Lightwave Logic, Inc. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures As of December 31, 2024, our Company evaluated the effectiveness and design and operation of its disclosure controls and procedures. Our Company’s disclosure controls and procedures are the controls and other procedures that we designed to ensure that our Company records, processes, summarizes, and reports in a timely manner the information that it must disclose in reports that our Company files with or submits to the Securities and Exchange Commission. Our principal executive officer and principal financial officer reviewed and participated in this evaluation. Based on this evaluation, our Company made the determination that its disclosure controls and procedures were effective. Management’s Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal controls over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on this evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2024. The Company’s internal control over financial reporting includes policies and procedures that (1) pertain to maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. In addition, the design of any system of controls is based in part on certain assumptions about the likelihood of future events, and controls may become inadequate if conditions change. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. 36 Attestation Report of the Registered Public Accounting Firm This Annual Report does not include an attestation report of our Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit our Company to provide only management’s attestation in this Annual Report. Changes in Internal Control Over Financial Reporting No change in our Company’s internal control over financial reporting occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information (a) Lincoln Park Purchase Agreement On March 17, 2025, Lightwave Logic, Inc. (the “ Company ”), entered into a purchase agreement (the “ Purchase Agreement ”) with Lincoln Park Capital Fund, LLC (“ Lincoln Park ” or “ Investor ”) (each, a “ Party ”, and together, the “ Parties ”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, the Company may sell to Lincoln Park up to $30,000,000 of shares (the “ Purchase Shares ”) of its common stock, par value $0.001 per share (the “ Common Stock ”). Concurrently with entering into the Purchase Agreement, the Company also entered into a registration rights agreement with Lincoln Park, pursuant to which it agreed to provide Lincoln Park with certain registration rights related to the shares issued under the Purchase Agreement (the “ Registration Rights Agreement ”). Beginning one business day following the date of satisfaction of certain conditions set forth in the Purchase Agreement (the “ Commencement Date ”) and over the thirty-six (36) month term following the Commencement Date, the Company has the right, but not the obligation, on any business day selected by the Company (each, a “ Purchase Date ”), to require Lincoln Park to purchase up to 250,000 shares of Common Stock (the “ Regular Purchase Share Limit ”) (each such purchase, a “ Regular Purchase ”). Lincoln Park’s committed obligation under each Regular Purchase shall not exceed $3,000,000 (subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction as provided in the Purchase Agreement), provided that the Parties may mutually agree at any time to increase the Regular Purchase Share Limit. The Company shall have the right to submit multiple Regular Purchase notices to the Investor as often as every business day, provided that the Company has not failed to deliver shares for the most recent prior Regular Purchase. The purchase price per share for each such Regular Purchase (the “ Purchase Price ”) shall be equal to the lesser of: (i) the lowest sale price of the Common Stock during the Purchase Date and (ii) the average of the three (3) lowest closing sale prices of the Common Stock during the ten (10) business days immediately preceding such Purchase Date. In addition to Regular Purchases and provided that the Company has directed a Regular Purchase in full, the Company in its sole discretion may require Lincoln Park on each Purchase Date to purchase on the following business day (each, an “ Accelerated Purchase Date ”) up to the lesser of: (i) three (3) times the number of shares purchased pursuant to such Regular Purchase and (ii) 30% of the trading volume on Nasdaq during all or, if certain trading volume or market price thresholds specified in the Purchase Agreement are crossed on the applicable Accelerated Purchase Date, the portion of the normal trading hours on the applicable Accelerated Purchase Date prior to such time that any one of such thresholds is crossed, which period of time on the applicable Accelerated Purchase Date (each such purchase, an “ Accelerated Purchase ”). The purchase price per share for each such Accelerated Purchase shall be equal to the lesser of: (i) the closing sale price on the Accelerated Purchase Date or (ii) 96.5% of the Accelerated Purchase Date’s volume weighted average price (the “ Accelerated Purchase Price ”). The Parties may mutually agree to increase the number of shares of Common Stock sold to the Investor pursuant to any Accelerated Purchase. The Company may also direct Lincoln Park, on any business day on which an Accelerated Purchase has been completed and all of the shares to be purchased thereunder have been properly delivered to Lincoln Park in accordance with the Purchase Agreement, to make additional purchases upon the same terms as an Accelerated Purchase, (an “ Additional Accelerated Purchase ”). The Company may direct multiple Additional Accelerated Purchases in a day provided that delivery of shares has been completed with respect to any prior Regular and Accelerated Purchases that Lincoln Park has purchased. 37 The purchase price of Regular Purchases, Accelerated Purchases and Additional Accelerated Purchases and the minimum closing sale price for a Regular Purchase will be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction occurring during the business days used to compute the purchase price. The aggregate number of shares that the Company can sell to Lincoln Park under the Purchase Agreement may in no case exceed 24,910,904 shares (subject to adjustment as described above), which is equal to approximately 19.99% of the shares of Common Stock outstanding immediately prior to the execution of the Purchase Agreement (the “ Exchange Cap ”), unless (i) stockholder approval is obtained to issue shares above the Exchange Cap, in which the Exchange Cap will no longer apply, or (ii) the average price of all applicable sales of Common Stock to Lincoln Park under the Purchase Agreement equals or exceeds $1.06 per share (subject to adjustment as described above) (which represents the lower of (A) the official closing price of the Common Stock on Nasdaq immediately preceding the signing of the Purchase Agreement and (B) the average official closing price of the Common Stock on Nasdaq for the five consecutive trading days ending on the trading day immediately preceding the date of the Purchase Agreement). In any event, the Purchase Agreement specifically provides that the Company may not issue or sell any shares of Common Stock under the Purchase Agreement if such issuance or sale would breach any applicable rules or regulations of Nasdaq. The Purchase Agreement also prohibits the Company from directing Lincoln Park to purchase any shares of Common Stock if those shares, when aggregated with all other shares of Common Stock then beneficially owned by Lincoln Park, would result in Lincoln Park beneficially owning more than 4.99% of its outstanding shares of Common Stock, or at the option of Lincoln Park following the satisfaction of certain conditions, 9.99% of the outstanding shares of Common Stock. On March 17, 2025, we issued 245,098 shares of Common Stock to Lincoln Park as an initial fee for its commitment to purchase shares of our common stock under the Purchase Agreement (the “ Initial Commitment Shares ”). We may issue up to 490,196 additional shares of Common Stock pro-rata in connection with the sale of Purchase Shares (the “ Additional Commitment Shares ” and together with the Initial Commitment Shares, the “ Commitment Shares ”). The Purchase Agreement contains customary representations, warranties, covenants, Suspension Events (as defined in the Purchase Agreement), closing conditions, indemnification and termination provisions. During any Suspension Event specified in the Purchase Agreement, we may not initiate any sales to Lincoln Park until such Suspension Event is cured. Lincoln Park does not have the right to terminate the Purchase Agreement upon the occurrence of a Suspension Event. There are no restrictions on future financings, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement or the Registration Rights Agreement, other than the Company’s agreement not to enter into any Variable Rate Transactions (as defined in the Purchase Agreement) with any third party, subject to certain exceptions set forth in the Purchase Agreement, over the thirty-six (36) month term following the date of the Purchase Agreement (irrespective of any earlier termination of the Purchase Agreement in accordance with the terms therein). The Purchase Agreement may be terminated by the Company at any time after the Commencement Date, at its sole discretion, without any cost or penalty, by giving one business day notice to Lincoln Park to terminate the Purchase Agreement. Lincoln Park has covenanted not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Common Stock. The foregoing is a summary description of certain terms of the Purchase Agreement and the Registration Rights Agreement and, by its nature, is incomplete. Copies of the Purchase Agreement and the Registration Rights Agreement are filed as Exhibits 10.33 and 10.34 attached hereto. The foregoing descriptions of the Purchase Agreement and the Registration Rights Agreement are qualified in their entirety by reference to such exhibits. The Purchase Agreement and Registration Rights Agreement contain customary representations and warranties, covenants and indemnification provisions that the parties made to, and solely for the benefit of, each other in the context of all of the terms and conditions of such agreements and in the context of the specific relationship between the parties thereto. The provisions of the Purchase Agreement and the Registration Rights Agreement, including any representations and warranties contained therein, are not for the benefit of any party other than the parties thereto and are not intended as documents for investors and the public to obtain factual information about the current state of affairs of the parties thereto. Rather, investors and the public should look to other disclosures contained in the Company’s annual, quarterly and current reports it may file with the Securities and Exchange Commission. The information contained in this Item 9B shall not constitute an offer to sell or the solicitation of an offer to buy the shares of the Company’s Common Shares discussed herein, nor shall there be any offer, solicitation or sale of the shares in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. (b) Trading Arrangements During the three months ended December 31, 2024, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any “non-Rule 10b5-1 arrangement” as defined in Item 408(c) of Regulation S-K. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. None. 38 PART III Item 10. Directors, Executive Officers and Corporate Governance. Information required under this Item will be contained in our definitive proxy statement, which will be filed within 120 days of December 31, 2024, our most recent fiscal year end, and is incorporated herein by reference. Item 11. Executive Compensation. Information required under this Item will be contained in our definitive proxy statement, which will be filed within 120 days of December 31, 2024, our most recent fiscal year end, and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Information required under this Item will be contained in our definitive proxy statement, which will be filed within 120 days of December 31, 2024, our most recent fiscal year end, and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence. Information required under this Item will be contained in our definitive proxy statement, which will be filed within 120 days of December 31, 2024, our most recent fiscal year end, and is incorporated herein by reference. Item 14. Principal Accountant Fees and Services. Information required under this Item will be contained in our definitive proxy statement, which will be filed within 120 days of December 31, 2024, our most recent fiscal year end, and is incorporated herein by reference. 39 PART IV Item 15. Exhibits and Financial Statement Schedules (a) The following Audited Financial Statements are filed as part of this Form 10-K Report: Report of Independent Registered Public Accounting Firm Balance Sheets Statements of Comprehensive Loss Statement of Stockholders’ Equity Statements of Cash Flows Notes to Financial Statements (b) The following exhibits are filed as part of this report. Exhibit No. Description of Exhibit Location 3.1 Articles of Incorporation Incorporated by reference to Company’s Form 10-SB as filed with the SEC on April 13, 2007 3.2 Certificate of Amendment to Articles of Incorporation Incorporated by reference to Company’s Definitive Schedule 14C Information Statement as filed with the SEC on February 19, 2008 3.3 Certificate of Amendment to Articles of Incorporation Incorporated by reference to Company’s Form S-1 Registration Statement as filed with the SEC on August 3, 2015 3.4 Second Amended and Restated Bylaws – June 18, 2024 Incorporated by reference to the Company’s Form 10-Q as filed with the SEC on June 25, 2024 4.1 Description of Registrant’s Securities Filed herewith 10.1 Employee Agreement - Yves Lemaitre Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on December 13, 2024. 10.2 Employee Agreement - Thomas Zelibor Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on December 13, 2024 10.3 Employee Agreement - James Marcelli Incorporated by reference to Company’s Form 10-Q as filed with the SEC on August 12, 2015 10.4 Employee Agreement Amendment - James Marcelli Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on April 20, 2021 10.5 Employee Agreement Amendment - James Marcelli Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on January 21, 2022 10.6 Employee Agreement Amendment – James Marcelli Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on April 27, 2023 10.7 Employee Agreement Amendment – James S. Marcelli Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on June 25, 2024 10.8 Employee Agreement – Michael Lebby Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on March 22, 2017 10.9 Employee Agreement Amendment - Michael Lebby Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on April 20, 2021 10.10 Employee Agreement Amendment - Michael Lebby Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on January 21, 2022 10.11 Employee Agreement Amendment – Michael Lebby Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on April 27, 2023 10.12 Employee Agreement Amendment – Michael Lebby Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on June 25, 2024 10.13 Form of Executive Paid Time Off Waiver Agreement Incorporated by reference to the Company’s Form 10-K as filed with the SEC on March 16, 2018 10.14 Form of Director Agreement Incorporated by reference to the Company’s Form 10-K as filed with the SEC on March 16, 2018 10.15 Form of Director and Officer Indemnification Agreement Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on January 21, 2022 10.16 Form of Director’s Non-Disclosure Agreement Incorporated by reference to the Company’s Form 10-K as filed with the SEC on March 16, 2018 40 Exhibit No. Description of Exhibit Location 10.17 Operations Committee Charter Incorporated by reference to the Company’s Form 10-Q as filed with the SEC on August 15, 2016 10.18 Statement of Operations Committee Work - Frederick J. Leonberger Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on April 3, 2017 10.19 Statement of Operations Committee Work - Siraj Nour El-Ahmadi Incorporated by reference to the Company’s Form 10-K as filed with the SEC on March 31, 2021 10.20 2007 Employee Stock Plan Incorporated by reference to Company’s Definitive Schedule 14C Information Statement as filed with the SEC on February 19, 2008 10.21 2007 Employee Stock Plan Amendment Incorporated by reference to Company’s Definitive Schedule 14A Proxy Statement as filed with the SEC on July 22, 2014 10.22 2016 Equity Incentive Plan Incorporated by reference to Appendix A to the Company’s Definitive Schedule 14A filed with the SEC on April 20, 2016 10.23 2016 Equity Incentive Plan Amendment Incorporated by reference to Appendix A to the Company’s Definitive Schedule 14A filed with the SEC on April 12, 2019 10.24 2016 Equity Incentive Plan Amendment No. 2 Incorporated by reference to Appendix A to the Company’s Definitive Schedule 14A filed with the SEC on April 14, 2023 10.25 Form of Non-qualified Stock Option Award Agreement - Employees Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on March 17, 2017 10.26 Form of Non-qualified Stock Option Award Agreement - Executive Officers Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on March 17, 2017 10.27 Form of Non-qualified Stock Option Award Agreement - Non Employee Directors Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on March 17, 2017 10.28 Form of Restricted Stock Award Agreement -Non Employee Directors Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on March 1, 2022 10.29 Lease Agreement dated October 26, 2017 Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on November 2, 2017 10.30 First Amendment to the October 26, 2017 Lease Agreement dated November 22, 2022 Incorporated by reference to Company’s Form 10-K as filed with the SEC on March 1, 2023 10.31 Purchase Agreement, dated February 28, 2023, by and between the Company and Lincoln Park Incorporated by reference to Company’s Form 10-K as filed with the SEC on March 1, 2023 10.32 Registration Rights Agreement, dated February 28, 2023, by and between the Company and Lincoln Park Incorporated by reference to Company’s Form 10-K as filed with the SEC on March 1, 2023 10.33 Purchase Agreement, dated March 17, 2025, by and between the Company and Lincoln Park Filed herewith 10.34 Registration Rights Agreement, dated March 17, 2025, by and between the Company and Lincoln Park Filed herewith 14.1 Code of Ethics and Business Conduct Incorporated by reference to the Company’s Form 10-K as filed with the SEC on March 16, 2018 16.1 Letter from Morison Cogen LLP to the Securities and Exchange Commission dated October 4, 2024 Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on October 4, 2024 19.1 Insider Trading Policy Incorporated by reference to the Company’s Form 10-K as filed with the SEC on February 29, 2024 21.1 Subsidiaries of the Registrant Incorporated by reference to the Company’s Form 10-K as filed with the SEC on February 29, 2024 41 Exhibit No. Description of Exhibit Location 23.1 Consent of Independent Registered Public Accounting Firm - Stephano Slack LLC Filed herewith 23.2 Consent of Independent Registered Public Accounting Firm - Morison Cogen LLP Filed herewith 31.1 Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, executed by the Principal Executive Officer of the Company. Filed herewith 31.2 Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, executed by the Principal Financial Officer of the Company. Filed herewith 32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by the Principal Executive Officer of the Company. Furnished 32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by the Principal Financial Officer of the Company. Furnished 97.1 Compensation Clawback Policy Incorporated by reference to the Company’s Form 10-K as filed with the SEC on February 29, 2024 101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) Item 16. Form 10-K Summary None 42 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LIGHTWAVE LOGIC, INC. Registrant By: /s/ Yves LeMaitre Yves LeMaitre, Chief Executive Officer (Principal Executive Officer) Date: March 18, 2025 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Yves LeMaitre Chief Executive Officer, Principal Executive Officer, Director March 18, 2025 Yves LeMaitre /s/ James S. Marcelli Chief Financial Officer, Chief Operating Officer, Principal Financial/Accounting Officer, Secretary, Director March 18, 2025 James S. Marcelli /s/ Ronald A. Bucchi Director, Chair of the Board of Directors March 18, 2025 Ronald A. Bucchi /s/ Siraj Nour El-Ahmadi Director March 18, 2025 Siraj Nour El-Ahmadi /s/ Craig Ciesla Director March 18, 2025 Craig Ciesla /s/ Laila Partridge Director March 18, 2025 Laila Partridge /s/ Thomas M. Connelly, Jr. Director March 18, 2025 Thomas M. Connelly, Jr. 43 LIGHTWAVE LOGIC, INC. FINANCIAL STATEMENTS DECEMBER 31, 2024 AND 2023 CONTENTS PAGE REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID Number 3523 ) F-2 - F-3 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID Number 00 536 ) F-4 - F-5 BALANCE SHEETS F-6 STATEMENTS OF COMPREHENSIVE LOSS F-7 STATEMENTS OF STOCKHOLDERS' EQUITY F-8 STATEMENTS OF CASH FLOWS F-9 NOTES TO FINANCIAL STATEMENTS F-10 - F-29 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Lightwave Logic, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying balance sheet of Lightwave Logic, Inc. (the Company) as of December 31, 2024, and the related statements of comprehensive loss, stockholders’ equity, and cash flows for the year ended December 31, 2024, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. F- 2 