UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________________to________________________
Commission file number: 001-40766
Lightwave Logic, Inc.
(Exact name of registrant as specified in its charter)
Nevada
82-0497368
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
369 Inverness Parkway, Suite 350, Englewood, CO
80112
(Address of principal executive offices)
(Zip Code)
(Registrant’s Telephone Number, including Area
Code): 720-340-4949
Securities registered pursuant to Section 12(b) of
the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.001 par value per share
LWLG
The NASDAQ Stock Market
Securities registered pursuant to section 12(g) of
the Act: None
Indicate
by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate
by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing
requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such
files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a
large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an
emerging growth company. See
the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
“emerging growth
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☒
Smaller reporting company ☒
Emerging growth company ☐
If
an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying
with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of
its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or
issued its audit report. ☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the
filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received
by any of the registrant's executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act of 1934). Yes ☐ No ☒
The aggregate market value of the voting and non-voting
common equity held by non-affiliates of the registrant was approximately $358,611,406 as of
June 30, 2024.
As of March 18, 2025, there were 124,799,620 shares outstanding of the registrant’s common stock, $.001 par value.
Documents
incorporated by reference. Portions of the registrant’s Definitive Proxy Statement for the registrant’s 2025 Annual Meeting
of Shareholders
are incorporated by reference in Part III of this report. The Definitive Proxy Statement or an amendment to this Form
10-K will be filed with the Securities
and Exchange Commission within 120 days after the registrant’s fiscal year ended December
31, 2024.
Table of Contents
Page
PART I
Item 1.
Business
1
Item 1A.
Risk Factors
13
Item 1B.
Unresolved Staff Comments
25
Item 1C.
Cybersecurity
25
Item 2.
Properties
26
Item 3.
Legal Proceedings
26
Item 4.
Mine Safety Disclosures
26
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
27
Item 6.
Reserved
29
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
29
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
36
Item 8.
Financial Statements and Supplementary Data
36
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
36
Item 9A.
Controls and Procedures
36
Item 9B.
Other Information
37
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
38
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
39
Item 11.
Executive Compensation
39
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
39
Item 13.
Certain Relationships and Related Transactions, and Director Independence
39
Item 14.
Principal Accountant Fees and Services
39
PART IV
Item 15.
Exhibits and Financial Statement Schedules
40
Item 16.
Form 10-K Summary
42
i
Forward-Looking Statements
This Annual Report on Form 10-K
contains forward-looking statements. Forward-looking statements involve risks and uncertainties, such as
statements about our plans, objectives,
expectations, assumptions or future events. In some cases, you can identify forward-looking statements by
terminology such as “anticipate,”
“estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,”
“we believe,” “we intend,” “may,” “should,” “will,”
“could” and
similar expressions denoting uncertainty or an action that may, will or is expected to occur in the future. These statements involve estimates,
assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future
results,
performances or achievements expressed or implied by the forward-looking statements. You should not place undue reliance on these
forward-looking
statements.
Factors that are known to us that
could cause a different result than projected by the forward-looking statement, include, but are not limited to:
·
inability to generate significant revenue or to manage growth;
·
lack of available funding;
·
lack of a market for or market acceptance of our products;
·
competition from third parties;
·
general economic and business conditions;
·
intellectual property rights of third parties;
·
changes in the price of our stock and dilution;
·
regulatory constraints and potential legal liability;
·
ability to maintain effective internal controls;
·
security breaches, cybersecurity attacks and other significant disruptions in our information technology systems;
·
changes in technology and methods of marketing;
·
delays in completing various engineering and manufacturing programs;
·
changes in customer order patterns and qualification of new customers;
·
changes in product mix;
·
success in technological advances and delivering technological innovations;
·
shortages in components;
·
production delays due to performance quality issues with outsourced components;
·
those events and factors described by us in Item 1.A “Risk Factors”;
·
other risks to which our Company is subject; and
·
other factors beyond the Company’s control.
Any forward-looking statement
made by us in this Annual Report on Form 10-K is based only on information currently available to us and speaks
only as of the date on
which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be
made
from time to time, whether as a result of new information, future developments or otherwise.
ii
PART I
Item 1.
Business.
Overview
Lightwave
Logic, Inc. is a technology platform company leveraging its proprietary engineered electro-optic (EO) polymers, named Perkinamine®
to transmit data at higher speeds with less power in a small form factor. The Company’s high activity and high stability organic
polymers allow it to create
next-generation photonic EO devices that convert data from electrical signals into light/optical signals
for applications in telecommunications, and for data
transmission potentially used to support generative AI.
Our
differentiation at the modulator device level is in higher speed, lower power consumption, simplicity of manufacturing, small
footprint (size),
and reliability. We have demonstrated the electro-optic polymers potential for higher speed and lower power
consumption in packaged devices, and during
2024, we continued to make advances in techniques to translate our world class material
properties to efficient, reliable modulator devices with commercial
foundries. We are currently focused on: a) working with potential
and existing customers to integrate our proprietary materials into our customers’ specific
PIC and device architecture; b)
testing and demonstrating the superior performance, simplicity of manufacturability and reliability of our devices, including
in
conjunction with the silicon photonics manufacturing ecosystem; and c) providing our potential and existing customers with the
proper Process
Development Kits (PDKs) to enable the efficient and fast integration of our materials into their own design and
manufacturing plans. Silicon-based
foundries are 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. We have now received silicon wafers that range up
to 200mm in diameter, which aligns well with foundry
manufacturing.
Our extremely
strong and broad patent portfolio allows us to optimize our business model in three areas: 1) Traditional focus on polymer materials
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 fiber optic data communications and telecommunications markets, in particular ultra-high bandwidth
optical connections deployed inside and between datacenters and/or AI clusters. In addition, we are exploring other applications that
include
automotive/LIDAR, sensing, displays, storage, aerospace and defense, satellites, quantum computing etc., for our polymer technology
platform. Our goal is
to have our unique polymer technology platform become ubiquitous across multiple market verticals over and above
the optical fiber optic communications
markets.
Artificial
Intelligence (AI) has been integrating deeper within our daily activities with applications to make us more efficient and possibly smarter.
The impact on the internet is huge, and the internet is based on an optical network that utilizes data centers to route and switch traffic
or information to and
from destinations. Data centers are being upgraded today in a fashion that the industry has not seen before with
significant investments of capital. The
expected demands of increased traffic, information, and data driven by AI is changing the way
the internet is being operated. AI is now creating new and
interesting market opportunities to upgrade the internet. Three of these opportunities
are important today: density, speed, and low power and these are very
well aligned with our high performance electro-optic polymers modulator
platform. We are designing high performance polymer modulator optical engines
to support the rise and growth of AI as it generates more
information that will travel through the internet and optical network. While we are not directly an
AI company designing electronic processors,
we do see immediate benefits of enabling higher levels of information to cross the internet using our optical
polymer modulator platform.
Unless the context otherwise requires,
all references to the “Company,” “we,” “our” or “us” and other similar terms means Lightwave
Logic, Inc.
Also, this Form 10-K Annual Report includes the names of various government agencies and the trade names of other companies.
Unless specifically stated
otherwise, the use or display by us of such other parties’ names and trade names in this report is not
intended to and does not imply a relationship with, or
endorsement or sponsorship of us by, any of these other parties.
1
Commencement of Commercial Operations
We commenced commercial operations
in May 2023. Presently, our commercial operations consist of a material supply license agreement
to
provide Perkinamine® chromophore materials for polymer based photonic devices and photonic integrated circuits
(PICs). The license agreement
represents tangible commercial progress for electro-optic polymers as part of our Company's business plan.
Our Company is also in various stages of new
materials development and evaluation with potential customers and strategic partners.
We expect to continue to obtain a revenue stream from technology
licensing agreements, and to obtain additional revenue streams from technology
transfer agreements and direct sale of our electro-optic materials. We have
seen increased interest in our materials during 2024, driven
by the need for higher speed connections to scale the AI-enabled network infrastructure and we
are in discussions on future license agreements.
In December 2024, we made the decision to focus our commercial and R&D efforts on the EO Polymer
materials development and manufacturing.
Although we continue to develop full Photonic Integrated Circuits and packaged device designs as part of our
internal technology and process
development roadmap, we are not actively promoting the sale of such PICs and/or packaged devices to external customers,
but rather EO
Polymer materials supply and license agreements.
Materials Development
Our Company
designs and synthesizes organic chromophores for use in its own proprietary electro-optic polymer systems and photonic
device
designs. A polymer system is not solely a material but also encompasses various technical enhancements necessary for its implementation.
These include
host polymers, poling methodologies, and molecular spacer systems that are customized to achieve specific optical properties.
Our organic electro-optic
polymer systems compounds are mixed into solution form that allows for thin film application. Our proprietary
electro-optic polymers are designed at the
molecular level for potentially superior performance, stability, and cost-efficiency. We believe
our proprietary and unique polymers have the potential to
replace more expensive, higher power consuming, slower-performance materials
such as semiconductor-based modulator devices that are used in fiber-
optic communication networks today.
Our patented
and patent pending molecular architectures are based on a well-understood chemical and quantum mechanical occurrence known
as aromaticity.
Aromaticity provides a high degree of molecular stability that enables our core molecular structures to maintain stability under a broad
range of operating conditions.
We expect
our patented and patent-pending optical materials along with trade secrets and licensed materials, to be the core of and the enabling
technology for future generations of optical devices, modules, sub-systems, and systems that we will develop or enable our partners to
fully commercialize.
Examples of our partners include: electro-optic PIC and device design and manufacturing companies, contract manufacturers,
original equipment
manufacturers, foundries, packaging and assembly manufacturers etc. Our Company contemplates future applications in
market verticals that may address
the needs of semiconductor companies, optical network companies, Web 2.0/3.0 media companies, high performance
computing companies,
telecommunications companies, aerospace companies, automotive companies, as well as for example, government agencies
and defense entities.
Device Design and Development
Electro-optic Modulators
Our Company
designs its own proprietary materials for electro-optical modulation devices. Electro-optical modulators convert data from electric
signals
into optical signals that can then be transmitted over high-speed fiber-optic cables. Our modulators are electro-optic, meaning they work
because
the optical properties of the polymers are affected by electric fields applied by means of electrodes. Modulators are key components
that are used in fiber
optic telecommunications, data communications, and data centers networks etc., to convey the high data flows that
have been driven by applications such
as pictures, video streaming, movies etc., that are being transmitted through the Internet. Electro-optical
modulators are expected to continue to be an
essential element as the appetite and hunger for data increases every year as well as the
drive towards lower power consumption, and smaller footprint
(size).
Current
semiconductor photonic technology today is struggling to reach faster device speeds. Our modulator devices, enabled by our electro-optic
polymer material systems, work at extremely high frequencies (wide bandwidths) and possess inherent advantages over current crystalline
electro-optic
material contained in most modulator devices such as bulk lithium niobate (LiNbO3), indium phosphide (InP), silicon (Si),
and gallium arsenide (GaAs).
Our advanced electro-optic polymer platform is creating a new class of modulators that can be easily integrated
into various PIC platforms and can address
higher data rates in a lower cost, lower power consuming manner, smaller footprint (size) with
much simpler data encoding techniques. Our electro-optic
polymer material will boost the performance of standard PIC platforms such as
silicon photonics and indium phosphide.
Our electro-optic
polymers can be integrated with other materials platforms because they can be applied as a thin film coating in a fabrication
clean room
such as may be found in semiconductor foundries using standard clean room tooling. These approaches enable our device platforms to not
only
be competitive but fully integrated with foundries. Our polymers are unique in that they are stable enough to seamlessly integrate
into existing CMOS,
Indium Phosphide (InP), Gallium Arsenide (GaAs), and other semiconductor manufacturing lines. Of relevance are the
integrated silicon photonics
platforms that combine optical and electronic functions. These include a miniaturized modulator for ultra-small
footprint applications in which we term the
Polymer Slot™. This design is based on a slot modulator fabricated into semiconductor
wafers that can include either silicon or indium phosphide.
Our Company
has a fabrication facility in Colorado to apply standard fabrication processes to our electro-optic polymers which create modulator
devices.
While our internal fabrication facility is capable of manufacturing modulator devices, we have partnered with commercial silicon-based
fabrication
companies that are called foundries who can scale our technology with volume quickly and efficiently. The process recipe for
fabrication plants or
foundries is called a ‘process development kit’ or PDK. We are currently working with commercial foundries
to implement our electro-optic polymers into
accepted PDKs by the foundries. One of the metrics for successful implementation of PDK is
to receive working modulator chips.
2
Glossary
Glossary of select technology
terms to provide you with a better understanding our Company’s technology and devices:
Electro-optic devices -
Electro-optic devices convert data from electric signals into optical signals for use in communications systems and in
optical interconnects
for high-speed data transfer.
Electro-optic material - Electro-optic
material is the core active ingredient in high-speed fiber-optic telecommunication systems. Electro-optic
materials are materials
that are engineered at the molecular level. Molecular level engineering is commonly referred to as “nanotechnology.”
Electro-optic modulators
- Electro-optic (E/O) modulators are electro-optic devices that perform electric-to-optic conversions within the
infrastructure
of the internet. Data centers may also benefit from this technology through devices that could significantly increase bandwidth and speed
while decreasing costs. Polymer E/O modulators can be designed and fabricated with multiple structures. The waveguides allow the light
to be efficiently
coupled into and out of the modulators, and provide a basis for integrating modulators together.
Gbaud - The rate of symbol
changes in data transmission in billions of symbol changes per second. Each symbol can support one or more bits, the
number of bits depending
on the modulation format.
NRZ – See PAM2.
PAM2 – 2 level Pulse
Amplitude Modulation, a modulation format in which the optical power in each symbol can assume either of two different
levels, low or
high, representing, respectively, a 0 or a 1. PAM2 supports 1 bit per symbol so the bit rate is equal to the baud rate or symbol rate.
For
example, a modulator capable of supporting 100 Gbaud can transmit 100 Gbps with PAM2 modulation. This modulation format is often called
NRZ (Non
Return to Zero).
PAM4 - 4 level Pulse Amplitude
Modulation, a modulation format in which the optical power in each symbol can assume any one of 4 different
levels. PAM4 supports 2 bits
per symbol so the bit rate is equal to two times the baud rate or symbol rate. For example, a modulator capable of supporting
100 Gbaud
can transmit 200 Gbps with PAM4 modulation.
PAM8 - 8 level Pulse Amplitude
Modulation, a modulation format in which the optical power in each symbol can assume any one of 8 different
levels. PAM4 supports 3 bits
per symbol so the bit rate is equal to three times the baud rate or symbol rate. For example, a modulator capable of supporting
100 Gbaud
can transmit 300 Gbps with PAM8 modulation.
Photonic Devices - Photonic
devices are components for creating, manipulating, or detecting light. This can include modulators, laser diodes,
light-emitting diodes,
solar and photovoltaic cells, displays and optical amplifiers. Other examples are devices for modulating a beam of light and for
combining
and separating beams of light of different wavelength.
Polymers - Polymers, also
known as plastics, are large carbon-based molecules that bond many small molecules together to form a long chain.
Polymer materials can
be engineered and optimized using nanotechnology to create a system in which unique surface, electrical, chemical, and electro-
optic characteristics
can be controlled. Materials based on polymers are used in a multitude of industrial and consumer products, from automotive parts to
home
appliances and furniture, as well as scientific and medical equipment.
3
Our Business Opportunity
Lightwave Logic, Inc. is developing
our advanced electro-optical polymer material systems. Current legacy technology is based on inorganic
crystalline materials, which has
allowed for the proliferation of data over fiber optic cables. However, there are inherent molecular deficiencies that have
prevented
this technology from scaling down in price and up in functionality, especially in terms of $/Gbps. This is primarily due to a closed valence
structure that does not allow for the molecular improvements. The valence or valency of an element is a measure of its combining power
with other atoms
when it forms chemical compounds or molecules. Also, the physical properties of a crystal do not allow for its implementation
into highly miniaturize slot
structures that are in simple terms the pathways that light travels through in the device.
Organic polymer materials have
free electrons that allow for limitless potential to combine with other molecular structures, which allows for
multiple options and combinations
to improving performance characteristics. Importantly, because they can be applied to optical structures in thin-film
liquid form, it
is possible to imbue electro-optic ability to highly miniaturized slot structures. Organic polymer materials are also more economic to
manufacture in comparison to growing exotic crystals that are prone to contamination and further must be sliced into thin wafers. Our
Company believes
that the combination of less expensive manufacturing cost, ease of application, and better scalability, together with
a lower cost of ownership due to lower
heat dissipation (requiring less cooling), will create enormous demand for our polymer material
through supply agreements as well as polymer-based
products.
Many companies’ early attempts
at developing commercially reliable organic polymers were stymied due to the difficulty of creating organic
molecules that could remain
electro-optically active after being subjected to the high heat of semiconductor manufacturing temperatures (such as silicon
CMOS, InP,
GaAs etc.). These early attempts also encountered difficulty synthesizing materials that could withstand photochemical bleaching (loss
of
sensitivity to specific frequencies) and material degradation due to high operating temperatures.
Over the last several years,
our Company has made various scientific breakthroughs that have allowed for the synthesis of proprietary organic
polymer materials that
can withstand extremely high process temperatures that exceed 175°C. Additionally, these materials have demonstrated
photochemical stability
in devices, even after being subjected to high intensity light for over 5,000 hours. These materials also exhibited stable electro-optic
performance after being continuously aged at 85°C for over 12,000 hours. This exposure duration far exceeds industry standard stress
conditions. These
devices have performed with 3dB bandwidths that exceed 70GHz.
We are now further optimizing
our electro-optic (EO) polymer materials platform to meet additional specifications that are beginning to be
required by the fiber communications
industry for applications such as networks running at data rates of 800Gbps and 1600Gbps and 3200Gbps in the
future. Our technology platform
has the capability and potential to address 4 or more channels of 400Gbps utilizing PAM4 encoding schemes, thus creating
a roadmap of
increased performance for the industry. Furthermore, we are collaborating with industry partners to optimize device designs and packaging.
We have already made extensive progress with our polymer materials on this front, and now we are integrating our robust polymer materials
onto an
integrated photonics platform.
While our initial focus is to
address data communications and telecommunications network applications along with cloud computing/data center
needs, we believe that
in the future we will have additional opportunities over and above AI to address other applications such as: chip-to-chip and
backplane
optical interconnects, photovoltaic cells, medical applications, satellite reconnaissance, navigation systems, radar applications, optical
filters,
spatial light modulators; and all-optical switches.
Electro-Optic Polymer Production – Our Approach vs. the BLA Approach
Our Electro-Optic Material Approach
Our core material expertise relates
to the production of high-performance, high-stability electro-optic polymers for high-speed (wide bandwidth)
telecommunication and data
communications applications. More specifically, it lies in a less mainstream, yet firmly established, scientific phenomenon
called aromaticity.
Aromaticity causes a high degree of molecular stability. It is a molecular arrangement wherein atoms combine into multi-membered
rings
and share their electrons among each other. Aromatic compounds are stable because the electronic charge distributes evenly over a great
area
preventing hostile moieties, such as oxygen and free radicals, from finding an opening to attack.
