellectual property assets of Chromosol Ltd (UK), which significantly
strengthened our Company's design capabilities with foundry PDKs with extremely low temperature atomic layer deposition (ALD) processes
that effectively hermetically seal polymer devices that have been prepared for high volume manufacturing. The advanced fabrication processes
of ALD with temperatures below 100C will solidify our market position with both the Company's manufacturing foundry partners as well
as end-users as we prepare to enter the 800Gbps integrated photonics marketplace. The acquisition also advanced our Company’s patent
portfolio of electro-optic polymer technology with an innovative polymer chemistry device patent that has potential to increase the performance
of integrated modulators through optical amplification in a photonic integrated circuit (PIC) and enhance the functionality of the PIC
by integrating laser light sources made using the polymer-based gain and a laser optical cavity defined on the Silicon photonic platform,
with our Company’s high speed, high efficiency modulators.
In total, our patent portfolio currently
consists of 66 granted patents that include 52 from the US, 1 from Canada, 6 from the EU, 2 from Japan and 3 from China.
Our materials patent portfolio has
also strengthened significantly with the filing of additional new patent applications on our core Perkinamine™ molecular compounds
as well as recent, innovative inventions that are expected to protect our P2IC polymer PIC platform from potential competition.
Included in our patent portfolio are the following nonlinear
optic chromophore designs:
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Stable Free Radical Chromophores, processes for preparing the same |
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Stable Free Radical Chromophores, processes for preparing the same |
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Tricyclic Spacer Systems for Nonlinear Optical Devices |
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Anti-Aromatic Chromophore Architectures |
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Heterocyclical Anti-Aromatic Chromophore Architectures |
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Heterocyclical Chromophore Architectures |
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Heterocyclical Chromophore Architectures with Novel Electronic Acceptor Systems |
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Multi-fiber/port hermetic capsule sealed by metallization and method |
Our patent portfolio includes patents not only on nonlinear optic chromophore
designs, but also device designs and inventions, fabrication process inventions, packaging design inventions, as well as novel chemistry
to enable high performance, low power, small footprint polymer PIC technology.
Our strategic plan is to utilize
our core proprietary technology and leverage our proprietary optical 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, automotive/LiDAR companies,
sensing companies, aerospace companies and government agencies.
We rely on a combination of patents,
patent applications, trademarks, trade secrets and contractual provisions to protect our technologies. Further, employees are required
to surrender any inventions or intellectual property developed as part of their employment agreements. We also have a policy of requiring
prospective business partners to enter into non-disclosure agreements (NDAs) before disclosure of any of our confidential or proprietary
information. Our Company can make no assurances that we will be able to effectively protect our technologies and know-how or that third
parties will not be able to develop similar technologies and know-how independently.
The anti-aromatic nature of these
structures dramatically improves the "zwitterionic-aromatic push-pull" of the systems, providing for low energy charge transfer.
Low energy charge transfer is important for the production of extremely high electro-optic character.
Heterocyclical Steric Hindering
System This patent describes a nitrogenous heterocyclical structure for the integration of steric hindering groups that are necessary
for the nanoscale material integration. Due to the [pi]-orbital configuration of the nitrogen bridge, this structure has been demonstrated
not to interfere with the conductive nature of the electronic conductive pathway and thus is non-disruptive to the electro-optic character
of the core molecular construction. The quantum mechanical design of the system is designed to establish complete molecular planarity
(flatness) for optimal performance.
Totally Integrated Material Engineering
System. This patent covers material integration structures under a design strategy known as Totally Integrated Material Engineering. These
integration structures provide for the "wrapping" of the core molecule in sterically hindering groups that maximally protect
the molecule from environmental threats and maximally protect it from microscopic aggregation (which is a major cause of performance degradation
and optical loss) within a minimal molecular volume. These structures also provide for the integration of polymerizable groups for integration
of materials into a highly stable cross-linked material matrix.
Recent Significant Events and Milestones Achieved
During
February and March 2018, we moved our Newark, Delaware synthetic laboratory and our Longmont, Colorado optical testing laboratory and
corporate headquarters to office, laboratory and research and development space located at 369 Inverness Parkway, Suite 350, Englewood,
Colorado. The 13,420 square feet Englewood facility includes fully functional 1,000 square feet of class 1,000 cleanroom, 500 square feet
of class 10,000 cleanroom, chemistry laboratories, and analytic laboratories. The Englewood facility streamlines all of our Company’s
research and development workflow for greater operational efficiencies.
During
March 2018, our Company, together with our packaging partner, successfully demonstrated packaged polymer modulators designed for 50Gbaud,
which we believe will allow us to scale our P2IC™ platform with our Mach-Zehnder ridge waveguide modulator design as
well as other photonics devices competitively in the 100Gbps and 400Gbps datacom and telecommunications applications market. We are currently
fine-tuning the performance parameters of these prototypes in preparation for customer evaluations.
During
June 2018, our Company Acquired the Polymer Technology Intellectual Property Assets of BrPhotonics Productos Optoelectrónicos S.A.,
a Brazilian corporation, which significantly advanced our patent portfolio of electro-optic polymer technology with 15 polymer chemistry
materials, devices, packaging and subsystems patent and further strengthened our design capabilities to solidify our market position as
we prepare to enter the 400Gbps integrated photonics marketplace with a highly competitive, scalable alternative to installed legacy systems.
Also, during
June 2018, our Company promoted polymer PICs and Solidified Polymer PICs as Part of the Photonics Roadmap at the World Technology Mapping
Forum in Enschede, Netherlands, which includes our Company’s technology of polymers and polymer PICs that have the potential to
drive not only 400Gbps aggregate data rate solutions, but also 800Gbps and beyond.
In August
2018 we announced the completion (ahead of schedule) of our fully equipped on-site fabrication facility, where we are expanding our high-speed
test and design capabilities. We also announced the continuation of the building of our internal expertise with the hiring of world-class
technical personnel with 100Gbps experience.
In February
2019 we announced a major breakthrough in our development of clean technology polymer materials that target the insatiable demand for
fast and efficient data communications in the multi-billion-dollar telecom and data markets supporting Internet, 5G and IoT (Internet
of Things) webscale services. The improved thermally stable polymer has more than double the electro-optic response of our previous materials,
enabling optical device performance of well over 100 GHz with extremely low power requirements. This addition to the family of PerkinamineTM
polymers will hold back run-away consumption of resources and energy needed to support ever-growing data consumption demands. We continue
to conduct testing of the material and assessment of associated manufacturing processes and device structures prior to release to full
development.
In
March 2019 we created an Advisory Board comprised of three world-class leaders in the photonics industry: Dr. Craig Ciesla, Dr. Christoph
S. Harder, and Mr. Andreas Umbach. In January 2022 Dr. Ciesla was named to our Board of Directors, and our Advisory Board is currently
comprised of Dr. Franky So, Dr. Christoph S. Harder, Mr. Andreas Umbach and Dr. Joseph
A. Miller, who is a former member of our Board of directors. The Advisory Board is working closely
with our Company leadership to enhance our Company’s product positioning and promote our polymer modulator made on our proprietary
Faster by Design™ polymer P2IC™
platform. The mission of the Advisory Board is initially to increase our Company’s outreach into the datacenter interconnect market
and later to support expansion into other billion-dollar markets. The Advisory Board members have each been chosen for their combination
of deep technical expertise, breadth of experience and industry relationships in the fields of fiber optics communications, polymer and
semiconductor materials. Each of the Advisory Board members has experience at both innovators like Lightwave Logic and large industry
leaders of the type most likely to adopt game-changing polymer-based products. In addition, they possess operational experience with semiconductor
and polymer businesses.
Also, in
March 2019, our Company received the “Best Achievement in PIC Platform” award for our 100 GHz polymer platform from the PIC
International Conference. The award recognizes innovative advances in the development and application of key materials systems driving
today’s photonic integrated circuits (PICs) and providing a steppingstone to future devices.
During
the second quarter of 2019, our Company promoted its polymers at CoInnovate in May and the World Technology Mapping Forum in June. CoInnovate
is a meeting of semiconductor industry experts. The World Technology Mapping Forum is a group authoring a photonics roadmap out to 2030.
In September
2019 at the prestigious European Conference on Communications (ECOC) in Dublin, Ireland, we showed measured material response over frequency
and the resulting optical data bits stream on our clean technology polymer materials, the newest addition to our family of PerkinamineTM
polymers, that meet and exceed of our near-term target speed of 80 GHz. We also released data demonstrating stability under elevated temperatures
in the activated (poled to create data carrying capability) state.
In October
2019, we reported that energy-saving polymer technology is highlighted in the recently published Integrated Photonics Systems Roadmap
- International (IPSR-I). The roadmap validates the need for low-voltage, high-speed technologies such as ours.
In May
2020, we announced that our latest electro-optic polymer material has exceeded target performance metrics at 1310 nanometers (nm), a wavelength
commonly used in high-volume datacenter fiber optics. This material demonstrates an attractive combination at 1310 nm of high electro-optic
coefficient, low optical loss and good thermal stability at 850 Celsius. The material is expected to enable modulators with
80 GHz bandwidth and low drive power, and has an electro-optic coefficient of 200 pm/V, an industry measure of how responsive a material
is to an applied electrical signal. This metric, otherwise known as r33, is very important in lowering power consumption when the material
is used in modulator devices. This technology is applicable to shorter reach datacenter operators, for whom decreasing power consumption
is imperative to the bottom line of a facility. We considered this a truly historic moment—not only in our Company’s history,
but in our industry–as we have demonstrated a polymer material that provides the basis for a world-class solution at the 1310 nm
wavelength, something which other companies have spent decades attempting to achieve.
In July
2020, we announced the official launch of our new corporate website www.lightwavelogic.com, reflecting ongoing efforts to provide up-to-date
information for investors and potential strategic partners. The revamped website offers a clean, modern design integrated with helpful
tools and investor relations resources, including a new corporate explainer video, to illustrate the target markets and advantages of
Lightwave Logic’s proprietary electro-optic polymers.
In
August 2020, we announced the addition of Dr. Franky So, a leading authority in the OLED industry, to our Advisory Board. Dr. So is the
Walter and Ida Freeman Distinguished Professor in the Department of Materials Science and Engineering at North Carolina State University.
Previously, he was the Head of Materials and Device research for OLEDs at OSRAM Opto Semiconductors, as well as Motorola’s corporate
research lab in the 1990s. Dr. So was an early researcher in electro-optic (EO) polymer modulators at Hoechst Celanese. As a member of
the Company’s advisory board, Dr. So will work closely with management to enhance Lightwave’s product positioning for, as
well as the promotion of, its polymer modulators made on its proprietary platform. In addition, he will provide technical support and
advisory services to the Lightwave materials and device teams.
On
October 7, 2020 we announced the receipt of U.S. Patent number 10,754,093 that improves both the performance and reliability of our high-speed,
low-power electro-optic polymer modulators intended for datacenter and telecommunications applications. The patent allows multi-layered
electro-optic polymer modulators to perform more efficiently through the design of custom interfaces. These interfaces are designed into
the cladding layers that allow optical transmission, electrical conductivity, material integrity, as well as a prevention of solvents
affecting adjacent polymer materials. The net impact of all of this allows for our Company’s modulators to improve performance across
the board, enabling higher reliability in the fiber optic communications environment.
On October
15, 2020, we announced that our proprietary polymer technologies are compatible with currently available integrated photonics platforms.
Our proprietary electro-optic materials are currently in the prototyping phase and are fabricated onto standard silicon wafers, and this
Polymer Plus™ advancement, driven by the feedback our Company received from potential customers to-date, has allowed our materials
to be suitable for additive integration to integrated photonics platforms such as silicon photonics, as well as indium phosphide and other
standard platforms – therefore enabling simpler integration by customers. We believe this breakthrough allows a polymer modulator
to enhance the performance of existing integrated photonics solutions in the marketplace, enabling higher speed and lower power consumption
on foundry-fabricated photonics designs. Since our technology is additive to existing platforms such as silicon photonics, our electro-optic
polymers are not actually competing with integrated photonic platforms, but rather enabling them to be more competitive in the marketplace,
and it further validates our EO polymer platform as ideally suited to enable optical networking more efficiently than ever.
On October
21, 2020, we announced that we have optimized a robust, photo-stable organic polymer material for use in our next-generation modulators
intended to be trialed with potential customers under NDA. Our materials show high tolerance to high-intensity infrared light, common
in a fiber optic communications environment and increasingly important as higher density of devices access the network, directly resulting
in higher intensity infrared light levels. Our preliminary results suggest that our recently developed electro-optic polymer material,
designed based on potential customer input, displays unrivaled light tolerance (also known as photostability) compared to any organic
commercial solution in use today. Our results meet both our current internal criteria and address potential customer feedback.
On November
2, 2020, we disclosed results on our polymer material stability testing including further results for electro-optic efficiency for our
Company’s materials that operate both at 1550nm as well as 1310nm. We demonstrated test materials results for electro-optic efficiency
to 4000hrs, improvement in sensitivity to oxygen as part of a broadband exposure test, and stability for polymers exposed to 1310nm light
at 100mW.
On November
20, 2020 we announced the receipt of U.S. Patent number 10,591,755 that details an important invention that allows users of electro-optic
polymer modulators to not only operate the devices with high speed and low power directly from CMOS IC chips, but gives them the opportunity
to avoid the expense, physical footprint and power consumption of high-speed modulator driver ICs. Furthermore, this patent strengthens
our freedom of manufacturing, and directly enables our modulators to become more competitive in the marketplace.
On December
16, 2020 we announced the development of a new sealant for our future Chip-on-Board (COB) packaged polymer platform. The sealant, which
blocks oxygen and other atmospheric gases, is a key step in our Company’s development towards a polymer modulator without a package,
an important enabling technology for the industry. We plan to develop the sealant for commercial implementation in our future modulators.
Recent results suggest that our electro-optic polymer sealant material displays encouraging barrier properties and is expected to translate
to significant improvement in bare chip robustness against atmospheric gases, as compared to existing EO polymer commercial solutions
in use today. While the initial measurements are highly promising, our Company plans to continue development work to further optimize
the sealant material and barrier performance towards the chip-on-board goal.
