What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-09 compared with 2023-08-09 · 349 added, 296 removed, 970 unchanged (40% of the section changed)

Item 2 Management's Discussion and

Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations

following discussion and analysis should be read in conjunction with our financial statements, included herewith.

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platform become ubiquitous.

Artificial Intelligence (AI) has been integrating deeper within our

daily activities with applications to make us more efficient and possibly smarter.

The impact on the internet is huge, and the internet

is based on an optical network that utilizes data centers to route and switch traffic or information to and from destinations.

are being upgraded today in a fashion that the industry has not seen before.

The expected demands of increased traffic, information, and

data driven by AI is changing the way the internet is being operated.

AI is now creating new and interesting market opportunities to upgrade

the internet.

Three of these are important today:

density, speed, and low power and these are very well aligned with our high performance

electro-optic polymers.

We are designing high performance polymer modulator optical engines to support the rise and growth of AI as it

generates more information that will travel through the internet and optical network.

Commencement of Commercial Operations

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either silicon or indium phosphide.

has a fabrication facility in Colorado to apply standard fabrication processes to our electro-optic polymers which create modulator devices.

Company has a fabrication facility in Colorado to apply standard fabrication processes to our electro-optic polymers which create modulator

While our internal fabrication facility is capable of manufacturing modulator devices, we have partnered with commercial silicon-based

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Recent Significant Events and Milestones Achieved

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,

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 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 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.

In August 2018 we completed (ahead of schedule) our fully equipped on-site fabrication facility to expand

our high-speed test and design capabilities.

In August 2023, we completed new laboratory production facilities, expanding the Englewood

facility by over 65%, nearly 10,000 square feet, for a total of approximately 23,500 square feet to support new commercial activity,

including enabling commercial device testing and evaluation, production reliability testing, laser characterization, SEM analysis and

the expansion of our Company's chemical synthesis production line.

Our Englewood facility streamlines all

of our Company’s research and development and production workflow for greater operational efficiencies

March 2018, our Company, together with our packaging partner, successfully demonstrated packaged polymer modulators designed for 50Gbaud,

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to drive not only 400Gbps aggregate data rate solutions, but also 800Gbps and beyond.

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.

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 August 2023, we announced

the completion of new laboratory production facilities, expanding our corporate headquarters by over 65%, nearly 10,000 square feet,

for a total of approximately 23,500 square feet to support new commercial activity, including enabling commercial device testing and evaluation,

production reliability testing, laser characterization, SEM analysis and the expansion of our Company's chemical synthesis production

2019 we announced a major breakthrough in our development of clean technology polymer materials that target the insatiable demand for

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technology opens the door for advanced integrated photonics architectural design.

We believe t he

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

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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-limited 1 bandwidth of 500 GHz.

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-limited 1 bandwidth of 500 GHz.

The EOE link achieved a world record and unprecedented 250

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___________________________

Set-up limited' indicates that the measurement

was limited by the testing equipment.

limited' indicates that the measurement was limited by the testing equipment.

of Kiel, Germany supported the digital signal processor (DSP), and ETHZ supported the photodetector.

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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.

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

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:

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.

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.

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

January 12, 2023, our Chief Executive Officer, Dr.

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positions us for potential near-term licensing opportunities in datacenter applications.

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,

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.

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.

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.

_____________________________

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."

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."

On May 4, 2023, we announced,

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simplified manufacturing of our polymer modulators with silicon photonics.

25, 2023, we announced our Company's first commercial material supply license agreement for our Perkinamine ® chromophore

This agreement is to provide Perkinamine ® chromophore materials for polymer based photonic devices

and photonic integrated circuits (PICs).

Supplying licensed materials is one prong of our Company's three-prong revenue model and business

strategy that includes polymer modulator products as well as technology transfer.

This agreement recognizes market acceptance and competitive

advantage of our technology and validates the first prong of our business model.

25, 2023, we announced our Company's first commercial material supply license agreement for our

Perkinamine ® chromophore materials.

This agreement is to provide

Perkinamine ® chromophore materials for polymer based photonic devices and photonic integrated circuits (PICs).

Supplying licensed materials is one prong of our Company's three-prong revenue model and business strategy that includes polymer

modulator products as well as technology transfer.

This agreement recognizes market acceptance and competitive advantage of our

technology and validates the first prong of our business model.

Further, it represents tangible commercial progress for

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She holds a Bachelor's degree with Honors from Wellesley College.

