Lightwave Logic(LWLG) - 2025 Q2 - Quarterly Report

Cover Page Report Filing Details | Item | Detail | | :--- | :--- | | Filing Type | Quarterly Report (Form 10-Q) | | Period Ended | June 30, 2025 | | Registrant | Lightwave Logic, Inc. | | State of Jurisdiction | Nevada | | Trading Symbol | LWLG | | Exchange | The Nasdaq Stock Market | | Common Stock Outstanding (as of Aug 14, 2025) | 129,439,986 shares | | Filer Status | Non-accelerated filer, Smaller reporting company | Table of Contents Forward-Looking Statements - This report contains forward-looking statements, identifiable by words such as 'anticipate,' 'intend,' 'plan,' and 'expect,' which are based on current beliefs and assumptions about the future of the business[8][9] - Actual results and financial conditions may differ materially due to inherent uncertainties and risks, including inability to generate significant revenue, lack of funding, market acceptance issues, competition, and changes in technology[9] - The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made, except as required by law[11] Part I. Financial Information Item 1. Financial Statements Unaudited financial statements for Lightwave Logic, Inc. for Q2 and H1 2025 and 2024 are presented, adhering to GAAP and SEC regulations Balance Sheets Balance Sheet Highlights | Metric | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $32,436,267 | $37,807,983 | $(5,371,716) | | Total Liabilities | $3,602,097 | $4,384,078 | $(781,981) | | Total Stockholders' Equity | $28,834,170 | $33,423,905 | $(4,589,735) | | Cash and cash equivalents | $22,106,946 | $27,667,964 | $(5,561,018) | - Total assets decreased by $5.37 million from December 31, 2024, to June 30, 2025, primarily driven by a $5.56 million decrease in cash and cash equivalents[17] - Total liabilities decreased by $0.78 million, mainly due to reductions in accounts payable and accrued expenses[17] Statements of Comprehensive Loss Comprehensive Loss Highlights | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $25,605 | $19,355 | $48,522 | $49,772 | | Total Cost and Expense | $5,631,287 | $6,258,930 | $10,559,585 | $12,140,217 | | Loss From Operations | $(5,605,682) | $(6,239,575) | $(10,511,063) | $(12,090,445) | | Net Loss | $(5,672,132) | $(6,019,684) | $(10,369,156) | $(11,699,595) | | Basic and Diluted Loss Per Share | $(0.05) | $(0.05) | $(0.08) | $(0.10) | - Net sales increased by 32.2% for the three months ended June 30, 2025, compared to the same period in 2024, but decreased by 2.5% for the six months ended June 30, 2025, compared to 2024[19] - Net loss decreased by 5.8% for the three months ended June 30, 2025, and by 11.4% for the six months ended June 30, 2025, compared to the respective periods in 2024, indicating a reduction in losses[19] - Research and development expenses decreased significantly by 39.5% for the three months and 36.2% for the six months ended June 30, 2025, compared to the prior year periods[19] Statements of Stockholders' Equity Stockholders' Equity Changes (Six Months Ended June 30, 2025) | Item | Number of Shares | Common Stock | Additional Paid-in Capital | Deferred Compensation | Accumulated Deficit | Total Equity | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Balance at Dec 31, 2024 | 123,301,653 | $123,302 | $184,363,772 | $(656,735) | $(150,406,434) | $33,423,905 | | Common stock issued to institutional investor | 1,685,881 | $1,686 | $2,173,297 | — | — | $2,174,983 | | Common stock issued for commitment shares | 261,386 | $261 | $243,569 | — | — | $243,830 | | Common stock sales at the market | 368,411 | $368 | $506,880 | — | — | $507,248 | | Exercise of options | 282,500 | $283 | $203,717 | — | — | $204,000 | | Cashless exercise of 1,350,000 options | 434,148 | $434 | $533,140 | — | — | $533,574 | | Options issued for services | — | — | $1,282,692 | — | — | $1,282,692 | | Performance stock units (PSUs) issued for services | — | — | $384,925 | — | — | $384,925 | | Restricted stock units (RSUs) issued for services | — | — | $11,113 | — | — | $11,113 | | Net loss for the six months ended June 30, 2025 | — | — | — | — | $(10,369,156) | $(10,369,156) | | Balance at June 30, 2025 | 126,466,708 | $126,467 | $189,836,354 | $(353,061) | $(160,775,590) | $28,834,170 | - Total common stock outstanding increased from 123,301,653 shares at December 31, 2024, to 126,466,708 shares at June 30, 2025, primarily due to issuances to institutional investors, commitment shares, and market sales[25] - Additional paid-in capital increased by approximately $5.47 million during the six months ended June 30, 2025, driven by stock issuances and stock-based compensation[25][26] Statements of Cash Flows Cash Flow Highlights (Six Months Ended June 30) | Cash Flow Activity | 2025 | 2024 | Change (2025 vs 2024) | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | $(7,260,222) | $(8,823,788) | $1,563,566 (less cash used) | | Net cash used in investing activities | $(1,002,226) | $(1,653,217) | $650,991 (less cash used) | | Net cash provided by financing activities | $2,701,430 | $8,240,733 | $(5,539,303) (less cash provided) | | Net decrease in cash and cash equivalents | $(5,561,018) | $(2,236,272) | $(3,324,746) (larger decrease) | | Cash and cash equivalents - End of Period | $22,106,946 | $29,195,815 | $(7,088,869) | - Net cash used in operating activities decreased by $1.56 million in the first six months of 2025 compared to 2024, primarily due to a lower net loss and changes in working capital[33] - Net cash provided by financing activities significantly decreased by $5.54 million, mainly due to lower proceeds from common stock sales to institutional investors in 2025[33] Notes to Financial Statements Note 1 – Nature of Business and Summary of Significant Accounting Policies - Lightwave Logic, Inc. is a technology platform company leveraging proprietary electro-optic (EO) polymers (Perkinamine®) to transmit data at higher speeds with less power, targeting applications in telecommunications and data transmission for generative AI[36][137] - The primary revenue stream is from technology material supply and licensing agreements for patented EO polymer materials, with expectations for additional revenue from technology transfer agreements and direct material sales[37][43] - Revenue recognition follows ASC 606, treating technology licenses and material supply as a single performance obligation, with upfront fees and minimum royalties recognized pro-rata over the contract term, and variable royalties/milestones recognized when earned/achieved[40][42][43][44][45] Note 2 – Management's Plans - The Company expects monthly expenditures of approximately $1.79 million over the next 12 months and has sufficient cash to finance operations through October 2026[58][170][171] - Additional funding sources include a $30 million common stock purchase agreement with an institutional investor (March 2025, $27.8 million remaining) and a $35 million at-the-market sales agreement with an investment banking company (December 2022, $26.9 million remaining)[58][167] - The first commercial agreement, a material supply and license agreement, generated $25,605 in revenue for Q2 2025 and $48,522 for H1 2025, with cash requirements expected to increase with revenue growth from commercialization[58] Note 3 – Revenue - The Company's first commercial agreement, a four-year non-exclusive material supply and license agreement, commenced in May 2023, generating running royalties, minimum annual royalties, and milestone license fees[59][61] Revenue Recognition from License Agreement | Period | Revenue Recognized | | :--- | :--- | | Three months ended June 30, 2025 | $25,605 | | Three months ended June 30, 2024 | $19,355 | | Six months ended June 30, 2025 | $48,522 | | Six months ended June 30, 2024 | $36,022 | Contract Balances | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Accounts receivable, net | $10,753 | $45,565 | | Short-term contract liability | $14,875 | $23,208 | Note 4 – Prepaid Expenses and Other Current Assets Prepaid Expenses and Other Current Assets | Category | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Insurance | $357,254 | $154,945 | +$202,309 | | Software licenses | $182,533 | $151,451 | +$31,082 | | Investor relations | $49,053 | $5,271 | +$43,782 | | Prototype devices | $0 | $44,134 | -$44,134 | | Total | $638,856 | $401,741 | +$237,115 | - Total prepaid expenses and other current assets increased by $237,115 from December 31, 2024, to June 30, 2025, primarily due to increases in prepaid insurance, software licenses, and investor relations expenses, while prototype devices decreased to zero[67] Note 5 – Property and Equipment Property and Equipment, Net | Category | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Lab equipment | $11,819,801 | $10,953,487 | +$866,314 | | Total Property and equipment, net | $5,724,559 | $5,691,545 | +$33,014 | | Accumulated depreciation | $6,902,263 | $6,037,723 | +$864,540 | Depreciation Expense | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three months ended June 30 | $461,228 | $395,928 | | Six months ended June 30 | $889,680 | $761,491 | - The Company recorded a gain of $28,800 on the trade-in of property and equipment during the six months ended June 30, 2025, compared to a loss of $3,166 in the prior year period[70] Note 6 – Intangible Assets Intangible Assets, Net | Category | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Patents | $2,235,408 | $2,127,076 | +$108,332 | | Accumulated amortization | $825,040 | $771,631 | +$53,409 | | Intangible assets, net | $1,410,368 | $1,355,445 | +$54,923 | Amortization Expense | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three months ended June 30 | $26,901 | $22,311 | | Six months ended June 30 | $53,409 | $43,246 | - Intangible assets primarily consist of legal and patent fees for patent applications, with amortization recorded only on granted patents over their remaining legal life[71] Note 7 – Leases - The Company's primary lease is for approximately 23,104 square feet of office, chemistry, clean room, and R&D space in Colorado, with an amended lease term of 128 months effective June 1, 2023, and annual base rent increases of approximately 3%[74][75] Undiscounted Future Minimum Lease Payments (as of June 30, 2025) | YEARS ENDING DECEMBER 31, | AMOUNT | | :--- | :--- | | 2025 | $194,305 | | 2026 | $399,199 | | 2027 | $411,174 | | 2028 | $423,612 | | 2029 | $436,300 | | Thereafter | $1,921,271 | | Total Undiscounted | $3,785,861 | | Less discounted interest | $(1,100,824) | | TOTAL | $2,685,037 | Weighted Average Lease Assumptions (as of June 30, 2025) | Metric | Value | | :--- | :--- | | Weighted average remaining lease term | 8.58 Years | | Weighted average discount rate | 8.25% | Note 8 – Income Taxes - No income tax benefit was recognized for losses in Q2 and H1 2025 and 2024, as a valuation allowance was created for the entire net deferred tax asset due to uncertainty of realization[83] - The Company had no unrecognized tax benefits or related interest/penalties as of January 1, 2025, and does not anticipate significant changes in the next 12 months[84] - U.S. and state income tax returns from 2021 onwards are subject to examination, and Net Operating Loss (NOL) carryforwards are subject to examination when utilized[85] Note 9 – Stockholders' Equity - The Company has preferred stock authorized but none issued or outstanding, with the board empowered to issue series with potentially superior rights to common stock[88] - A new $100 million universal shelf registration statement became effective on August 5, 2024[89] - The Company entered into a new $30 million purchase agreement with an institutional investor (Lincoln Park) on March 17, 2025, with $27,846,150 remaining available as of the filing date[93][167] - An at-the-market sales agreement with Roth Capital allows for the sale of up to $35 million in common stock, with $26,949,862 remaining available as of the filing date[95][167] Note 10 – Stock Based Compensation - The Company operates under the 2025 Equity Incentive Plan (approved May 15, 2025), authorizing grants of up to 6,000,000 shares for options and restricted stock, with 5,206,775 shares remaining available as of June 30, 2025[101] Total Share-Based Compensation Expense | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three months ended June 30 | $1,101,401 | $1,850,270 | | Six months ended June 30 | $2,080,593 | $2,540,981 | - As of June 30, 2025, there was $1,709,499 of unrecognized compensation expense related to non-vested market-based share awards, expected to be recognized through June 2028[107] - During the six months ended June 30, 2025, the Company granted 2,187,501 performance stock units (PSUs) to executives, tied to commercialization goals, with a grant date fair value of $2,029,126[123] Note 11 – Related Party Transactions - The Company engaged in related party transactions for legal services, accounting and IT services, director compensation, and consulting fees to advisory board members during the three and six months ended June 30, 2025 and 2024[125][127] Related Party Expenses (Six Months Ended June 30, 2025) | Category | Amount | Related Accrual (June 30, 2025) | | :--- | :--- | :--- | | Legal fees and expense reimbursements | $69,643 | $68,750 | | Accounting and IT service fees | $39,740 | $4,920 | | Director fees and travel expenses | $108,636 | $51,250 | | Consulting fees to advisory board member | $165,000 | $22,500 | Note 12 – Retirement Plan - The Company established a 401(k) retirement plan for eligible employees, amended effective February 15, 2025, offering pre-tax and Roth deferrals[126] - The Company matches 100% of participant contributions up to 4% for all eligible employees, with matching contributions vesting immediately[126] 401(k) Matching Contributions Charged to Expense | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three months ended June 30 | $45,890 | $34,324 | | Six months ended June 30 | $85,477 | $59,092 | Note 13 – Segment Reporting - The Company operates as a single reportable segment, with the CEO acting as the Chief Operating Decision Maker (CODM) and evaluating the business as a whole based on operating loss[129] Segment Operating Loss and Net Sales | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $25,605 | $19,355 | $48,522 | $49,772 | | Segment Operating Loss | $(5,605,682) | $(6,239,575) | $(10,511,063) | $(12,090,445) | - For the three and six months ended June 30, 2025, 100% of net sales were generated internationally. For the six months ended June 30, 2024, 28% of net sales were from the U.S. and 72% internationally[135] Note 14 – Subsequent Events - On July 4, 2025, the U.S. enacted H.R. 1, a tax reform bill, which the Company is evaluating for its impact on the estimated annual effective tax rate and R&D expense deductibility; these impacts are not reflected in the current report[133] - On August 6, 2025, the Board's Compensation Committee approved a grant of 51,250 options with a total value of $87,907 to Technical Advisory Board members under the 2025 Plan, with an exercise price of $2.04 per share[134] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Lightwave Logic, Inc.'s financial condition and results of operations for Q2 and H1 2025 and 2024 Overview - Lightwave Logic, Inc. is a technology platform company utilizing proprietary electro-optic (EO) polymers (Perkinamine®) for high-speed, low-power data transmission in telecommunications and generative AI applications[137] - The Company's differentiation lies in higher speed, lower power consumption, manufacturing simplicity, small footprint, and reliability of its modulator devices, with ongoing advances in integrating materials with commercial foundries[138] - The Company is focused on integrating its materials into customer PIC and device architectures, demonstrating superior performance, and providing Process Development Kits (PDKs) to enable efficient integration, leveraging silicon-based foundry partnerships for scalability[138] - The Company's strong patent portfolio supports a business model focused on polymer materials development, patent licensing, and technology transfers to foundries, initially targeting fiber optic data communications and telecommunications, especially for AI-driven network infrastructure[139][140][141] Commencement of Commercial Operations - Commercial operations began in May 2023 with a material supply license agreement for Perkinamine chromophore materials for polymer-based photonic devices and PICs[143] - Increased interest in the Company's materials in 2024 and 2025 is driven by the need for higher speed connections to scale AI-enabled network infrastructure, leading to discussions on future license agreements[143] - In December 2024, the Company decided to focus commercial and R&D efforts on EO Polymer materials development and manufacturing, rather than actively promoting the sale of full PICs or packaged devices to external customers[143] Business Strategy - The Company's revenue strategy includes technology licensing for specific product applications, joint venture relationships with industry leaders, and direct production and sale of electro-optic materials[145] - Key objectives include further developing proprietary organic EO polymer material systems, partnering with PIC/device design and manufacturing companies for PDKs, developing intellectual property, and growing commercial device design, reliability, testing, and manufacturing capabilities[149] - The Company aims to maintain and develop strategic relationships with major telecommunications and data communications companies and add high-level personnel to support materials and process development[149] Capital Requirements - The Company commenced commercial operations in May 2023 and does not yet generate sufficient revenue to cover operating expenses, having incurred substantial net losses since inception[148] - Capital requirements are met primarily through the issuance and sale of common stock, with future expenditures dependent on R&D progress, product introduction rates, intellectual property costs, market acceptance, and ability to establish partnerships[148][170] Results of Operations Comparison of Q2 2025 to Q2 2024 Q2 2025 vs Q2 2024 Financial Performance | Metric | Q2 2025 | Q2 2024 | Change | Percent Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $25,605 | $19,355 | $6,250 | 32.2% | | Cost of Sales | $3,463 | $0 | $3,463 | N/A | | Research and development expenses | $2,641,941 | $4,362,258 | $(1,720,317) | -39% | | General and administrative expenses | $2,985,883 | $1,896,672 | $1,089,211 | 57% | | Total Operating Expenses | $5,627,824 | $6,258,930 | $(631,106) | -10% | | Other (Expense) Income | $(66,450) | $219,891 | $(286,341) | -130% | | Net Loss | $(5,672,132) | $(6,019,684) | $347,552 | -6% | - Research and development expenses decreased by 39% due to lower non-cash stock option/restricted stock amortization, salaries, lab materials, outside services, wafer fabrication, and consulting, partially offset by increased depreciation[153] - General and administrative expenses increased by 57% primarily due to higher salaries and non-cash stock option/restricted stock amortization, offset by decreases in consulting, sales/marketing, and business insurance[155] - Other expense increased by 130% due to a significant increase in commitment fees associated with institutional investor stock purchases and a decrease in interest income[156] Comparison of H1 2025 to H1 2024 H1 2025 vs H1 2024 Financial Performance | Metric | H1 2025 | H1 2024 | Change | Percent Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $48,522 | $36,022 | $12,500 | 34.7% | | Cost of Sales | $5,491 | $5,175 | $316 | 6.1% | | Research and development expenses | $5,731,159 | $8,982,920 | $(3,251,761) | -36% | | General and administrative expenses | $4,822,935 | $3,152,122 | $1,670,813 | 53% | | Total Operating Expenses | $10,554,094 | $12,135,042 | $(1,580,948) | -13% | | Other Income | $141,907 | $390,850 | $(248,943) | -64% | | Net Loss | $(10,369,156) | $(11,699,595) | $1,330,439 | -11% | - Revenues increased by 34.7% for the six months ended June 30, 2025, compared to the same period in 2024, with 100% of net sales generated internationally in H1 2025[158][159] - Net loss decreased by 11% for the six months ended June 30, 2025, compared to 2024, primarily due to reduced R&D expenses and other operational cost decreases, despite increases in salary expenses and commitment fees[165] Liquidity and Capital Resources - The Company's primary sources of operating cash inflows are proceeds from common stock sales to Lincoln Park Capital Fund, LLC and Roth Capital Partners, LLC, and proceeds from option exercises[166] - As of the filing date, $27,846,150 remains available under the 2025 Purchase Agreement with Lincoln Park and $26,949,862 remains available under the Roth Sales Agreement[167] - The Company expects to incur approximately $1.79 million of expenditures per month over the next 12 months and has sufficient cash to finance operations through October 2026[170][171] - Cash requirements are expected to increase due to planned activities such as adding staff, expanding R&D, increasing marketing, partnering with foundries, developing strategic relationships, and improving manufacturing processes[171] Analysis of Cash Flows Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(7,260,222) | $(8,823,788) | | Net cash used in investing activities | $(1,002,226) | $(1,653,217) | | Net cash provided by financing activities | $2,701,430 | $8,240,733 | | Cash and cash equivalents - End of Period | $22,106,946 | $29,195,815 | - Net cash used in operating activities decreased in H1 2025 compared to H1 2024, primarily due to a lower net loss and adjustments for non-cash items like stock options and depreciation[177][181] - Net cash provided by financing activities significantly decreased in H1 2025, mainly due to lower proceeds from common stock sales to institutional investors compared to the prior year[179][183] Contractual Obligations - There have been no material changes outside the ordinary course of business in the Company's contractual commitments during the six months ended June 30, 2025, with operating lease obligations detailed in Note 7[184] Significant Accounting Policies - The Company's significant accounting policies have not materially changed since the 2024 Form 10-K was filed[185] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the Company's market risk exposure, primarily interest rate risk, concluding no material financial market risk - As of June 30, 2025, the Company held $22.1 million in cash and cash equivalents, with fair values determined based on 'Level 1' inputs (quoted prices for identical instruments in active markets)[186] - The Company does not use market risk sensitive instruments for hedging, trading, or speculative purposes[186] - A 10% change in interest rates on June 30, 2025, would not have a material effect on the fair value of the Company's investment portfolio, indicating no material financial market risk exposure due to short holding periods and investment nature[187][188] Item 4. Controls and Procedures This section reports on the effectiveness of the Company's disclosure controls and internal control over financial reporting - As of June 30, 2025, the Company's Principal Executive Officer and Principal Financial Officer concluded that disclosure controls and procedures were effective, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[189] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, these controls[190] Part II. Other Information Item 1. Legal Proceedings This section states that there are no material legal proceedings affecting the Company - The Company is not involved in any material legal proceedings[192] Item 1A. Risk Factors This section highlights key risks, including substantial operating losses, capital needs, and uncertainties in revenue and financing - The Company has incurred substantial operating losses since inception, with a net loss of $10.4 million for the six months ended June 30, 2025, and an accumulated deficit of $160.8 million[194] - The Company anticipates continued operating losses through at least 2025 and requires additional capital to fund operations beyond October 2026, with no assurance of achieving profitability or securing future financing on acceptable terms[195][196] - Failure to obtain adequate additional financing could lead to substantial limitations on operations, including reductions in capital expenditures, staff, and discretionary costs, and potential dilution for existing shareholders if equity or convertible debt is issued[198] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports no unregistered sales of equity securities or use of proceeds to disclose - There were no unregistered sales of equity securities or use of proceeds to report[199] Item 3. Defaults Upon Senior Securities This section indicates that the Company has no defaults upon senior securities to report - The Company has no defaults upon senior securities[200] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the Company - Mine Safety Disclosures are not applicable to the Company[201] Item 5. Other Information This section confirms no directors or officers adopted or terminated Rule 10b5-1 trading plans during the quarter - During the three months ended June 30, 2025, none of the Company's directors or officers adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 arrangements[202] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including articles of incorporation, bylaws, and certifications - The exhibits include the Company's Articles of Incorporation, Second Amended and Restated Bylaws, the 2025 Equity Incentive Plan, and certifications pursuant to Rule 13a-14(a) and 18 U.S.C. Section 1350[203] Signatures - The report is signed by Yves LeMaitre, Chief Executive Officer (Principal Executive Officer), and James S. Marcelli, Chief Financial Officer and Chief Operating Officer (Principal Financial Officer), on August 14, 2025[207]