Lightwave Logic, Inc. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures As of December 31, 2021, our Company evaluated the effectiveness and design and operation of its disclosure controls and procedures. Our Company’s disclosure controls and procedures are the controls and other procedures that we designed to ensure that our Company records, processes, summarizes, and reports in a timely manner the information that it must disclose in reports that our Company files with or submits to the Securities and Exchange Commission. Our principal executive officer and principal financial officer reviewed and participated in this evaluation. Based on this evaluation, our Company made the determination that its disclosure controls and procedures were effective. 49 Management’s Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal controls over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on this evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2021. The Company’s internal control over financial reporting includes policies and procedures that (1) pertain to maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. In addition, the design of any system of controls is based in part on certain assumptions about the likelihood of future events, and controls may become inadequate if conditions change. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Audit Report on Internal Controls Over Financial Reporting of the Registered Public Accounting Firm Morison Cogen LLP, the Company’s independent registered public accounting firm has audited the financial statements included in this Annual Report on Form 10-K and, as part of their audit, has issued their report, included herein, on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021. Changes in Internal Control Over Financial Reporting No change in our Company’s internal control over financial reporting occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. None. 50 PART III Item 10. Directors, Executive Officers and Corporate Governance Information required under this Item will be contained in our definitive proxy statement, which will be filed within 120 days of December 31, 2021, our most recent fiscal year end, and is incorporated herein by reference. Item 11. Executive Compensation. Information required under this Item will be contained in our definitive proxy statement, which will be filed within 120 days of December 31, 2021, our most recent fiscal year end, and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Information required under this Item will be contained in our definitive proxy statement, which will be filed within 120 days of December 31, 2021, our most recent fiscal year end, and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence. Information required under this Item will be contained in our definitive proxy statement, which will be filed within 120 days of December 31, 2021, our most recent fiscal year end, and is incorporated herein by reference. Item 14. Principal Accountant Fees and Services. Information required under this Item will be contained in our definitive proxy statement, which will be filed within 120 days of December 31, 2021, our most recent fiscal year end, and is incorporated herein by reference. 51 PART IV Item 15. Exhibits, Financial Statement Schedules (a) The following Audited Financial Statements are filed as part of this Form 10-K Report: Report of Independent Registered Public Accounting Firm Balance Sheets Statements of Comprehensive Loss Statement of Stockholders’ Equity Statements of Cash Flows Notes to Financial Statements (b) The following exhibits are filed as part of this report. Exhibit No. Description of Exhibit Location 3.1 Articles of Incorporation Incorporated by reference to Company’s Form 10-SB as filed with the SEC on April 13, 2007 3.2 Certificate of Amendment to Articles of Incorporation Incorporated by reference to Company’s Definitive Schedule 14C Information Statement as filed with the SEC on February 19, 2008 3.3 Certificate of Amendment to Articles of Incorporation Incorporated by reference to Company’s Form S-1 Registration Statement as filed with the SEC on August 3, 2015 3.4 Restated Bylaws Incorporated by reference to the Company’s Form 10-K as filed with the SEC on March 16, 2018 4.1 Description of Registrant’s Securities Incorporated by reference to the Company’s Form 10-K as filed with the SEC on March 16, 2020 10.1 Employee Agreement – Michael Lebby Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on March 22, 2017 10.2 Employee Agreement Amendment - Michael Lebby Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on April 20, 2021 10.3 Employee Agreement Amendment - Michael Lebby Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on January 21, 2022 10.4 Employee Agreement - James Marcelli Incorporated by reference to Company’s Form 10-Q as filed with the SEC on August 12, 2015 10.5 Employee Agreement Amendment - James Marcelli Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on January 21, 2022 10.6 Employee Agreement Amendment - James Marcelli Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on January 21, 2022 10.7 Form of Executive Paid Time Off Waiver Agreement Incorporated by reference to