What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-03-01 compared with 2022-03-01 · 278 added, 173 removed, 124 unchanged (78% of the section changed)

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historical financial statements and should be read in conjunction with such financial statements and notes thereto set forth elsewhere

herein and the "Forward-Looking Statements" explanation included herein.

The COVID-19 pandemic 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 Governor of Colorado’s Executive Order, Safer-at Home, 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.

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 potential for a resurgence of the virus and other factors.

The longer the COVID-19 pandemic continues, the greater

the potential negative financial effect on the Company.

within this Annual Report on Form 10-K and the "Forward-Looking Statements" explanation included elsewhere herein.

Lightwave Logic, Inc.

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1) Polymer Stack™, 2) Polymer Plus™, and 3) Polymer Slot™.

Our polymer technology

Our unique polymer technology

platform 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 2021, we continue to make advances in techniques to translate material properties

to efficient, reliable devices.

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.

In 2021 we discussed the addition of silicon-based

foundry partners to help scale in volume our polymer modulator devices.

Silicon-based foundries are large semiconductor fabrication plants

developed for the electronics IC business, that are now engaging with silicon photonics to increase their wafer throughput.

with silicon-based foundries not only demonstrates that our polymer technology can be transferred into standard production

lines using standard equipment, and also allows us to efficiently utilize our capital.

Our extremely strong patent portfolio

allows us to optimize our business model in three areas:

1) Traditional focus on product development, 2) Patent licensing, 3) Technology

transfer to foundries.

Electro-optical devices called modulators convert

data from electric signals into optical signals for multiple applications.

Our differentiation at the modulator

device level is in higher speed, lower power consumption, simplicity of manufacturing, small footprint (size), and reliability.

demonstrated higher speed and lower power consumption in packaged devices, and during 2022, we continued to make advances in techniques

to translate material properties to efficient, reliable modulator devices with commercial foundries.

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.

In 2022 we discussed the addition of several silicon-based foundry partners to help scale in volume our polymer

modulator devices.

Silicon-based foundries are large semiconductor fabrication plants developed for the electronics IC business, that

are now engaging with silicon photonics to increase their wafer throughput.

Partnering with silicon-based foundries not only demonstrates

that our polymer technology can be transferred into standard production lines using standard equipment, it also allows us to efficiently

utilize our capital.

The foundry partnerships will allow us to scale our high-performance polymer optical engines quickly and efficiently.

Our extremely strong and broad patent

portfolio allows us to optimize our business model in three areas:

1) Traditional focus on product development, 2) Patent licensing and

3) Technology transfer to foundries.

We are continually looking to strengthen our patent portfolio both by internal inventions and acquisition

of intellectual property.

We are initially targeting applications

in data communications and telecommunications markets and are exploring other applications that include automotive/LIDAR, sensing, displays

etc., for our polymer technology platform.

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;

in fiber optic data communications and telecommunications markets and are exploring other applications that include automotive/LIDAR,

sensing, displays etc., for our polymer technology platform.

Our goal is to have our unique polymer technology platform become ubiquitous.

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;

and (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:

and (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 continue 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

Develop photonic devices based on our P 2 IC™ technology

Develop proprietary intellectual property

Grow our commercial device development capabilities

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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.

Maintain/develop strategic relationships with major telecommunications and data communications companies to further the awareness and commercialization of our technology platform

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

We are currently developing our polymer technology to operate at the next industry node of 100Gbaud.

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 .

expect our initial modulator products will operate at symbol rates at least 112 Gigabaud which is roughly 200Gbps when utilized with PAM4

encoding schemes.

Our devices are highly linear, and can also enable the performance required to take advantage of more advance complex

encoding schemes if required.

Capital Requirements

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Results of Operations

following is a discussion and analysis of the Company’s results of operations for the year ended December 31, 2021 compared with

the year ended December 31, 2020.

For the discussion related to the results of operations for the year ended December 31, 2020 compared

with the year ended December 31, 2019, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020,

which was filed with the Securities and Exchange Commission on March 31, 2021.

