Lightwave Logic, Inc. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures As of December 31, 2020, 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, 2020. 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. 43 Index 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. 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 Not Applicable. 44 Index PART III Item 10. Directors, Executive Officers and Corporate Governance Identity of directors, executive officers and significant employees Name Age Position Director Class/ Term   Michael Lebby 60 Director; Chief Executive Officer Class II Expires 2022 James S. Marcelli 73 Director; President; Chief Operating Officer, Secretary Class III Expires 2023 Thomas E. Zelibor 66 Chair of the Board of Directors Class III Expires 2023 Joseph A. Miller 79 Director Class II Expires 2022 Ronald A Bucchi 66 Director Class II Expires 2022 Siraj Nour El-Ahmadi 56 Director Class I Expires 2021 Frederick J. Leonberger 73 Director Class I Expires 2021 Business experience of directors, executive officers, and significant employees Dr. Michael Lebby . Dr. Lebby has served as our Chief Executive Officer since May 1, 2017 and as a director of our Company since August 26, 2015. He also previously served a member of our Operations Committee until April 30, 2017. Dr. Lebby is in charge of the overall general management of the Company and supervision of Company policies, setting the Company’s strategies, formulating and overseeing the Company’s business plan, raising capital, expanding the Company’s management team and the general promotion of the Company From June 2013 to 2015, Dr. Lebby has served as President and CEO of OneChip Photonics, Inc., a privately held company headquartered in Ottawa, Canada, that is a leading provider of low-cost, small-footprint, high-performance indium phosphide (InP)-based photonic integrated circuits (PICs) and PIC-based optical sub-assemblies (OSAs) for the Data Center markets. Also, from 2013 to 2015 Dr. Lebby served as part-time full professor, and chair of optoelectronics at Glyndwr University in Wales, UK, to bring forward advanced materials, device, and integrated photonics based technologies for the datacenter and high performance computing markets. During the period 2014 to 2016, Dr. Lebby focused on a foundry based model for InP-based photonic integrated circuits (PICs) and optoelectronic integrated circuits (OEICs) in the datacenter segment and was instrumental in assembling California’s proposal (via USC) to the Federal Government for an integrated photonics manufacturing institute. Dr. Lebby holds a Doctor of Engineering, a Ph.D., a MBA and a bachelor’s degree, all from the University of Bradford, United Kingdom. Dr. Lebby has well over 200 issued utility patents with the USPTO. This number expands to over 450 if international derivative patents are included. Mr. James S. Marcelli . Mr. Marcelli has served as an officer and director of our Company since August 2008. Since May 2012, Mr. Marcelli has served as our Company’s President and Chief Operating Officer, and he was named our Secretary in March 2018. Previously, from August 2008 to April 2012, Mr. Marcelli served as our President and Chief Executive Officer. Mr. Marcelli is in charge of the day-to-day operations of our Company and its movement to a fully functioning commercial corporation, and also serves as our Company’s principal financial officer. Since 2000, Mr. Marcelli has served as the president and chief executive officer of Marcelli Associates, a consulting company that offers senior management consulting, mentoring, and business development services to start-up and growth companies. Business segments Mr. Marcelli has worked with included an Internet networking gaming center, high-speed custom gaming computers, high tech manufacturing businesses and business service companies. 45 Index Thomas E. Zelibor, Rear Admiral, USN (Ret) . RADM Zelibor has served as our Chair of the Board of Directors (non-executive) since May 1, 2017. Previously, has served as our Chief Executive Officer and Chair of the Board of Directors (executive) from May 2012 to April 30, 2017. Mr. Zelibor also previously served as Chair of the Board of Directors (non-executive) of our Company since October 2011 and has served as a director of our Company since July 2008. He also previously served on our Operation Committee. Mr. Zelibor is currently the Chief Executive Officer of the Space Foundation. Mr. Zelibor previously served as a Director of Nuvectra Corp., the Chief Executive Officer and President of Zelibor & Associates, LLC, a management-consulting firm and as the Chief Executive Officer and President of Flatirons Solutions Corp. Prior to that time, RADM Zelibor served in the U.S. Navy in a number of positions, including as the Dean of the College of Operational and Strategic Leadership at the United States Naval War College where he was responsible for the adoption of a corporate approach to leadership development; Director of Global Operations, United States Strategic Command; Director, Space, Information Warfare, Command and Control on the Navy staff; Department of the Navy, Deputy Chief Information Officer (CIO), Navy; Commander, Carrier Group Three and Commander, Naval Space Command. Mr. Zelibor earned his bachelor’s degree from the United States Naval Academy and has been a participant in the Senior Leader in Residence Program and a visiting scholar for the Zell Center for Risk Research at the Kellogg School of Management, Northwestern University. Dr. Joseph A. Miller, Jr. Dr. Miller has served as a director of our Company since May 10, 2011. From 2002 to May 2012, Dr. Miller served as Executive Vice President and Chief Technology Officer of Corning Incorporated, having joined Corning Incorporated in 2001 as Senior Vice President and Chief Technology Officer. Prior to joining Corning Incorporated, Dr. Miller was with E.I. DuPont de Nemours, Inc., where he served as Chief Technology Officer and Senior Vice President for Research and Development since 1994. Dr. Miller began his career with DuPont in 1966. Dr. Miller previously served as a director and Non-executive Chairman of Nuvectra Corp., and as a director for Greatbatch, Inc. He holds a doctorate degree in Chemistry from Penn State University. Mr. Ronald A. Bucchi . Mr. Bucchi has served as a director of our Company since June 11, 2012, and he currently serves as the Chair of our Audit Committee. Mr. Bucchi is currently a self-employed C.P.A., CGMA with a specialized practice that concentrates in CEO consulting, strategic planning, mergers, acquisitions, business sales and tax. He works with domestic and international companies. Mr. Bucchi is a former member of the board of directors of First Connecticut Bancorp, Inc., having served as Lead Director, Chair of the Audit Committee, Governance Chairman and a member of the Asset Liability Committee and Loan Committee. The Bank sold in September of 2018. He is currently a member of the Advisory Board of Baker Street Scientific, Inc., the Treasurer and a member of the Board of Directors of the Petit Family Foundation, Inc. and the Farmington Bank Foundation, Inc. He has served on numerous other community boards and is past Chairman of the Wheeler Clinic and the Wheeler YMCA. He is a member of the Connecticut Society of Certified Public Accountants, American Institute of Certified Public Accountants and Chartered Global Management Accountant. Mr. Bucchi is a graduate of the Harvard Business School Executive Education program with completed course studies in general board governance, audit and compensation and a graduate of Central Connecticut State University where he received his B.S. in Accounting. Mr. Siraj Nour El-Ahmadi . Mr. El-Ahmadi has served as a director of our Company since October 2, 2013, and he currently serves a member of our Audit Committee. Since 2004, Mr. El-Ahmadi has served as Founder, President and Chief Executive Officer of Menara Networks, a developer of innovative products and solutions that simplify layered optical transport networks. Mr. El-Ahmadi has over 17 years of experience in optical transmission in particular and the telecom industry in general. Prior to founding Menara, Mr. El-Ahmadi served as Vice President-Marketing & Product Management at Nortel where he was responsible for the OPTera LH 4000 ULR product (acquired from Qtera) that achieved over $200M in revenues in its first two years. Prior to that, Mr. El-Ahmadi was the Product Architect & Vice President of Product Management at Qtera Corporation, a successful technology start-up acquired by Nortel in 2000 for $3.25 billion. Mr. El-Ahmadi also held a Senior Manager position at Bell Northern Research and worked as a Transmission Engineer at WilTel (WorldCom) where he evaluated and deployed the world’s first bidirectional EDFA and bi-directional WDM transmission. Mr. El-Ahmadi holds a BS and MS in Electrical Engineering from the University of Oklahoma, is a member of Eta Kappa Nu and is the inventor of 11 patents, issued or pending, in the area of optical communications. He has authored a number of publications and is a frequent speaker at telecom and optical networking events and conferences. 