NOTE 2 – MANAGEMENT’S PLANS
Our future expenditures and capital requirements
will depend on numerous factors, including: the progress of our research and development efforts; the rate at which we can, directly
or through arrangements with original equipment manufacturers, introduce and sell products incorporating our polymer materials technology;
the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; market acceptance
of our products and competing technological developments; and our ability to establish cooperative development, joint venture and licensing
arrangements. We expect that we will incur approximately $1,675,000 of
expenditures per month over the next 12 months. Our current cash position enables us to finance our operations through July 2024. On
July 2, 2021, the Company filed a $100,000,000 universal shelf registration statement with the U.S. Securities and Exchange Commission
which became effective on July 9, 2021. On October 4, 2021, the Company entered into a purchase agreement with the institutional investor
to sell up to $33,000,000
of common stock over a 36-month period (described in Note 9). Pursuant to the purchase agreement, the Company received $1,347,933
in April and May 2023 and no remaining amounts are available to the Company per the agreement. On February 28, 2023,
the Company entered into a purchase agreement with the institutional investor to sell up to $30,000,000
of common stock over a 36-month period (described in Note 9). Pursuant to the purchase agreement, the Company received $0
in April and May 2023 and a remaining available amount of $26,999,998
is available to the Company per the agreement. On December 9, 2022, the Company entered into a sales agreement with an investment
banking company whereby the Company may offer and sell shares of its common stock having an aggregate offering price of up to $35,000,000
from time to time through or to the investment banking company, as sales agent or principal (described in Note 9). Our cash requirements
are expected to increase at a rate consistent with the Company’s path to revenue as we expand our activities and operations with
the objective of commercializing our electro-optic polymer technology. We currently have no debt to service.
LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2023 AND 2022 |
NOTE 3 – PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
Schedule of prepaid expenses and other current assets | |
| | |
| |
| |
March 31, 2023 | | |
December 31, 2022 | |
| |
| | |
| |
Deposit for Equipment | |
$ | 210,012 | | |
$ | 59,850 | |
License | |
| 131,011 | | |
| 94,195 | |
Insurance | |
| 116,188 | | |
| 218,767 | |
Investor relations | |
| 76,583 | | |
| 18,250 | |
Other | |
| 75,446 | | |
| 45,675 | |
Prototype Devices | |
| 40,473 | | |
| 40,473 | |
Rent | |
| 36,525 | | |
| 36,525 | |
Legal | |
| 16,960 | | |
| 83,941 | |
Loan interest receivable | |
| — | | |
| 13,669 | |
| |
| | | |
| | |
Prepaid expenses and other current assets | |
$ | 703,198 | | |
$ | 611,345 | |
NOTE 4 – LOAN RECEIVABLE
On September 7, 2022, the Company entered into a
convertible loan agreement (the “Loan”) with an entity and issued a loan on September 12, 2022 in the amount of EUR 600,000
bearing interest at 7% per annum with a maturity date of March 31, 2023. The loan and interest were repaid in February and March
2023. The Company recorded $11,125 of interest income for the three months ended March 31, 2023 and used the average exchange rate for
the conversion of the EUR denominated interest income for the period.
NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
Schedule of property and equipment | |
| | | |
| | |
| |
March 31, 2023 | | |
December 31, 2022 | |
| |
| | |
| |
Office equipment | |
$ | 131,814 | | |
$ | 119,404 | |
Lab equipment | |
| 6,468,420 | | |
| 6,234,777 | |
Furniture | |
| 33,128 | | |
| 33,128 | |
Leasehold improvements | |
| 184,843 | | |
| 184,843 | |
| |
| 6,818,205 | | |
| 6,572,152 | |
Less: Accumulated depreciation | |
| 4,308,810 | | |
| 4,052,885 | |
| |
| | | |
| | |
| |
$ | 2,509,395 | | |
$ | 2,519,267 | |
Depreciation expense for the three months ending
March 31, 2023 and 2022 was $255,925 and $222,089. During the three months ending March 31, 2023 and 2022, the Company did not retire
or sell any property and equipment.
LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2023 AND 2022 |
NOTE 6 – INTANGIBLE ASSETS
This represents legal fees and patent fees associated
with the prosecution of patent applications. The Company has recorded amortization expense on patents granted, which are amortized
over the remaining legal life. Maintenance patent fees are paid to a government patent authority to maintain a granted patent in
force. Some countries require the payment of maintenance fees for pending patent applications. Maintenance fees paid after a patent
is granted are expensed, as these are considered ongoing costs to “maintain a patent”. Maintenance fees paid prior
to a patent grant date are capitalized to patent costs, as these are considered “patent application costs”. No amortization
expense has been recorded on the remaining patent applications since patents have yet to be granted.
Patents consists of the following:
Schedule of Patents | |
| | |
| |
| |
March 31, 2023 | | |
December 31, 2022 | |
| |
| | |
| |
Patents | |
$ | 1,712,539 | | |
$ | 1,606,064 | |
Less: Accumulated amortization | |
| 595,080 | | |
| 575,729 | |
| |
| | | |
| | |
Intangible assets - net | |
$ | 1,117,459 | | |
$ | 1,030,335 | |
Amortization expense for the three months ending
March 31, 2023 and 2022 was $19,351 and $22,079. There were no patent costs written off for the three months ending March 31, 2023 and
2022.
