What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-02-29 compared with 2023-03-01 · 288 added, 236 removed, 166 unchanged (76% of the section changed)

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within this Annual Report on Form 10-K and the "Forward-Looking Statements" explanation included elsewhere herein.

Lightwave Logic, Inc.

is a development

stage company moving toward commercialization of next generation electro-optic photonic devices made on its P 2 IC™ technology

platform which we have detailed as:

is a technology company focused on the development of next generation electro-optic photonic devices made on its P 2 IC™

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.

demonstrated higher speed and lower power consumption in packaged devices, and during 2022, we continued to make advances in techniques

to translate material properties to efficient, reliable modulator devices with commercial foundries.

We are currently focused on testing

and demonstrating the simplicity of manufacturability and reliability of our devices, including in conjunction with the silicon photonics

manufacturing ecosystem.

In 2022 we discussed the addition of several silicon-based foundry partners to help scale in volume our polymer

modulator devices.

Silicon-based foundries are large semiconductor fabrication plants developed for the electronics IC business, that

are now engaging with silicon photonics to increase their wafer throughput.

Partnering with silicon-based foundries not only demonstrates

that our polymer technology can be transferred into standard production lines using standard equipment, it also allows us to efficiently

utilize our capital.

The foundry partnerships will allow us to scale our high-performance polymer optical engines quickly and efficiently.

Our extremely strong and broad patent

portfolio allows us to optimize our business model in three areas:

1) Traditional focus on product development, 2) Patent licensing and

3) Technology transfer to foundries.

We are continually looking to strengthen our patent portfolio both by internal inventions and acquisition

of intellectual property.

We are initially targeting applications

in fiber optic data communications and telecommunications markets and are exploring other applications that include automotive/LIDAR,

sensing, displays etc., for our polymer technology platform.

Our goal is to have our unique polymer technology platform become ubiquitous.

business strategy anticipates that our revenue stream will be derived from one or some combination of the following:

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.

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.

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.

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

expected demands of increased traffic, information, and data driven by AI is changing the way the internet is being operated.

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

Commencement of Commercial Operations

We commenced commercial operations

Presently, our commercial operations consist of a material supply license agreement

to provide Perkinamine ® chromophore materials for polymer based photonic devices and photonic integrated circuits

The license agreement represents tangible commercial progress for electro-optic polymers as part of our Company's business plan.

Our Company is also in various stages of photonic device and materials development and evaluation with potential customers

and strategic partners.

We expect to continue to obtain a revenue stream from technology licensing agreements, and to obtain additional

revenue streams from technology transfer agreements and direct sale of our electro-optic device components.

Business Strategy

Our first revenue stream was obtained

from our entry into a material supply license agreement to provide Perkinamine ® chromophore

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

Our Company is also in various stages

of photonic device and materials development and evaluation with potential customers and strategic partners.

We expect to continue to

obtain a revenue stream from technology licensing agreements, and to obtain additional revenue streams from technology transfer agreements

and direct sale of our electro-optic device components.

Specifically,

our business strategy provides that our revenue stream will be derived from one or some combination of the following:

(i) technology licensing

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

Develop photonic devices based on our P 2 IC™ technology

Develop photonic devices based on our P 2 IC TM technology

Develop proprietary intellectual property

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will be part of our proprietary photonics integrated circuit (PIC) technology platform .

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 initial modulator products will operate at symbol rates at least 112 Gigabaud which is roughly 200Gbps when utilized with PAM4 encoding

Our devices are highly linear and can also enable the performance required to take advantage of more advance complex encoding

schemes if required.

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.

commenced commercial operations in May 2023, and we do not generate sufficient revenues to pay for our operating expenses.

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 year ended December

31, 2022 to year ended December 31, 2021 and year ended December 31, 2021 to year ended December 31, 2020

As a development stage company,

we had no revenues during the years ended December 31, 2022, December 31, 2021 and December 31, 2020.

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.

Comparison of year ended December 31, 2023 to year

ended December 31, 2022 and year ended December 31, 2022 to year ended December 31, 2021

During the year ended

December 31, 2023, we recognized $40,502 of licensing and royalty revenue.