To the Board of Directors and Stockholders of Lightwave Logic, Inc. (Continued) Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ Stephano Slack LLC We have served as the Company’s auditor since 2024. Wayne, Pennsylvania March 18, 2025 F- 3 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Lightwave Logic, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying balance sheet of Lightwave Logic, Inc. (the Company) as of December 31, 2023, and the related statements of comprehensive loss, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO. Basis for Opinions The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audit of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions. F- 4 To the Board of Directors and Stockholders of Lightwave Logic, Inc. (Continued) Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ Morison Cogen LLP We served as the Company’s auditor from 2005 to 2024. Blue Bell, Pennsylvania February 29, 2024 F- 5 LIGHTWAVE LOGIC, INC. BALANCE SHEETS December 31, 2024 December 31, 2023 ASSETS CURRENT ASSETS Cash and cash equivalents $ 27,667,964 $ 31,432,087 Accounts Receivable 45,565 30,376 Prepaid expenses and other current assets 401,741 1,237,621 TOTAL CURRENT ASSETS 28,115,270 32,700,084 PROPERTY AND EQUIPMENT - net of accumulated depreciation of $ 6,037,723 and $ 4,674,560 5,691,545 4,990,790 OTHER ASSETS Intangible assets - net of accumulated amortization of $ 771,631 and $ 659,250 1,355,445 1,254,501 Operating Lease - Right of Use - Building 2,645,723 2,838,210 TOTAL OTHER ASSETS 4,001,168 4,092,711 TOTAL ASSETS $ 37,807,983 $ 41,783,585 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 515,955 $ 1,447,596 Accrued bonuses and accrued expenses 877,165 599,430 Accounts payable and accrued expenses - related parties 200,779 313,483 Contract liability 23,208 39,875 Deferred lease liability — 38,297 Operating lease liability 168,289 144,120 TOTAL CURRENT LIABILITIES 1,785,396 2,582,801 LONG TERM LIABILITIES Operating lease liability 2,598,682 2,766,970 TOTAL LONG TERM LIABILITIES 2,598,682 2,766,970 TOTAL LIABILITIES 4,384,078 5,349,771 STOCKHOLDERS' EQUITY Preferred stock, $ 0.001 par value, 1,000,000 authorized, no shares issued or outstanding — — Common stock $ 0.001 par value, 250,000,000 authorized, 123,301,653 and 118,137,309 issued and outstanding at December 31, 2024 and December 31, 2023 123,302 118,137 Additional paid-in-capital 184,363,772 164,619,363 Deferred compensation ( 656,735 ) ( 432,293 ) Accumulated deficit ( 150,406,434 ) ( 127,871,393 ) TOTAL STOCKHOLDERS' EQUITY 33,423,905 36,433,814 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 37,807,983 $ 41,783,585 The accompanying notes are an integral part of these financial statements. F- 6 LIGHTWAVE LOGIC, INC. STATEMENTS OF COMPREHENSIVE LOSS FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023 2024 2023 NET SALES $ 95,605 $ 40,502 COST AND EXPENSE Cost of sales 7,395 2,513 Research and development 16,806,548 15,903,689 General and administrative 6,370,805 5,359,565 TOTAL COST AND EXPENSE 23,184,748 21,265,767 LOSS FROM OPERATIONS ( 23,089,143 ) ( 21,225,265 ) OTHER INCOME (EXPENSE) Interest income 926,854 657,546 Commitment fee ( 154,210 ) ( 673,578 ) (Loss) gain on disposal of property and equipment and intangible assets ( 213,440 ) 215,509 Other (expense) ( 5,102 ) ( 12,244 ) NET LOSS $ ( 22,535,041 ) $ ( 21,038,032 ) LOSS PER SHARE Basic $ ( 0.19 ) $ ( 0.18 ) Diluted $ ( 0.19 ) $ ( 0.18 ) WEIGHTED AVERAGE NUMBER OF SHARES Basic 120,599,885 115,467,300 Diluted 120,599,885 115,467,300 The accompanying notes are an integral part of these financial statements. F- 7 LIGHTWAVE LOGIC, INC. STATEMENTS OF STOCKHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023 Additional Number of Common Paid-in Deferred Accumulated Shares Stock Capital Compensation Deficit Total BALANCE AT DECEMBER 31, 2023 118,137,309 $ 118,137 $ 164,619,363 $ ( 432,293 ) $ ( 127,871,393 ) $ 36,433,814 Common stock issued to institutional investor 3,850,000 3,850 12,363,115 — — 12,366,965 Common stock issued for commitment shares 41,956 42 154,168 — — 154,210 Common stock sales at the market by investment banking company 551,501 552 1,779,424 — — 1,779,976 Exercise of options 375,000 375 245,725 — — 246,100 Exercise of warrants 119,000 119 91,131 — — 91,250 Options issued for services — — 4,440,003 — — 4,440,003 Restricted stock awards issued for future services 226,887 227 670,843 ( 671,070 ) — — Deferred compensation — — — 446,628 — 446,628 Net loss for the year ended December 31, 2024 — — — — ( 22,535,041 ) ( 22,535,041 ) BALANCE AT DECEMBER 31, 2024 123,301,653 $ 123,302 $ 184,363,772 $ ( 656,735 ) $ ( 150,406,434 ) $ 33,423,905 Additional Number of Common Paid-in Deferred Accumulated Shares Stock Capital Compensation Deficit Total BALANCE AT DECEMBER 31, 2022 112,882,793 $ 112,883 $ 134,406,825 $ ( 133,324 ) $ ( 106,833,361 ) $ 27,553,023 Common stock issued to institutional investor 3,650,400 3,650 19,989,709 — — 19,993,359 Common stock issued for commitment shares 112,739 113 673,465 — — 673,578 Common stock sales at the market by investment banking company 202,115 202 1,515,676 — — 1,515,878 Exercise of options 914,408 914 776,760 — — 777,674 Exercise of warrants 269,000 269 235,981 — — 236,250 Options issued for services — — 6,459,387 — — 6,459,387 Restricted stock awards issued for future services 105,854 106 561,560 ( 561,666 ) — — Deferred compensation — — — 262,697 — 262,697 Net loss for the year ended December 31, 2023 — — — — ( 21,038,032 ) ( 21,038,032 ) BALANCE AT DECEMBER 31, 2023 118,137,309 $ 118,137 $ 164,619,363 $ ( 432,293 ) $ ( 127,871,393 ) $ 36,433,814 The accompanying notes are an integral part of these financial statements. F- 8 LIGHTWAVE LOGIC, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ ( 22,535,041 ) $ ( 21,038,032 ) Adjustments to reconcile net loss to net cash used in operating activities Stock options issued for services 4,440,003 6,459,387 Amortization of deferred compensation 446,628 262,697 Common stock issued for commitment shares 154,210 673,578 Depreciation and amortization of patents 1,682,760 1,119,141 Amortization of right of use asset 192,487 184,835 Loss (gain) on disposal of property and equipment and intangible assets 213,440 ( 215,509 ) Decrease (increase) in assets Accounts receivable ( 15,189 ) ( 30,376 ) Prepaid expenses and other current assets 835,880 ( 587,540 ) (Decrease) increase in liabilities Accounts payable ( 931,641 ) 655,925 Accrued bonuses, accrued expenses and other liabilities 277,735 219,150 Accounts payable and accrued expenses-related parties ( 112,704 ) 213,314 Contract liability ( 16,667 ) 39,875 Deferred lease liability ( 38,297 ) ( 41,778 ) Operating lease liability ( 144,119 ) ( 150,691 ) Net cash used in operating activities ( 15,550,515 ) ( 12,236,024 ) CASH FLOWS FROM INVESTING ACTIVITIES Cost of intangibles ( 430,501 ) ( 307,687 ) Purchase of property and equipment ( 2,267,398 ) ( 3,292,224 ) Repayment of loan — 642,120 Sale of property and equipment — 590 Net cash used in investing activities ( 2,697,899 ) ( 2,957,201 ) CASH FLOWS FROM FINANCING ACTIVITIES Exercise of options and warrants 337,350 1,013,924 Issuance of common stock, institutional investor 12,366,965 19,993,359 Common stock sales at the market by investment banking company 1,779,976 1,515,878 Net cash provided by financing activities 14,484,291 22,523,161 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ( 3,764,123 ) 7,329,936 CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 31,432,087 24,102,151 CASH AND CASH EQUIVALENTS - END OF YEAR $ 27,667,964 $ 31,432,087 Supplemental Disclosure of Non-cash investing and financing activities : Amended Operating Lease - Right of Use - Building and Operating lease liability $ — $ 2,703,527 The accompanying notes are an integral part of these financial statements. F- 9 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2024 AND 2023 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES History and Nature of Business Lightwave Logic, Inc is a technology platform company leveraging its proprietary engineered electro-optic (EO) polymers, named Perkinamine® to transmit data at higher speeds with less power in a small form factor. The Company’s high activity and high stability organic polymers allow it to create next-generation photonic EO devices that convert data from electrical signals into light/optical signals for applications in telecommunications, and for data transmission potentially used to support generative AI. The Company's first revenue stream is from a technology material supply and licensing agreement that incorporates the Company's patented electro-optic polymer materials for use in manufacturing photonic devices. Currently, the Company is in various stages of materials development and evaluation with potential customers and strategic partners. The Company expects 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 its electro-optic materials. The Company’s current development activities are subject to significant risks and uncertainties, including failing to secure additional funding to operationalize the Company’s technology now under development. Lightwave Logic, Inc. was organized under the laws of the State of Nevada in 1997, and it commenced with its current business plan in 2004. Basis of Presentation The accompanying financial statements are presented in accordance with accounting principles generally accepted in the United States of America. Estimates 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 management’s best knowledge of current events and actions the Company may undertake in the future, actual results could differ from the estimates. Cash Equivalents The Company considers all highly liquid investments with an original maturity from the date of purchase of three months or less to be cash equivalents. Concentration of Credit Risk Certain financial instruments potentially subject the Company to concentrations of credit risk. These financial instruments consist primarily of cash. At December 31, 2024, the Company did have deposits with a financial institution that exceed the Federal Depository Insurance coverage. Accounts Receivable Accounts receivable are carried at their contractual amounts, less an estimated allowance for credit losses. Management estimates the allowance for credit losses using a loss-rate approach based on historical loss information, adjusted for management’s expectations about current and future economic conditions, as the basis to determine expected credit losses. Management exercises significant judgment in determining expected credit losses. Key inputs include macroeconomic factors, industry trends, the creditworthiness of counterparties, historical experience, the financial conditions of the customers, and the amount and age of past due accounts. Management believes that the composition of receivables at year-end is consistent with historical conditions as credit terms and practices and the client base has not changed significantly. Receivables are considered past due if full payment is not received by the contractual due date, which is typically 30 days from the invoice date. Past due accounts are generally written off against the allowance for credit losses only after all collection attempts have been exhausted. The allowance for credit losses was zero 0 as of December 31, 2024 and 2023. There was one customer who represented 100 % of total accounts receivable as of December 31, 2024. F- 10 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2024 AND 2023 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Property and Equipment Property and equipment is stated at the Company’s original cost or fair value for acquired property and equipment net of accumulated depreciation. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the respective assets, which are generally as follows: 3 years for office equipment, 3 to 5 years for lab equipment, 7 years for furniture and 3 years for software. Leasehold improvements are amortized over the lesser of remaining life of the lease or. Leasehold improvements are amortized over the lesser of remaining life of the lease or useful life of the asset, using the straight-line method. The cost of normal maintenance and repairs is charged to operating expenses as incurred. Material expenditures that increase the life of an asset are capitalized and depreciated over the estimated remaining useful life of the asset. The cost of assets sold, or otherwise disposed of, and the related accumulated depreciation is relieved from the property accounts, and any gains or losses are recognized in income from continued operations. Intangible Assets Definite-lived intangible assets are stated at cost. Patents are amortized over their estimated useful lives, commencing from the date of grant for the remaining legal lives of the patents. The patents generally have a term of up to 20 years from the date of filing of the earliest related patent application. When certain patent applications are abandoned by the Company for claims that are covered by patents already granted to the Company, the cost of patent applications are removed from the accounts and the resulting expense is reflected in the statement of comprehensive loss. Fair Value of Financial Instruments The carrying value of the Company’s short-term financial instruments such as cash, accounts payable and accrued expenses approximate their fair values because of their short maturities. Revenue Recognition and Contract Liability The Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. Under ASC 606, revenue is recognized when control of goods or services is transferred to a customer in an amount that reflects the consideration to which the Company expects to be entitled. To achieve this, the Company applies the five-step model: 1. Identify the contract with a customer. 2. Identify the performance obligations in the contract. 3. Determine the transaction price for the contract. 4. Allocate the transaction price to the performance obligations. 5. Recognize revenue as performance obligations are satisfied. The Company’s primary revenue stream includes technology license and material supply agreements. F- 11 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2024 AND 2023 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Revenue Recognition and Contract Liability (Continued) Technology License and Material Supply Agreements The Company enters into technology license and material supply agreements, under which it grants customers a non-exclusive, royalty-bearing license to use its patented electro-optic polymer technology (the “Licensed Product”). The Company also supplies proprietary polymers to licensees for use in their manufacturing of photonic devices. The Company assesses whether the license and the supply of proprietary polymers represent distinct performance obligations. Based on this assessment, the Company has determined that the license and material supply are not distinct for financial reporting purposes because they are highly interdependent. Accordingly, the Company accounts for these as a single performance obligation. Revenue under these agreements is recognized as follows: Upfront License Fees – Nonrefundable upfront license fees are recorded as contract liability and recognized on a pro-rata basis over the contract term. Minimum Annual Royalties – Fixed royalty payments required under the contract are also recognized on a pro-rata basis over the contract term. Variable Royalties – Royalties exceeding the minimum annual amount are recognized when earned, typically when the licensee’s sales exceed the minimum threshold. Milestone Payments – Recognized only when the contractual milestone is achieved, such as when the licensee sells a specified number of units of the Licensed Product. Contract Costs The Company capitalizes incremental costs to obtain contracts if they are expected to be recoverable, in accordance with ASC 340-40, Other Assets and Deferred Costs – Contracts with Customers. These capitalized costs are amortized over the expected contract term in a manner consistent with the related revenue recognition. Contract Liability Contract liability represents amounts received in advance for performance obligations not yet satisfied, including nonrefundable upfront license fees. The Company recognizes contract liability revenue as revenue when the related performance obligations are satisfied. Cost of Sales Cost of sales consists of labor costs, material costs and manufacturing overhead costs associated with the production of materials transferred to the customer under the technology license and material supply agreement at the Company’s facility. F- 12 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2024 AND 2023 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Income Taxes The Company follows FASB ASC 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for temporary differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. Stock-based Payments The Company accounts for stock-based compensation under the provisions of FASB ASC 718, "Compensation - Stock Compensation", which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date. The fair value of restricted stock awards is estimated by the market price of the Company’s common stock at the date of grant. Restricted stock awards are being amortized to expense over the shorter of the requisite service period or the actual vesting period. The Company estimates the fair value of option and warrant awards on the date of grant using the Black-Scholes model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the shorter of the requisite service period or the actual vesting period, using the straight-line method. In June 2018, the FASB issued Accounting Standard Update (“ASU”) No. 2018-07, Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting (the “2018 Update). The amendments in the 2018 Update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. Prior to the 2018 Update, Topic 718 applied only to share- based transactions to employees. Consistent with the accounting requirement for employee share-based payment awards, nonemployee share-based payment awards within the scope of Topic 718 are measured at grant-date fair value of the equity instruments that an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. The Company has elected to account for forfeiture of stock-based awards as they occur. Loss Per Share The Company follows FASB ASC 260, “Earnings per Share”, resulting in the presentation of basic and diluted earnings per share. Because the Company reported a net loss in 2024 and 2023, common stock equivalents, including stock options and warrants were anti-dilutive; therefore, the amounts reported for basic and dilutive loss per share were the same. Leases The Company is a lessee in operating leases primarily incurred to facilitate manufacturing, research and development, and selling, general and administrative activities. At contract inception, the Company determines if an arrangement is or contains a lease, and if so, recognizes a right-of-use asset and lease liability at the lease commencement date. For operating leases, the lease liability is measured at the present value of the unpaid lease payments at the lease commencement date, whereas for finance leases, the lease liability is initially measured at the present value of the unpaid lease payments and subsequently measured at amortized cost using the interest method. Operating lease right-of-use assets are included in other assets on the Balance Sheets. The short-term portion of operating lease liabilities is included in other current liabilities on the Balance Sheets and the long-term portion is included in long term liabilities on the Balance Sheets. As of December 31, 2024, the Company had no leases that qualified as financing arrangements. F- 13 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2024 AND 2023 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Leases (Continued) Key estimates and judgments include how the Company determines the discount rate used to discount the unpaid lease payments to present value and the lease term. The Company monitors for events or changes in circumstances that could potentially require recognizing an impairment loss. The Company elected a short-term lease exemption practical expedient under ASU 2026-02, “Leases” (Topic 842), which allows the Company to not recognize leases with the total lease term of 12 months or less on the balance sheet. Impairment of Long Lived and Finite-Lived Intangible Assets Long lived assets, such as property, equipment, and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable, such as a significant decrease in market price of an asset group, a significant adverse change in legal factors or business climate that could affect the value of an asset group, or a continuous deterioration of the Company’s financial condition. Recoverability of asset groups to be held and used is measured by comparing the undiscounted future cash flows expected to be generated by the asset group to the carrying amount of the asset group. If the carrying amount of the asset group exceeds its estimated undiscounted future cash flows, impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary. For the years ended December 31, 2024 and 2023, the Company did no t record an impairment of its long-lived and finite-lived intangible assets. Comprehensive Loss The Company follows FASB ASC 220.10, “Reporting Comprehensive Income (Loss).” Comprehensive loss is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net loss. Since the Company has no items of other comprehensive loss, comprehensive loss is equal to net loss. Recently Adopted Accounting Pronouncements In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose significant segment expenses and other segment items on an interim and annual basis and provide in interim periods all disclosures about a reportable segment's profit or loss and assets that are currently required annually. The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative threshold to determine its reportable segments. The new disclosure requirements are also applicable to entities that account and report as a single operating segment entity. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. The Company adopted the guidance for the annual reporting period ended December 31, 2024. There was no impact on the Company’s reportable segments identified and additional required disclosures have been included in Note 14 - Segment Reporting. Recently Issued Accounting Pronouncements Not Yet Adopted ASU 2023-09 – Income Taxes (Topic 740) requires disclosures related to the rate reconciliation and income taxes paid disclosures improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. The other amendments in this Update improve the effectiveness and comparability of disclosures by (1) adding disclosures of pretax income (or loss) and income tax expense (or benefit) to be consistent with U.S. Securities and Exchange Commission (SEC) Regulation S-X 210.4-08(h), Rules of General Application—General Notes to Financial Statements: Income Tax Expense, and (2) removing disclosures that no longer are considered cost beneficial or relevant. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2024. The Company does not expect this ASU to have material impact on its disclosures in the year of adoption. F- 14 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2024 AND 2023 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Recently Issued Accounting Pronouncements Not Yet Adopted (Continued) ASU 2024-03 – Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40) requires disclosure, in the notes to financial statements, of specified information about certain costs and expenses, such as the amounts of purchases of inventory, employee compensation, depreciation, intangible asset amortization, included in each relevant expense caption; disclosure of a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively; and disclosure of the total amounts of selling expenses. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2026 and interim reporting period within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is evaluating the impact of this ASU on its financial statement disclosures. NOTE 2 – MANAGEMENT’S PLANS The Company’s future expenditures and capital requirements will depend on numerous factors, including: the progress of our research and development efforts; the rate at which the Company can, directly or through arrangements with original equipment manufacturers, introduce and sell its polymer materials technology; the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; market acceptance of the Company’s products and competing technological developments; and the Company’s ability to establish cooperative development, joint venture and licensing arrangements. The Company expects that it will incur approximately $ 1,727,000 of expenditures per month over the next 12 months. The Company’s current cash position enables it to finance its operations through April 2026. On March 17, 2025, the Company entered into a purchase agreement with an institutional investor to sell up to $ 30,000,000 of common stock over a 36-month period. As of the date of this filing, $ 30,000,000 remains available to the Company per the agreement. On February 28, 2023, the Company entered into a purchase agreement with an institutional investor to sell up to $ 30,000,000 of common stock over a 36-month period (described in Note 10). Pursuant to the purchase agreement, the Company received $ 1,486,983 during the period from January 1 through March 18, 2025 and the remaining available amount of $ 0 is available to the Company per the agreement. On December 9, 2022, the Company entered into a sales agreement with an investment banking company whereby the Company may offer and sell shares of its common stock having an aggregate offering price of up to $ 35,000,000 from time to time through or to the investment banking company, as sales agent or principal (described in Note 10). Pursuant to the sales agreement, the Company received $ 116,435 during the period from January 1 through March 18, 2025 and the remaining available amount of $ 31,482,032 is available to the Company per the agreement. The Company's first commercial agreement occurred in May 2023 from a material supply and license agreement that incorporates the Company's patented electro-optic polymer materials for use in manufacturing photonic devices (described in Note 3). For the year ended December 31, 2024, the Company recognized $ 81,855 in revenue related to this agreement. The Company’s cash requirements are expected to increase at a rate consistent with the Company’s path to revenue as it expands its activities and operations with the objective of increasing its revenue stream from commercialization of its electro-optic polymer technology. The Company currently has no debt to service. NOTE 3 – REVENUE The Company's first commercial agreement occurred in May 2023, in the form of a four-year material supply and license agreement (the “License Agreement”) that incorporates the Company's patented electro-optic polymer materials for use in manufacturing of photonic devices (the “Licensed Product”). The licensee shall pay the Company a running royalty with a minimum royalty paid on an annual basis over the term of the License Agreement the minimum royalty payments and milestone license fees. The License Agreement is a non-exclusive material supply and license agreement. F- 15 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2024 AND 2023 NOTE 3 – REVENUE (CONTINUED) Additional future revenue will be generated from royalties from the licensee’s sale of Licensed Product that exceed the minimum royalty payments and milestone license fees. During 2024, the Company also performed device processing work for a customer. Timing of Revenue Recognition and Contract Balances Revenues related to the initial license fee and a minimum annual royalty are recognized over time commencing with the License Agreement in May 2023. An up-front license fee in the amount of $ 50,000 was paid during the period ended December 31, 2023. $ 23,208 and $ 39,875 of this amount is recorded as a contract liability in current liabilities on the Company’s balance sheets as of December 31, 2024 and December 31, 2023, respectively. For the years ended December 31, 2024 and December 31, 2023, the Company recognized $ 81,855 and $ 40,502 in revenue related to this agreement. In March 2024, the Company completed device processing work on the devices supplied by a customer. Revenue for this contract was recognized at the time of shipment of the devices back to the customer and amounted to $ 13,750 for the year ended December 31, 2024. Contract balances are as follows: Schedule of contract balances December 31, 2024 December 31, 2023 Accounts receivable, net $ 45,565 $ 30,376 Short-term contract assets $ — $ — Long-term contract assets $ — $ — Short-term contract liability $ 23,208 $ 39,875 Significant changes in the contract balances for the years ended December 31, 2024 are as follows: Schedule of significant changes in the contract balances Year Ended December 31, 2024 Assets Liabilities Balance at December 31, 2023 $ 30,376 $ ( 39,875 ) Revenue recognized that was previously included in contract liability — 16,667 Decreases/increases due to cash received ( 63,884 ) — Billed receivables recorded 109,449 — Transferred to receivables from unbilled receivables ( 95,564 ) — Unbilled receivables recorded 65,188 — Balance at December 31, 2024 $ 45,565 $ ( 23,208 ) A rollforward of contract balances is not disclosed for the year ended December 31, 2023 since there were no contracts as of December 31, 2022. Assets Recognized for the Costs to Obtain a Contract There are no assets recognized for the costs to obtain the License Agreement. F- 16 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2024 AND 2023 NOTE 4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets consist of the following: Schedule of prepaid expenses and other current assets December 31, 2024 December 31, 2023 Insurance $ 154,945 $ 237,791 License 151,451 241,936 Prototype devices 44,134 161,267 Rent 36,525 36,525 Other 9,415 53,373 Investor relations 5,271 6,313 Materials fabrication — 475,936 Deposit for equipment — 20,000 Lease incentive receivable — 4,480 Prepaid expenses and other current assets $ 401,741 $ 1,237,621 NOTE 5 – LOAN RECEIVABLE On September 7, 2022, the Company entered into a convertible loan agreement (the “Loan”) with an entity and issued a loan on September 12, 2022 in the amount of EUR 600,000 bearing interest at 7 % per annum with a maturity date of March 31, 2023 . The Company recorded $ 13,375 of interest income for the year ended December 31, 2022. The exchange rates used for the conversion of the EUR denominated loan were the December 31, 2022 reporting period end date exchange rate for the loan principal resulting in a balance of $ 642,120 and interest receivable resulting in a balance of $ 13,669 and the average exchange rate for the period ended December 31, 2022 for interest income. The loan and interest were repaid in February and March 2023. The Company recorded $ 11,125 of interest income for the period ended December 31, 2023 and used the average exchange rate for the conversion of the EUR denominated interest income for the period. F- 17 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2024 AND 2023 NOTE 6 – PROPERTY AND EQUIPMENT Property and equipment consist of the following: Schedule of property and equipment December 31, 2024 December 31, 2023 Office equipment $ 155,511 $ 146,196 Lab equipment 10,953,487 8,937,847 Furniture 54,493 74,119 Leasehold improvements 432,400 396,111 Software 133,377 111,077 11,729,268 9,665,350 Less: Accumulated depreciation 6,037,723 4,674,560 $ 5,691,545 $ 4,990,790 Depreciation expense for the years ended December 31, 2024 and 2023 was $ 1,563,477 and $ 1,035,620 , respectively. During the year ended December 31, 2024, the Company retired property and equipment with a cost of $ 203,480 and accumulated depreciation of $ 200,314 for a loss of $ 3,166 . During the year ended December 31, 2023, the Company disposed of equipment for proceeds of $ 590 , trade-in credit of $ 216,090 and a gain of $ 215,509 . NOTE 7 – INTANGIBLE ASSETS Intangible assets represent legal fees and patent fees associated with the prosecution of patent applications. The Company has recorded amortization expense on patents granted, which are amortized over the remaining legal life. Maintenance patent fees are paid to a government patent authority to maintain a granted patent in force. Some countries require the payment of maintenance fees