the Company’s Form 10-K as filed with the SEC on March 16, 2018 10.8 Form of Director Agreement Incorporated by reference to the Company’s Form 10-K as filed with the SEC on March 16, 2018 10.9 Form of Director and Officer Indemnification Agreement Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on January 21, 2022 10.10 Form of Director’s Non-Disclosure Agreement Incorporated by reference to the Company’s Form 10-K as filed with the SEC on March 16, 2018 10.11 Operations Committee Charter Incorporated by reference to the Company’s Form 10-Q as filed with the SEC on August 15, 2016 10.12 Statement of Operations Committee Work - Frederick J. Leonberger Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on April 3, 2017 10.13 Statement of Operations Committee Work - Siraj Nour El-Ahmadi Incorporated by reference to the Company’s Form 10-K as filed with the SEC on March 31, 2021 52 10.14 2007 Employee Stock Plan Incorporated by reference to Company’s Definitive Schedule 14C Information Statement as filed with the SEC on February 19, 2008 10.15 2007 Employee Stock Plan Amendment Incorporated by reference to Company’s Definitive Schedule 14A Proxy Statement as filed with the SEC on July 22, 2014 10.16 2016 Equity Incentive Plan Incorporated by reference to Appendix A to the Company’s Definitive Schedule 14A filed with the SEC on April 20, 2016 10.17 2016 Equity Incentive Plan Amendment Incorporated by reference to Appendix A to the Company’s Definitive Schedule 14A filed with the SEC on April 12, 2019 10.18 Form of Non-qualified Stock Option Award Agreement - Employees Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on March 17, 2017 10.19 Form of Non-qualified Stock Option Award Agreement - Executive Officers Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on March 17, 2017 10.20 Form of Non-qualified Stock Option Award Agreement - Non Employee Directors Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on March 17, 2017 10.21 Form of Restricted Stock Award Agreement -Non Employee Directors Filed herewith 10.22 Lease Agreement – Englewood, CO. Facility Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on November 2, 2017 10.23 Purchase Agreement, dated October 4, 2021, by and between the Company and Lincoln Park Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on October 5, 2021 10.24 Registration Rights Agreement, dated October 4, 2021, by and between the Company and Lincoln Park Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on October 5, 2021 14.1 Code of Ethics and Business Conduct Incorporated by reference to the Company’s Form 10-K as filed with the SEC on March 16, 2018 21.1 Subsidiaries of the Registrant Filed herewith 23.1 Consent of Independent Registered Public Accounting Firm - Morison Cogen LLP Filed herewith 31.1 Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, executed by the Principal Executive Officer of the Company. Filed herewith 31.2 Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, executed by the Principal Financial Officer of the Company. Filed herewith 32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by the Principal Executive Officer of the Company. Furnished herewith 32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by the Principal Financial Officer of the Company. Furnished herewith 101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 53 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) Item 16. Form 10-K Summary None 54 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LIGHTWAVE LOGIC, INC. Registrant By: /s/ Michael Lebby Michael Lebby, Chief Executive Officer (Principal Executive Officer) Date: March 1, 2022 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Michael Lebby Chief Executive Officer, Principal Executive Officer, Director March 1, 2022 Michael Lebby /s/ James S. Marcelli President, Chief Operating Officer, Principal Financial Officer, Secretary, Director March 1, 2022 James S. Marcelli /s/ Thomas E. Zelibor Chair of the Board of Directors March 1, 2022 Thomas E. Zelibor /s/ Ronald A. Bucchi Director March 1, 2022 Ronald A. Bucchi /s/ Siraj Nour El-Ahmadi Director March 1, 2022 Siraj Nour El-Ahmadi /s/ Frederick J. Leonberger Director March 1, 2022 Frederick J. Leonberger /s/ Craig Ciesla Director March 1, 2022 Craig Ciesla 55 LIGHTWAVE LOGIC, INC. FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 CONTENTS PAGE REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-2 - F-3 BALANCE SHEETS F-4 STATEMENTS OF COMPREHENSIVE LOSS F-5 STATEMENT OF STOCKHOLDERS' EQUITY F-6 STATEMENTS OF CASH FLOWS F-7 NOTES TO FINANCIAL STATEMENTS F-8 - F-18 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Lightwave Logic, Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying balance sheets of Lightwave Logic, Inc. (the Company) as of December 31, 2021 and 2020, and the related statements of comprehensive loss, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO. Basis for Opinion The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. F- 2 To the Board of Directors and Stockholders of Lightwave Logic, Inc. (Continued) Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ Morison Cogen LLP We have served as the Company’s auditor since 2005. PCAOB ID Number 00536 Blue Bell, Pennsylvania March 1, 2022 F- 3 LIGHTWAVE LOGIC, INC. BALANCE SHEETS December 31, 2021 December 31, 2020 ASSETS CURRENT ASSETS Cash and cash equivalents $ 23,432,612 $ 3,306,590 Prepaid expenses and other current assets 232,308 567,185 Total Current Assets 23,664,920 3,873,775 PROPERTY AND EQUIPMENT - NET 2,179,075 1,873,549 OTHER ASSETS Intangible assets - net 848,133 916,000 Operating Lease - Right of Use - Building 536,447 703,454 TOTAL OTHER ASSETS 1,384,580 1,619,454 TOTAL ASSETS $ 27,228,575 $ 7,366,778 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 215,734 $ 169,247 Accrued bonuses and accrued expenses 1,118,080 81,396 Current portion of equipment purchase — 13,107 Accounts payable and accrued expenses - related parties 32,189 49,797 Deferred lease liability 41,778 41,778 Paycheck Protection Program advance — 410,700 Operating lease liability 178,192 167,007 TOTAL CURRENT LIABILITIES 1,585,973 933,032 LONG TERM LIABILITIES Deferred lease liability 80,075 121,853 Operating lease liability 358,255 536,447 TOTAL LONG TERM LIABILITIES 438,330 658,300 TOTAL LIABILITIES 2,024,303 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, 110,555,459 and 97,775,789 issued and outstanding at December 31, 2021 and December 31, 2020 110,556 97,776 Additional paid-in-capital 114,696,597 76,649,170 Accumulated deficit ( 89,602,881 ) ( 70,971,500 ) TOTAL STOCKHOLDERS' EQUITY 25,204,272 5,775,446 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 27,228,575 $ 7,366,778 The accompanying notes are an integral part of these financial statements. F- 4 LIGHTWAVE LOGIC, INC. STATEMENTS OF COMPREHENSIVE LOSS FOR THE YEARS ENDING DECEMBER 31, 2021 AND 2020 For the For the Year Ending Year Ending December 31, 2021 December 31, 2020 NET SALES $ — $ — COST AND EXPENSE Research and development 12,476,040 4,590,545 General and administrative 4,520,403 2,009,429 TOTAL COST AND EXPENSE 16,996,443 6,599,974 LOSS FROM OPERATIONS ( 16,996,443 ) ( 6,599,974 ) OTHER INCOME (EXPENSE) Paycheck Protection Program loan forgiveness 410,700 — Interest income 13,826 776 Commitment fee ( 2,059,464 ) ( 116,366 ) NET LOSS $ ( 18,631,381 ) $ ( 6,715,564 ) Basic and Diluted Loss per Share $ ( 0.18 ) $ ( 0.07 ) Basic and Diluted Weighted Average Number of Shares 105,223,959 91,859,025 The accompanying notes are an integral part of these financial statements. F- 5 LIGHTWAVE LOGIC, INC. STATEMENT OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDING DECEMBER 31, 2021 AND 2020 Additional Number of Common Paid-in Accumulated Shares Stock Capital Deficit Total BALANCE AT DECEMBER 31, 2019 87,409,600 $ 87,410 $ 69,076,240 $ ( 64,255,936 ) $ 4,907,714 Common stock issued to institutional investor 8,125,000 8,125 5,165,175 — 5,173,300 Common stock issued for commitment shares 168,137 168 116,198 — 116,366 Exercise of warrants 2,073,052 2,073 1,656,369 — 1,658,442 Options issued for services — — 539,414 — 539,414 Warrants issued for services — — 95,774 — 95,774 Net loss for the year ending December 31, 2020 — — — ( 6,715,564 ) ( 6,715,564 ) BALANCE AT DECEMBER 31, 2020 97,775,789 $ 97,776 $ 76,649,170 $ ( 70,971,500 ) $ 5,775,446 Additional Number of Common Paid-in Accumulated Shares Stock Capital Deficit Total BALANCE AT DECEMBER 31, 2020 97,775,789 $ 97,776 $ 76,649,170 $ ( 70,971,500 ) $ 5,775,446 Common stock issued to institutional investor 9,290,011 9,291 30,341,383 — 30,350,674 Common stock issued for commitment shares 514,536 514 2,058,950 — 2,059,464 Exercise of options 2,046,250 2,046 1,948,829 — 1,950,875 Cashless exercise of 445,252 options 251,873 252 2,236,606 — 2,236,858 Exercise of warrants 677,000 677 427,673 — 428,350 Options issued for services — — 1,022,985 — 1,022,985 Warrants issued for services — — 11,001 — 11,001 Net loss for the year ending December 31, 2021 — — — ( 18,631,381 ) ( 18,631,381 ) BALANCE AT DECEMBER 31, 2021 110,555,459 $ 110,556 $ 114,696,597 $ ( 89,602,881 ) $ 25,204,272 The accompanying notes are an integral part of these financial statements. F- 6 LIGHTWAVE LOGIC, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDING DECEMBER 31, 2020 AND 2021 For the For the Year Ending Year Ending December 31, 2021 December 31, 2020 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ ( 18,631,381 ) $ ( 6,715,564 ) Adjustments to reconcile net loss to net cash used in operating activities Warrants issued for services 11,001 95,774 Stock options issued for services 1,022,985 539,414 Cashless option exercise 3,672,823 — Common stock issued for services and fees 2,059,464 116,366 Depreciation and amortization of patents 878,520 784,419 Paycheck Protection Program loan forgiveness ( 410,700 ) — Decrease (increase) in assets Prepaid expenses and other current assets 334,877 ( 194,636 ) Increase (decrease) in liabilities Accounts payable 46,487 80,824 Accrued bonuses and accrued expenses 1,036,684 15,627 Accounts payable and accrued expenses-related parties ( 17,608 ) 34,992 Deferred lease liability ( 41,778 ) ( 41,779 ) Paycheck Protection Program advance — 410,700 Net cash used in operating activities ( 10,038,626 ) ( 4,873,863 ) CASH FLOWS FROM INVESTING ACTIVITIES Cost of intangibles ( 18,649 ) ( 59,923 ) Purchase of property and equipment ( 