4
Previous and Current Competitive Organic Electro-Optic
Polymer Efforts
For the past several decades,
diverse corporate interests, including, to our knowledge, IBM, Lockheed Martin, DuPont, AT&T Bell Labs,
Honeywell, Motorola, HP, 3M,
and others in addition to numerous universities and U.S. Government Agencies, have attempted to produce high-
performance, high-stability
electro-optic polymers for high-speed (wide bandwidth) telecommunication applications. These efforts were largely
unsuccessful due, in
our opinion, to the industry’s singular adherence to an industry pervasive engineering model known as the Bond Length Alternation
("BLA") theory model, which none of our patented molecular designs rely upon. The BLA model, like all other current industry-standard
molecular
designs, consists of molecular designs containing long strings of atoms called polyene chains. Longer polyene chains provide
higher electro-optic
performance, but are also more susceptible to environmental threats, which result in unacceptably low-performing,
thermally unstable electro-optic
polymers.
As a result, high frequency modulators
engineered with electro-optic polymers designed on the BLA model or any other polyene chain design
models are unstable over typical operating
temperature ranges, and often exhibit performance degradation within days, hours or even minutes. Similarly,
lower frequency modulators
exhibit comparable failings, but to a lesser extent. These flaws, in most cases, have prevented commercial quality polymer-
based modulators
from entering the commercial marketplace. The thermal stability of these devices does not generally meet the minimum Telcordia GR-
468
operating temperature range (-40 degrees Celsius to +85 degrees Celsius) much less the harsher MILSPEC 883D (military specification) range
of -55
degrees Celsius to 150 degrees Celsius. While many new applications do not require meeting full military or Telcordia GR-468 specifications
for polymers,
many potential customers prefer to see polymer operate at or near these conditions to convey confidence in the material
system. We understand from initial
conversations with data center architects and designers that the temperature specifications that our
materials achieve are compliant with their equipment
design needs.
We are aware of other academic
and commercial development efforts—some by larger companies with vastly more financial resources than we
possess. However, we believe
that no one yet has developed organic polymer materials that have demonstrated the combination of thermal stability,
photochemical stability
and reliability that can meet or exceed commercial specifications.
Our Electro-Optic Photonic P2IC™ Device Approach
Our electro-optic device designs
are built around our proprietary organic polymer material systems that we believe will enable better performance
than the current embedded
legacy technology built around inorganic materials. We also believe that the inherent flexibility of being able to apply our
organic polymer
materials in liquid thin-film form will accelerate the move toward ultra-miniaturization of Polymer Photonic Integrated Circuits (P2IC™)
by increasing the number of photonic circuits on a single chip. Polymer photonics is the application of polymers on to a platform such
as silicon where
there are both active and passive photonic component designs. In polymer photonics, polymer devices such as modulators,
waveguides, and multiplexers
can be fabricated on to a silicon platform that acts as a package as well as a base for mounting lasers (which
are needed to source the light). We continue to
invest in R&D and process development to help accelerate the adoption of our polymer
materials by potential customers into their own PIC platforms,
typically based on silicon photonics.
Our initial device, though highly miniaturized, utilizes conventional
design and fabrication techniques in the industry. Our future device designs
will utilize silicon photonics (SiPh) technology, which can
support highly miniaturized slot waveguides structures etched in large format (200mm), low
cost, and less expensive silicon wafers coated
with our organic electro-optic polymers. The low-cost structure compares well to compound semiconductor
technologies such as GaAs (Gallium
arsenide) and InP (Indium Phosphide), which suffer from small format wafers that do not allow the economies of scale
in high volume fabrication
plants. The degree of miniaturization possible of the slot modulator using SiPh is not technically feasible to accomplish with
inorganic
crystalline materials. Although this may not always remain the case, presently there are nearly insurmountable technical difficulties
that are
inherent to a crystalline molecule. We now have the capability to model, simulate and design photonic integrated circuits (PICs)
in-house.
5
Our Intellectual Property
Our research and development efforts
over the last 10+ years have yielded our Company an extensive patent portfolio as well as critical trade
secrets, unpatented technology
and proprietary knowledge related to our optical polymer materials. Our intellectual property portfolio has expanded
significantly over
the few years. We have actively filed technical utility patents and are currently in the process of readying a number of other inventions
for formal filings in 2025 and 2026. We expect to continue innovating our technology platform over the next decade. We had additional
patents issued or
published over the past year indicating that our technology is being recognized as being unique.
In 2018, we acquired the polymer
technology intellectual property assets of BrPhotonics Productos Optoelectrónicos S.A., a Brazilian corporation,
which significantly
advanced our patent portfolio of electro-optic polymer technology with 15 polymer chemistry materials, devices, packaging and
subsystems
patents and further strengthened our design capabilities to solidify our market position as we prepare to enter the 400Gbps integrated
photonics
marketplace with a highly competitive, scalable alternative to installed legacy systems.
In
2022, we acquired the polymer technology and intellectual property assets of Chromosol Ltd (UK), which significantly
strengthened our
Company's design capabilities with foundry PDKs with extremely low temperature atomic layer deposition (ALD) processes
that effectively hermetically
seal polymer devices that have been prepared for high volume manufacturing. The advanced fabrication processes
of ALD with temperatures below 100C
will solidify our market position with both the Company's manufacturing foundry partners as well as
end-users as we prepare to enter the 800Gbps
integrated photonics marketplace. The acquisition also advanced our Company’s patent
portfolio of electro-optic polymer technology with an innovative
polymer chemistry device patent that has potential to increase the performance
of integrated modulators through optical amplification in a photonic
integrated circuit (PIC) and enhance the functionality of the PIC
by integrating laser light sources made using the polymer-based gain and a laser optical
cavity defined on the Silicon photonic platform,
with our Company’s high speed, high efficiency modulators.
In total, our patent portfolio
currently consists of 77 granted patents that include 46 from the US, 2 from Canada, 3 from the United Kingdom, 18
from the EU, 1 from
Japan, 6 from China (including Hong Kong), and 1 from Australia.
Our materials patent portfolio
has also strengthened significantly with the filing of additional new patent applications on our core Perkinamine®
molecular compounds
as well as recent, innovative inventions that are expected to protect our P2IC polymer PIC platform from potential competition.
Included in our patent portfolio are the following
nonlinear optic chromophore designs:
•
Stable Free Radical Chromophores, processes for preparing the same
•
Stable Free Radical Chromophores, processes for preparing the same
•
Tricyclic Spacer Systems for Nonlinear Optical Devices
•
Anti-Aromatic Chromophore Architectures
•
Heterocyclical Anti-Aromatic Chromophore Architectures
•
Heterocyclical Chromophore Architectures
•
Heterocyclical Chromophore Architectures with Novel Electronic Acceptor Systems
•
Multi-fiber/port hermetic capsule sealed by metallization and method
•
Device Design Fabrication
Methods
•
Modulators and
Waveguides
•
Hermetic Capsulation
Our patent portfolio includes
patents not only on nonlinear optic chromophore designs, but also device designs and inventions, fabrication process
inventions, packaging
design inventions, as well as novel chemistry to enable high performance, low power, small footprint polymer PIC technology.
Our strategic plan is to utilize
our core proprietary technology and leverage our proprietary optical materials to be the core of and the enabling
technology for future
generations of optical devices, modules, sub-systems and systems that we will develop or potentially out-license to electro-optic
device
manufacturers. Our Company contemplates future applications that may address the needs of semiconductor companies, automotive/LiDAR
companies,
sensing companies, aerospace companies and government agencies.
We rely on a combination of patents,
patent applications, trademarks, trade secrets and contractual provisions to protect our technologies. Further,
employees are required
to surrender any inventions or intellectual property developed as part of their employment agreements. We also have a policy of
requiring
prospective business partners to enter into non-disclosure agreements (NDAs) before disclosure of any of our confidential or proprietary
information. Our Company can make no assurances that we will be able to effectively protect our technologies and know-how or that third
parties will not
be able to develop similar technologies and know-how independently.
6
Recent Significant Events and Milestones Achieved
During
February and March 2018, we moved our Newark, Delaware synthetic laboratory and our Longmont, Colorado optical testing laboratory
and
corporate headquarters to office, laboratory and research and development space located at 369 Inverness Parkway, Suite 350, Englewood,
Colorado.
The 13,420 square feet Englewood facility includes fully functional 1,000 square feet of class 1,000 cleanroom, 500 square feet
of class 10,000 cleanroom,
chemistry laboratories, and analytic laboratories. The Englewood facility streamlines all of our Company’s
research and development workflow for greater
operational efficiencies.
During
June 2018, our Company Acquired the Polymer Technology Intellectual Property Assets of BrPhotonics Productos Optoelectrónicos S.A.,
a Brazilian corporation, which significantly advanced our patent portfolio of electro-optic polymer technology with 15 polymer chemistry
materials,
devices, packaging and subsystems patent and further strengthened our design capabilities to solidify our market position as
we prepare to enter the
400Gbps integrated photonics marketplace with a highly competitive, scalable alternative to installed legacy systems.
On September
1, 2021, our Company's common shares began trading on the Nasdaq Capital Market (“Nasdaq”). The Company’s Nasdaq listing
will help to expand our potential shareholder base, improve liquidity, elevate our public profile within the industry and should ultimately
enhance
shareholder value.
On
November 29, 2022, we announced our acquisition of the polymer technology and intellectual property assets
of Chromosol Ltd (UK). The
acquisition significantly strengthened our Company's design capabilities with foundry PDKs with extremely
low temperature atomic layer deposition
(ALD) processes that effectively hermetically seal polymer devices that have been prepared for
high volume manufacturing. Having access to extremely
low temperature ALD allows our Company's polymer modulators to be protected from
the environment without the need for expensive and large footprint
gold box packaging, propelling our Company forward with chip-scale
packaging as required by major hyper-scaler end-users.
Since
the acquisition, our Company has made substantially progress in the utilization of ALD to hermetically seal polymers for modulator
applications.
On December 12, 2022, we announced the receipt of U.S. patent number 11,506,918
B2 entitled “Hybrid electro-optic polymer modulator with
atomic layer deposition (ALD) sealant layer,” which allows our proprietary
polymers to be sealed to moisture and atmospheric gases in a very low
temperature and quasi-hermetic environment through the use of a
chip-scale packaging approach that can be applied in parallel at wafer level (i.e. in
volume) and that eliminates the need for a separate
hermetic enclosure or "gold box." Specifically, our electro-optic polymer modulators will be sealed with
low-temperature conformal
atomic layer deposition dielectric layers that are supported on a silicon substrate with passive silicon photonics waveguides.
The sealant
process will enable lower cost system implementation in a high-volume foundry environment.
On March
22, 2023, we announced that our latest commercial-class electro-optic polymer material achieved
breakthrough performance metrics at
1310 nanometers (nm), a wavelength popular in hyperscale datacenter applications. These
commercial-class improvements include a significantly higher
electro-optic coefficient exceeding 200 pm/V, which allows for very
low drive power of 1 volt or less. Other characteristics include optimized chromophore
loading, superior low optical loss, excellent temporal
stability at 850 Celsius, and extremely high thermal and photo stability. The breakthrough
commercial-class electro-optic material is
expected to enable ultra-small footprint modulators with at least 100 GHz bandwidth as well as meeting all
critical requirements for pluggable
transceivers, on-board optics and co-packaging solutions. Additionally, the achievement of these results at the 1310nm
bandwidth positions
us for potential near-term licensing opportunities in datacenter applications.
7
On
May 25, 2023, we announced our Company's first commercial material supply license agreement for our Perkinamine® chromophore
materials. This agreement is to provide Perkinamine® chromophore materials for polymer based photonic devices and
photonic integrated circuits (PICs).
Supplying licensed materials is one prong of our Company's three-prong revenue model and business
strategy that includes polymer modulator products as
well as technology transfer. This agreement recognizes market acceptance and competitive
advantage of our technology and validates the first prong of our
business model. Further, it represents tangible commercial progress for
electro-optic polymers as part of our business plan.
On
May 31, 2023, we announced the receipt of U.S. patent number 11,661,428 entitled "Nonlinear Optical Chromophores, Nonlinear Optical
Materials Containing the Same, and Uses Thereof in Optical Devices," which details an innovative organic chromophore design using
a novel 'thiophene
bridge' to significantly improve material performance in a production environment. This is accomplished by designing
thiophene-containing bridging
groups that are positioned between the electron-donating and electron-accepting ends of the chromophore.
These designs provide nonlinear optical
chromophores with significantly improved optical properties and improved stability. We expect
this patent will help us progress our commercial
discussions with potential customers.
On
August 21, 2023, we announced the completion of new laboratory production facilities, expanding our corporate headquarters by over 65%,
nearly 10,000 square feet, for a total of approximately 23,500 square feet to support new commercial activity, including enabling commercial
device testing
and evaluation, production reliability testing, laser characterization, SEM analysis and the expansion of our Company's
chemical synthesis production line.
On
March 24, 2024, at the 2024 Optical Fiber Conference in San Diego, California (OFC 2024), we presented world-class results for our
Company’s
200Gbps heterogeneous polymer/silicon photonic modulator at a record low drive voltage, which are based on a novel packaged heterogeneous
polymer EO modulator design leveraging silicon photonics devices from a 200mm production foundry process and Lightwave Logic’s proprietary
high
temperature, high performance EO Polymer material. Each modulator was operated at 100GBaud PAM4 and achieved all drive voltages below
2V, and as
low as 1V which is excellent for low power operation. We discussed the test set-up for the high-speed results, and how electro-optic
polymer-based
modulators based on 200mm silicon foundry wafers are ideal for 4 lane 200Gbps per lane 800Gbps pluggable optical transceivers
for datacenter
applications. We also shared updated lifetime and reliability data for both the electro-optic polymer materials and electro-optic
polymer devices. Our results
demonstrate that a hybrid approach, leveraging the cost and integration benefits of silicon photonics along
with the unparalleled bandwidth and low power
advantages of Lightwave Logic’s proprietary EO polymers, lays a clear path for competitive
performance and integration for today’s and future optical
pluggable transceivers, and we expect these results will position our
Company to support the burgeoning demand of generative AI as datacenters around
the world begin to upgrade their hardware faster than
expected to meet the demands of the future.
On
March 28, 2024, we announced world-class performance of the Company’s Perkinamine® EO polymer material operating in an optical
interconnect link, at 437.1Gbps employing a PAM8 178GBaud signal encoded by a plasmonic Mach Zehnder modulator (MZM). In this work, intensity
modulated, direct detection (IM/DD) techniques were utilized to drive higher performance. The paper, authored by our teammates ETH Zurich
and
Polariton Technologies, demonstrated data rates beyond 400Gbps for a IM/Dd optical interconnect link for the first time. This world-class
result, achieving
data rates of 400Gbps per lane, demonstrates that our Company’s EO polymers are capable of exceeding double the
current industry expectation. This has
the potential to enable 4 lane 1.6Tbps (1600Gbps) pluggable transceiver modules, which is on the
roadmap of datacenter operators today.
On
May 21, 2024, we announced our collaboration with Advanced Micro Foundry (AMF), a leading Silicon Photonics volume foundry, to
develop
state-of art polymer slot modulators utilizing AMF's silicon photonics platform. These modulators have been shown to achieve a record
low drive
voltage below 1V and data rates of 200Gbps PAM4. This performance will enable a new generation of 800 Gb/s and 1.6T Gb/s pluggable
transceivers to
address fast growing requirements for optical connectivity for large generative AI computing clusters. Lightwave Logic
and AMF have collaborated over
the past year to develop the electro optic polymer slot modulators utilizing AMF's standard manufacturing
process flow on 200-mm wafers. This successful
demonstration marked a significant milestone in integrated photonics, blending Silicon
photonics with polymer materials. Building on this demonstration,
both parties are aiming to enhance the modulators to ensure these advanced
components are readily accessible to product companies on a manufacturing
scale. This accomplishment puts our Company in a very strong
position to ramp volume both for our polymers as well as 200-mm silicon wafer volume
with AMF. It also opens exciting opportunities to
develop novel solutions for commercial-grade-compatible EO polymer modulators seamlessly integrated
with AMF's standard processes.
On
September 24, 2024, we announced a collaboration with Polariton Technologies to demonstrate a packaged device with over
110 GHz super
high bandwidth packaged electro-optic polymer modulators using Polariton's plasmonic modulator device design that
contains Lightwave's proprietary
Perkinamine® chromophores at the European Conference on Optical Communications (ECOC) held
in Frankfurt, Germany from September 22-26, 2024.
The packaged device contains a plasmonic modulator using
electro-optic polymer material and platform chips have demonstrated 400 Gbps, which is the
current specification that datacenters
are looking for in optical transceiver modules. This collaboration forms an important technology platform for
scalability using
large silicon foundries for mass commercialization with 200mm silicon wafers. The combination of electro-optic polymers and
plasmonics
can support datacenters around the world which are responding to high power consumption and the burgeoning demand for
higher speed data transmission
from artificial intelligence, machine learning, and other cloud-based services. This device enables
ultra-high bandwidths, which are extremely well suited
for next generation internet and optical networking transceivers that require
200Gbps per lane today, and 400Gbps per lane soon.
8
On
December 11, 2024, we strengthened our Company's management team to reinforce our competitive position and accelerate product and
commercial
strategic initiatives, including capitalizing on high-growth opportunities across the AI and datacenter networking sector, expediting
commercialization for our proprietary electro-optic materials, and opening new markets and applications for our advanced polymer-based
solutions. We
named optical communications industry veteran Yves LeMaitre as our Chief Executive Officer and former CEO and
Chairman Thomas E. Zelibor as our
President. Ronald Bucchi, lead independent director, was appointed as our new non-executive
independent Chairman, and James S. Marcelli, principal
financial officer, was named as our Chief Financial Officer and continues to serve
as Chief Operating Officer. Dr. Michael Lebby retired as Chairman and
Chief Executive Officer of Lightwave Logic, effective December
10, 2024.
On March 10, 2025, we announced the advancement of our technical collaboration
with Polariton Technologies, a technology leader of high-speed
EO components for the communication market, and our transition from being
a material supplier to collaborating on market development through end-user
engagement and technical cooperation. Lightwave Logic and
Polariton will work together to jointly develop technical solutions to enable the faster
adoption and integration of combined plasmonics
and polymer-based products, with semiconductor fabrication plants, outsourced assembly, and test
operations. In addition to manufacturing
transmitter PICs with inherent superior electro-optic performance, both teams will be working together on an
extensive qualification and
reliability program, high-speed RF and optical testing and back-end manufacturing process integration.
As we
move forward to diligently meet our goals, we continue to work closely with our packaging and foundry partners for 200Gbps and
400Gbps/lane
device designs and prototypes, and we are advancing our reliability and characterization efforts to support our prototyping. Our partnership
with silicon-based foundries will allow us to scale commercial volumes of electro-optic polymer modulator devices using large silicon
wafers, and we are
currently working to have our fabrication processes accepted into foundry PDKs (process development kits). These are
the recipes that foundries use to
manufacture devices in their fabrication plants.