for pending patent applications. Maintenance fees paid after a patent is granted are expensed, as these are considered ongoing costs to “maintain a patent”. Maintenance fees paid prior to a patent grant date are capitalized to patent costs, as these are considered “patent application costs”. No amortization expense has been recorded on the remaining patent applications since patents on these applications have yet to be granted. Intangible assets consist of the following: Schedule of intangible assets December 31, 2024 December 31, 2023 Patents $ 2,127,076 $ 1,913,751 Less: Accumulated amortization 771,631 659,250 Intangible assets - net $ 1,355,445 $ 1,254,501 Amortization expense for the years ended December 31, 2024 and 2023 was $ 119,283 and $ 83,521 , respectively. During the year ended December 31, 2024, the Company retired certain expired patent applications and patents with a cost of $ 217,176 and accumulated amortization of $ 6,902 for a loss of $ 210,274 included in the statements of comprehensive loss in the (Loss) gain on disposal of property and equipment and intangible assets. There were no patent costs written off for the year ended December 31, 2023. F- 18 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2024 AND 2023 NOTE 8 – LEASES On October 30, 2017, the Company entered into a lease agreement (the “Lease”) to lease approximately 13,420 square feet of office, chemistry, clean room and research and development space located in Colorado for the Company’s principal executive offices and research and development facility. The term of the lease is sixty-one ( 61 ) months, beginning on November 1, 2017 and ending on November 30, 2022 . In January 2022, the term was extended for an additional twenty-four ( 24 ) months. On November 22, 2022, the Company entered into an amendment to the Lease (“the Amended Lease”) to lease an additional approximately 9,684 square feet of adjacent office and warehouse space. The term of the Amended Lease is one hundred twenty ( 128 ) months, with an effective date of June 1, 2023 . Base rent through January 31, 2024 of the Amended Lease term is approximately $ 30,517 per month. The base rent for the next full year of the Amended Lease term is approximately $ 377,288 , with an increase in annual base rent of approximately 3 % in each subsequent year of the lease term. Commencing on June 1, 2023, monthly installments of base rent and one-twelfth of landlord’s estimate of tenant’s proportionate share of annual operating expenses shall be due on the first day of each calendar month. The Amended Lease also provides an allowance of up to $ 43,216 to be used solely for the cost of renovations to the additional lease premises. As of June 1, 2023, the operating lease right-of-use asset and operating lease liability amounted to $ 2,945,322 and $ 2,984,058 , respectively. As of December 30, 2024, the operating lease right-of-use asset and operating lease liability amounted to $ 2,645,723 and $ 2,766,971 , respectively. For purposes of calculating operating lease liability, lease term includes the initial non-cancelable term plus any term under renewal options that are reasonably assured. Any rent escalations, along with rent abatements, are included in the computation of rent expense calculated on a straight-line basis over the lease term. The interest rate implicit in lease contracts is typically not readily determinable and as such the Company uses the appropriate incremental borrowing rate based on information available at the lease commencement date in determining the present value of the lease payments. Undiscounted future minimum lease payments under the Amended Lease as of December 31, 2024, by year and in aggregate, including the extended term, are as follows: Schedule of future lease payments of operating leases YEARS ENDED DECEMBER 31, AMOUNT 2025 387,666 2026 399,199 2027 411,174 2028 423,612 2029 436,300 Thereafter 1,921,271 3,979,222 Less discounted interest ( 1,212,251 ) TOTAL $ 2,766,971 The Company has elected not to recognize right-of-use assets and lease liabilities arising from short-term leases. There are no other material operating leases. The following table presents weighted average assumptions used to compute the Company’s right-of-use assets and lease liabilities: Schedule of operating lease right-of-use assets December 31, 2024 Weighted average remaining lease term (in years) 9.08 Weighted average discount rate 8.25 % As of December 31, 2024, current operating leases had remaining terms between 13 months and 9 years, with some leases having options to extend the lease terms. Current lease agreements do not contain any residual value guarantees or material restrictive covenants. As of December 31, 2024, the Company did not have any finance leases. Operating and short-term lease costs totaling $ 513,428 and $ 102,077 are included in research and development and general and administrative expenses for the year ended December 31, 2024. Operating and short-term lease costs totaling $ 334,051 and $ 79,083 are included in research and development and general and administrative expenses for the year ended December 31, 2023. F- 19 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2024 AND 2023 NOTE 9 – INCOME TAXES As discussed in Note 1, the Company utilizes the asset and liability method of accounting for income taxes in accordance with FASB ASC 740. The income tax (benefit) provision consists of the following: Schedule of income tax benefit provision 2024 2023 Current $ — $ — Deferred ( 4,220,000 ) ( 6,526,000 ) Change in valuation allowance 4,220,000 6,526,000 Total $ — $ — The reconciliation of the statutory federal rate to the Company’s effective income tax rate is as follows: Schedule of reconciliation of statutory federal rate to effective income tax rate 2024 2023 Amount % Amount % Income tax benefit at U.S. federal income tax rate $ ( 4,732,000 ) ( 21 ) $ ( 4,418,000 ) ( 21 ) State tax benefit, net of federal tax effect ( 763,000 ) ( 3 ) ( 957,000 ) ( 5 ) Federal deduction net of tax — — 44,000 — Non-deductible share-based compensation — — 1,653,000 8 Exercised share based compensation ( 280,000 ) ( 1 ) ( 2,850,000 ) ( 13 ) Other 1,555,000 6 2,000 — Change in valuation allowance 4,220,000 19 6,526,000 31 $ — — $ — — The components of deferred tax assets as of December 31, 2024 and 2023 are as follows: Schedule of components of deferred tax assets 2024 2023 Deferred tax asset for NOL carryforwards $ 29,737,000 $ 29,018,000 Share-based compensation 4,901,000 3,889,000 Section 174 research and development expenses 4,932,000 — Section 481(a) adjustment ( 2,264,000 ) — Other ( 281,000 ) ( 102,000 ) Valuation allowance ( 37,025,000 ) ( 32,805,000 ) Total $ — $ — The valuation allowance for deferred tax assets as of December 31, 2024 and 2023 was $ 37,025,000 and $ 32,805,000 , respectively. The change in the total valuation for the year ended December 31, 2024 was an increase of $ 4,220,000 , and for the year ended December 31, 2023 was an increase of $ 6,526,000 . In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the net operating losses and temporary differences become deductible. Management considered projected future taxable income and tax planning strategies in making this assessment. The value of the deferred tax assets was offset by a valuation allowance, due to the current uncertainty of the future realization of the deferred tax assets. F- 20 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2024 AND 2023 NOTE 9 – INCOME TAXES (CONTINUED) As of December 31, 2024, the Company had net operating loss carry forwards of approximately $ 121,349,000 , comprised of net operating losses in the amount of approximately $ 36,485,000 recorded in tax years beginning prior to January 1, 2018 expiring through the year ending December 31, 2038 and net operating losses recorded in tax years beginning January 1, 2018 and after in the amount of approximately $ 84,864,000 which are allowed for an indefinite carryforward period but may be subject to limitations. This amount can be used to offset future taxable income of the Company. The timing and manner in which the Company can utilize operating loss carryforwards in any year may be limited by provisions of the Internal Revenue Code regarding changes in ownership of corporations. Such limitation may have an impact on the ultimate realization of its carryforwards and future tax deductions. The Company follows ASC 740-10, which provides guidance for the recognition and measurement of certain tax positions in an enterprise’s financial statements. Recognition involves a determination of whether it is more likely than not that a tax position will be sustained upon examination with the presumption that the tax position will be examined by the appropriate taxing authority having full knowledge of all relevant information. The adoption of ASC 740-10 did not require an adjustment to the Company’s financial statements. The Company’s policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. As of January 1, 2024, the Company had no unrecognized tax benefits and no charge during 2024, and accordingly, the Company did no t recognize any interest or penalties during 2024 related to unrecognized tax benefits. There is no accrual for uncertain tax positions as of December 31, 2024. The Company files U.S. income tax returns and a state income tax return. With few exceptions, the U.S. and state income tax returns filed for the tax years ended on December 31, 2021 and thereafter are subject to examination by the relevant taxing authorities. NOTE 10 – STOCKHOLDERS’ EQUITY Preferred Stock Pursuant to the Company’s Articles of Incorporation, the Company’s board of directors is empowered, without stockholder approval, to issue series of preferred stock with any designations, rights and preferences as they may from time to time determine. The rights and preferences of this preferred stock may be superior to the rights and preferences of the Company’s common stock; consequently, preferred stock, if issued could have dividend, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the common stock. Additionally, preferred stock, if issued, could be utilized, under special circumstances, as a method of discouraging, delaying or preventing a change in control of the Company’s business or a takeover from a third party. Common Stock On July 2, 2021, the Company filed a $100,000,000 universal shelf registration statement with the U.S. Securities and Exchange Commission which became effective on July 9, 2021 and expired on July 8, 2024. On July 26, 2024, the Company filed a new $100,000,000 universal shelf registration statement with the U.S. Securities and Exchange Commission which became effective on August 5, 2024. F- 21 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2024 AND 2023 NOTE 10 – STOCKHOLDERS’ EQUITY (CONTINUED) Common Stock (Continued) On October 4, 2021, the Company entered into a purchase