August 21, 2023, we announced the completion of new laboratory production facilities, expanding our corporate headquarters by

over 65%, nearly 10,000 square feet, for a total of approximately 23,500 square feet to support new commercial activity, including enabling

commercial device testing and evaluation, production reliability testing, laser characterization, SEM analysis and the expansion of our

Company's chemical synthesis production line.

October 3, 2023, we announced our receipt of the 2023 Industry Award for Most Innovative Hybrid PIC/Optical Integration Platform from

the European Conference on Optical Communications (ECOC) – a premier industry exhibition – held in Glasgow,

Scotland from October 2-4, 2023.

ECOC is one of the leading conferences on optical communication and attracts top industry minds

from across the world.

The ECOC awards emphasize technology and product commercialization, highlighting significant achievements in advancing

the business of optical communications, transport, networking, fiber-based products, photonic integration circuits and related developments.

The Innovative Product category with 5 subcategories looks across the industry at new products driving change in their respective market

segment, and what is timely and helping to increase the use of optics.

Metrics include design features that are photonics, electronics,

thermal, mechanical, chemical, environmental and carbon footprint based.

move forward to diligently meet our goals, we continue to work closely with our packaging and foundry partners for 112Gbaud prototypes,

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Comparison of three months

ended June 30, 2023 to three months ended June 30, 2022

Company's first commercial agreement occurred in May 2023 from a material supply and license agreement (the “License Agreement”)

that incorporates the Company's patented electro-optic polymer materials for use in manufacturing photonic devices.

are recognized over time commencing with the License Agreement.

No revenues were recognized for the three-month period ending June 30,

2023, since the licensee did not requisition material as of June 30, 2023.

Pursuant to the License Agreement, an up-front licensing fee

in the amount of $50,000 was paid during the three-month period ending June 30, 2023 and is recorded in short term liability deferred

revenue in the Company’s balance sheet as of June 30, 2023.

ended September 30, 2023 to three months ended September 30, 2022

Company's first commercial agreement occurred in May 2023 from a material supply and license agreement (the “License

Agreement”) that incorporates the Company's patented electro-optic polymer materials for use in manufacturing photonic

devices (the “Licensed Product”).

All revenues are recognized over time commencing with the Company’s first

commercial agreement in May 2023.

No revenues were recognized for the three-month period ending September 30, 2023 since the

licensee did not requisition material as of September 30, 2023.

An up-front licensing fee in the amount of $50,000 was paid during

the three-month period ending June 30, 2023 and is recorded in short term liability deferred revenue in the Company’s balance

sheet as of September 30, 2023.

During October 2023, the licensee requisitioned material under the License Agreement.

will recognize related revenue during the quarter ending December 31, 2023.

Operating Expenses

For the Three

Months Ending

June 30, 2023

June 30, 2022

For the Three Months Ending September 30, 2023

For the Three Months Ending September 30, 2022

Change from Prior Three Month Period

Percent Change from Prior Three Month Period

Research and development

1 unchanged sentence

Research and development

expenses increased for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, primarily due to increases

in research and development salary expenses, prototype device development expenses, research and development non-cash stock option amortization,

employee relocation expenses, chemistry and wafer fabrication materials and supplies, recruiting fees and research and development consulting

Research and development

salary expenses increased by $498,383 in the three months ended June 30, 2023, compared to the same period in 2022.

Prototype device development

expenses increased by $207,601 in the three months ended June 30, 2023, compared to the same period in 2022.

expenses increased for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, primarily

due to increases in research and development salary expenses, research and development non-cash stock option and RSA amortization, rent

expense, recruiting fees, chemistry and wafer fabrication materials and supplies and research and development consulting expenses, offset

by decreases in prototype device development and research and development travel expenses.

Research and development

non-cash stock option amortization expenses increased by $204,269 in the three months ended June 30, 2023, compared to the same period

Employee relocation expenses increased by $178,626 in the three months ended June 30, 2023, compared to the same period

Chemistry and wafer fabrication materials and supplies increased by $66,533 in the three months ended June 30, 2023, compared

salary expenses increased by $509,236 in the three months ended September 30, 2023, compared to the same period in 2022.

development non-cash stock option and RSA amortization expenses increased by $154,175 in the three months ended September 30, 2023, compared

to the same period in 2022.