NOTE 7 – COMMITMENTS
On October 30, 2017, the Company entered into a lease
agreement to lease approximately 13,420 square feet of office, laboratory and research and development space located in Colorado for
the Company’s principal executive offices and research and development facility. The term of the lease is sixty- one (61)
months, beginning on November 1, 2017 and ending on November 30, 2022. During January 2022, the term was extended for an additional
twenty-four (24) months. Base rent for the first year of the lease term is approximately $168,824, with an increase in annual base
rent of approximately 3% in each subsequent year of the lease term. As specified in the lease, the Company paid the landlord (i)
all base rent for the period November 1, 2017 and ending on October 31, 2019, in the sum of $347,045; and (ii) the estimated amount of
tenant’s proportionate share of operating expenses for the same period in the sum of $186,293. Commencing on November 1, 2019,
monthly installments of base rent and one-twelfth of landlord’s estimate of tenant’s proportionate share of annual operating
expenses shall be due on the first day of each calendar month. The lease also provides that (i) on November 1, 2019 landlord shall pay
the Company for the cost of the cosmetic improvements in the amount of $3.00 per rentable square foot of the premises, and (ii) on or
prior to November 1, 2019, the Company shall deposit with Landlord the sum of $36,524 as a security deposit which shall be held by landlord
to secure the Company’s obligations under the lease. On October 30, 2017, the Company entered into an agreement with the
tenant leasing the premise from the landlord (“Original Lessee”) whereby the Original Lessee agreed to pay the Company the
sum of $260,000 in consideration of the Company entering into the lease and landlord agreeing to the early termination of the Original
Lessee’s lease agreement with landlord. The consideration of $260,000 was received on November 1, 2017.
LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2023 AND 2022 |
NOTE 7 – COMMITMENTS (CONTINUED)
Due to the adoption of the new lease standard, the
Company has capitalized the present value of the minimum lease payments commencing November 1, 2019, including the additional option
period using an estimated incremental borrowing rate of 6.5%. The minimum lease payments do not include common area annual expenses which
are considered to be nonlease components.
As of January 1, 2019 the operating lease right-of-use
asset and operating lease liability amounted to $885,094 with no cumulative-effect adjustment to the opening balance of retained earnings/accumulated
deficit.
On November 22, 2022, the Company entered into an
amendment to the Lease (“the Amended Lease”) to lease an additional approximately 9,684 square feet of adjacent office and
warehouse space. The Amended Lease is contingent upon the landlord entering into a written agreement with the existing tenant occupying
the expanded premise (“the Existing Tenant Lease Termination”) to terminate its lease prior to the expiration date thereof,
and to surrender the expansion premises to the landlord. The term of the Amended Lease is one hundred twenty (120) months, with an effective
date estimated to be June 1, 2023 or earlier if the existing tenant terminates its lease prior to that date. Base rent through October
31, 2023 of the Amended Lease term is approximately $30,517 per month. The base rent for the next full year of the Amended Lease term
is approximately $377,288, with an increase in annual base rent of approximately 3% in each subsequent year of the lease term.
Commencing on the effective date, monthly installments of base rent and one-twelfth of landlord’s estimate of tenant’s proportionate
share of annual operating expenses shall be due on the first day of each calendar month. The Amended Lease also provides an allowance
of up to $38,736 to be used solely for the cost of renovations to the additional lease premises. As of March 31, 2023, the landlord did
not enter into the Existing Tenant Lease Termination. As a result, the Company did not capitalize the present value of the minimum lease
payments under the Amended Lease.
The Company has elected not to recognize right-of-use
assets and lease liabilities arising from short-term leases. There are no other material operating leases.
The Company is obligated under the operating lease
for office and laboratory space. The aggregate minimum future lease payments under the operating leases, including the extended term
are as follows:
Schedule of Future Lease Payments of Operating Leases | | |
| |
YEARS ENDING | | |
| |
DECEMBER 31, | | |
AMOUNT | |
| | |
| |
| 2023 | | |
$ | 160,604 | |
| 2024 | | |
| 182,624 | |
| Total operating lease obligation | | |
| 343,228 | |
| Less discounted
interest | | |
| (31,355 | ) |
| | | |
| | |
| TOTAL | | |
$ | 311,873 | |
Rent expense totaling $36,142 and $12,047 is included
in research and development and general and administrative expenses for the three months ended March 31, 2023. Rent expense totaling
$34,599 and $11,533 is included in research and development and general and administrative expenses for the three months ended March
31, 2022.
LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2023 AND 2022 |
NOTE 8 – INCOME TAXES
There is no income tax benefit for the losses for
the three months ended March 31, 2023 and 2022 since management has determined that the realization of the net deferred tax asset is
not assured and has created a valuation allowance for the entire amount of such benefits.
The Company’s policy is to record interest
and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. As of January 1, 2023,
the Company had no unrecognized tax benefits, or any tax related interest or penalties. There were no changes in the Company’s
unrecognized tax benefits during the period ended March 31, 2023. The Company did not recognize any interest or penalties during 2022
related to unrecognized tax benefits. With few exceptions, the U.S. and state income tax returns filed for the tax years ending on December
31, 2019 and thereafter are subject to examination by the relevant taxing authorities.
NOTE 9 – STOCKHOLDERS’ EQUITY
Preferred Stock
Pursuant to the Company’s articles of incorporation,
the Company’s Board of Directors is empowered, without stockholder approval, to issue series of preferred stock with any designations,
rights and preferences as they may from time to time determine. The rights and preferences of this preferred stock may be superior to
the rights and preferences of the Company’s common stock; consequently, preferred stock, if issued could have dividend, liquidation,
conversion, voting or other rights that could adversely affect the voting power or other rights of the common stock. Additionally, preferred
stock, if issued, could be utilized, under special circumstances, as a method of discouraging, delaying or preventing a change in control
of the Company’s business or a takeover from a third party.
Common Stock, Options and Warrants
In January 2019, the Company signed a purchase agreement
with the institutional investor to sell up to $25,000,000 of common stock. The Company registered 9,500,000 shares pursuant to a registration
statement filed on January 30, 2019 which became effective February 13, 2019. The Company issued 350,000 shares of common stock to the
institutional investor as an initial commitment fee valued at $258,125, fair value, and 812,500 shares of common stock are reserved for
additional commitment fees to the institutional investor in accordance with the terms of the purchase agreement. The Company registered
an additional 6,000,000 shares pursuant to a registration statement filed on January 24, 2020 which became effective February 4, 2020.