agreement with an institutional investor to sell up to $ 33,000,000 of common stock over a 36-month period. Concurrently with entering into the purchase agreement, the Company also entered into a registration rights agreement which provides the institutional investor with certain registration rights related to the shares issued under the purchase agreement. Pursuant to the purchase agreement, the Company issued 30,312 shares of common stock to the institutional investor as an initial commitment fee valued at $ 279,174 , fair value, and 60,623 shares of common stock are reserved for additional commitment fees to the institutional investor in accordance with the terms of the purchase agreement. During the period October 4, 2021 through December 31, 2023, the institutional investor purchased 3,632,456 shares of common stock for proceeds of $ 33,000,000 and the Company issued 60,623 shares of common stock as additional commitment fee, valued at $ 694,531 fair value. During the year ended December 31, 2023, pursuant to the purchase agreement, the institutional investor purchased 779,945 shares of common stock for proceeds of $ 3,847,307 and the Company issued 7,069 shares of common stock as additional commitment fee, valued at $ 38,161 fair value. All of the registered shares under the purchase agreement have been issued as of December 31, 2023. On February 28, 2023, the Company entered into a purchase agreement with an institutional investor to sell up to $ 30,000,000 of common stock over a 36-month period. Concurrently with entering into the purchase agreement, the Company also entered into a registration rights agreement which provides the institutional investor with certain registration rights related to the shares issued under the purchase agreement. Pursuant to the purchase agreement, the Company issued 50,891 shares of common stock to the institutional investor as an initial commitment fee valued at $ 279,391 , fair value, and 101,781 shares of common stock are reserved for additional commitment fees to the institutional investor in accordance with the terms of the purchase agreement. During the period February 28, 2023 through December 31, 2024, the institutional investor purchased 6,720,455 shares of common stock for proceeds of $ 28,513,017 and the Company issued 96,735 shares of common stock as additional commitment fee, valued at $ 510,236 fair value, leaving 5,046 in reserve for additional commitment fees. During the year ended December 31, 2024, pursuant to the purchase agreement, the institutional investor purchased 3,850,000 shares of common stock for proceeds of $ 12,366,965 , and the Company issued 41,956 shares of common stock as additional commitment fee, valued $ 154,210 fair value. During the period February 28, 2023 through December 31, 2023, the institutional investor purchased 2,870,455 shares of common stock for proceeds of $ 16,146,052 and the Company issued 54,779 shares of common stock as additional commitment fee, valued at $ 356,026 fair value. During the period from January 1, 2025 through March 18, 2025, pursuant to the purchase agreement, the institutional investor purchased 1,035,881 shares of common stock for proceeds of $ 1,486,983 and the Company issued 5,046 shares of common stock as additional commitment fee, valued at $ 8,029 fair value, leaving zero 0 in reserve for additional commitment fees. On December 9, 2022, the Company entered into a sales agreement with an investment banking company. In accordance with the terms of this sales agreement, the Company may offer and sell shares of its common stock having an aggregate offering price of up to $ 35,000,000 from time to time through or to the investment banking company, as sales agent or principal. Sales of shares of the Company’s common stock, if any, may be made by any method deemed to be an “at the market offering”. The sales agent is entitled to compensation under the terms of the sales agreement at a commission rate equal to 3 % of the gross proceeds of the sales price of common stock that they sell. F- 22 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2024 AND 2023 NOTE 11 – STOCK BASED COMPENSATION Common Stock (Continued) During the year ended December 31, 2024, pursuant to the sales agreement, the investment banking company sold 551,501 shares of the Company’s common stock for proceeds of $ 1,779,976 after a payment of the commission in the amount of $ 55,054 to the investment banking company. During the year ended December 31, 2023, pursuant to the sales agreement, the investment banking company sold 202,115 shares of the Company’s common stock for proceeds of $ 1,515,878 after a payment of the commission in the amount of $ 46,884 to the investment banking company. During the period from January 1, 2025 through March 18, 2025, pursuant to the sales agreement, the investment banking company sold 50,000 shares of the Company’s common stock for proceeds of $ 116,435 after a payment of the commission in the amount of $ 3,601 to the investment banking company. Common Stock Options and Warrants During 2007, the Board of Directors of the Company adopted the 2007 Employee Stock Plan (“2007 Plan”) that was approved by the shareholders. Under the 2007 Plan, the Company is authorized to grant options to purchase up to 10,000,000 shares of common stock to directors, officers, employees and consultants who provide services to the Company. The 2007 Plan is intended to permit stock options granted to employees under the 2007 Plan to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended (“Incentive Stock Options”). All options granted under the 2007 Plan, which are not intended to qualify as Incentive Stock Options are deemed to be non-qualified options (“Non-Statutory Stock Options”). Effective June 24, 2016, the 2007 Plan was terminated. As of December 31, 2024, options to purchase 2,053,000 shares of common stock have been issued and are outstanding. During 2016, the Board of Directors of the Company adopted the 2016 Plan that was approved by the shareholders at the 2016 annual meeting of shareholders on May 20, 2016. Under the 2016 Plan, the Company is authorized to grant awards of incentive and non-qualified stock options and restricted stock to purchase up to 3,000,000 shares of common stock to employees, directors and consultants. Effective May 16, 2019, the number of shares of the Company’s common stock available for issuance under the 2016 Plan was increased from 3,000,000 to 8,000,000 shares. Effective May 25, 2023, the number of shares of the Company’s common stock available for issuance under the 2016 Plan was increased from 8,000,000 to 13,000,000 shares and awards of restricted stock units are authorized for issuance. As of December 31, 2024, options to purchase 7,446,859 shares of common stock have been issued and are outstanding and 356,061 restricted shares of common stock have been granted. As of December 31, 2024, 3,480,845 shares of common stock remain available for grants under the 2016 Plan. F- 23 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2024 AND 2023 NOTE 11 – STOCK BASED COMPENSATION (CONTINUED) Common Stock Options and Warrants (Continued) Both plans are administered by the Company’s Board of Directors or its compensation committee which determines the persons to whom awards will be granted, the number of awards to be granted, and the specific terms of each grant. Subject to the provisions regarding Ten Percent Shareholders, (as defined in the 2016 Plan), the exercise price per share of each option cannot be less than 100% of the fair market value of a share of common stock on the date of grant. Options granted under the 2016 Plan are generally exercisable for a period of 10 years from the date of grant and may vest on the grant date, another specified date or over a period of time. The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of an award, with the following assumptions for 2024: no dividend yield, expected volatility, based on the Company’s historical volatility, 76.3 % to 78.5 % , risk-free interest rate between 3.73 % to 4.47 % and expected option life of 10 years, which is based on the legal contractual life of the options. The Black-Scholes option pricing model assumptions for 2023 are as follows: no dividend yield, expected volatility, based on the Company’s historical volatility, 73.7 % to 77.2 % , risk-free interest rate between 3.37 % to 4.82 % and expected option life of 10 years. As of December 31, 2024, there was $ 2,755,783 of unrecognized compensation expense related to non-vested market-based share awards that is expected to be recognized through December 2027. As of December 31, 2023, there was $ 3,295,335 of unrecognized compensation expense related to non-vested market-based share awards. Share-based compensation was recognized as follows: Schedule of share-based compensation 2024 2023 2007 Employee Stock Option Plan $ — $ — 2016 Equity Incentive Plan 4,440,003 6,459,387 2016 Equity Incentive Plan restricted stock awards 446,628 262,697 Warrants — — Total share-based compensation $ 4,886,631 $ 6,722,084 F- 24 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2024 AND 2023 NOTE 11 – STOCK BASED COMPENSATION (CONTINUED) Common Stock Options and Warrants (Continued) The following tables summarize all stock option and warrant activity of the Company during the years ended December 31, 2024 and 2023: Schedule of stock option and warrant activity Non-Qualified Stock Options and Warrants Outstanding and Exercisable Number of Exercise Weighted Average Shares Price Exercise Price Outstanding, December 31, 2022 8,073,173 $ 0.51 - $ 16.81 $ 1.91 Granted 1,959,667 $ 4.28 - $ 7.67 $ 5.24 Forfeited ( 39,625 ) $ 6.25 - $ 8.93 $ 7.12 Exercised ( 1,183,408 ) $ 0.67 - $ 5.22 $ 0.86 Outstanding, December 31, 2023 8,809,807 $ 0.51 - $ 16.81 $ 2.76 Granted 1,628,000 $ 1.96 - $ 5.00 $ 4.05 Forfeited ( 43,948 ) $ 4.28 - $ 7.67 $ 5.70 Exercised ( 494,000 ) $ 0.57 - $ 1.15 $ 0.68 Outstanding, December 31, 2024 9,899,859 $ 0.51 - $ 16.81 $ 3.07 Exercisable, December 31, 2024 8,848,908 $ 0.51 - $ 16.81 $ 3.00 The aggregate intrinsic value of options and warrants outstanding and exercisable as of December 31, 2024 was $ 6,418,443 and $ 6,400,033 , respectively. The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and warrants and the closing stock price of $ 2.10 for the Company’s common stock on December 31, 2024. During the year ending December 31, 2024, 375,000 options with the aggregate intrinsic value of $ 1,399,958 were exercised for proceeds of $ 246,100 . During the year ending December 31, 2024, 119,000 warrants with the aggregate intrinsic value of $ 171,550 were exercised for proceeds of $ 91,250 . During the year ending December 31, 2023, 914,408 options with the aggregate intrinsic value of $ 4,698,996 were exercised for proceeds of $ 777,674 . During the year ending December 31, 2023, 269,000 warrants with the aggregate intrinsic value of $ 