Recruiting fees increased by $60,397 in the three months ended June 30, 2023, compared to the same period

Research and development consulting expenses increased by $49,020 in the three months ended June 30, 2023, compared to the same

period in 2022.

Rent expense increased by $87,689 in the three months ended September 30, 2023, compared to the same period

Recruiting fees increased by $34,315 in the three months ended September 30, 2023, compared to the same period in 2022.

and wafer fabrication materials and supplies increased by $26,352 in the three months ended September 30, 2023, compared to the same period

Research and development consulting expenses increased by $13,236 in the three months ended September 30, 2023, compared to the

same period in 2022.

These increases were offset by a decrease in prototype device development expenses of $385,725 and a decrease in

research and development travel expense of $24,234 in the three months ended September 30, 2023, compared to the same period in 2022.

We expect to continue to incur

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General and administrative expenses

increased for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, primarily due to increases in

insurance, general and administrative consulting fees, legal fees, shareholder meeting expenses and accounting expenses offset by a decrease

in general and administrative non-cash stock option amortization.

Insurance expenses increased by

$38,452 in the three months ended June 30, 2023, compared to the same period in 2022.

General and administrative consulting fees increased

by $31,500 in the three months ended June 30, 2023, compared to the same period in 2022.

Legal expenses increased by $26,716 in the three

months ended June 30, 2023, compared to the same period in 2022.

Shareholder meeting expenses increased by $22,726 in the three months

ended June 30, 2023, compared to the same period in 2022.

Accounting expenses increased by $21,686 in the three months ended June 30,

increased for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, primarily due to increases

in general and administrative non-cash stock option and RSA amortization, salary, office expenses, general and administrative consulting

fees, rent expense, accounting and software expenses, offset by a decrease in legal fees.

General and administrative non-cash

stock option and RSA amortization expenses increased by $91,667 in the three months ended September 30, 2023, compared to the same period

Salary expense increased by $49,153 in the three months ended September 30, 2023, compared to the same period in 2022.

expenses increased by $43,880 in the three months ended September 30, 2023, compared to the same period in 2022.

General and administrative

consulting fees increased by $37,600 in the three months ended September 30, 2023, compared to the same period in 2022.

Rent expense increased

by $29,319 in the three months ended September 30, 2023, compared to the same period in 2022.

Accounting expenses increased by $27,564

in the three months ended September 30, 2023, compared to the same period in 2022.

Software expenses increased by $26,479 in the three

months ended September 30, 2023, compared to the same period in 2022.

Legal expenses decreased by $130,025 in the three months ended September

30, 2023, compared to the same period in 2022.

General and administrative non-cash stock option amortization decreased by $29,862 in the three

months ended June 30, 2023, compared to the same period in 2022.

Other Income (Expense)

For the Three

Months Ending

June 30, 2023

June 30, 2022

For the Three Months Ending September 30, 2023

For the Three Months Ending September 30, 2022

Change from Prior Three Month Period

Percent Change from Prior Three Month Period

Other Income/(Expense)

Other income (expenses)

increased for the three months ended June 30, 2023, as compared to the three months ended June 30, 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 $173,088.

For the Three

Months Ending

June 30, 2023

June 30, 2022

Other income increased

for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, primarily due to an increase

in interest income earned on money market account of $220,025 and a decrease in commitment fee associated with the purchase of shares

by an institutional investor for sale under a stock purchase agreement in the amount of $47,868.

For the Three Months Ending September 30, 2023

For the Three Months Ending September 30, 2022

Change from Prior Three Month Period

Percent Change from Prior Three Month Period

Net loss was $5,164,591 and $4,803,383

for the three months ended June 30, 2023 and 2022, respectively, for an increase of $1,655,149 due primarily to increases in research

and development salary expenses, prototype device development expenses, employee relocation expenses, non-cash stock option amortization,

commitment fee associated with the purchase of shares by an institutional investor for sale under a stock purchase agreement, chemistry

and wafer fabrication materials and supplies, recruiting fees, consulting fees, insurance expenses, legal fees, shareholder meeting expenses

and accounting expenses.

Comparison of six months ended June 30, 2023 to

six months ended June 30, 2022

revenues are recognized over time commencing with the License Agreement in May 2023.

No revenues were recognized for the six-month period

ending June 30, 2023, since the licensee did not requisition material as of June 30, 2023.