46 Index Dr. Frederick J. Leonberger . Dr. Leonberger has served as a director of our Company since April 1, 2017. Since 2010, Dr. Leonberger has served as the Principal of EOvation Advisors LLC, a private technology and business advisory firm and presently serves as a board member for various private photonics companies and as a Professor at the Institute for Advanced Discovery & Innovation, University of South Florida. Dr. Leonberger is a widely known technologist and industry leader in the field of photonics and fiber optics. For nearly 40 years he has been a leading contributor to the development of a variety of important optical devices, company leadership, product and business strategy, and commercialization. The integrated optical modulator technology he and his colleagues pioneered has been used pervasively for over 20 years to encode data at multi-Gb/s rates in long-haul fiber optic networks (the Internet "superhighways"). He previously served as senior vice president and chief technology officer of JDS Uniphase Corporation (JDSU, now Lumentum), a leading optical components company, from 1995 until his retirement in 2003, where he played a lead role in technology strategy, mergers and acquisitions and intellectual property activities. Prior to JDSU, he was co-founder and general manager of United Technologies Photonics (UTP), a high-speed optical modulator company, and held research management positions at United Technologies Research Center ( UTRC ) and MIT Lincoln Laboratory. He is a member of the National Academy of Engineering and the recipient of several industry awards. The Board of Directors believes that each of the Directors named above has the necessary qualifications to be a member of the Board of Directors. Each Director has exhibited during his prior service as a director the ability to operate cohesively with the other members of the Board of Directors. Moreover, the Board of Directors believes that each director brings a strong background and skill set to the Board of Directors, giving the Board of Directors as a whole competence and experience in diverse areas, including corporate governance and board service, finance, management and industry experience. Our bylaws provide that the number of directors who constitute our Board of Directors is determined by resolution of the Board of Directors, but the total number of directors constituting the entire Board of Directors shall not be less than three or more than nine. Our Board of Directors currently consists of seven directors. Our Board of Directors is divided into three classes, as nearly equal in number as possible, designated: Class I, Class II and Class III, with staggered terms and with each director serving for a term ending on the date of the third annual meeting following the annual meeting at which such director was elected; provided that the term of each director shall continue until the election and qualification of a successor and be subject to such director's earlier death, resignation or removal. Code of Ethics Our Company has adopted a Code of Ethics and Business Conduct that applies to all of the Company’s employees, including its principal executive officer and principal financial officer. A copy of our Code of Ethics and Business Conduct is available for review on the “Investors - Corporate Governance” page of our Company’s website lightwavelogic.com . The Company intends to disclose any changes in or waivers from its Code of Ethics and Business Conduct by posting such information on its website. Nominating Committee Our Board of Directors does not have a nominating committee. This is due to our development stage and smaller sized Board of Directors. Instead of having such a committee, our entire Board of Directors historically has searched for and evaluated qualified individuals to become nominees for membership on our Board of Directors. No material changes to the procedures by which our stockholders may recommend nominees to our Board of Directors has occurred since we last provided disclosure regarding these procedures in our Definitive Schedule 14A filed on April 21, 2020. Audit Committee Our Company has in place a separately designated standing audit committee in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. Our audit committee is governed by an audit committee charter. A copy of our Audit Committee Charter is available for review on the “Investors - Governance” page of our Company’s website lightwavelogic.com . Our audit committee is comprised of Ronald A. Bucchi and Siraj Nour El-Ahmadi. Mr. Bucchi serves as our audit committee financial expert as that term is defined by the rules promulgated by the Securities and Exchange Commission. Mr. Bucchi is an independent director, as defined below in Certain Relationships and Related Transactions, and Director Independence. 47 Index Item 11. Executive Compensation. Compensation Discussion and Analysis The Company’s entire Board of Directors currently participates in the review and determination of the compensation packages of our executive officers because our Board of Directors currently has no standing compensation committee or committee performing similar functions. A discussion of the policies and decisions that shape our executive compensation program, including the specific objectives and elements, is set forth below. Executive Compensation Objectives and Philosophy The objective of our executive compensation program is to attract, retain and motivate talented executives who are critical for the continued growth and success of our Company and to align the interests of these executives with those of our shareholders. To this end, our compensation programs for executive officers are designed to achieve the following objectives: • attract talented and experienced executives to join the Company;   • motivate, reward and retain executives whose knowledge, skills and performance are critical to our success;   • be “market-based” and reflect the competitive environment for personnel;   • focus executive behavior on achievement of our corporate mission and long-term corporate objectives and strategy;   • be affordable, within the context of our operating expense model;   • be fairly and equitably administered;   • reflect our values; and   • align the interests of management and shareholders by providing management with longer-term incentives through equity ownership.   The Board of Directors reviews the allocation of compensation components regularly to help ensure alignment with strategic and operating goals, competitive market practices and our changing business needs. The Board of Directors focuses on simplicity and flexibility wherever possible. The Board of Directors does not apply a specific formula to determine the allocation between cash and non-cash forms of compensation. Certain compensation components, such as base salaries, benefits and perquisites, are intended primarily to attract and retain qualified executives. Other compensation elements, such as long-term incentive opportunities, are designed to motivate and reward our long-term performance and to strongly align named executive officers' interests with those of shareholders. 48 Index Elements of Executive Officer Compensation The primary elements of our executive officer compensation program are: (i) annual base salary; and (ii) long-term equity incentive compensation in the form of stock option grants, with the objective of aligning the executive officers' long-term interests with those of the shareholders. In establishing overall executive compensation levels and making specific compensation decisions for the executives in 2020, the Board of Directors considered a number of criteria, including the executive's position, any applicable employment agreement, prior compensation levels, scope of responsibilities, prior and current period performance, attainment of individual and overall company performance objectives and retention concerns. In addition, the Board of Directors considered the results of the advisory vote by shareholders on the "say-on-pay" proposal presented to shareholders at the Company’s 2018 Annual Meeting of Shareholders where approximately 96% of the votes cast on the “say-on-pay” proposal was voted for approval of the 2017 executive compensation. In determining our 2020 executive compensation program, the Board of Directors reviewed the results of the say-on-pay vote and concluded that changes to the program were not desired by our shareholders for 2020. Therefore, our 2020 executive compensation approach was overall generally in line with the executive officer compensation approach previously approved by our shareholders. The Board of Directors performs a review of compensation for our executive officers annually. As part of this review, the Board of Directors takes into consideration its understanding of external market data, including companies competing in our industry. The Board of Directors does not engage independent consultants to perform an analysis of the current compensation program. Generally, our Board of Directors reviews and approves compensation arrangements for executive officers annually and in connection with the hiring of new executives. We do not have any formal or informal policy regarding compensation arrangements for executive officers. Instead, the Board of Directors determines what it believes to be the appropriate level and mix of the various compensation components based on recommendations from our chief executive officer, Company performance against stated objectives and individual performance. In considering compensation of executives, one of the factors the Board of Directors takes into account is the anticipated tax treatment of various components of compensation. Our Board’s strategy is to be cost and tax efficient and the Board intends to preserve corporate tax deductions where possible, while maintaining the flexibility in the future to approve arrangements that it deems to be in our best interests and the best interests of our shareholders, even if such arrangements do not always qualify for full tax deductibility. We do not believe Section 162(m) of the Internal Revenue Code, which generally disallows a tax deduction for certain compensation in excess of $1 million to our named executive officers, will have a material effect on us due to the current compensation levels of named executive officers. Base Salary Base salaries are reviewed at least annually by our Board of Directors and may be adjusted from time to time based upon market conditions, individual responsibilities and Company and individual performance. We believe that a competitive base salary is a necessary element of any compensation program that is designed to attract and retain talented and experienced executives. We also believe that attractive base salaries can motivate and reward executives for their overall performance. Base salaries are established in part based on the individual experience, skills and expected contributions of our executives and our executives' performance during the prior year, in addition to affordability within the context of our operating expense model. Annual Non-Equity Incentive Compensation Annual non-equity incentive compensation is typically not included as part of our named executive compensation given that our Company is in the development stage. 