Comparison of year ended December

31, 2021 to year ended December 31, 2020

31, 2022 to year ended December 31, 2021 and year ended December 31, 2021 to year ended December 31, 2020

As a development stage company,

we had no revenues during the year ended December 31, 2021 and December 31, 2020.

Our Company is in various stages of photonic device

and materials development and evaluation with potential customers and strategic partners.

Our 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

we had no revenues during the years ended December 31, 2022, December 31, 2021 and December 31, 2020.

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.

Operating Expenses

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General and administrative

December 31, 2021

December 31, 2020

Research and development

General and administrative

Research and development expenses

increased for the year ended December 31, 2022, as compared to the year ended December 31, 2021, primarily due to increases in research

and development non-cash stock option amortization, prototype device development expenses, research and development salary expenses, laboratory

and wafer fabrication materials and supplies, research and development consulting expenses, depreciation and research and development

travel expenses offset by a decrease in expense for cashless option exercises and research and development bonus expenses.

Research and development non-cash

stock option amortization expenses increased by $3,732,646 in the year ended December 31, 2022, compared to the same period in 2021.

device development expenses increased by $1,460,419 in the year ended December 31, 2022, compared to the same period in 2021.

and development salary expenses increased by $617,627 in the year ended December 31, 2022, compared to the same period in 2021.

and wafer fabrication materials and supplies increased by $242,737 in the year ended December 31, 2022, compared to the same period in

Research and development consulting expenses increased by $224,435 in the year ended December 31, 2022, compared to the same period

Depreciation expenses increased by $173,206 in the year ended December 31, 2022, compared to the same period in 2021.

and development travel expenses increased by $147,136 in the year ended December 31, 2022, compared to the same period in 2021.

for research and development cashless option exercises decreased by $3,382,582 in the year ended December 31, 2022, compared to the same

period in 2021.

Research and development bonus expenses decreased by $3,003,169 in the year ended December 31, 2022, compared to the same

period in 2021.

Research and development expenses

increased for the year ended December 31, 2021, as compared to the year ended December 31, 2020, primarily due to the research and development

expense for cashless option exercises and increases in research and development salary expenses, prototype device development expenses,

non-cash stock option and warrant amortization, laboratory and wafer fabrication materials and supplies, operations committee fees, depreciation

and research and development travel expenses.

The research and development expense for cashless option exercises for the year ended

December 31, 2021 were $3,490,324.

There was no expense for cashless option exercises for the year ended December 31, 2020.

development salary expenses increased by $3,300,257 in the year ended December 31, 2021, compared to the same period in 2020 primarily

for additional salary expenses.

Prototype device development expenses increased by $368,483 in the year ended December 31, 2021, compared

to the same period in 2020.

Non-cash stock option and warrant amortization expenses increased by $349,059 in the year ended December

31, 2021, compared to the same period in 2020.

Laboratory and wafer fabrication materials and supplies increased

expense for cashless option exercises and increases in research and development bonus and salary expenses, prototype device development

expenses, non-cash stock option and warrant amortization, laboratory and wafer fabrication materials and supplies, operations committee

fees, depreciation and research and development travel expenses.

The research and development expense

for cashless option exercises for the year ended December 31, 2021 were $3,490,324.

There was no expense for cashless option exercises

for the year ended December 31, 2020.

Research and development bonus and salary expenses increased by $3,300,257 in the year ended December

31, 2021, compared to the same period in 2020 primarily for bonus expenses.

Prototype device development expenses increased by $368,483

in the year ended December 31, 2021, compared to the same period in 2020.

Non-cash stock option and warrant amortization expenses increased

by $349,059 in the year ended December 31, 2021, compared to the same period in 2020.

Depreciation expenses increased by $92,404 in the

year ended December 31, 2021, compared to the same period in 2020.

Research and development travel expenses increased by $41,741 in the

year ended December 31, 2021, compared to the same period in 2020.