As a development stage company during the years ended

December 31, 2022 and December 31, 2021, we had no revenues.

The Company is in various stages of photonic device and materials

development and evaluation with potential customers and strategic partners, and commercialization.

The Company expects to continue

obtaining a revenue stream from technology licensing agreements, to obtain additional revenue streams from technology transfer

agreements and direct sale of its own electro-optic device components.

Cost of Sales

During the year ended December

31, 2023, we recognized $2,513 in Cost of Sales, and $0 in Cost of Sales during the years ended December 31, 2022 and 2021.

Operating Expenses

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increased for the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to increases in research

and development salary and bonus expenses, research and development non-cash stock option and RSA amortization, recruiting fees, employee

relocation expenses, rent expense, chemistry and wafer fabrication materials and supplies, testing expenses, software expenses, research

and development consulting expenses, and travel expenses, offset by a decrease in prototype expenses.

Research and development salary

and bonus expenses increased by $1,636,577 in the year ended December 31, 2023, compared to the same period in 2022.

Research and development

non-cash stock option and RSA amortization expenses increased by $690,879 in the year ended December 31, 2023, compared to the same period

Recruiting fees increased by $195,697 in the year ended December 31, 2023, compared to the same period in 2022.

Employee relocation

expenses increased by $178,626 in the year ended December 31, 2023, compared to the same period in 2022.

Rent expense increased by $153,949

in the year ended December 31, 2023, compared to the same period in 2022.

Chemistry and wafer fabrication materials and supplies increased

by $143,581 in the year ended December 31, 2023, compared to the same period in 2022.

Research and development testing expenses increased

by $129,593 in the year ended December 31, 2023 compared to the same period in 2022.

Software expenses increased by $126,854 in the year

ended December 31, 2023, compared to the same period in 2022.

Research and development consulting expenses increased by $112,261 in the

year ended December 31, 2023, compared to the same period in 2022.

Research and development travel expenses increased by $96,923 in the

year ended December 31, 2023, compared to the same period in 2022.

These increases were offset by a $483,617 decrease in prototype expenses

in the year ended December 31, 2023, compared to the same period in 2022.

Research and development expenses

increased for the year ended December 31, 2022, as compared to the year ended December 31, 2021, primarily due to increases in research

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

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period in 2021.

Research and development expenses

increased for the year ended December 31, 2021, as compared to the year ended December 31, 2020, primarily due to the research and development

expense for cashless option exercises and increases in research and development bonus and salary expenses, prototype device development

expenses, non-cash stock option and warrant amortization, laboratory and wafer fabrication materials and supplies, operations committee

fees, depreciation and research and development travel expenses.

The research and development expense

for cashless option exercises for the year ended December 31, 2021 were $3,490,324.

There was no expense for cashless option exercises

for the year ended December 31, 2020.

Research and development bonus and salary expenses increased by $3,300,257 in the year ended December

31, 2021, compared to the same period in 2020 primarily for bonus expenses.

Prototype device development expenses increased by $368,483

in the year ended December 31, 2021, compared to the same period in 2020.

Non-cash stock option and warrant amortization expenses increased

by $349,059 in the year ended December 31, 2021, compared to the same period in 2020.

Laboratory and wafer fabrication materials and supplies

increased by $128,481 in the year ended December 31, 2021, compared to the same

period in 2020.

Depreciation expenses increased by $92,404 in the year ended December 31, 2021, compared to the same period in 2020.

and development travel expenses increased by $41,741 in the year ended December 31, 2021, compared to the same period in 2020.

We expect to continue to incur

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General and administrative expenses

increased for the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to increases in general

and administrative salary and bonus expenses, accounting fees, general and administrative consulting fees, general and administrative

non-cash stock option and RSA amortization, D&O insurance expenses, investor relations expenses, travel expenses, office expenses,

rent expense, general and administrative recruiting fees, and software expenses, offset by a decrease in legal fees.

General and administrative salary

and bonus expenses increased by $172,690 in the year ended December 31, 2023, compared to the same period in 2022.