Pursuant to the License Agreement, an up-front

licensing fee in the amount of $50,000 was paid during the six-month period ending June 30, 2023 and is recorded in short term liability

deferred revenue in the Company’s balance sheet as of June 30, 2023.

for the three months ended September 30, 2023 and 2022, respectively, for an increase of $361,208 due primarily to increases in salaries,

non-cash stock option and RSA amortization expense, rent expense, consulting fees, office expense, research and development recruiting

fees, accounting fees, software expense and wafer fabrication materials and supplies expenses, offset by decreases in prototype device

development expenses, legal fees, commitment fee associated with the purchase of shares by an institutional investor for sale under a

stock purchase agreement and research and development travel expenses and an increase in other income resulting from interest income earned

on money market account.

Results of Operations

Comparison of nine months ended

September 30, 2023 to nine months ended September 30, 2022

Company's first commercial agreement occurred in May 2023 from a material supply and license agreement (the “License Agreement”)

that incorporates the Company's patented electro-optic polymer materials for use in manufacturing photonic devices (the “Licensed

All revenues are recognized over time commencing with the Company’s first commercial agreement in May 2023.

revenues were recognized for the nine month period ending September 30, 2023 since the licensee did not requisition material as of September

An up-front licensing fee in the amount of $50,000 was paid during the nine month period ending September 30, 2023 and is recorded

in short term liability deferred revenue in the Company’s balance sheet as of September 30, 2023.

During October 2023, the licensee requisitioned material under the

License Agreement.

The Company will recognize related revenue during the quarter ending December 31, 2023.

Operating Expenses

Months Ending

June 30, 2023

June 30, 2022

For the Nine Months Ending September 30, 2023

For the Nine Months Ending September 30, 2022

Change from Prior Nine Month Period

Percent Change from Prior Nine Month Period

Research and development

1 unchanged sentence

Research and development

expenses increased for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, primarily due to increases

in research and development salary expenses, research and development non-cash stock option amortization, prototype device development

expenses, employee relocation expenses, recruiting fees, chemistry and wafer fabrication materials and supplies, research and development

consulting expenses, testing expenses and research and development travel expenses.

Research and development

salary expenses increased by $677,758 in the six months ended June 30, 2023, compared to the same period in 2022.

expenses increased for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, primarily due

to increases in research and development salary expenses, research and development non-cash stock option and RSA amortization, recruiting

fees, employee relocation expenses, chemistry and wafer fabrication materials and supplies, research and development consulting expenses,

testing expenses and rent expense.

Research and development

non-cash stock option amortization expenses increased by $631,048 in the six months ended June 30, 2023, compared to the same period in

Prototype device development expenses increased by $431,457 in the six months ended June 30, 2023, compared to the same period in

Employee relocation expenses increased by $178,626 in the six months ended June 30, 2023, compared to the same period in 2022.

fees increased by $167,226 in the six months ended June 30, 2023, compared to the same period in 2022.

Chemistry and wafer fabrication

materials and supplies increased by $115,366 in the six months ended June 30, 2023, compared to the same period in 2022.

development consulting expenses increased by $111,694 in the six months ended June 30, 2023, compared to the same period in 2022.

and development testing expenses increased by $95,805 in the six months ended June 30, 2023, compared to the same period in 2022.

and development travel expenses increased by $66,510 in the six months ended June 30, 2023, compared to the same period in 2022.

salary expenses increased by $1,216,792 in the nine months ended September 30, 2023, compared to the same period in 2022.

development non-cash stock option and RSA amortization expenses increased by $785,224 in the nine months ended September 30, 2023, compared

to the same period in 2022.

Recruiting fees increased by $201,541 in the nine months ended September 30, 2023, compared to the same period

Employee relocation expenses increased by $178,626 in the nine months ended September 30, 2023, compared to the same period in

Chemistry and wafer fabrication materials and supplies increased by $141,719 in the nine months ended September 30, 2023, compared

to the same period in 2022.

Research and development consulting expenses increased by $124,930 in the nine months ended September 30,

2023, compared to the same period in 2022.

Research and development testing expenses increased by $106,604 in the nine months ended September

30, 2023, compared to the same period in 2022.

Rent expense increased by $98,267 in the nine months ended September 30, 2023, compared

to the same period in 2022.

We expect to continue to incur

10 unchanged sentences

General and administrative expenses

increased for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, primarily due to increases in legal

fees, insurance, general and administrative consulting fees, general and administrative non-cash stock option amortization, accounting

expenses and general and administrative travel expenses.