We are
actively engaged with test equipment manufacturers of the most advanced test equipment to test our state-of-the-art polymer devices. We
continue to engage with multiple industry bodies to promote our roadmap. We continue to fine tune our business model with target markets,
customers, and
technical specifications. Our business model includes the licensing of our strong IP and Patent portfolio, as well as technology
transfer to entities such as
foundries. Discussions with prospective customers are validating that our materials are ideally suited for
the datacenter, AI connectivity and
telecommunications markets. Details and feedback of what these prospective customers are seeking from
a prototype are delivered to our technical team.
The Global Photonic Device Market and Our Target Markets
Our initial
target market is the AI focused datacenter eco-system that is exponentially expanding to address the need for accurate Large Language
Models – LLMs - for a variety of applications. To address these requirements, datacenters have grown in number and scope to include
hundreds of
thousands of servers, switches and associated equipment per datacenter to address the computing needs required for LLMs –
a process often known as
“scaling up and scaling out”. The number of “hyperscale” datacenters are expected to
continue to increase in number both in the US, but also in the rest of
the world.
Figure 1: Number of Data
Center Sites (by Size)
Source: “How Many
Data Centers Are There and Where Are They being Built”, Yih-Khai Wong, ABI Research, July 16, 2024
9
A “single”
hyperscale datacenter may consist of multiple large warehouse-size buildings on a campus or even several locations distributed around
a metropolitan area. Regardless of the design, these datacenters will require transmitting and receiving vast amounts of data - not only
around a single data
center building – but often also between buildings in distributed data center architecture. The connectivity
required between servers, switches and related
electronics within a single datacenter building is often shorter than 500 meters, with
a growing requirement for opto-electronics for connecting equipment
that may be in facilities that are up to 10km apart. The ideal method
for addressing these links has been – and will continue to be - single mode fiber
cabling. Correspondingly, the minimum “speeds”
or bandwidth required for transmitting data on these connections is expected to be 800Gigabits/second –
a speed that eventually
be supplanted with 1.6Terabit/second and 3.2 Terabit/second connections, (2 times and 4 times faster than 800Gibaits/second), as
shown
in Figure 2. Each connection speed will require either 4 or 8 modulators which results in a multimillion unit opportunity on a yearly
basis.
Figure 2: Number of Opto-Electronic
Connectivity Requirements (by “speed”)
Source: “Optical
Communications market Forecast”, Lightcounting, October, 2024
The combined
growth in number of datacenters and speed requirements has generated considerable discussion of the need for reduction in the
growth of
energy demands needed for operations. Our polymers will enable low power modulators that will be required for the opto-electronics utilized
for
interconnecting the switches and servers deployed at these required speeds on this cabling infrastructure.
Figure 3: Datacenter
Power Consumption Forecast
Source: “Investing
in the Rising Data Center Economy”, McKinsey, January 17, 2023
10
Business Strategy
Our first revenue stream was obtained
from our entry into a material supply license agreement to provide Perkinamine® chromophore
materials
for polymer based photonic devices and photonic integrated circuits (PICs). Our Company is also in various stages
of materials development and
evaluation with potential customers and strategic partners. We expect to continue to obtain a revenue stream
from technology licensing agreements, and to
obtain additional revenue streams from technology transfer agreements and direct sale of
our electro-optic Perkinamine® chromophore material.
Specifically,
our business strategy provides 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 materials. 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.
•
Partner with PIC or packaged device design and manufacturing companies to further the development of PDKs for our polymer material.
•
Develop proprietary intellectual property.
•
Grow
our commercial device design and development capabilities.
•
Partner with silicon-based foundries who can scale volume quickly and integrate our materials into their infrastructure.
•
Grow our product reliability and quality assurance capabilities.
•
Grow our optoelectronic and RF testing capabilities.
•
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.
•
Add
high-level personnel with industrial and manufacturing experience in key areas of our materials and process development programs.
Create Organic Polymer-Enabled Electro-Optic Modulators
We
intend to utilize our proprietary optical polymer technology to enable the creation by our customers of a portfolio of commercial electro-optic
polymer product devices with applications for various markets, including telecommunications, data communications and data centers.
We expect our -polymer material
to be used initially in modulator products that 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 advanced
complex encoding schemes if required.
11
Our Research and Development Process
Our research and development process consists of the
following steps:
•
We develop novel polymer materials utilizing our patented and patent pending technology to meet certain performance specifications. We
then develop methods to synthesize larger quantities of such material.
•
We conduct a full battery of tests at the completion of the synthesis of each new polymer material to evaluate its characteristics. We also
create development strategies to optimize materials to meet specifications for specific applications. We model and simulate each new
polymer material so that we can further understand how to optimize the material for device operation.
•
We integrate data from the material characterization and test results to fabricate sample devices for internal use. We analyze device-testing
results to refine and improve fabrication processes and methods. In addition, we investigate alternative material and design variations to
possibly create more efficient fabrication processes.
•
We create an initial device design using simulation software. Following device fabrication, we run a series of optical and electronic tests on
the device.
•
We are developing PDKs with commercial silicon-based foundries so that our technology can transfer seamlessly to larger silicon wafer
fabrication plants, and scale in volume quickly.
We have and expect to continue to make significant operating and capital
expenditures for research and development. Our research and
development expenses were $16,806,548 and $15,903,689, for the years ended
December 31, 2024, and 2023, respectively.
Our Past Government Program Participation
Our Company has been a participant
in several vital government sponsored research and development programs with various government agencies
that protect the interests of
our country. The following is a list of some of the various divisions of government agencies that have provided us with advisory,
financial
and/or materials support in the pursuit of high-speed electro-optic materials. Our previous relationships included:
•
National Reconnaissance Office (NRO)
•
Properties Branch of the Army Research Laboratory on the Aberdeen Proving Grounds in Aberdeen, Maryland
•
Defense Advance Research Project Agency (DARPA)
•
Naval Air Warfare Center Weapons Division in China Lake, California
•
Air Force Research Laboratory at Wright-Patterson Air Force Base in Dayton, Ohio
We are aware of a multitude of
government programs that include for example the Chips and Science Act amongst others. As noted above, we are
not currently partnered
with or financially supported by any governmental agency at this time, however, we are exploring future opportunities as our
Company grows
and gains the additional resources and personnel necessary to support these efforts.
Our Competition
Competitors
The markets we are targeting for
our electro-optic polymer technology are intensely competitive. While there are no major multi-national
companies that compete directly
with us on electro-polymers, there are other companies that do manufacture optical modulators based on alternative
material platforms
such as Indium Phosphide, Silicon or Silicon Nitride and Lithium Niobate. These companies that have incumbent optical modulators
using
semiconductors include: Lumentum, Broadcom, Marvell, Cisco, Intel, Ciena, Fujitsu, and Coherent. These companies are heavily invested
in the
production of crystalline-based semiconductor electro-optic modulator technologies, as well as the development of novel manufacturing
techniques and
modulator designs.
12
Smaller companies that compete
with us on optical modulators using new and novel technologies include: Hyperlite (who are developing thin film
lithium niobate (TFLN),
NLM Photonics (organic hybrid polymer) and Lumiphase (who are developing Barium Titanate or BTO).
Our Plan to Compete
We believe that as our organic
polymer technology gains industry acceptance, we will be poised to obtain a significant portion of the component
manufacturing market
and have our technology become ubiquitous. Electro-optic polymers demonstrate several advantages over other technologies, such
as inorganic-based
technologies, due to their reduced manufacturing and processing costs, higher performance, and lower power requirements. Our
patented
organic polymers and future electro-optic photonic devices have demonstrated significant stability advantages over our known competitor’s
materials.
We believe the principal competitive factors in our
target markets are:
•
The ability to develop and commercialize highly stable optical polymer-based materials and optical devices in commercial quantities.
•
The ability to obtain appropriate patent and proprietary rights protection.
•
The ability to create commercial silicon-based PDKs for our electro-optic polymers.
•
Lower cost, high production yield for these products.
•
The ability to enable integration and implement advanced technologies.
•
Strong sales and marketing, and distribution channels for access to products.
We believe that our current business
planning will position our Company to compete adequately with respect to these factors. Our future success is
difficult to predict because
we are an early-stage company with most of products still in development.
Many of our existing and potential
competitors have substantially greater research and product development capabilities and financial, scientific,
marketing and human resources
than we do. As a result, these competitors may:
•
Succeed in developing products that are equal to or superior to our products and future products or that achieve greater market acceptance
than our products and future products.
•
Devote greater resources to developing, marketing or selling their products.
•
Respond quickly to new or emerging technologies or scientific advances and changes in customer requirements, which could render our
technologies or products obsolete.
•
Introduce products that make the continued development of our products and/or future products uneconomical.
•
Obtain patents that block or otherwise inhibit our ability to develop and commercialize our future products.
•
Withstand price competition more successfully than we can.
•
Establish cooperative relationships among themselves or with third parties that enhance their ability to address the needs of our prospective
customers.
•
Take advantage of acquisition or other opportunities more readily than we can.
11
Employees and Human Capital
We currently have 31 full-time
employees, and we retain several independent contractors on an as-needed basis. Based on our current
development plan we expect to add
4 additional full-time employees in 2025.
People
As a technology and innovation-driven
company, we depend on a highly skilled workforce. Attracting, developing, advancing and retaining the
best talent is critical for us to
execute our strategy and grow our business. Individuals with technical, engineering, chemistry and other science
backgrounds, experience,
or interests are particularly important for us to succeed. We strive to advance a diverse, equitable and inclusive work
environment.
Technical Team
Our team is composed of world-class
technologists, including materials scientists, design engineers, device engineers, synthetic organic chemists,
test and material engineers
and technicians.
Diversity and Inclusion
We work to create a culture of diversity and inclusion so that all of our employees feel they are respected and treated
equally, regardless of gender,
race, ethnicity, age, disability, sexual orientation, gender identity, cultural background or religious
belief.
Compensation and benefits
Our total
rewards package includes market-competitive pay, stock option grants and bonuses, healthcare benefits, retirement savings plans, life
insurance, disability insurance, paid time off and family leave, and flexible work schedules.
The principal
purposes of our equity incentive plan is to attract and retain employees who will contribute to our Company’s long range success,
to
provide incentives that align the interests of our employees with those of our shareholders, and to promote the success of our Company’s
business.
Health
and Safety
We are
committed to providing a healthy environment and safe workplace by operating in accordance with established health and safety protocols
within our facility and maintaining a strong health and safety compliance program. We prioritize, manage, and carefully track safety performance
at our
facility and integrate sound safety practices in every aspect of our operations. We regularly conduct self-assessments to examine
our safety culture and
processes.
Available Information
We maintain
a website at www.lightwavelogic.com. We make available on our website under “Investors” – “SEC Filings,”
free of charge, our
annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those
reports as soon as reasonably
practicable after we electronically file or furnish such material with the SEC. References to our website
in this report are provided as a convenience, and
the information on our website is not, and shall not be deemed to be a part of this
Annual Report on Form 10-K or incorporated into any other filings we
make with the SEC. The SEC maintains an Internet site (www.sec.gov)
that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC.
In addition, we make available on our website under “Leadership” – “Governance Documents”, free
of charge,
our Audit Committee Charter, Compensation Committee Charter, Nominating And Corporate Governance Committee Charter, Operations
Committee
Charter and Code of Ethics and Business Conduct. In addition, the foregoing information is available in print, without charge, to any
stockholder who requests these materials from us.
12
Item 1A.
Risk Factors.
Investing in our common stock
is risky. In addition to the other information contained in this Annual Report on Form 10-K, you should consider
carefully the following
risk factors in evaluating our business and us. If any of the following events actually occur, our business, operating results,
prospects
or financial condition could be materially and adversely affected. This could cause the trading price of our common stock to decline and
you may
lose all or part of your investment. The risks described below are not the only ones that we face. Additional risks not presently
known to us or that we
currently deem immaterial may also significantly impair our business operations and could result in a complete
loss of your investment.
We have incurred substantial operating losses since
our inception and will continue to incur substantial operating losses for the foreseeable future.
Since our inception, we have been
engaged primarily in the research and development of our electro-optic polymer materials technologies and
products. As a result of these
activities, we incurred significant losses and experienced negative cash flow since our inception. We incurred a net loss of
$22,535,041
for the year ended December 31, 2024, and $21,038,032 for the year ended December 31, 2023. We anticipate that we will continue to incur
operating losses through at least 2025.
We may not be able to generate
significant revenue either through customer contracts for our existing or future products or technologies or through
development contracts
from the U.S. government or government subcontractors. We expect to continue to make significant operating and capital
expenditures for
research and development and to improve and expand production, sales, marketing and administrative systems and processes. As a result,
we will need to generate significant revenue to achieve profitability. We cannot assure you that we will ever achieve profitability.
We are subject to the risks frequently experienced by early-stage companies.
The likelihood of our success
must be considered in light of the risks frequently encountered by early-stage companies, especially those formed to
develop and market
new technologies. These risks include our potential inability to:
·
Establish significant product sales and marketing capabilities;
·
Establish and maintain significant markets for our products and future products;
·
Identify, attract, retain and motivate qualified personnel;
·
Continue to develop and upgrade our technologies to
keep pace with changes in technology and the growth of markets using polymer-based
materials;
·
Develop expanded product production facilities, along
with silicon-based foundry and other outside contractor relationships; and
·
Maintain our reputation and build trust with customers.
Our failure to effectively manage our growth and
effectively transition from our focus on research and development activities to commercial
operations could harm our business.
Failure to manage growth of operations
could harm our business. To date, a large number of our activities and resources have been directed at the
research and development of
our technologies and development of potential related products including work in association with external partners. The
transition from
a focus on research and development to being a vendor of products requires effective planning and management. Additionally, growth
arising
from expected synergies from any future acquisitions will require effective planning and management. Future expansion will be expensive
and will
likely strain management and other resources.
In order to effectively manage growth, we must:
·
Continue to develop an effective planning and management process to implement our business strategy;
·
Hire, train and integrate new personnel in all areas of our business;
·
Expand our facilities and increase capital investments; and
·
Continue to successfully partner with silicon-based foundries.
We cannot assure you that we will be able to accomplish
these tasks effectively or otherwise effectively manage our growth.
13
We will require additional capital to continue
to fund our operations and if we do not obtain additional capital, we may be required to
substantially limit our operations.
Our business does not presently
generate the cash needed to finance our current and anticipated operations. Based on our current operating plan
and budgeted cash requirements,
we believe that we have sufficient funds to finance our operations through April 2026; however, we will need to obtain
additional future
financing after that time to finance our operations until such time that we can conduct profitable revenue-generating activities. We expect
that we will need to seek additional funding through public or private financings, including equity financings, and through other arrangements,
including
collaborative arrangements. Poor financial results, unanticipated expenses or unanticipated opportunities could require additional
financing sooner than we
expect. Other than with respect to (i) the purchase agreement for up to $30 million we entered into with Lincoln
Park on February 28, 2023 (the “2023
Purchase Agreement”); (ii) the purchase agreement for up to $30 million we entered
into with Lincoln Park on March 17, 2025 (the “2025 Purchase
Agreement"); and (iii) the sales agreement for up to $35
million we entered into with Roth Capital Partners, LLC (“Roth Capital”) on December 9, 2022
(the “Roth Sales
Agreement”); we have no plans or arrangements with respect to the possible acquisition of additional financing, and such financing
may
be unavailable when we need it or may not be available on acceptable terms. We currently have a remaining amount of $0 million and
$30 million pursuant
to the 2023 Purchase Agreement and 2025 Purchase Agreement with Lincoln Park, subject to the conditions set forth
therein, respectively, and $31.5
million that is available to our Company pursuant to the Roth Sales Agreement with Roth Capital.
Our forecast of the period of
time through which our financial resources will be adequate to support our operations is a forward-looking statement
and involves risks
and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this
Annual Report on Form 10-K. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital
resources
sooner than we currently expect.
Additional financing may not be
available to us, due to, among other things, our Company not having a sufficient credit history, income stream,
profit level, asset base
eligible to be collateralized, or market for its securities. If we raise additional funds by issuing equity or convertible debt securities,
the percentage ownership of our existing shareholders may be reduced, and these securities may have rights superior to those of our common
stock. If
adequate funds are not available to satisfy our long-term capital requirements, or if planned revenues are not generated, we
may be required to substantially
limit our operations.
We are entering new markets, and if we fail to
accurately predict growth in these new markets, we may suffer substantial losses.
We are
initially targeting applications in fiber optic data communications and telecommunications markets, in particular ultra-high bandwidth
optical connections deployed inside and between datacenters and/or AI clusters. In addition, we are exploring other applications that
include
automotive/LIDAR, sensing, displays, storage, aerospace and defense, satellites, quantum computing etc., for our polymer technology
platform. We expect
to continue to develop products for these markets and to seek to identify new markets. These markets change rapidly,
and we cannot assure you that they
will grow or that we will be able to accurately forecast market demand, or lack thereof, in time to
respond appropriately. Our investment of resources to
develop products for these markets may either be insufficient to meet actual demand
or result in expenses that are excessive in light of actual sales volumes.
Failure to predict growth and demand accurately in new markets
may cause us to suffer substantial losses. In addition, as we enter new markets, there is a
significant risk that:
·
The market may not accept the price and/or performance of our products;
·
There may be issued patents we are not aware of that could block our entry into the market or could result in excessive litigation; and
·
The time required for us to achieve market acceptance of our products may exceed our capital resources that would require additional
investment.
Our plan to develop relationships with strategic partners may not be
successful.
Part of our business strategy
is to maintain and develop strategic relationships with private firms, such as packaging companies and silicone-based
foundries, and to
a lesser extent, government agencies and academic institutions, to conduct research and development and testing of our products and
technologies.
For these efforts to be successful, we must identify partners whose competencies complement ours. We must also successfully enter into
agreements with them on terms attractive to us, and integrate and coordinate their resources and capabilities with our own. We may be
unsuccessful in
entering into agreements with acceptable partners or negotiating favorable terms in these agreements. Also, we may be
unsuccessful in integrating the
resources or capabilities of these partners. In addition, our strategic partners may prove difficult to
work with or less skilled than we originally expected. If
we are unsuccessful in our collaborative efforts, our ability to develop and
market products could be severely limited.
14
The failure to establish and maintain collaborative relationships may
have a materially adverse affect on our business.
We are initially targeting applications
in fiber optic data communications and telecommunications markets, in particular ultra-high bandwidth
optical connections deployed inside
and between datacenters and/or AI clusters. In addition, we are exploring other applications that include
automotive/LIDAR, sensing, displays,
storage, aerospace and defense, satellites, quantum computing etc., for our polymer technology platform. Our ability
to generate significant
revenues depends significantly on the extent to which potential customers and other potential industry partners develop, promote and
sell
systems that incorporate our products, which, of course, we cannot control. Any failure by potential customers and other potential industry
partners to
successfully develop and market systems that incorporate our products could adversely affect our sales. The extent to which
potential customers and other
industry partners develop, promote and sell systems incorporating our products is based on a number of factors
that are largely beyond our ability to
control.
We may participate in joint ventures that expose us to operational and
financial risk.
We may participate in one or more
joint ventures for the purpose of assisting us in carrying out our business expansion, especially with respect to
new product and/or market
development. We may experience with our joint venture partner(s) issues relating to disparate communication, culture, strategy,
and resources.
Further, our joint venture partner(s) may have economic or business interests or goals that are inconsistent with ours, exercise their
rights in
a way that prohibits us from acting in a manner which we would like, or they may be unable or unwilling to fulfill their obligations
under the joint venture
or other agreements. We cannot assure you that the actions or decisions of our joint venture partners will not
affect our operations in a way that hinders our
corporate objectives or reduces any anticipated cost savings or revenue enhancement resulting
from these ventures.
If we fail to develop and introduce new or enhanced
products on a timely basis, our ability to attract and retain customers could be impaired and
our competitive position could be harmed.
We plan to operate in a dynamic
environment characterized by rapidly changing technologies and industry standards and technological
obsolescence. To compete successfully,
we must design, develop, market and sell products that provide increasingly higher levels of performance and
reliability and meet the
cost expectations of our customers. The introduction of new products by our competitors, the market acceptance of products based
on new
or alternative technologies, or the emergence of new industry standards could render our anticipated products obsolete. Our failure to
anticipate or
timely develop products or technologies in response to technological shifts could adversely affect our operations. In particular,
we may experience
difficulties with product design, manufacturing, marketing or certification that could delay or prevent our development,
introduction or marketing of
products. If we fail to introduce products that meet the needs of our customers or penetrate new markets
in a timely fashion our Company will be adversely
affected.
Our future growth will suffer if we do not achieve
sufficient market acceptance of our organic nonlinear optical materials.
We expect our patented and patent-pending
optical materials along with trade secrets and licensed materials, to be the core of and the enabling
technology for future generations
of optical devices, modules, sub-systems and systems that we will develop or out-license to electro-optic device
manufacturers. Most of
our materials are still in the development stage, and we do not know when a market for our materials will develop, if at all. Our
success
depends, in part, upon our ability to gain market acceptance of our organic nonlinear optical materials. To be accepted, our materials
must meet the
technical and performance requirements of our potential customers. OEMs, suppliers or government agencies may not accept
polymer-based materials. In
addition, even if we achieve some degree of market acceptance for our materials in one industry, we may not
achieve market acceptance in other industries
that we are targeting. Also, certain large corporations may be predisposed against doing
business with a company of our limited size and operating history.
15
Our potential customers require our products to
undergo a lengthy and expensive qualification process, which does not assure product sales.
Prior to purchasing our products,
our potential customers will require that our products undergo extensive qualification processes. These
qualification processes may continue
for several months or more. However, qualification of a product by a customer does not assure any sales of the
product to that customer.
Even after successful qualification and sales of a product to a customer, a subsequent revision to the product, changes in our
customer’s
manufacturing process or our selection of a new supplier may require a new qualification process, which may result in additional delays.
Also,
once one of our products is qualified, it could take several additional months or more before a customer commences volume production
of components or
devices that incorporate our products. Despite these uncertainties, we are devoting substantial resources, including
design, engineering, sales, marketing
and management efforts, to qualifying our products with customers in anticipation of sales. If we
are unsuccessful or delayed in qualifying any of our
products with a customer, sales of our products to a customer may be precluded or
delayed, which may impede our growth and cause our business to suffer.
Obtaining a sales contract with a potential customer
does not guarantee that a potential customer will not decide to cancel or change its product
plans, which could cause us to generate no
revenue from a product and adversely affect our results of operations.
Even after we secure a sales contract
with a potential customer, we may experience delays in generating revenue from our products as a result of a
lengthy development cycle
that may be required. Potential customers will likely take a considerable amount of time to evaluate our products; it could take
12 to
24 months from early engagement by our sales team to actual product sales. The delays inherent in these lengthy sales cycles increase
the risk that a
customer will decide to cancel, curtail, reduce or delay its product plans, causing us to lose anticipated sales. In addition,
any delay or cancellation of a
customer’s plans could materially and adversely affect our financial results, as we may have incurred
significant expense and generated no revenue. Finally,
our customers’ failure to successfully market and sell their products could
reduce demand for our products and materially and adversely affect our business,
financial condition and results of operations. If we
were unable to generate revenue after incurring substantial expenses to develop any of our products, our
business would suffer.
Many of our products will have long sales cycles,
which may cause us to expend resources without an acceptable financial return and which makes
it difficult to plan our expenses and forecast
our revenue.
Many of our products will have
long sales cycles that involve numerous steps, including initial customer contacts, specification writing,
engineering design, prototype
fabrication, pilot testing, regulatory approvals (if needed), sales and marketing and commercial manufacture. During this
time, we may
expend substantial financial resources and management time and effort without any assurance that product sales will result. The anticipated
long sales cycle for some of our products makes it difficult to predict the quarter in which sales may occur. Delays in sales may cause
us to expend
resources without an acceptable financial return and make it difficult to plan expenses and forecast revenues.
Successful commercialization of our current and future products will
require us to maintain a high level of technical expertise.
Technology in our target markets
is undergoing rapid change. To succeed in our target markets, we will have to establish and maintain a leadership
position in the technology
supporting those markets. Accordingly, our success will depend on our ability to:
·
Accurately predict the needs of our target customers and develop, in a timely manner, the technology required to support those needs;
·
Provide products that are not only technologically sophisticated but are also available at a price acceptable to customers and competitive
with comparable products;
·
Establish and effectively defend our intellectual property; and
·
Enter into relationships with other companies that have developed complementary technology into which our products may be integrated.
We cannot assure you that we will be able to achieve
any of these objectives.
16
One of our significant target markets is the telecommunications market,
which historically has not accepted polymer modulators.
One of our significant target
markets is the telecommunications market, which demands high reliability optical components. Historically, polymer
modulators have not
been accepted into this market even though polymer modulators have achieved Telcordia™ based specifications. It is clear that the
telecommunications market is demanding higher and higher data rates for its optical components, and may again decide that polymer based
modulators are
not suitable even if higher data rates, high reliability, and low power consumption are demonstrated.
Another of our significant target markets is the
data communications (datacenter and/or high performance computing) market, which may be
subject to heavy competition from other PIC based
technologies such as silicon photonics and Indium Phosphide.
Another of our significant target
markets is the fiber optic data communications market, in particular ultra-high bandwidth optical connections
deployed inside and between
datacenters and/or AI clusters, which may be subject to heavy competition from other PIC based technologies such as silicon
photonics
and Indium Phosphide. As the demands for high performance, low cost ($/Gbps) is implemented into next generation architectures, polymer
modulators and polymer based PIC products may be subject to significant competition. Furthermore, there is a potential that technologies
such as silicon
photonics and Indium Phosphide might reach the metric of $1/Gbps at 800Gbps before ours. Customers may then be less willing
to purchase new
technology such as ours or invest in new technology development such as ours for next generation systems.
Our inability to successfully acquire and integrate
other businesses, assets, products or technologies could harm our business and cause us to fail
at achieving our anticipated growth.
We may grow our business through
strategic acquisitions and investments, and we are actively evaluating acquisitions and strategic investments in
businesses, products
or technologies that we believe could complement or expand our product offering, create and/or expand a client base, enhance our
technical
capabilities or otherwise offer growth or cost-saving opportunities. From time to time, we may enter into letters of intent with companies
with
which we are negotiating potential acquisitions or investments or as to which we are conducting due diligence. Although we are currently
not a party to any
binding material definitive agreement with respect to potential investments in, or acquisitions of, complementary businesses,
products or technologies, we
may enter into these types of arrangements in the future, which could materially decrease the amount of our
available cash or require us to seek additional
equity or debt financing. We have limited experience in successfully acquiring and integrating
businesses, products and technologies. We may not be
successful in negotiating the terms of any potential acquisition, conducting thorough
due diligence, financing the acquisition or effectively integrating the
acquired business, product or technology into our existing business
and operations. Our due diligence may fail to identify all of the problems, liabilities or
other shortcomings or challenges of an acquired
business, product or technology, including issues related to intellectual property, product quality or product
architecture, regulatory
compliance practices, revenue recognition or other accounting practices, or employee or customer issues.
Additionally,
in connection with any acquisitions we complete, we may not achieve the synergies or other benefits we expected to achieve, and we
may
incur write-downs, impairment charges or unforeseen liabilities that could negatively affect our operating results or financial position
or could
otherwise harm our business. If we finance acquisitions using existing cash, the reduction of our available cash could cause
us to face liquidity issues or
cause other unanticipated problems in the future. If we finance acquisitions by issuing convertible debt
or equity securities, the ownership interest of our
existing stockholders may be diluted, which could adversely affect the market price
of our stock. Further, contemplating or completing an acquisition and
integrating an acquired business, product or technology could divert
management and employee time and resources from other matters, which could harm
our business, financial condition and operating results.
We may incur debt in the future that might be secured
with our intellectual property as collateral, which could subject our Company to the risk of
loss of all of our intellectual property.
We currently have no debt to service.
If we incur debt in the future, we may be required to secure the debt with our intellectual property, including
all of our patents and
patents pending. In the event we default on the debt, we could incur the loss of all of our intellectual property, which would materially
and adversely affect our Company and cause you to lose your entire investment in our Company.
17
Our failure to compete successfully could harm our business.
The markets that we are targeting
for our proprietary electro-optic polymer systems and photonic devices are intensely competitive. Most of our
present and potential competitors
have or may have substantially greater research and product development capabilities, financial, scientific, marketing,
manufacturing
and human resources, name recognition and experience than we have. As a result, these competitors may:
·
succeed in developing materials and product integration expertise that is equal to or superior to our offerings or that will achieve greater
market acceptance than our offerings and future offerings;
·
devote greater resources to developing, marketing or selling their products;
·
respond more quickly to new or emerging technologies or scientific advances and changes in customer requirements, which could render our
technologies obsolete;
·
introduce products that make the continued development of our materials and future materials uneconomical;
·
obtain patents that block or otherwise inhibit our ability to develop and commercialize our materials and future materials;
·
withstand price competition more successfully than we can;
·
establish cooperative relationships among themselves or with third parties that enhance their ability to address the needs of our prospective
customers.
Our failure to compete successfully against these existing
or future competitors could harm our business.
We may be unable to obtain effective intellectual
property protection for our products and technology.
Our intellectual property, or
any intellectual property that we have or may acquire, license or develop in the future, may not provide meaningful
competitive advantages.
Our patents and patent applications, including those we license, may be challenged by competitors, and the rights granted under
such patents
or patent applications may not provide meaningful proprietary protection. For example, numerous patents held by third parties relate to
polymer materials and electro-optic devices. These patents could be used as a basis to challenge the validity or limit the scope of our
patents or patent
applications. A successful challenge to the validity or limitation of the scope of our patents or patent applications
could limit our ability to commercialize
our polymer materials technology and, consequently, reduce our revenues.
Moreover, competitors may infringe
our patents or those that we license, or successfully avoid these patents through design innovation. To combat
infringement or unauthorized
use, we may need to resort to litigation, which can be expensive and time-consuming and may not succeed in protecting our
proprietary
rights. In addition, in an infringement proceeding a court may decide that our patents or other intellectual property rights are not valid
or are
unenforceable, or may refuse to stop the other party from using the intellectual property at issue on the ground that it is non-infringing.
Policing
unauthorized use of our intellectual property is difficult and expensive, and we may not be able to, or have the resources to,
prevent misappropriation of our
proprietary rights, particularly in countries where the laws may not protect these rights as fully as
the laws of the United States.
We also rely on the law of trade
secrets to protect unpatented technology and know-how. We try to protect this technology and know-how by
limiting access to those employees,
contractors and strategic partners with a need to know this information and by entering into confidentiality agreements
with these parties.
Any of these parties could breach the agreements and disclose our trade secrets or confidential information to our competitors, or these
competitors might learn of the information in other ways. Disclosure of any trade secret not protected by a patent could materially harm
our business.
18
We may be subject to patent infringement claims,
which could result in substantial costs and liability and prevent us from selling our products.
Third parties may claim that our
products or related technologies infringe their patents. Any patent infringement claims brought against us may
cause us to incur significant
expenses, divert the attention of our management and key personnel from other business concerns and, if successfully asserted
against
us, require us to pay substantial damages. In addition, as a result of a patent infringement suit, we may be forced to stop or delay developing,
manufacturing or selling products that are claimed to infringe a patent covering a third party’s intellectual property unless that
party grants us rights to use
its intellectual property. We may be unable to obtain these rights on terms acceptable to us, if at all.
Even if we are able to obtain rights to a third party’s
patented intellectual property, these rights may be non-exclusive, and therefore
our competitors may obtain access to the same intellectual property.
Ultimately, we may be unable to sell our products or may have to
cease some of our business operations as a result of patent infringement claims, which
could severely harm our business.
If our products infringe the intellectual
property rights of others, we may be required to indemnify customers for any damages they suffer. Third
parties may assert infringement
claims against our current or potential customers. These claims may require us to initiate or defend protracted and costly
litigation
on behalf of customers, regardless of the merits of these claims. If any of these claims succeed, we may be forced to pay damages on behalf
of
these customers or may be required to obtain licenses for the products they use. If we cannot obtain all necessary licenses on commercially
reasonable
terms, we may be unable to continue selling such products.
Our technology may be subject to government rights.
We may have obligations to government agencies in connection with the
technology that we have developed, including the right to require that a
compulsory license be granted to one or more third parties selected
by certain government agencies. It may be difficult to monitor whether these third
parties will limit their use of our technology to
these licensed uses, and we could incur substantial expenses to enforce our rights to our licensed technology
in the event of misuse.
The loss of certain of our key personnel, or any
inability to attract and retain additional personnel, could impair our ability to attain our business
objectives.
Our future success depends to
a significant extent on the continued service of our key management personnel, particularly Yves LeMaitre, our
Chief Executive Officer,
Thomas E. Zelibor, our President and James S. Marcelli our Chief Financial Officer, Chief Operating Officer, and Secretary.
Accordingly,
the loss of the services of any of these persons would adversely affect our business and our ability to continue to commercialize our
products,
and impede the attainment of our business objectives.
Our future success will also depend
on our ability to attract, retain and motivate highly skilled personnel to assist us with product development and
commercialization. Competition
for highly educated qualified personnel in the polymer industry is intense. If we fail to hire and retain a sufficient number
of qualified
management, engineering, sales and technical personnel, we will not be able to attain our business objectives.
If we fail to develop and maintain the quality of our manufacturing
integration and design processes, our operating results would be harmed.
The manufacture and integration
of our materials for devices is a multi-stage process that requires the use of high-quality materials and advanced
manufacturing technologies
and design. Also, polymer-related device development and manufacturing, whether performed by a silicon photonics design
house or elsewhere,
must occur in a highly controlled, clean environment to minimize particles and other yield and quality-limiting contaminants. In spite
of stringent quality controls, weaknesses in process control or minute impurities in materials may cause a substantial percentage of a
product in a lot to be
defective. If we are not able to develop and continue to improve our manufacturing design processes, if stringent
quality controls are not maintained, or if
contamination problems arise, our operating results would be harmed.
The complexity of our organic nonlinear optical
materials may lead to errors, defects and bugs, which could result in the necessity to redesign
materials and could negatively impact
our reputation with customers.
Organic nonlinear optical materials
as complex as those we market and intend to market might contain errors, defects and bugs when first
introduced or as new versions are
released. Delivery and integration of materials with production defects or reliability, quality or compatibility problems
could significantly
delay or hinder market acceptance of our materials or result in a costly recall and could damage our reputation and adversely affect our
ability to sell our materials. If our organic nonlinear optical materials experience defects, we may need to undertake a redevelopment
of the materials, a
process that may result in significant additional expenses.
We may also be required to make
significant expenditures of capital and resources to resolve such problems. There is no assurance that problems
will not be found in new
products after commencement of commercial production, despite testing by our suppliers, our customers and us.
19
If we decide to make commercial quantities of products
at our facilities, we will be required to make significant capital expenditures to increase
capacity.
We lack the internal ability to
manufacture products at a level beyond the stage of early commercial introduction. To the extent we do not have an
outside vendor to manufacture
our products, we will have to increase our internal production capacity and we will be required to expand our existing
facilities or to
lease new facilities or to acquire entities with additional production capacities. These activities would require us to make significant
capital
investments and may require us to seek additional equity or debt financing. We cannot assure you that such financing would be
available to us when needed
on acceptable terms, or at all. Further, we cannot assure you that any increased demand for our products would
continue for a sufficient period of time to
recoup our capital investments associated with increasing our internal production capacity.
In addition, we do not have experience
manufacturing our products in large quantities. In the event of significant demand for our products, large-
scale production might prove
more difficult or costly than we anticipate and lead to quality control issues and production delays.
We may not be able to manufacture products at competitive prices.
To date, we have produced limited
quantities of materials for license and sale and materials and devices for research, development, demonstration
and prototype purposes.
The cost per unit for these products currently exceeds the price at which we could expect to profitably sell them. If we cannot
substantially
lower our cost of production as we move into sales of products in significant commercial quantities, our financial results will be harmed.
We may be unable to export our products or technology
to other countries, convey information about our technology to citizens of other countries
or sell certain products commercially, if the
products or technology are subject to United States export or other regulations.
We develop certain polymer-based
products that we believe the United States government and other governments may be interested in using for
military and information gathering
or antiterrorism activities. United States government export regulations may restrict us from selling or exporting certain
products into
other countries, exporting our technology to those countries, conveying information about our technology to citizens of other countries
or
selling certain products to commercial customers. We may be unable to obtain export licenses for products or technology, if they become
necessary. We
currently cannot assess whether national security concerns would affect our future products and, if so, what procedures
and policies we would have to
adopt to comply with applicable existing or future regulations.
We are subject to regulatory compliance related to our operations.
We are subject to various U.S.
governmental regulations related to occupational safety and health, labor and business practices. Failure to comply
with current or future
regulations could result in the imposition of substantial fines, suspension of production, alterations of our production processes,
cessation
of operations, or other actions, which could harm our business.
We may incur liability arising from the use of hazardous materials.
Our business and our facilities
are subject to a number of federal, state and local laws and regulations relating to the generation, handling,
treatment, storage and
disposal of certain toxic or hazardous materials and waste products that we use or generate in our operations. Many of these
environmental
laws and regulations subject current or previous owners or occupiers of land to liability for the costs of investigation, removal or
remediation
of hazardous materials. In addition, these laws and regulations typically impose liability regardless of whether the owner or occupier
knew of,
or was responsible for, the presence of any hazardous materials and regardless of whether the actions that led to the presence
were taken in compliance with
the law. In our business, we use hazardous materials that are stored on site. We use various chemicals in
our manufacturing process that may be toxic and
covered by various environmental controls. An unaffiliated waste hauler transports the
waste created by use of these materials off-site. Many environmental
laws and regulations require generators of waste to take remedial
actions at an off-site disposal location even if the disposal was conducted lawfully. The
requirements of these laws and regulations are
complex, change frequently and could become more stringent in the future. Failure to comply with current
or future environmental laws
and regulations could result in the imposition of substantial fines, suspension of production, alteration of our production
processes,
cessation of operations or other actions, which could severely harm our business.
20
Our data and information systems and network infrastructure
may be subject to hacking or other cybersecurity threats. If our security measures
are breached and an unauthorized party obtains access
to our proprietary business information, our information systems may be perceived as
being unsecure, which could harm our business and
reputation, and our proprietary business information could be misappropriated which could
have an adverse effect on our business and results
of operations.
Our Company stores and transmits its proprietary information on its computer systems. Despite our security measures, our information systems
and network infrastructure may be vulnerable to cyber-attacks or could be breached due to an employee error or other disruption that could result in
unauthorized disclosure of sensitive information that has the potential to significantly interfere with our business operations. Breaches of our security
measures could expose us to a risk of loss or misuse of this information, litigation and potential liability. Since techniques used to obtain unauthorized
access or to sabotage information systems change frequently and generally are not recognized until launched against a target, we may be unable to
anticipate these techniques or to implement adequate preventive measures in advance of such an attack on our systems. In addition, we use third party
vendors to store our proprietary information who use cyber or “Cloud” storage of information as part of their service or product offerings, and despite our
attempts to validate the security of such services, our proprietary information may be misappropriated by other parties. In the event of an actual or
perceived breach of our security, or the security of one of our vendors, the market perception of the effectiveness of our security measures could be harmed
and we could suffer damage to our reputation or our business. Additionally, misappropriation of our proprietary business information could prove
competitively harmful to our business.
We conduct significantly all of our research and
development activities at our Englewood, CO facility, and circumstances beyond our control may
result in considerable business interruptions.
We
conduct significantly all of our research and development activities at our Englewood, CO facility. Our operations are vulnerable to
interruption
by fire, earthquake, floods or other natural disaster, quarantines or other disruptions associated with infectious diseases, national
catastrophe,
terrorist activities, war, disruptions in our computing and communications infrastructure due to power loss, telecommunications
failure, human error,
physical or electronic security breaches and computer viruses, and other events beyond our control. We do not have
a detailed disaster recovery plan.
We could be negatively affected as a result
of a proxy contest and the actions of activist stockholders.
A proxy
contest with respect to election of our directors, or other activist stockholder activities, could adversely affect our business because:
(1)
responding to a proxy contest and other actions by activist stockholders can be costly and time-consuming, disruptive to our operations
and divert the
attention of management and our employees; (2) perceived uncertainties as to our future direction caused by activist activities
may result in the loss of
potential business opportunities, and may make it more difficult to attract and retain qualified personnel and
business partners; and (3) if individuals are
elected to our Board of Directors with a specific agenda, it may adversely affect our ability
to effectively and timely implement our strategic plans.
The requirements of being a public company are
a strain on our systems and resources, are a diversion to management’s attention and are costly.
As a public company, we are subject
to the reporting requirements of the Securities Exchange Act of 1934 (“Exchange Act”) the Sarbanes-Oxley
Act of 2002
(“Sarbanes-Oxley Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”),
and the rules and
regulations of The NASDAQ Stock Market. The requirements of these rules and regulations increase our legal, accounting
and financial compliance costs,
make some activities more difficult, time-consuming and costly and may also place undue strain on our
personnel, systems and resources.
21
The Exchange Act requires, among
other things, that we file annual, quarterly and current reports with respect to our business and operating
results. The Sarbanes-Oxley
Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over
financial reporting.
We are continuing the costly process of implementing and testing our systems to report our results as a public company, to continue to
manage our growth and to implement internal controls. We are and will continue to be required to implement and maintain various other
control and
business systems related to our equity, finance, treasury, information technology, other recordkeeping systems and other operations.
As a result of this
implementation and maintenance, management's attention may be diverted from other business concerns, which could adversely
affect our business.
Furthermore, we rely on third-party software and system providers for ensuring our reporting obligations and effective
internal controls, and to the extent
these third parties fail to provide adequate service including as a result of any inability to scale
to handle our growth and the imposition of these increased
reporting and internal controls and procedures, we could incur material costs
for upgrading or switching systems and our business could be materially
affected.
In addition, changing laws, regulations
and standards relating to corporate governance and public disclosure are creating uncertainty for public
companies, increasing legal
and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are
subject to varying
interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time
as new
guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters
and higher costs
necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with
evolving laws, regulations and
standards, and this investment may result in increased general and administrative expenses and a diversion
of management's time and attention from
revenue-generating activities to compliance activities. If our efforts to comply with new laws,
regulations and standards differ from the activities intended
by regulatory or governing bodies due to ambiguities related to their application
and practice, regulatory authorities may initiate legal proceedings against
us and our business may be adversely affected.
In addition, we expect these laws,
rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability
insurance, and we may
be required to incur substantial costs to maintain appropriate levels of coverage. These factors could also make it more difficult for
us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee, and qualified executive
officers.
As a result of being a public
company, our business and financial condition are more visible, which we believe may result in threatened or actual
litigation, including
by competitors and other third parties. If such claims are successful, our business and operating results could be adversely affected,
and
even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to
resolve them, could divert the
time and resources of our management and adversely affect our business and operating results.
If we fail to maintain an effective system of disclosure
controls and internal control over financial reporting, our ability to produce timely and
accurate financial statements or comply with
applicable regulations could be impaired.
As a public company, we are subject
to the reporting requirements of the Securities Exchange Act of 1934 (Exchange Act) the Sarbanes-Oxley Act
of 2002 (Sarbanes-Oxley Act),
the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), and the rules and regulations of The
NASDAQ Stock Market.
We expect that compliance with these rules and regulations will continue to increase our legal, accounting and financial
compliance costs,
make some activities more difficult, time-consuming and costly, and place significant strain on our personnel, systems and resources.
The Sarbanes-Oxley Act requires,
among other things, that we assess the effectiveness of our internal control over financial reporting annually and
the effectiveness of
our disclosure controls and procedures quarterly. In particular, Section 404 of the Sarbanes-Oxley Act, (Section 404), requires us to
perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on, and
our independent
registered public accounting firm to attest to, the effectiveness of our internal control over financial reporting. Our
compliance with applicable provisions
of Section 404 requires that we incur substantial accounting expense and expend significant management
time on compliance-related issues as we
implement additional corporate governance practices and comply with reporting requirements. Moreover,
if we are not able to comply with the
requirements of Section 404 applicable to us in a timely manner, or if we or our independent registered
public accounting firm identifies deficiencies in our
internal control over financial reporting that are deemed to be material weaknesses,
the market price of our stock could decline and we could be subject to
sanctions or investigations by the SEC or other regulatory authorities,
stockholder or other third-party litigation, all of which would require additional
financial and management resources.
Furthermore, investor perceptions
of our Company may suffer if deficiencies are found, and this could cause a decline in the market price of our
stock or hinder our ability
to raise capital. Irrespective of compliance with Section 404, any failure of our internal control over financial reporting could
have
a material adverse effect on our stated operating results and harm our reputation. If we are unable to continue to implement and maintain
these
requirements effectively or efficiently, it could harm our operations, financial reporting, or financial results and could result
in an adverse opinion on our
internal controls from our independent registered public accounting firm.
22
The exercise of options and warrants and other
issuances of shares of common stock or securities convertible into common stock will dilute your
interest.
Our
Board may determine from time to time that it needs to raise additional capital by issuing additional shares of our common stock or other
securities and we are not restricted from issuing additional common stock, including securities that are convertible into or exchangeable
for, or that
represent the right to receive, shares of our common stock. Because our decision to issue securities in any future offering
will depend on market conditions
and other factors beyond our control, we cannot predict or estimate the amount, timing, or nature of
any future offerings, or the prices at which such
offerings may be affected. Additional equity offerings may dilute the holdings of existing
stockholders or reduce the market price of our common stock.
As of December 31, 2024, we have
outstanding options and warrants to purchase an aggregate of 8,848,908 shares of our common stock at
exercise prices ranging from $0.51
to 16.81 per share with a weighted average exercise price of $3.00 per share. The exercise of options and warrants at
prices below the
market price of our common stock could adversely affect the price of shares of our common stock. Additional dilution may result from the
issuance of shares of our capital stock in connection with any collaboration (although none are contemplated at this time) or in connection
with other
financing efforts, including pursuant to the 2025 Purchase Agreement with Lincoln Park, and the Roth Sales Agreement
with Roth Capital. Any issuance of
our common stock that is not made solely to then-existing stockholders proportionate to their interests,
such as in the case of a stock dividend or stock split,
will result in dilution to each stockholder by reducing his, her or its percentage
ownership of the total outstanding shares. Moreover, if we issue options or
warrants to purchase our common stock in the future and those
options or warrants are exercised or we issue restricted stock, stockholders may experience
further dilution. Holders of shares of our
common stock have no preemptive rights that entitle them to purchase their pro rata share of any offering of
shares of any class or series.
The trading
price of our common stock has been, and may continue to be, volatile, and the value of our common stock may decline. This
volatility,
as well as general market conditions, may cause our stock price to fluctuate greatly and even potentially expose us to litigation.
Our common stock may be subject
to continued volatility. During the past 52 weeks, the share price for our common stock ranged from a low of
$1.00 to a high of $4.82.
We cannot assure you that the market price for our common stock will be less volatile or will remain at its current level. A
decrease
in the market price for our shares could result in substantial losses for investors. The market price of our common stock may be significantly
affected by one or more of the following factors, many of which are beyond our control, including:
·
our Company’s ability to execute on its business plan;
·
the status of particular development programs and the timing of performance under specific development agreements;
·
actual or anticipated demand for our products and future products and technologies;
·
amount and timing of our costs related to our development and marketing efforts or other initiatives and expansion of our operations;
·
changes in anticipated commercial deployment of certain products and financial results;
·
our ability to enter into, renegotiate or renew key agreements or strategic relationships;
·
our ability to develop expanded product production facilities, along with silicon-based foundry and other outside contractor relationships;
·
issuance of new or updated research or reports by securities analysts;
·
the use by investors or analysts of third-party data regarding our business that may not reflect our operations;
·
fluctuations in the valuation of companies perceived by investors to be comparable to us;
·
share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;
·
large trades, block trades or short selling of our common stock;
·
actual or anticipated changes in our competitive position relative to our industry competitors;
·
announcements or implementation by our competitors of technological innovations or new products;
·
changes in laws or regulations applicable to our products or industry;
·
additions or departures of key personnel;
·
capital-raising activities or commitments;
·
product shortages requiring suppliers to allocate minimum quantities;
·
the commencement or conclusion of legal proceedings that involve us;
·
costs related to possible future acquisitions of technologies or businesses;
·
economic conditions specific to our industry, as well as general economic and market conditions; or
·
other events or factors, including those resulting from civil unrest, war, foreign invasions, terrorism, or public health crises or responses to
such events.
23
Furthermore,
the stock markets frequently experience extreme price and volume fluctuations that affect the market prices of equity securities of
many
companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad
market
and industry fluctuations, as well as general economic, political, and market conditions such as recessions, elections, interest
rate changes, or international
currency fluctuations, may negatively impact the market price of our common stock. As a result of such
fluctuations, you may not realize any return on
your investment in us and may lose some or all of your investment. In the past, companies
that have experienced volatility in the market price of their stock
have been subject to securities class action litigation or derivative
litigation.
A sale of a substantial number of shares of our
common stock may cause the price of our common stock to decline and may impair our ability to
raise capital in the future.
Our common stock is traded on
The NASDAQ Capital Market and, despite certain increases of trading volume from time to time, there have been
periods when the market
for our common stock could be considered “thinly-traded,” meaning that the number of persons interested in purchasing our
common stock at or near bid prices at any given time may be relatively small. Finance transactions or option/warrant exercises resulting
in a large amount
of newly issued shares that become readily tradable, or other events that cause current stockholders to sell shares,
could place downward pressure on the
trading price of our stock the trading price of our stock could decline. Additionally, we believe
a significant portion of our shares are held by shareholders
that accumulated their shares during a time when our shares prices were significantly
less than our current share prices. If these shareholders, some of
which hold a substantial number of shares of our common stock, decide
to sell some or all of their shares at once without regard to the impact of their sales
on the market price of our stock, the trading
price of our stock could decline. In addition, the lack of a robust resale market may require a stockholder who
desires to sell a large
number of shares of common stock to sell the shares in increments over time to mitigate any adverse impact of the sales on the market
price of our stock.
If our existing stockholders sell,
or the market perceives that our stockholders intend to sell, substantial amounts of our common stock in the
public market, including
shares issued upon the exercise of outstanding options or warrants or pursuant to the 2025 Purchase Agreement with Lincoln Park,
and the Roth Sales Agreement with Roth Capital, the market price of our common stock could decline. Sales of a substantial number of shares
of our
common stock may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that
we deem reasonable or
appropriate. We may become involved in securities class action litigation that could divert management’s attention
and harm our business.
Our common stock will be subject to potential delisting
if we do not maintain the listing requirements of the Nasdaq Capital Market.
Our common stock commenced trading
on The NASDAQ Capital Market on September 1, 2021. We cannot assure you that an active trading
market for our common stock will continue
to be sustained. Nasdaq has rules for continued listing, including, without limitation, minimum market
capitalization and other requirements.
Failure to maintain our listing, or de-listing from Nasdaq, would make it more difficult for stockholders to dispose of
our securities
and more difficult to obtain accurate price quotations on our securities. This could have an adverse effect on the price of our common
stock.
Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need
in the future, may also be
materially and adversely affected if our common stock and/or other securities are not traded on a national
securities exchange.
If securities or industry analysts do not publish
research or reports about our business, or if they change their recommendations regarding our
stock adversely, our stock price and trading
volume could decline.
The trading market for most listed
companies’ securities depends in part on the research and reports that securities or industry analysts publish about
them or their
business. We currently have no independent research analysts that cover our stock and we may not obtain research coverage by securities
and
industry analysts until our products are commercialized and we obtain revenues, and there is no assurances that we will ever obtain
independent research
analysts coverage. If no securities or industry analysts commence coverage of us, the trading price for our common
stock could be negatively affected. In
the event any analyst who covers us downgrades our securities, the price of our securities would
likely decline. If one or more of these analysts ceases to
cover us or fails to publish regular reports on us, interest in the purchase
of our securities could decrease, which could cause the price of our common stock
and its trading volume to decline.
Our board of directors has the authority, without
stockholder approval, to issue preferred stock with terms that may not be beneficial to existing
common stockholders and with the ability
to affect adversely stockholder voting power and perpetuate their control over us.
Our articles of incorporation,
as amended, allow us to issue shares of preferred stock without any vote or further action by our stockholders. Our
board of directors
has the authority to fix and determine the relative rights and preferences of preferred stock. Our board of directors also has the authority
to issue preferred stock without further stockholder approval, including large blocks of preferred stock. As a result, our board of directors
could authorize
the issuance of a series of preferred stock that would grant to holders thereof the preferred right to our assets upon
liquidation, the right to receive dividend
payments before dividends are distributed to the holders of common stock or other preferred
stockholders and the right to the redemption of the shares,
together with a premium, prior to the redemption of our common stock or existing
preferred stock, if any.
24
Preferred stock could be used
to dilute a potential hostile acquirer. Accordingly, any future issuance of preferred stock or any rights to purchase
preferred stock
may have the effect of making it more difficult for a third party to acquire control of us. This may delay, defer or prevent a change
of
control or an unsolicited acquisition proposal. The issuance of preferred stock also could decrease the amount of earnings attributable
to, and assets
available for distribution to, the holders of our common stock and could adversely affect the rights and powers, including
voting rights, of the holders of
our common stock and preferred stock.
Our articles of incorporation and amended and restated
bylaws, and certain provisions of Nevada corporate law, as well as certain of our
contracts, contain provisions that could delay or prevent
a change in control even if the change in control would be beneficial to our stockholders.
Nevada law, as well as our articles
of incorporation, as amended, and amended and restated bylaws, contain anti-takeover provisions that could
delay or prevent a change in
control of our Company, even if the change in control would be beneficial to our stockholders. These provisions could lower
the price
that future investors might be willing to pay for shares of our common stock. These anti-takeover provisions:
·
authorize our board of directors to create and issue, without stockholder approval, preferred stock, thereby increasing the number of
outstanding shares, which can deter or prevent a takeover attempt;
·
prohibit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director
candidates;
·
empower our board of directors to fill any vacancy on our board of directors, whether such vacancy occurs as a result of an increase in the
number of directors or otherwise;
·
provide that our board of directors be divided into three classes, with approximately one-third of the directors to be elected each year;
·
provide that special meetings of our stockholders may only be called by the chairperson, president or chief executive officer, or by resolution
of the board of directors or at the request in writing of stockholders owning 66 2/3% in amount of the entire capital stock of the Company
issued and outstanding and entitled to vote;
·
establish advance notice procedures with regard to stockholder proposals relating to stockholder nominees for director and other stockholder
proposals;
·
provide that our board of directors is expressly authorized to adopt, amend or repeal our bylaws; and
·
provide that our directors will be elected by a plurality of the votes cast in the election of directors.
Nevada Revised Statutes, the terms
of our employee stock option agreements and other contractual provisions may also discourage, delay or
prevent a change in control of
our Company. Nevada Revised Statutes sections 78.378 to 78.3793 provide state regulation over the acquisition of a
controlling interest
in certain Nevada corporations unless the articles of incorporation or bylaws of the corporation provide that the provisions of these
sections do not apply. Our articles of incorporation, as amended, and amended and restated bylaws do not state that these provisions do
not apply. The
statute creates a number of restrictions on the ability of a person or entity to acquire control of a Nevada company by
setting down certain rules of conduct
and voting restrictions in any acquisition attempt, among other things. The statute contains certain
limitations and it may not apply to our Company. Our
2016 Equity Incentive Plan includes change-in-control provisions that allow us to
grant options that may become vested immediately upon a change in
control. Our board of directors also has the power to adopt a stockholder
rights plan that could delay or prevent a change in control of our Company even if
the change in control is generally beneficial to our
stockholders. These plans, sometimes called “poison pills,” are oftentimes criticized by institutional
investors or their
advisors and could affect our rating by such investors or advisors. If our board of directors adopts such a plan, it might have the effect
of
reducing the price that new investors are willing to pay for shares of our common stock.
Together, these charter, statutory
and contractual provisions could make the removal of our management and directors more difficult and may
discourage transactions that
otherwise could involve payment of a premium over prevailing market prices for our common stock. Furthermore, the
existence of the foregoing
provisions, as well as the significant common stock beneficially owned by our founders, executive officers, and members of our
board of
directors, could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also
deter potential
acquirers of our Company, thereby reducing the likelihood that you could receive a premium for your common stock in an
acquisition.
Item 1B.
Unresolved Staff Comments.
None.
Item 1C.
Cybersecurity.
Cybersecurity Risk Management
and Strategy. We depend on software applications, information technology systems, computing infrastructure
and cloud service
providers to operate our business. Certain of these systems are managed, hosted, provided or used by third parties, to assist in conducting
our business and which have their own cyber security measures in place. We implement generally applicable industry standards and best
practices
processes for the assessment, identification, and management of material risks from cybersecurity threats to our information
technology systems. We have
an Information Security Coordinator who oversees our information security policies and procedures. Our Information
Security Coordinator maintains a
cyber incident reporting and response process and provides management notifications based on the seriousness
of any incident. Our information security
policies and procedures are required to be reviewed on a regular basis.
25
We
have not experienced a cybersecurity incident that resulted in a material adverse impact to our business or operations; however, there
can be no
guarantee that we will not experience such an incident in the future. For a description of the risks from cybersecurity threats
that may materially affect our
Company and how they may do so, please see “Risk Factors” included in Part I, Item 1A of
this Annual Report on Form 10-K, including “Our data and
information systems and network infrastructure may be subject to
hacking or other cyber security threats. If our security measures are breached and an
unauthorized party obtains access to our proprietary
business information, our information systems may be perceived as being unsecure, which could harm
our business and reputation, and our
proprietary business information could be misappropriated which could have an adverse effect on our business and
results of operations."
Cybersecurity Governance. Our
Audit Committee has primary responsibility for overseeing our risk-management program relating to
cybersecurity, although our Board of
Directors participates in periodic reviews and discussion dedicated to cyber risks, threats, and protections.
Item 2.
Properties.
Our principal executive office
and research and development facility is located at 369 Inverness Parkway, Suite 350, Englewood, Colorado. The
23,104 square feet facility
includes fully functional 1,000 square feet of class 1,000 cleanroom, 500 square feet of class 10,000 cleanroom, chemistry
laboratories,
and analytic laboratories, and serves as our office, laboratory and research and development space. Our total annual base rent during
2024 is
expected to be approximately $387,666.
Item 3.
Legal Proceedings.
We are not a party to any litigation
of a material nature, nor are we aware of any threatened litigation of a material nature.
Item 4.
Mine Safety Disclosures.
Not Applicable.
26
PART II
Item 5.
Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity Securities.
Market Information
Our common stock trades on the
Nasdaq Capital Market under the symbol LWLG.
Holders of
Common Stock
On March 18, 2025, we had approximately
67 holders of our common stock, not including persons who hold our common stock in nominee or
"street
name” accounts through brokers or banks.
Dividend
Policy
Our Company has never paid
a cash dividend and has no present plans to pay cash dividends.
Securities Authorized for Issuance under Equity Compensation Plans
Equity Compensation Plans as of December 31, 2024.
Equity Compensation Plan Information
Number of securities to
be
issued upon exercise of
outstanding options,
warrants and rights
Weighted-average
exercise
price of outstanding
options,
warrants and rights
Number of securities
remaining
available for future
issuance
under equity
compensation plans
(excluding securities
reflected in
column (a))
Plan category
(a)
(b)
(c)
Equity compensation plans approved
by security holders(1)
9,499,859
$3.17
3,480,845
Equity compensation plans not approved by security
holders (2)
400,000
$0.60
—
Total
9,899,859
$3.07
3,480,845
1.
Reflects shares of common stock to be issued pursuant to our 2016 Equity Incentive Plan and our 2007 Employee Stock Plan, both of which are for
the benefit of our directors, officers, employees and consultants. We have reserved 13,000,000 shares of common stock for such persons pursuant to
our 2016 Equity Incentive Plan. We terminated our 2007 Employee Stock Plan in June 2016 and no additional awards are made under that plan.
2.
Comprised of common stock purchase warrants we issued for services.
27
Stock Performance Graph
The graph
set forth below compares the cumulative total stockholder return on our common stock between December 31, 2019 and December 31,
2024,
with the cumulative total return of (a) the NASDAQ Composite Index and (b) Solactive EPIC Core Photonics USD Index NTR, over the same
period. This graph assumes the investment of $100 on December 31, 2019 in our common stock, the NASDAQ Composite Index and the Solactive
EPIC
Core Photonics USD Index NTR and assumes the reinvestment of dividends, if any. The graph assumes our closing sales price on December
31, 2019 of
$0.70 per share as the initial value of our common stock.
The
comparisons shown in the graph below are based upon historical data. The stock price performance shown in the graph below is not necessarily
indicative of, nor is it intended to forecast, the potential future performance of our common stock. Information used in the graph was
obtained from the
NASDAQ Stock Market LLC and Solactive AG, financial data providers and sources believed to be reliable.
The above
graph and related information shall not be deemed “soliciting material” or to be “filed” with the Securities and
Exchange Commission,
nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange
Act except to the extent we
specifically incorporate it by reference into such filing. Our stock price performance shown in the graph
below is not indicative of future stock price
performance.
28
Recent Sales of Unregistered Securities
During the period covered by this
report, our Company has sold the following securities without registering the securities under the Securities Act:
Date
Security
January 2024
Common Stock — 19,000 shares of Common Stock at $0.75 per share pursuant to a warrant exercise.
December 2024
Common Stock — 100,000 shares of Common Stock at $0.77 per share pursuant to a warrant exercise.
No underwriters
were utilized, and no commissions or fees were paid with respect to any of the above transactions. These persons were the only
offerees
in connection with these transactions. We relied on Section 4(a)(2) and Rule 506 of Regulation D of the Securities Act since the transaction
does
not involve any public offering.
Purchases of Equity Securities by the Issuer
or Affiliated Purchasers
None.
Item 6.
RESERVED.
Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following management’s
discussion and analysis of financial condition and results of operations provides information that management
believes is relevant to
an assessment and understanding of our plans and financial condition. The following selected financial information is derived from
our
historical financial statements and should be read in conjunction with such financial statements and notes thereto set forth elsewhere
within this Annual
Report on Form 10-K and the "Forward-Looking Statements" explanation included elsewhere herein.
Overview
Lightwave
Logic, Inc. is a technology platform company leveraging its proprietary engineered electro-optic (EO) polymers to transmit data at
higher
speeds with less power in a small form factor. The Company’s high activity and high stability organic polymers allow it to create
next-generation
photonic EO devices that convert data from electrical signals into light/optical signals for applications in telecommunications,
and for data transmission
potentially used to support generative AI.
Our differentiation
at the modulator device level is in higher speed, lower power consumption, simplicity of manufacturing, small footprint (size),
and reliability.
We have demonstrated the electro-optic polymers potential for higher speed and lower power consumption in packaged devices, and during
2024, we continued to make advances in techniques to translate our world class material properties to efficient, reliable modulator devices
with commercial
foundries. We are currently focused on a) working with potential and existing customers to integrate our proprietary materials
into our customers’ specific
PIC and device architecture. b) testing and demonstrating the superior performance, simplicity of manufacturability
and reliability of our devices, including
in conjunction with the silicon photonics manufacturing ecosystem c) providing our potential
and existing customers with the proper Process Development
Kits (PDKs) to enable the efficient and fast integration of our materials into
their own design and manufacturing plans. In 2024 we continued to work with
silicon-based foundry partners to help scale in volume our
polymer modulator devices and we received working modulator chips from these foundries. We
have advanced and matured our interactions
with our foundry partners and we continue to receive working modulator chips for prototyping. Silicon-based
foundries are 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. We have now received silicon wafers that range up to 200mm in diameter,
which aligns well with foundry
manufacturing.
Our extremely
strong and broad patent portfolio allows us to optimize our business model in three areas: 1) Traditional focus on polymer materials
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 fiber optic data communications and telecommunications markets, in particular ultra-high bandwidth
optical connections deployed inside and between datacenters and/or AI clusters. In addition, we are exploring other applications that
include
automotive/LIDAR, sensing, displays, storage, aerospace and defense, etc., for our polymer technology platform. Our goal is to
have our unique polymer
technology platform become ubiquitous across multiple market verticals over and above the optical fiber optic
communications markets.
29
Artificial
Intelligence (AI) has been integrating deeper within our daily activities with applications to make us more efficient and possibly smarter.
The impact on the internet is huge, and the internet is based on an optical network that utilizes data centers to route and switch traffic
or information to and
from destinations. Data centers are being upgraded today in a fashion that the industry has not seen before with
significant investments of capital. The
expected demands of increased traffic, information, and data driven by AI is changing the way
the internet is being operated. AI is now creating new and
interesting market opportunities to upgrade the internet. Three of these opportunities
are important today: density, speed, and low power and these are very
well aligned with our high performance electro-optic polymers modulator
platform. We are designing high performance polymer modulator optical engines
to support the rise and growth of AI as it generates more
information that will travel through the internet and optical network. While we are not directly an
AI company designing electronic processors,
we do see immediate benefits of enabling higher levels of information to cross the internet using our optical
polymer modulator platform.
Commencement of Commercial Operations
We
commenced commercial operations in May 2023. Presently, our commercial operations consist of a material
supply license agreement to
provide Perkinamine® chromophore
materials for polymer based photonic devices and photonic integrated circuits (PICs). The license agreement
represents tangible commercial
progress for electro-optic polymers as part of our Company's business plan. Our Company is also
in various stages of
photonic proprietary device designs and materials development and evaluation with potential customers and strategic
partners. We expect to continue to
obtain a revenue stream from technology licensing agreements, and to obtain additional revenue streams
from technology transfer agreements and sale of
our electro-optic proprietary device designs.
Business Strategy
Our
first revenue stream was obtained from our entry into a material supply license agreement to
provide Perkinamine® chromophore
materials for
polymer based photonic devices and photonic integrated circuits (PICs). Our Company
is also in various stages of photonic device designs and materials
development and evaluation with potential customers and strategic partners.
We expect to continue to obtain a revenue stream from technology licensing
agreements, and to obtain additional revenue streams from technology
transfer agreements and sale of our proprietary electro-optic devices.
Specifically,
our business strategy provides 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 sale of our own proprietary
electro-
optic device designs. Our objective is to be a leading provider of proprietary technology and know-how in the electro-optic materials
and devices. In order
to meet this objective, we intend to continue to:
•
Further the development of proprietary organic electro-optic polymer material systems
•
Develop photonic device designs based on our
P2IC™ technology
•
Develop proprietary intellectual property
•
Grow our device design development
capabilities
•
Partner with silicon-based foundries who can scale volume quickly
•
Grow our product reliability and quality assurance capabilities
•
Grow our optoelectronic packaging and testing capabilities
•
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
•
Add high-level personnel with industrial and manufacturing experience in key areas of our materials and device development
Create Organic Polymesr-Enabling design and production
of Electro-Optic Modulators
We
intend to utilize our proprietary optical polymer technology to create an initial portfolio of commercial electro-optic polymer product
devices
designs 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.
Capital Requirements
We
commenced commercial operations in May 2023, and we do not generate sufficient revenues to pay for our operating expenses. We have
incurred
substantial net losses since inception. We have satisfied our capital requirements since inception primarily through the issuance and
sale of our
common stock.
30
Results of Operations
Comparison of year ended December
31, 2024 to year ended December 31, 2023
Revenues
During the year ended December
31, 2024, we recognized $81,855 of licensing and royalty revenue and $13,750 of revenue for the device
processing work on the device supplied
by a customer. During the year ended December 31, 2023, we recognized $40,502 of licensing and royalty revenue.
Cost of sales
During the year ended December 31, 2024,
we recognized $7,395 in cost of sales. During the year ended December 31, 2023, we recognized $2,513 in
cost of sales.
Operating expenses
For the Year
Ended
December 31, 2024
For the Year
Ended December
31, 2023
Change from
Prior
Year
Percent
Change from
Prior Year
Research and development
16,806,548 $
15,903,689 $
902,859
6%
General and administrative
6,370,805
5,359,565
1,011,240
19%
$
23,177,353 $
21,263,254 $
1,914,099
9%
Research and development
expenses increased for the year ended December 31, 2024, as compared to the year ended December 31, 2023,
primarily due to increases in
research and development salary and benefits expenses, research and development equipment depreciation expense, prototype
device development
and wafer fabrication expenses, research and development travel expenses, rent expenses, property tax expenses, research and
development
consulting expenses, software expenses, and laboratory and wafer fabrication materials and supplies expenses, offset by decreases in research
and development non-cash stock option amortization expenses, research and development recruiting fees, and research and development employee
relocation expenses in the year ended December 31, 2024, compared to the same period in 2023.
·
Research and development salary
and benefits expenses increased by $1,472,979 in the year ended December 31, 2024, compared to the
same period in 2023.
·
Depreciation expense increased
by $424,232 in the year ended December 31, 2024, compared to the same period in 2023.
·
Prototype device development
and wafer fabrication expenses increased by $341,555 in the year ended December 31, 2024, compared to the
same period in 2023.
·
Research and development travel
expenses increased by $107,351 in the year ended December 31, 2024, compared to the same period in
2023.
·
Research and development rent
expenses increased by $99,898 in the year ended December 31, 2024, compared to the same period in 2023.
·
Property tax expenses increased
by $98,181 in the year ended December 31, 2024, compared to the same period in 2023.
·
Research and development consulting
expenses increased by $65,261 in the year ended December 31, 2024, compared to the same period in
2023.
·
Research and development software
expenses increased by $64,318 in the year ended December 31, 2024, compared to the same period in
2023.
·
Laboratory and wafer fabrication
materials and supplies expenses increased by $59,090 in the year ended December 31, 2024, compared to
the same period in 2023.
·
These increases were offset
by a $1,571,632 decrease in research and development non-cash stock option amortization expenses, a $216,115
decrease in research and
development recruiting fees, and a $108,305 decrease in research and development employee relocation expenses
in the year ended December
31, 2024, compared to the same period in 2023.
31
We expect to continue to incur
substantial research and development expenses developing and commercializing our electro-optic materials
platform. These expenses will
increase as a result of accelerated development effort to support commercialization of our non-linear optical polymer
materials technology
and create next-generation photonic EO device designs; working with semiconductor foundries; hiring additional technical and
support
personnel; engaging senior technical advisors; pursuing other potential business opportunities and collaborations; customer testing and
evaluation;
and incurring related operating expenses.
General and administrative expenses
increased for the year ended December 31, 2024, as compared to the year ended December 31, 2023,
primarily due to increases in general
and administrative salary and benefits expenses, consulting fees, depreciation expense, investor relations expenses,
and sales and marketing
expenses, offset by decreases general and administrative non-cash stock option amortization expenses, and accounting expenses.
·
General and administrative salary
and benefits expenses increased by $866,829 in the year ended December 31, 2024, compared to the
same period in 2023.
·
General and administrative consulting
fees increased by $215,707 in the year ended December 31, 2024, compared to the same period in
2023.
·
Depreciation expense increased
by $103,624 in the year ended December 31, 2024, compared to the same period in 2023.
·
Investor relations expenses
increased by $54,259 in the year ended December 31, 2024, compared to the same period in 2023.
·
Sales and marketing expenses
increased by $52,623 in the year ended December 31, 2024, compared to the same period in 2023.
·
These increases were offset
by a $263,822 decrease in general and administrative non-cash stock option amortization expense and a
$183,722 decrease in accounting
fees in the year ended December 31, 2024, compared to the same period in 2023.
Other Income
For the Year
Ended
December 31, 2024
For the Year
Ended
December 31, 2023
Change from
Prior
Year
Percent
Change from
Prior Year
Other Income
$
554,102 $
187,233 $
366,869
196%
Other income increased
for the year ended December 31, 2024, as compared to year ended December 31, 2023, primarily due to a $519,368
decrease in commitment
fee associated with the purchase of shares by an institutional investor for sale under a stock purchase agreement, a $280,433
increase
in interest income on money market account, and a recognition of a $210,274 loss on retirement of certain expired patent applications
and patents.
Other income increased
for the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to an increase in
interest income
earned on money market account of $568,137 and a gain on disposal of fixed assets of $215,509, offset by an increase in commitment fee
associated with the purchase of shares by an institutional investor for sale under a stock purchase agreement in the amount of $463,869.
Net Loss
For the Year
Ended
December 31, 2024
For the Year
Ended
December 31, 2023
Change from
Prior
Year
Percent
Change from
Prior Year
Net Loss
$
22,535,041 $
21,038,032
$
1,497,009
7%
Net loss was $22,535,041 and $21,038,032
for the year ended December 31, 2024 and 2023, respectively, for an increase of $1,497,009 due
primarily to increases in salary and benefits
expenses, depreciation expense, prototype device development and wafer fabrication expenses, and consulting
fees, recognition of loss
on retirement of certain expired patent applications and patents, travel expenses, rent expense, property tax expenses, software
expenses,
laboratory and wafer fabrication materials and supplies expenses, investor relations expenses, and sales and marketing expenses. These
increases
were offset by decreases in non-cash stock option amortization expense, commitment fee associated with the purchase of shares
by an institutional investor
for sale under a stock purchase agreement, recruiting fees, accounting fees, and employee relocation expenses,
and an increase in interest income on money
market account.
32
Significant Accounting Policies
Our Company’s accounting
policies are more fully described in Note 1 of Notes to Financial Statements. As disclosed in Note 1 of Notes to
Financial Statements,
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 our management’s best knowledge of current events and actions our Company may undertake in the future,
actual results could
differ from the estimates.
Liquidity and Capital Resources
Our primary source of operating cash
inflows was (i) proceeds from the sale of common stock to Lincoln Park (institutional investor) pursuant to
purchase agreements with Lincoln
Park and proceeds from sale of common stock by Roth Capital (investment banking company) pursuant to the at the
market sale agreement
with Roth Capital as described in Note 10 to the Financial Statements and (ii) proceeds received pursuant to the exercise of options
and
warrants.
On July 2, 2021, our Company
filed a $100 million universal shelf registration statement which became effective on July 9, 2021, and expired on
July 8, 2024. On July
26, 2024, the Company filed a new $100 million universal shelf registration statement which became effective on August 5, 2024. On
October
4, 2021, our Company entered into the 2021 purchase agreement with Lincoln Park to sell up to $33 million of registered common stock over
a 36-
month period. All of the registered shares under the October 4, 2021 purchase agreement with Lincoln Park have been issued as of
December 31, 2023. On
February 28, 2023, our Company entered into the 2023 Purchase Agreement with Lincoln Park to sell up to $30 million
of registered common stock over a
36-month period. As of the date of this filing, $0 remains on the 2023 Purchase Agreement. On March
17, 2025, our Company entered into the 2025
Purchase Agreement with Lincoln Park to sell up to $30 million of registered common stock
over a 36-month period, subject to the conditions set forth
therein. As of the date of this filing, $30 million remains on the 2025 Purchase
Agreement. On December 9, 2022, our Company entered into the at the
market sale agreement with Roth Capital, as sales agent, whereby pursuant
to the at the market sale agreement, our Company may offer and sell up to $35
million in shares of our registered common stock, from time
to time through Roth Capital. As of the date of this filing, $31.5 million remains available to
our Company pursuant to the at the market
sale agreement.
During the year ended December
31, 2024, the Company received $12,366,965 in proceeds pursuant to the 2023 Purchase Agreement with
Lincoln Park, $1,779,976 in proceeds
pursuant to the at the market sale agreement with Roth Capital, $337,350 in proceeds pursuant to the exercise of
options and warrants
and $63,884 in cash collections from customer contracts, of which $50,000 related to the proceeds received under a material supply
and
license agreement and $13,884 – to the proceeds received for a contact for processing work on the devices supplied by a customer.
During the year
ended December 31, 2023, the Company received $19,993,359 in proceeds pursuant to the 2021 purchase agreement and 2023
Purchase Agreement with
Lincoln Park, $1,515,878 in proceeds pursuant to the at the market sale agreement with Roth Capital, $1,013,924
in proceeds pursuant to the exercise of
options and warrants and $50,000 in a proceed received under a material supply and license agreement
of which $39,875 is recorded as a contract liability
as of December 31, 2023.
During
the year ended December 31, 2024, our primary sources of cash outflows from operations included payroll, rent, utilities, payments to
vendors including prototypes development and foundries expenses, laboratory and wafer fabrication materials and supplies expenses, and
third-party
service providers. During the year ended December 31, 2023, our primary sources of cash outflows from operations included
payroll, rent, utilities,
payments to vendors including prototypes development and foundries expenses and third-party service providers.
Sources and Uses of Cash
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; and our ability to establish cooperative development, joint
venture and licensing
arrangements. We expect that we will incur approximately $1,727,000 of expenditures per month over the next 12
months.
33
We
expect the proceeds received pursuant to the 2023 and the 2025 Lincoln Park purchase agreements and, the at the market sale agreement
with
Roth Capital, the exercise of options and warrants, and commercial operations to provide us with sufficient funds to maintain our
operations over the next
12 months. Our current cash position enables us to finance our operations through April 2026
before we will be required to replenish our cash reserves. Our
cash requirements are expected to increase at a rate consistent with our
Company’s revenue growth as we expand our activities and operations with the
objective of increasing our revenue stream from the
commercialization of our electro-optic polymer technology. We currently have no debt to service. We
expect that our cash used in operations
will continue to increase during 2025 and beyond because 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
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;
and
·
Increases in our general and administrative activities related to our operations
as a reporting public company and related corporate
compliance requirements.
2023
and 2025 Purchase Agreements with Lincoln Park
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 conditions) from time to time over a 36-month period. On March 17, 2025, our
Company entered
into the 2025 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 conditions) from time to time over a 36-month period. Pursuant to the 2025 Purchase Agreement, subject
to the
conditions set forth therein, Lincoln Park is obligated to make purchases as the Company directs in accordance with the 2025 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
a look back formula for market prices of our common stock immediately preceding the sales to Lincoln
Park.
There
are no trading volume requirements or restrictions on the 2025 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 2025 Purchase Agreement. We can also accelerate the amount of common stock to be purchased under
certain circumstances. There
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 2025 Purchase Agreement.
At
the Market Sale Agreement – Roth Capital
On December
9, 2022, we entered into the at the market sale agreement with Roth Capital, as sales agent. Pursuant to the at the market sale
agreement,
our Company may offer and sell up to $35 million 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 at the market sale 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 this 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 at the market sale agreement.
The amount
of proceeds we receive from the at the market sale agreement, if any, will depend upon the number of shares of our common stock
sold and
the market price at which they are sold. There can be no assurance that we will be able to sell any shares under or fully utilize this
agreement. Roth
Capital is not required to sell any specific number of shares of our common stock under the agreement. We intend to use
net proceeds from the at the
market sale 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.
34
We cannot
assure you that we will meet the conditions of the 2025 Purchase Agreement 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 at the market
sale
agreement with Roth Capital. 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, which could result
in our Company reducing some capital
expenditures or reducing staff and discretionary costs.
Analysis of Cash Flows
For the year ended December 31, 2024
Net cash used in operating
activities was $15,550,515 for the year ended December 31, 2024, primarily attributable to the net loss of $22,535,041
adjusted by $4,440,003
in options issued for services, $446,628 amortization of deferred compensation, $154,210 in common stock issued for services,
$1,682,760
in depreciation expenses and patent amortization expenses, $192,487 amortization of right of use asset, $213,440 loss on disposal of property
and equipment and retirement of certain expired patent applications and patents, $(15,189) in accounts receivable, $835,880 in prepaid
expenses and other
current assets, and ($965,693) in accounts payable, accrued bonuses, accrued expenses, contract liability and other
liabilities. 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 $2,697,899 for the year ended December 31, 2024, consisting of $430,501 in cost for intangibles and
$2,267,398 in asset
additions for the Colorado headquarter facility and labs.
Net cash provided by
financing activities was $14,484,291 for the year ended December 31, 2024, and consisted of $337,350 in proceeds from
exercise of options
and warrants, $12,366,965 in proceeds from resale of common stock to an institutional investor and $1,779,976 in proceeds from at the
market sale of common stock by an investment banking company.
On December
31, 2024, our cash and cash equivalents totaled $27,667,964, our assets totaled $37,807,983, our liabilities totaled $4,384,078 and
we
had stockholders’ equity of $33,423,905.
For the year ended December 31, 2023
Net cash used in operating activities
was $12,236,024 for the year ended December 31, 2023, primarily attributable to the net loss of $21,038,032
adjusted by $6,459,387 in
options issued for services, $262,697 amortization of deferred compensation, $673,578 in common stock issued for services,
$1,119,141
in depreciation expenses and patent amortization expenses, $184,835 amortization of right of use asset, $215,509 gain on disposal of property
and equipment, ($587,540) in prepaid expenses, $935,795 in accounts receivable, accounts payable, accrued bonuses, accrued expenses, deferred
revenue
and other liabilities. 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 $2,957,201 for the year ended December 31, 2023, consisting of $307,687 in cost for intangibles,
$3,292,224 in asset additions for
the Colorado headquarter facility and labs offset by $642,120 in a loan repayment and $590 in proceeds on sale of
property and equipment.
Net cash provided by financing
activities was $22,523,161 for the year ended December 31, 2023, and consisted of $1,013,924 in proceeds from
exercise of options and
warrants, $19,993,359 in proceeds from resale of common stock to an institutional investor and $1,515,878 in proceeds from at the
market
sale of common stock by an investment banking company.
On December
31, 2023, our cash and cash equivalents totaled $31,432,087, our assets totaled $41,783,585, our liabilities totaled $5,349,771 and
we
had stockholders’ equity of $36,433,814.
Contractual Obligations
See “Note
8–Leases” 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.
35
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
At December 31, 2024, we had $27.6
million in cash and cash equivalents. For the purposes of this Item 7A. we consider all highly liquid
instruments with maturities of three
months or less at the time of purchase to be cash equivalents. The fair value of all of our cash equivalents is determined
based on "Level
1” inputs, which are based upon quoted prices for identical or similar instruments in markets that are active. We
do not use any market risk
sensitive instruments to hedge any risks, and we hold no market risk sensitive instruments for trading or speculative
purposes. We place our cash
investments in instruments that meet credit quality standards. At December 31, 2024, we had deposits
with a financial institution that exceeded the Federal
Depository Insurance coverage.
Market
Interest Rate Risk
We are exposed to market risk
related to changes in interest rates. Our primary exposure to market risk is interest rate sensitivity, which is affected
by changes in
the general level of U.S. interest rates. If a 10% change in interest rates had occurred on December 31, 2024, this change would not have
had
a material effect on the fair value of our investment portfolio as of that date.
Due to the short holding period
of our investments and the nature of our investments, we have concluded that we do not have a material financial
market risk exposure.
Item 8.
Financial Statements and Supplementary Data
Our Financial Statements are attached
as Appendix A (following Exhibits) and included as part of this Form 10-K Report. A list of our Financial
Statements is provided in response
to Item 15 of this Form 10-K Report.
Item 9.
Changes In and Disagreements With Accountants On Accounting and Financial Disclosure
None.
Item 9A.
Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of December 31, 2024, 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.
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,
2024.
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.
36
Attestation Report of
the Registered Public Accounting Firm
This
Annual Report does not include an attestation report of our Company’s independent registered public accounting firm regarding internal
control over financial reporting. Management’s report was not subject to attestation by our Company’s registered public accounting
firm pursuant to rules
of the Securities and Exchange Commission that permit our Company to provide only management’s attestation
in this Annual Report.
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
(a) Lincoln
Park Purchase Agreement
On March 17, 2025,
Lightwave Logic, Inc. (the “Company”), entered into a purchase agreement (the “Purchase Agreement”)
with Lincoln Park
Capital Fund, LLC (“Lincoln Park” or “Investor”) (each, a “Party”,
and together, the “Parties”), which provides that, upon the terms and subject to the
conditions and limitations set
forth therein, the Company may sell to Lincoln Park up to $30,000,000 of shares (the “Purchase Shares”) of its common
stock, par value $0.001 per share (the “Common Stock”).
Concurrently with entering
into the Purchase Agreement, the Company also entered into a registration rights agreement with Lincoln Park,
pursuant to which it agreed
to provide Lincoln Park with certain registration rights related to the shares issued under the Purchase Agreement (the
“Registration
Rights Agreement”).
Beginning one
business day following the date of satisfaction of certain conditions set forth in the Purchase Agreement (the “Commencement
Date”) and over the thirty-six (36) month term following the Commencement Date, the Company has the right, but not the
obligation, on any business day
selected by the Company (each, a “Purchase
Date”), to require Lincoln Park to purchase up to 250,000 shares of Common Stock (the “Regular
Purchase
Share Limit”) (each such purchase, a “Regular
Purchase”). Lincoln Park’s committed obligation under each Regular Purchase shall not exceed $3,000,000
(subject
to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar
transaction as provided in
the Purchase Agreement), provided that the Parties may mutually agree at any time to increase the Regular
Purchase Share Limit. The Company shall have
the right to submit multiple Regular Purchase notices to the Investor as often as every
business day, provided that the Company has not failed to deliver
shares for the most recent prior Regular Purchase.
The purchase price
per share for each such Regular Purchase (the “Purchase Price”) shall be equal to the lesser of: (i) the lowest sale
price of the
Common Stock during the Purchase Date and (ii) the average of the three (3) lowest closing sale prices of the Common Stock
during the ten (10) business
days immediately preceding such Purchase Date.
In addition to Regular
Purchases and provided that the Company has directed a Regular Purchase in full, the Company in its sole discretion may
require Lincoln
Park on each Purchase Date to purchase on the following business day (each, an “Accelerated Purchase Date”) up to the
lesser of: (i) three
(3) times the number of shares purchased pursuant to such Regular Purchase and (ii) 30% of the trading volume on
Nasdaq during all or, if certain trading
volume or market price thresholds specified in the Purchase Agreement are crossed on the applicable
Accelerated Purchase Date, the portion of the normal
trading hours on the applicable Accelerated Purchase Date prior to such time that
any one of such thresholds is crossed, which period of time on the
applicable Accelerated Purchase Date (each such purchase, an “Accelerated
Purchase”).
The purchase price
per share for each such Accelerated Purchase shall be equal to the lesser of: (i) the closing sale price on the Accelerated
Purchase Date
or (ii) 96.5% of the Accelerated Purchase Date’s volume weighted average price (the “Accelerated Purchase Price”).
The Parties may
mutually agree to increase the number of shares of Common Stock sold to the Investor pursuant to any Accelerated Purchase.
The Company may also
direct Lincoln Park, on any business day on which an Accelerated Purchase has been completed and all of the shares to be
purchased thereunder
have been properly delivered to Lincoln Park in accordance with the Purchase Agreement, to make additional purchases upon the
same terms
as an Accelerated Purchase, (an “Additional Accelerated Purchase”). The Company may direct multiple Additional Accelerated
Purchases in a
day provided that delivery of shares has been completed with respect to any prior Regular and Accelerated Purchases that
Lincoln Park has purchased.
37
The purchase price
of Regular Purchases, Accelerated Purchases and Additional Accelerated Purchases and the minimum closing sale price for a
Regular Purchase
will be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction
occurring during the business days used to compute the purchase price. The aggregate number of shares that the Company can sell to Lincoln
Park under
the Purchase Agreement may in no case exceed 24,910,904 shares (subject to adjustment as described above), which is equal to
approximately 19.99% of
the shares of Common Stock outstanding immediately prior to the execution of the Purchase Agreement (the “Exchange
Cap”), unless (i) stockholder
approval is obtained to issue shares above the Exchange Cap, in which the Exchange Cap will no
longer apply, or (ii) the average price of all applicable
sales of Common Stock to Lincoln Park under the Purchase Agreement equals or
exceeds $1.06 per share (subject to adjustment as described above)
(which represents the lower of (A) the official closing price
of the Common Stock on Nasdaq immediately preceding the signing of the Purchase
Agreement and (B) the average official closing price of
the Common Stock on Nasdaq for the five consecutive trading days ending on the trading day
immediately preceding the date of the Purchase
Agreement). In any event, the Purchase Agreement specifically provides that the Company may not issue or
sell any shares of Common Stock
under the Purchase Agreement if such issuance or sale would breach any applicable rules or regulations of Nasdaq.
The Purchase Agreement
also prohibits the Company from directing Lincoln Park to purchase any shares of Common Stock if those shares, when
aggregated with all
other shares of Common Stock then beneficially owned by Lincoln Park, would result in Lincoln Park beneficially owning more than
4.99%
of its outstanding shares of Common Stock, or at the option of Lincoln Park following the satisfaction of certain conditions, 9.99% of
the
outstanding shares of Common Stock.
On March 17, 2025,
we issued 245,098 shares of Common Stock to Lincoln Park as an initial fee for its commitment to purchase shares of our
common stock under
the Purchase Agreement (the “Initial Commitment Shares”). We may issue up to 490,196 additional shares of Common Stock
pro-rata
in connection with the sale of Purchase Shares (the “Additional Commitment Shares” and together with the Initial
Commitment Shares, the “Commitment
Shares”).
The Purchase Agreement
contains customary representations, warranties, covenants, Suspension Events (as defined in the Purchase Agreement),
closing conditions,
indemnification and termination provisions. During any Suspension Event specified in the Purchase Agreement, we may not initiate any
sales
to Lincoln Park until such Suspension Event is cured. Lincoln Park does not have the right to terminate the Purchase Agreement upon the
occurrence
of a Suspension Event. There are no restrictions on future financings, rights of first refusal, participation rights, penalties
or liquidated damages in the
Purchase Agreement or the Registration Rights Agreement, other than the Company’s agreement not to
enter into any Variable Rate Transactions (as
defined in the Purchase Agreement) with any third party, subject to certain exceptions set
forth in the Purchase Agreement, over the thirty-six (36) month
term following the date of the Purchase Agreement (irrespective of any
earlier termination of the Purchase Agreement in accordance with the terms
therein).
The Purchase Agreement
may be terminated by the Company at any time after the Commencement Date, at its sole discretion, without any cost or
penalty, by giving
one business day notice to Lincoln Park to terminate the Purchase Agreement. Lincoln Park has covenanted not to cause or engage in
any
manner whatsoever, any direct or indirect short selling or hedging of the Common Stock.
The foregoing is a
summary description of certain terms of the Purchase Agreement and the Registration Rights Agreement and, by its nature, is
incomplete.
Copies of the Purchase Agreement and the Registration Rights Agreement are filed as Exhibits 10.33 and 10.34 attached hereto. The foregoing
descriptions of the Purchase Agreement and the Registration Rights Agreement are qualified in their entirety by reference to such exhibits.
The Purchase
Agreement and Registration Rights Agreement contain customary representations and warranties, covenants and indemnification
provisions that the parties
made to, and solely for the benefit of, each other in the context of all of the terms and conditions of such
agreements and in the context of the specific
relationship between the parties thereto. The provisions of the Purchase Agreement and
the Registration Rights Agreement, including any representations
and warranties contained therein, are not for the benefit of any party
other than the parties thereto and are not intended as documents for investors and the
public to obtain factual information about the
current state of affairs of the parties thereto. Rather, investors and the public should look to other disclosures
contained in the Company’s
annual, quarterly and current reports it may file with the Securities and Exchange Commission.
The information contained in this Item
9B shall not constitute an offer to sell or the solicitation of an offer to buy the shares of the Company’s
Common Shares discussed
herein, nor shall there be any offer, solicitation or sale of the shares in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
(b) Trading Arrangements
During
the three months ended December 31, 2024, none of
our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted
or terminated any contract, instruction or written
plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense
conditions of Rule 10b5-1(c) under
the Exchange Act or any “non-Rule 10b5-1 arrangement” as defined in Item 408(c) of Regulation S-K.
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None.
38
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,
2024,
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,
2024,
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,
2024,
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,
2024,
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,
2024,
our most recent fiscal year end, and is incorporated herein by reference.
39
PART IV
Item 15.
Exhibits and 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
Second Amended and Restated Bylaws – June 18, 2024
Incorporated by reference to the Company’s Form 10-Q as filed with the SEC on
June 25, 2024
4.1
Description of Registrant’s Securities
Filed herewith
10.1
Employee Agreement - Yves Lemaitre
Incorporated by reference to the Company’s Current Report on Form 8-K as filed
with the SEC on December 13, 2024.
10.2
Employee Agreement - Thomas Zelibor
Incorporated by reference to the Company’s Current Report on Form 8-K as filed
with the SEC on December 13, 2024
10.3
Employee Agreement - James Marcelli
Incorporated by reference to Company’s Form 10-Q as filed with the SEC on
August 12, 2015
10.4
Employee Agreement Amendment - James Marcelli
Incorporated by reference to the Company’s Current Report on Form 8-K as filed
with the SEC on April 20, 2021
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 April 27, 2023
10.7
Employee Agreement Amendment – James S. Marcelli
Incorporated by reference to the Company’s Current Report on Form 8-K as filed
with the SEC on June 25, 2024
10.8
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
10.9
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
10.10
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
10.11
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 27, 2023
10.12
Employee Agreement Amendment – Michael Lebby
Incorporated by reference to the Company’s Current Report on Form 8-K as filed
with the SEC on June 25, 2024
10.13
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
10.14
Form of Director Agreement
Incorporated by reference to the Company’s Form 10-K as filed with the SEC on
March 16, 2018
10.15
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
10.16
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
40
Exhibit
No.
Description of Exhibit
Location
10.17
Operations Committee Charter
Incorporated by reference to the Company’s Form 10-Q as filed with the SEC on
August 15, 2016
10.18
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
10.19
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
10.20
2007 Employee Stock Plan
Incorporated by reference to Company’s Definitive Schedule 14C Information
Statement as filed with the SEC on February 19, 2008
10.21
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
10.22
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
10.23
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
10.24
2016
Equity Incentive Plan Amendment No. 2
Incorporated by reference to Appendix A to the Company’s Definitive Schedule
14A filed with the SEC on April 14, 2023
10.25
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
10.26
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
10.27
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
10.28
Form of Restricted Stock 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 1, 2022
10.29
Lease Agreement dated October 26, 2017
Incorporated by reference to the Company’s Current Report on Form 8-K as filed
with the SEC on November 2, 2017
10.30
First Amendment to the October 26, 2017 Lease
Agreement dated November 22, 2022
Incorporated by reference to Company’s Form 10-K as filed with the SEC on
March 1, 2023
10.31
Purchase Agreement, dated February 28, 2023, by and
between the Company and Lincoln Park
Incorporated by reference to Company’s Form 10-K as filed with the SEC on
March 1, 2023
10.32
Registration Rights Agreement, dated February 28, 2023,
by and between the Company and Lincoln Park
Incorporated by reference to Company’s Form 10-K as filed with the SEC on
March 1, 2023
10.33
Purchase Agreement, dated March 17, 2025, by and
between the Company and Lincoln Park
Filed herewith
10.34
Registration Rights Agreement, dated March 17, 2025, by
and between the Company and Lincoln Park
Filed herewith
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
16.1
Letter from Morison Cogen LLP to the Securities and
Exchange Commission dated October 4, 2024
Incorporated by reference to the Company’s Current Report on Form 8-K as filed
with the SEC on October 4, 2024
19.1
Insider Trading Policy
Incorporated by reference to the Company’s Form 10-K as filed with the SEC on
February 29, 2024
21.1
Subsidiaries of the Registrant
Incorporated by reference to the Company’s Form 10-K as filed with the SEC on
February 29, 2024
41
Exhibit
No.