Accounting fees increased

by $191,803 in the year ended December 31, 2023, compared to the same period in 2022.

General and administrative consulting fees increased

by $144,600 in the year ended December 31, 2023, compared to the same period in 2022.

General and administrative non-cash stock option

and RSA amortization expenses increased by $125,863 in the year ended December 31, 2023, compared to the same period in 2022.

insurance expenses increased by $99,555 in the year ended December 31, 2023, compared to the same period in 2022.

Investor relations expenses

increased by $67,670 in the year ended December 31, 2023, compared to the same period in 2022.

Travel expenses increased by $58,999 in

the year ended December 31, 2023, compared to the same period in 2022.

Office expenses increased by $53,949 in the year ended December

31, 2023, compared to the same period in 2022.

Rent expense increased by $48,350 in the year ended December 31, 2023, compared to the

same period in 2022.

General and administrative recruiting fees increased by $43,255 in the year ended December 31, 2023, compared to

the same period in 2022.

Software expenses increased by $33,222 in the year ended December 31, 2023, compared to the same period in 2022.

These increases were offset by a $38,374 decrease in legal fees in the year ended December 31, 2023, compared to the same period in 2022.

General and administrative expenses

decreased for the year ended December 31, 2022, as compared to the year ended December 31, 2021, primarily due to decreases in general

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to the same period in 2021.

General and administrative expenses

increased for the year ended December 31, 2021, as compared to the year ended December 31, 2020, primarily due to general and administrative

bonus expenses, general and administrative expense for cashless option exercises and increases in investor expenses, general and administrative

consulting fees, non-cash stock option amortization, legal fees, general and administrative travel expenses and director and officer insurance.

General and administrative bonus

and salary expenses increased by $2,015,959 in the year ended December 31, 2021, compared to the same period in 2020 primarily for bonus

The general and administrative expense for cashless option exercises for the year ended December 31, 2021 were $182,501.

was no expense for cashless option exercises for the year ended December 31, 2020.

Investor expenses increased by $108,341 in the year

ended December 31, 2021, compared to the same period in 2020 primarily for the expenses to uplist the Company to the Nasdaq Capital Market.

Compensation consulting expenses increased by $53,500 in the year ended December 31, 2021, compared to the same period in 2020.

stock option amortization expenses increased by $49,739 in the year ended December 31, 2021, compared to the same period in 2020.

expenses increased by $44,718 in the year ended December 31, 2021, compared to the same period in 2020 primarily for the expenses to uplist

the Company to the Nasdaq Capital Market.

General and administrative travel expenses increased by $33,260 in the year ended December 31,

2021, compared to the same period in 2020.

Director and officer insurance increased by $32,390 in the year ended December 31, 2021, compared

to the same period in 2020.

Other Income (Expense)

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Other Income (Expense)

$ (1,634,938 )

December 31, 2022

December 31, 2021

Other Income/(Expense)

$ (1,634,938 )

Other Expense

$ (1,634,938 )

Other income (expenses) decreased

for the year ended December 31, 2022, as compared to the year ended December 31, 2021, primarily due to a decrease in commitment fee associated

Other income increased for the

year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to an increase in interest income earned

on money market account of $568,137 and a gain on disposal of fixed assets of $215,509, offset by 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 $463,869.

Other expenses decreased for the

year ended December 31, 2022, as compared to the year ended December 31, 2021, primarily due to 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 $1,849,755 offset

by the forgiveness by the Small Business Administration during 2021 of a loan funding from the Paycheck Protection Program n the amount

Other income (expenses) increased

for the year ended December 31, 2021, as compared to the year ended December 31, 2020, primarily due to an increase in commitment fee

in the amount of $1,943,098 associated with the purchase of shares by an institutional investor for sale under a stock purchase agreement

offset by the Paycheck Protection Program loan forgiveness January 22, 2021 in the amount of $410,700.

by the forgiveness by the Small Business Administration during 2021 of a loan funding from the Paycheck Protection Program in the amount

December 31, 2023

December 31, 2022

$ (1,400,901 )

December 31, 2022

December 31, 2021

$ (1,400,901 )

Net loss was $21,038,032 and $17,230,480

for the year ended December 31, 2023 and 2022, respectively, for an increase of $3,807,552 due primarily to increases in salary and bonus

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, consulting fees, recruiting fees, rent expense, accounting fees, research and development employee

relocation costs, software costs, research and development travel expenses, chemistry and wafer fabrication materials and supplies, testing

expenses, D&O insurance, investor relations fees, and office expenses, offset by decrease primarily related to prototype and legal

expenses, a higher interest income earned on money market account, and a gain on property and equipment disposal.

Net loss was $17,230,480 and $18,631,381

for the year ended December 31, 2022 and 2021, respectively, for a decrease of $1,400,901 due primarily to decreases in expense for cashless

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expenses, depreciation, director fees and insurance expenses.

Net loss was $18,631,381 and $6,715,564

for the year ended December 31, 2021 and 2020, respectively, for an increase of $11,915,817, due primarily to bonus and salary expenses,

the expense for cashless option exercises and increases in commitment fee, non-cash stock option and warrant amortization, prototype device

development expenses, laboratory and wafer fabrication materials and supplies, investor expenses, operations committee fees, depreciation,

compensation consulting fees, travel expenses, legal expenses and director and officer insurance.

Significant Accounting Policies

Our Company’s accounting policies

are more fully described in Note 1 of Notes to Financial Statements.

As disclosed in Note 1 of Notes to Financial Statements, the preparation

of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates

and assumptions that affect the amounts reported in the financial statements and accompanying disclosures.

Although these estimates are

based on our management’s best knowledge of current events and actions our Company may undertake in the future, actual results could

differ from the estimates.

Our Company’s accounting

policies are more fully described in Note 1 of Notes to Financial Statements.

As disclosed in Note 1 of Notes to Financial Statements,

the preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management

to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures.

these estimates are based on our management’s best knowledge of current events and actions our Company may undertake in the future,

actual results could differ from the estimates.

Liquidity and Capital Resources

source of operating cash inflows was proceeds from the sale of common stock to Lincoln Park, an institutional investor, pursuant to purchase

agreements with Lincoln Park (the institutional investor) as described in Note 10 to the Financial Statements and proceeds received pursuant

to the exercise of options and warrants.

source of operating cash inflows was proceeds from the sale of common stock to Lincoln Park (institutional investor) pursuant to purchase

agreements with Lincoln Park and proceeds from sale of common stock by Roth Capital (investment banking company) pursuant to the at the

market sale agreement with Roth Capital as described in Note 11 to the Financial Statements and below, proceeds received pursuant to the

exercise of options and warrants and a proceed received under a material supply and license agreement of which $39,875 is recorded as

deferred revenue as of December 31, 2023.

All of the registered shares under

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On October 4, 2021, our Company entered

into the 2021 Purchase Agreement to sell up to $33 million of common stock over a 36-month period, with $2,126,557 remaining on the 2021

Purchase Agreement 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 $30 remaining on the 2023 Purchase Agreement as of the date of this filing,

and 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.

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 year ended December 31, 2021, the Company

received $30,350,674 in proceeds pursuant to the purchase agreements with the institutional investor and $2,379,225 in proceeds pursuant

to the exercise of options and warrants.

During the year ended December 31, 2020,

we received $5,173,300 in proceeds pursuant to the January 2019 purchase agreement with the institutional investor and $1,658,442

in proceeds from exercise of warrants.

Additionally, on April 24, 2020, we received $410,700 in loan funding from the Paycheck Protection

Program, as described in Note 8 to the Financial Statements.

The loan was forgiven by the Small Business Administration in its

entirety on January 22, 2021.

into the 2021 purchase agreement with Lincoln Park to sell up to $33 million of common stock over a 36-month period.

All of the registered

shares under the October 4, 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 to sell up to $30 million of common stock over a 36-month period, with

$10.5 million remaining on the 2023 purchase agreement as of the date of this filing.

On December 9, 2022, our Company entered into the

at the market sale agreement with Roth Capital, as sales agent, whereby pursuant to the at the market sale 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

$33.4 million remains available to our Company pursuant to the at the market sale agreement.

the year ended December 31, 2023, the Company received $19,993,359 in proceeds pursuant to the 2021 purchase agreement and 2023 purchase

agreement with Lincoln Park, $1,515,878 in proceeds pursuant to the at the market sale agreement with Roth Capital, $1,013,924 in proceeds

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

$39,875 is recorded as deferred revenue as of December 31, 2023.

During the year ended December 31, 2022, the 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

During the year ended December 31, 2021, the Company received $30,350,674 in proceeds pursuant to purchase agreements with Lincoln

Park and $2,379,225 in proceeds pursuant to the exercise of options and warrants.

the year ended December 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

During the year ended December 31, 2021, our primary sources of cash outflows from operations included payroll and bonus, payroll

taxes related to cashless option exercise, rent, utilities, payments to vendors including prototypes development and foundries expenses

and third-party service providers.

During the year ended December 31, 2020, our primary sources

of cash outflows from operations included payroll, rent, utilities, payments to vendors and third-party service providers.

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.

During the year

ended December 31, 2021, our primary sources of cash outflows from operations included payroll and bonus, payroll taxes related to cashless

option exercise, rent, utilities, payments to vendors including prototypes development and foundries expenses and third-party service

Sources and Uses of Cash

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the rate at which we can,

directly or through arrangements with original equipment manufacturers, introduce and sell products incorporating our polymer materials

directly or through arrangements with original equipment manufacturers, continue to 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;

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 $1,604,000 of expenditures per month over the next 12 months.

We expect the 2021 Purchase Agreement,

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 April 2024

before we will be required to replenish our cash reserves pursuant to our 2021 Purchase Agreement, the 2022 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.

have no debt to service.

market acceptance of our products and competing technological developments;

and our ability to establish or continue to establish cooperative

development, joint venture and licensing arrangements.

We expect that we will incur approximately $1,830,000 of expenditures per month

over the next 12 months.

We expect the proceeds

received pursuant to the 2023 purchase agreement and future purchase agreements with Lincoln Park, the at the market sale agreement

with Roth Capital, the exercise of options and warrants and commercial operations to provide us with sufficient funds to maintain

our operations over the next 12 months.

Our current cash position enables us to finance our operations through July 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 revenue growth as we expand our

activities and operations with the objective of increasing our revenue stream from the commercialization of our electro-optic

polymer technology.

We currently have no debt to service.

We expect that our cash used in

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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

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.

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 each of the

2021 Purchase Agreement, and the 2023 Purchase Agreement, Lincoln Park is obligated to make purchases as the Company directs in accordance

with each of the applicable purchase agreements, which may be terminated by the Company at any time, without cost or penalty.

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

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.

are no trading volume requirements or restrictions under either of the 2021 Purchase Agreement or 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.

accelerate the amount of common stock to be purchased under certain circumstances.

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

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

2023 Purchase Agreement with Lincoln Park

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 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 and any future purchase agreements

with Lincoln Park 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.

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 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 under the 2023 purchase agreement .

the Market Sale Agreement – Roth Capital

December 9, 2022, we entered into the at the market sale agreement with Roth Capital, as sales agent.

Pursuant to the at the market sale

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.

delivery of a placement notice based on our Company’s instructions and subject to the terms and conditions of the at the market

sale 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

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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.

We are not obligated to make any sales of shares under this 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 at the market sale 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

There can be no assurance that we will be able to sell any shares under or fully utilize the Roth Sales Agreement.

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,

from the at the market sale 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 this agreement.

is not required to sell any specific number of shares of our common stock under the agreement.

We intend to use net proceeds from the

at the market sale 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.

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.

meet the conditions of the 2023 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 at the market sale agreement with Roth

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

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was $12,236,024 for the year ended December 31, 2023, primarily attributable to the net loss of $21,038,032 adjusted by $6,459,387 in

options issued for services, $262,697 amortization of deferred compensation, $673,578 in common stock issued for services, $1,119,141

in depreciation expenses and patent amortization expenses, $184,835 amortization of right of use asset, $215,509 gain on disposal of property

and equipment, ($587,540) in prepaid expenses, $935,795 in accounts receivable, accounts payable, accrued bonuses, 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.