49 Index Long-term Equity Incentive Compensation Long-term incentive compensation allows the executive officers to share in any appreciation in the value of our common stock. The Board of Directors believes that stock option participation aligns executive officers' interests with those of the shareholders. The amounts of the awards are designed to reward past performance, create incentives to meet long-term objectives and ensure that we retain executive talent over a longer period of time. Awards are based upon various factors, including market conditions and incentives given by other companies in our industry. Stock option awards provide our executive officers with the right to purchase shares of our common stock at a fixed exercise price, and stock option vest over time, subject to continued employment with our company over the vesting period. Stock options generally vest quarterly over a period of one year. All stock options have an exercise price equal to fair market value of our common stock on the date of grant, which is equal to our closing market price on such date. Severance and Change in Control Benefits Pursuant to employment agreements we have entered into with our executives and the terms of our 2016 Equity Incentive Plan, our executives are entitled to certain benefits in the event of a change in control of our Company or the termination of their employment under specified circumstances, including termination following a change in control. We believe these benefits help us compete for and retain executive talent and are generally in line with severance packages offered to executives by the companies in our peer group. We also believe that these benefits would serve to minimize the distraction caused by any change in control scenario and reduce the risk that key talent would leave the Company before any such transaction closes, which could reduce the value of the Company if such transaction failed to close. Other Compensation Generally, benefits available to executive officers are available to all employees on similar terms and include health and welfare benefits, disability benefits and a 401(k) plan. We provide the benefits above to attract and retain our executive officers by offering compensation that is competitive with other companies similar in size and stage of development. These benefits represent a relatively small portion of their total compensation. The table below summarizes all compensation awarded to, earned by, or paid to our named executive officers for the fiscal years ended December 31, 2020 and 2019. Summary Compensation Table Name and Principal Position Year Salary ($) Bonus ($) Stock Awards ($) Option Awards ($) All Other Compensation ($) Total ($) (a) (b) (c) (1) (d) (e) (2) (f) (2) (g) (3) (h)   Dr. Michael S. Lebby 2020 278,250 — — 42,178 3,024 323,452 CEO; Director 2019 273,833 — — 38,805 2,963 315,601   James S. Marcelli 2020 262,500 — — 42,178 2,189 306,867 President; COO; Sec., Director 2019 258,333 — — 38,805 2,245 299,383 (1) The named executive officer’s compensation includes the amount for services rendered to the Company in his capacity as both an officer and a director. (2) The aggregate fair value of awards and options in columns (e) and (f) are computed in accordance with FASB ASC 718. All assumptions made in the valuation are more fully described in Note 10 - Stock Based Compensation of Notes to Financial Statements. The amounts shown in columns (f) do not reflect dollar amounts actually received by our named executive officers. (3) The amount in column (g) reflects a salary gross up for long term disability premium payments. 50 Index At no time during the last fiscal year was any outstanding option otherwise modified or re-priced, and there was no tandem feature, reload feature, or tax-reimbursement feature associated with any of the stock options we granted to our executive officers or otherwise. We grant stock awards and stock options to our executive officers based on their level of experience and contributions to our Company. The aggregate fair value of awards and options are computed in accordance with FASB ASC 718 and are reported in the Summary Compensation Table above in the columns (e) and (f). No plan-based awards were granted to our named executive officers during the last completed fiscal year. The table below summarizes all of the outstanding equity awards for our named executive officers as of December 31, 2020, our latest fiscal year end. Outstanding Equity Awards At Fiscal Year-End Option Awards   Name Number of securities underlying unexercised options(#) exercisable Number of securities underlying unexercised options(#) unexercisable Equity incentive plan awards: number of securities underlying unexercised unearned options Option exercise price Option expiration date (#) ($)   (a) (b) (c) (d) (e) (f)   Dr. Michael S. Lebby 200,000 — — 0.69 08/25/25 CEO, Director (1)(3) 50,000 — — 0.68 01/28/26 50,000 — — 0.85 01/16/27 350,000 — — 0.70 03/19/27 87,500 12,500 — 1.04 04/07/29   James S. Marcelli 50,000 — — 0.67 08/09/25 President, COO, Sec., 1,150,000 — — 0.70 06/30/25 Director (2)(3) 100,000 — — 1.00 05/16/23 87,500 12,500 — 1.04 04/07/29 (1) Dr. Lebby received an option to purchase up to: (i) 200,000 shares of Common Stock, of which 50,000 shares vested on August 26, 2015 and the remaining shares vest in equal annual installments of 50,000 options per year commencing on August 26, 2016; (ii) 50,000 shares of Common Stock, of which 20,000 shares vested on February 11, 2016 and the remaining shares vested quarterly in equal installments of 10,000 options per quarter commencing on April 1, 2016; (iii) 50,000 shares of Common Stock, of which 20,000 shares vested on January 17, 2017 and the remaining shares vested quarterly in equal installments of 10,000 options per quarter commencing on April 1, 2017; (iv) 350,000 shares of Common Stock, which vest quarterly over one year in equal installments of 87,500 shares per quarter beginning May 1, 2017; (v) 100,000 shares of Common Stock, of which 12,500 shares vested on May 1, 2019 and the remaining shares vested quarterly in equal installments of 12,500 options per quarter commencing on August 1, 2019. (2) Mr. Marcelli received an option to purchase up to (i) 50,000 shares of Common Stock, of which 12,500 shares vested on August 10, 2015 and the remaining shares vested quarterly in equal installments of 12,500 shares; (ii) 1,150,000 shares of Common Stock at an exercise price of $.70 that vested immediately; and (iii) up to 100,000 shares of Common Stock, of which 25,000 shares vested on August 1, 2013 and the remaining shares vested quarterly in equal installments of 25,000 shares commencing on October 1, 2013; (iv) 100,000 shares of Common Stock, of which 12,500 shares vested on May 1, 2019 and the remaining shares vested quarterly in equal installments of 12,500 options per quarter commencing on August 1, 2019. (3) In the event of a change in control of our Company, such person’s options will become fully vested and/or exercisable, as the case may be, immediately prior to such change in control, and shall remain exercisable as set forth in their stock option agreement. 51 Index Option Exercises and Stock Vested No stock options, SARs and similar instruments were exercised, and no stock, including restricted stock, restricted stock units and similar instruments vested, by or for any of our named executive officer during the last completed fiscal year. Pension Benefits-Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation No pension benefits were paid to any of our named executive officers during the last completed fiscal year. We do not currently sponsor any non-qualified defined contribution plans or non-qualified deferred compensation plans. Employee, Severance, Separation and Change in Control Agreements Dr. Michael S. Lebby Employee Agreement- Chief Executive Officer On March 20, 2017, we entered into an employment agreement with Dr. Michael S. Lebby (the “ Lebby Employment Agreement ”). The term of the Lebby Employment Agreement commenced on May 1, 2017 for a period of 24 months, following which time the Lebby Employment Agreement will be renewed for successive 12-month periods at the end of each term upon the written agreement of the parties that shall be delivered by each party to the other not less than 60 days prior to the expiration of the existing term. Upon entering into the Lebby Employment Agreement, Dr. Lebby was granted (i) 350,000 stock options, which have an exercise price of $0.70 per share and are fully vested at this time. In the event of a change in control of our Company, Dr. Lebby’s options shall remain exercisable as set forth in Dr. Lebby’s stock option agreement. On April 8, 2019, we entered into an amended employee agreement with Dr. Lebby to (i) increase his base salary to $278,250 per year effective May 1, 2019, (ii) provide him with eligibility to receive bonus compensation to be determined by the Board of Directors from time to time in its sole discretion, and (iii) extend his employee agreement’s expiration date to April 30, 2021. Additionally, Dr. Lebby was granted an option to purchase up to 100,000 shares of Company common stock at an exercise price equal to $1.04 per share. The options vest quarterly over two years in equal installments of 12,500 shares per quarter beginning on May 1, 2019. If Dr. Lebby’s employment terminates upon the expiration of the term of the Lebby Employment Agreement, and the Company elects for any reason not to renew the Lebby Employment Agreement for an additional 12-month term, then our Company will continue to pay to Dr. Lebby the compensation described in the Lebby Employment Agreement for a period of 9 months the after the termination. If Dr. Lebby’s employment is terminated by the Company without cause during the term of the Lebby Employment Agreement, the Company will pay to Dr. Lebby’s the compensation described in the Lebby Employment Agreement for the remainder of the term of Lebby Employment Agreement or 12 months, whichever is longer. Mr. James S. Marcelli Employee Agreement- President; Chief Operating Officer On August 10, 2015, we entered into a new employment agreement with Mr. Marcelli, which was amended during 2015 and 2017 (collectively, the “ Marcelli Employment Agreement ”), which replaced his previous employment agreement, as amended. The term of the Marcelli Employment Agreement commenced on January 1, 2014 and expires December 31, 2019, following which time the Marcelli Employment Agreement will be renewed for successive 12-month periods at the end of each term upon the written agreement of the parties that shall be delivered by each party to the other not less than 60 days prior to the expiration of the existing term. Upon entering into the Marcelli Employment Agreement, Mr. Marcelli was granted (i) 50,000 stock options, which have an exercise price of $0.67 per share and are fully vested at this time. In the event of a change in control of our Company, Mr. Marcelli’s options shall remain exercisable as set forth in Mr. Marcelli’s stock option agreement. On April 8, 2019, we entered into an amended employee agreement with Mr. Marcelli, to (i) increase his base salary to $262,500 per year effective May 1, 2019, (ii) provide him with eligibility to receive bonus compensation to be determined by the Board of Directors from time to time in its sole discretion, and (iii) extend his employee agreement’s expiration date to December 31, 2021. Additionally, Mr. Marcelli was granted an option to purchase up to 100,000 shares of Company common stock at an exercise price equal to $1.04 per share. The options vest quarterly over two years in equal installments of 12,500 shares per quarter beginning on May 1, 2019. 52 Index If Mr. Marcelli’s employment terminates upon his death and key man life insurance is in place for Mr. Marcelli, our Company will continue to pay the compensation described in the Marcelli Employment Agreement to his estate through the remainder of the term of the Marcelli Employment Agreement, or 12 months, whichever is longer. If Mr. Marcelli’s employment terminates upon the expiration of the term of the Marcelli Employment Agreement, and the Company elects for any reason not to renew the Marcelli Employment Agreement for an additional 12-month term, then our Company will continue to pay to Mr. Marcelli the compensation described in the Marcelli Employment Agreement for a period of 9 months the after the termination. If Mr. Marcelli’s employment is terminated by the Company without cause during the term of the Marcelli Employment Agreement, the Company will pay to Mr. Marcelli the compensation described in the Marcelli Employment Agreement for the remainder of the term of Marcelli Employment Agreement or 12 months, whichever is longer. Potential Payments Upon Termination or Change In Control Pursuant to employment agreements we have entered into with our executives and the terms of our 2016 Equity Incentive Plan, our executives are entitled to certain benefits in the event of a change in control of our Company or the termination of their employment under specified circumstances, including termination following a change in control. We believe these benefits help us compete for and retain executive talent and are generally in line with severance packages offered to executives by the companies in our peer group. We also believe that these benefits would serve to minimize the distraction caused by any change in control scenario and reduce the risk that key talent would leave the Company before any such transaction closes, which could reduce the value of the Company if such transaction failed to close. Compensation of Directors Set forth below is a summary of the compensation of our directors during our December 31, 2020 fiscal year. Fees Earned or Paid in Cash Stock Awards Option Awards Non-Equity Incentive Plan Compensation Non-Qualified Deferred Compensation Earnings All Other Compensation Total Name ($) (1) ($) ($) (2) ($) ($) ($) ($) Thomas E. Zelibor 7,400 — 66,932 (3) — — — 74,332 Joseph A. Miller 7,400 — 36,508 (4) — — — 43,008 Ronald A. Bucchi 7,400 — 48,678 (5) — — — 66,205 Siraj Nour El-Ahmadi 25,800 — 36,508 (4) — — — 62,308 Frederick Leonberger 145,400 — 42,258 (4) — — — 187,658 (1) The amount in this column reflects cash compensation received under the Director Compensation Program of $2,000 per attendance at an in-person meeting and $700 per participation in a teleconference meeting. With respect to Dr. Leonberger, it also reflects cash compensation received of $11,500 per month for serving on our Operations Committee. With respect to Siraj Nour El-Ahmadi, it also reflects cash compensation received of $4,600 per month commencing September 2020 for serving on our Operations Committee. (2) The option awards in this column reflect options issued on January 14, 2020 to purchase shares of our Company’s common stock at an exercise price of $.80 that vest pursuant to the following schedule: 25% of the options vest immediately, and the remaining options vest in three equal quarterly installments of 25% of the options granted commencing on April 1, 2020. (3) Reflects an option to purchase up to 60,000 shares of common stock for board service and up to 50,000 shares of common stock for serving as Chair of the Board. (4) Reflects an option to purchase up to 60,000 shares of common stock for board service. With respect to Dr. Leonberger only, it also reflects an additional $5,750 for the amortization of an option to purchase up to 200,000 shares of common stock for board service that was granted in March 2017. (5) Reflects an option to purchase up to 60,000 shares of common stock for board service and up to 20,000 shares of common stock for serving as Audit Committee Chair. 53 Index In the event of a change in control of our Company, all of the above person’s options become fully vested and/or exercisable, as the case may be, immediately prior to such change in control, and shall remain exercisable as set forth in their stock option agreement. Compensation Policies and Practices as They Relate to Our Risk Management No risks arise from our Company’s compensation policies and practices for our employees that are reasonably likely to have a material adverse effect on our Company. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The following table sets forth, as of March 31, 2021, the names, addresses, amount and nature of beneficial ownership and percent of such ownership of our common stock of each of our officers and directors, our officers and directors as a group and each person or group known to our Company to be the beneficial owner of more than five percent (5%) of our common stock: Name and Address (1) Amount and Nature of Beneficial Ownership (2) % Owned (3)(4) Number of Options and Warrants Included in Amount and Nature of Beneficial Ownership (5) Michael Lebby Chief Executive Officer, Principal Executive Officer and Director 812,643 * 750,000 James S. Marcelli President, Chief Operating Officer, Principal Financial Officer, Secretary and Director 1,646,700 1.6% 1,400,000 Thomas E. Zelibor Chair of the Board of Directors 1,560,124 (6) 1.5% 1,510,000 Joseph A. Miller, Jr. Director 583,400 * 570,000 Ronald A. Bucchi Director 934,000 (7) * 760,000 Siraj Nour El-Ahmadi Director 570,000 * 570,000 Frederick Leonberger Director 1,095,000 1.0% 1,095,000 Directors and Officers as a Group (7 Persons): 7,201,867 7.0% 6,655,000 ——————— * Less than 1%. (1) In care of our Company at 369 Inverness Parkway, Suite 350, Englewood, CO 80112. (2) To our best knowledge, as of the date hereof, such holders had the sole voting and investment power with respect to the voting securities beneficially owned by them, unless otherwise indicated herein. Includes the person's right to obtain additional shares of common stock within 60 days from March 31, 2021. (3) Based on 101,758,709 shares of common stock outstanding on March 31, 2021. Does not include shares underlying: (i) options to purchase shares of our common stock under our 2007 Employee Stock Plan and our 2016 Equity Incentive Plan; or (ii) outstanding warrants to purchase shares of our common stock. (4) If a person listed on this table has the right to obtain additional shares of common stock within 60 days from March 31, 2021, the additional shares are deemed to be outstanding for the purpose of computing the percentage of class owned by such person but are not deemed to be outstanding for the purpose of computing the percentage of any other person. (5) Represents options and warrants exercisable within 60 days from March 31, 2021. (6) Mr. Zelibor disclaims beneficial ownership of 400 shares held by his spouse. (7) Mr. Bucchi disclaims beneficial ownership of 53,000 shares held by his spouse. We are not aware of any arrangements that could result in a change of control. 54 Index Securities Authorized for Issuance under Equity Compensation Plans Information regarding our compensation plans under which our equity securities are authorized for issuance can be found in Part II –Item 5 of this report. Item 13. Certain Relationships and Related Transactions, and Director Independence. Transactions With Related Persons None. Policies and Procedures for Related-Party Transactions Our Company does not have any formal written policies or procedures for related party transactions, however in practice, our Board of Directors reviews and approves all related party transactions and other matters pertaining to the integrity of management, including potential conflicts of interest, trading in our securities, or adherence to standards of business conduct. Director Independence Although we are currently traded on the OTCQX Market, our Board of Directors has reviewed each of the Directors’ relationships with the Company in conjunction with NASDAQ Listing Rule 5605(a)(2) that provides that an “independent director” is ‘one who is not an executive officer or an employee of the company and who does not have a relationship that, in the opinion of the board of directors, would interfere with exercising independent judgment in carrying out a director’s responsibilities.’ Our Board of Directors has affirmatively determined that the following directors, Joseph A. Miller, Jr., Ronald A. Bucchi, Siraj Nour El-Ahmadi, Thomas E. Zelibor and Frederick J. Leonberger are independent directors in that they are independent of management and free of any relationship that would interfere with their independent judgment as members of our Board of Directors. In making such determination, our Board of Directors considered the relationships that each such non-employee director has with our Company and all other facts and circumstances that our Board of Directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director. The following members of our Board of Directors, Dr. Michael Lebby and James S. Marcelli are not independent directors pursuant to the standards described above. Our Company does not have a separately designated nominating or compensation committee or committee performing similar functions; therefore, our full Board of Directors currently serves in these capacities. Item 14. Principal Accounting Fees and Services. Audit Fees. The aggregate fees billed for the years ended December 31, 2020 and December 31, 2019 for professional services rendered by Morison Cogen, LLP for the audit of the Company’s annual financial statements and review of financial statements included in the Company’s Form 10-Q or services that are normally provided by Morison Cogen, LLP in connection with statutory and regulatory filings or engagements were $84,460 for the year ended December 31, 2020 and were $56,000 for the year ended December 31, 2019. Audit-Related Fees. Fees billed for the years ended December 31, 2020 and December 31, 2019 for assurance and related services rendered by Morison Cogen, LLP that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under the category Audit Fees described above were $0 for the year ended December 31, 2020 and $0 for the year ended December 31, 2019. Tax Fees. Fees billed for the years ended December 31, 2020 and December 31, 2019 for tax compliance services rendered by Morison Cogen, LLP were $6,000 for the year ended December 31, 2020 and $6,000 for the year ended December 31, 2019. 55 Index All Other Fees. Fees billed for the years ended December 31, 2020 and December 31, 2019 for products and services provided by Morison Cogen, LLP, other than the services reported in the Audit Fees, Audit-Related Fees, and Tax Fees categories above were $0 for the year ended December 31, 2020 and $0 for the year ended December 31, 2019. Audit Committee Pre-Approval Policies. The Company’s audit committee currently does not have any pre-approval policies or procedures concerning services performed by Morison Cogen, LLP. All the services performed by Morison Cogen, LLP that are described above were pre-approved by the Company’s audit committee. None of the hours expended on Morison Cogen, LLP ‘s engagement to audit the Company’s financial statements for the years ended December 31, 2020 and December 31, 2019 were attributed to work performed by persons other than Morison Cogen, LLP’s full-time, permanent employees. 56 Index PART IV Item 15. Exhibits, 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 Restated Bylaws Incorporated by reference to the Company's Form 10-K as filed with the SEC on March 16, 2018 4.1 Description of Registrant's Securities Incorporated by reference to the Company's Form 10-K as filed with the SEC on March 16, 2020 10.1 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 10.2 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 10, 2019 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 March 22, 2017 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 April 10, 2019 10.6 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 10.7 Form of Director Agreement Incorporated by reference to the Company's Form 10-K as filed with the SEC on March 16, 2018 10.8 Form of Director Indemnification Agreement Incorporated by reference to the Company's Form 10-K as filed with the SEC on March 16, 2018 10.9 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 10.10 Operations Committee Charter Incorporated by reference to the Company's Form 10-Q as filed with the SEC on August 15, 2016 10.11 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 10.12 Statement of Operations Committee Work - Siraj Nour El-Ahmadi Filed herewith 10.13 2007 Employee Stock Plan Incorporated by reference to Company’s Definitive Schedule 14C Information Statement as filed with the SEC on February 19, 2008 57 Index           10.14 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 10.15 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 10.16 2016 Equity Incentive Plan Amendment Plan Incorporated by reference to Appendix A to the Company’s Definitive Schedule 14A filed with the SEC on April 12, 2019 10.17 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 10.18 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 10.19 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 10.20 Lease Agreement – Englewood, CO. Facility Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on November 2, 2017 10.21 Purchase Agreement dated as of January 21, 2019, by and between the Company and Lincoln Park Capital Fund, LLC Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on January 22, 2019 10.22 Registration Rights Agreement, dated as of January 21, 2019, by and between the Company and Lincoln Park Capital Fund, LLC Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on January 22, 2019 10.23 Promissory Note made to Community Banks of Colorado dated April 23, 2020 Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on April 28, 2020 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 21.1 Subsidiaries Filed herewith 23.1 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 herewith 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 herewith 101 XBRL data files of Financial Statements and Notes contained in this Annual Report on Form 10-K Item 16. Form 10-K Summary None 58 Index 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/ Michael Lebby Michael Lebby, Chief Executive Officer (Principal Executive Officer) Date: March 31, 2021 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/ Michael Lebby Chief Executive Officer, Principal Executive Officer, Director March 31, 2021 Michael Lebby   /s/ James S. Marcelli President, Chief Operating Officer, Principal Financial Officer, Secretary, Director March 31, 2021 James S. Marcelli   /s/ Thomas E. Zelibor Chair of the Board of Directors March 31, 2021 Thomas E. Zelibor   /s/ Joseph A. Miller Director March 31, 2021 Joseph A. Miller   /s/ Ronald A. Bucchi Director March 31, 2021 Ronald A. Bucchi   /s/ Siraj Nour El-Ahmadi Director March 31, 2021 Siraj Nour El-Ahmadi   /s/ Frederick J. Leonberger Director March 31, 2021 Frederick J. Leonberger 59 Index LIGHTWAVE LOGIC, INC. FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019 CONTENTS PAGE   REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-2   BALANCE SHEETS F-3   STATEMENTS OF COMPREHENSIVE LOSS F-4   STATEMENT OF STOCKHOLDERS' EQUITY F-5   STATEMENTS OF CASH FLOWS F-6   NOTES TO FINANCIAL STATEMENTS F-7 F-1 Index 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 sheets of Lightwave Logic, Inc. (the Company) as of December 31, 2020 and 2019, and the related statements of comprehensive loss, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the financial statements). 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, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, 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 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 audits 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 audits, 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 audits 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 audits 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 audits provide a reasonable basis for our opinion. 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 have served as the Company’s auditor since 2005. Blue Bell, Pennsylvania March 31, 2021 F-2 Index LIGHTWAVE LOGIC, INC. BALANCE SHEETS December 31, 2020 December 31, 2019   ASSETS CURRENT ASSETS Cash and cash equivalents $ 3,306,590 $ 2,236,344 Prepaid expenses and other current assets 567,185 372,549 3,873,775 2,608,893   PROPERTY AND EQUIPMENT - NET 1,873,549 2,416,503   OTHER ASSETS Intangible assets - net 916,000 939,481 Operating Lease - Right of Use - Building 703,454 859,979 1,619,454 1,799,460   TOTAL ASSETS $ 7,366,778 $ 6,824,856     LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 169,247 $ 88,423 Current portion of equipment purchase 13,107 630,329 Accounts payable and accrued expenses - related parties 49,797 14,805 Deferred lease liability 41,778 41,778 Paycheck Protection Program advance 410,700 — Operating lease liability 167,007 156,524 Accrued expenses 81,396 65,769 933,032 997,628   LONG TERM LIABILITIES Deferred lease liability 121,853 163,632 Operating lease liability 536,447 703,455 Long term portion of equipment purchase — 52,427 658,300 919,514   TOTAL LIABILITIES 1,591,332 1,917,142   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, 97,775,789 and 87,409,600 issued and outstanding at December 31, 2020 and December 31, 2019 97,776 87,410 Additional paid-in-capital 76,649,170 69,076,240 Accumulated deficit ( 70,971,500 ) ( 64,255,936 )   TOTAL STOCKHOLDERS' EQUITY 5,775,446 4,907,714   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,366,778 $ 6,824,856 The accompanying notes are an integral part of these financial statements. F-3 Index LIGHTWAVE LOGIC, INC. STATEMENTS OF COMPREHENSIVE LOSS FOR THE YEARS ENDING DECEMBER 31, 2020 AND 2019 For the For the Year Ending Year Ending December 31, 2020 December 31, 2019   NET SALES $ — $ —   