Laboratory and wafer fabrication materials and supplies

increased by $128,481 in the year ended December 31, 2021, compared to the same

period in 2020.

Depreciation expenses increased by $92,404 in the year ended December 31, 2021, compared to the same period in 2020.

and development travel expenses increased by $41,741 in the year ended December 31, 2021, compared to the same period in 2020.

We expect to continue to incur

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General and administrative expenses

decreased for the year ended December 31, 2022, as compared to the year ended December 31, 2021, primarily due to decreases in general

and administrative bonus and salary expenses and general and administrative expense for cashless option exercises offset by increases

general and administrative non-cash stock option amortization, legal expenses, director fees, insurance and general and administrative

travel expenses.

General and administrative bonus

and salary expenses decreased by $2,054,916 in the year ended December 31, 2022, compared to the same period in 2021 primarily for bonus

expenses in the year ended December 31, 2021.

The expense for general and administrative cashless option exercises decreased by $170,137

in the year ended December 31, 2022, compared to the same period in 2021.

General and administrative non-cash stock option amortization

increased by $1,138,708 in the year ended December 31, 2022, compared to the same period in 2021.

Legal expenses increased by $417,624

in the year ended December 31, 2022, compared to the same period in 2021.

Director fees increased by $149,750 in the year ended December

31, 2022, compared to the same period in 2021.

Insurance expenses increased by $136,771 in the year ended December 31, 2022, compared

to the same period in 2021.

General and administrative travel expenses increased by $75,652 in the year ended December 31, 2022, compared

to the same period in 2021.

General and administrative expenses

increased for the year ended December 31, 2021, as compared to the year ended December 31, 2020, primarily due to general and administrative

salary expenses, general and administrative expense for cashless option exercises and increases in investor expenses, general and administrative

bonus expenses, general and administrative expense for cashless option exercises and increases in investor expenses, general and administrative

consulting fees, non-cash stock option amortization, legal fees, general and administrative travel expenses and director and officer insurance.

General and administrative salary expenses increased by $2,015,959 in the year ended December 31, 2021, compared to the same period in

2020 primarily for additional salary expenses.

The general and administrative expense for cashless option exercises for the year ended

December 31, 2021 were $182,501.

There was no expense for cashless option exercises for the year ended December 31, 2020.

Investor expenses

increased by $108,341 in the year ended December 31, 2021, compared to the same period in 2020 primarily for the expenses to uplist the

Company to the Nasdaq Capital Market.

Compensation consulting expenses increased by $53,500 in the year ended December 31, 2021, compared

to the same period in 2020.

Non-cash stock option amortization expenses increased by $49,739 in the year ended December 31, 2021, compared

General and administrative bonus

and salary expenses increased by $2,015,959 in the year ended December 31, 2021, compared to the same period in 2020 primarily for bonus

The general and administrative expense for cashless option exercises for the year ended December 31, 2021 were $182,501.

was no expense for cashless option exercises for the year ended December 31, 2020.

Investor expenses increased by $108,341 in the year

ended December 31, 2021, compared to the same period in 2020 primarily for the expenses to uplist the Company to the Nasdaq Capital Market.

Compensation consulting expenses increased by $53,500 in the year ended December 31, 2021, compared to the same period in 2020.

stock option amortization expenses increased by $49,739 in the year ended December 31, 2021, compared to the same period in 2020.

expenses increased by $44,718 in the year ended December 31, 2021, compared to the same period in 2020 primarily for the expenses to uplist

the Company to the Nasdaq Capital Market.

General and administrative travel expenses increased by $33,260 in the year ended December 31,

2021, compared to the same period in 2020.

Director and officer insurance increased by $32,390 in the year ended December 31, 2021, compared

to the same period in 2020.

Legal expenses increased by $44,718 in the year ended December 31, 2021, compared to the same period in 2020

primarily for the expenses to uplist the Company to the Nasdaq Capital Market.

General and administrative travel expenses increased by

$33,260 in the year ended December 31, 2021, compared to the same period in 2020.

