Lightwave Logic(LWLG) - 2021 Q2 - Quarterly Report

Part I Financial Information Item 1 Financial Statements The unaudited financial statements for the period ended June 30, 2021, show the company is in a development stage with no revenue, a significant increase in net loss, a strengthened balance sheet from financing, and decreased total liabilities Balance Sheets As of June 30, 2021, the company's balance sheet shows total assets increased to $18.0 million, driven by a fourfold increase in cash, while total liabilities decreased and stockholders' equity grew substantially Condensed Consolidated Balance Sheets (Unaudited) | Financial Metric | June 30, 2021 (Unaudited) | December 31, 2020 (Audited) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $13,913,519 | $3,306,590 | | Total Current Assets | $14,346,036 | $3,873,775 | | Total Assets | $17,994,174 | $7,366,778 | | Liabilities & Equity | | | | Total Current Liabilities | $487,542 | $933,032 | | Total Liabilities | $1,037,301 | $1,591,332 | | Total Stockholders' Equity | $16,956,873 | $5,775,446 | Statements of Comprehensive Loss The company reported no net sales, with the net loss widening to $4.5 million in Q2 2021 and $6.3 million for the six-month period, driven by higher research and development expenses and commitment fees Condensed Consolidated Statements of Comprehensive Loss (Unaudited) | Metric | Q2 2021 | Q2 2020 | Six Months 2021 | Six Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $0 | $0 | $0 | $0 | | Research and development | $2,782,243 | $1,057,470 | $4,129,785 | $2,247,241 | | General and administrative | $674,000 | $574,803 | $1,222,229 | $1,181,228 | | Loss from Operations | ($3,456,243) | ($1,632,273) | ($5,352,014) | ($3,428,469) | | Net Loss | ($4,539,485) | ($1,663,928) | ($6,274,529) | ($3,491,102) | | Basic and Diluted Loss per Share | ($0.04) | ($0.02) | ($0.06) | ($0.04) | Statement of Stockholders' Equity For the six months ended June 30, 2021, total stockholders' equity increased from $5.8 million to $17.0 million, primarily driven by a $14.0 million capital raise from issuing common stock - Key changes in stockholders' equity include the issuance of 8,062,500 common shares, raising $13,973,249 - A net loss of $6,274,529 increased the accumulated deficit - Various other equity transactions included option and warrant exercises[22] Statements of Cash Flows For the six months ended June 30, 2021, a net cash increase of $10.6 million was driven by $14.3 million in financing activities, offsetting cash used in operating and investing activities Condensed Consolidated Statements of Cash Flows (Unaudited) | Cash Flow Activity (Six Months Ended June 30) | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($2,991,879) | ($2,344,201) | | Net cash used in investing activities | ($654,699) | ($38,978) | | Net cash provided by financing activities | $14,253,507 | $2,369,148 | | Net increase (decrease) in cash | $10,606,929 | ($14,031) | Notes to Financial Statements The notes detail the company's business, confirm cash sufficiency through November 2022, mention a new $100 million shelf registration, and confirm the forgiveness of a PPP loan - The company is focused on developing next-generation photonic devices and non-linear optical polymer materials for high-speed fiber-optic data communications and optical computing markets[32] - Management projects monthly expenditures of approximately $816,000 and believes its current cash position will finance operations through November 2022, with a $100 million universal shelf registration statement effective in July 2021 to support future capital requirements[43] - The company's $410,700 Paycheck Protection Program (PPP) loan, received in April 2020, was forgiven in its entirety by the Small Business Administration on January 22, 2021[58] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's development-stage status, business strategy, increased net loss due to R&D spending, and enhanced liquidity from stock sales sufficient to fund operations through late 2022 Overview Lightwave Logic is a development-stage company commercializing proprietary organic polymer-based electro-optic photonic devices for the data and telecommunications sectors - The company is moving toward commercialization of electro-optic photonic devices made on its PIC technology platform using proprietary high-stability organic polymers[83] - Key differentiators at the device level are higher speed, lower power consumption, simplicity of manufacturing, and reliability[84] Business Strategy and Development The company's strategy focuses on commercializing its polymer materials and PICs, targeting the cloud, data center, and telecom markets to address industry scaling issues related to cost per Gbps - The business strategy anticipates revenue from technology licensing, joint ventures, or direct sale of electro-optic device components[94] - Initial modulator products are expected to operate at data rates of at least 50 Gbaud, with development underway for the next industry node of 100 Gbaud[96] - The company's technology is positioned to address the growing gap between customer cost expectations ($/Gbps) and the performance of existing PIC-based technologies in the fiber optic market[115][117] Recent Significant Events and Milestones The company achieved key milestones including new patents, breakthrough test results for modulators exceeding 100GHz bandwidth, and improved thermal properties for its polymers - In June 2021, the company announced that new modulators demonstrated electro-optical bandwidths exceeding 100GHz, achieving triple the data rate of competing devices[144] - A U.S. patent (11,042,051) was received in June 2021 for a new device design that enables mass-volume manufacturing and direct-drive, low-voltage operation[145] - In August 2021, the company announced improved thermal design properties for its electro-optic polymers, enabling greater stability and design flexibility for high-volume silicon foundry processes[146] Results of Operations With no revenue, the net loss for Q2 2021 increased 173% to $4.5 million and 80% to $6.3 million for the six-month period, driven by higher R&D expenses including a significant non-cash charge Operating Expense Comparison (Three Months Ended June 30) | Expense Comparison (Three Months Ended June 30) | 2021 | 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Research and development | $2,782,243 | $1,057,470 | +$1,724,773 | +163% | | General and administrative | $674,000 | $574,803 | +$99,197 | +17% | | Total Operating Expenses | $3,456,243 | $1,632,273 | +$1,823,970 | +112% | Net Loss Comparison (Six Months Ended June 30) | Net Loss Comparison (Six Months Ended June 30) | 2021 | 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Loss | $6,274,529 | $3,491,102 | +$2,783,427 | +80% | - The increase in R&D expense for Q2 2021 was primarily due to a non-cash expense of approximately $1.3 million for cashless option exercises, which was not present in the 2020 period[152] Liquidity and Capital Resources The company's liquidity relies on stock sales, with a cash balance of $13.9 million as of June 30, 2021, providing a runway through November 2022, and a new $100 million shelf registration for future funding - The company's cash position of $13.9 million as of June 30, 2021 is expected to finance operations through November 2022, based on an estimated monthly expenditure of $816,000[167][170] - A new $100 million universal shelf registration statement became effective on July 9, 2021, providing a vehicle for future capital raises[166][170] - The purchase agreement with Lincoln Park, which allowed for the sale of up to $25 million in common stock, was completed as of June 30, 2021[171] Item 3 Quantitative and Qualitative Disclosures About Market Risk The company has indicated that this section is not applicable - The company, as a smaller reporting company, is not required to provide the information under this item[180] Item 4 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal controls during the quarter - Management concluded that as of June 30, 2021, the company's disclosure controls and procedures were effective[181] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2021, that have materially affected, or are reasonably likely to materially affect, internal controls[182] Part II Other Information Item 2 Recent Sales of Unregistered Securities In June 2021, the company issued 200,000 shares of common stock through three unregistered warrant exercise transactions, relying on the Section 4(a)(2) exemption Unregistered Sales of Common Stock (June 2021) | Date | Security | Shares | Price per Share | | :--- | :--- | :--- | :--- | | June 2021 | Common Stock | 150,000 | $0.63 | | June 2021 | Common Stock | 25,000 | $0.64 | | June 2021 | Common Stock | 25,000 | $0.67 | Item 6 Exhibits This section lists exhibits filed with the Form 10-Q, including executive employment agreement amendments, Sarbanes-Oxley certifications, and Inline XBRL data files - The exhibits filed with this report include amendments to executive employment agreements, CEO and CFO certifications (Rule 13a-14(a) and Section 906), and interactive data files (Inline XBRL)[186] Signatures The report is duly signed and authorized by the company's Chief Executive Officer and President, Chief Operating Officer on August 16, 2021