On
January 13, 2021, we announced the receipt of U.S. Patent number 10,886,694 that details an invention that allows electro-optic polymer
modulators to be packaged in a hermetic environment using well-known, high-volume and low-cost fabrication processes that are available
in a typical semiconductor fabrication foundry – improving suitability for mass production. Further, the design of this capsule
package can improve both the reliability and the coupling interface between fiber optic cables and their laser sources for arrayed photonic
integrated circuit solutions. The package can also interpose signals from an underlying circuit board to the polymer modulators, lasers,
and other components for data transfer. The hermetic capsule is built from a semiconductor base that contains electrical and optical circuits
and components. A hermetic capsule chamber is created by the design of a semiconductor lid that is sealed to the semiconductor base platform
by a metallization process. Using standardized fabrication techniques we can now create a package that achieves the performance, reliability,
cost, and volume requirements that has been a challenge for the photonics industry for years.
On
May 11, 2021, we announced the receipt of U.S. Patent number 10,989,871 that details an invention that allows for improved protective
polymer layers in modulators when designed into advanced integrated photonic platforms, better positioning them for high-volume manufacturing
processes. The protective layers will enhance electro-optic polymer devices' performance through higher reliability, better optical performance
and enable the use of standardized manufacturing processes best suited for mass-production.
On June
7, 2021, we announced that our company’s common stock was added to the Solactive EPIC Core
Photonics EUR Index NTR as part of the index's semi-annual additions. The index includes global public companies with a common theme of
optoelectronics, photonics, and optical technologies in general that range from components, modules, manufacturers, and optical network
system companies. This inclusion broadens our exposure to the capital markets community, as well as credibility with potential partners
and customers.
On
June 16, 2021, we announced test results from new modulators fabricated in 2021, which exceeded bandwidth
design targets and achieved triple the data rate as compared to competing devices in use today. The breakthrough new devices demonstrated
3dB electro-optical with electrical bandwidths that exceed 100GHz – with measurements coming close to our Company’s state-of-the-art
110GHz test equipment capability. We expect this advancement to have a profound impact on the traffic flow on the internet.
On
June 24, 2021, we announced the receipt of U.S. patent number 11,042,051 that details a breakthrough
new device design that enables mass-volume manufacturing when designed into advanced integrated photonic platforms. The device
design enhances reliability, improves optical mode control and most important, lowers by consumption through the use of direct-drive,
low-voltage operation. The patent is entitled, "Direct drive region-less polymer modulator methods of fabricating and materials therefor"
and is expected to open the opportunity for low power consumption electro-optic polymers to be developed into large foundry PDKs (process
development kits) and be ready for mass volume commercialization. The patent emphasizes our technology
platform using fabrication techniques that would naturally fit into foundry PDKs.
On
August 4, 2021, we announced that we developed improved thermal design properties for electro-optic polymers used in our Polymer Plus™
and Polymer Slot™ modulators, enabling the speed, flexibility and stability needed for high-volume silicon foundry processes. We
successfully created a 2x improvement in r33, while allowing higher stability during poling and post-poling. This provides better thermal
performance and enables greater design flexibility in high-volume silicon foundry PDK (process development kit) processes.
On
August 9, 2021, we announced the receipt of U.S. patent number 11,067,748 entitled "Guide Transition Device and Method" that
covers a new invention that enables enhanced optical routing architectures for polymer-based integrated photonics that can be scaled with
partner foundries. This new invention will enable innovative, highly scalable optical routing architectures for integrated photonic platforms.
The patent provides novel optical waveguide transition designs using two planes of optical waveguides that are expected to be critical
for optical signal routing and optical switching, opening the opportunity for high speed, energy efficient electro-optic polymers to be
implemented into foundry PDKs (process development kits) to improve the performance of integrated photonic circuits. This breakthrough
technology opens the door for advanced integrated photonics architectural design. We believe the
simplicity of the design is ideal for production in foundries and will best position our Company to enable increased data traffic on the
internet while using less power.
On September
1, 2021, our Company's common shares began trading on the Nasdaq Capital Market ("Nasdaq"). The Company’s Nasdaq listing
will help to expand our potential shareholder base, improve liquidity, elevate our public profile within the industry and should ultimately
enhance shareholder value.
On September
15, 2021, we announced the receipt of the 2021 Industry Award for Optical Integration from the European Conference on Optical Communications
(ECOC), a premier industry exhibition that was held in Bordeaux from September 13-15, 2021. ECOC created the fiber communication industry
awards in six categories to put the spotlight on innovation happening within the industry. The awards recognize and highlight key industry
achievements in advancing optical components, photonic integration, optical transport and data center innovation. The awards are selected
from top industry players, representing significant innovation in photonics integration at our prestigious exhibition.
On
September 16, 2021, we announced the achievement of world-record performance for a polymer modulator, as demonstrated in an optical transmission
experiment by ETH Zurich, using our Company's proprietary, advanced PerkinamineTM chromophores and Polariton Technologies Ltd.'s
newest plasmonic EO modulator, a silicon-photonics-based plasmonic racetrack modulator offering energy-efficient, low-loss, and high-speed
modulation in a compact footprint. The groundbreaking results were presented as a post-deadline paper at the prestigious European Conference
on Optical Communications (ECOC) industry exhibition and conference in Bordeaux on September 16, 2021. Polariton's plasmonic modulator
transmitted 220 Gbit/s OOK and 408 Gbit/s 8PAM. Transmission of an optical signal was conducted over 100 m using a low-voltage electrical
drive of 0.6Vp, an on-chip loss of 1 dB, and an optical 3 dB bandwidth of beyond 110 GHz.
On
January 3, 2022, we announced the publication of our patent application 20210405504A1 by the United States Patent and Trademark Office
(USPTO) – entitled 'Nonlinear Optical Chromophores Having a Diamondoid Group Attached Thereto, Methods of Preparing the Same,
and Uses Thereof' – which significantly improves the overall stability and performance of our electro-optic polymers. The
Company's electro-optic chromophores are designed to have one or more diamondiod molecular groups attached to the chromophore. When such
chromophores are dispersed in a host polymer matrix, the electro-optic materials result in improved macroscopic electro-optic properties,
increased poling efficiency, increased loading as well as increased stability of these materials after poling. The impact of this technology
is that it will accelerate the path for very high-speed, low-power electro-optic polymers to be implemented into large foundry process
development kits (“PDKs”) to boost performance of integrated photonic circuits.
On
January 3, 2022, we announced that we enhanced our Company’s Foundry Process Development Kit Offering with the addition of
Optical Grating Couplers. This expanded design tool kit will enable silicon foundries to implement
PDKs and fabricate modulators and optical gratings in a single fab run, further enhancing modulator efficacy. We are continuing to work
on additional design tool kit components to enable an expedited commercialization process through a more simplified manufacturing process
for our foundry partners.
On
January 3, 2022, we announced that we appointed respected industry leader Dr. Craig Ciesla to our Board of Directors and that retired
director Dr. Joseph A. Miller transitioned to our Company's Advisory Board. Dr. Ciesla is currently
the Vice President, Head of the Advanced Platforms and Devices Group at Illumina, a leading provider of DNA sequencing and array technologies.
There he leads a team driving innovation in sequencing platforms, microfluidics, electronics, and nanofabrication. Prior to Illumina,
he was Vice President of Engineering at Kaiam, where he was responsible for the development and production of 100G transceivers for the
data-center market. He was also the founding CEO of Tactus Technology, an innovator in the user interface industry, where he was the co-inventor
of Tactus' polymer morphing screen technology. Before Tactus he had a variety of roles at Intel, JDSU (now Lumentum), Bookham (now Oclaro)
and Ignis Optics developing a wide range of products in the fiber-optics market. He started his career at Toshiba Research Europe, where
he performed early terahertz images of skin cancer. Dr. Ciesla holds a BSc (Hons.) in Applied Physics and Ph.D. in Physics from Heriot-Watt
University in Edinburgh.
On
February 10, 2022, we announced breakthrough photostability results on our electro-optic polymer modulators that are compatible with high-volume
silicon foundry processes. The improved photostability of our polymers are expected to minimize any optical losses and provide
a more robust platform for silicon foundries. This breakthrough photostability performance is incredibly important as we optimize our
polymers for high-volume silicon foundry processes.
On March
7, 2022, we announced the receipt of U.S. patent number 11,262,605 entitled, "Active region-less
polymer modulator integrated on a common PIC platform and method." This invention will simplify modulator integration for high-volume
foundry manufacturing operations while enhancing polymer reliability to enable a more effective photonic engine. The essence of the invention
is a complete optical engine that fits into fiber optic transceivers (either pluggable or co-packaged) that are used in routers, servers
and elsewhere in optical networks. The engine is designed for high-volume manufacturing operations using silicon foundry infrastructure.
The patent illustrates the use of our polymer modulators as a high speed, low power engine not only for data communication and telecommunication
applications, but other new market opportunities as well.
On
March 22, 2022 we announced the achievement of world-class results for a polymer modulator, as demonstrated in an enhanced stability and
high-speed measurement by Polariton Technologies and ETH Zurich. The results were generated using the Company's proprietary, advanced
Perkinamine™ chromophores in Polariton's silicon-photonics-based plasmonic racetrack modulator that offers energy-efficient, low-loss,
and high-speed modulation in a compact footprint that is ideal for pluggable and/or co-packaging transceiver modules. The plasmonic modulator
performance was compared to that of silicon photonic microring modulators. The plasmonic device, using Lightwave Logic's electro-optic
polymer material, was shown to be 250-3000x more stable than the silicon devices relative to operating condition changes. In addition,
the plasmonic modulator was tested for 70+ minutes at 100 Gbps NRZ at 80C with no decrease in performance. The world-class results were
presented as a contributed peer-reviewed paper at the prestigious 2022 Optical Fiber Conference (OFC2022), the optical communication industry's
leading international technical conference and trade show, in San Diego on March 10, 2022.
On
April 19, 2022, we announced the publication of our patent application 2022/0113566 A1 entitled "TFP
(thin film polymer) optical transition device and method" that illustrates the design of a simpler to fabricate, lower cost hybrid
integrated photonics chip using electro-optic polymers which are more advantageous for high-volume production. The invention will simplify
polymer modulator fabrication when integrated with silicon photonics for high-volume foundry manufacturing applications. The simplified
fabrication approach enables us to simplify the production of very high speed, low power proprietary polymer modulators that will enable
significantly faster data rates in the internet environment. The essence of the invention is a hybrid polymer-silicon photonics engine
that fits into fiber optic transceivers (either pluggable or co-packaged) that are used in the routers, servers and network equipment
that are proliferating with the growth of data centers, cloud computing and optical communications capacity. The hybrid polymer-silicon
photonics engine is designed to use high-volume silicon foundry infrastructure.
On
May 25, 2022, we announced enhanced photostability results on our Company's proprietary electro-optic polymer modulators – demonstrating
the reliability necessary for commercial deployments – all based on a technology which can be ported into high-volume silicon foundries
and integrated onto a silicon photonics platform with other optical devices. Photostability is a critical performance metric required
both in high volume manufacturing processes (such as photolithography) and in offering the high reliability and network availability required
for commercial deployments. In the tests conducted, subjecting the Company's latest polymers to high intensity optical power for over
3000 hours produced no change in device performance. The ability of our proprietary polymers to pass this accelerated photostability aging
test provides assurance that they will both tolerate the optical exposures which occur in high-volume manufacturing and support the reliability
over the required operating life of optical transceivers and network elements.
On
June 21, 2022, we announced the publication of our patent application 2022/0187637A1 entitled "Hybrid electro-optic polymer modulator
with silicon photonics" that details a novel fabrication process that allows our Company’s proprietary polymers to be fabricated
by silicon foundries in a high-volume manufacturing environment. The published patent application also details a more efficient process
that allows for high yielding, high stability poling of polymers in a high-volume foundry manufacturing environment. The development of
the PDK for this new optical hybrid optical modulator design is now in progress with our Company’s foundry partners.
June
23, 2022, we announced the publication of our patent application 2022/0187638A1 entitled " Hybrid electro-optic polymer modulator
with atomic layer deposition (ALD) sealant layer" that allows our Company’s proprietary polymers to be sealed to moisture
and other atmospheric gases in a very low temperature and quasi-hermetic environment through the use of a chip-scale packaging approach
that can be applied in parallel at wafer level (i.e. in volume) and that eliminates the need for a separate hermetic enclosure or "gold
box." Chip-scale packaging is a technique that has been gathering momentum in the silicon electronics industry for the past decade
to reduce device chip packaging costs and increase device performance – enabling high-volume front and back-end manufacturing as
well as extremely small sizes in miniaturization. Specifically, our electro-optic polymer modulators are sealed with a low-temperature
conformal atomic layer deposition dielectic layers that are supported on a silicon substrate with passive silicon photonics waveguides.
On
June 27, 2022 our Company's common stock was added to the Russell 3000® Index. We expect
that the awareness of being included in one of the most widely followed benchmarks will not only benefit our existing shareholders but
will lead to a broader base of institutional investors. The annual Russell index reconstitution captures the 4,000 largest US stocks as
of May 6, ranking them by total market capitalization. Our membership in the US all-cap Russell 3000® Index, which remains
in place for one year, means automatic inclusion in the small-cap Russell 2000® Index as well as the appropriate growth and value
style indexes.
On June
30, 2022, we announced that our CEO, Dr. Michael Lebby, was again invited to co-chair the Photonic Integrated Circuits (PIC) International
Conference that took place June 28-29, 2022 in Brussels, Belgium. At the conference, Dr. Lebby led an invited talk entitled, "Enabling
lower power consumption optical networking using high speed, low power polymer modulators", focusing on the issue of reducing power
consumption in datacenters and optical networks. He also contributed to a panel session, "Hybrid PICs technology challenges and solutions,"
on the need for hybrid integration addressing the volume production of 3D and 2.5 integrated electronic and photonic integrated circuits
(PICs) based on the utilization of large silicon foundries. This included a discussion on the use of silicon photonics with hybrid technologies
such as electro-optic polymers, polymer based plasmonics, silicon nitride and III-V laser sources.
On September
22, 2022, we announced the achievement of world record performance for low-power consumption ultra-high-speed 'green' slot modulators
in collaboration with Karlsruhe Institute of Technology (KIT) and its spin-off SilOriX as part of a peer-reviewed post-deadline paper
presented at the prestigious 2022 European Conference on Optical Communications (ECOC) in Basel, Switzerland on September 22, 2022. The
team presented the first sub-1mm Mach Zehnder-type modulators with sub-1V drive voltage that rely on Lightwave’s proprietary advanced
Perkinamine™ chromophores. The devices rely on the slot-waveguide device concept developed at KIT and commercialized through SilOriX.