1,097,530 ) ( 158,061 ) Net cash used in investing activities ( 1,116,179 ) ( 217,984 ) CASH FLOWS FROM FINANCING ACTIVITIES Exercise of options and warrants 2,379,225 1,658,442 Cashless option exercise tax payments ( 1,435,965 ) — Issuance of common stock, institutional investor 30,350,674 5,173,300 Repayment of equipment purchase payable ( 13,107 ) ( 669,649 ) Net cash provided by financing activities 31,280,827 6,162,093 NET INCREASE IN CASH AND CASH EQUIVALENTS 20,126,022 1,070,246 CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 3,306,590 2,236,344 CASH AND CASH EQUIVALENTS - END OF YEAR $ 23,432,612 $ 3,306,590 The accompanying notes are an integral part of these financial statements. F- 7 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2021 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES History and Nature of Business Lightwave Logic, Inc. is a technology company focused on the development of next generation photonic devices and non-linear optical polymer materials systems for applications in high speed fiber-optic data communications and optical computing markets. Currently the Company is in various stages of photonic device and materials development and evaluation with potential customers and strategic partners. The Company expects to obtain a revenue stream from technology licensing agreements, technology transfer agreements and the production and direct sale of its own electro-optic device components. The Company’s current development activities are subject to significant risks and uncertainties, including failing to secure additional funding to operationalize the Company’s technology now under development. In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States. In mid March 2020 the Governor of Colorado declared a health emergency and issued an order to close all nonessential businesses. The Company temporarily curtailed most of its business operations from mid March 2020 through May 1, 2020. The Company is currently operating under the guidelines of the State of Colorado Department of Public Health and Environment and the Governor of Colorado’s Executive Order, Safer-at Home, as amended. Lightwave Logic, Inc. (the “Company”) was organized under the laws of the State of Nevada in 1997, and the Company commenced with its current business plan in 2004. Basis of Presentation The accompanying financial statements are presented in accordance with accounting principles generally accepted in the United States of America. For the statements of comprehensive loss, stockholders’ equity and cash flows for the year ended December 31, 2019 refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Although these estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future, actual results could differ from the estimates. Cash Equivalents For the purposes of the statement of cash flows, the Company considers all highly liquid instruments with maturities of three months or less at the time of purchase to be cash equivalents. Concentration of Credit Risk Certain financial instruments potentially subject the Company to concentrations of credit risk. These financial instruments consist primarily of cash. At December 31, 2021, the Company did have deposits with a financial institution that exceed the Federal Depository Insurance coverage. F- 8 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Property and Equipment Equipment is stated at cost. Depreciation is principally provided by use of straight-line methods for financial and tax reporting purposes over the estimated useful lives of the assets, generally 5 years. When property is retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in operations. Intangible Assets Definite-lived intangible assets are stated at cost. Patents are amortized over their estimated useful lives, commencing from the date of grant for the remaining legal lives of the patents. The patents generally have a term of up to 20 years from the date of filing of the earliest related patent application. When certain patent applications are abandoned by the Company for claims that are covered by patents already granted to the Company, the cost of patent applications are removed from the accounts and the resulting expense is reflected in the statement of comprehensive loss. Fair Value of Financial Instruments The carrying value of the Company’s short-term financial instruments such as cash, accounts payable and accrued expenses approximate their fair values because of their short maturities. Revenue Recognition In accordance with FASB ASC 606, Revenue from Contracts with Customers , the Company will recognize revenue upon transfer of promised goods or services in an amount that reflects the consideration expected to be received in exchange for those goods or services. To determine revenue recognition for arrangements within the scope of FASB ASC 606, the Company performs the following five steps: 1. Identify the contract with the customer. 2. Identify the performance obligations in the contract. 3. Determine the transaction price. 4. Allocate the transaction price to the performance obligations in the contract. 