Legal expenses increased by $266,121

in the six months ended June 30, 2023, compared to the same period in 2022.

Insurance expenses increased by $94,388 in the six months

ended June 30, 2023, compared to the same period in 2022.

General and administrative consulting fees increased by $66,500 in the six months

ended June 30, 2023, compared to the same period in 2022.

General and administrative non-cash stock option amortization increased by $50,838

in the six months ended June 30, 2023, compared to the same period in 2022.

Accounting expenses increased by $40,234 in the six months

ended June 30, 2023, compared to the same period in 2022.

General and administrative travel expenses increased by $36,375 in the six months

ended June 30, 2023, compared to the same period in 2022.

Other Income (Expense)

Months Ending

June 30, 2023

June 30, 2022

Other Income/(Expense)

Other income (expenses)

increased for the six months ended June 30, 2023, as compared to the six months ended June 30, 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 $474,569.

Months Ending

June 30, 2023

June 30, 2022

$ 7,358,359 $

increased for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, primarily due to increases

in general and administrative non-cash stock option and RSA amortization, legal fees, general and administrative consulting fees, D&O

insurance expenses, accounting fees, general and administrative salary expenses, investor relations expenses, office expenses, rent expense

and software expenses.

General and administrative non-cash

stock option and RSA amortization expenses increased by $142,505 in the nine months ended September 30, 2023, compared to the same period

Legal fees increased by $136,096 in the nine months ended September 30, 2023, compared to the same period in 2022.

and administrative consulting fees increased by $104,100 in the nine months ended September 30, 2023, compared to the same period in 2022.

D&O insurance expenses increased by $96,839 in the nine months ended September 30, 2023, compared to the same period in 2022.

and administrative salary expenses increased by $68,267 in the nine months ended September 30, 2023, compared to the same period in 2022.

Accounting fees increased by $67,798 in the nine months ended September 30, 2023, compared to the same period in 2022.

Investor relations

expenses increased by $54,714 in the nine months ended September 30, 2023, compared to the same period in 2022.

Office expenses increased

by $52,693 in the nine months ended September 30, 2023, compared to the same period in 2022.

Rent expense increased by $34,619 in the

nine months ended September 30, 2023, compared to the same period in 2022.

Software expenses increased by $31,155 in the nine months ended

September 30, 2023, compared to the same period in 2022.

Other Expense

For the Nine Months Ending September 30, 2023

For the Nine Months Ending September 30, 2022

Change from Prior Nine Month Period

Percent Change from Prior Nine Month Period

Other Expense

Other expenses increased

for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 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 $426,701 offset primarily by a higher interest income earned on money market account in the amount of $337,454.

For the Nine Months Ending September 30, 2023

For the Nine Months Ending September 30, 2022

Change from Prior Nine Month Period

Percent Change from Prior Nine Month Period

Net loss was $16,098,356 and $12,161,742

for the six months ended June 30, 2023 and 2022, respectively, for an increase of $3,575,406 due primarily to increases in research and

development salary expenses, non-cash stock option amortization, commitment fee associated with the purchase of shares by an institutional

investor for sale under a stock purchase agreement, prototype device development expenses, employee relocation expenses, consulting fees,

recruiting fees, chemistry and wafer fabrication materials and supplies, travel expenses, testing expenses, legal fees, insurance expenses

and accounting expenses.

for the nine months ended September 30, 2023 and 2022, respectively, for an increase of $3,936,614 due primarily to increases in salary

expense, non-cash stock option and RSA amortization, commitment fee associated with the purchase of shares by an institutional investor

for sale under a stock purchase agreement, research and development recruiting fees, research and development employee relocation costs,

chemistry and wafer fabrication materials and supplies, consulting fees, testing expenses, rent, D&O insurance, legal fees, accounting

fees, investor relations fees, office expenses and software expenses offset by a decrease primarily related to a higher interest income

earned on money market account.

Liquidity and Capital Resources

source of operating cash inflows was proceeds from the sale of common stock to Lincoln Park pursuant to purchase agreements with the institutional

investor and proceeds from sale of common stock pursuant to an at the market sale agreement with Roth Capital investment banking company

(all as described in Note 10 to the Financial Statements), proceeds received pursuant to the exercise of options and warrants and a proceed

received under the License Agreement which the Company recorded as deferred revenue as of June 30, 2023.

On July 2, 2021, the

Company filed with the U.S.