Further, the material has experimentally proven thermal stability at 85°C and offers extreme energy-efficiency along with high-speed
modulation in a compact footprint. Additionally, this shows that our material can perform in a variety of device structures and designs
and is positioned to significantly reduce power consumption of optical networking and to become a true 'green photonics' enabler for the
industry.
On September
22, 2022, we announced the achievement of a world-record demonstration of a 250GHz super high bandwidth electro-optical-electrical (EOE)
link through a collaboration with ETH Zurich. The link was demonstrated by ETH Zurich and uses Polariton's high-speed plasmonic modulators
containing Lightwave's proprietary Perkinamine™ chromophores and ETH Zurich's high-speed graphene photodetectors. The link contained
a plasmonic modulator using electro-optic polymer material as well as a novel metamaterial enhanced graphene photodetector featuring a
200 nm spectral window and a setup-limited1 bandwidth of 500 GHz. The EOE link achieved a world record and unprecedented 250
GHz 3dB bandwidth2. This is an optical link that utilizes devices with extremely high bandwidths, and the plasmonic demonstration
shows that hybrid technologies such as our electro-optic polymers and graphene together form an important technology platform for volume
scalability using large silicon foundries for mass commercialization. The groundbreaking results
were presented by Stephan Koepfli as part of a peer-reviewed post-deadline paper presented at the prestigious 2022 European Conference
on Optical Communications (ECOC) in Basel, Switzerland on September 22, 2022.
On
November 15, 2022, we announced the receipt of U.S. patent number 11,435,603 B2 entitled "TFP (thin
film polymer) optical transition device and method," which illustrates the design of a simpler to fabricate, lower cost hybrid integrated
photonics chip using electro-optic polymers which are more advantageous for high-volume production. The simplified fabrication approach
enables streamlined production of very high speed, low power proprietary polymer modulators that will enable significantly faster data
rates in the internet environment. The essence of the invention is a hybrid polymer-silicon photonics engine that fits into fiber optic
transceivers (either pluggable or co-packaged) that are used in the routers, servers and network equipment that are proliferating with
the growth of data centers, cloud computing and optical communications capacity.
On
November 17, 2022, we announced the receipt of U.S. patent number 11,435,604 B2 entitled "Hybrid electro-optic
polymer modulator with silicon photonics," which allows Lightwave Logic's proprietary polymers to be fabricated by silicon foundries
in a high-volume manufacturing environment. The patent also details a more efficient process that allows for high yielding, high stability
poling of polymers in a high-volume foundry manufacturing environment. From a commercial standpoint, this patent enables our polymers
to be mass-produced using existing silicon foundry equipment, simplifying production for the foundry's we are working with.
On
November 29, 2022, we announced our acquisition of the polymer technology and intellectual property assets
of Chromosol Ltd (UK). The acquisition significantly strengthened our Company's design capabilities with foundry PDKs with extremely low
temperature atomic layer deposition (ALD) processes that effectively hermetically seal polymer devices that have been prepared for high
volume manufacturing. The advanced fabrication processes of ALD with temperatures below 100C will solidify our Company's market position
with both the Company's manufacturing foundry partners as well as end-users as we prepare to enter the 800Gbps integrated photonics marketplace.
The acquisition also advanced our Company’s patent portfolio of electro-optic polymer technology with an innovative polymer chemistry
device patent that has potential to increase the performance of integrated modulators through optical amplification in a photonic integrated
circuit (PIC) and enhance the functionality of the PIC by integrating laser light sources made using the polymer-based gain and a laser
optical cavity defined on the Silicon photonic platform, with our Company’s high speed, high efficiency modulators. Having access
to extremely low temperature ALD allows our Company's polymer modulators to be protected from the environment without the need for expensive
and large footprint gold box packaging, propelling our Company forward with chip-scale packaging as required by major hyper-scaler end-users.
The patent opens a new class of PICs which expands our variety of devices. The Patent is US patent number 9837794, EU patent number 3017489,
China registration number 201480048236 & 201910230856, and is entitled, “Optoelectronic devices, methods of fabrication thereof
and materials therefor.”
———————
1
Set-up limited' indicates that the measurement was limited by the testing equipment.
2
University of Kiel, Germany supported the digital signal processor (DSP),
and ETHZ supported the photodetector.
On
December 12, 2022, we announced the receipt of U.S. patent number 11,506,918 B2 entitled “Hybrid electro-optic
polymer modulator with atomic layer deposition (ALD) sealant layer,” which allows our proprietary polymers to be sealed to moisture
and atmospheric gases in a very low temperature and quasi-hermetic environment through the use of a chip-scale packaging approach that
can be applied in parallel at wafer level (i.e. in volume) and that eliminates the need for a separate hermetic enclosure or "gold
box." Specifically, our electro-optic polymer modulators will be sealed with low-temperature conformal atomic layer deposition dielectric
layers that are supported on a silicon substrate with passive silicon photonics waveguides. The sealant process will enable lower cost
system implementation in a high-volume foundry environment.
On
December 13, 2022, we provided a world-class figure-of merit performance for modulators using electro-optical polymers and a plasmonic
device design in conjunction with Polariton Technologies. Building from the world record performance and demonstration of a 250 GHz super
high bandwidth electro-optical-electrical (EOE) link that was presented at the 2022 European Conference on Optical Communications
(ECOC)3
through a collaboration with ETH Zurich, these latest figure of merit results show the potential for extreme power savings for optical
network equipment and demonstrated clearly that polymer-based technology platforms are positioned well for general implementation. These
results were achieved using Polariton's electro-optic polymer-based plasmonic devices with Lightwave's electro-optic materials, with a
bandwidth greater than 250 GHz. While these high-speed results have been reported previously, here Lightwave Logic reported for the first
time that the voltage-length product Figure of Merit (FoM) for this modulator is just 60 Vum, which is approximately 10X better than the
performance of the optical semiconductor modulators that are incumbent in the optical network and internet today. This figure of merit
will allow ultra-low voltage operation and, enabled by Polariton's plasmonic modulator, the ability to carry significantly more data per
modulator while consuming much less power. The net positive effect on system level equipment is expected not only to be significant, but
perhaps more importantly, also a strong driver of a ''green photonics" platform. These results position our Company extremely well
for next generation ultra-high-capacity interconnects for the hyper-scale market. The combination of electro-optic polymers and plasmonics
is becoming an ideal sunrise technology platform to address the 'Achilles heel' of the data industry: high power consumption. As the industry
contemplates the implementation of PAM4 200G lanes for 2023 and 2024, these optical devices already have shown capability for at least
2X these lane speeds.
On
January 12, 2023, our Chief Executive Officer, Dr. Michael Lebby, hosted a presentation and participated
in an industry panel discussion at the 2023 Photonics Spectra Conference,
a prominent virtual conference within the photonics industry. In the panel discussion, Dr. Lebby and a panel of industry experts from
the entire photonics integrated chip (PIC) value chain, discussed lessons learned when scaling PIC production for volume applications.
In his presentation, Dr. Lebby reviewed the potential solutions that electro-optical polymer modulators offer to integrated and hybrid
photonics integrated chips (PICs), discussing their relevance to PIC packaging operations as well as how electro-optic polymers boost
PIC speed and power efficiency.
On
January 30, 2023, our Chief Executive Officer, Dr. Michael Lebby, participated in an industry panel discussion
at the 2023 Laser Focus World Executive Forum. The Laser Focus World Executive Forum is one of the
industry's premier events for senior-level executives, technology directors, and business managers from technology companies around the
world, delivering an in-depth analysis of the global laser and photonics market. In this discussion, Dr. Lebby joined a panel of industry
experts to discuss how the success of Silicon Photonics is based on the premise that it is a semiconductor technology, and hence it can
be manufactured in volume by semiconductor fabs. The panel addressed the manufacturing plans of photonic integrated circuits (PICs) by
semiconductor fabs and how the photonic industry can transfer their processes to the semiconductor industry.
As we move
forward to diligently meet our goals, we continue to work closely with our packaging and foundry partners for 112Gbaud prototypes, and
we are advancing our reliability and characterization efforts to support our prototyping. Depending on electrical encoding schemes such
as PAM4, or PAM8, or wavelength optical multiplexing, these Gigabaud rates roughly translate to 200Gbps and 300Gbps per lane, and are
the key speed rates for emerging 800Gbps to future possible 1200Gbps applications. Our partnership with silicon-based foundries will
allow us to scale commercial volumes of electro-optic polymer modulator devices using large silicon wafers, and we are currently working
to have our fabrication processes accepted into foundry PDKs (process development kits). These are the recipes that foundries use to manufacture
devices in their fabrication plants.
We are
actively engaged with test equipment manufacturers of the most advanced test equipment to test our state-of-the-art polymer devices. We
continue to engage with multiple industry bodies to promote our roadmap. We continue to fine tune our business model with target markets,
customers, and technical specifications. Our business model includes the licensing of our strong IP and Patent portfolio, as well as technology
transfer to entities such as foundries. Discussions with prospective customers are validating that our modulators are ideally suited for
the datacenter and telecommunications markets that are over 10km in length. Details and feedback of what these prospective customers are
seeking from a prototype are delivered to our technical team.
———————
3
The groundbreaking results were presented by Stefan
Koepfli (ETH Zurich) as part of a peer-reviewed post-deadline paper presented at the prestigious
2022 European Conference on Optical Communications (ECOC) in Basel, Switzerland on September 22, 2022. The post-deadline
paper is titled ">500 GHz Bandwidth Graphene Photodetector Enabling Highest-Capacity Plasmonic-to-Plasmonic Links."
The Global Photonic Device Market
General Overview
Lightwave Logic has been reviewing
the latest market data as well as its own internal data for its business strategy, and below we detail the global market dynamics both
in terms of data traffic as well as how co-packaged optical solutions which will require optimized modulators will grow in the fiber communications
segment of the market.
As we have already seen with products
such as smart phones, lap top computers, and personal digital assistants (PDAs), Internet traffic, and especially mobile internet traffic
is one of the important metrics that is being used to show activity in fiber communications, and particularly telecommunications as well
as data communications (which includes datacenters and high-performance computing). Internet Protocol (IP) traffic has typically been
used to gauge the amount of data that is being used on the internet as shown in the graph below (sourced from Cisco VNI in 2022). The
metric is Exabytes per month. An Exabyte is 1E18 which is 1000 Petabytes, or 1000,000 Terabytes or a billion Gigabytes of data. As seen
from the graph which has a strong growth of 26% CAGR (2017-2022) of global IP traffic, with the majority traffic being driven by internet
video. The traffic rates are fast approaching the metric of Zetta which is 1E21 bytes of data. Some estimates are discussing the further
metric of Yotta which is 1E24 bytes of data over the next decade, which is also expected to be driven for the most part by internet video.
Within the overall market trends
of IP traffic growth and in particular mobile video, the internet will need to be able to support high volumes of data traffic. To do
this, the fiber-optic infrastructure that allows data to be communicated between network nodes such as datacenters, within datacenters,
and optical network switches etc., needs to be upgraded. Today, fiber-optic networks are a combination of long, medium and short optical
interconnects that range from 3 meters (or 1yard) to over 1000km depending on application in the optical network. Optical components,
typically known as photonics components are used to build the fiber-optic infrastructure and consist of things such as: laser diodes,
photodetectors, multipliers, modulators, transceivers etc. These are known as discrete components, while a mix of these components that
are integrated or connected on a single substrate (such as silicon, InP, GaAs etc.) are called PICs (Photonic Integrated Components).
All of these components are packaged and put into transceivers.
The global device and connection
growth market share as forecasted by Yole Developpment in their optical transceivers for datacom and telecom report (2021) is expected
to grow from $18B in 2018 to approximately $30B in 2023 as can be seen by the figure below (Source: Yole Developpment). The compound annual
growth is expected to reach a healthy 10% for the period 2018 to 2023. This market has machine to machine market vertical at nearly 50%
of the market share by 2023, followed by smartphones, TVs and game consoles, non-smartphones, Personal computers, other, and tablets.
The datacom optics revenue forecast
ranging from 2020 through 2026, and onto 2032 is shown in the figure below. This data is also sourced from Yole Developpment, and is reported
in their co-packaged optics for data centers report in 2022. The data shows that the datacom optics revenues have grown from nearly $6B
in 2020 to a forecast that exceeds $15B in 2026, and over $28B by 2032. The respective compound annual growth rates are a very healthy
19% for 2020-2026, and a healthy 11% for the period 2026-2032. The market is segmented into three major categories that include: Active
optical cable and embed optical modules, ethernet, and co-packaged optics/on-board optics. In all of these categories the growth of PIC
based engines for optical transceivers being utilized in datacom optics is expected to grow quickly. In all of these segments today, many
of the optical engines are either indium phosphide or silicon photonics based. These optical engines are expected to be upgraded with
hybrid PIC solutions that improve the overall performance of the PIC.
The optical transceiver revenue
forecast ranging from 2020 through 2026 by market segment is shown in the figure below. This data is also sourced from Yole Developpment,
and is reported in their optical transceivers for datacom and telecom market report published in 2021. The data shows that the optical
transceiver revenues have grown from nearly $10B in 2020 to forecast that approaches $21B in 2026. The respective compound annual growth
rates are a healthy 14% for the period 2020-2026. The market is segmented into two major categories that include: Datacom and telecom.
In these categories the growth of PIC based engines for optical transceivers being utilized in both datacom and telecom is expected to
grow quickly using hybrid solutions that are expected to incorporate electro-optic polymer technologies.
A large driver of the growth of
the optical transceiver market is the corresponding growth of - and the “need for speed” by - the large data center operators
lead by Amazon. Data sourced from Lightcounting shows the rapid adoption and growth of each generation of speed. As noted earlier, our
unique polymer technology platform has inherent advantages for the requirements of 800Gbps.
As the Company is developing polymer
based photonic devices such as fiber-optic modulators, these devices translate electric signals into optical signals and allow laser-based
technology to operate effectively at, 100G, 200G, and beyond. Lasers with modulators are used in fiber communication systems to transfer
data over fiber-optic networks today and are expected to be a key driver in photonics components for PIC based technological solutions
over the next decade. Optical data transfer using lasers and modulators is significantly faster and more efficient than transfer technologies
using only electric signals, permitting more cost-effective use of bandwidth for broadband Internet and voice services.
Our Target Markets
Cloud computing and data centers
Big
data is a general term used to describe the voluminous amount of unstructured and semi-structured data a Company creates – data
that would take too much time and cost too much money to load into a relational database for analysis. Companies are looking to cloud
computing in their data centers to access all the data. Inherent speed and bandwidth limits of traditional solutions and the potential
of organic polymer devices offer an opportunity to increase the bandwidth, reduce costs, improve speed of access, and to reduce power
consumption both at the device as well as the system level.
Datacenters
have grown to enormous sizes with hundreds of thousands and even millions of servers in a single datacenter. The number of so-called “hyperscale”
datacenters are expected to continue to increase in number. Due to their size, a single “datacenter” may consist of multiple
large warehouse-size buildings on a campus or even several locations distributed around a metropolitan area. Data centers are confronted
with the problem of moving vast amounts of data not only around a single data center building, but also between buildings in distributed
data center architecture. Links within a single datacenter building may be shorter than 500 meters, though some will require optics capable
of 2 km. Between datacenter buildings, there is an increasing need for high performance interconnects over 10km in reach.
Our
modulators are suitable for single-mode fiber optic links. We believe that our single mode modulator solutions will be competitive at
500m to 10km link distance lengths, with inherent advantages for 800Gbps applications.
Telecommunications/Data Communications
The
telecommunications industry has evolved from transporting traditional analogue voice data over copper wire into the movement of digital
voice and data. Telecommunication companies are faced with the enormous increasing challenges to keep up with the resulting tremendous
explosion in demand for bandwidth. The metropolitan network is especially under stress now and into the near future. Telecommunications
companies provide services to some data center customers for the inter-data center connections discussed above. 5G mobile upgrade, autonomous
driving and IoT are expected to increase the need for data stored and processed close to the end user in edge data centers. This application
similarly requires optics capable of very high speeds and greater than 10 km reach.
Industry issues of scaling
The
key issues facing the fiber-optic communications industry are the economic progress and scalability of any PIC based technological platform.
Our polymer platform is unique in that it is truly scalable and is expected to become a high performance engine for transceiver modules.
Scalable means being able to scale up for high-speed data rates, while simultaneously being able to scale down in cost, and lower power
consumption. This allows a competitive cost per data rate or cost per Gbps metric to be achieved.
Fiber
optic datacenter and high-performance computing customers want to achieve the metric of $1/Gbps @ 800Gbps (this essentially means a single
mode fiber optic link that has a total cost of $800 and operates with a data rate of 800Gbps). Equally importantly, the datacenter industry
would like to reduce the power consumption of optical ports for 400Gbps, 800Gbps, etc., significantly. As industry tries to match this
target, it needs scalable PIC platforms to achieve this goal, of which our polymer platform is uniquely suited.
An article by Dr, Michael Lebby
that was recently published in broadband communities (BBC) magazine in early February 2023 discusses the virtues of polymer based technologies
as part of an industry technology roadmap. The article is entitled “The internet is the brick wall Nostradamus did not see coming.”
In this article cost/performance metrics are discussed that show the trend to higher and higher data rates using PIC platforms that include
very high speed, low power modulator devices.
The
article also shows that electro-optic polymers play an important role in PICs over the next decade as they can reduce or close the gap
between customer expectations and technical performance through effective scaling increase of high performance with low cost for short
distance transceiver optical links.
Some of the things needed to achieve the scaling performance of polymers in integrated photonics platforms
is within sight today:
| 1. | Increased r33 (which leads to very low Vpi in modulator devices) and we are currently
optimizing our polymers for this. With Vpi levels of 1V or less will enable direct from associated electronics and potentially save network
architects the cost of individual driver ICs. |
| 2. | Increase temperature stability so that the polymers can operate
at broader temperature ranges effective, where we have made significant progress over the past few years. |
| 3. | Low optical loss in waveguides and active/passive devices for improved
optical budget metrics which is currently an ongoing development program at our Company. |
| 4. | Higher levels of hermeticity for lower cost packaging of optical
sub-assemblies within a transceiver module, where our advanced designs are being implemented into polymer-based packages that utilize atomic
layer deposition (ALD) that is being developed in-house. |
Scalability in terms of cost reduction
and high volume manufacturing can be enhanced by:
| 1. | Leverage of commercial silicon photonics manufacturing capacity
through the use of silicon-based foundries. Our Polymer Plus™ platform seeks to be additive to standard silicon photonics circuits. |
| 2. | Reduction of optical packaging costs by integration at the chip
level of multiple modulators and also with other optical devices. Our P2IC™ platform seeks to address device integration. |
Business Strategy
Our
business strategy anticipates that our revenue stream will be derived from one or some combination of the following: (i) technology licensing
for specific product application; (ii) joint venture relationships with significant industry leaders; and (iii) the production and direct
sale of our own electro-optic device components. Our objective is to be a leading provider of proprietary technology and know-how in the
electro-optic device market. In order to meet this objective, we intend to continue to:
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Further the development of proprietary organic electro-optic polymer material systems |
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Develop photonic devices based on our P2ICTM technology |
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Develop proprietary intellectual property |
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Grow our commercial device development capabilities |
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Partner with silicon-based foundries who can scale volume quickly |
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Grow our product reliability and quality assurance capabilities |
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Grow our optoelectronic packaging and testing capabilities |
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Grow our commercial material manufacturing capabilities |
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Maintain/develop strategic relationships with major telecommunications and data communications companies to further the awareness and commercialization of our technology platform |
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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 symbol rates at least 112 Gigabaud which is roughly 200Gbps when utilized with PAM4 encoding schemes. Our devices
are highly linear, and can also enable the performance required to take advantage of more advance complex encoding schemes if required.
Our Research and Development Process
Our research and development process consist of the following
steps:
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We develop novel polymer materials utilizing our patented and patent pending technology to meet certain performance specifications. We then develop methods to synthesize larger quantities of such material. |
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We conduct a full battery of tests at the completion of the synthesis of each new polymer material to evaluate its characteristics. We also create development strategies to optimize materials to meet specifications for specific applications. We model and simulate each new polymer material so that we can further understand how to optimize the material for device operation. |
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We integrate data from the material characterization and test results to fabricate devices. We analyze device-testing results to refine and improve fabrication processes and methods. In addition, we investigate alternative material and design variations to possibly create more efficient fabrication processes. |
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We create an initial device design using simulation software. Following device fabrication, we run a series of optical and electronic tests on the device. |
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We are developing PDKs with commercial silicon-based foundries so that our technology can transfer seamlessly to larger silicon wafer fabrication plants, and scale in volume quickly. |
We have and expect to continue to
make significant operating and capital expenditures for research and development. Our research and development expenses were $12,805,374,
$12,476,040 and $4,590,545 for the years ended December 31, 2022, 2021 and 2020, respectively.
Our Proprietary Products in Development
As
part of a tactical marketing strategy, our Company is developing several optical devices using our proprietary electro-optical polymer
material, which are in various stages of development. These include:
Ridge Waveguide Modulator, Polymer Stack ™
Our
ridge electro-optic waveguide modulator was designed and fabricated in our in-house laboratory. The fabrication of our first in-house
device is significant to our entire device program and is an important starting point for modulators that are being developed for target
markets. We have multiple generations of new materials that we will soon be optimizing for this specific design. In September 2017 we
announced that our initial alpha prototype ridge waveguide modulator, enabled by our P2IC™
polymer system, demonstrated bandwidth performance levels that will enable 112 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 112 Gbaud symbol rate (4x 200 Gbps data rate) polymer modulators using PAM-4 encoding
to enable 800 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 112 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 symbol rates above 112 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 Gbps 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
112 Gbaud, we believe potential customers recognize that scalability to higher speeds is an important differentiator of the polymer technology.
We
believe the ridge waveguide modulator Polymer Stack™ represents our first commercially viable device and targets the fiber optics
communications market. We have completed internal market analysis and are initially targeting interconnect reach distances of less than
1km. In these markets, the system network companies are looking to implement modulator-based transceivers that can handle aggregated data
rates 800 Gbps and above. The market opportunity for less than 10km is worth over $2B over the next decade.
Polymer Plus™
Using our
novel waveguide design, we are developing a more compact modulator to be implemented directly with existing integrated photonics platforms
such as silicon photonics and Indium Phosphide. As our electro-optic polymers are applied in liquid form, they can be deposited as a thin
film coating in a fabrication clean room such as may be found in semiconductor foundries. This approach we call Polymer Plus™. The
advantage of this approach is that it allows existing semiconductor integrated photonics platforms such as silicon photonics and indium
phosphide to be upgraded with higher speed modulation functionality with the use of polymers in a straight-forward and simple approach.
Further, our polymers are unique in that they are stable enough to seamlessly integrate into existing CMOS, Indium Phosphide (InP), Gallium
Arsenide (GaAs), and other semiconductor manufacturing lines.
A large
majority of commercial silicon photonics platforms utilize large silicon photonics foundries such as those that manufacture IC products
for a number of applications such as communications, computing, consumer, etc. In order to seamlessly integrate our polymer materials
to upgrade for example, silicon photonics designs, partnering with a silicon foundry is necessary.
Polymer Slot™
As
part of supporting further improvement and scalability of our platform, we continue to develop more advanced device structures that include
the Polymer Slot™. Our high performance, low power, extremely small footprint polymer photonics slot waveguide modulator utilizes
a slot design that is part of PIC platform such as silicon photonics with one of our proprietary electro-optic polymer material systems
as the enabling material layer. Initial performance results in 2022 from commercial foundries achieved key design specifications for the
slot modulator.
Preliminary
testing and initial data on our polymer photonics slot waveguide modulators fabricated at commercial foundries demonstrated extremely
high performance suitable for the hyperscaler and fiber optics markets. The tested polymer photonic slot chip had less than 1-millimeter
square footprint, enabling the possibility of sophisticated PIC architecture designs on a single silicon substrate. In addition, the waveguide
structure was a fraction of the length of a typical inorganic-based silicon photonics modulator waveguide and is suitable to be used as
an engine for state-of-the-art pluggable transceiver modules such as the OSFP and the QSFP-DD.
With
the combination of our proprietary electro-optic polymer material and the extremely high optical field concentration in the slot waveguide,
the test modulators demonstrated very low operating voltage. Initial speeds exceeded 70GHz in the telecom, 1550 nanometer frequency band,
and there were devices that exceeded over 100GHz 3dB bandwidth.
We
are also continuing our collaborative development of our polymer photonic slot waveguide modulators (Polymer Slot™) with a partner
that has advanced device design capabilities using Plasmonic technologies. Some of these devices demonstrated performance levels that
exceeded 250GHz in 2022.
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 Gbps, 400 Gbps, 800 Gbps and beyond. Our P2IC™
platform will contain several photonic devices that may include, over and above polymer-based modulators, photonic devices such as lasers,
multiplexers, demultiplexers, detectors, fiber couplers.
While our
polymer-based ridge waveguide and slot modulators are currently under development to be commercially viable products, our long-term device
development goal is to produce a platform for the 400 Gbps, 800 Gbps, 1600Gbps and beyond fiber optic transceiver market. This has been
stated in our photonics product roadmap that is publicly available on our website. The roadmap shows a progression in speed from 50 Gbaud
based modulators to 100 Gbaud based 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, 1.6Tbps (or 1600Gbps), and a
scaling philosophy that will grow to 3.2Tbps line rates.
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. At the ECOC
2022 conference we demonstrated two different world record performances using polymer slot based modulators.
Other Potential Applications for Our Products
We believe that there are myriad
potential applications for our organic polymer materials and devices outside of our initial focus of data communications, telecommunications
and data centers. These potential applications encompass areas as diverse as military, space, optical computing, and life sciences. We
believe that as viable organic polymer materials gain acceptance, their increased flexibility, functionality and low cost will create
new applications that may not yet be technically feasible. Two such future applications with revolutionary potential are:
All-Optical Switches
An all-optical switch is one that
enables signals in optical fibers or networks to be selectively switched from one fiber or circuit to another. Many device designs have
been developed and commercialized in today’s telecom networks to effect optical switching by using mechanical or electrical control
elements to accomplish the switching event. Future networks will require all-optical switches that can be more rapidly activated with
a low energy and short duration optical (light) control pulse.
Multi-Channel Optical Modem
The availability of low-cost electro-optic
modulators will enable low-cost multichannel optical modems that will use many wavelengths in parallel and employ high efficiency modulation
techniques such as QAM (quadrature amplitude modulation). Such modems would enable an order of magnitude increase in the Internet capacity
of legacy fiber. Our Company is in the early feasibility stage of such a multichannel optical modem.
Our Past Government Program Participation
Our Company has been a participant
in several vital government sponsored research and development programs with various government agencies that protect the interests of
our country. The following is a list of some of the various divisions of government agencies that have provided us with advisory, financial
and/or materials support in the pursuit of high-speed electro-optic materials. We are not currently partnered with, strategically related
to, or financially supported by any governmental agency at this time, however, we may explore future opportunities as our Company grows
and gains the additional resources and personnel necessary to support these efforts. Our previous relationships included:
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National Reconnaissance Office (NRO) |
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Properties Branch of the Army Research Laboratory on the Aberdeen Proving Grounds in Aberdeen, Maryland. |
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Defense Advance Research Project Agency (DARPA) |
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Naval Air Warfare Center Weapons Division in China Lake, California |
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Air Force Research Laboratory at Wright-Patterson Air Force Base in Dayton, Ohio |
Our Competition
Competitive Technologies - PIC Based Technologies
PIC technologies have historically
been driven using III-V compound semiconductors, namely InP, although GaAs remains a strong PIC platform, and is expected to strengthen
via the VCSEL based 3D sensing applications. Indium Phosphide has been used since the 1980s as the first PIC platform with laser modulator
chips where both the laser and modulator were fabricated monolithically. Since the 1980s, there have been InP based transmitters, receivers,
and other functional elements that all support the fiber-communications industry. In fact, over the past 3 decades, the fiber communications
industry has driven the increased performance, miniaturization and simplicity in packaging for PIC based technologies. Also, back in the
1980s, ‘optoelectronics’ was the key word to describe having both electronic and photonic functions or devices on a single
chip. This was known in early publications as an optoelectronics integrated circuit (OEIC). Today optoelectronics is synonymous with ‘photonics’,
and hence the common-place use of ‘photonics integrated circuits’ for PICs.
In the below figure that discusses
hybrid PICs, it can be seen in red that the incumbent technology for PICs is InP. InP can provide a number of devices and opportunities
in both electronics as well as photonics. InP main weakness from a function standpoint is that although it can provide HFETs, JFETs, bipolar
electronic devices, it has not been able to successfully penetrate LSI, VLSI, or ULSI etc., with digital IC circuitry. Chips such as ASICs
and DSPs are not practically available with the InP platform – mostly due to advancement in electronic transistor design, and also
through limited maturity in large format wafer manufacturing. Today the majority of InP fabrication is based on 4” or 100mm wafers,
and only in the past two years have folks been seriously looking at 6” or 150mm InP wafer infrastructure. From the photonics standpoint,
there are very good reasons why InP is the incumbent technology – it provides world class performance in lasers, modulators, simple
electronics such as drivers and TIAs (transimpedance amplifiers), as well as highly performing active and passive devices such as SOAs,
waveguides, spot-size converters, and mux/demux blocks such as AWG and Eschelle gratings.
Over the past decade, the rise of
silicon-based photonics has accelerated quickly (as can be seen in green in the Figure). Silicon has a huge history in electronics, and
it’s been said by many that if the existing infrastructure could be utilized effectively, then the cost of producing photonics with
similar fabrication, design, testing, and simulation tools, would become competitive with the current incumbent technology: InP. As can
be seen by the figure, silicon is capable of handling many photonics devices in addition to all electronic functionality with CMOS and
BiCMOS based technologies. The only photonic device that remains impossible (at least for the time being) is the emitter or laser where
light is generated. This has spawned a new segment for silicon photonics (SiPh) where engineers and scientists have developed creative
ways to implement InP into device, wafer, and epi-designs that are silicon based. These solutions are typically referred to as heterogeneous
solutions or Hybrid PICs where both InP and silicon are utilized to create PIC platforms with emitter or laser-based functionality.
While the red area of the Figure
represents the incumbent technology InP, the green areas, Silicon Photonics, the middle areas that are shaded yellow represent PIC based
technologies that can utilize either III-V compound semiconductor platforms such as InP, GaAs, even GaN, as well as silicon platforms
such as silicon wafers, and various combinations of silicon-based materials such as SOI (silicon on insulator), SiGe etc. The yellow areas
are represented by both polymers and dielectric materials that can be deposited onto either silicon or III-V material wafers. These combinations
of technology allow flexibility in PIC designs where both polymers and dielectrics can provide a multitude of active and passive photonic
devices such as: waveguides (W/G), spot size converters (SSC), modulators (such as Mach Zehnder and slot types), multipliers and demultipliers
(Mux/Demux variants such as AWGs, MMI, and Echelle gratings). The interesting part of the polymer and dielectric technology is that combinations
of active and passive devices can be mixed and matched with either III-V compound devices as well as silicon based, heterogeneous based
devices to design more effective and efficient PICs. For polymers, very low voltage can be utilized for low cost, low power consumption,
very high-speed modulators that can be deposited onto a semiconductor platform. For dielectric photonics, very low temperature sensitivity
mux/demux devices (such as athermal designs) can be deposited onto a semiconductor platform. As can be seen from the Figure, polymer and
dielectric technology suffers from that the fact that high density ICs and laser-based emitters are not available but could be integrated
with the appropriate designs for the PIC with III-V compound semiconductors and/or silicon-based technology that have both DSP/ASIC type
circuits and laser emitters.
PIC technologies have a number
various and broad applications as can be seen by the Figure below and highlighted in green. In this Figure applications range from fiber
optic communications (green lines), to other market verticals such as: display/ projection display, automotive/LIDAR for self-driving
vehicles, optical sensing/3D, bio-photonic sensing, medical, instrumentation etc. .Market TAMs are forecasted over the next decade with
estimations for the opportunities for PICs.
PIC technologies are based upon
semiconductor wafers (such as III-V compound semiconductors – InP, GaAs etc.) as well as silicon wafers (which can be tailored to
become SiGe heterogeneous, SOI, etc.). As these platforms are semiconductor based, the wafers are processed in fabs or fabrication facilities
to produce devices. As a general rule, silicon has the largest wafers with 8” (200mm) and 12” (300mm) format discs. GaAs typically
is running 3” (75mm), 4” (100mm) and 6” (150mm) wafers in production fabs or fabrication plants around the world. There
is an expectation that GaAs will eventually move to 8” (200mm) wafers in the next 5 years. InP is in production today on 2”
(50mm), 3” (75mm) and 4” (100mm) wafers with an expectation to move to 6” (150mm) in the next 5 years. Heterogeneous
solutions with silicon photonics that utilize materials such as SiGe and InP are typically 8” (200mm) and 12” (300mm) format
wafers. Polymer photonics can be deposited on either III-V compound semiconductor wafers as well as silicon wafers which makes it suitable
for the next generation of PIC based technological platforms for the fiber communications industry.
The supply chain for the PIC industry
starts with the wafer development and continues through epitaxial growth, device fabrication, optical sub-assembly, module or transceiver
builds, and sub-systems which are implemented into optical networking applications. Within these supply chain segments, several combinations
of technology can be utilized. For example, CMOS IC circuits can be fabricated onto silicon wafers together with silicon photonics, heterogeneous
solutions, that could have the advantage of polymer active devices, and dielectric passive devices on board. InP may be combined with
polymer photonics to house on-board or on-wafer emitters to source light for the optical signaling with modulators. Included in the wafers
can be combinations of electrical and optical circuitry. Electrical circuitry is usually set up as both as single as well as multilevel
interconnects. Optical circuitry is usually set up as a waveguide or optical layer as part of the device fabrication design. PICs can
interconnect electrical devices with photonic devices, and also increase chip functionality through the use of electrical and optical
active and passive device solutions. Polymer technologies can provide active device function through for example Mach Zehnder modulators,
as well as providing passive device function with waveguides, multipliers, and demultipliers.
Competitors
The markets we are targeting for
our electro-optic polymer technology are intensely competitive. While there are no major multi-national companies that compete directly
with us on electro-polymers, there are other companies that do manufacture optical modulators. These companies that have incumbent optical
modulators using semiconductors include: Lumentum, Broadcom, Intel, Ciena, Fujitsu, and Coherent. These companies are heavily invested
in the production of crystalline-based semiconductor electro-optic modulator technologies, as well as the development of novel manufacturing
techniques and modulator designs.
Smaller companies that compete with
us on optical modulators using new and novel technologies include: Hyperlite (who are developing thin film lithium niobate (TFLN) and
Lumiphase (who are developing Barium Titanate or BTO).
Our Plan to Compete
We believe that as our organic polymer
technology gains industry acceptance, we will be poised to obtain a significant portion of the component manufacturing market and have
our technology become ubiquitous. Electro-optic polymers demonstrate several advantages over other technologies, such as inorganic-based
technologies, due to their reduced manufacturing and processing costs, higher performance, and lower power requirements. Our patented
organic polymers and future electro-optic photonic devices have demonstrated significant stability advantages over our known competitor’s
materials.
We believe the principal competitive factors in our target
markets are:
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The ability to develop and commercialize highly stable optical polymer-based materials and optical devices in commercial quantities. |
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The ability to obtain appropriate patent and proprietary rights protection. |
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The ability to create commercial silicon-based PDKs for our electro-optic polymers |
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Lower cost, high production yield for these products. |
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The ability to enable integration and implement advanced technologies. |
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Strong sales and marketing, and distribution channels for access to products. |
We believe that our current business
planning will position our Company to compete adequately with respect to these factors. Our future success is difficult to predict because
we are an early stage company with all of our potential products still in development.
Many of our existing and potential
competitors have substantially greater research and product development capabilities and financial, scientific, marketing and human resources
than we do. As a result, these competitors may:
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Succeed in developing products that are equal to or superior to our potential products or that achieve greater market acceptance than our potential products. |
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Devote greater resources to developing, marketing or selling their products. |
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Respond quickly to new or emerging technologies or scientific advances and changes in customer requirements, which could render our technologies or potential products obsolete. |
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Introduce products that make the continued development of our potential products uneconomical. |
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Obtain patents that block or otherwise inhibit our ability to develop and commercialize our potential products. |
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Withstand price competition more successfully than we can. |
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Establish cooperative relationships among themselves or with third parties that enhance their ability to address the needs of our prospective customers. |
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Take advantage of acquisition or other opportunities more readily than we can. |
Employees and Human Capital
We currently have 21 full-time employees, and we retain
several independent contractors on an as-needed basis. Based on our current development plan we expect to add 9 additional full-time employees
in 2023.
People
As a technology and innovation-driven
company, we depend on a highly skilled workforce. Attracting, developing, advancing and retaining the best talent is critical for us to
execute our strategy and grow our business. Individuals with technical, engineering, chemistry and other science backgrounds, experience,
or interests are particularly important for us to succeed. We strive to advance a diverse, equitable and inclusive work environment.
Technical Team
Our team is composed of world-class
technologists, including materials scientists, design engineers, device engineers, synthetic organic chemists, test and material engineers
and technicians.
Diversity, Inclusion and Equity
We recognize and view equity as
key to our success. We work to create a culture of diversity and inclusion so that all of our employees feel they are respected and treated
equally, regardless of gender, race, ethnicity, age, disability, sexual orientation, gender identity, cultural background or religious
belief. We strive to provide our employees a diverse, equitable, and inclusive work environment.
Compensation and benefits
Our total
rewards package includes market-competitive pay, stock option grants and bonuses, healthcare benefits, retirement savings plans, life
insurance, disability insurance, paid time off and family leave, and flexible work schedules.
The principal
purposes of our equity incentive plan is to attract and retain employees who will contribute to our Company’s long range success,
to provide incentives that align the interests of our employees with those of our shareholders, and to promote the success of our Company’s
business.
Health
and Safety
We are
committed to providing a healthy environment and safe workplace by operating in accordance with established health and safety protocols
within our facility and maintaining a strong health and safety compliance program. We prioritize, manage, and carefully track safety performance
at our facility and integrate sound safety practices in every aspect of our operations. We regularly conduct self-assessments to examine
our safety culture and processes. In response to the COVID-19 pandemic and related mitigation measures, and in conjunction with federal
and statewide mandates, we implemented certain changes in an effort to protect our employees from COVID-related exposures. For example,
we implemented social distancing in the workplace, extensive cleaning and sanitation processes for both research and development areas
and office spaces, and broad work-from-home initiatives for employees in our administrative functions.
Available Information
We maintain
a website at www.lightwavelogic.com. We make available on our website under “Investors” – “Financial & Filings,”
free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those
reports as soon as reasonably practicable after we electronically file or furnish such material with the SEC. References to our website
in this report are provided as a convenience, and the information on our website is not, and shall not be deemed to be a part of this
Report on Form 10-K or incorporated into any other filings we make with the SEC. The SEC maintains an Internet site (www.sec.gov) that
contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. In
addition, we make available on our website under “Investors” – “Corporate Governance”, free of charge, our
Audit Committee Charter, Compensation Committee Charter, Nominating And Corporate Governance Committee Charter, Operations Committee Charter
and Code of Ethics and Business Conduct. In addition, the foregoing information is available in print, without charge, to any stockholder
who requests these materials from us.
Investing in our common stock is
risky. In addition to the other information contained in this Annual Report on Form 10-K, you should consider carefully the following
risk factors in evaluating our business and us. If any of the following events actually occur, our business, operating results, prospects
or financial condition could be materially and adversely affected. This could cause the trading price of our common stock to decline and
you may lose all or part of your investment. The risks described below are not the only ones that we face. Additional risks not presently
known to us or that we currently deem immaterial may also significantly impair our business operations and could result in a complete
loss of your investment.
We have incurred substantial operating losses since
our inception and will continue to incur substantial operating losses for the foreseeable future.
Since our inception, we have been
engaged primarily in the research and development of our electro-optic polymer materials technologies and potential products. As a result
of these activities, we incurred significant losses and experienced negative cash flow since our inception. We incurred a net loss of
$17,230,480 for the year ended December 31, 2022, $18,631,381 for the year ended December 31, 2021 and $6,715,564 for the year ended December
31, 2020. We anticipate that we will continue to incur operating losses through at least 2023.
We may not be able to generate significant
revenue either through customer contracts for our potential products or technologies or through development contracts from the U.S. government
or government subcontractors. We expect to continue to make significant operating and capital expenditures for research and development
and to improve and expand production, sales, marketing and administrative systems and processes. As a result, we will need to generate
significant revenue to achieve profitability. We cannot assure you that we will ever achieve profitability.
We are subject to the risks frequently experienced by early stage companies.
The likelihood of our success must
be considered in light of the risks frequently encountered by early stage companies, especially those formed to develop and market new
technologies. These risks include our potential inability to:
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Establish product sales and marketing capabilities; |
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Establish and maintain markets for our potential products; |
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Identify, attract, retain and motivate qualified personnel; |
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Continue to develop and upgrade our technologies to keep pace with changes in technology and the growth of markets using polymer based materials; |
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Develop expanded product production facilities, along with silicon-based foundry and other outside contractor relationships; |
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Maintain our reputation and build trust with customers; |
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Scale up from small pilot or prototype quantities to large quantities of product on a consistent basis; |
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Contract for or develop the internal skills needed to master large volume production of our products; and |
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Fund the capital expenditures required to develop volume production due to the limits of our available financial resources. |
If we fail to effectively manage our growth, and
effectively transition from our focus on research and development activities to commercially successful products, our business could suffer.
Failure to manage growth of operations
could harm our business. To date, a large number of our activities and resources have been directed at the research and development of
our technologies and development of potential related products including work in association with external partners. The transition from
a focus on research and development to being a vendor of products requires effective planning and management. Additionally, growth arising
from the expected synergies from future acquisitions will require effective planning and management. Future expansion will be expensive
and will likely strain management and other resources.
In order to effectively manage growth, we must:
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Continue to develop an effective planning and management process to implement our business strategy; |
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Hire, train and integrate new personnel in all areas of our business; |
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Expand our facilities and increase capital investments; and |
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Continue to successfully partner with silicon-based foundries. |
We cannot assure you that we will be able to accomplish
these tasks effectively or otherwise effectively manage our growth.
We will require additional capital to continue
to fund our operations and if we do not obtain additional capital, we may be required to substantially limit our operations.
Our business does not presently
generate the cash needed to finance our current and anticipated operations. Based on our current operating plan and budgeted cash requirements,
we believe that we have sufficient funds to finance our operations through April 2024; however, we will need to obtain additional future
financing after that time to finance our operations until such time that we can conduct profitable revenue-generating activities. We expect
that we will need to seek additional funding through public or private financings, including equity financings, and through other arrangements,
including collaborative arrangements. Poor financial results, unanticipated expenses or unanticipated opportunities could require additional
financing sooner than we expect. Other than with respect to (i) the purchase agreement for $33 million
we entered into with Lincoln Park Capital Fund, LLC (“Lincoln Park”) on October 4, 2021 (the “2021 Purchase
Agreement”); (ii) the purchase agreement for up to $30 million we entered into with Lincoln Park on February 28, 2023
(the "2023 Purchase Agreement”); and (iii) the sales agreement for up to $35 million we entered into with Roth
Capital Partners, LLC (“Roth Capital”) on December 9, 2022 (the “Roth Sales Agreement”);
we have no plans or arrangements with respect to the possible acquisition of additional financing, and such financing may be unavailable
when we need it or may not be available on acceptable terms. We currently have a remaining amount of $2,126,557 million that is available
to our Company pursuant to the 2021 Purchase Agreement with Lincoln Park, $30 million that is available to our Company pursuant to the
2023 Purchase Agreement with Lincoln Park, and $35 million that is available to our Company pursuant to the Roth Sales Agreement with
Roth Capital.
Our forecast of the period of time
through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and
uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this Annual
Report on Form 10-K. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources
sooner than we currently expect.
Additional financing may not be
available to us, due to, among other things, our Company not having a sufficient credit history, income stream, profit level, asset base
eligible to be collateralized, or market for its securities. If we raise additional funds by issuing equity or convertible debt securities,
the percentage ownership of our existing shareholders may be reduced, and these securities may have rights superior to those of our common
stock. If adequate funds are not available to satisfy our long-term capital requirements, or if planned revenues are not generated, we
may be required to substantially limit our operations.
We are entering new markets, and if we fail to
accurately predict growth in these new markets, we may suffer substantial losses.
We are devoting significant resources
to develop next generation proprietary photonic devices that are based on our advanced electro-optical polymer material systems for future
applications in data communications and telecommunications markets and we are exploring other applications that include automotive/LIDAR,
sensing, displays etc. We expect to continue to develop products for these markets and to seek to identify new markets. These markets
change rapidly, and we cannot assure you that they will grow or that we will be able to accurately forecast market demand, or lack thereof,
in time to respond appropriately. Our investment of resources to develop products for these markets may either be insufficient to meet
actual demand or result in expenses that are excessive in light of actual sales volumes. Failure to predict growth and demand accurately
in new markets may cause us to suffer substantial losses. In addition, as we enter new markets, there is a significant risk that:
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The market may not accept the price and/or performance of our products; |
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There may be issued patents we are not aware of that could block our entry into the market or could result in excessive litigation; and |
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The time required for us to achieve market acceptance of our products may exceed our capital resources that would require additional investment. |
Our plan to develop relationships with strategic partners may not be
successful.
Part of our business strategy is
to maintain and develop strategic relationships with private firms, such as packaging companies and silicone based foundries, and to a
lesser extent, government agencies and academic institutions, to conduct research and development and testing of our products and technologies.
For these efforts to be successful, we must identify partners whose competencies complement ours. We must also successfully enter into
agreements with them on terms attractive to us, and integrate and coordinate their resources and capabilities with our own. We may be
unsuccessful in entering into agreements with acceptable partners or negotiating favorable terms in these agreements. Also, we may be
unsuccessful in integrating the resources or capabilities of these partners. In addition, our strategic partners may prove difficult to
work with or less skilled than we originally expected. If we are unsuccessful in our collaborative efforts, our ability to develop and
market products could be severely limited.
The failure to establish and maintain collaborative relationships may
have a materially adverse affect on our business.
We are initially targeting applications
in data communications and telecommunications markets and are exploring other applications that include automotive/LIDAR, sensing, displays
etc. Our ability to generate revenues depends significantly on the extent to which potential customers and other potential industry partners
develop, promote and sell systems that incorporate our products, which, of course, we cannot control. Any failure by potential customers
and other potential industry partners to successfully develop and market systems that incorporate our products could adversely affect
our sales. The extent to which potential customers and other industry partners develop, promote and sell systems incorporating our products
is based on a number of factors that are largely beyond our ability to control.
We may participate in joint ventures that expose us to operational and
financial risk.
We may participate in one or more
joint ventures for the purpose of assisting us in carrying out our business expansion, especially with respect to new product and/or market
development. We may experience with our joint venture partner(s) issues relating to disparate communication, culture, strategy, and resources.
Further, our joint venture partner(s) may have economic or business interests or goals that are inconsistent with ours, exercise their
rights in a way that prohibits us from acting in a manner which we would like, or they may be unable or unwilling to fulfill their obligations
under the joint venture or other agreements. We cannot assure you that the actions or decisions of our joint venture partners will not
affect our operations in a way that hinders our corporate objectives or reduces any anticipated cost savings or revenue enhancement resulting
from these ventures.
If we fail to develop and introduce new or enhanced
products on a timely basis, our ability to attract and retain customers could be impaired and our competitive position could be harmed.
We plan to operate in a dynamic
environment characterized by rapidly changing technologies and industry standards and technological obsolescence. To compete successfully,
we must design, develop, market and sell products that provide increasingly higher levels of performance and reliability and meet the
cost expectations of our customers. The introduction of new products by our competitors, the market acceptance of products based on new
or alternative technologies, or the emergence of new industry standards could render our anticipated products obsolete. Our failure to
anticipate or timely develop products or technologies in response to technological shifts could adversely affect our operations. In particular,
we may experience difficulties with product design, manufacturing, marketing or certification that could delay or prevent our development,
introduction or marketing of products. If we fail to introduce products that meet the needs of our customers or penetrate new markets
in a timely fashion our Company will be adversely affected.
Our future growth will suffer if we do not achieve
sufficient market acceptance of our organic nonlinear optical material products or our proprietary photonic devices.
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.
All of our potential products are still in the development stage, and we do not know when a market for these products will develop, if
at all. Our success depends, in part, upon our ability to gain market acceptance of our products. To be accepted, our products must meet
the technical and performance requirements of our potential customers. OEMs, suppliers or government agencies may not accept polymer-based
products. In addition, even if we achieve some degree of market acceptance for our potential products in one industry, we may not achieve
market acceptance in other industries for which we are developing products.
Achieving market acceptance for
our products will require marketing efforts and the expenditure of financial and other resources to create product awareness and demand
by customers. We may be unable to offer products that compete effectively due to our limited resources and operating history. Also, certain
large corporations may be predisposed against doing business with a company of our limited size and operating history. Failure to achieve
broad acceptance of our products by customers and to compete effectively would harm our operating results.
Our potential customers require our products to
undergo a lengthy and expensive qualification process, which does not assure product sales.
Prior to purchasing our products,
our potential customers will require that our products undergo extensive qualification processes. These qualification processes may continue
for several months or more. However, qualification of a product by a customer does not assure any sales of the product to that customer.
Even after successful qualification and sales of a product to a customer, a subsequent revision to the product, changes in our customer’s
manufacturing process or our selection of a new supplier may require a new qualification process, which may result in additional delays.
Also, once one of our products is qualified, it could take several additional months or more before a customer commences volume production
of components or devices that incorporate our products. Despite these uncertainties, we are devoting substantial resources, including
design, engineering, sales, marketing and management efforts, to qualifying our products with customers in anticipation of sales. If we
are unsuccessful or delayed in qualifying any of our products with a customer, sales of our products to a customer may be precluded or
delayed, which may impede our growth and cause our business to suffer.
Obtaining a sales contract with a potential customer
does not guarantee that a potential customer will not decide to cancel or change its product plans, which could cause us to generate no
revenue from a product and adversely affect our results of operations.
Even after we secure a sales contract
with a potential customer, we may experience delays in generating revenue from our products as a result of a lengthy development cycle
that may be required. Potential customers will likely take a considerable amount of time to evaluate our products; it could take 12 to
24 months from early engagement by our sales team to actual product sales. The delays inherent in these lengthy sales cycles increase
the risk that a customer will decide to cancel, curtail, reduce or delay its product plans, causing us to lose anticipated sales. In addition,
any delay or cancellation of a customer’s plans could materially and adversely affect our financial results, as we may have incurred
significant expense and generated no revenue. Finally, our customers’ failure to successfully market and sell their products could
reduce demand for our products and materially and adversely affect our business, financial condition and results of operations. If we
were unable to generate revenue after incurring substantial expenses to develop any of our products, our business would suffer.
Many of our products will have long sales cycles,
which may cause us to expend resources without an acceptable financial return and which makes it difficult to plan our expenses and forecast
our revenue.
Many of our products will have long
sales cycles that involve numerous steps, including initial customer contacts, specification writing, engineering design, prototype fabrication,
pilot testing, regulatory approvals (if needed), sales and marketing and commercial manufacture. During this time, we may expend substantial
financial resources and management time and effort without any assurance that product sales will result. The anticipated long sales cycle
for some of our products makes it difficult to predict the quarter in which sales may occur. Delays in sales may cause us to expend resources
without an acceptable financial return and make it difficult to plan expenses and forecast revenues.
Successful commercialization of our current and future products will
require us to maintain a high level of technical expertise.
Technology in our target markets
is undergoing rapid change. To succeed in our target markets, we will have to establish and maintain a leadership position in the technology
supporting those markets. Accordingly, our success will depend on our ability to:
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Accurately predict the needs of our target customers and develop, in a timely manner, the technology required to support those needs; |
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Provide products that are not only technologically sophisticated but are also available at a price acceptable to customers and competitive with comparable products; |
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Establish and effectively defend our intellectual property; and |
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Enter into relationships with other companies that have developed complementary technology into which our products may be integrated. |
We cannot assure you that we will be able to achieve
any of these objectives.
One of our significant target markets is the telecommunications market,
which historically has not accepted polymer modulators.
One of our significant target markets
is the telecommunications market, which demands high reliability optical components. Historically, polymer modulators have not been accepted
into this market even though polymer modulators have achieved Telcordia™ based specifications. It is clear that the telecommunications
market is demanding higher and higher data rates for its optical components, and may again decide that polymer based modulators are not
suitable even if higher data rates, high reliability, and low power consumption are demonstrated.
Another of our significant target markets is the
data communications (datacenter and/or high performance computing) market, which may be subject to heavy competition from other PIC based
technologies such as silicon photonics and Indium Phosphide.
Another of our significant target
markets is the data communications (datacenter and/or high performance computing) market, which may be subject to heavy competition from
other PIC based technologies such as silicon photonics and Indium Phosphide. As the demands for high performance, low cost ($/Gbps) is
implemented into next generation architectures, polymer modulators and polymer based PIC products may be subject to significant competition.
Furthermore, there is a potential that technologies such as silicon photonics and Indium Phosphide might reach the metric of $1/Gbps at
400Gbps before ours. Customers may then be less willing to purchase new technology such as ours or invest in new technology development
such as ours for next generation systems.
Our inability to successfully acquire and integrate
other businesses, assets, products or technologies could harm our business and cause us to fail at achieving our anticipated growth.
We may grow our business through
strategic acquisitions and investments, and we are actively evaluating acquisitions and strategic investments in businesses, products
or technologies that we believe could complement or expand our product offering, create and/or expand a client base, enhance our technical
capabilities or otherwise offer growth or cost-saving opportunities. From time to time, we may enter into letters of intent with companies
with which we are negotiating potential acquisitions or investments or as to which we are conducting due diligence. Although we are currently
not a party to any binding material definitive agreement with respect to potential investments in, or acquisitions of, complementary businesses,
products or technologies, we may enter into these types of arrangements in the future, which could materially decrease the amount of our
available cash or require us to seek additional equity or debt financing. We have limited experience in successfully acquiring and integrating
businesses, products and technologies. We may not be successful in negotiating the terms of any potential acquisition, conducting thorough
due diligence, financing the acquisition or effectively integrating the acquired business, product or technology into our existing business
and operations. Our due diligence may fail to identify all of the problems, liabilities or other shortcomings or challenges of an acquired
business, product or technology, including issues related to intellectual property, product quality or product architecture, regulatory
compliance practices, revenue recognition or other accounting practices, or employee or customer issues.
Additionally, in connection with
any acquisitions we complete, we may not achieve the synergies or other benefits we expected to achieve, and we may incur write-downs,
impairment charges or unforeseen liabilities that could negatively affect our operating results or financial position or could otherwise
harm our business. If we finance acquisitions using existing cash, the reduction of our available cash could cause us to face liquidity
issues or cause other unanticipated problems in the future. If we finance acquisitions by issuing convertible debt or equity securities,
the ownership interest of our existing stockholders may be diluted, which could adversely affect the market price of our stock. Further,
contemplating or completing an acquisition and integrating an acquired business, product or technology could divert management and employee
time and resources from other matters, which could harm our business, financial condition and operating results.
Our operations and financial results could be adversely
impacted by the COVID-19 pandemic, which has at times negatively impacted our stock price and could curtail our ability to raise necessary
funds in the near-term on terms that are acceptable to us, and may negatively impact our business, results of operations, particularly
with respect to our research and development, and financial position.
The
COVID-19 pandemic continues to have a significant impact around the world, prompting governments and businesses to take certain measures
in response, such as the imposition of travel restrictions, temporary closures of businesses, quarantine and shelter-in-place orders,
and adoption of remote working. While the extent of the impact of the COVID-19 pandemic on our business and financial results remains
uncertain, a continued and prolonged public health crisis such as the COVID-19 pandemic would have a negative impact on our business,
results of operations, particularly with respect to our research and development, and financial condition. The COVID-19 pandemic has resulted
in significant volatility and substantial declines in the stock markets, which has negatively impacted our stock price at times which
in turn has negatively impacted our ability to raise significant funds in during those times on terms that are acceptable to us. It is
unknown the potential impact in the long-term in the event of a prolonged disruption or recession. In addition, the COVID-19 pandemic
could impact the conduct of our research and development due to the slowdown or stoppage of modulator and materials development at our
laboratory facility. Given the dynamic nature of these circumstances, the duration of any business disruption or potential impact of the
COVID-19 pandemic to our business is difficult to predict.