5. Recognize revenue as (or when) the performance obligations are satisfied. For product sales, revenue will be recognized at a point in time when the product is shipped or is delivered to the customer’s location. For services performed, revenue will be recognized at a point in time when the service is performed. However, for certain contracts, revenue will be recognized over time as the customer simultaneously receives and consumes the benefits of performance as the Company performs the service. Income Taxes The Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for temporary differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. F- 9 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Stock-based Payments The Company accounts for stock-based compensation under the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 718, "Compensation - Stock Compensation", which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date. The Company estimates the fair value of stock-based awards on the date of grant using the Black-Scholes model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods using the straight-line method. In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting (the “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. 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. Recoverability of Long-Lived Assets The Company follows FASB ASC 360, “Property, Plant, and Equipment”. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the excess of the asset’s carrying amount. Comprehensive Income (Loss) The Company follows FASB ASC 220.10, “Reporting Comprehensive Income (Loss).” Comprehensive income (loss) is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net income (loss). Since the Company has no items of other comprehensive income (loss), comprehensive income (loss) is equal to net income (loss). Recently Adopted Accounting Pronouncements As of December 31, 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. Recently Issued Accounting Pronouncements Not Yet Adopted As of December 31, 2021, there are no recently issued accounting standards not yet adopted which would have a material effect on the Company’s financial statements. Reclassifications Certain reclassifications have been made to the 2020 financial statement in order to conform to the 2021 financial statement presentation. F- 10 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 NOTE 2 – MANAGEMENT’S PLANS Our future expenditures and capital requirements will depend on numerous factors, including: 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; our ability to establish cooperative development, joint venture and licensing arrangements; and the impact of the COVID-19 pandemic. We expect that we will incur approximately $ 1,015,000 of expenditures per month over the next 12 months. Our current cash position enables us to finance our operations through December 2023. 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. On October 4, 2021, the Company entered into a purchase agreement with the institutional investor to sell up to $ 33,000,000 of common stock over a 36-month period (described in Note 10). Pursuant to the purchase agreement, the Company received $ 3,173,743 in January and February and a remaining available amount of $ 13,448,832 is available to the Company per the agreement. 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. 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 December 31, 2021 December 31, 2020 Insurance $ 123,877 $ 93,569 Other 33,041 40,134 Rent 36,525 36,525 License 38,865 36,728 Deposit for Equipment — 140,394 Prototype Devices — 118,206 Research & Development Credit — 101,629 Prepaid expenses and other current assets $ 232,308 $ 567,185 NOTE 4 – PROPERTY AND EQUIPMENT Property and equipment consist of the following: Schedule of Property and Equipment December 31, 2021 December 31, 2020 Office equipment $ 95,516 $ 86,097 Lab equipment 4,952,933 3,884,807 Furniture 33,128 33,128 Leasehold improvements 254,350 234,366 5,335,927 4,238,398 Less: Accumulated depreciation 3,156,852 2,364,849 $ 2,179,075 $ 1,873,549 Depreciation expense for the years ending December 31, 2021 and 2020 was $ 792,004 and $ 701,015 . During the years ended December 31, 2021 and 2020, the Company did not sell or retire property and equipment. F- 11 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 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. Intangible assets consist of the following: Schedule of Patents December 31, 2021 December 31, 2020 Patents $ 1,345,649 $ 1,327,000 Less: Accumulated amortization 497,516 411,000 Intangible assets - net $ 848,133 $ 916,000 Amortization expense for the years ending December 31, 2021 and 2020 was $ 86,516 and $ 83,404 . There were no patent costs written off for the years ended December 31, 2021 and 2020. NOTE 6 – 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 . During January 2022, the term was extended for an additional twenty-four ( 24 ) months. Base rent for the first year of the lease term is approximately $ 168,824 , with an increase in annual base rent of approximately 3 % in each subsequent year of the lease term. As specified in the lease, the Company paid the landlord (i) all base rent for the period November 1, 2017 and ending on October 31, 2019, in the sum of $ 347,045 ; and (ii) the estimated amount of tenant’s proportionate share of operating expenses for the same period in the sum of $ 186,293 . Commencing on November 1, 2019, monthly installments of base rent and one-twelfth of landlord’s estimate of tenant’s proportionate share of annual operating expenses shall be due on the first day of each calendar month. The lease also provides that (i) on November 1, 2019 landlord shall pay the Company for the cost of the cosmetic improvements in the amount of $3.00 per rentable square foot of the premises, and (ii) on or prior to November 1, 2019, the Company shall deposit with Landlord the sum of $ 36,524 as a security deposit which shall be held by landlord to secure the Company’s obligations under the lease. The lease contains an option to extend the term to October 31, 2024. On October 30, 2017, the Company entered into an agreement with the tenant leasing the premise from the landlord (“Original Lessee”) whereby the Original Lessee agreed to pay the Company the sum of $260,000 in consideration of the Company entering into the lease and landlord agreeing to the early termination of the Original Lessee’s lease agreement with landlord. The consideration of $ 260,000 was received on November 1, 2017. Due to the adoption of the new lease standard, the Company has capitalized the present value of the minimum lease payments commencing November 1, 2019, including the additional option period using an estimated incremental borrowing rate of 6.5 %. The minimum lease payments do not include common area annual expenses which are considered to be nonlease components. As of January 1, 2019 the operating lease right-of-use asset and operating lease liability amounted to $ 885,094 with no cumulative-effect adjustment to the opening balance of retained earnings/accumulated deficit. The Company has elected not to recognize right-of-use assets and lease liabilities arising from short-term leases. F- 12 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 NOTE 6 – COMMITMENTS CONTINUED) The Company is obligated under an operating lease for office and laboratory space. The aggregate minimum future lease payments under the operating lease, including the extended term are as follows: Schedule of Future Lease Payments of Operating Leases YEARS ENDING DECEMBER 31, AMOUNT 2022 $ 207,563 2023 213,781 2024 182,624 Total operating lease obligation 603,968 Less discounted interest ( 67,521 ) TOTAL $ 536,447 Rent expense totaling $ 134,243 and $ 44,747 is included in research and development and general and administrative expenses for the year ended December 31, 2021. Rent expense totaling $ 129,806 and $ 43,269 is included in research and development and general and administrative expenses for the year ended December 31, 2020. NOTE 7 – 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 8 – INCOME TAXES As discussed in Note 1, the Company utilizes the asset and liability method of accounting for income taxes in accordance with FASB ASC 740. The income tax (benefit) provision consists of the following: Schedule of Income Tax (Benefit) Provision 2021 2020 Current $ — $ — Deferred ( 3,692,000 ) ( 1,972,000 ) Change in valuation allowance 3,692,000 1,972,000 Total $ — $ — F- 13 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 NOTE 8 – INCOME TAXES (CONTINUED) The reconciliation of the statutory federal rate to the Company’s effective income tax rate is as follows: Schedule of Reconciliation of Statutory Federal Rate to Effective Income Tax Rate 2021 2020 Amount % Amount % Income tax benefit at U.S. federal income tax rate $ ( 3,913,000 ) ( 21 ) $ ( 1,544,000 ) ( 21 ) State tax benefit, net of federal tax effect ( 838,000 ) ( 4 ) ( 441,000 ) ( 6 ) Federal deduction net of tax 38,000 — — — Tax exempt income ( 111,000 ) ( 1 ) — — Non-deductible share-based compensation 899,000 5 13,000 — Change in valuation allowance 3,692,000 20 1,972,000 27 Other 233,000 1 — — $ — — $ — — The components of deferred tax assets as of December 31, 2021 and 2020 are as follows: Schedule of Components of Deferred Tax Assets 2021 2020 Deferred tax asset for NOL carryforwards $ 19,966,000 $ 15,338,000 Share-based compensation 1,242,000 2,178,000 Valuation allowance ( 21,208,000 ) ( 17,516,000 ) Total $ — $ — The valuation allowance for deferred tax assets as of December 31, 2021 and 2020 was $ 21,208,000 and $ 17,516,000 , respectively. The change in the total valuation for the year ended December 31, 2021 was an increase of $ 3,692,000 and for the year ended December 31, 2020 was an increase of $ 1,972,000 . In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the net operating losses and temporary differences become deductible. Management considered projected future taxable income and tax planning strategies in making this assessment. The value of the deferred tax assets was offset by a valuation allowance, due to the current uncertainty of the future realization of the deferred tax assets. As of December 31, 2021, the Company had net operating loss carry forwards of approximately $ 73,950,000 , expiring through the year ending December 31, 2038 . Net operating losses recorded in tax years beginning January 1, 2018 and after of approximately $ 35,670,000 are