Securities and Exchange Commission a $100 million universal shelf registration statement that became effective

on July 9, 2021.

This shelf registration statement registered shares under the October 4, 2021 purchase agreement with Lincoln Park (the

“ 2021 Purchase Agreement ”), the 2023 Purchase Agreement (defined below) and the Roth Sales Agreement (defined below).

All of the registered shares under the 2021 Purchase Agreement have been issued as of June 30, 2023.

On February 28, 2023, our Company

entered into a purchase Agreement (the “ 2023 Purchase Agreement ”) to sell up to $30 million of common stock over a

36-month period, with $18 million remaining on the 2023 Purchase Agreement as of the date of this filing.

On December 9, 2022, our Company

entered into an at the market sale agreement with Roth Capital , as sales agent (the “ Roth

Sales Agreement ”), 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 $33 million remains available to our Company

pursuant to the Roth Sales Agreement.

During the six months

ended June 30, 2023, our Company received $14,950,409 in proceeds pursuant to the 2021 Purchase Agreement and 2023 Purchase Agreement,

$643,529 in proceeds pursuant to the Roth Sales Agreement, $456,801 in proceeds pursuant to the exercise of options and warrants and $50,000

in a proceed received under the License Agreement which the Company recorded as deferred revenue as of June 30, 2023.

During the year

ended December 31, 2022, our Company received $12,775,268 in proceeds pursuant to the 2021 Purchase Agreement and $653,895 in proceeds

pursuant to the exercise of options and warrants.

the six months ended June 30, 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

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.

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

investor and proceeds from sale of common stock by Roth Capital pursuant to the at the market sale agreement with the investment banking

company as described in Note 10 to the Financial Statements, proceeds received pursuant to the exercise of options and warrants and a

proceed received under a material supply and license agreement which the Company recorded as deferred revenue as of September 30, 2023.

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.

All of the registered shares under

the October 4, 2021 purchase agreement with Lincoln Park (the “ 2021 Purchase Agreement ”) have been issued as of June

On February 28, 2023, our Company entered into a purchase agreement with Lincoln Park (the “ 2023 Purchase Agreement ”)

to sell up to $30 million of common stock over a 36-month period, with $16.9 million 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 $33.6 million remains available to our Company pursuant to the Roth Sales Agreement.

During the nine months

ended September 30, 2023, our Company received $16,063,909 in proceeds pursuant to the 2021 Purchase Agreement and 2023 Purchase Agreement

with Lincoln Park, $1,378,474 in proceeds pursuant to the Roth Sales Agreement with Roth Capital, $632,074 in proceeds pursuant to the

exercise of options and warrants and $50,000 in a proceed received under a material supply and license agreement which the company recorded

as deferred revenue as of September 30, 2023.

During the year ended December 31, 2022, our Company received $12,775,268 in proceeds pursuant

to the 2021 Purchase Agreement with Lincoln Park and $653,895 in proceeds pursuant to the exercise of options and warrants.

the nine months ended September 30, 2023, our primary sources of cash outflows from operations included payroll, rent, utilities, payments

to vendors including prototypes development and foundries expenses and third-party service providers.

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.

future expenditures and capital requirements will depend on numerous factors, including:

the progress of our research and development

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 $1,640,000 of expenditures per month over the next

the 2023 Purchase Agreement and the Roth Sales Agreement, which we detail 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 February 2025 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.

and our ability to establish

cooperative development, joint venture and licensing arrangements.

We expect that we will incur approximately $1,750,000 of expenditures

per month over the next 12 months.

the 2023 Purchase Agreement with Lincoln Park and the Roth Sales Agreement, which we detail 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 April

2025 before we will be required to replenish our cash reserves pursuant to the 2023 Purchase Agreement Lincoln Park or the Roth Sales

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.

that our cash used in operations will continue to increase during 2023 and beyond as a result of the following planned activities:

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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 to 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.

shares under the 2021 Purchase Agreement with Lincoln Park have been issued as of June 30, 2023.

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 to 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

7 unchanged sentences

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.

us as we direct in accordance with the 2023 Purchase Agreement.

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 the 2023 Purchase Agreement.

Agreement – Roth Capital

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of acting as agent of 3.0% of the gross proceeds from the sale of the shares pursuant to the Roth Sales Agreement.

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

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.

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

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.

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.

assure you that we will meet the conditions of the 2023 Purchase Agreement 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 six months ended June 30, 2023

For the nine months ended September 30, 2023

Net cash used in operating

activities was $7,004,008 for the six months ended June 30, 2023, primarily attributable to the net loss of $10,933,765 adjusted by $3,389,804

in options issued for services, $133,854 amortization of deferred compensation, $582,426 in common stock issued for services, $531,046

in depreciation expenses and patent amortization expenses, $92,812 amortization of right of use asset, $581 loss on disposal of property

and equipment, ($162,748) in prepaid expenses and ($638,019) in accounts payable, accrued expenses, deferred revenue and other liabilities.

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.

activities was $9,913,798 for the nine months ended September 30, 2023, primarily attributable to the net loss of $16,098,356 adjusted

by $5,085,114 in options issued for services, $198,253 amortization of deferred compensation, $607,728 in common stock issued for services,

$797,500 in depreciation expenses and patent amortization expenses, $138,502 amortization of right of use asset, $581 loss on disposal

of property and equipment, $87,058 in prepaid expenses and ($730,178) in accounts payable, accrued expenses, deferred revenue and other

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 $513,095 for the six months ended June 30, 2023, consisting of $177,245 in cost for intangibles, $978,560 in asset additions

for the Colorado headquarter facility and labs offset by $642,120 in a loan repayment and $590 in proceeds on sale of property and equipment.

Net cash provided by financing

activities was $16,050,739 for the six months ended June 30, 2023 and consisted of $456,801 in proceeds from exercise of options and warrants,

$14,950,409 in proceeds from resale of common stock to an institutional investor and $643,529 in proceeds from at the market sale of common

stock by an investment banking company.

activities was $1,386,164 for the nine months ended September 30, 2023, consisting of $215,061 in cost for intangibles, $1,813,813 in

asset additions for the Colorado headquarter facility and labs offset by $642,120 in a loan repayment and $590 in proceeds on sale of

property and equipment.

Net cash provided by

financing activities was $18,074,457 for the nine months ended September 30, 2023 and consisted of $632,074 in proceeds from exercise

of options and warrants, $16,063,909 in proceeds from resale of common stock to an institutional investor and $1,378,474 in proceeds from

at the market sale of common stock by an investment banking company.

30, 2023, our cash and cash equivalents totaled $30,876,646, our assets totaled $39,104,017, our liabilities totaled $3,683,798 and we

had stockholders’ equity of $35,420,219.

For the six months ended

June 30, 2022

used in operating activities was $5,245,275 for the six months ended June 30, 2022, primarily attributable to the net loss of $7,358,359

the nine months ended September 30, 2022

used in operating activities was $7,700,332 for the nine months ended September 30, 2022, primarily attributable to the net loss of $12,161,742

adjusted by $4,288,172 in options issued for services, $67,467 amortization of deferred compensation, $181,027 in common stock issued

4 unchanged sentences

to develop our business infrastructure.

used by investing activities was $414,565 for the six months ended June 30, 2022, consisting of $41,905 in cost for intangibles and $372,660

in asset additions for the Colorado headquarter facility and labs.

provided by financing activities was $7,056,977 for the six months ended June 30, 2022, and consisted of $422,925 in proceeds from exercise

of options and warrants, $6,705,693 in proceeds from resale of common stock to an institutional investor offset by $71,641 in cashless

option exercise tax payments.

used by investing activities was $1,807,415 for the nine months ended September 30, 2022, consisting of $47,705 in cost for intangibles,

$1,171,530 in asset additions for the Colorado headquarter facility and labs and $588,180 in a loan issuance.

provided by financing activities was $11,096,777 for the nine months ended September 30, 2022 and consisted of $470,690 in proceeds from

exercise of options and warrants, $10,709,293 in proceeds from resale of common stock to an institutional investor offset by $83,206 in

cashless option exercise tax payments.

30, 2022, our cash and cash equivalents totaled $25,021,642, our assets totaled $30,148,946, our liabilities totaled $1,354,749 and we

3 unchanged sentences

warehouse space that became effective June 1, 2023.

See Note 8 to the financial statements herein for a discussion of the lease

amendment and our other our contractual commitments.

There have been no other material changes outside the ordinary course of business

in our contractual commitments during the six months ended June 30, 2023.

See Note 8 - Leases to the financial statements herein for a discussion of the lease

There have been no other material changes outside the ordinary course of business in our contractual commitments during the

nine months ended September 30, 2023.

Significant Accounting Policies

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis