Lightwave Logic, Inc. 10-Q

Item 1 Financial Statements LIGHTWAVE LOGIC, INC. FINANCIAL STATEMENTS JUNE 30, 2021 (UNAUDITED) Page Balance Sheets 2 Statements of Comprehensive Loss 3 Statement of Stockholders’ Equity 4 Statements of Cash Flows 6 Notes to Financial Statements 7 1 LIGHTWAVE LOGIC, INC. BALANCE SHEETS June 30, 2021 December 31, 2020 (Unaudited) (Audited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 13,913,519 $ 3,306,590 Prepaid expenses and other current assets 432,517 567,185 Total Current Assets 14,346,036 3,873,775 PROPERTY AND EQUIPMENT - NET 2,136,500 1,873,549 OTHER ASSETS Intangible assets - net 890,334 916,000 Operating Lease - Right of Use - Building 621,304 703,454 Total Other Assets 1,511,638 1,619,454 TOTAL ASSETS $ 17,994,174 $ 7,366,778 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 134,890 $ 169,247 Current portion of equipment purchase — 13,107 Accounts payable and accrued expenses - related parties 71,991 49,797 Deferred lease liability 41,778 41,778 Paycheck Protection Program advance — 410,700 Operating lease liability 172,509 167,007 Accrued expenses 66,374 81,396 Total Current Liabilities 487,542 933,032 LONG TERM LIABILITIES Deferred lease liability 100,964 121,853 Operating lease liability 448,795 536,447 Total Long Term Liabilities 549,759 658,300 TOTAL LIABILITIES 1,037,301 1,591,332 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, 107,335,110 and 97,775,789 issued and outstanding at June 30, 2021 and December 31, 2020 107,336 97,776 Additional paid-in-capital 94,095,566 76,649,170 Accumulated deficit ( 77,246,029 ) ( 70,971,500 ) TOTAL STOCKHOLDERS' EQUITY 16,956,873 5,775,446 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 17,994,174 $ 7,366,778 See accompanying notes to these financial statements. 2 LIGHTWAVE LOGIC, INC. STATEMENTS OF COMPREHENSIVE LOSS FOR THE THREE MONTHS AND SIX ENDING JUNE 30, 2021 AND 2020 (UNAUDITED) For the Three For the Three For the Six For the Six Months Ending Months Ending Months Ending Months Ending June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 NET SALES $ — $ — $ — $ — COST AND EXPENSE Research and development 2,782,243 1,057,470 4,129,785 2,247,241 General and administrative 674,000 574,803 1,222,229 1,181,228 TOTAL COST OF EXPENSE 3,456,243 1,632,273 5,352,014 3,428,469 LOSS FROM OPERATIONS ( 3,456,243 ) ( 1,632,273 ) ( 5,352,014 ) ( 3,428,469 ) OTHER INCOME (EXPENSE) Paycheck Protection Program loan forgiveness — — 410,700 — Interest income 105 295 413 325 Commitment fee ( 1,083,347 ) ( 31,950 ) ( 1,333,628 ) ( 62,958 ) NET LOSS $ ( 4,539,485 ) $ ( 1,663,928 ) $ ( 6,274,529 ) $ ( 3,491,102 ) Basic and Diluted Loss per Share $ ( 0.04 ) $ ( 0.02 ) $ ( 0.06 ) $ ( 0.04 ) Basic and Diluted Weighted Average Number of Shares 104,125,843 90,641,867 101,969,122 89,566,849 See accompanying notes to these financial statements. 3 LIGHTWAVE LOGIC, INC. STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED) SIX-MONTH PERIOD ENDED JUNE 30, 2021 Additional Number of Common Paid-in Accumulated Shares Stock Capital Deficit Total BALANCE AT DECEMBER 31, 2020 (AUDITED) 97,775,789 $ 97,776 $ 76,649,170 $ ( 70,971,500 ) $ 5,775,446 Common stock issued to institutional investor 8,062,500 8,063 13,965,186 — 13,973,249 Common stock issued for commitment shares 454,138 454 1,333,174 — 1,333,628 Exercise of options 710,000 710 618,790 — 619,500 Cashless exercise of 240,627 options 132,683 133 863,705 — 863,838 Exercise of warrants 200,000 200 127,050 — 127,250 Options issued for services — — 528,249 — 528,249 Warrants issued for services — — 10,242 — 10,242 Net loss for the six months ending June 30, 2020 — — — ( 6,274,529 ) ( 6,274,529 ) BALANCE AT JUNE 30, 2021 (UNAUDITED) 107,335,110 $ 107,336 $ 94,095,566 $ ( 77,246,029 ) $ 16,956,873 SIX-MONTH PERIOD ENDED JUNE 30, 2020 Additional Number of Common Paid-in Accumulated Shares Stock Capital Deficit Total BALANCE AT DECEMBER 31, 2019 (AUDITED) 87,409,600 $ 87,410 $ 69,076,240 $ ( 64,255,936 ) $ 4,907,714 Common stock issued to institutional investor 4,375,000 4,375 2,757,551 — 2,761,926 Common stock issued for commitment shares 89,767 90 62,868 — 62,958 Options issued for services — — 354,958 — 354,958 Warrants issued for services — — 50,677 — 50,677 Net loss for the six months ending June 30, 2020 — — — ( 3,491,102 ) ( 3,491,102 ) BALANCE AT JUNE 30, 2020 (UNAUDITED) 91,874,367 $ 91,875 $ 72,302,294 $ ( 67,747,038 ) $ 4,647,131 See accompanying notes to these financial statements. 4 LIGHTWAVE LOGIC, INC. STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED) THREE-MONTH PERIOD ENDED JUNE 30, 2021 Additional Number of Common Paid-in Accumulated Shares Stock Capital Deficit Total BALANCE AT MARCH 31, 2021 (UNAUDITED) 101,758,709 $ 101,759 $ 82,119,653 $ ( 72,706,544 ) $ 9,514,868 Common stock issued to institutional investor 4,270,589 4,271 9,015,006 — 9,019,277 Common stock issued for commitment shares 293,129 293 1,083,054 — 1,083,347 Exercise of options 680,000 680 597,820 — 598,500 Cashless exercise of 210,627 options 132,683 133 863,705 — 863,838 Exercise of warrants 200,000 200 127,050 — 127,250 Options issued for services — — 287,001 — 287,001 Warrants issued for services — — 2,277 — 2,277 Net loss for the three months ending June 30, 2021 — — — ( 4,539,485 ) ( 4,539,485 ) BALANCE AT JUNE 30, 2021 (UNAUDITED) 107,335,110 $ 107,336 $ 94,095,566 $ ( 77,246,029 ) $ 16,956,873 THREE-MONTH PERIOD ENDED JUNE 30, 2020 Additional Number of Common Paid-in Accumulated Shares Stock Capital Deficit Total BALANCE AT MARCH 31, 2020 (UNAUDITED) 89,578,547 $ 89,579 $ 70,690,553 $ ( 66,083,110 ) $ 4,697,022 Common stock issued to institutional investor 2,250,000 2,250 1,407,563 — 1,409,813 Common stock issued for commitment shares 45,820 46 31,904 — 31,950 Options issued for services — — 148,521 — 148,521 Warrants issued for services — — 23,753 — 23,753 Net loss for the three months ending June 30, 2020 — — — ( 1,663,928 ) ( 1,663,928 ) BALANCE AT JUNE 30, 2020 (UNAUDITED) 91,874,367 $ 91,875 $ 72,302,294 $ ( 67,747,038 ) $ 4,647,131 See accompanying notes to these financial statements. 5 LIGHTWAVE LOGIC, INC. STATEMENTS OF CASH FLOW FOR THE SIX MONTHS ENDING JUNE 30, 2021 AND 2020 (UNAUDITED) For the Six For the Six Months Ending Months Ending June 30, 2021 June 30, 2020 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ ( 6,274,529 ) $ ( 3,491,102 ) Adjustment to reconcile net loss to net cash used in operating activities Warrants issued for services 10,242 50,677 Stock options issued for services 528,249 354,958 Cashless option exercise 1,317,223 — Common stock issued for services and fees 1,333,628 62,958 Depreciation and amortization of patents 417,414 396,101 Paycheck Protection Program loan forgiveness ( 410,700 ) — (Increase) decrease in assets Prepaid expenses and other current assets 134,668 ( 183,862 ) (Decrease) increase in liabilities Accounts payable ( 34,357 ) 48,430 Accounts payable and accrued expenses- related parties 22,194 60,455 Deferred lease liability ( 20,889 ) ( 20,890 ) Paycheck Protection Program loan — 410,700 Accrued expenses ( 15,022 ) ( 32,626 ) Net cash used in operating activities ( 2,991,879 ) ( 2,344,201 ) CASH FLOWS FROM INVESTING ACTIVITIES Cost of intangibles ( 18,221 ) ( 29,101 ) Purchase of property and equipment ( 636,478 ) ( 9,877 ) Net cash used in investing activities ( 654,699 ) ( 38,978 ) CASH FLOWS FROM FINANCING ACTIVITIES Exercise of options and warrants 746,750 — Cashless option exercise tax payments ( 453,385 ) Issuance of common stock, institutional investor 13,973,249 2,761,926 Repayment of equipment purchase payable ( 13,107 ) ( 392,778 ) Net cash provided by financing activities 14,253,507 2,369,148 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 10,606,929 ( 14,031 ) CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 3,306,590 2,236,344 CASH AND CASH EQUIVALENTS - END OF PERIOD $ 13,913,519 $ 2,222,313 See accompanying notes to these financial statements. 6 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 AND 2020 NOTE 1- NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Financial Statements The accompanying unaudited financial statements have been prepared by Lightwave Logic, Inc. (the “Company”). These statements include all adjustments (consisting only of its normal recurring adjustments) which management believes necessary for a fair presentation of the statements and have been prepared on a consistent basis using the accounting polices described in the Summary of Significant Accounting Policies included in the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission on March 31, 2021 (the “2020 Annual Report”). Certain financial information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although the Company firmly believes that the accompanying disclosures are adequate to make the information presented not misleading. The financial statements should be read in conjunction with the financial statements and notes thereto included in the 2020 Annual Report. The interim operating results for the three and six months ending June 30, 2021 may not be indicative of operating results expected for the full year. 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 spread throughout the United States. 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. 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 “2018 Update). The amendments in the 2018 Update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. Prior to the 2018 Update, Topic 718 applied only to share-based transactions to employees. Consistent with the accounting requirement for employee share-based payment awards, nonemployee share-based payment awards within the scope of Topic 718 are measured at grant-date fair value of the equity instruments that an entity is obligated to issue when the good has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from the instruments have been satisfied. The Company has elected to account for forfeiture of stock-based awards as they occur. 7 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 AND 2020 NOTE 1- NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 2021 and 2020, 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. Comprehensive Income 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 Issued Accounting Pronouncements Not Yet Adopted As of June 30, 2021, there are no recently issued accounting standards not yet adopted which would have a material effect on the Company’s financial statements. Recently Adopted Accounting Pronouncements As of June 30, 2021 and for the period then ended, there are no recently adopted accounting standards that have a material effect on the Company’s financial statements. 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. We expect that we will incur approximately $ 816,000 of expenditures per month over the next 12 months. Our current cash position enables us to finance our operations through November 2022. On July 2, 2021, the Company filed a $100,000,000 universal shelf registration statement with the U.S. Securities and Exchange Commission which became effective on July 9, 2021. Our cash requirements are expected to increase at a rate consistent with the Company’s path to revenue as we expand our activities and operations with the objective of commercializing our electro-optic polymer technology. We currently have no debt to service. 8 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 AND 2020 NOTE 3 – PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets consist of the following: Schedule of Prepaid expenses and other current assets June 30, 2021 December 31, 2020 Insurance $ 232,254 $ 93,569 License 86,415 25,478 Other 60,907 51,384 Rent 36,525 36,525 Research & Development Credit 16,416 101,629 Deposit for Equipment — 140,394 Prototype Devices — 118,206 Prepaid expenses and other current assets $ 432,517 $ 567,185 NOTE 4 – PROPERTY AND EQUIPMENT Property and equipment consists of the following: Schedule of Property and Equipment June 30, 2021 December 31, 2020 Office equipment $ 86,097 $ 86,097 Lab equipment 4,518,608 3,884,807 Furniture 33,128 33,128 Leasehold improvements 237,043 234,366 4,874,876 4,238,398 Less: Accumulated depreciation 2,738,376 2,364,849 $ 2,136,500 $ 1,873,549 Depreciation expense for the six months ending June 30, 2021 and 2020 was $ 373,527 and $ 354,381 . Depreciation expense for the three months ending June 30, 2021 and 2020 was $ 199,522 and $ 176,088 . During the three and six months ending June 30, 2021 and 2020, the Company did no t retire or sell property and equipment. 9 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 AND 2020 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 on these applications have yet to be granted. Patents consist of the following: Schedule of Patents June 30, 2021 December 31, 2020 Patents $ 1,345,221 $ 1,327,000 Less: Accumulated amortization 454,887 411,000 Intangible assets - net $ 890,334 $ 916,000 Amortization expense for the six months ending June 30, 2021 and 2020 was $ 43,887 and $ 41,720 . Amortization expense for the three months ending June 30, 2021 and 2020 was $ 21,314 and $ 20,842 . There were no patent costs written off for the three and six months ending June 30, 2021 and 2020. NOTE 6 – LONG TERM EQUIPMENT PURCHASE PAYABLE Outstanding long term equipment purchase payable is comprised of the following: Schedule of Outstanding Long Term Equipment Purchase Payable Interest June 30, December 31, Classification Rate 2021 2020 Current 0.00 % $ — $ 13,107 Long term 0.00 % — — $ — $ 13,107 10 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 AND 2020 NOTE 7 – COMMITMENTS On October 30, 2017, the Company entered into a lease agreement to lease approximately 13,420 square feet of office, laboratory and research and development space located in Colorado for the Company’s principal executive offices and research and development facility. The term of the lease is sixty- one ( 61 ) months, beginning on November 1, 2017 and ending on November 30, 2022 . 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. There are no other material operating leases. The Company is obligated under the operating lease for office and laboratory space. The aggregate minimum future lease payments under the operating leases, including the extended term are as follows: Schedule of Future Lease Payments of Operating Leases YEARS ENDING DECEMBER 31, AMOUNT 2021 101,254 2022 207,563 2023 213,781 2024 182,624 Total operating lease obligation 705,222 Less discounted interest ( 83,918 ) TOTAL $ 621,304 11 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 AND 2020 NOTE 7 – COMMITMENTS (CONTINUED) Rent expense amounting to $ 66,933 and $ 22,311 is included in research and development and general and administrative expenses for the six months ended June 30, 2021. Rent expense amounting to $ 64,718 and $ 21,573 is included in research and development and general and administrative expenses for the six months ended June 30, 2020. Rent expense amounting to $ 33,466 and $ 11,155 is included in research and development and general and administrative expenses for the three months ended June 30, 2021. Rent expense amounting to $ 32,359 and $ 10,786 is included in research and development and general and administrative expenses for the three months ended June 30, 2020. 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 Coronavirus Aid, Relief, and Economic Security Act enacted on March 27, 2020 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 by the Small Business Administration in its entirety on January 22, 2021. NOTE 9 – INCOME TAXES There is no income tax benefit for the losses for the six months ended June 30, 2021 and 2020 since management has determined that the realization of the net deferred tax asset is not assured and has created a valuation allowance for the entire amount of such benefits. The Company’s policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. As of January 1, 2021, the Company had no unrecognized tax benefits, or any tax related interest or penalties. There were no changes in the Company’s unrecognized tax benefits during the period ended June 30, 2021. The Company did not recognize any interest or penalties during 2020 related to unrecognized tax benefits. With few exceptions, the U.S. and state income tax returns filed for the tax years ending on December 31, 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. 12 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 AND 2020 NOTE 10 – STOCKHOLDERS’ EQUITY (CONTINUED) Common Stock Options and Warrants In January 2019, the Company signed a purchase agreement with the institutional investor to sell up to $ 25,000,000 of common stock. The Company registered 9,500,000 shares pursuant to a registration statement filed on January 30, 2019 which became effective February 13, 2019. The Company issued 350,000 shares of common stock to the institutional investor as an initial commitment fee valued at $ 258,125 , fair value, and 812,500 shares of common stock are reserved for additional commitment fees to the institutional investor in accordance with the terms of the purchase agreement. The Company registered an additional 6,000,000 shares pursuant to a registration statement filed on January 24, 2020 which became effective February 4, 2020. The Company registered an additional 8,000,000 shares pursuant to a registration statement filed on November 20, 2020 which became effective November 20, 2020. During the period January 2019 through June 30, 2021, the institutional investor purchased 22,337,500 shares of common stock for proceeds of $ 23,773,924 and the Company issued 772,666 shares of common stock as additional commitment fee, valued at $ 1,575,509 , fair value, leaving 39,834 in reserve for additional commitment fees. During the six month period ending June 30, 2021, the institutional investor purchased 8,062,500 shares of common stock for proceeds of $ 13,973,249 and the Company issued 454,138 shares of common stock as additional commitment fee, valued at $ 1,333,628 , fair value. During the three month period ending June 30, 2021, the institutional investor purchased 4,270,589 shares of common stock for proceeds of $ 9,019,277 and the Company issued 293,129 shares of common stock as additional commitment fee, valued at $ 1,083,347 , fair value. All of the registered shares under the purchase agreement have been issued as of June 30, 2021. On July 2, 2021, the Company filed a $100,000,000 universal shelf registration statement with the U.S. Securities and Exchange Commission which became effective on July 9, 2021. 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 2007 Plan, the Company is authorized to grant options to purchase up to 10,000,000 shares of common stock to directors, officers, employees and consultants who provide services to the Company. The 2007 Plan is intended to permit stock options granted to employees under the 2007 Plan to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended (“Incentive Stock Options”). All options granted under the 2007 Plan, which are not intended to qualify as Incentive Stock Options are deemed to be non-qualified options (“Non-Statutory Stock Options”). Effective June 24, 2016, the 2007 Plan was terminated. As of June 30, 2021, options to purchase 4,040,000 shares of common stock have been issued and are outstanding. 13 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 AND 2020 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 June 30, 2021, options to purchase 4,175,623 shares of common stock have been issued and are outstanding and 3,283,750 shares of common stock remain available for grants under the 2016 Plan. Both plans are administered by the Company’s Board of Directors or its compensation committee which determines the persons to whom awards will be granted, the number of awards to be granted, and the specific terms of each grant. Subject to the provisions regarding Ten Percent Shareholders, (as defined in the 2016 Plan), the exercise price per share of each option cannot be less than 100% of the fair market value of a share of common stock on the date of grant. Options granted under the 2016 Plan are generally exercisable for a period of 10 years from the date of grant and may vest on the grant date, another specified date or over a period of time. The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of an award, with the following assumptions for 2021: no dividend yield in all years, expected volatility, based on the Company’s historical volatility, 70.4 % to 71.8 %, risk-free interest rate between 1.15 % to 1.73 % and expected option life of 10 years. Prior to May 2018, the expected life is based on the estimated average of the life of options using the “simplified” method, as prescribed in FASB ASC 718, due to insufficient historical exercise activity during recent years. Starting in May 2018, the expected life is based on the legal contractual life of options. As of June 30, 2021, there was $ 779,323 of unrecognized compensation expense related to non-vested market-based share awards that is expected to be recognized through March 2023. Share-based compensation was recognized as follows: Schedule of Stock-based Compensation Plans For the Six For the Six Months Ending Months Ending June 30, 2021 June 30, 2020 2007 Employee Stock Option Plan $ — $ — 2016 Equity Incentive Plan 528,249 354,958 Warrants 10,242 50,677 Total share-based compensation $ 538,491 $ 405,635 14 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 AND 2020 NOTE 11 – STOCK BASED COMPENSATION (CONTINUED) The following tables summarize all stock option and warrant activity of the Company during the six months ended June 30, 2021: Schedule of Non-Qualified Stock Options and Warrants Outstanding and Exercisable Non-Qualified Stock Options and Warrants Outstanding and Exercisable Number of Exercise Weighted Average Shares Price Exercise Price Outstanding, December 31, 2020 10,022,500 $ 0.51 - $ 1.69 $ 0.84 Granted 965,000 $ 1.27 - $ 1.60 $ 1.46 Forfeited ( 6,250 ) $ 0.83 $ 0.83 Exercised ( 1,150,627 ) $ 0.63 - $ 1.50 $ 0.84 Outstanding, June 30, 2021 9,830,623 $ 0.51 - $ 1.69 $ 0.90 Exercisable, June 30, 2021 9,002,292 $ 0.51 - $ 1.69 $ 0.86 The aggregate intrinsic value of options and warrants outstanding and exercisable as of June 30, 2021 was $ 122,380,234 . 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 $ 14.45 for the Company’s common stock on June 30, 2021. During the six month period ending June 30, 2021, 710,000 options were exercised for proceeds of $ 619,500 , 200,000 warrants were exercised for proceeds of $ 127,250 and 240,627 options were exercised via cashless method. Schedule of Non-Qualified Stock Options and Warrants Outstanding, by Exercise Price Range Non-Qualified Stock Options and Warrants Outstanding Number Outstanding Weighted Average Weighted Average Range of Currently Exercisable Remaining Exercise Price of Options and Exercise Prices at June 30, 2021 Contractual Life Warrants Currently Exercisable $ 0.51 - $ 1.69 9,002,292 5.04 Years $ 0.86 NOTE 12 – RELATED PARTY At June 30, 2021 the Company had a legal accrual to related party of $ 66,253 , travel and office expense accruals of officers in the amount of $ 3,338 and accounting service fee accrual to a related party of $ 2,400 . 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 . 15 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2021 AND 2020 NOTE 13 – RETIREMENT PLAN The Company established a 401(k) retirement plan covering all eligible employees beginning November 15, 2013. For the six months ending June 30, 2021 and 2020, a contribution of $ 28,431 and $ 27,828 was charged to expense for all eligible non-executive participants. For the three months ending June 30, 2021 and 2020, a contribution of $ 15,127 and $ 14,748 was charged to expense for all eligible non-executive participants. 16