Lightwave Logic(LWLG) - 2022 Q1 - Quarterly Report

Part I Financial Information Item 1 Financial Statements The unaudited financial statements for Q1 2022 show the company in a development stage with no revenue, a net loss increase to $3.56 million from $1.74 million year-over-year, and a strong cash position of $24.3 million Balance Sheet Summary (USD) | Balance Sheet Items | March 31, 2022 (Unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $24,337,502 | $23,432,612 | | Total Current Assets | $24,551,720 | $23,664,920 | | Total Assets | $28,049,727 | $27,228,575 | | Liabilities & Equity | | | | Total Current Liabilities | $848,953 | $1,585,973 | | Total Liabilities | $1,230,456 | $2,024,303 | | Total Stockholders' Equity | $26,819,271 | $25,204,272 | Statement of Comprehensive Loss Summary (USD) | Income Statement Items | Three Months Ending Mar 31, 2022 | Three Months Ending Mar 31, 2021 | | :--- | :--- | :--- | | Net Sales | $0 | $0 | | Research and development | $2,625,138 | $1,362,805 | | General and administrative | $885,430 | $532,967 | | Loss from Operations | ($3,510,568) | ($1,895,772) | | Net Loss | ($3,555,761) | ($1,735,044) | | Loss per Share (Basic & Diluted) | ($0.03) | ($0.02) | Cash Flow Summary (USD) | Cash Flow Items | Three Months Ending Mar 31, 2022 | Three Months Ending Mar 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($2,545,689) | ($1,253,391) | | Net cash used in investing activities | ($221,991) | ($493,639) | | Net cash provided by financing activities | $3,672,570 | $4,961,865 | | Net increase in cash | $904,890 | $3,214,835 | | Cash and cash equivalents - End of Period | $24,337,502 | $6,521,425 | - The company is a technology firm focused on developing next-generation photonic devices and non-linear optical polymer materials for high-speed fiber-optic data communications, aiming to generate revenue through licensing, technology transfer, and direct sales of its components[32] - The company expects to incur approximately $1.16 million of expenditures per month over the next 12 months, with its current cash position sufficient to finance operations through January 2024, and an institutional investor purchase agreement providing access to up to $33 million in common stock sales, with $11.47 million remaining available[46] Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations The company, a development-stage entity commercializing its proprietary polymer technology platform, reported no revenue and a net loss of $3.56 million in Q1 2022, an increase from $1.74 million in Q1 2021, with current cash of $24.3 million expected to fund operations through January 2024 Overview and Business Strategy Lightwave Logic is a development-stage company commercializing its proprietary polymer-based electro-optic photonic devices (PIC™ technology platform), aiming for higher speed, lower power, and manufacturing simplicity through licensing, joint ventures, and direct sales - The company is developing next-generation electro-optic photonic devices on its PIC™ technology platform, which includes Polymer Stack™, Polymer Plus™, and Polymer Slot™[85] - The business model focuses on three areas: traditional product development, patent licensing, and technology transfer to foundries[87] - The company's revenue stream is anticipated to come from a combination of technology licensing, joint ventures, and direct sales of its electro-optic device components[95] Proprietary Products and Target Markets The company is developing high-speed optical devices, including Ridge Waveguide and Polymer Slot™ modulators, for cloud computing, data centers, and telecommunications, aiming to integrate with existing silicon photonics platforms - Initial modulator products are expected to operate at data rates of at least 50 Gbaud, enabling 100 Gbps with PAM-4 encoding, with development underway for the next node of 100 Gbaud[97] - The Polymer Plus™ approach allows the company's electro-optic polymers to be deposited as a thin film, enabling seamless integration with existing semiconductor platforms like CMOS, InP, and GaAs[93][102] - The company's long-term goal is to produce a multi-channel Polymer Photonic Integrated Circuit (PIC™) platform to address markets with aggregated data rates of 100, 400, 800 Gbaud, and beyond[107] - Target markets include cloud computing, data centers (particularly for interconnects >10km), and telecommunications, driven by demand from 5G, autonomous driving, and IoT[110][111][113] Recent Significant Events and Milestones The company achieved numerous milestones, including receiving multiple U.S. patents, demonstrating world-record polymer modulator performance, achieving breakthrough photostability, and listing its common stock on the Nasdaq Capital Market in September 2021 - In September 2021, the company's common shares began trading on the Nasdaq Capital Market (Nasdaq)[149] - Achieved world-record performance for a polymer modulator