allowed for an indefinite carryforward period but limited to 80% of each subsequent year’s net income. This amount can be used to offset future taxable income of the Company. The timing and manner in which the Company can utilize operating loss carryforwards in any year may be limited by provisions of the Internal Revenue Code regarding changes in ownership of corporations. Such limitation may have an impact on the ultimate realization of its carryforwards and future tax deductions. F- 14 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 NOTE 8 – INCOME TAXES (CONTINUED) The Company follows FASB ASC 740.10, which provides guidance for the recognition and measurement of certain tax positions in an enterprise’s financial statements. Recognition involves a determination of whether it is more likely than not that a tax position will be sustained upon examination with the presumption that the tax position will be examined by the appropriate taxing authority having full knowledge of all relevant information. The adoption of FASB ASC 740.10 did not require an adjustment to the Company’s financial statements. The Company’s policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. As of January 1, 2021, the Company had no unrecognized tax benefits and no charge during 2021, and accordingly, the Company did not recognize any interest or penalties during 2021 related to unrecognized tax benefits. There is no accrual for uncertain tax positions as of December 31, 2021. The Company files U.S. income tax returns and a state income tax return. With few exceptions, the U.S. and state income tax returns filed for the tax years ending on December 31, 2018 and thereafter are subject to examination by the relevant taxing authorities. NOTE 9 – STOCKHOLDERS’ EQUITY Preferred Stock Pursuant to the Company’s Articles of Incorporation, the Company’s board of directors is empowered, without stockholder approval, to issue series of preferred stock with any designations, rights and preferences as they may from time to time determine. The rights and preferences of this preferred stock may be superior to the rights and preferences of the Company’s common stock; consequently, preferred stock, if issued could have dividend, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the common stock. Additionally, preferred stock, if issued, could be utilized, under special circumstances, as a method of discouraging, delaying or preventing a change in control of the Company’s business or a takeover from a third party. Common Stock Options and Warrants In January 2019, the Company signed a purchase agreement with the institutional investor to sell up to $ 25,000,000 of common stock. The Company registered 9,500,000 shares pursuant to a registration statement filed on January 30, 2019 which became effective February 13, 2019. The Company issued 350,000 shares of common stock to the institutional investor as an initial commitment fee valued at $ 258,125 , fair value, and 812,500 shares of common stock are reserved for additional commitment fees to the institutional investor in accordance with the terms of the purchase agreement. The Company registered an additional 6,000,000 shares pursuant to a registration statement filed on January 24, 2020 which became effective February 4, 2020. The Company registered an additional 8,000,000 shares pursuant to a registration statement filed on November 20, 2020 which became effective November 20, 2020. During the period January 2019 through December 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 year ending December 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. All of the registered shares under the purchase agreement have been issued as of December 31, 2021. F- 15 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 NOTE 9 – STOCKHOLDERS’ EQUITY (CONTINUED Common Stock Options and Warrants (Continued) 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. On October 4, 2021, the Company entered into a purchase agreement with the institutional investor to sell up to $ 33,000,000 of common stock over a 36-month period. Concurrently with entering into the purchase agreement, the Company also entered into a registration rights agreement which provides the institutional investor with certain registration rights related to the shares issued under the purchase agreement. Pursuant to the purchase agreement, the Company issued 30,312 shares of common stock to the institutional investor as an initial commitment fee valued at $ 279,174 , fair value, and 60,623 shares of common stock are reserved for additional commitment fees to the institutional investor in accordance with the terms of the purchase agreement. During the year ending December 31, 2021, pursuant to the purchase agreement, the institutional investor purchased 1,227,511 shares of common stock for proceeds of $ 16,377,425 and the Company issued 30,086 shares of common stock as additional commitment fee, valued at $ 446,663 , fair value, leaving 30,537 in reserve for additional commitment fees. During January and February 2022, pursuant to the purchase agreement, the institutional investor purchased 400,000 shares of common stock for proceeds of $ 3,173,743 and the Company issued 5,831 shares of common stock as additional commitment fee, valued at $ 53,123 , fair value, leaving 24,706 in reserve for additional commitment fees. NOTE 10 – 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 December 31, 2021, options to purchase 3,085,000 shares of common stock have been issued and are outstanding. During 2016, the Board of Directors of the Company adopted the 2016 Equity Incentive Plan (“2016 Plan”) that was approved by the shareholders at the 2016 annual meeting of shareholders on May 20, 2016. Under the 2016 Plan, the Company is authorized to grant awards of incentive and non-qualified stock options and restricted stock to purchase up to 3,000,000 shares of common stock to employees, directors and consultants. Effective May 16, 2019, the number of shares of the Company’s common stock available for issuance under the 2016 Plan was increased from 3,000,000 to 8,000,000 shares. As of December 31, 2021, options to purchase 3,663,248 shares of common stock have been issued and are outstanding and 3,210,250 shares of common stock remain available for grants under the 2016 Plan. Both plans are administered by the Board of Directors or its compensation committee which determines the persons to whom awards will be granted, the number of awards to be granted, and the specific terms of each grant. Subject to the provisions regarding Ten Percent Shareholders, the exercise price per share of each option cannot be less than 100% of the fair market value of a share of common stock on the date of grant. Options granted under the 2016 Plan are generally exercisable for a period of 10 years from the date of grant and may vest on the grant date, another specified date or over a period of time. F- 16 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 NOTE 10 – STOCK BASED COMPENSATION (CONTINUED) 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 77.1 %, 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. The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of an award, with the following assumptions for 2020: no dividend yield in all years, expected volatility, based on the Company’s historical volatility, 64 % to 78 %, risk-free interest rate between 0.30 % to 1.82 % and expected option life of 4.6 to 10 years. As of December 31, 2021, there was $ 1,087,645 of unrecognized compensation expense related to non-vested market-based share awards that is expected to be recognized through September 30, 2023. Share-based compensation was recognized as follows: Schedule of Stock-based Compensation Plans 2021 2020 2007 Employee Stock Option Plan $ — $ — 2016 Equity Incentive Plan 1,022,985 539,414 Warrants 11,001 95,774 Total share-based compensation $ 1,033,986 $ 635,188 The following tables summarize all stock option and warrant activity of the Company during the years ended December 31, 2021 and 2020: Schedule of Non-Qualified Stock Options and Warrants Outstanding and Exercisable Number of Exercise Weighted Average Shares Price Exercise Price Outstanding, December 31, 2019 16,302,517 $ 0.57 - $ 1.69 $ 0.85 Granted 647,500 $ 0.51 - $ 0.86 $ 0.76 Expired ( 4,845,715 ) $ 0.80 - $ 1.02 $ 0.86 Forfeited ( 8,750 ) $ 1.10 $ 1.10 Exercised ( 2,073,052 ) $ 0.80 $ 0.80 Outstanding, December 31, 2020 10,022,500 $ 0.57 - $ 1.69 $ 0.85 Granted 1,061,000 $ 1.27 - $ 16.81 $ 2.32 Forfeited ( 28,750 ) $ 0.64 - $ 0.86 $ 0.82 Exercised ( 3,168,502 ) $ 0.60 - $ 1.50 $ 0.88 Outstanding, December 31, 2021 7,886,248 $ 0.51 - $ 16.81 $ 1.02 Exercisable, December 31, 2021 7,403,249 $ 0.51 - $ 16.81 $ 0.89 F- 17 LIGHTWAVE LOGIC, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 NOTE 10 – STOCK BASED COMPENSATION (CONTINUED) The aggregate intrinsic value of options and warrants outstanding and exercisable as of December 31, 2021 was $ 103,604,322 . 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 $ 14.88 for the Company’s common stock on December 31, 2021. During the year ending December 31, 2021, 2,046,250 options were exercised for proceeds of $ 1,950,875 . During the year ending December 31, 2021, 677,000 warrants were exercised for proceeds of $ 428,350 and 445,252 options were exercised via cashless method. No options were exercised during 2020. During the year ending December 31, 2020, 2,073,052 warrants were exercised for proceeds of $ 1,658,442 . 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 December 31, 2021 Contractual Life Warrants Currently Exercisable $ 0.51 - $ 16.81 7,403,249 5.0 Years $ 0.89 NOTE 11 – RELATED PARTY At December 31, 2021 the Company had office expense accruals of officers in the amount of $ 24,000 , a legal accrual to related party of $ 6,130 and accounting service fee accrual and expense reimbursements to related parties of $ 2,059 . 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 . NOTE 12 – RETIREMENT PLAN The Company established a 401(k) retirement plan covering all eligible employees beginning November 15, 2013. A contribution of $ 53,035 was charged to expense and accrued for the year ending December 31, 2021 to all eligible non-executive participants. A contribution of $ 53,832 was charged to expense and accrued for the year ending December 31, 2020 to all eligible non-executive participants. F-18