The Company registered an additional 8,000,000 shares pursuant to a registration statement filed on November 20, 2020 which became effective
November 20, 2020. During the period January 2019 through March 31, 2023, the institutional investor purchased 22,337,500 shares of common
stock for proceeds of $23,773,924 and the Company issued 772,666 shares of common stock as additional commitment fee, valued at $1,575,509,
fair value, leaving 39,834 in reserve for additional commitment fees. During the three month period ending March 31, 2023, the institutional
investor did not purchase any shares of common stock. All of the registered shares under the purchase agreement have been issued as of
March 31, 2023.
LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2023 AND 2022 |
NOTE 9 – STOCKHOLDERS’ EQUITY (CONTINUED)
Common Stock, Options and Warrants (Continued)
On July 2, 2021, the Company filed a $100,000,000
universal shelf registration statement with the U.S. Securities and Exchange Commission which became effective on July 9, 2021.
On October 4, 2021, the Company entered into a purchase
agreement with the institutional investor to sell up to $33,000,000
of common stock over a 36-month period. Concurrently with entering into the purchase agreement, the Company also entered into
a registration rights agreement which provides the institutional investor with certain registration rights related to the shares issued
under the purchase agreement. Pursuant to the purchase agreement, the Company issued 30,312
shares of common stock to the institutional investor as an initial commitment fee valued at $279,174,
fair value, and 60,623
shares of common stock are reserved for additional commitment fees to the institutional investor in accordance with the terms
of the purchase agreement. During the period October 4, 2021 through March 31, 2023, the institutional investor purchased 3,327,511
shares of common stock for proceeds of $31,652,068
and the Company issued 58,144
shares of common stock as additional commitment fee, valued at $682,796,
fair value, leaving 2,479
in reserve for additional commitment fees. During the three month period ending March 31, 2023, pursuant to the purchase agreement,
the institutional investor purchased 475,000
shares of common stock for proceeds of $2,499,375
and the Company issued 4,590
shares of common stock as additional commitment fee, valued at $26,424,
During April and May 2023, pursuant to the purchase agreement, the institutional investor purchased 304,945
shares of common stock for proceeds of $1,347,933
and the Company issued 2,479
shares of common stock as additional commitment fee, valued at $11,735,
fair value, leaving 0
in reserve for additional commitment fees. All of the registered shares under the purchase agreement have been
issued as of May 9, 2023.
On February 28, 2023, the Company entered
into a purchase agreement with an institutional investor to sell up to $30,000,000
of common stock over a 36-month period. Concurrently with entering into the purchase agreement, the Company also entered into
a registration rights agreement which provides the institutional investor with certain registration rights related to the shares issued
under the purchase agreement. Pursuant to the purchase agreement, the Company issued 50,891
shares of common stock to the institutional investor as an initial commitment fee valued at $279,391,
fair value, and 101,781
shares of common stock are reserved for additional commitment fees to the institutional investor in accordance with the terms
of the purchase agreement. During the period February 28, 2023 through March 31, 2023, the institutional investor purchased 545,455
shares of common stock for proceeds of $3,000,002
and the Company issued 10,178
shares of common stock as additional commitment fee, valued at $55,877,
fair value, leaving 91,603
in reserve for additional commitment fees. During April and May 2023, pursuant to the purchase agreement, the institutional investor
purchased 0
shares of common stock for proceeds of $0
and the Company issued 0
shares of common stock as additional commitment fee, valued at $0,
fair value, leaving 91,603
in reserve for additional for additional commitment fees.
LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2023 AND 2022 |
NOTE 9 – STOCKHOLDERS’ EQUITY (CONTINUED)
Common Stock,
Options and Warrants (Continued)
On December 9, 2022, the Company entered into a sales
agreement with an investment banking company. In accordance with the terms of this sales agreement, the Company may offer and sell shares
of its common stock having an aggregate offering price of up to $35,000,000 from time to time through or to the investment banking company,
as sales agent or principal. Sales of shares of the Company’s common stock, if any, may be made by any method deemed to be an “at
the market offering”. The sales agent will be entitled to compensation under the terms of the sales agreement at a commission rate
equal to 3% of the gross proceeds of the sales price of common stock that they sell.
Restricted Stock Awards
On March 16, 2023, the Compensation Committee of
the Board of Directors approved grants totaling 99,616 Restricted Stock Awards to the Company’s four outside directors. Each RSA
had a grant date fair value of $5.22 which shall be amortized on a straight-line basis over the vesting period into director’s
compensation expenses within the Consolidated Statement of Comprehensive Loss. Such RSAs were granted under the 2016 Equity Incentive
Plan (“2016 Plan”) and vest in total 8,338 shares on March 16, 2023, with the remaining vesting in 33 equal monthly installments
in total of 2,766 shares beginning April 1, 2023. Upon the occurrence of a Change in Control, 100% of the unvested Restricted Stock shall
vest as of the date of the Change in Control. Upon vesting, the restrictions on the shares lapse.
NOTE 10 – STOCK BASED COMPENSATION
During 2007, the Board of Directors of the Company
adopted the 2007 Employee Stock Plan (“2007 Plan”) that was approved by the shareholders. Under the 2007 Plan, the Company
is authorized to grant options to purchase up to 10,000,000 shares of common stock to directors, officers, employees and consultants
who provide services to the Company. The 2007 Plan is intended to permit stock options granted to employees under the 2007 Plan
to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended (“Incentive Stock Options”).
All options granted under the 2007 Plan, which are not intended to qualify as Incentive Stock Options are deemed to be non-qualified
options (“Non-Statutory Stock Options”). Effective June 24, 2016, the 2007 Plan was terminated. As of March 31, 2023, options
to purchase 2,895,000 shares of common stock have been issued and are outstanding.
LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2023 AND 2022 |
NOTE 10 – STOCK BASED COMPENSATION (CONTINUED)
During 2016, the Board of Directors of the Company
adopted the 2016 Plan that was approved by the shareholders at the 2016 annual meeting of shareholders on May 20, 2016. Under the 2016
Plan, the Company is authorized to grant awards of incentive and non-qualified stock options and restricted stock to purchase up to 3,000,000
shares of common stock to employees, directors and consultants. Effective May 16, 2019, the number of shares of the Company’s common
stock available for issuance under the 2016 Plan was increased from 3,000,000 to 8,000,000 shares. As of March 31, 2023, options
to purchase 5,712,923 shares of common stock have been issued and are outstanding and 122,936 restricted shares of common stock are issued.
As of March 31, 2023, 885,314 shares of common stock remain available for grants under the 2016 Plan.
Both plans are administered by the Company’s
Board of Directors or its compensation committee which determines the persons to whom awards will be granted, the number of awards to
be granted, and the specific terms of each grant. Subject to the provisions regarding Ten Percent Shareholders, (as defined in the 2016
Plan), the exercise price per share of each option cannot be less than 100% of the fair market value of a share of common stock
on the date of grant. Options granted under the 2016 Plan are generally exercisable for a period of 10 years from the date of grant
and may vest on the grant date, another specified date or over a period of time.
The Company uses the Black-Scholes option pricing
model to calculate the grant-date fair value of an award, with the following assumptions for 2023: no dividend yield in all years, expected
volatility, based on the Company’s historical volatility, 73.7% to 76.9%, risk-free interest rate between 3.49% to 3.94% and expected
option life of 10 years. Prior to May 2018, the expected life is based on the estimated average of the life of options using the “simplified”
method, as prescribed in FASB ASC 718, due to insufficient historical exercise activity during recent years. Starting in May 2018, the
expected life is based on the legal contractual life of options.
As of March 31, 2023, there was $5,427,714 of unrecognized
compensation expense related to non-vested market-based share awards that is expected to be recognized through December 1, 2025.
Share-based compensation was recognized as follows:
Schedule of Stock-based Compensation Plans | |
| | |
| |
| |
For the Three | | |
For the Three | |
| |
Months Ending | | |
Months Ending | |
| |
March 31, 2023 | | |
March 31, 2022 | |
| |
| | |
| |
2007 Employee Stock Option Plan | |
$ | — | | |
$ | — | |
2016 Equity Incentive Plan option awards | |
| 1,795,842 | | |
| 1,338,932 | |
2016 Equity Incentive Plan restricted stock awards | |
| 73,498 | | |
| 22,930 | |
Warrants | |
| — | | |
| — | |
| |
| | | |
| | |
Total share-based compensation | |
$ | 1,869,340 | | |
$ | 1,361,862 | |
LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2023 AND 2022 |
NOTE 10 – STOCK BASED COMPENSATION (CONTINUED)
The following tables summarize all stock option and
warrant activity of the Company during the three months ended March 31, 2023:
Schedule of Non-Qualified Stock Options and Warrants Outstanding and Exercisable | | |
| | | |
| | | |
| | |
| | |
| Non-Qualified
Stock Options and Warrants Outstanding and Exercisable | |
| | |
| | | |
| | | |
| | |
| | |
| Number
of | | |
| Exercise | | |
| Weighted
Average | |
| | |
| Shares | | |
| Price | | |
| Exercise
Price | |
| | |
| | | |
| | | |
| | |
Outstanding, December 31, 2022 | | |
| 8,073,173 | | |
| $0.51 - $16.81 | | |
$ | 1.91 | |
| | |
| | | |
| | | |
| | |
Granted | | |
| 1,355,000 | | |
| $4.53 - $6.25 | | |
$ | 5.20 | |
Forfeited | | |
| (22,250 | ) | |
| $6.25 - $7.50 | | |
$ | 7.00 | |
Exercised | | |
| (35,000 | ) | |
| $0.70
- $0.75 | | |
$ | 0.74 | |
| | |
| | | |
| | | |
| | |
Outstanding, March 31, 2023 | | |
| 9,370,923 | | |
| $0.51
- $16.81 | | |
$ | 2.38 | |
| | |
| | | |
| | | |
| | |
Exercisable, March 31, 2023 | | |
| 8,075,171 | | |
| $0.51
- $16.81 | | |
$ | 1.84 | |
The aggregate intrinsic value of options and warrants
outstanding and exercisable as of March 31, 2023 was $30,696,511. The aggregate intrinsic value is calculated as the difference between
the exercise price of the underlying options and warrants and the closing stock price of $5.23 for the Company’s common stock on
March 31, 2023. During the three month period ending March 31, 2023, 10,000 options were exercised for proceeds of $7,000 and 25,000
warrants were exercised for proceeds of $18,750.
Schedule of Non-Qualified Stock Options and Warrants Outstanding, by Exercise Price Range |
|
|
|
|
|
|
Non-Qualified Stock
Options and Warrants Outstanding |
|
|
|
|
|
|
Weighted Average |
Range of |
|
Number Outstanding
Currently Exercisable |
|
Weighted Average
Remaining |
|
Exercise Price of Options and Warrants Currently |
Exercise Prices |
|
at March 31, 2023 |
|
Contractual Life |
|
Exercisable |
|
|
|
|
|
|
|
$0.51 - $16.81 |
|
8,075,171 |
|
5.31 |
|
$1.84 |
LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2023 AND 2022 |
NOTE 10 – STOCK BASED COMPENSATION (CONTINUED)
The fair value of restricted stock awards is estimated
by the market price of the Company’s common stock at the date of grant. Restricted stock activity during the three month period
ending March 31, 2023 is as follows:
Schedule of Nonvested Restricted Stock Units Activity | |
| | | |
| | |
| |
| | |
Weighted Average | |
| |
Number of | | |
Grant Date Fair | |
| |
Shares | | |
Value per Share | |
| |
| | |
| |
Non-vested, beginning of period | |
| 13,816 | | |
$ | 9.65 | |
| |
| | | |
| | |
Granted | |
| 99,616 | | |
| 5.22 | |
Vested | |
| (8,338 | ) | |
| 5.22 | |
Cancelled and forfeited | |
| — | | |
| — | |
| |
| | | |
| | |
Non-vested, end of period | |
| 105,094 | | |
$ | 5.80 | |
Restricted stock awards are being amortized to expense over the vesting
period. As of March 31, 2023, the unamortized value of the RSAs was $579,822.