Director and officer insurance increased by $32,390

in the year ended December 31, 2021, compared to the same period in 2020.

Other Income (Expense)

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$ (1,634,938 )

December 31, 2021

December 31, 2020

Other Income/(Expense)

$ (1,634,938 )

$ (1,519,348 )

Other income (expenses) decreased

for the year ended December 31, 2022, as compared to the year ended December 31, 2021, primarily due to a decrease in commitment fee associated

with the purchase of shares by an institutional investor for sale under a stock purchase agreement in the amount of $1,849,755 offset

by the forgiveness by the Small Business Administration during 2021 of a loan funding from the Paycheck Protection Program n the amount

Other income (expenses) increased

4 unchanged sentences

December 31, 2021

$ (1,400,901 )

December 31, 2021

December 31, 2020

Net loss was $17,230,480 and $18,631,381

for the year ended December 31, 2021 and 2020, respectively, for an increase of $11,915,817, due primarily to salary expenses, the expense

for cashless option exercises and increases in commitment fee, non-cash stock option and warrant amortization, prototype device development

expenses, laboratory and wafer fabrication materials and supplies, investor expenses, operations committee fees, depreciation, compensation

consulting fees, travel expenses, legal expenses and director and officer insurance.

for the year ended December 31, 2022 and 2021, respectively, for a decrease of $1,400,901 due primarily to decreases in expense for cashless

option exercises, bonus expenses and commitment fee associated with the purchase of shares by an institutional investor for sale under

a stock purchase agreement offset by increases in non-cash stock option amortization, prototype device development expenses, research

and development salary expenses, legal expenses, the forgiveness by the Small Business Administration during 2021 of a loan funding from

the Paycheck Protection Program, laboratory and wafer fabrication materials and supplies, research and development consulting fees, travel

expenses, depreciation, director fees and insurance expenses.

Net loss was $18,631,381 and $6,715,564

for the year ended December 31, 2021 and 2020, respectively, for an increase of $11,915,817, due primarily to bonus and salary expenses,

the expense for cashless option exercises and increases in commitment fee, non-cash stock option and warrant amortization, prototype device

development expenses, laboratory and wafer fabrication materials and supplies, investor expenses, operations committee fees, depreciation,

compensation consulting fees, travel expenses, legal expenses and director and officer insurance.

Significant Accounting Policies

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Liquidity and Capital Resources

source of operating cash inflows was proceeds from the sale of common stock to an institutional investor (Lincoln Park) pursuant to purchase

agreements with the institutional investor as described in Note 9 to the Financial Statements and proceeds received pursuant to the exercise

of options and warrants.

the registered shares under the January 21, 2019 purchase agreement with the institutional investor have been issued as of June 30, 2021.

July 2, 2021, our Company filed a $100 million universal shelf registration statement which became effective on July 9, 2021, and on October

4, 2021, our Company entered into a new purchase agreement (the “ Purchase Agreement ”) with the institutional investor

to sell up to $33 million of common stock over a 36-month period, with $13,448,832 remaining on the Purchase Agreement as of the date

of this filing.

the year ended December 31, 2021, we received $30,350,674 in proceeds pursuant to the purchase agreements with the institutional investor

and $2,379,225 in proceeds pursuant to the exercise of options and warrants.

During 2020, we received $5,173,300 in proceeds pursuant

to the January 21, 2019 purchase agreement with the institutional investor and $1,658,442 in proceeds from exercise of

Additionally, on April 24, 2020, we received $410,700 in loan funding from the Paycheck Protection Program, as described

in Note 7 to the Financial Statements.

The loan was forgiven by the Small Business Administration in its entirety on January 22,

the year ended December 31, 2021, 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.

During the year ended December 31, 2020, our

primary sources of cash outflows from operations included payroll, rent, utilities, payments to vendors and third-party service providers.

source of operating cash inflows was proceeds from the sale of common stock to Lincoln Park, an institutional investor, pursuant to purchase

agreements with Lincoln Park (the institutional investor) as described in Note 10 to the Financial Statements and proceeds received pursuant

to the exercise of options and warrants.

All of the registered shares under

the January 21, 2019 purchase agreement with Lincoln Park have been issued as of June 30, 2021.

On July 2, 2021, the Company filed

a $100 million universal shelf registration statement which became effective on July 9, 2021.

On October 4, 2021, our Company entered

into the 2021 Purchase Agreement to sell up to $33 million of common stock over a 36-month period, with $2,126,557 remaining on the 2021

Purchase Agreement as of the date of this filing.

On February 28, 2023, our Company entered into the 2023 Purchase Agreement to sell up

to $30 million of common stock over a 36-month period, with $30 remaining on the 2023 Purchase Agreement as of the date of this filing,

and on December 9, 2022, our Company entered into the Roth Sales Agreement with Roth Capital ,

as sales agent, whereby pursuant to the Roth Sales Agreement, our Company may offer and sell up to $35,000,000 in shares of our common

stock, from time to time through Roth Capital.

As of the date of this filing $35 million remains available to our Company pursuant to

the Roth Sales Agreement.

the year ended December 31, 2022, the Company received $12,775,268 in proceeds pursuant to the 2021 purchase agreement with the institutional

investor and $653,895 in proceeds pursuant to the exercise of options and warrants.

During the year ended December 31, 2021, the Company

received $30,350,674 in proceeds pursuant to the purchase agreements with the institutional investor and $2,379,225 in proceeds pursuant

to the exercise of options and warrants.

During the year ended December 31, 2020,

we received $5,173,300 in proceeds pursuant to the January 2019 purchase agreement with the institutional investor and $1,658,442

in proceeds from exercise of warrants.

Additionally, on April 24, 2020, we received $410,700 in loan funding from the Paycheck Protection

Program, as described in Note 8 to the Financial Statements.

The loan was forgiven by the Small Business Administration in its

entirety on January 22, 2021.

the year ended December 31, 2022, our primary sources of cash outflows from operations included payroll, rent, utilities, payments to

vendors including prototypes development and foundries expenses, third-party service providers and payroll taxes related to cashless option

During the year ended December 31, 2021, our primary sources of cash outflows from operations included payroll and bonus, payroll

taxes related to cashless option exercise, rent, utilities, payments to vendors including prototypes development and foundries expenses

and third-party service providers.

During the year ended December 31, 2020, our primary sources

of cash outflows from operations included payroll, rent, utilities, payments to vendors and third-party service providers.

Sources and Uses of Cash

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We expect that we will incur approximately $1,604,000 of expenditures per month over the next 12 months.

We expect our Lincoln Park financing (described below) to provide us with sufficient funds to maintain our operations over that period

Our current cash position enables us to finance our operations through December 2023 before we will be required to replenish

our cash reserves pursuant to the Lincoln Park financing.

Our cash requirements are expected to increase at a rate consistent with our

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.

4, 2021 , our Company entered into the Purchase Agreement with Lincoln Park, pursuant to which Lincoln Park agreed to purchase from

us up to $33,000,000 of our Common Stock (subject to certain limitations) from time to time over a 36-month period.

Pursuant to the Purchase

Agreement, Lincoln Park is obligated to make purchases as the Company directs in accordance with the Purchase Agreement, which may be

terminated by the Company at any time, without cost or penalty.

Sales of shares will be made in specified amounts and at prices that are

based upon the market prices of our Common Stock immediately preceding the sales to Lincoln Park.

We expect this financing to provide

us with sufficient funds to maintain our operations for the foreseeable future.

With the additional capital, we expect to achieve a level

of revenues attractive enough to fulfill our development activities and adequate enough to support our business model for the foreseeable

We cannot assure you that we will meet the conditions of the Purchase Agreement with Lincoln Park in order to obligate Lincoln

Park to purchase our shares of common stock.

In the event we fail to do so, and other adequate funds are not available to satisfy long-term

capital requirements, or if planned revenues are not generated, we may be required to substantially limit our operations.

This limitation

of operations may include reductions in capital expenditures and reductions in staff and discretionary costs.

There are no trading volume requirements

or restrictions under the Purchase Agreement, and we will control the timing and amount of any sales of our Common Stock to Lincoln Park.

Lincoln Park has no right to require any sales by us, but is obligated to make purchases from us as we direct in accordance with the Purchase

We can also accelerate the amount of Common Stock to be purchased under certain circumstances.

are no limitations on the use of proceeds, financial or business covenants, restrictions on future financings (other than restrictions

on the Company’s ability to enter into a similar type of agreement or equity line of credit during the term, excluding an at-the-market

transaction with a registered broker-dealer), rights of first refusal, participation rights, penalties or liquidated damages in the Purchase

We expect the 2021 Purchase Agreement,

the 2023 Purchase Agreement and the Roth Sales Agreement (all as more fully described below) to provide us with sufficient funds

to maintain our operations over that period of time.

Our current cash position enables us to finance our operations through April 2024

before we will be required to replenish our cash reserves pursuant to our 2021 Purchase Agreement, the 2022 Purchase Agreement or the

Roth Sales Agreement.

Our cash requirements are expected to increase at a rate consistent with our Company’s path to revenue

growth as we expand our activities and operations with the objective of commercializing our electro-optic polymer technology.

have no debt to service.

We expect that our cash used in

operations will continue to increase during 2023 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

· Partnering with commercial foundries to implement our electro-optic polymers

into accepted PDKs by the foundries;

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;

Partnering with commercial foundries to implement our electro-optic polymers into accepted PDKs by the foundries;

Developing and maintaining collaborative relationships with strategic partners;

Developing and improving our manufacturing processes and quality controls;

· Increases in our general and administrative activities related to our operations

as a reporting public company and related corporate compliance requirements.

Increases in our general and administrative activities related to our operations as a reporting public company and related corporate compliance requirements.

2021 and 2023 Purchase Agreements - Lincoln Park

4, 2021 , our Company entered into the 2021 Purchase Agreement with Lincoln Park, pursuant to which Lincoln Park agreed to purchase

from us up to $33 million of our common stock (subject to certain limitations) from time to time over a 36-month period.

On February 28,

2023, our Company entered into the 2023 Purchase Agreement with Lincoln Park, pursuant to which Lincoln Park agreed to purchase from us

up to $30 million of our common stock (subject to certain limitations) from time to time over a 36-month period.

Pursuant to each of the

2021 Purchase Agreement, and the 2023 Purchase Agreement, Lincoln Park is obligated to make purchases as the Company directs in accordance

with each of the applicable purchase agreements, which may be terminated by the Company at any time, without cost or penalty.

shares will be made in specified amounts and at prices that are based upon the market prices of our common stock immediately preceding

the sales to Lincoln Park.

We expect this financing to provide us with sufficient funds to maintain our operations for the foreseeable

With the additional capital, we expect to achieve a level of revenues attractive enough to fulfill our development activities

and adequate enough to support our business model for the foreseeable future.

are no trading volume requirements or restrictions under either of the 2021 Purchase Agreement or the 2023 Purchase Agreement, and

we will control the timing and amount of any sales of our common stock to Lincoln Park.

Lincoln Park has no right to require any sales

by us, but is obligated to make purchases from us as we direct in accordance with each of the applicable purchase agreements.

accelerate the amount of common stock to be purchased under certain circumstances.

limitations on the use of proceeds, financial or business covenants, restrictions on future financings (other than restrictions on the

Company’s ability to enter into a similar type of agreement or equity line of credit during the term, excluding an at-the-market

transaction with a registered broker-dealer), rights of first refusal, participation rights, penalties or liquidated damages in either

of the purchase agreements.

Roth Sales Agreement – Roth Capital

December 9, 2022, we entered into the Roth Sales Agreement with Roth Capital, as sales agent.

Pursuant to the Roth Sales Agreement,

our Company may offer and sell up to $35,000,000 in shares of our common stock, from time to time through Roth Capital.

Upon delivery

of a placement notice based on our Company’s instructions and subject to the terms and conditions of the Roth Sales Agreement, Roth

Capital may sell the shares by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated

under the Securities Act, including sales made directly on or through The Nasdaq Capital Market, on any other existing trading market

for the Company’s common stock, in negotiated transactions at market prices prevailing at the time of sale or at prices related

to such prevailing market prices, or by any other method permitted by law, including negotiated transactions, subject to the prior written

consent of our Company.

We are not obligated to make any sales of shares under the Roth Sales Agreement.

The Company or Roth Capital

may suspend or terminate the offering of shares upon notice to the other party, subject to certain conditions.

Roth Capital will

act as sales agent on a commercially reasonable efforts basis consistent with its normal trading and sales practices and applicable state

and federal law, rules and regulations and the rules of Nasdaq.

We have agreed to pay Roth Capital commissions for its services

of acting as agent of 3.0% of the gross proceeds from the sale of the shares pursuant to the Roth Sales Agreement.

The amount of proceeds we receive

from the Roth Sales Agreement, if any, will depend upon the number of shares of our common stock sold and the market price at which they

There can be no assurance that we will be able to sell any shares under or fully utilize the Roth Sales Agreement.

is not required to sell any specific number of shares of our common stock under the Roth Sales Agreement.

We intend to use net proceeds

from the Roth Sales Agreement for general corporate purposes, including, without limitation, sales and marketing activities, product development,

making acquisitions of assets, businesses, companies or securities, capital expenditures, and for working capital needs.

We cannot assure you that we will

meet the conditions of either of the purchase agreements with Lincoln Park in order to obligate Lincoln Park to purchase our shares of

common stock, and we cannot assure you that we will be able to sell any shares under or fully utilize the Roth Sales Agreement.

event we fail to do so, and other adequate funds are not available to satisfy long-term capital requirements, or if planned revenues are

not generated, we may be required to substantially limit our operations.

This limitation of operations may include reductions in capital

expenditures and reductions in staff and discretionary costs.

Analysis of Cash Flows

1 unchanged sentence

Net cash used in operating activities

was $10,465,880 for the year ended December 31, 2022, primarily attributable to the net loss of $17,230,480 adjusted by $5,813,628 in

options issued for services, $91,713 amortization of deferred compensation, $209,709 in common stock issued for services, $1,045,208 in

depreciation expenses and patent amortization expenses, ($379,037) in prepaid expenses, ($135,661) in accounts payable, accrued bonuses

and accrued expenses and $119,040 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 $2,209,722 for the year ended December 31, 2022, consisting of $260,415 in cost for intangibles, $1,307,187 in asset additions for

the Colorado headquarter facility and labs and $642,120 in a loan issuance.

Net cash provided by financing activities

was $13,345,141 for the year ended December 31, 2022 and consisted of $653,895 in proceeds from exercise of options and warrants, $12,775,268

in proceeds from resale of common stock to an institutional investor offset by $84,022 in cashless option exercise tax payments.

31, 2022, our cash and cash equivalents totaled $24,102,151, our assets totaled $29,263,472, our liabilities totaled $1,710,449 and we

had stockholders’ equity of $27,553,023.

For the year ended December 31, 2021

Net cash used in operating activities

was $10,038,626 for the year ended December 31, 2021, primarily attributable to the net loss of $18,631,381 adjusted by $11,001 in warrants

28 unchanged sentences

from resale of common stock to an institutional investor offset by $669,649 repayment of equipment purchased.

31, 2020, our cash and cash equivalents totaled $3,306,590, our assets totaled $7,366,778, our liabilities totaled $1,591,332 and we had

stockholders’ equity of $5,775,446.

Contractual Obligations

See "Note 7–Commitments" of the

notes to the financial statements contained elsewhere within this Annual Report on Form 10-K for a discussion of our operating lease for

office and laboratory space.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis