Lightwave Logic, Inc. 10-Q

Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with our financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management. This information should also be read in conjunction with our audited historical financial statements which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the Securities and Exchange Commission on March 31, 2021. COVID-19 On January 30, 2020, the World Health Organization declared the coronavirus “COVID-19” outbreak a “Public Health Emergency of International Concern” and on March 11, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of COVID-19 included restrictions on travel, quarantines, or “stay-at-home” restrictions in certain areas and forced closures for certain types of public places and businesses. The COVID-19 pandemic, including the recently identified variants of the COVID-19 virus, has had and continues to have a significant impact on local, state, national and global economies. The actions taken by governments, as well as businesses and individuals, to limit the spread of the disease has significantly disrupted the Company’s normal activities. Numerous businesses, including some of our contractors, collaborative partners and suppliers, have either shut down or are operating on a limited basis with employees working from home, some employees have been furloughed or laid off and social distancing has been mandated through stay-at-home orders, and continues with the Safer-at-Home orders, as amended. The Company expects these actions to have a significant impact on the Company’s results of operations, particularly with respect to research and development, and financial position. The full extent of the impact to the Company due to the impact of the COVID-19 pandemic cannot be currently determined, particularly in light of the recently identified variants of the COVID-19 virus and the potential re-imposition of restrictions currently being considered by federal, state and local governments and in certain states presently implemented. The extent to which the COVID-19 pandemic will impact the Company will depend on future developments, which are highly uncertain and cannot be reasonably predicted, including the duration of the outbreak, the increase or reduction in governmental restrictions to businesses and individuals, the apparent resurgence of the virus and other factors. The longer the COVID-19 pandemic continues, the greater the potential negative financial effect on the Company. Overview Lightwave Logic, Inc. is a development stage company moving toward commercialization of next generation electro-optic photonic devices made on its P 2 IC TM technology platform which uses in-house proprietary high-activity and high-stability organic polymers. Electro-optical devices convert data from electric signals into optical signals for multiple applications. Our differentiation at the device level is in higher speed, lower power consumption, simplicity of manufacturing and reliability. We have demonstrated higher speed and lower power consumption in packaged devices, and during 2019, we developed new materials that promise to further lower power consumption. We are currently focused on testing and demonstrating the simplicity of manufacturability and reliability of our devices, including in conjunction with the silicon photonics manufacturing ecosystem. We are initially targeting applications in data communications and telecommunications markets and are exploring other applications for our polymer technology platform. 17 Materials Development Our Company designs and synthesizes organic chromophores for use in its own proprietary electro-optic polymer systems and photonic device designs. A polymer system is not solely a material, but also encompasses various technical enhancements necessary for its implementation. These include host polymers, poling methodologies, and molecular spacer systems that are customized to achieve specific optical properties. Our organic electro-optic polymer systems compounds are mixed into solution form that allows for thin film application. Our proprietary electro-optic polymers are designed at the molecular level for potentially superior performance, stability and cost-efficiency. We believe they have the potential to replace more expensive, higher power consuming, slower-performance materials and devices used in fiber-optic communication networks. Our patented and patent pending molecular architectures are based on a well-understood chemical and quantum mechanical occurrence known as aromaticity . Aromaticity provides a high degree of molecular stability that enables our core molecular structures to maintain stability under a broad range of operating conditions. We expect our patented and patent-pending optical materials along with trade secrets and licensed materials, to be the core of and the enabling technology for future generations of optical devices, modules, sub-systems and systems that we will develop or potentially out-license to electro-optic device manufacturers. Our Company contemplates future applications that may address the needs of semiconductor companies, optical network companies, Web 2.0 media companies, high performance computing companies, telecommunications companies, aerospace companies, and government agencies. Device Design and Development Electro-optic Modulators Our Company designs its own proprietary electro-optical modulation devices. Electro-optical modulators convert data from electric signals into optical signals that can then be transmitted over high-speed fiber-optic cables. Our modulators are electro-optic, meaning they work because the optical properties of the polymers are affected by electric fields applied by means of electrodes. Modulators are key components that are used in fiber optic telecommunications, data communications, and data centers networks etc., to convey the high data flows that have been driven by applications such as pictures, video streaming, movies etc., that are being transmitted through the Internet. Electro-optical modulators are expected to continue to be an essential element as the appetite and hunger for data increases every year. Polymer Photonic Integrated Circuits (P 2 IC TM ) Our Company also designs its own proprietary polymer photonic integrated circuits (otherwise termed a polymer PIC). A polymer PIC is a photonic device that integrates several photonic functions on a single chip. We believe that our technology can enable the ultra-miniaturization needed to increase the number of photonic functions residing on a semiconductor chip to create a progression like what was seen in the computer integrated circuits, commonly referred to as Moore’s Law. One type of integration is to combine several instances of the same photonic functions such as a plurality of modulators to create a 4-channel polymer PIC. In this case, the number of photonic components would increase by a factor of 4. Another type is to combine different types of devices including from different technology bases such as the combination of a semiconductor laser with a polymer modulator. Our P 2 IC™ platform encompasses both these types of architecture. Current photonic technology today is struggling to reach faster device speeds. Our modulator devices, enabled by our electro-optic polymer material systems, work at extremely high frequencies (wide bandwidths) and possess inherent advantages over current crystalline electro-optic material contained in most modulator devices such as lithium niobate (LiNbO3), indium phosphide (InP), silicon (Si), and gallium arsenide GaAs). Our advanced electro-optic polymer platform is creating a new class of modulators such as the Polymer Stack ™ and associated PIC platforms that can address higher data rates in a lower cost, lower power consuming manner, with much simpler modulation techniques. Our electro-optic polymers can be integrated with other materials platforms because they can be applied as a thin film coating in a fabrication clean room such as may be found in semiconductor foundries. This approach we call Polymer Plus™. Our polymers are unique in that they are stable enough to seamlessly integrate into existing CMOS, Indium Phosphide (InP), Gallium Arsenide (GaAs), and other semiconductor manufacturing lines. Of particular relevance are the integrated silicon photonics platforms that combine optical and electronic functions. These include a miniaturized modulator for ultra-small footprint applications in which we term the Polymer Slot ™. This design is based on a slot modulator fabricated into semiconductor wafers that include both silicon and indium phosphide. 18 Business Strategy Our business strategy anticipates that our revenue stream will be derived from one or some combination of the following: (i) technology licensing for specific product application; (ii) joint venture relationships with significant industry leaders; or (iii) the production and direct sale of our own electro-optic device components. Our objective is to be a leading provider of proprietary technology and know-how in the electro-optic device market. In order to meet this objective, we intend to: · Further the development of proprietary organic electro-optic polymer material systems   · Develop photonic devices based on our P 2 IC TM technology   · Continue to develop proprietary intellectual property   · Grow our commercial device development capabilities   · Grow our product reliability and quality assurance capabilities   · Grow our optoelectronic packaging and testing capabilities   · Grow our commercial material manufacturing capabilities   · Maintain/develop strategic relationships with major telecommunications and data communications companies to further the awareness and commercialization of our technology platform   · Continue to add high-level personnel with industrial and manufacturing experience in key areas of our materials and device development programs.   Create Organic Polymer-Enabled Electro-Optic Modulators We intend to utilize our proprietary optical polymer technology to create an initial portfolio of commercial electro-optic polymer product devices with applications for various markets, including telecommunications, data communications and data centers. These product devices will be part of our proprietary photonics integrated circuit (PIC) technology platform. We expect our initial modulator products will operate at data rates at least 50 Gbaud (capable of 50 Gbps with standard data encoding of NRZ and 100 Gbps with more complex PAM-4 encoding). Our devices are highly linear, enabling the performance required to take advantage of the more advance complex encoding schemes. We are currently developing our polymer technology to operate at the next industry node of 100Gbaud. Our Proprietary Products in Development As part of a two-pronged marketing strategy, our Company is developing several optical devices, which are in various stages of development and that utilize our polymer optical materials. They include: Ridge Waveguide Modulator, Polymer Stack ™ Our ridge electro-optic waveguide modulator was designed and fabricated in our in-house laboratory. The fabrication of our first in-house device is significant to our entire device program and is an important starting point for modulators that are being developed for target markets. We have multiple generations of new materials that we will soon be optimizing for this specific design. In September 2017 we announced that our initial alpha prototype ridge waveguide modulator, enabled by our P 2 IC™ polymer system, demonstrated bandwidth performance levels that will enable 50 Gbaud modulation in fiber-optic communications. This device demonstrated true amplitude (intensity) modulation in a Mach-Zehnder modulator structure incorporating our polymer waveguides. This important achievement will allow users to utilize arrays of 4 x 50 Gbaud (4x 100 Gbps) polymer modulators using PAM-4 encoding to access 400 Gbps data rate systems. These ridge waveguide modulators are currently being packaged with our partner into prototype packages. These prototype packages enable potential customers to evaluate the performance at 50 Gbaud. Once a potential customer generates technical feedback on our prototype, we expect to be asked to optimize the performance to their specifications. Assuming this is successful, we expect to enter a qualification phase where our prototypes will be evaluated more fully. In parallel, we are developing modulators for scalability to higher data rates above 50 Gbaud. In September 2018, we showed in conference presentations the potential of our polymer modulator platform to operate at over 100 GHz bandwidth. This preliminary result corresponds to 100 Gbaud data rates using a simple NRZ data encoding scheme or 200 Gbps with PAM-4 encoding. With 4 channel arrays in our P 2 IC™ platform, the Company thus has the potential to address both 400 Gbps and 800 Gbps markets. While customers may start the engagement at 50 Gbaud, we believe potential customers recognize that scalability to higher speeds is an important differentiator of the polymer technology. We believe the ridge waveguide modulator Polymer Stack™ represents our first commercially viable device and targets the fiber optics communications market. We have completed internal market analysis and are initially targeting interconnect reach distances of greater than 10km. In these markets, the system network companies are looking to implement modulator-based transceivers that can handle aggregated data rates 100 Gbps and above. The market opportunity for greater than 10km is worth over $1B over the next decade. Ridge Waveguide Modulator, Polymer Stack ™ Using the ridge waveguide design, we are developing a more compact modulator to be implemented directly with existing integrated photonics platforms such as silicon photonics and Indium Phosphide. As our electro-optic polymers are applied in liquid form, they can be deposited as a thin film coating in a fabrication clean room such as may be found in semiconductor foundries. This approach we call Polymer Plus™. The advantage of this approach is that it allows existing semiconductor integrated photonics platforms such as silicon photonics and indium phosphide to be upgraded with higher speed modulation functionality with the use of polymers in a straight-forward and simple approach. Further, our polymers are unique in that they are stable enough to seamlessly integrate into existing CMOS, Indium Phosphide (InP), Gallium Arsenide (GaAs), and other semiconductor manufacturing lines. A large majority of commercial silicon photonics platforms utilize large silicon photonics foundries such as those that manufacture IC products for a number of applications such as communications, computing, consumer, etc. In order to seamlessly integrate our polymer materials to upgrade for example, silicon photonics designs, partnering with a silicon foundry is necessary. Advanced Modulator Structures As part of supporting further improvement and scalability of our platform, we continue to explore more advanced device structures. Our functional polymer photonics slot waveguide modulator utilizes an existing modulator structure with one of our proprietary electro-optic polymer material systems as the enabling material layer and is functional as an operating prototype device. Preliminary testing and initial data on our polymer photonics slot waveguide modulators demonstrated several promising characteristics. The tested polymer photonic chip had a 1-millimeter square footprint, enabling the possibility of sophisticated integrated optical circuits on a single silicon substrate. In addition, the waveguide structure was approximately 1/20 the length of a typical inorganic-based silicon photonics modulator waveguide. With the combination of our proprietary electro-optic polymer material and the extremely high optical field concentration in the slot waveguide modulator which is called Polymer Slot™, the test modulators demonstrated less than 2.2 volts to operate. Initial speeds exceeded 30-35 GHz in the telecom, 1550 nanometer frequency band. This is equivalent to 4 x 10Gbps, inorganic, lithium niobate modulators that would require approximately 12-16 volts to move the same amount of information. We are continuing our collaborative development of our polymer photonic slot waveguide modulators (Polymer Slot™) with an associated third-party research . We are now designing Polymer Slot™ modulators to operate at data rates greater than 50 Gbaud. Our Long-Term Device Development Goal - Multichannel Polymer Photonic Integrated Circuit (P 2 IC™) Our P 2 IC™ platform is positioned to address markets with aggregated data rates of 100 Gbaud, 400 Gbaud, 800 Gbaud and beyond. Our P 2 IC™ platform will contain a number of photonic devices that may include, over and above polymer-based modulators, photonic devices such as lasers, multiplexers, demultiplexers, detectors, fiber couplers. While our polymer-based ridge waveguide and slot modulators are currently under development to be commercially viable products, our long-term device development goal is to produce a platform for the 400 Gbps and beyond transceiver market. This has been stated in our photonics product roadmap that is publicly available on our website. The roadmap shows a progression in speed from 50 Gbaud based ridge waveguide modulators to 100 Gbaud based ridge waveguide modulators. The roadmap shows a progression in integration in which the modulators are arrayed to create a flexible, multichannel P 2 IC™ platform that spans 100 Gbps, 400 Gbps, 800 Gbps, and a scaling philosophy that will grow to 1.6 Tbps aggregated data-rate markets. We showed bandwidths of polymer-based modulator devices at a major international conference (ECOC – European Conference on Optical Communications 2018) with bandwidths that exceeded 100GHz. We noted that to achieve 100Gbaud, the polymer-based modulator only needs to achieve 80GHz bandwidth. During ECOC 2019, we showed environmental stability. We continue to develop our polymer materials and device designs to optimize additional metrics. We are now optimizing the device parameters for very low voltage operation. 19 Our Target Markets Cloud computing and data centers Big data is a general term used to describe the voluminous amount of unstructured and semi-structured data a Company creates – data that would take too much time and cost too much money to load into a relational database for analysis. Companies are looking to cloud computing in their data centers to access all the data. Inherent speed and bandwidth limits of traditional solutions and the potential of organic polymer devices offer an opportunity to increase the bandwidth, reduce costs and improve speed of access. Datacenters have grown to enormous sizes with hundreds of thousands and even millions of servers in a single datacenter. The number of so-called “hyperscale” datacenters are expected to continue to increase in number. Due to their size, a single “datacenter” may consist of multiple large warehouse-size buildings on a campus or even several locations distributed around a metropolitan area. Data centers are confronted with the problem of moving vast amounts of data not only around a single data center building, but also between buildings in distributed data center architecture. Links within a single datacenter building may be shorter than 500 meters, though some will require optics capable of 2 km. Between datacenter buildings, there is an increasing need for high performance interconnects over 10km in reach. Our modulators are suitable for single-mode fiber optic links. We believe that our single mode modulator solutions will be competitive at 500m to 10km link distances, but it will be ideally suited at greater than 10km link distances. Telecommunications/Data Communications The telecommunications industry has evolved from transporting traditional analogue voice data over copper wire into the movement of digital voice and data. Telecommunication companies are faced with the enormous increasing challenges to keep up with the resulting tremendous explosion in demand for bandwidth. The metropolitan network is especially under stress now and into the near future. Telecommunications companies provide services to some data center customers for the inter-data center connections discussed above. 5G mobile upgrade, autonomous driving and IoT are expected to increase the need for data stored and processed close to the end user in edge data centers. This application similarly requires optics capable of very high speeds and greater than 10 km reach. Industry issues of scaling The key issues facing the fiber-optic communications industry are the economic progress and scalability of any PIC based technological platform. The polymer platform is unique in that it is truly scalable. Scalable means being able to scale up for high-speed data rates, while simultaneously being able to scale down in cost. This allows a competitive cost per data rate or cost per Gbps metric to be achieved. Fiber optic datacenter and high-performance computing customers want to achieve the metric of $1/Gbps @ 400Gbps (this essentially means a single mode fiber optic link that has a total cost of $400 and operates with a data rate of 400Gbps ➔ which also means that each transceiver at each end of the fiber optic link must be able to be priced at $200), but as industry tries to match this target, it is already falling behind as can be seen in the Figure below which plots generic typical PIC based technology:   In the above figures that forecast $/Gbps to 2025 (where the left-hand graph is a linear vertical scale, and the right-hand graph is a log scale), it can be seen that the orange curve plots the customer expectation, while the other color curves show $/Gbps improvement over time for various high-speed data rate transceivers using PIC based technologies. A gap is appearing between what customer expect and what the technologists can produce. 20 Polymers play an important role in PICs over the next decade as they can reduce or close the gap between customer expectations and technical performance through effective scaling increase of high performance with low cost. This is shown below how polymers have the potential to scale to the needs of the customers over the next 5 years.   Some of the things needed to achieve the scaling performance of polymers in integrated photonics platforms is within sight today: 1. Increased r33 (which leads to very low Vpi in modulator devices) and we are currently optimizing our polymers for this. 2. Increase temperature stability so that the polymers can operate at broader temperature ranges effective, where we have made significant progress over the past few years. 3. Low optical loss in waveguides and active/passive devices for improved optical budget metrics which is currently an ongoing development program at our Company. 4. Higher levels of hermeticity for lower cost packaging of optical sub-assemblies within a transceiver module, where our advanced designs are being implemented into polymer-based packages. Scalability in terms of cost reduction and high-volume manufacturing can be enhanced by: 1. Leverage of commercial silicon photonics manufacturing capacity. Our Polymer Plus™ platform seeks to be additive to standard silicon photonics circuits. 2. Reduction of optical packaging costs by integration at the chip level of multiple modulators and also with other optical devices. Our P2IC™ platform seeks to address device integration. Recent Significant Events and Milestones Achieved During February and March 2018, we moved our Newark, Delaware synthetic laboratory and our Longmont, Colorado optical testing laboratory and corporate headquarters to office, laboratory and research and development space located at 369 Inverness Parkway, Suite 350, Englewood, Colorado. The 13,420 square feet Englewood facility includes fully functional 1,000 square feet of class 1,000 cleanroom, 500 square feet of class 10,000 cleanroom, chemistry laboratories, and analytic laboratories. The Englewood facility streamlines all of our Company’s research and development workflow for greater operational efficiencies. During March 2018, our Company, together with our packaging partner, successfully demonstrated packaged polymer modulators designed for 50Gbps, which we believe will allow us to scale our P 2 IC™ platform with our Mach-Zehnder ridge waveguide modulator design as well as other photonics devices competitively in the 100Gbps and 400Gbps datacom and telecommunications applications market. We are currently fine-tuning the performance parameters of these prototypes in preparation for customer evaluations. 21 During June 2018, our Company Acquired the Polymer Technology Intellectual Property Assets of BrPhotonics Productos Optoelectrónicos S.A., a Brazilian corporation, which significantly advanced our patent portfolio of electro-optic polymer technology with 15 polymer chemistry materials, devices, packaging and subsystems patent and further strengthened our design capabilities to solidify our market position as we prepare to enter the 400Gbps integrated photonics marketplace with a highly competitive, scalable alternative to installed legacy systems. Also, during June 2018, our Company promoted polymer PICs and Solidified Polymer PICs as Part of the Photonics Roadmap at the World Technology Mapping Forum in Enschede, Netherlands, which includes our Company’s technology of polymers and polymer PICs that have the potential to drive not only 400Gbps aggregate data rate solutions, but also 800Gbps and beyond. In August 2018 we announced the completion (ahead of schedule) of our fully equipped on-site fabrication facility, where we are expanding our high-speed test and design capabilities. We also announced the continuation of the building of our internal expertise with the hiring of world-class technical personnel with 100Gbps experience. In February 2019 we announced a major breakthrough in our development of clean technology polymer materials that target the insatiable demand for fast and efficient data communications in the multi-billion-dollar telecom and data markets supporting Internet, 5G and IoT (Internet of Things) webscale services. The improved thermally stable polymer has more than double the electro-optic response of our previous materials, enabling optical device performance of well over 100 GHz with extremely low power requirements. This addition to the family of Perkinamine TM polymers will hold back run-away consumption of resources and energy needed to support ever-growing data consumption demands. We continue to conduct testing of the material and assessment of associated manufacturing processes and device structures prior to release to full development. In March 2019 we created an Advisory Board comprised of three world-class leaders in the photonics industry: Dr. Craig Ciesla, Dr. Christoph S. Harder, and Mr. Andreas Umbach. The Advisory Board is working closely with our Company leadership to enhance our Company’s product positioning and promote our polymer modulator made on our proprietary Faster by Design ™ polymer P 2 IC™ platform. The mission of the Advisory Board is initially to increase our Company’s outreach into the datacenter interconnect market and later to support expansion into other billion-dollar markets. The Advisory Board members have each been chosen for their combination of deep technical expertise, breadth of experience and industry relationships in the fields of fiber optics communications, polymer and semiconductor materials. Each of the Advisory Board members has experience at both innovators like Lightwave Logic and large industry leaders of the type most likely to adopt game-changing polymer-based products. In addition, they possess operational experience with semiconductor and polymer businesses. Also, in March 2019, our Company received the “Best Achievement in PIC Platform” award for our 100 GHz polymer platform from the PIC International Conference. The award recognizes innovative advances in the development and application of key materials systems driving today’s photonic integrated circuits (PICs) and providing a steppingstone to future devices. During the second quarter of 2019, our Company promoted its polymers at CoInnovate in May and the World Technology Mapping Forum in June. CoInnovate is a meeting of semiconductor industry experts. The World Technology Mapping Forum is a group authoring a photonics roadmap out to 2030. In September 2019 at the prestigious European Conference on Communications (ECOC) in Dublin, Ireland, we showed measured material response over frequency and the resulting optical data bits stream on our clean technology polymer materials, the newest addition to our family of Perkinamine TM polymers, that meet and exceed of our near-term target speed of 80 GHz. We also released data demonstrating stability under elevated temperatures in the activated (poled to create data carrying capability) state. In October 2019, we reported that energy-saving polymer technology is highlighted in the recently published Integrated Photonics Systems Roadmap - International (IPSR-I). The roadmap validates the need for low-voltage, high-speed technologies such as ours. 22 In May 2020, we announced that our latest electro-optic polymer material has exceeded target performance metrics at 1310 nanometers (nm), a wavelength commonly used in high-volume datacenter fiber optics. This material demonstrates an attractive combination at 1310 nm of high electro-optic coefficient, low optical loss and good thermal stability at 85 0 Celsius. The material is expected to enable modulators with 80 GHz bandwidth and low drive power, and has an electro-optic coefficient of 200 pm/V, an industry measure of how responsive a material is to an applied electrical signal. This metric, otherwise known as r33, is very important in lowering power consumption when the material is used in modulator devices. This technology is applicable to shorter reach datacenter operators, for whom decreasing power consumption is imperative to the bottom line of a facility. We considered this a truly historic moment—not only in our Company’s history, but in our industry–as we have demonstrated a polymer material that provides the basis for a world-class solution at the 1310 nm wavelength, something which other companies have spent decades attempting to achieve. In July 2020, we announced the official launch of our new corporate website www.lightwavelogic.com, reflecting ongoing efforts to provide up-to-date information for investors and potential strategic partners. The revamped website offers a clean, modern design integrated with helpful tools and investor relations resources, including a new corporate explainer video, to illustrate the target markets and advantages of Lightwave Logic’s proprietary electro-optic polymers. In August 2020, we announced the addition of Dr. Franky So, a leading authority in the OLED industry, to our Advisory Board. Dr. So is the Walter and Ida Freeman Distinguished Professor in the Department of Materials Science and Engineering at North Carolina State University. Previously, he was the Head of Materials and Device research for OLEDs at OSRAM Opto Semiconductors, as well as Motorola’s corporate research lab in the 1990s. Dr. So was an early researcher in electro-optic (EO) polymer modulators at Hoechst Celanese. As a member of the Company’s advisory board, Dr. So will work closely with management to enhance Lightwave’s product positioning for, as well as the promotion of, its polymer modulators made on its proprietary platform. In addition, he will provide technical support and advisory services to the Lightwave materials and device teams. On October 7, 2020, we announced the receipt of U.S. Patent number 10,754,093 that improves both the performance and reliability of our high-speed, low-power electro-optic polymer modulators intended for datacenter and telecommunications applications. The patent allows multi-layered electro-optic polymer modulators to perform more efficiently through the design of custom interfaces. These interfaces are designed into the cladding layers that allow optical transmission, electrical conductivity, material integrity, as well as a prevention of solvents affecting adjacent polymer materials. The net impact of all of this allows for our Company’s modulators to improve performance across the board, enabling higher reliability in the fiber optic communications environment. On October 15, 2020, we announced that our proprietary polymer technologies are compatible with currently available integrated photonics platforms. Our proprietary electro-optic materials are currently in the prototyping phase and are fabricated onto standard silicon wafers, and this Polymer Plus™ advancement, driven by the feedback our Company received from potential customers to-date, has allowed our materials to be suitable for additive integration to integrated photonics platforms such as silicon photonics, as well as indium phosphide and other standard platforms – therefore enabling simpler integration by customers. We believe this breakthrough allows a polymer modulator to enhance the performance of existing integrated photonics solutions in the marketplace, enabling higher speed and lower power consumption on foundry-fabricated photonics designs. Since our technology is additive to existing platforms such as silicon photonics, our electro-optic polymers are not actually competing with integrated photonic platforms, but rather enabling them to be more competitive in the marketplace, and it further validates our EO polymer platform as ideally suited to enable optical networking more efficiently than ever. On October 21, 2020, we announced that we have optimized a robust, photo-stable organic polymer material for use in our next-generation modulators intended to be trialed with potential customers under NDA. Our materials show high tolerance to high-intensity infrared light, common in a fiber optic communications environment and increasingly important as higher density of devices access the network, directly resulting in higher intensity infrared light levels. Our preliminary results suggest that our recently developed electro-optic polymer material, designed based on potential customer input, displays unrivaled light tolerance (also known as photostability) compared to any organic commercial solution in use today. Our results meet both our current internal criteria and address potential customer feedback. On November 2, 2020, we disclosed results on our polymer material stability testing including further results for electro-optic efficiency for our Company’s materials that operate both at 1550nm as well as 1310nm. We demonstrated test materials results for electro-optic efficiency to 4000hrs, improvement in sensitivity to oxygen as part of a broadband exposure test, and stability for polymers exposed to 1310nm light at 100mW. On November 20, 2020, we announced the receipt of U.S. Patent number 10,591,755 that details an important invention that allows users of electro-optic polymer modulators to not only operate the devices with high speed and low power directly from CMOS IC chips, but gives them the opportunity to avoid the expense, physical footprint and power consumption of high-speed modulator driver ICs. Furthermore, this patent strengthens our freedom of manufacturing, and directly enables our modulators to become more competitive in the marketplace. 23 On December 16, 2020, we announced the development of a new sealant for our future Chip-on-Board (COB) packaged polymer platform. The sealant, which blocks oxygen and other atmospheric gases, is a key step in our Company’s development towards a polymer modulator without a package, an important enabling technology for the industry. We plan to develop the sealant for commercial implementation in our future modulators. Recent results suggest that our electro-optic polymer sealant material displays encouraging barrier properties and is expected to translate to significant improvement in bare chip robustness against atmospheric gases, as compared to existing EO polymer commercial solutions in use today. While the initial measurements are highly promising, our Company plans to continue development work to further optimize the sealant material and barrier performance towards the chip-on-board goal. On January 13, 2021, we announced the receipt of U.S. Patent number 10,886,694 that details an invention that allows electro-optic polymer modulators to be packaged in a hermetic environment using well-known, high-volume and low-cost fabrication processes that are available in a typical semiconductor fabrication foundry – improving suitability for mass production. Further, the design of this capsule package can improve both the reliability and the coupling interface between fiber optic cables and their laser sources for arrayed photonic integrated circuit solutions. The package can also interpose signals from an underlying circuit board to the polymer modulators, lasers, and other components for data transfer. The hermetic capsule is built from a semiconductor base that contains electrical and optical circuits and components. A hermetic capsule chamber is created by the design of a semiconductor lid that is sealed to the semiconductor base platform by a metallization process. Using standardized fabrication techniques we can now create a package that achieves the performance, reliability, cost, and volume requirements that has been a challenge for the photonics industry for years. On May 11, 2021, we announced the receipt of U.S. Patent number 10,989,871 that details an invention that allows for improved protective polymer layers in modulators when designed into advanced integrated photonic platforms, better positioning them for high-volume manufacturing processes. The protective layers will enhance electro-optic polymer devices' performance through higher reliability, better optical performance and enable the use of standardized manufacturing processes best suited for mass-production. On June 7, 2021, we announced that our company’s common stock was added to the Solactive EPIC Core Photonics EUR Index NTR as part of the index's semi-annual additions. The index includes global public companies with a common theme of optoelectronics, photonics, and optical technologies in general that range from components, modules, manufacturers, and optical network system companies. This inclusion broadens our exposure to the capital markets community, as well as credibility with potential partners and customers. On June 16, 2021, we announced test results from new modulators fabricated in 2021, which exceeded bandwidth design targets and achieved triple the data rate as compared to competing devices in use today. The breakthrough new devices demonstrated 3dB electro-optical with electrical bandwidths that exceed 100GHz – with measurements coming close to our Company’s state-of-the-art 110GHz test equipment capability. We expect this advancement to have a profound impact on the traffic flow on the internet. On June 24, 2021, we announced the receipt of U.S. patent number 11,042,051 that details a breakthrough new device design that enables mass-volume manufacturing when designed into advanced integrated photonic platforms. The device design enhances reliability, improves optical mode control and most important, lowers by consumption through the use of direct-drive, low-voltage operation. The patent is entitled, "Direct drive region-less polymer modulator methods of fabricating and materials therefor" and is expected to open the opportunity for low power consumption electro-optic polymers to be developed into large foundry PDKs (process development kits) and be ready for mass volume commercialization. The patent emphasizes our technology platform using fabrication techniques that would naturally fit into foundry PDKs. On August 4, 2021, we announced that we developed improved thermal design properties for electro-optic polymers used in our Polymer Plus™ and Polymer Slot™ modulators, enabling the speed, flexibility and stability needed for high-volume silicon foundry processes. We successfully created a 2x improvement in r33, while allowing higher stability during poling and post-poling. This provides better thermal performance and enables greater design flexibility in high-volume silicon foundry PDK (process development kit) processes. On August 9, 2021, we announced the receipt of U.S. patent number 11,067,748 entitled "Guide Transition Device and Method" that covers a new invention that enables enhanced optical routing architectures for polymer-based integrated photonics that can be scaled with partner foundries. This new invention will enable innovative, highly scalable optical routing architectures for integrated photonic platforms. The patent provides novel optical waveguide transition designs using two planes of optical waveguides that are expected to be critical for optical signal routing and optical switching, opening the opportunity for high speed, energy efficient electro-optic polymers to be implemented into foundry PDKs (process development kits) to improve the performance of integrated photonic circuits. This breakthrough technology opens the door for advanced integrated photonics architectural design. We believe t he simplicity of the design is ideal for production in foundries and will best position our Company to enable increased data traffic on the internet while using less power. 24 As we move forward to diligently meet our goals, we continue to work closely with our packaging partner for the 50Gbaud and 100 Gbaud prototypes, and we are advancing our reliability and characterization efforts to support our prototyping. We are actively engaged with test equipment manufacturers of the most advanced test equipment to test our state-of-the-art polymer devices. We continue to engage with multiple industry bodies to promote our roadmap. We continue to fine tune our business model with target markets, customers, and technical specifications. Discussions with prospective customers are validating that our modulators are ideally suited for the datacenter and telecommunications markets that are over 10km in length. Details of what these prospective customers are seeking from a prototype are delivered to our technical team. Capital Requirements As a development stage company, we do not generate revenues. We have incurred substantial net losses since inception. We have satisfied our capital requirements since inception primarily through the issuance and sale of our common stock. Results of Operations Comparison of three months ended June 30, 2021 to three months ended June 30, 2020 Revenues As a development stage company, we had no revenues during the three months ended June 30, 2021 and June 30, 2020. The Company is in various stages of photonic device and material development and evaluation. We expect the next revenue stream to be in product development agreements and prototype devices prior to moving into production. Operating Expenses Change from Percent For the Three For the Three Prior Three Change from Months Ending Months Ending Month Prior Three June 30, 2021 June 30, 2020 Period Month Period Research and development $ 2,782,243 $ 1,057,470 $ 1,724,773 163 % General and administrative 674,000 574,803 99,197 17 % $ 3,456,243 $ 1,632,273 $ 1,823,970 112 % Research and development expenses increased for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, primarily due to the expense for cashless option exercises and increases in salary expenses, non-cash stock option and warrant amortization, laboratory and wafer fabrication materials and supplies, depreciation, prototype device development expenses and operations committee fees. The expense for cashless option exercises for the three months ended June 30, 2021 were approximately $1.3 million. There was no expense for cashless option exercises for the three months ended June 30, 2020. Salary expenses increased by approximately $211 thousand in the three months ended June 30, 2021, compared to the same period in 2020 primarily for bonus payments. Non-cash stock option and warrant amortization expenses increased by approximately $105 thousand in the three months ended June 30, 2021, compared to the same period in 2020. Laboratory and wafer fabrication materials and supplies increased by approximately $33 thousand in the three months ended June 30, 2021, compared to the same period in 2020. Depreciation expenses increased by approximately $24 thousand in the three months ended June 30, 2021, compared to the same period in 2020. Prototype device development expenses increased by approximately $16 thousand in the three months ended June 30, 2021, compared to the same period in 2020. We expect to continue to incur substantial research and development expense developing and commercializing our photonic devices, and electro-optic materials platform. These expenses will increase as a result of accelerated development effort to support commercialization of our non-linear optical polymer materials technology; to build photonic device prototypes; hiring additional technical and support personnel; engaging senior technical advisors; pursuing other potential business opportunities and collaborations; customer testing and evaluation; and incurring related operating expenses. 25 General and administrative expenses increased for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, primarily due to increases in salary expenses and non-cash stock option amortization. Salary expenses increased by approximately $98 thousand in the three months ended June 30, 2021, compared to the same period in 2020 primarily for bonus payments. Non-cash stock option amortization expenses increased by approximately $12 thousand in the three months ended June 30, 2021, compared to the same period in 2020. Other Income (Expense) Change from Percent For the Three For the Three Prior Three Change from Months Ending Months Ending Month Prior Three June 30, 2021 June 30, 2020 Period Month Period Other Income/(Expense) $ (1,083,242 ) $ (31,655 ) $ (1,051,587 ) 3322 % Other income (expenses) increased for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, primarily due to an increase in commitment fee in the amount of approximately $1 million associated with the purchase of shares by an institutional investor for sale under a stock purchase agreement. Net Loss Change from Percent For the Three For the Three Prior Three Change from Months Ending Months Ending Month Prior Three June 30, 2021 June 30, 2020 Period Month Period Net Loss $ 4,539,485 $ 1,663,928 $ 2,875,557 173 % Net loss was $4,539,485 and $1,663,928 for the three months ended June 30, 2021 and 2020, respectively, for an increase of $2,875,557, due primarily to the expense for cashless option exercises and increases in commitment fee, salary expenses, non-cash stock option and warrant amortization, laboratory and wafer fabrication materials and supplies, depreciation, prototype device development expenses and operations committee fees. Comparison of six months ended June 30, 2021 to six months ended June 30, 2020 Revenues As a development stage company, we had no revenues during the six months ended June 30, 2021 and June 30, 2020. The Company is in various stages of photonic device and material development and evaluation. We expect the next revenue stream to be in product development agreements and prototype devices prior to moving into production. Operating Expenses Change from Percent For the Six For the Six Prior Six Change from Months Ending Months Ending Month Prior Six June 30, 2021 June 30, 2020 Period Month Period Research and development $ 4,129,785 $ 2,247,241 $ 1,882,544 84 % General and administrative 1,222,229 1,181,228 41,001 3 % $ 5,352,014 $ 3,428,469 $ 1,923,545 56 % 26 Research and development expenses increased for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020, primarily due to the expense for cashless option exercises and increases in salary expenses, non-cash stock option and warrant amortization, prototype device development expenses, operations committee fees, laboratory and wafer fabrication materials and supplies and depreciation. The expense for cashless option exercises for the six months ended June 30, 2021 was approximately $1.3 million. There was no expense for cashless option exercises for the six months ended June 30, 2020. Salary expenses increased by approximately $216 thousand in the six months ended June 30, 2021, compared to the same period in 2020 primarily for bonus payments. Non-cash stock option and warrant amortization expenses increased by approximately $138 thousand in the six months ended June 30, 2021, compared to the same period in 2020. Prototype device development expenses increased by approximately $113 thousand in the six months ended June 30, 2021, compared to the same period in 2020. Laboratory and wafer fabrication materials and supplies increased by approximately $37 thousand in the six months ended June 30, 2021, compared to the same period in 2020. Depreciation expenses increased by approximately $20 thousand in the six months ended June 30, 2021, compared to the same period in 2020. We expect to continue to incur substantial research and development expense developing and commercializing our photonic devices, and electro-optic materials platform. These expenses will increase as a result of accelerated development effort to support commercialization of our non-linear optical polymer materials technology; to build photonic device prototypes; hiring additional technical and support personnel; engaging senior technical advisors; pursuing other potential business opportunities and collaborations; customer testing and evaluation; and incurring related operating expenses. General and administrative expenses increased for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020, primarily due to increases in salary expenses, director and officer insurance and other tax expenses offset by decreases in auditing fees and legal fees. Salary expenses increased by approximately $97 thousand in the six months ended June 30, 2021, compared to the same period in 2020 primarily for bonus payments. Director and officer insurance increased by approximately $20 thousand in the six months ended June 30, 2021, compared to the same period in 2020. Other tax expenses increased by approximately $14 thousand in the six months ended June 30, 2021, compared to the same period in 2020. Auditing fees decreased by approximately $22 thousand in the six months ended June 30, 2021, compared to the same period in 2020. The additional auditing expenses incurred during the prior period related to the audit of internal controls for the year ended December 31, 2019 required for accelerated filers. The Company was not an accelerated filer for the year ended December 31, 2020. Legal fees decreased by approximately $15 thousand in the six months ended June 30, 2021, compared to the same period in 2020. Other Income (Expense) Change from Percent For the Six For the Six Prior Six Change from Months Ending Months Ending Month Prior Six June 30, 2021 June 30, 2020 Period Month Period Other Income/(Expense) $ (922,515 ) $ (62,633 ) $(859,882) 1373% Other income (expenses) increased for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020, primarily due to an increase in commitment fee in the amount of approximately $1.27 million associated with the purchase of shares by an institutional investor for sale under a stock purchase agreement offset by the Paycheck Protection Program loan forgiveness January 22, 2021 in the amount of $410.7 thousand. Net Loss Change from Percent For the Six For the Six Prior Six Change from Months Ending Months Ending Month Prior Six June 30, 2021 June 30, 2020 Period Month Period Net Loss $ 6,274,529 $ 3,491,102 $2,783,427 80% 27 Net loss was $6,274,529 and $3,491,102 for the six months ended June 30, 2021 and 2020, respectively, for an increase of $2,783,427, due primarily to the expense for cashless option exercises and increases in commitment fee, salary expenses, non-cash stock option and warrant amortization, prototype device development expenses, operations committee fees, laboratory and wafer fabrication materials and supplies, depreciation, director and officer insurance and other tax expenses offset by decreases in auditing fees and legal fees. Significant Accounting Policies We believe our significant accounting policies affect our more significant estimates and judgments used in the preparation of our financial statements. Our Annual Report on Form 10-K for the year ended December 31, 2020 contains a discussion of these significant accounting policies. Liquidity and Capital Resources Our primary source of operating cash inflows was proceeds from the sale of common stock to an institutional investor pursuant to a purchase agreement with the institutional investor as described in Sources and Uses of Cash below (Lincoln Park financing) and in Note 10 to the Financial Statements. All of the registered shares under the purchase agreement with the institutional investor have been issued as of June 30, 2021. We also received cash proceeds pursuant to the exercise of options and warrants for cash. On July 2, 2021, our Company filed a $100,000,000 universal shelf registration statement which became effective on July 9, 2021. For the six months ended June 30, 2021 During the six months ended June 30, 2021, the Company received approximately $13.97 million pursuant to the purchase agreement with the institutional investor. Also, during this period we received proceeds of $746,750 pursuant to the exercise of options and warrants. Our primary sources of cash outflows from operations included payroll, payroll taxes related to cashless option exercise, rent, utilities, payments to vendors and third-party service providers. On June 30, 2021, our cash and cash equivalents totaled $13,913,519, our assets totaled $17,994,174, our liabilities totaled $1,037,301 and we had stockholders’ equity of $16,956,873. For the six months ended June 30, 2020 During the six months ended June 30, 2020, net cash used in operating activities was $2,344,201 and net cash used in investing activities was $38,978, which was due primarily to the Company’s research and development activities and general and administrative expenditures. Net cash provided by financing activities for the six months ended June 30, 2020 was $2,369,148. At June 30, 2020, our cash and cash equivalents totaled $2,222,313, our assets totaled $6,560,570, our liabilities totaled $1,913,439, and we had stockholders’ equity of $4,647,131. Sources and Uses of Cash 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. 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. 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 with the U.S. Securities and Exchange Commission which became effective on July 9, 2021. Market volatility resulting from the COVID-19 pandemic or other factors could adversely impact our ability to access capital as and when needed. If adequate funds are not available to us on a timely basis, we may be required to delay or limit our operations, including research and development efforts relating to the commercializing our electro-optic polymer technology. On January 21, 2019, our Company entered into a purchase agreement with Lincoln Park, pursuant to which Lincoln Park agreed to purchase from us up to $25,000,000 of our Common Stock (subject to certain limitations) from time to time over a 36-month period. All of the registered shares under the purchase agreement have been issued as of June 30, 2021. 28 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. During the six months ended June 30, 2021, the Company received proceeds of $746,750 pursuant to the exercise of options and warrants. We expect that our cash used in operations will continue to increase through 2021 and beyond as a result of the following planned activities: · The addition of management, sales, marketing, technical and other staff to our workforce;   · Increased spending for the expansion of our research and development efforts, including purchases of additional laboratory and production equipment;   · Increased spending in marketing as our products are introduced into the marketplace;   · Developing and maintaining collaborative relationships with strategic partners;   · Developing and improving our manufacturing processes and quality controls; and   · Increases in our general and administrative activities related to our operations as a reporting public company and related corporate compliance requirements.   Analysis of Cash Flows For the six months ended June 30, 2021 Net cash used in operating activities was $2,991,879 for the six months ended June 30, 2021, primarily attributable to the net loss of $6,274,529 adjusted by $10,242 in warrants issued for services, $528,249 in options issued for services, $1,333,628 in common stock issued for services, $417,414 in depreciation expenses and patent amortization expenses, ($410,700) in Paycheck Protection Program loan forgiveness $134,668 in prepaid expenses, ($48,074) in accounts payable and accrued expenses and $1,317,223 in cashless option exercise expense. Net cash used in operating activities consisted of payments for research and development, legal, professional and consulting expenses, rent and other expenditures necessary to develop our business infrastructure. Net cash used by investing activities was $654,699 for the six months ended June 30, 2021, consisting of $18,221 in cost for intangibles and $636,478 in asset additions primarily for the Colorado headquarter facility and labs. Net cash provided by financing activities was $14,253,507 for the six months ended June 30, 2021 and consisted of $746,750 in proceeds from exercise of options and warrants, $13,973,249 in proceeds from resale of common stock to an institutional investor offset by $453,385 in cashless option exercise tax payments and $13,107 repayment of equipment purchased. For the six months ended June 30, 2020 Net cash used in operating activities was $2,344,201 for the six months ended June 30, 2020, primarily attributable to the net loss of $3,491,102 adjusted by $50,677 in warrants issued for services, $354,958 in options issued for services, $62,958 in common stock issued for services, $396,101 in depreciation expenses and patent amortization expenses, ($183,862) in prepaid expenses, $55,369 in accounts payable and accrued expenses and $410,700 in proceeds from Paycheck Protection Plan refundable advance. Net cash used in operating activities consisted of payments for research and development, legal, professional and consulting expenses, rent and other expenditures necessary to develop our business infrastructure. Net cash used by investing activities was $38,978 for the six months ended June 30, 2020, consisting of $29,101 in cost for intangibles and $9,877 in asset additions primarily for the new Colorado headquarter facility and labs. Net cash provided by financing activities was $2,369,148 for the six months ended June 30, 2020 and consisted of $2,761,926 in proceeds from resale of common stock to an institutional investor offset by $392,778 repayment of equipment purchased. 29 Contractual Obligations There have been no material changes outside the ordinary course of business in our contractual commitments during the three months ended June 30, 2021. Off-Balance Sheet Arrangements As of June 30, 2021, we do not have an interest in any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors. Item 3 Quantitative and Qualitative Disclosures About Market Risk Not Applicable.