NOTE 11 – RELATED PARTY
At March 31, 2023 the Company had a legal accrual
to related party of $44,600, travel and office expense accruals of officers in the amount of $22,125, director and operations committee
fees in the amount of $19,750 and accruals for accounting and other service fees to related parties of $12,327. At December 31, 2022
the Company had a legal accrual to a related party of $60,577, fees and consulting expense accruals of advisory board members in the
amount of $18,000, fees to directors in the amount of $13,500, travel and office expense accruals of officers in the amount of $4,859
and accounting service fee accrual and expense reimbursement to related parties of $3,233.
NOTE 12 – RETIREMENT PLAN
The Company established a 401(k) retirement plan
covering all eligible employees beginning November 15, 2013. For the three months ending March 31, 2023 and 2022, a contribution of $15,521
and $13,088 was charged to expense for all eligible non-executive participants.
| Item 2 | Management's Discussion and
Analysis of Financial Condition and Results of Operations |
The
following discussion and analysis should be read in conjunction with our financial statements, included herewith. This discussion should
not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached
herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment
of our management. This information should also be read in conjunction with our audited historical financial statements which are included
in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission on March
1, 2023.
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 and 2023, 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 and we started to receive working modulator chips from the foundries. We have advanced our interactions
with our foundries and we continue to receive working modulator chips for prototyping. 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.
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. These approaches enable our Polymer Plus™ and
Polymer Slot™ device platforms. 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 can include
either silicon or 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. One of the metrics for successful implementation of PDK is
to receive working modulator chips. Our work with the foundries is being focused with the Polymer Plus™ and the Polymer Slot™
polymer modulators.
Business Strategy
Our
business strategy anticipates that our revenue stream will be derived from one or some combination of the following: (i) technology licensing
for specific product application; (ii) joint venture relationships with significant industry leaders; and (iii) the production and direct
sale of our own electro-optic device components. Our objective is to be a leading provider of proprietary technology and know-how in the
electro-optic device market. In order to meet this objective, we intend to continue to:
|
· |
Further the development of proprietary organic electro-optic polymer material systems |
|
· |
Develop photonic devices based on our P2IC™ technology |
|
· |
Develop proprietary intellectual property |
|
· |
Grow our commercial device development capabilities |
|
· |
Partner with silicon-based foundries who can scale volume quickly |
|
· |
Grow our product reliability and quality assurance capabilities |
|
· |
Grow our optoelectronic packaging and testing capabilities |
|
· |
Grow our commercial material manufacturing capabilities |
|
· |
Maintain/develop strategic relationships with major telecommunications and data communications companies to further the awareness and commercialization of our technology platform |
|
· |
Add high-level personnel with industrial and manufacturing experience in key areas of our materials and device development programs. |
Create Organic Polymer-Enabled
Electro-Optic Modulators
We
intend to utilize our proprietary optical polymer technology to create an initial portfolio of commercial electro-optic polymer product
devices with applications for various markets, including telecommunications, data communications and data centers. These product devices
will be part of our proprietary photonics integrated circuit (PIC) technology platform.
We expect
our initial modulator products will operate at 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 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.
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. |
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 Perkinamine™ 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.
———————
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
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.”
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.
On March
22, 2023, we announced that our latest commercial-class electro-optic polymer material achieved
breakthrough performance metrics at 1310 nanometers (nm), a wavelength popular in hyperscale datacenter applications. These commercial-class
improvements include a significantly higher electro-optic coefficient exceeding 200 pm/V, which allows for
very low drive power of 1 volt or less. Other characteristics include optimized chromophore loading, superior low optical loss, excellent
temporal stability at 850 Celsius, and extremely high thermal and photo stability. The
breakthrough commercial-class electro-optic material
is expected to enable ultra-small footprint modulators with at least 100 GHz bandwidth as well as meeting all critical requirements
for pluggable transceivers, on-board optics and co-packaging solutions. Additionally, The achievement of these results at the 1310nm bandwidth
positions us for potential near-term licensing opportunities in datacenter applications.
In
April 2023, our Chief Executive Officer, Dr. Michael Lebby, co-chaired the Photonic
Integrated Circuits (PIC) International Conference in Brussels, Belgium. Industry-leading insiders delivered more than 30 presentations
spanning six sectors at the conference. The conference provided attendees with an up-to-date overview of the status of the global photonics
industry as well as the opportunity to meet many other key players within the community. In addition to
serving as co-chair of the event, Dr. Lebby hosted a presentation for in-person attendees within the "Scaling PICs in Volume Using
Foundries" track, focusing on the industry's consideration of electro-optic polymer modulators due to their increased modulation
speed, lower power consumption, and potential for future multi-Tbps aggregated data-rates in the next decade. Additionally, Dr. Lebby
discussed the latest results on foundry fabricated EO polymers, as well as the latest work in photonics roadmaps on both the integrated
photonics (PIC) level as well as PIC packaging level.
In May 2023, we announced, that in conjunction
with our research partners at the Karlsruhe Institute of Technology and Solarix, the achievement of record optical modulator performance
using our Company's latest Perkinamine® Series 5 material at extremely low cryogenic temperatures, delivering the
potential to revolutionize applications in supercomputers, quantum circuits and advanced computing systems. Building from the world
record performance and demonstration of super high bandwidth, and super low voltage electro-optic modulators with Karlsruhe Institute
of Technology and Silorix over the past year, the results have the potential to enable supercomputing and quantum systems to be more
competitive than standard computational systems given its faster speeds at low temperatures. This achievement opens huge opportunities
to our Company in the areas of supercomputing and quantum systems by giving access to very high data rate, low power optical modulators.
———————
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."
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.
Capital Requirements
As a development
stage company, we do not generate revenues. We have incurred substantial net losses since inception. We have satisfied our capital requirements
since inception primarily through the issuance and sale of our common stock.
Results of Operations
Comparison of three months ended March 31, 2023
to three months ended March 31, 2022
Revenues
As a development stage company,
we had no revenues during the three months ended March 31, 2023 and March 31, 2022. The Company is in various stages of photonic device
and materials development and evaluation with potential customers and strategic partners. The Company expects to obtain a revenue stream
from technology licensing agreements, technology transfer agreements and the production and direct sale of its own electro-optic device
components.
Operating Expenses
| |
| | |
| | |
Change from | | |
Percent | |
| |
For the Three | | |
For the Three | | |
Prior Three | | |
Change from | |
| |
Months Ending | | |
Months Ending | | |
Month | | |
Prior Three | |
| |
March
31, 2023 | | |
March
31, 2022 | | |
Period | | |
Month
Period | |
| |
| | |
| | |
| | |
| |
Research and development | |
$ | 3,799,707 | | |
$ | 2,625,138 | | |
$ | 1,174,569 | | |
| 45 | % |
General and administrative | |
| 1,360,170 | | |
| 885,430 | | |
| 474,740 | | |
| 54 | % |
| |
$ | 5,159,877 | | |
$ | 3,510,568 | | |
$ | 1,649,309 | | |
| 47 | % |
Research and development expenses
increased for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, primarily due to increases
in research and development non-cash stock option amortization, prototype device development expenses, research and development salary
expenses, recruiting fees, research and development consulting expenses, testing expenses, laboratory and wafer fabrication materials
and supplies, depreciation and research and development travel expenses.
Research and development non-cash
stock option amortization expenses increased by $426,778 in the three months ended March 31, 2023, compared to the same period in 2022.
Prototype device development expenses increased by $223,856 in the three months ended March 31, 2023, compared to the same period in 2022.
Research and development salary expenses increased by $143,675 in the three months ended March 31, 2023, compared to the same period in
2022. Recruiting fees increased by $106,830 in the three months ended March 31, 2023, compared to the same period in 2022. Research and
development consulting expenses increased by $62,674 in the three months ended March 31, 2023, compared to the same period in 2022.
Testing expenses increased by $62,597 in the three months ended March 31, 2023, compared to the same period in 2022. Laboratory and wafer
fabrication materials and supplies increased by $48,832 in the three months ended March 31, 2023, compared to the same period in 2022.
Depreciation expenses increased by $36,152 in the three months ended March 31, 2023, compared to the same period in 2022. Research and
development travel expenses increased by $33,484 in the three months ended March 31, 2023, compared to the same period in 2022.
We expect to continue to incur
substantial research and development expense developing and commercializing our photonic devices, and electro-optic materials platform.
These expenses will increase as a result of accelerated development effort to support commercialization of our non-linear optical polymer
materials technology; to build photonic device prototypes; working with semiconductor foundries; hiring additional technical and support
personnel; engaging senior technical advisors; pursuing other potential business opportunities and collaborations; customer testing and
evaluation; and incurring related operating expenses.
General and administrative expenses
decreased for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, primarily due to increases
in legal fees, general and administrative non-cash stock option amortization, insurance, consulting fees and general and administrative
travel expenses.
Legal expenses increased by $239,406
in the three months ended March 31, 2023, compared to the same period in 2022. General and administrative non-cash stock option amortization
increased by $80,700 in the three months ended March 31, 2023, compared to the same period in 2022. Insurance expenses increased by $55,937
in the three months ended March 31, 2023, compared to the same period in 2022. Consulting fees increased by $35,000 in the three months
ended March 31, 2023, compared to the same period in 2022. General and administrative travel expenses increased by $22,886 in the three
months ended March 31, 2023, compared to the same period in 2022.
Other Income (Expense)
| |
| | |
| | |
Change from | | |
Percent | |
| |
For the Three | | |
For the Three | | |
Prior Three | | |
Change from | |
| |
Months Ending | | |
Months Ending | | |
Month | | |
Prior Three | |
| |
March
31, 2023 | | |
March
31, 2022 | | |
Period | | |
Month
Period | |
| |
| | | |
| | | |
| | | |
| | |
Other Income/(Expense) | |
$ | (316,141 | ) | |
$ | (45,193 | ) | |
$ | (270,948 | ) | |
| 600 | % |
Other income (expenses) increased
for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, primarily due to an increase in commitment
fee associated with the purchase of shares by an institutional investor for sale under a stock purchase agreement in the amount of $301,481.
Net Loss
| |
| | |
| | |
Change from | | |
Percent | |
| |
For the Three | | |
For the Three | | |
Prior Three | | |
Change from | |
| |
Months Ending | | |
Months Ending | | |
Month | | |
Prior Three | |
| |
March
31, 2023 | | |
March
31, 2022 | | |
Period | | |
Month
Period | |
| |
| | | |
| | | |
| | | |
| | |
Net Loss | |
$ | 5,476,018 | | |
$ | 3,555,761 | | |
$ | 1,920,257 | | |
| 54 | % |
Net loss was $5,476,018 and $3,555,761
for the three months ended March 31, 2023 and 2022, respectively, for an increase of $1,920,257 due primarily to increases in non-cash
stock option amortization, commitment fee associated with the purchase of shares by an institutional investor for sale under a stock purchase
agreement, legal fees, prototype device development expenses, research and development salary expenses, recruiting fees, consulting fees,
testing expenses, travel expenses, insurance expenses, laboratory and wafer fabrication materials and supplies and depreciation.