in collaboration with ETH Zurich and Polariton Technologies, transmitting 220 Gbit/s OOK and 408 Gbit/s 8PAM[151] - Announced breakthrough photostability results on electro-optic polymer modulators, which are compatible with high-volume silicon foundry processes[155] - Received U.S. patent number 11,262,605 for an 'Active region-less polymer modulator' designed to simplify integration and enhance reliability for high-volume foundry manufacturing[156] Results of Operations For Q1 2022, the company reported no revenue, with operating expenses increasing by 85% to $3.51 million due to higher R&D and G&A expenses, leading to a 105% widening of net loss to $3.56 million Operating Expenses Comparison (Q1 2022 vs Q1 2021, USD) | Expense Category | Three Months Ending Mar 31, 2022 | Three Months Ending Mar 31, 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $2,625,138 | $1,362,805 | $1,262,333 | 93% | | General and administrative | $885,430 | $532,967 | $352,463 | 66% | | Total Operating Expenses | $3,510,568 | $1,895,772 | $1,614,796 | 85% | - The increase in R&D expenses was primarily due to higher non-cash stock option amortization ($856,534), salary expenses ($210,236), and costs for lab materials and prototype development[165] - The increase in G&A expenses was mainly driven by higher non-cash stock option amortization ($256,115) and director fees ($37,750)[167] Net Loss Comparison (USD) | Metric | Three Months Ending Mar 31, 2022 | Three Months Ending Mar 31, 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Loss | $3,555,761 | $1,735,044 | $1,820,717 | 105% | Liquidity and Capital Resources The company's primary cash source is common stock sales, with $24.3 million in cash and equivalents as of March 31, 2022, sufficient to fund operations through January 2024, supported by an active purchase agreement - The company's primary source of cash is from the sale of common stock to an institutional investor, from which it received $3.69 million in Q1 2022[172][174] - The company has a purchase agreement with an institutional investor to sell up to $33 million of common stock, with $11,469,582 remaining available as of the filing date[173] - Management believes current cash is sufficient to finance operations through January 2024, with expected monthly expenditures of approximately $1.16 million over the next 12 months[176][177] Analysis of Cash Flows (Q1 2022, USD) | Cash Flow Activity | Amount | | :--- | :--- | | Net cash used in operating activities | ($2,545,689) | | Net cash used by investing activities | ($221,991) | | Net cash provided by financing activities | $3,672,570 | Item 3 Quantitative and Qualitative Disclosures About Market Risk The company's market risk primarily relates to U.S. interest rate changes affecting its $24.3 million in cash and equivalents, but due to short-term investments, this risk is deemed not material - As of March 31, 2022, the company had $24.3 million in cash and cash equivalents[186] - The primary market risk exposure is to interest rate changes, but due to the short holding period of investments, the company concludes this risk is not material[187][188] Item 4 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting - Management concluded that as of March 31, 2022, the company's disclosure controls and procedures were effective[190] - There were no changes in internal control over financial reporting during the quarter ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, internal controls[191] Part II Other Information Item 1 Legal Proceedings The company reported no legal proceedings - None[194] Item 1A Risk Factors The company highlights significant risks, including a history of substantial operating losses and an accumulated deficit of $93.2 million, requiring additional capital beyond January 2024 which may not be available - The company has incurred substantial operating losses since inception and expects them to continue, with the net loss for Q1 2022 at $3.6 million and the accumulated deficit reaching $93.2 million[196] - The company will require additional capital to fund operations beyond its current runway, estimated through January 2024, and failure to obtain financing could necessitate a substantial limitation of operations[198] - There is no assurance that the company will ever achieve profitability, as it needs to generate significant revenue to offset substantial operating and capital expenditures[197] Item 2 Recent Sales of Unregistered Securities The company reported no recent sales of unregistered securities - None[201] Item 6 Exhibits The report lists several exhibits filed, including employment agreements, officer indemnification agreements, and certifications from key executives as required by the Sarbanes-Oxley Act - Exhibits filed with the report include employment agreements, director and officer indemnification agreements, and certifications pursuant to SEC rules and the Sarbanes-Oxley Act[204]