1,162,230 were exercised for proceeds of $ 236,250 . F- 25 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2024 AND 2023 NOTE 11 – STOCK BASED COMPENSATION (CONTINUED) Common Stock Options and Warrants (Continued) Schedule of non-qualified stock options and warrants outstanding Non-Qualified Stock Options and Warrants Outstanding Range of Exercise Prices Number Outstanding Currently Exercisable at December 31, 2024 Weighted Average Remaining Contractual Life Weighted Average Exercise Price of Options and Warrants Currently Exercisable $ 0.51 - $ 16.81 8,848,908 5.3 Years $ 3.00 Restricted Stock Awards On March 16, 2023, the Compensation Committee of the Board of Directors approved grants totaling 99,616 Restricted Stock Awards to the Company’s four outside directors. Each RSA had a grant date fair value of $ 5.22 which shall be amortized on a straight-line basis over the vesting period into director’s compensation expenses within the Statement of Comprehensive Loss. Such RSAs were granted under the 2016 Equity Incentive Plan (“2016 Plan”) and vest in total 8,338 shares on March 16, 2023, with the remaining vesting in 33 equal monthly installments in total of 2,766 shares beginning April 1, 2023. On August 1, 2023, the Compensation Committee of the Board of Directors approved a grant totaling 6,238 Restricted Stock Awards to the Company’s outside director. Each RSA had a grant date fair value of $ 6.68 which shall be amortized on a straight-line basis over the vesting period into director’s compensation expenses within the Statement of Comprehensive Loss. Such RSA was granted under the 2016 Plan. 218 shares from this grant vested on August 1, with the remaining vesting in 28 equal monthly installments in total of 215 shares beginning September 1, 2023. On June 18, 2024, the Compensation Committee of the Board of Directors approved grants totaling 92,475 Restricted Stock Awards to the Company’s five outside directors. Each RSA had a grant date fair value of $ 3.33 which shall be amortized on a straight-line basis over the vesting period into director’s compensation expenses within the Statement of Comprehensive Loss. Such RSAs were granted under the 2016 Equity Incentive Plan (“2016 Plan”) and vested in total 15,455 shares on June 18, 2024, with the remaining vesting in 10 equal quarterly installments in total of 7,702 shares beginning July 1, 2024. On August 1, 2024, the Compensation Committee of the Board of Directors approved a grant totaling 12,924 Restricted Stock Awards to the Company’s outside director. Each RSA had a grant date fair value of $ 3.16 which shall be amortized on a straight-line basis over the vesting period into director’s compensation expenses within the Statement of Comprehensive Loss. Such RSA was granted under the 2016 Equity Incentive Plan (“2016 Plan”) and vests in 9 equal quarterly installments of 1,436 shares beginning September 1, 2024. On September 4, 2024, the Compensation Committee of the Board of Directors approved a grant totaling 11,488 Restricted Stock Awards to the Company’s outside director. Each RSA had a grant date fair value of $ 2.68 which shall be amortized on a straight-line basis over the vesting period into director’s compensation expenses within the Statement of Comprehensive Loss. Such RSA was granted under the 2016 Equity Incentive Plan (“2016 Plan”) and vests in 8 equal quarterly installments of 1,436 shares beginning October 1, 2024. F- 26 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2024 AND 2023 NOTE 11 – STOCK BASED COMPENSATION (CONTINUED) Restricted Stock Awards (Continued) On December 10, 2024, the Compensation Committee of the Board of Directors approved a grant totaling 110,000 Restricted Stock Awards to the two Company’s executives and an outside director for consulting services. Each RSA had a grant date fair value of $ 2.65 which shall be amortized on a straight-line basis over the vesting period into stock-based compensation expenses within the Statement of Comprehensive Loss. The RSAs were granted under the 2016 Equity Incentive Plan (“2016 Plan”) and cliff vest on March 10, 2025 for an outside director and on June 10, 2025 for the executives. Upon the occurrence of a Change in Control, 100% of the unvested Restricted Stock shall vest as of the date of the Change in Control. Upon vesting, the restrictions on the shares lapse. The fair value of restricted stock awards is estimated by the market price of the Company’s common stock at the date of grant. Restricted stock activity during the year ending December 31, 2024 and 2023 are as follows: Schedule of fair value of restricted stock awards Restricted Stock Awards Year Ended December 31, 2024 December 31, 2023 Number of Shares Weighted Average Grant Date Fair Value per Share Number of Shares Weighted Average Grant Date Fair Value per Share Non-vested, beginning of period 78,452 $ 5.71 13,816 $ 9.65 Granted 226,887 2.96 105,854 5.31 Vested ( 77,847 ) 4.79 ( 41,218 ) 6.00 Cancelled and forfeited — — — — Non-vested, end of period 227,492 $ 3.28 78,452 $ 5.71 Restricted stock awards are being amortized to expense over the vesting period. As of December 31, 2024 and 2023, the unamortized value of the restricted stock awards was $ 656,735 and $ 432,292 , respectively. NOTE 12 – RELATED PARTY During the years ended December 31, 2024, and 2023, the Company engaged in transactions with related parties, including consultants, directors, and entities affiliated with members of the Board of Directors. These transactions primarily relate to legal services, consulting fees, director compensation, accounting services, and expense reimbursements. Related Party Transactions for the Year Ended December 31, 2024 • The Company incurred $ 90,360 in legal fees with a related party law firm, of which $ 90,360 remained accrued as of December 31, 2024. • The Company incurred $ 207,269 in accounting and IT service fees and expense reimbursements to related parties, with $ 8,326 accrued as of December 31, 2024. • The Company incurred $ 251,194 in fees and travel expenses to directors, with $ 72,748 accrued as of December 31, 2024. • The Company incurred $ 438,716 in consulting fees and travel reimbursements to advisory board members, with $ 29,345 accrued as of December 31, 2024. F- 27 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2024 AND 2023 NOTE 12 – RELATED PARTY (CONTINUED) Related Party Transactions for the Year Ended December 31, 2023: • The Company incurred $ 175,737 in legal fees with a related party law firm, of which $ 115,160 remained accrued as of December 31, 2023. • The Company incurred $ 382,910 in accounting and IT service fees and expense reimbursements to related parties, with $ 102,351 accrued as of December 31, 2023. • The Company incurred $ 207,563 in fees and travel expenses to directors, with $ 62,226 accrued as of December 31, 2023. • The Company incurred $ 390,483 in consulting fees and travel reimbursements to advisory board members, with $ 33,746 accrued as of December 31, 2023. NOTE 13 – RETIREMENT PLAN The Company established a 401(k) retirement plan covering all eligible employees beginning November 15, 2013. The plan offers two types of elected deferrals: pre-tax deferrals and Roth deferrals. The Company matches 100% of each participant contribution, up to 4% for all eligible employees. Matching contributions vest immediately. Participants are entitled to receive distributions of all vested amounts beginning at age 59 1/2. Matching contributions to all eligible non-executive participants charged to expense were $ 134,766 and $ 72,520 for the years ending December 31, 2024 and 2023, respectively. The plan is subject to the annual IRS elective deferral limit of $ 23,000 per employee for 2024 and $7,500 catch-up for 50 and over . NOTE 14 – SEGMENT REPORTING The Company operates as a single reportable segment, as the Chief Operating Decision Maker (“CODM”), the Chief Executive Officer (“CEO”), evaluates the business on a consolidated basis and does not receive discrete financial information for multiple business units. Measure of Segment Profit or Loss The CODM assesses the Company's financial performance based on operating loss, which aligns with the amount reported in the statements of comprehensive loss. The following table presents a reconciliation of segment operating loss to net loss: Schedule of reconciliation of segment operating loss 2024 2023 NET SALES $ 95,605 $ 40,502 COST OF SALES 7,395 2,513 GROSS PROFIT 88,210 37,989 OPERATING EXPENSES Research and development 16,806,548 15,903,689 General and administrative 6,370,805 5,359,565 23,177,353 21,263,254 SEGMENT OPERATING LOSS ( 23,089,143 ) ( 21,225,265 ) OTHER INCOME (EXPENSE) Interest income 926,854 657,546 Commitment fee ( 154,210 ) ( 673,578 ) (Loss) gain on disposal of property and equipment and intangible assets ( 213,440 ) 215,509 Other (expense) ( 5,102 ) ( 12,244 ) NET LOSS $ ( 22,535,041 ) $ ( 21,038,032 ) F- 28 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2024 AND 2023 Significant Segment Expenses The Company considers the following as significant expenses in evaluating its segment performance: • Research and Development: includes costs related to personnel, laboratory and wafer fabrication materials and supplies, prototype device development and wafer fabrication expenses, and third-party consulting costs aimed at developing high-performance electro-optic polymer materials. • General and Administrative: includes personnel costs, professional fees, and other overhead expenses. • Cost of Sales: represents labor costs, material costs and manufacturing overhead costs associated with the production of materials transferred to the customer under the technology license and material supply agreement at the Company’s facility. Since the Company has only one reportable segment, no additional segment disclosures are required beyond entity-wide disclosures presented below. Entity-Wide Disclosures • Geographic Revenue Information: For the year ended December 31, 2024, 14 % of the Company's net sales were generated in the United States and 86 % internationally. For the year ended December 31, 2023, 100 % of the Company’s net sales were generated internationally. • Major Customers: The Company has one customer that accounted for 10 % or more of total revenue. Chief Operating Decision Maker (CODM) The CODM of the Company is the Chief Executive Officer (CEO), who is responsible for evaluating financial results and making resource allocation decisions. NOTE 15 – SUBSEQUENT EVENTS On March 17, 2025, the Company entered into a purchase agreement with an institutional investor to sell up to $ 30,000,000 of common stock over a 36-month period. Concurrently with entering into the purchase agreement, the Company also entered into a registration rights agreement which provides the institutional investor with certain registration rights related to the shares issued under the purchase agreement. F-29