Liquidity and Capital Resources
Sources and
Uses of Cash
Our primary
source of operating cash inflows was proceeds from the sale of common stock to Lincoln Park pursuant to purchase agreements with an institutional
investor as described in Note 9 to the financial statements herein and proceeds received pursuant to the exercise of options and warrants.
All of the registered shares under
the January 21, 2019 purchase agreement with Lincoln Park have been issued as of June 30, 2021. On July 2, 2021, the Company filed
a $100 million universal shelf registration statement which became effective on July 9, 2021. On October 4, 2021, our Company entered
into a purchase agreement (the “2021 Purchase Agreement”) to sell up to $33 million of common stock over a 36-month
period, and all of the registered shares under the 2021 Purchase Agreement with Lincoln Park have been issued as of the date of this filing.
On February 28, 2023, our Company entered into the 2023 Purchase Agreement to sell up to $30 million of common stock over a 36-month period,
with $26,999,998 remaining on the 2023 Purchase Agreement as of the date of this filing. On December 9, 2022, our Company entered into
the Roth Sales Agreement with Roth Capital, as sales agent, whereby pursuant to the Roth
Sales Agreement, our Company may offer and sell up to $35,000,000 in shares of our common stock, from time to time through Roth Capital.
As of the date of this filing $35 million remains available to our Company pursuant to the Roth Sales Agreement.
During
the three months ended March 31, 2023, the Company received $5,499,377 in proceeds pursuant to the 2021 Purchase agreement with the institutional
investor and $25,750 in proceeds pursuant to the exercise of options and warrants. During the year ended December 31, 2022, the Company
received $12,775,268 in proceeds pursuant to the 2021 Purchase agreement with the institutional investor and $653,895 in proceeds pursuant
to the exercise of options and warrants.
During
the three months ended March 31, 2023, our primary sources of cash outflows from operations included payroll, rent, utilities, payments
to vendors including prototypes development and foundries expenses, third-party service providers and payroll taxes related to cashless
option exercise. During the year ended December 31, 2022, our primary sources of cash outflows from operations included payroll, rent,
utilities, payments to vendors including prototypes development and foundries expenses, third-party service providers and payroll taxes
related to cashless option exercise.
Our future
expenditures and capital requirements will depend on numerous factors, including: the progress of our research and development efforts;
the rate at which we can, directly or through arrangements with original equipment manufacturers, introduce and sell products incorporating
our polymer materials technology; the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property
rights; market acceptance of our products and competing technological developments; and our ability to establish cooperative development,
joint venture and licensing arrangements. We expect that we will incur approximately $1,675,000 of expenditures per month over the next
12 months.
We expect
the 2023 Purchase Agreement and the Roth Sales Agreement (all as more fully described below) to provide us with sufficient funds
to maintain our operations over that period of time. Our current cash position enables us to finance our operations through July 2024
before we will be required to replenish our cash reserves pursuant to the 2023 Purchase Agreement or the Roth Sales Agreement. Our
cash requirements are expected to increase at a rate consistent with our Company’s path to revenue growth as we expand our activities
and operations with the objective of commercializing our electro-optic polymer technology. We currently have no debt to service.
We expect
that our cash used in operations will continue to increase during 2023 and beyond as a result of the following planned activities:
|
· |
The addition of management, sales, marketing, technical and other staff to our workforce; |
|
· |
Increased spending for the expansion of our research and development efforts, including purchases of additional laboratory and production equipment; |
|
· |
Increased spending in marketing as our products are introduced into the marketplace; |
|
· |
Partnering with commercial foundries to implement our electro-optic polymers into accepted PDKs by the foundries; |
|
· |
Developing and maintaining collaborative relationships with strategic partners; |
|
· |
Developing and improving our manufacturing processes and quality controls; and |
|
· |
Increases in our general and administrative activities related to our operations as a reporting public company and related corporate compliance requirements. |
2021 and 2023 Purchase Agreements
- Lincoln Park
On October
4, 2021, our Company entered into the 2021 Purchase Agreement with Lincoln Park, pursuant to which Lincoln Park agreed to purchase
from us up to $33 million of our common stock (subject to certain limitations) from time to time over a 36-month period. All of the registered
shares under the 2021 Purchase Agreement with Lincoln Park have been issued as of the date of this filing. On February 28, 2023, our Company
entered into the 2023 Purchase Agreement with Lincoln Park, pursuant to which Lincoln Park agreed to purchase from us up to $30 million
of our common stock (subject to certain limitations) from time to time over a 36-month period. Pursuant the 2023 Purchase Agreement, Lincoln
Park is obligated to make purchases as the Company directs in accordance with the 2023 Purchase Agreement , which may be terminated by
the Company at any time, without cost or penalty. Sales of shares will be made in specified amounts and at prices that are based upon
the market prices of our common stock immediately preceding the sales to Lincoln Park. We expect this financing to provide us with sufficient
funds to maintain our operations for the foreseeable future. With the additional capital, we expect to achieve a level of revenues attractive
enough to fulfill our development activities and adequate enough to support our business model for the foreseeable future.