COST AND EXPENSE Research and development 4,529,498 4,319,295 General and administrative 2,070,476 2,000,112 6,599,974 6,319,407   LOSS FROM OPERATIONS ( 6,599,974 ) ( 6,319,407 )   OTHER INCOME (EXPENSE) Interest income 776 232 Commitment fee ( 116,366 ) ( 407,792 )     NET LOSS $ ( 6,715,564 ) $ ( 6,726,967 )   Basic and Diluted Loss per Share $ ( 0.07 ) $ ( 0.08 )   Basic and Diluted Weighted Average Number of Shares 91,859,025 83,299,508 The accompanying notes are an integral part of these financial statements. F-4 Index LIGHTWAVE LOGIC, INC. STATEMENT OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDING DECEMBER 31, 2020 AND 2019 Additional Number of Common Paid-in Accumulated Shares Stock Capital Deficit Total BALANCE AT DECEMBER 31, 2018 79,176,330 $ 79,177 $ 62,356,854 $ ( 57,528,969 ) $ 4,907,062   Common stock issued to institutional investor 7,700,000 7,700 5,631,260 — 5,638,960 Common stock issued for commitment shares 533,270 533 407,259 — 407,792 Options issued for services — — 600,727 — 600,727 Warrants issued for services — — 80,140 — 80,140 Net loss for the year ending December 31, 2019 — — — ( 6,726,967 ) ( 6,726,967 )   BALANCE AT DECEMBER 31, 2019 87,409,600 $ 87,410 $ 69,076,240 $ ( 64,255,936 ) $ 4,907,714   Additional Number of Common Paid-in Accumulated Shares Stock Capital Deficit Total BALANCE AT DECEMBER 31, 2019 87,409,600 $ 87,410 $ 69,076,240 $ ( 64,255,936 ) $ 4,907,714   Common stock issued to institutional investor 8,125,000 8,125 5,165,175 — 5,173,300 Common stock issued for commitment shares 168,137 168 116,198 — 116,366 Exercise of warrants 2,073,052 2,073 1,656,369 — 1,658,442 Options issued for services — — 539,414 — 539,414 Warrants issued for services — — 95,774 — 95,774 Net loss for the year ending December 31, 2020 — — — ( 6,715,564 ) ( 6,715,564 )   BALANCE AT DECEMBER 31, 2020 97,775,789 $ 97,776 $ 76,649,170 $ ( 70,971,500 ) $ 5,775,446 The accompanying notes are an integral part of these financial statements. F-5 Index LIGHTWAVE LOGIC, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDING DECEMBER 31, 2020 AND 2019 For the For the Year Ending Year Ending December 31, 2020 December 31, 2019 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ ( 6,715,564 ) $ ( 6,726,967 ) Adjustments to reconcile net loss to net cash used in operating activities Warrants issued for services 95,774 80,140 Stock options issued for services 539,414 600,727 Common stock issued for services and fees 116,366 407,792 Depreciation and amortization of patents 784,419 698,694 Decrease (increase) in assets Prepaid expenses and other current assets ( 194,636 ) 165,410 Increase (decrease) in liabilities Accounts payable 80,824 ( 62,318 ) Accounts payable and accrued expenses-related parties 34,992 981 Deferred lease liability ( 41,779 ) 5,082 Paycheck Protection Program advance 410,700 — Accrued expenses 15,627 64,614   Net cash used in operating activities ( 4,873,863 ) ( 4,765,845 )   CASH FLOWS FROM INVESTING ACTIVITIES Cost of intangibles ( 59,923 ) ( 82,195 ) Purchase of property and equipment ( 158,061 ) ( 223,475 )   Net cash used in investing activities ( 217,984 ) ( 305,670 )   CASH FLOWS FROM FINANCING ACTIVITIES Exercise of warrants 1,658,442 —   Issuance of common stock, institutional investor 5,173,300 5,638,960 Repayment of equipment purchase payable ( 669,649 ) ( 505,726 )   Net cash provided by financing activities 6,162,093 5,133,234   NET INCREASE IN CASH AND CASH EQUIVALENTS 1,070,246 61,719   CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 2,236,344 2,174,625   CASH AND CASH EQUIVALENTS - END OF YEAR $ 3,306,590 $ 2,236,344   Supplemental Disclosure of Non-cash investing and financing activities : Operating Lease - Right of Use - Building and Operating lease liability $ — $ 885,094 Equipment acquisition funded by liability — 1,010,000 The accompanying notes are an integral part of these financial statements. F-6 Index LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES History and Nature of Business Lightwave Logic, Inc. is a technology company focused on the development of next generation photonic devices and non-linear optical polymer materials systems for applications in high speed fiber-optic data communications and optical computing markets. Currently the Company is in various stages of photonic device and materials development and evaluation with potential customers and strategic partners. The Company expects to obtain a revenue stream from datacom and telecom devices, sales of non-linear optical polymers, and product development agreements prior to moving into full-scale production. 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. In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States. In mid March 2020 the Governor of Colorado declared a health emergency and issued an order to close all nonessential businesses. The Company temporarily curtailed most of its business operations from mid March 2020 through May 1, 2020. The Company is currently operating under the guidelines of the State of Colorado Department of Public Health and Environment and the Governor of Colorado’s Executive Order, Safer-at Home, as amended. Lightwave Logic, Inc. (the “Company”) was organized under the laws of the State of Nevada in 1997, and the Company 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 For the purposes of the statement of cash flows, the Company considers all highly liquid instruments with maturities of three months or less at the time of purchase to be cash equivalents. F-7 Index LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019     NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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, 2020, the Company did have deposits with a financial institution that exceed the Federal Depository Insurance coverage. Property and Equipment Equipment is stated at cost. Depreciation is principally provided by use of straight-line methods for financial and tax reporting purposes over the estimated useful lives of the assets, generally 5 years. When property is retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in 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 In accordance with FASB ASC 606, Revenue from Contracts with Customers, the Company will recognize revenue upon transfer of promised goods or services in an amount that reflects the consideration expected to be received in exchange for those goods or services. To determine revenue recognition for arrangements within the scope of FASB ASC 606, the Company performs the following five steps: 1. Identify the contract with the customer. 2. Identify the performance obligations in the contract. 3. Determine the transaction price. 4. Allocate the transaction price to the performance obligations in the contract. 5. Recognize revenue as (or when) the performance obligations are satisfied. For product sales, revenue will be recognized at a point in time when the product is shipped or is delivered to the customer’s location. For services performed, revenue will be recognized at a point in time when the service is performed. However, for certain contracts, revenue will be recognized over time as the customer simultaneously receives and consumes the benefits of performance as the Company performs the service. Income Taxes The Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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. F-8 Index LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019     NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Stock-based Payments The Company accounts for stock-based compensation under the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (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 Company estimates the fair value of stock-based 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 requisite service periods using the straight-line method. In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this Update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. Prior to this 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. 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 2020 and 2019, 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. Recoverability of Long-Lived Assets The Company follows FASB ASC 360, “Property, Plant, and Equipment”. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the excess of the asset’s carrying amount. Comprehensive Income (Loss) The Company follows FASB ASC 220.10, “Reporting Comprehensive Income (Loss).” Comprehensive income (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 income (loss). Since the Company has no items of other comprehensive income (loss), comprehensive income (loss) is equal to net income (loss). Recently Adopted Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) and subsequent related updates. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from operating leases. The Company adopted the standard effective January 1, 2019 under the optional transition method which allows the entity to apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment, if any, to the opening balance of retained earnings in the period of adoption. The standard had a material impact on the balance sheet (see Note 7). Recently Issued Accounting Pronouncements Not Yet Adopted As of December 31, 2020, there are no recently issued accounting standards not yet adopted which would have a material effect on the Company’s financial statements. F-9 Index LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019     NOTE 2 – MANAGEMENT’S PLANS Our future expenditures and capital requirements will depend on numerous factors, including: the impact of the COVID-19 pandemic; the progress of our research and development efforts; the rate at which we can, directly or through arrangements with original equipment manufacturers, introduce and sell products incorporating our polymer materials technology; the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; market acceptance of our products and competing technological developments; and our ability to establish cooperative development, joint venture and licensing arrangements. From late March through May 1, 2020, the Company curtailed most operations due to the COVID-19 pandemic. On April 24, 2020, the Company received $ 410,700 in loan funding from the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Paycheck Protection Program, administered by the U.S. Small Business Administration. The loan was eligible for forgiveness as part of the CARES Act if certain requirements were met. The loan was forgiven in its entirely on January 22, 2021 (See Note 8). We expect that we will incur approximately $ 700,000 of expenditures per month over the next 12 months. Our current cash position enables us to finance our operations through December 2021 before we will be required to replenish our cash reserves pursuant to the Lincoln Park financing. Subject to any additional impact of the COVID-19 pandemic, we expect our Lincoln Park financing (described in Note 10) to provide us with sufficient funds to maintain our operations over that period of time and until May 2022. Our cash requirements are expected to increase at a rate consistent with the Company’s path to revenue growth as we expand our activities and operations with the objective of commercializing our electro-optic polymer technology. We currently have no debt to service. NOTE 3 – PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets consist of the following: December 31, 2020 December 31, 2019   Deposit for equipment $ 140,394 $ — Prototype Devices 118,206 27,810 Research & Development Credit   101,629   158,612 Insurance 93,569 89,828 Other 76,862 58,756 Rent 36,525 36,525 Prepaid Material — 1,018   $ 567,185 $ 372,549 F-10 Index LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019     NOTE 4 – PROPERTY AND EQUIPMENT Property and equipment consists of the following: December 31, 2020 December 31, 2019   Office equipment $ 86,097 $ 84,751 Lab equipment 3,884,807 3,733,057 Furniture 33,128 33,128 Leasehold improvements 234,366 229,401 4,238,398 4,080,337 Less: Accumulated depreciation 2,364,849 1,663,834     $ 1,873,549 $ 2,416,503 Depreciation expense for the years ending December 31, 2020 and 2019 was $ 701,015 and $ 617,741 . During the years ended December 31, 2020 and 2019, the Company did not sell or retire property and equipment. NOTE 5 – INTANGIBLE ASSETS This represents legal fees and patent fees associated with the prosecution of patent applications. The Company has recorded amortization expense on patents granted, which are amortized over the remaining legal life. Maintenance patent fees are paid to a government patent authority to maintain a granted patent in force. Some countries require the payment of maintenance fees for pending patent applications. Maintenance fees paid after a patent is granted are expensed, as these are considered ongoing costs to “maintain a patent”. Maintenance fees paid prior to a patent grant date are capitalized to patent costs, as these are considered “patent application costs”. No amortization expense has been recorded on the remaining patent applications since patents have yet to be granted. Intangible assets consist of the following: December 31, 2020 December 31, 2019   Patents $ 1,327,000 $ 1,267,077 Less: Accumulated amortization 411,000 327,596   $ 916,000 $ 939,481 Amortization expense for the years ending December 31, 2020 and 2019 was $ 83,404 and $ 80,953 . There were no patent costs written off for the years ended December 31, 2020 and December 31, 2019. F-11 Index LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019     NOTE 6 – EQUIPMENT PURCHASE PAYABLE Outstanding equipment purchase payable is comprised of the following: Final Year Interest December 31, December 31, of Maturity Classification Rate 2020 2019   Current 0.00 % $ 13,107 $ 630,329 2021 Long term 0.00 % — 52,427 $ 13,107 $ 682,756 NOTE 7 – COMMITMENTS On October 30, 2017, the Company entered into a new lease to lease approximately 13,420 square feet of office, laboratory and research and development space located in Colorado for the Company’s new 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 . The term shall be extended for an additional twenty-four ( 24 ) months, subject to certain conditions, waivable solely by Landlord in its sole and absolute discretion. Base rent for the first year of the lease term is approximately $ 168,824 , with an increase in annual base rent of approximately 3 % in each subsequent year of the lease term. As specified in the lease, the Company paid the landlord (i) all base rent for the period November 1, 2017 and ending on October 31, 2019, in the sum of $ 347,045 ; and (ii) the estimated amount of tenant’s proportionate share of operating expenses for the same period in the sum of $ 186,293 . Commencing on November 1, 2019, monthly installments of base rent and one-twelfth of landlord’s estimate of tenant’s proportionate share of annual operating expenses shall be due on the first day of each calendar month. The lease also provides that (i) on November 1, 2019 landlord shall pay the Company for the cost of the cosmetic improvements in the amount of $3.00 per rentable square foot of the premises, and (ii) on or prior to November 1, 2019, the Company shall deposit with Landlord the sum of $ 36,524 as a security deposit which shall be held by landlord to secure the Company’s obligations under the lease. The lease contains an option to extend the term to October 31, 2024. On October 30, 2017, the Company entered into an agreement with the tenant leasing the premise from the landlord (“Original Lessee”) whereby the Original Lessee agreed to pay the Company the sum of $260,000 in consideration of the Company entering into the lease and landlord agreeing to the early termination of the Original Lessee’s lease agreement with landlord. The consideration of $ 260,000 was received on November 1, 2017. Due to the adoption of the new lease standard, the Company has capitalized the present value of the minimum lease payments commencing November 1, 2019, including the additional option period using an estimated incremental borrowing rate of 6.5 %. The minimum lease payments do not include common area annual expenses which are considered to be nonlease components. As of January 1, 2019 the operating lease right-of-use asset and operating lease liability amounted to $ 885,094 with no cumulative-effect adjustment to the opening balance of retained earnings/accumulated deficit. The Company has elected not to recognize right-of-use assets and lease liabilities arising from short-term leases. F-12 Index LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019     NOTE 7 – COMMITMENTS (CONTINUED) The Company is obligated under an operating lease for office and laboratory space. The aggregate minimum future lease payments under the operating leases, including the extended term are as follows: YEARS ENDING DECEMBER 31, AMOUNT   2021 $ 201,501 2022 207,563 2023 213,781 2024 182,624 805,469 Less discounted interest ( 102,015 )   TOTAL $ 703,454 Rent expense totaling $ 129,806 and $ 43,269 is included in research and development and general and administrative expenses for the year ended December 31, 2020. Rent expense totaling $ 114,559 and $ 38,220 is included in research and development and general and administrative expenses for the year ended December 31, 2019. NOTE 8 – PAYCHECK PROTECTION PROGRAM ADVANCE On April 24, 2020, the Company received $ 410,700 in loan funding from the Paycheck Protection Program, established pursuant to the recently enacted Coronavirus Aid, Relief, and Economic Security Act and administered by the U.S. Small Business Administration. The unsecured loan is evidenced by a promissory note of the Company dated April 23, 2020 in the principal amount of $ 410,700 , to Community Banks of Colorado, a division of NBH Bank, the lender. The loan proceeds have been used to cover payroll costs, rent and utility costs. The loan was eligible for forgiveness as part of the CARES Act if certain requirements were met. The loan was forgiven in its entirety on January 22, 2021. 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: 2020 2019   Current $ — $ — Deferred ( 1,972,000 ) ( 1,779,000 ) Change in valuation allowance 1,972,000 1,779,000   $ — $ — F-13 Index LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019     NOTE 9 – INCOME TAXES (CONTINUED) The reconciliation of the statutory federal rate to the Company’s effective income tax rate is as follows: 2020 2019 Amount % Amount %   Income tax benefit at U.S. federal income tax rate $ ( 1,544,000 ) ( 21 ) $ ( 1,413,000 ) ( 21 ) State tax benefit, net of federal tax effect ( 441,000 ) ( 6 ) ( 404,000 ) ( 6 ) Non-deductible share-based compensation 13,000 — 38,000 1 Change in valuation allowance 1,972,000 27 1,779,000 26 $ — — $ — — The components of deferred tax assets as of December 31, 2020 and 2019 are as follows: 2020 2019   Deferred tax asset for NOL carryforwards $ 15,338,000 $ 13,524,000 Share-based compensation 2,178,000 2,020,000 Valuation allowance ( 17,516,000 ) ( 15,544,000 )   $ — $ — The valuation allowance for deferred tax assets as of December 31, 2020 and 2019 was $17,516,000 and $15,544,000, respectively. The change in the total valuation for the year ended December 31, 2020 was an increase of $ 1,972,000 and for the year ended December 31, 2019 was an increase of $ 1,779,000 . 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. As of December 31, 2020, the Company had net operating loss carry forwards of approximately $ 56,805,000 , expiring through the year ending December 31, 2037 for net operating losses originating in tax years beginning before January 1, 2018. Net operating losses recorded in tax years beginning January 1, 2018 and after are allowed for an indefinite carryforward period but limited to 80% of each subsequent year’s net income. 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. F-14 Index LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019     NOTE 9 – INCOME TAXES (CONTINUED) The Company follows FASB 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 FASB 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, 2020, the Company had no unrecognized tax benefits and no charge during 2020, and accordingly, the Company did not recognize any interest or penalties during 2020 related to unrecognized tax benefits. There is no accrual for uncertain tax positions as of December 31, 2020. 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 ending on December 31, 2017 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 Options and Warrants 2016 Purchase Agreement In January 2016, the Company signed a Purchase Agreement with an institutional investor to sell up to $ 20,000,000 of common stock. The Company also entered into a registration rights agreement with the institutional investor whereby the Company agreed to file a registration statement related to the transaction with the U.S. Securities and Exchange Commission registering 5,000,000 shares of the Company’s common stock. The registration statement was filed on March 25, 2016. The registration statement became effective April 7, 2016. The Company registered an additional 5,000,000 shares pursuant to a registration statement filed on April 19, 2017 which became effective June 15, 2017. The Company registered an additional 5,000,000 shares pursuant to a registration statement filed on May 2, 2018 which became effective May 11, 2018. Under the Purchase Agreement and at Company's sole discretion, the institutional investor has committed to invest up to $20,000,000 in common stock over a 36 -month period. The Company issued 350,000 shares of restricted common stock to the institutional investor as an initial commitment fee valued at $ 237,965 , fair value, and 650,000 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 August 2016 through December 31, 2019, the institutional investor purchased 14,000,000 shares of common stock for proceeds of $ 13,150,370 and the Company issued 427,405 shares of common stock as additional commitment fee, valued at $ 456,367 , fair value, leaving 222,595 in reserve for additional commitment fees. During the year ending December 31, 2019, the institutional investor purchased 1,550,000 shares of common stock for proceeds of $ 1,011,585 and the Company issued 32,879 shares of common stock as additional commitment fee, valued at $ 24,162 , fair value. The 2016 Purchase Agreement expired April, 2019. F-15 Index LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019     NOTE 10 – STOCKHOLDERS’ EQUITY (CONTINUED) Common Stock Options and Warrants (Continued) 2019 Purchase Agreement In January 2019, the Company signed a Purchase Agreement with the institutional investor to sell up to $ 25,000,000 of common stock. The Company registered 9,500,000 shares pursuant to a registration statement filed on January 30, 2019 which became effective February 13, 2019. The Company issued 350,000 shares of common stock to the institutional investor as an initial commitment fee valued at $ 258,125 , fair value, and 812,500 shares of common stock are reserved for additional commitment fees to the institutional investor in accordance with the terms of the Purchase Agreement. The Company registered an additional 6,000,000 shares pursuant to a registration statement filed on January 24, 2020 which became effective February 4, 2020. The Company registered an additional 8,000,000 shares pursuant to a registration statement filed on November 20, 2020 which became effective November 20, 2020. During the period January 2019 through December 31, 2020, the institutional investor purchased 14,275,000 shares of common stock for proceeds of $ 9,800,675 and the Company issued 318,528 shares of common stock as additional commitment fee, valued at $ 241,871 , fair value, leaving 493,972 in reserve for additional commitment fees. During the year ending December 31, 2020, the institutional investor purchased 8,125,000 shares of common stock for proceeds of $ 5,173,300 and the Company issued 168,137 shares of common stock as additional commitment fee, valued at $ 116,366 , fair value. During January through March 31, 2021, the institutional investor purchased 3,791,911 shares of common stock for proceeds of $ 4,953,972 and the Company issued 161,009 shares of common stock as additional commitment fee, valued at $ 250,280 , fair value, leaving 332,963 in reserve for additional commitment fees. NOTE 11 – STOCK BASED COMPENSATION During 2007, the Board of Directors of the Company adopted the 2007 Employee Stock Plan (“2007 Plan”) that was approved by the shareholders. Under the 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 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, 2020, options to purchase 4,450,000 shares of common stock have been issued and are outstanding. F-16 Index LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019     NOTE 11 – STOCK BASED COMPENSATION (CONTINUED) During 2016, the Board of Directors of the Company adopted the 2016 Equity Incentive Plan (“2016 Plan”) that was approved by the shareholders at the 2016 annual meeting of shareholders on May 20, 2016. Under the 2016 Plan, the Company is authorized to grant awards of incentive and non-qualified stock options and restricted stock to purchase up to 3,000,000 shares of common stock to employees, directors and consultants. Effective May 16, 2019, the number of shares of the Company’s common stock available for issuance under the 2016 Plan was increased from 3,000,000 to 8,000,000 shares. As of December 31, 2020, options to purchase 3,757,500 shares of common stock have been issued and are outstanding and 4,242,500 shares of common stock remain available for grants under the 2016 Plan. Both plans are administered by the 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, 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 2020: no dividend yield in all years, expected volatility, based on the Company's historical volatility, 64 % to 78 %, risk-free interest rate between 0.30 % to 1.82 % and expected option life of 4.6 to 10 years. Prior to May 2018, the expected life is based on the estimated average of the life of options using the “simplified” method, as prescribed in FASB ASC 718, due to insufficient historical exercise activity during recent years. Starting in May 2018, the expected life is based on the legal contractual life of options. The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of an award, with the following assumptions for 2019: no dividend yield in all years, expected volatility, based on the Company's historical volatility, 60 % to 80.5 %, risk-free interest rate between 1.47 % to 2.71 % and expected option life of 5 .0 to 10 years. As of December 31, 2020, there was $ 161,831 of unrecognized compensation expense related to non-vested market-based share awards that is expected to be recognized through September 30, 2022. Share-based compensation was recognized as follows: 2020 2019   2007 Employee Stock Option Plan $ — $ — 2016 Equity Incentive Plan 539,414 600,727 Warrants 95,774 80,140   Total share-based compensation $ 635,188 $ 680,867 F-17 Index LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019     NOTE 11 – STOCK BASED COMPENSATION (CONTINUED) The following tables summarize all stock option and warrant activity of the Company during the years ended December 31, 2020 and 2019: Non-Qualified Stock Options and Warrants Outstanding and Exercisable Weighted Number of Exercise Average Shares Price Exercise Price   Outstanding, December 31, 2018 18,964,867 $ 0.57 - $ 1.69 $ 0.91   Granted 1,327,500 $ 0.64 - $ 1.05 $ 0.80 Expired ( 3,838,600 ) $ 0.95 - $ 1.25 $ 1.13 Forfeited ( 151,250 ) $ 0.77 - $ 1.50 $ 0.91   Outstanding, December 31, 2019 16,302,517 $ 0.57 - $1.69 $ 0.85   Granted 647,500 $ 0.51 - $ 0.86 $ 0.76 Expired ( 4,845,715 ) $ 0.80 - $ 1.02 $ 0.86 Forfeited ( 8,750 ) $ 1.10 $ 1.10 Exercised 2,073,052 $ 0.80 $ 0.80   Outstanding, December 31, 2020 10,022,500 $ 0.51 - $ 1.69 $ 0.84     Exercisable, December 31, 2020 9,707,924 $ 0.51 - $ 1.69 $ 0.84 The aggregate intrinsic value of options and warrants outstanding and exercisable as of December 31, 2020 was $ 1,593,794 . 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 $ 0.93 for the Company’s common stock on December 31, 2020. During the year ending December 31, 2020, 2,073,052 warrants were exercised for proceeds of $ 1,658,442 . No options were exercised during 2020. No options or warrants were exercised during 2019. Non-Qualified Stock Options and Warrants Outstanding Range of Exercise Prices Number Outstanding Currently Exercisable at December 31, 2020 Weighted Average Remaining Contractual Life Weighted Average Exercise Price of Options and Warrants Currently Exercisable   $ 0.51 - $ 1.69 9,707,924 5.0 Years $ 0.84 F-18 Index LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019     NOTE 12 – RELATED PARTY At December 31, 2020 the Company had a legal accrual to related party of $ 30,100 , director fees accrued in the amount of $ 10,000 , travel and office expense accruals of officers in the amount of $ 7,177 and accounting service fee accrual to a related party of $ 2,520 . At December 31, 2019 the Company had a legal accrual to related party of $ 10,152 and travel and office expense accruals of officers in the amount of $ 4,653 . During July 2018, the Company issued a warrant to purchase 100,000 shares of common stock at a purchase price of $ 1.15 per share for professional services to be rendered over a twelve month period commencing July 1, 2018. The warrant was valued at $ 62,637 , fair value upon issuance, using the Black-Scholes Option Pricing Formula. The expense is being recognized based on service terms of the agreement over a twelve month period. For the year ending December 31, 2019, the Company recognized $ 31,319 of expense. NOTE 13 – RETIREMENT PLAN The Company established a 401(k) retirement plan covering all eligible employees beginning November 15, 2013. A contribution of $ 53,832 was charged to expense and accrued for the year ending December 31, 2020 to all eligible non-executive participants. A contribution of $ 45,663 was charged to expense and accrued for the year ending December 31, 2019 to all eligible non-executive participants.   F-19