Net cash used by investing activities

was $2,957,201 for the year ended December 31, 2023, consisting of $307,687 in cost for intangibles, $3,292,224 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 $22,523,161 for the year ended December 31, 2023, and consisted of $1,013,924 in proceeds from exercise of options and

warrants, $19,993,359 in proceeds from resale of common stock to an institutional investor and $1,515,878 in proceeds from at the market

sale of common stock by an investment banking company.

31, 2023, our cash and cash equivalents totaled $31,432,087, our assets totaled $41,783,585, our liabilities totaled $5,349,771 and we

had stockholders’ equity of $36,433,814.

For the year ended December 31, 2022

Net cash used in operating activities

was $10,465,880 for the year ended December 31, 2022, primarily attributable to the net loss of $17,230,480 adjusted by $5,813,628 in

options issued for services, $91,713 amortization of deferred compensation, $209,709 in common stock issued for services, $1,045,208 in

1 unchanged sentence

and accrued expenses and $119,040 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 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

1 unchanged sentence

the Colorado headquarter facility and labs and $642,120 in a loan issuance.

Net cash provided by financing activities

was $13,345,141 for the year ended December 31, 2022 and consisted of $653,895 in proceeds from exercise of options and warrants, $12,775,268

Net cash provided by financing

activities was $13,345,141 for the year ended December 31, 2022 and consisted of $653,895 in proceeds from exercise of options and warrants,

$12,775,268 in proceeds from resale of common stock to an institutional investor offset by $84,022 in cashless option exercise tax payments.

13 unchanged sentences

for the Colorado headquarter facility and labs.

Net cash provided by financing activities

was $31,280,827 for the year ended December 31, 2021 and consisted of $2,379,225 in proceeds from exercise of options and warrants, $30,

350,674 in proceeds from resale of common stock to an institutional investor offset by $1,435,965 in cashless option exercise tax payments

and $13,107 repayment of equipment purchased.

Net cash provided by financing

activities was $31,280,827 for the year ended December 31, 2021 and consisted of $2,379,225 in proceeds from exercise of options and warrants,

$30,350,674 in proceeds from resale of common stock to an institutional investor offset by $1,435,965 in cashless option exercise tax

payments and $13,107 repayment of equipment purchased.

31, 2021, our cash and cash equivalents totaled $23,432,612, our assets totaled $27,228,575, our liabilities totaled $2,024,303 and we

had stockholders’ equity of $25,204,272.

For the year ended December 31, 2020

Net cash used in operating activities

was $4,873,863 for the year ended December 31, 2020, primarily attributable to the net loss of $6,715,564 adjusted by $95,774 in warrants

issued for services, $539,414 in options issued for services, $116,366 in common stock issued for services, $784,419 in depreciation expenses

and patent amortization expenses, ($194,636) in prepaid expenses, $89,664 in accounts payable and accrued expenses and $410,700 in proceeds

from Paycheck Protection Plan refundable advance.

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 $217,984 for the year ended December 31, 2020, consisting of $59,923 in cost for intangibles and $158,061 in asset additions primarily

for the new Colorado headquarter facility and labs.

Net cash provided by financing activities

was $6,162,093 for the year ended December 31, 2020 and consisted of $1,658,442 in proceeds from exercise of warrants, $5,173,300 in proceeds

from resale of common stock to an institutional investor offset by $669,649 repayment of equipment purchased.

31, 2020, our cash and cash equivalents totaled $3,306,590, our assets totaled $7,366,778, our liabilities totaled $1,591,332 and we had

stockholders’ equity of $5,775,446.

Contractual Obligations

See "Note 7–Commitments" of the

notes to the financial statements contained elsewhere within this Annual Report on Form 10-K for a discussion of our operating lease for

office and laboratory space.

See “Note 8–Commitments”

of the notes to the financial statements contained elsewhere within this Annual Report on Form 10-K for a discussion of our operating

lease for office and laboratory space.

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-K

Item 7. Management’s Discussion and Analysis