The extent to which the COVID-19 pandemic will
adversely impact our business, financial condition and results of operations is highly uncertain and cannot be predicted.
The COVID-19 pandemic has created
significant worldwide uncertainty, volatility and economic disruption. The extent to which COVID-19 will adversely impact our business,
financial condition and results of operations is dependent upon numerous factors, many of which are highly uncertain, rapidly changing
and uncontrollable. These factors include, but are not limited to: (i) the duration and scope of the pandemic; (ii) governmental, business
and individual actions that have been and continue to be taken in response to the pandemic, including travel restrictions, quarantines,
social distancing, work-from-home and shelter-in-place orders and shut-downs; (iii) the impact on U.S. and global economies and the timing
and rate of economic recovery; (iv) potential adverse effects on the financial markets and access to capital; (v) potential goodwill or
other impairment charges; (vi) increased cybersecurity risks as a result of pervasive remote working conditions; (vii) our ability to
effectively carry out our operations due to any adverse impacts on the health and safety of our employees and their families; and (viii)
the ability of our collaborative partners to timely satisfy their collaborative obligations to us.
We may incur debt in the future that might be secured
with our intellectual property as collateral, which could subject our Company to the risk of loss of all of our intellectual property.
We currently have no debt to service. If we incur debt
in the future, we may be required to secure the debt with our intellectual property, including all of our patents and patents pending.
In the event we default on the debt, we could incur the loss of all of our intellectual property, which would materially and adversely
affect our Company and cause you to lose your entire investment in our Company.
Our failure to compete successfully could harm our business.
The markets that we are targeting
for our proprietary electro-optic polymer systems and photonic devices are intensely competitive. Most of our present and potential competitors
have or may have substantially greater research and product development capabilities, financial, scientific, marketing, manufacturing
and human resources, name recognition and experience than we have. As a result, these competitors may:
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succeed in developing products that are equal to or superior to our potential products or that will achieve greater market acceptance than our potential products; |
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devote greater resources to developing, marketing or selling their products; |
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respond more quickly to new or emerging technologies or scientific advances and changes in customer requirements, which could render our technologies or potential products obsolete; |
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introduce products that make the continued development of our potential products uneconomical; |
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obtain patents that block or otherwise inhibit our ability to develop and commercialize our potential products; |
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withstand price competition more successfully than we can; |
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establish cooperative relationships among themselves or with third parties that enhance their ability to address the needs of our prospective customers. |
Our failure to compete successfully against these existing
or future competitors could harm our business.
We may be unable to obtain effective intellectual
property protection for our potential products and technology.
Our intellectual property, or any
intellectual property that we have or may acquire, license or develop in the future, may not provide meaningful competitive advantages.
Our patents and patent applications, including those we license, may be challenged by competitors, and the rights granted under such patents
or patent applications may not provide meaningful proprietary protection. For example, numerous patents held by third parties relate to
polymer materials and electro-optic devices. These patents could be used as a basis to challenge the validity or limit the scope of our
patents or patent applications. A successful challenge to the validity or limitation of the scope of our patents or patent applications
could limit our ability to commercialize our polymer materials technology and, consequently, reduce our revenues.
Moreover, competitors may infringe
our patents or those that we license, or successfully avoid these patents through design innovation. To combat infringement or unauthorized
use, we may need to resort to litigation, which can be expensive and time-consuming and may not succeed in protecting our proprietary
rights. In addition, in an infringement proceeding a court may decide that our patents or other intellectual property rights are not valid
or are unenforceable, or may refuse to stop the other party from using the intellectual property at issue on the ground that it is non-infringing.
Policing unauthorized use of our intellectual property is difficult and expensive, and we may not be able to, or have the resources to,
prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect these rights as fully as
the laws of the United States.
We also rely on the law of trade
secrets to protect unpatented technology and know-how. We try to protect this technology and know-how by limiting access to those employees,
contractors and strategic partners with a need to know this information and by entering into confidentiality agreements with these parties.
Any of these parties could breach the agreements and disclose our trade secrets or confidential information to our competitors, or these
competitors might learn of the information in other ways. Disclosure of any trade secret not protected by a patent could materially harm
our business.
We may be subject to patent infringement claims,
which could result in substantial costs and liability and prevent us from commercializing our potential products.
Third parties may claim that our
potential products or related technologies infringe their patents. Any patent infringement claims brought against us may cause us to incur
significant expenses, divert the attention of our management and key personnel from other business concerns and, if successfully asserted
against us, require us to pay substantial damages. In addition, as a result of a patent infringement suit, we may be forced to stop or
delay developing, manufacturing or selling potential products that are claimed to infringe a patent covering a third party’s intellectual
property unless that party grants us rights to use its intellectual property. We may be unable to obtain these rights on terms acceptable
to us, if at all. Even if we are able to obtain rights to a third party’s patented intellectual property, these rights may be non-exclusive,
and therefore our competitors may obtain access to the same intellectual property. Ultimately, we may be unable to commercialize our potential
products or may have to cease some of our business operations as a result of patent infringement claims, which could severely harm our
business.
If our potential products infringe
the intellectual property rights of others, we may be required to indemnify customers for any damages they suffer. Third parties may assert
infringement claims against our current or potential customers. These claims may require us to initiate or defend protracted and costly
litigation on behalf of customers, regardless of the merits of these claims. If any of these claims succeed, we may be forced to pay damages
on behalf of these customers or may be required to obtain licenses for the products they use. If we cannot obtain all necessary licenses
on commercially reasonable terms, we may be unable to continue selling such products.
Our technology may be subject to government rights.
We may have obligations to government
agencies in connection with the technology that we have developed, including the right to require that a compulsory license be granted
to one or more third parties selected by certain government agencies. It may be difficult to monitor whether these third parties will
limit their use of our technology to these licensed uses, and we could incur substantial expenses to enforce our rights to our licensed
technology in the event of misuse.
The loss of certain of our key personnel, or any
inability to attract and retain additional personnel, could impair our ability to attain our business objectives.
Our future success depends to a
significant extent on the continued service of our key management personnel, particularly Dr. Michael Lebby, our Chief Executive Officer
and James S. Marcelli our President, Chief Operating Officer, Secretary and Principal Financial Officer. Accordingly, the loss of the
services of either of these persons would adversely affect our business and our ability to timely commercialize our products, and impede
the attainment of our business objectives.
Our future success will also depend
on our ability to attract, retain and motivate highly skilled personnel to assist us with product development and commercialization. Competition
for highly educated qualified personnel in the polymer industry is intense. If we fail to hire and retain a sufficient number of qualified
management, engineering, sales and technical personnel, we will not be able to attain our business objectives.
If we fail to develop and maintain the quality of our manufacturing
processes, our operating results would be harmed.
The manufacture of our potential
products is a multi-stage process that requires the use of high-quality materials and advanced manufacturing technologies. Also, polymer-related
device development and manufacturing must occur in a highly controlled, clean environment to minimize particles and other yield and quality-limiting
contaminants. In spite of stringent quality controls, weaknesses in process control or minute impurities in materials may cause a substantial
percentage of a product in a lot to be defective. If we are not able to develop and continue to improve on our manufacturing processes
or to maintain stringent quality controls, or if contamination problems arise, our operating results would be harmed.
The complexity of our anticipated products may
lead to errors, defects and bugs, which could result in the necessity to redesign products and could negatively, impact our reputation
with customers.
Products as complex as those we
intend to market might contain errors, defects and bugs when first introduced or as new versions are released. Delivery of products with
production defects or reliability, quality or compatibility problems could significantly delay or hinder market acceptance of our products
or result in a costly recall and could damage our reputation and adversely affect our ability to sell our products. If our products experience
defects, we may need to undertake a redesign of the product, a process that may result in significant additional expenses.
We may also be required to make
significant expenditures of capital and resources to resolve such problems. There is no assurance that problems will not be found in new
products after commencement of commercial production, despite testing by our suppliers, our customers and us.
If we decide to make commercial quantities of products
at our facilities, we will be required to make significant capital expenditures to increase capacity.
We lack the internal ability to
manufacture products at a level beyond the stage of early commercial introduction. To the extent we do not have an outside vendor to manufacture
our products, we will have to increase our internal production capacity and we will be required to expand our existing facilities or to
lease new facilities or to acquire entities with additional production capacities. These activities would require us to make significant
capital investments and may require us to seek additional equity or debt financing. We cannot assure you that such financing would be
available to us when needed on acceptable terms, or at all. Further, we cannot assure you that any increased demand for our potential
products would continue for a sufficient period of time to recoup our capital investments associated with increasing our internal production
capacity.
In addition, we do not have experience
manufacturing our potential products in large quantities. In the event of significant demand for our potential products, large-scale production
might prove more difficult or costly than we anticipate and lead to quality control issues and production delays.
We may not be able to manufacture products at competitive prices.
To date, we have produced limited
quantities of products for research, development, demonstration and prototype purposes. The cost per unit for these products currently
exceeds the price at which we could expect to profitably sell them. If we cannot substantially lower our cost of production as we move
into sales of products in commercial quantities, our financial results will be harmed.
We may be unable to export our potential products
or technology to other countries, convey information about our technology to citizens of other countries or sell certain products commercially,
if the products or technology are subject to United States export or other regulations.
We are developing certain polymer-based
products that we believe the United States government and other governments may be interested in using for military and information gathering
or antiterrorism activities. United States government export regulations may restrict us from selling or exporting these potential products
into other countries, exporting our technology to those countries, conveying information about our technology to citizens of other countries
or selling these potential products to commercial customers. We may be unable to obtain export licenses for products or technology, if
they become necessary. We currently cannot assess whether national security concerns would affect our potential products and, if so, what
procedures and policies we would have to adopt to comply with applicable existing or future regulations.
We are subject to regulatory compliance related to our operations.
We are subject to various U.S. governmental
regulations related to occupational safety and health, labor and business practices. Failure to comply with current or future regulations
could result in the imposition of substantial fines, suspension of production, alterations of our production processes, cessation of operations,
or other actions, which could harm our business.
We may incur liability arising from the use of hazardous materials.
Our business and our facilities
are subject to a number of federal, state and local laws and regulations relating to the generation, handling, treatment, storage and
disposal of certain toxic or hazardous materials and waste products that we use or generate in our operations. Many of these environmental
laws and regulations subject current or previous owners or occupiers of land to liability for the costs of investigation, removal or remediation
of hazardous materials. In addition, these laws and regulations typically impose liability regardless of whether the owner or occupier
knew of, or was responsible for, the presence of any hazardous materials and regardless of whether the actions that led to the presence
were taken in compliance with the law. In our business, we use hazardous materials that are stored on site. We use various chemicals in
our manufacturing process that may be toxic and covered by various environmental controls. An unaffiliated waste hauler transports the
waste created by use of these materials off-site. Many environmental laws and regulations require generators of waste to take remedial
actions at an off-site disposal location even if the disposal was conducted lawfully. The requirements of these laws and regulations are
complex, change frequently and could become more stringent in the future. Failure to comply with current or future environmental laws
and regulations could result in the imposition of substantial fines, suspension of production, alteration of our production processes,
cessation of operations or other actions, which could severely harm our business.
Our data and information systems and network infrastructure
may be subject to hacking or other cyber security threats. If our security measures are breached and an unauthorized party obtains access
to our proprietary business information, our information systems may be perceived as being unsecure, which could harm our business and
reputation, and our proprietary business information could be misappropriated which could have an adverse effect on our business and results
of operations.
Our Company stores and transmits
its proprietary information on its computer systems. Despite our security measures, our information systems and network infrastructure
may be vulnerable to cyber-attacks or could be breached due to an employee error or other disruption that could result in unauthorized
disclosure of sensitive information that has the potential to significantly interfere with our business operations. Breaches of our security
measures could expose us to a risk of loss or misuse of this information, litigation and potential liability. Since techniques used to
obtain unauthorized access or to sabotage information systems change frequently and generally are not recognized until launched against
a target, we may be unable to anticipate these techniques or to implement adequate preventive measures in advance of such an attack on
our systems. In addition, we use third party vendors to store our proprietary information who use cyber or “Cloud” storage
of information as part of their service or product offerings, and despite our attempts to validate the security of such services, our
proprietary information may be misappropriated by other parties. In the event of an actual or perceived breach of our security, or the
security of one of our vendors, the market perception of the effectiveness of our security measures could be harmed and we could suffer
damage to our reputation or our business. Additionally, misappropriation of our proprietary business information could prove competitively
harmful to our business.
We conduct significantly all of our research and
development activities at our Englewood, CO facility, and circumstances beyond our control may result in considerable business interruptions.
We conduct significantly all of
our research and development activities at our Englewood, CO facility. Our operations are vulnerable to interruption by fire, earthquake,
floods or other natural disaster, quarantines or other disruptions associated with infectious diseases, national catastrophe, terrorist
activities, war, disruptions in our computing and communications infrastructure due to power loss, telecommunications failure, human error,
physical or electronic security breaches and computer viruses, and other events beyond our control. We do not have a detailed disaster
recovery plan. Additionally, presently, the novel strain of coronavirus known as COVID-19 has the potential to interrupt some, if not
all, of our research and development activities.
We could be negatively affected as a result
of a proxy contest and the actions of activist stockholders.
A proxy
contest with respect to election of our directors, or other activist stockholder activities, could adversely affect our business because:
(1) responding to a proxy contest and other actions by activist stockholders can be costly and time-consuming, disruptive to our operations
and divert the attention of management and our employees; (2) perceived uncertainties as to our future direction caused by activist activities
may result in the loss of potential business opportunities, and may make it more difficult to attract and retain qualified personnel and
business partners; and (3) if individuals are elected to our Board of Directors with a specific agenda, it may adversely affect our ability
to effectively and timely implement our strategic plans.
The requirements of being a public company are
a strain on our systems and resources, are a diversion to management’s attention and are costly.
As a public company, we are subject
to the reporting requirements of the Securities Exchange Act of 1934 (“Exchange Act”) the Sarbanes-Oxley Act of 2002
(“Sarbanes-Oxley Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”),
and the rules and regulations of The NASDAQ Stock Market. The requirements of these rules and regulations increase our legal, accounting
and financial compliance costs, make some activities more difficult, time-consuming and costly and may also place undue strain on our
personnel, systems and resources.
The Exchange Act requires, among
other things, that we file annual, quarterly and current reports with respect to our business and operating results. The Sarbanes-Oxley
Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.
We are continuing the costly process of implementing and testing our systems to report our results as a public company, to continue to
manage our growth and to implement internal controls. We are and will continue to be required to implement and maintain various other
control and business systems related to our equity, finance, treasury, information technology, other recordkeeping systems and other operations.
As a result of this implementation and maintenance, management's attention may be diverted from other business concerns, which could adversely
affect our business. Furthermore, we rely on third-party software and system providers for ensuring our reporting obligations and effective
internal controls, and to the extent these third parties fail to provide adequate service including as a result of any inability to scale
to handle our growth and the imposition of these increased reporting and internal controls and procedures, we could incur material costs
for upgrading or switching systems and our business could be materially affected.
In addition, changing laws, regulations
and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and
financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying
interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time
as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters
and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with
evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion
of management's time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws,
regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application
and practice, regulatory authorities may initiate legal proceedings against us and our business may be adversely affected.
In addition, we expect these laws,
rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may
be required to incur substantial costs to maintain appropriate levels of coverage. These factors could also make it more difficult for
us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee, and qualified executive
officers.
As a result of being a public company,
our business and financial condition are more visible, which we believe may result in threatened or actual litigation, including by competitors
and other third parties. If such claims are successful, our business and operating results could be adversely affected, and even if the
claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could
divert the time and resources of our management and adversely affect our business and operating results.
If we fail to maintain an effective system of disclosure
controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with
applicable regulations could be impaired.
As a public company, we are subject
to the reporting requirements of the Securities Exchange Act of 1934 (Exchange Act) the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley Act),
the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), and the rules and regulations of The NASDAQ Stock Market.
We expect that compliance with these rules and regulations will continue to increase our legal, accounting and financial compliance costs,
make some activities more difficult, time consuming and costly, and place significant strain on our personnel, systems and resources.
The Sarbanes-Oxley Act requires,
among other things, that we assess the effectiveness of our internal control over financial reporting annually and the effectiveness of
our disclosure controls and procedures quarterly. In particular, Section 404 of the Sarbanes-Oxley Act, (Section 404), requires us to
perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on, and
our independent registered public accounting firm to attest to, the effectiveness of our internal control over financial reporting. Our
compliance with applicable provisions of Section 404 requires that we incur substantial accounting expense and expend significant management
time on compliance-related issues as we implement additional corporate governance practices and comply with reporting requirements. Moreover,
if we are not able to comply with the requirements of Section 404 applicable to us in a timely manner, or if we or our independent registered
public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses,
the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities,
stockholder or other third-party litigation, all of which would require additional financial and management resources.
Furthermore, investor perceptions
of our Company may suffer if deficiencies are found, and this could cause a decline in the market price of our stock or hinder our ability
to raise capital. Irrespective of compliance with Section 404, any failure of our internal control over financial reporting could have
a material adverse effect on our stated operating results and harm our reputation. If we are unable to continue to implement and maintain
these requirements effectively or efficiently, it could harm our operations, financial reporting, or financial results and could result
in an adverse opinion on our internal controls from our independent registered public accounting firm.
The exercise of options and warrants and other
issuances of shares of common stock or securities convertible into common stock will dilute your interest.
Our Board may determine from time
to time that it needs to raise additional capital by issuing additional shares of our common stock or other securities and we are not
restricted from issuing additional common stock, including securities that are convertible into or exchangeable for, or that represent
the right to receive, shares of our common stock. Because our decision to issue securities in any future offering will depend on market
conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future offerings,
or the prices at which such offerings may be affected. Additional equity offerings may dilute the holdings of existing stockholders or
reduce the market price of our common stock.
As of December 31, 2022, we have
outstanding options and warrants to purchase an aggregate of 8,073,173 shares of our common stock at exercise prices ranging from $0.51
- $16.81 per share with a weighted average exercise price of $1.91 per share. The exercise of options and warrants at prices below the
market price of our common stock could adversely affect the price of shares of our common stock. Additional dilution may result from the
issuance of shares of our capital stock in connection with any collaboration (although none are contemplated at this time) or in connection
with other financing efforts, including pursuant to the 2021 Purchase Agreement with Lincoln Park, the 2023 Purchase Agreement with Lincoln
Park, and the Roth Sales Agreement with Roth Capital. Any issuance of our common stock that is not made solely to then-existing stockholders
proportionate to their interests, such as in the case of a stock dividend or stock split, will result in dilution to each stockholder
by reducing his, her or its percentage ownership of the total outstanding shares. Moreover, if we issue options or warrants to purchase
our common stock in the future and those options or warrants are exercised or we issue restricted stock, stockholders may experience further
dilution. Holders of shares of our common stock have no preemptive rights that entitle them to purchase their pro rata share of any offering
of shares of any class or series.
The trading
price of our common stock has been, and may continue to be, volatile, and the value of our common stock may decline. This
volatility, as well as general market conditions, may cause our stock price to fluctuate greatly and even potentially expose us to litigation.
Our common stock may be subject
to continued volatility. During the past 52 weeks, the share price for our common stock ranged from a low of $3.91 to high of $13.59.
We cannot assure you that the market price for our common stock will be less volatile or will remain at its current level. A decrease
in the market price for our shares could result in substantial losses for investors. The market price of our common stock may be significantly
affected by one or more of the following factors, many of which are beyond our control, including:
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our Company’s ability to execute on its business plan; |
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the status of particular development programs and the timing of performance under specific development agreements; |
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actual or anticipated demand for our potential products and technologies; |
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amount and timing of our costs related to our development and marketing efforts or other initiatives and expansion of our operations; |
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changes in anticipated commercial deployment of our products and financial results; |
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our ability to enter into, renegotiate or renew key agreements or strategic relationships, |
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our ability to develop expanded product production facilities, along with silicon-based foundry and other outside contractor relationships; |
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issuance of new or updated research or reports by securities analysts; |
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the use by investors or analysts of third-party data regarding our business that may not reflect our operations; |
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fluctuations in the valuation of companies perceived by investors to be comparable to us; |
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share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; |
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large trades, block trades or short selling of our common stock, |
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actual or anticipated changes in our competitive position relative to our industry competitors; |
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announcements or implementation by our competitors of technological innovations or new products; |
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changes in laws or regulations applicable to our products or industry; |
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additions or departures of key personnel; |
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capital-raising activities or commitments; |
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product shortages requiring suppliers to allocate minimum quantities; |
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the commencement or conclusion of legal proceedings that involve us; |
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costs related to possible future acquisitions of technologies or businesses; |
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economic conditions specific to our industry, as well as general economic and market conditions; or |
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other events or factors, including those resulting from civil unrest, war, foreign invasions, terrorism, or public health crises (e.g. Covid-19), or responses to such events. |
Furthermore,
the stock markets frequently experience extreme price and volume fluctuations that affect the market prices of equity securities of many
companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad
market and industry fluctuations, as well as general economic, political, and market conditions such as recessions, elections, interest
rate changes, or international currency fluctuations, may negatively impact the market price of our common stock. As a result of such
fluctuations, you may not realize any return on your investment in us and may lose some or all of your investment. In the past, companies
that have experienced volatility in the market price of their stock have been subject to securities class action litigation or derivative
litigation.
A sale of a substantial number of shares of our common stock may cause
the price of our common stock to decline and may impair our ability to raise capital in the future.
Our common stock is traded on The
NASDAQ Capital Market and, despite certain increases of trading volume from time to time, there have been periods when the market for
our common stock could be considered “thinly-traded,” meaning that the number of persons interested in purchasing our common
stock at or near bid prices at any given time may be relatively small. Finance transactions or option/warrant exercises resulting in a
large amount of newly issued shares that become readily tradable, or other events that cause current stockholders to sell shares, could
place downward pressure on the trading price of our stock the trading price of our stock could decline. Additionally, we believe a significant
portion of our shares are held by shareholders that accumulated their shares during a time when our shares prices were significantly less
than our current share prices. If these shareholders, some of which hold a substantial number of shares of our common stock, decide to
sell some or all of their shares at once without regard to the impact of their sales on the market price of our stock, the trading price
of our stock could decline. In addition, the lack of a robust resale market may require a stockholder who desires to sell a large number
of shares of common stock to sell the shares in increments over time to mitigate any adverse impact of the sales on the market price of
our stock.
If our existing stockholders sell,
or the market perceives that our stockholders intend to sell, substantial amounts of our common stock in the public market, including
shares issued upon the exercise of outstanding options or warrants or pursuant to the 2021 Purchase Agreement with Lincoln Park, the 2023
Purchase Agreement with Lincoln Park, and the Roth Sales Agreement with Roth Capital, the market price of our common stock could decline.
Sales of a substantial number of shares of our common stock may make it more difficult for us to sell equity or equity-related securities
in the future at a time and price that we deem reasonable or appropriate. We may become involved in securities class action litigation
that could divert management’s attention and harm our business.
Our common stock will be subject to potential
delisting if we do not maintain the listing requirements of the Nasdaq Capital Market.
Our common stock commenced trading
on The NASDAQ Capital Market on September 1, 2021. We cannot assure you that that an active trading market for our common stock will continue
to be sustained. Nasdaq has rules for continued listing, including, without limitation, minimum market capitalization and other requirements.
Failure to maintain our listing, or de-listing from Nasdaq, would make it more difficult for stockholders to dispose of our securities
and more difficult to obtain accurate price quotations on our securities. This could have an adverse effect on the price of our common
stock. Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need
in the future, may also be materially and adversely affected if our common stock and/or other securities are not traded on a national
securities exchange.
If securities or industry analysts do not publish
research or reports about our business, or if they change their recommendations regarding our stock adversely, our stock price and trading
volume could decline.
The trading market for most listed
companies’ securities depends in part on the research and reports that securities or industry analysts publish about them or their
business. We currently have no independent research analysts that cover our stock and we may not obtain research coverage by securities
and industry analysts until our products are commercialized and we obtain revenues, and there is no assurances that we will ever obtain
independent research analysts coverage. If no securities or industry analysts commence coverage of us, the trading price for our common
stock could be negatively affected. In the event any analyst who covers us downgrades our securities, the price of our securities would
likely decline. If one or more of these analysts ceases to cover us or fails to publish regular reports on us, interest in the purchase
of our securities could decrease, which could cause the price of our common stock and its trading volume to decline.
Our board of directors has the authority, without
stockholder approval, to issue preferred stock with terms that may not be beneficial to existing common stockholders and with the ability
to affect adversely stockholder voting power and perpetuate their control over us.
Our articles of incorporation, as
amended, allow us to issue shares of preferred stock without any vote or further action by our stockholders. Our board of directors has
the authority to fix and determine the relative rights and preferences of preferred stock. Our board of directors also has the authority
to issue preferred stock without further stockholder approval, including large blocks of preferred stock. As a result, our board of directors
could authorize the issuance of a series of preferred stock that would grant to holders thereof the preferred right to our assets upon
liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock or other preferred
stockholders and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock or existing
preferred stock, if any.
Preferred stock could be used to
dilute a potential hostile acquirer. Accordingly, any future issuance of preferred stock or any rights to purchase preferred stock may
have the effect of making it more difficult for a third party to acquire control of us. This may delay, defer or prevent a change of control
or an unsolicited acquisition proposal. The issuance of preferred stock also could decrease the amount of earnings attributable to, and
assets available for distribution to, the holders of our common stock and could adversely affect the rights and powers, including voting
rights, of the holders of our common stock and preferred stock.
Our articles of incorporation and bylaws, and certain
provisions of Nevada corporate law, as well as certain of our contracts, contain provisions that could delay or prevent a change in control
even if the change in control would be beneficial to our stockholders.
Nevada law, as well as our articles
of incorporation, as amended, and bylaws, contain anti-takeover provisions that could delay or prevent a change in control of our Company,
even if the change in control would be beneficial to our stockholders. These provisions could lower the price that future investors might
be willing to pay for shares of our common stock. These anti-takeover provisions:
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authorize our board of directors to create and issue, without stockholder approval, preferred stock, thereby increasing the number of outstanding shares, which can deter or prevent a takeover attempt; |
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prohibit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates; |
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empower our board of directors to fill any vacancy on our board of directors, whether such vacancy occurs as a result of an increase in the number of directors or otherwise; |
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provide that our board of directors be divided into three classes, with approximately one-third of the directors to be elected each year; |
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provide that our board of directors is expressly authorized to adopt, amend or repeal our bylaws; and |
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provide that our directors will be elected by a plurality of the votes cast in the election of directors. |
Nevada Revised Statutes, the terms
of our employee stock option agreements and other contractual provisions may also discourage, delay or prevent a change in control of
our Company. Nevada Revised Statutes sections 78.378 to 78.3793 provide state regulation over the acquisition of a controlling interest
in certain Nevada corporations unless the articles of incorporation or bylaws of the corporation provide that the provisions of these
sections do not apply. Our articles of incorporation, as amended, and bylaws do not state that these provisions do not apply. The statute
creates a number of restrictions on the ability of a person or entity to acquire control of a Nevada company by setting down certain rules
of conduct and voting restrictions in any acquisition attempt, among other things. The statute contains certain limitations and it may
not apply to our Company. Our 2016 Equity Incentive Plan includes change-in-control provisions that allow us to grant options that may
become vested immediately upon a change in control. Our board of directors also has the power to adopt a stockholder rights plan that
could delay or prevent a change in control of our Company even if the change in control is generally beneficial to our stockholders. These
plans, sometimes called “poison pills,” are oftentimes criticized by institutional investors or their advisors and could affect
our rating by such investors or advisors. If our board of directors adopts such a plan, it might have the effect of reducing the price
that new investors are willing to pay for shares of our common stock.
Together, these charter, statutory
and contractual provisions could make the removal of our management and directors more difficult and may discourage transactions that
otherwise could involve payment of a premium over prevailing market prices for our common stock. Furthermore, the existence of the foregoing
provisions, as well as the significant common stock beneficially owned by our founders, executive officers, and members of our board of
directors, could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also
deter potential acquirers of our Company, thereby reducing the likelihood that you could receive a premium for your common stock in an
acquisition.