There
are no trading volume requirements or restrictions under the 2023 Purchase Agreement, and we will control the timing and amount of any
sales of our common stock to Lincoln Park. Lincoln Park has no right to require any sales by us, but is obligated to make purchases from
us as we direct in accordance with each of the applicable purchase agreements. We can also accelerate the amount of common stock to be
purchased under certain circumstances. There are no limitations on the use of proceeds, financial
or business covenants, restrictions on future financings (other than restrictions on the Company’s ability to enter into a similar
type of agreement or equity line of credit during the term, excluding an at-the-market transaction with a registered broker-dealer), rights
of first refusal, participation rights, penalties or liquidated damages in either of the purchase agreements.
Roth Sales
Agreement – Roth Capital
On
December 9, 2022, we entered into the Roth Sales Agreement with Roth Capital, as sales agent. Pursuant to the Roth Sales Agreement,
our Company may offer and sell up to $35,000,000 in shares of our common stock, from time to time through Roth Capital. Upon delivery
of a placement notice based on our Company’s instructions and subject to the terms and conditions of the Roth Sales Agreement, Roth
Capital may sell the shares by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated
under the Securities Act, including sales made directly on or through The Nasdaq Capital Market, on any other existing trading market
for the Company’s common stock, in negotiated transactions at market prices prevailing at the time of sale or at prices related
to such prevailing market prices, or by any other method permitted by law, including negotiated transactions, subject to the prior written
consent of our Company. We are not obligated to make any sales of shares under the Roth Sales Agreement. The Company or Roth Capital
may suspend or terminate the offering of shares upon notice to the other party, subject to certain conditions. Roth Capital will act as
sales agent on a commercially reasonable efforts basis consistent with its normal trading and sales practices and applicable state and
federal law, rules and regulations and the rules of Nasdaq. We have agreed to pay Roth Capital commissions for its services
of acting as agent of 3.0% of the gross proceeds from the sale of the shares pursuant to the Roth Sales Agreement.
The amount
of proceeds we receive from the Roth Sales Agreement, if any, will depend upon the number of shares of our common stock sold and the market
price at which they are sold. There can be no assurance that we will be able to sell any shares under or fully utilize the Roth Sales
Agreement. Roth Capital is not required to sell any specific number of shares of our common stock under the Roth Sales Agreement. We intend
to use net proceeds from the Roth Sales Agreement for general corporate purposes, including, without limitation, sales and marketing activities,
product development, making acquisitions of assets, businesses, companies or securities, capital expenditures, and for working capital
needs.
We cannot
assure you that we will meet the conditions of either of the purchase agreements with Lincoln Park in order to obligate Lincoln Park to
purchase our shares of common stock, and we cannot assure you that we will be able to sell any shares under or fully utilize the Roth
Sales Agreement. In the event we fail to do so, and other adequate funds are not available to satisfy long-term capital requirements,
or if planned revenues are not generated, we may be required to substantially limit our operations. This limitation of operations may
include reductions in capital expenditures and reductions in staff and discretionary costs.
Analysis of Cash Flows
For the three months ended March 31, 2023
Net cash used in operating activities
was $3,748,656 for the three months ended March 31, 2023, primarily attributable to the net loss of $5,476,018 adjusted by $1,795,842
in options issued for services, $73,498 amortization of deferred compensation, $361,694 in common stock issued for services, $275,276
in depreciation expenses and patent amortization expenses, $46,381 amortization of right of use asset, ($91,853) in prepaid expenses and
($733,476) in accounts payable, accrued bonuses and accrued expenses. Net cash used in operating activities consisted of payments
for research and development, legal, professional and consulting expenses, rent and other expenditures necessary to develop our business
infrastructure.
Net cash used by investing activities
was $289,592 for the three months ended March 31, 2023, consisting of $106,475 in cost for intangibles, $246,053 in asset additions for
the Colorado headquarter facility and labs offset by $642,120 in a loan repayment.
Net cash provided by financing activities
was $5,525,127 for the three months ended March 31, 2023 and consisted of $25,750 in proceeds from exercise of options and warrants and
$5,499,377 in proceeds from resale of common stock to an institutional investor.
On March
31, 2023, our cash and cash equivalents totaled $26,168,214, our assets totaled $30,810,139, our liabilities totaled $976,973 and we had
stockholders’ equity of $29,833,166.
For the three months ended March 31, 2022
Net cash used in operating activities
was $2,545,689 for the three months ended March 31, 2022, primarily attributable to the net loss of $3,555,761 adjusted by $1,338,932
in options issued for services, $22,930 amortization of deferred charges, $60,213 in common stock issued for services, $244,168 in depreciation
expenses and patent amortization expenses, $18,090 in prepaid expenses, ($750,376) in accounts payable, accrued bonuses and accrued expenses
and $76,115 in cashless option exercise expense. Net cash used in operating activities consisted of payments for research and development,
legal, professional and consulting expenses, rent and other expenditures necessary to develop our business infrastructure.
Net cash used by investing activities
was $221,991 for the three months ended March 31, 2022, consisting of $39,706 in cost for intangibles and $182,285 in asset additions
for the Colorado headquarter facility and labs.
Net cash provided by financing activities
was $3,672,570 for the three months ended March 31, 2022 and consisted of $26,850 in proceeds from exercise of options, $3,686,817 in
proceeds from resale of common stock to an institutional investor offset by $41,097 in cashless option exercise tax payments.
On March
31, 2022, our cash and cash equivalents totaled $24,337,502, our assets totaled $28,049,727, our liabilities totaled $1,230,456 and we
had stockholders’ equity of $26,819,271.
Contractual Obligations
There have
been no material changes outside the ordinary course of business in our contractual commitments during the three months ended March 31,
2023. See Note 7 to the financial statements herein for a discussion of our contractual commitments.
Significant Accounting Policies
We believe
our significant accounting policies affect our more significant estimates and judgments used in the preparation of our financial statements.
Our Annual Report on Form 10-K for the year ended December 31, 2022 contains a discussion of these significant accounting policies. The
Company’s significant accounting policies have not materially changed since that report
was filed.