Description of Exhibit
Location
23.1
Consent of Independent Registered Public Accounting
Firm - Stephano Slack LLC
Filed herewith
23.2
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
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
97.1
Compensation Clawback Policy
Incorporated by reference to the Company’s Form 10-K as filed with the SEC on
February 29, 2024
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
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
42
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/ Yves LeMaitre
Yves LeMaitre,
Chief Executive Officer
(Principal Executive Officer)
Date: March 18, 2025
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/ Yves LeMaitre
Chief Executive Officer, Principal Executive Officer, Director
March 18, 2025
Yves LeMaitre
/s/ James S. Marcelli
Chief Financial Officer, Chief Operating Officer, Principal
Financial/Accounting Officer, Secretary, Director
March 18, 2025
James S. Marcelli
/s/ Ronald A. Bucchi
Director, Chair of the Board of Directors
March 18, 2025
Ronald A. Bucchi
/s/ Siraj Nour El-Ahmadi
Director
March 18, 2025
Siraj Nour El-Ahmadi
/s/ Craig Ciesla
Director
March 18, 2025
Craig Ciesla
/s/ Laila Partridge
Director
March 18, 2025
Laila Partridge
/s/ Thomas M. Connelly, Jr.
Director
March 18, 2025
Thomas M. Connelly, Jr.
43
LIGHTWAVE LOGIC, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 2024 AND 2023
CONTENTS
PAGE
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID Number 3523)
F-2 - F-3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID Number 00536)
F-4 - F-5
BALANCE SHEETS
F-6
STATEMENTS OF COMPREHENSIVE LOSS
F-7
STATEMENTS OF STOCKHOLDERS' EQUITY
F-8
STATEMENTS OF CASH FLOWS
F-9
NOTES TO FINANCIAL STATEMENTS
F-10 - F-29
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 sheet of
Lightwave Logic, Inc. (the Company) as of December 31, 2024, and the related statements of
comprehensive loss, stockholders’ equity,
and cash flows for the year ended December 31, 2024, and the related notes (collectively referred to as the
financial statements).
In our opinion, the financial statements present fairly,
in all material respects, the financial position of the Company as of December 31, 2024, and the
results of its operations and its cash
flows for the year ended December 31, 2024, in conformity with accounting principles generally accepted in the United
States of America.
Basis for Opinion
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our
audit. 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 audit in accordance with the standards
of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud. The company is not required to have, nor
were we engaged to perform,
an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of
internal
control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal
control over
financial reporting. Accordingly, we express no such opinion.
Our audit 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 audit also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating
the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
F-2
To the Board of Directors and
Stockholders of Lightwave Logic, Inc.
(Continued)
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/ Stephano Slack LLC
We have served as the Company’s auditor since
2024.
Wayne, Pennsylvania
March 18, 2025
F-3
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 sheet of
Lightwave Logic, Inc. (the Company) as of December 31, 2023, and the related statements of
comprehensive loss, stockholders’ equity,
and cash flows for the year then ended, 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, 2023, 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,
2023, and the results of its
operations and its cash flows for the year then ended, 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, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.
Basis for Opinions
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 audit in accordance with the standards
of the PCAOB. Those standards require that we plan and perform the audit 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 audit 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 audit 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 audit also included performing
such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.
F-4
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
served as the Company’s auditor from 2005 to 2024.
Blue
Bell, Pennsylvania
February
29, 2024
F-5
LIGHTWAVE LOGIC, INC.
BALANCE SHEETS
December 31, 2024
December 31, 2023
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
27,667,964 $
31,432,087
Accounts Receivable
45,565
30,376
Prepaid expenses and other current assets
401,741
1,237,621
TOTAL CURRENT ASSETS
28,115,270
32,700,084
PROPERTY AND EQUIPMENT - net of accumulated depreciation of $6,037,723 and $4,674,560
5,691,545
4,990,790
OTHER ASSETS
Intangible assets - net of accumulated amortization of $771,631 and $659,250
1,355,445
1,254,501
Operating Lease - Right of Use - Building
2,645,723
2,838,210
TOTAL OTHER ASSETS
4,001,168
4,092,711
TOTAL ASSETS
$
37,807,983 $
41,783,585
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable
$
515,955 $
1,447,596
Accrued bonuses and accrued expenses
877,165
599,430
Accounts payable and accrued expenses - related parties
200,779
313,483
Contract liability
23,208
39,875
Deferred lease liability
—
38,297
Operating lease liability
168,289
144,120
TOTAL CURRENT LIABILITIES
1,785,396
2,582,801
LONG TERM LIABILITIES
Operating lease liability
2,598,682
2,766,970
TOTAL LONG TERM LIABILITIES
2,598,682
2,766,970
TOTAL LIABILITIES
4,384,078
5,349,771
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,
123,301,653 and 118,137,309 issued and outstanding at
December 31, 2024 and December 31, 2023
123,302
118,137
Additional paid-in-capital
184,363,772
164,619,363
Deferred compensation
(656,735)
(432,293)
Accumulated deficit
(150,406,434)
(127,871,393)
TOTAL STOCKHOLDERS' EQUITY
33,423,905
36,433,814
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
37,807,983 $
41,783,585
The accompanying notes are an integral part of these
financial statements.
F-6
LIGHTWAVE LOGIC, INC.
STATEMENTS OF COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER
31, 2024 AND 2023
2024
2023
NET SALES
$
95,605 $
40,502
COST AND EXPENSE
Cost of sales
7,395
2,513
Research and development
16,806,548
15,903,689
General and administrative
6,370,805
5,359,565
TOTAL COST AND EXPENSE
23,184,748
21,265,767
LOSS FROM OPERATIONS
(23,089,143)
(21,225,265)
OTHER INCOME (EXPENSE)
Interest income
926,854
657,546
Commitment fee
(154,210)
(673,578)
(Loss) gain on disposal of property and equipment and intangible assets
(213,440)
215,509
Other (expense)
(5,102)
(12,244)
NET LOSS
$
(22,535,041) $
(21,038,032)
LOSS PER SHARE
Basic
$
(0.19) $
(0.18)
Diluted
$
(0.19) $
(0.18)
WEIGHTED AVERAGE NUMBER OF SHARES
Basic
120,599,885
115,467,300
Diluted
120,599,885
115,467,300
The accompanying notes are an integral part of these financial statements.
F-7
LIGHTWAVE LOGIC, INC.
STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
Additional
Number of
Common
Paid-in
Deferred
Accumulated
Shares
Stock
Capital
Compensation
Deficit
Total
BALANCE AT DECEMBER 31, 2023
118,137,309 $ 118,137 $164,619,363 $
(432,293) $ (127,871,393) $ 36,433,814
Common stock issued to institutional investor
3,850,000
3,850
12,363,115
—
— 12,366,965
Common stock issued for commitment shares
41,956
42
154,168
—
—
154,210
Common stock sales at the market by investment banking
company
551,501
552
1,779,424
—
—
1,779,976
Exercise of options
375,000
375
245,725
—
—
246,100
Exercise of warrants
119,000
119
91,131
—
—
91,250
Options issued for services
—
—
4,440,003
—
—
4,440,003
Restricted stock awards issued for future services
226,887
227
670,843
(671,070)
—
—
Deferred compensation
—
—
—
446,628
—
446,628
Net loss for the year ended December 31, 2024
—
—
—
—
(22,535,041) (22,535,041)
BALANCE AT DECEMBER 31, 2024
123,301,653 $ 123,302 $184,363,772 $
(656,735) $ (150,406,434) $ 33,423,905
Additional
Number of
Common
Paid-in
Deferred
Accumulated
Shares
Stock
Capital
Compensation
Deficit
Total
BALANCE AT DECEMBER 31, 2022
112,882,793 $112,883 $134,406,825 $
(133,324) $ (106,833,361) $ 27,553,023
Common stock issued to institutional investor
3,650,400
3,650
19,989,709
—
— 19,993,359
Common stock issued for commitment shares
112,739
113
673,465
—
—
673,578
Common stock sales at the market by investment banking
company
202,115
202
1,515,676
—
—
1,515,878
Exercise of options
914,408
914
776,760
—
—
777,674
Exercise of warrants
269,000
269
235,981
—
—
236,250
Options issued for services
—
—
6,459,387
—
—
6,459,387
Restricted stock awards issued for future services
105,854
106
561,560
(561,666)
—
—
Deferred compensation
—
—
—
262,697
—
262,697
Net loss for the year ended December 31, 2023
—
—
—
—
(21,038,032) (21,038,032)
BALANCE AT DECEMBER 31, 2023
118,137,309 $118,137 $164,619,363 $
(432,293) $ (127,871,393) $ 36,433,814
The accompanying
notes are an integral part of these financial statements.
F-8
LIGHTWAVE LOGIC, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
2024
2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
$
(22,535,041) $
(21,038,032)
Adjustments to reconcile net loss to net cash used in operating activities
Stock options issued for services
4,440,003
6,459,387
Amortization of deferred compensation
446,628
262,697
Common stock issued for commitment shares
154,210
673,578
Depreciation and amortization of patents
1,682,760
1,119,141
Amortization of right of use asset
192,487
184,835
Loss (gain) on disposal of property and equipment and intangible assets
213,440
(215,509)
Decrease (increase) in assets
Accounts receivable
(15,189)
(30,376)
Prepaid expenses and other current assets
835,880
(587,540)
(Decrease) increase in liabilities
Accounts payable
(931,641)
655,925
Accrued bonuses, accrued expenses and other liabilities
277,735
219,150
Accounts payable and accrued expenses-related parties
(112,704)
213,314
Contract liability
(16,667)
39,875
Deferred lease liability
(38,297)
(41,778)
Operating lease liability
(144,119)
(150,691)
Net cash used in operating activities
(15,550,515)
(12,236,024)
CASH FLOWS FROM INVESTING ACTIVITIES
Cost of intangibles
(430,501)
(307,687)
Purchase of property and equipment
(2,267,398)
(3,292,224)
Repayment of loan
—
642,120
Sale of property and equipment
—
590
Net cash used in investing activities
(2,697,899)
(2,957,201)
CASH FLOWS FROM FINANCING ACTIVITIES
Exercise of options and warrants
337,350
1,013,924
Issuance of common stock, institutional investor
12,366,965
19,993,359
Common stock sales at the market by investment banking company
1,779,976
1,515,878
Net cash provided by financing activities
14,484,291
22,523,161
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
(3,764,123)
7,329,936
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR
31,432,087
24,102,151
CASH AND CASH EQUIVALENTS - END OF YEAR
$
27,667,964 $
31,432,087
Supplemental Disclosure of Non-cash investing and financing activities:
Amended Operating Lease - Right of Use - Building and Operating lease liability
$
— $
2,703,527
The
accompanying notes are an integral part of these financial statements.
F-9
LIGHTWAVE LOGIC, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024 AND
2023
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
History and
Nature of Business
Lightwave Logic, Inc is a technology platform
company leveraging its proprietary engineered electro-optic (EO) polymers, named Perkinamine® to
transmit data at higher speeds with
less power in a small form factor. The Company’s high activity and high stability organic polymers allow it to create
next-generation
photonic EO devices that convert data from electrical signals into light/optical signals for applications in telecommunications, and
for data
transmission potentially used to support generative AI.
The
Company's first revenue stream is from a technology material supply and licensing agreement that incorporates the Company's patented
electro-optic
polymer materials for use in manufacturing photonic devices. Currently, the Company is in various stages of materials development
and evaluation with
potential customers and strategic partners. The Company expects to continue to obtain a revenue stream from technology
licensing agreements, and to
obtain additional revenue streams from technology transfer agreements and direct sale of its electro-optic
materials.
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.
Lightwave Logic, Inc. was organized under the laws
of the State of Nevada in 1997, and it 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.
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
The Company considers all highly liquid investments
with an original maturity from the date of purchase of three months or less 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, 2024, the Company
did have deposits with a financial institution that exceed the Federal Depository Insurance coverage.
Accounts Receivable
Accounts receivable are carried at their contractual amounts, less an estimated
allowance for credit losses. Management estimates the allowance for credit
losses using a loss-rate approach based on historical loss
information, adjusted for management’s expectations about current and future economic
conditions, as the basis to determine expected
credit losses. Management exercises significant judgment in determining expected credit losses. Key inputs
include macroeconomic factors,
industry trends, the creditworthiness of counterparties, historical experience, the financial conditions of the customers, and
the amount
and age of past due accounts. Management believes that the composition of receivables at year-end is consistent with historical conditions
as
credit terms and practices and the client base has not changed significantly. Receivables are considered past due if full payment is
not received by the
contractual due date, which is typically 30 days from the invoice date. Past due accounts are generally written off
against the allowance for credit losses
only after all collection attempts have been exhausted. The allowance for credit losses was zero
as of December 31, 2024 and 2023.
There was one customer who represented 100% of total accounts receivable
as of December 31, 2024.
F-10
LIGHTWAVE LOGIC, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024 AND 2023
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Property and Equipment
Property and equipment is stated at the Company’s original cost or
fair value for acquired property and equipment net of accumulated depreciation.
Depreciation of property and equipment is computed using
the straight-line method over the estimated useful lives of the respective assets, which are
generally as follows: 3 years for office
equipment, 3 to 5 years for lab equipment, 7 years for furniture and 3 years for software. Leasehold improvements
are amortized over the
lesser of remaining life of the lease or. Leasehold improvements are amortized over the lesser of remaining life of the lease or useful
life of the asset, using the straight-line method. The cost of normal maintenance and repairs is charged to operating expenses as incurred.
Material
expenditures that increase the life of an asset are capitalized and depreciated over the estimated remaining useful life of the
asset. The cost of assets sold, or
otherwise disposed of, and the related accumulated depreciation is relieved from the property accounts,
and any gains or losses are recognized in income
from continued 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 and Contract Liability
The Company recognizes revenue in accordance with
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic
606, Revenue from
Contracts with Customers. Under ASC 606, revenue is recognized when control of goods or services is transferred to a customer in an
amount
that reflects the consideration to which the Company expects to be entitled.
To achieve this, the Company applies the five-step
model:
1. Identify the contract with a customer.
2. Identify the performance obligations in the contract.
3. Determine the transaction price for the contract.
4. Allocate the transaction price to the performance obligations.
5. Recognize revenue as performance obligations are satisfied.
The Company’s primary revenue stream includes technology license
and material supply agreements.
F-11
LIGHTWAVE LOGIC, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024 AND 2023
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Revenue Recognition and Contract Liability (Continued)
Technology License and Material Supply Agreements
The Company enters into technology license and material
supply agreements, under which it grants customers a non-exclusive, royalty-bearing license to
use its patented electro-optic polymer
technology (the “Licensed Product”). The Company also supplies proprietary polymers to licensees for use in their
manufacturing
of photonic devices.
The Company assesses whether the license and the
supply of proprietary polymers represent distinct performance obligations. Based on this assessment,
the Company has determined that the
license and material supply are not distinct for financial reporting purposes because they are highly interdependent.
Accordingly, the
Company accounts for these as a single performance obligation.
Revenue under these agreements is recognized as follows:
Upfront License Fees – Nonrefundable upfront
license fees are recorded as contract liability and recognized on a pro-rata basis over the contract term.
Minimum Annual Royalties – Fixed royalty payments
required under the contract are also recognized on a pro-rata basis over the contract term.
Variable Royalties – Royalties exceeding the
minimum annual amount are recognized when earned, typically when the licensee’s sales exceed the
minimum threshold.
Milestone Payments – Recognized only when the
contractual milestone is achieved, such as when the licensee sells a specified number of units of the
Licensed Product.
Contract Costs
The Company capitalizes incremental costs to obtain
contracts if they are expected to be recoverable, in accordance with ASC 340-40, Other Assets and
Deferred Costs – Contracts with
Customers. These capitalized costs are amortized over the expected contract term in a manner consistent with the related
revenue recognition.
Contract Liability
Contract liability represents amounts received in
advance for performance obligations not yet satisfied, including nonrefundable upfront license fees. The
Company recognizes contract liability
revenue as revenue when the related performance obligations are satisfied.
Cost of Sales
Cost of sales consists of labor costs, material costs and manufacturing
overhead costs associated with the production of materials transferred to the
customer under the technology license and material supply
agreement at the Company’s facility.
F-12
LIGHTWAVE LOGIC, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024 AND 2023
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Income Taxes
The Company follows FASB 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.
Stock-based Payments
The Company
accounts for stock-based compensation under the provisions of FASB 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 fair value of restricted stock awards is estimated by the market price of the Company’s common
stock at the date of grant. Restricted stock
awards are being amortized to expense over the shorter of the requisite service period or
the actual vesting period. The Company estimates the fair value of
option and warrant 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 shorter of the requisite
service period or the actual vesting period, using the straight-line method. In June 2018, the FASB
issued Accounting Standard Update
(“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 non-employees. 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 2024 and 2023, 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.
Leases
The Company is a lessee in operating
leases primarily incurred to facilitate manufacturing, research and development, and selling, general and
administrative activities. At
contract inception, the Company determines if an arrangement is or contains a lease, and if so, recognizes a right-of-use asset
and lease
liability at the lease commencement date. For operating leases, the lease liability is measured at the present value of the unpaid lease
payments at
the lease commencement date, whereas for finance leases, the lease liability is initially measured at the present value of
the unpaid lease payments and
subsequently measured at amortized cost using the interest method. Operating lease right-of-use assets are
included in other assets on the Balance Sheets.
The short-term portion of operating lease liabilities is included in other current liabilities
on the Balance Sheets and the long-term portion is included in
long term liabilities on the Balance Sheets. As of December 31, 2024, the
Company had no leases that qualified as financing arrangements.
F-13
LIGHTWAVE LOGIC, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024 AND 2023
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Leases (Continued)
Key estimates and judgments
include how the Company determines the discount rate used to discount the unpaid lease payments to present value and the
lease term. The
Company monitors for events or changes in circumstances that could potentially require recognizing an impairment loss.
The Company elected a short-term
lease exemption practical expedient under ASU 2026-02, “Leases” (Topic 842), which allows the Company to not
recognize leases
with the total lease term of 12 months or less on the balance sheet.
Impairment of Long Lived and Finite-Lived Intangible Assets
Long lived assets, such as property,
equipment, and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in
circumstances indicate
that the carrying amount of an asset group may not be recoverable, such as a significant decrease in market price of an asset group, a
significant adverse change in legal factors or business climate that could affect the value of an asset group, or a continuous deterioration
of the Company’s
financial condition. Recoverability of asset groups to be held and used is measured by comparing the undiscounted
future cash flows expected to be
generated by the asset group to the carrying amount of the asset group. If the carrying amount of the
asset group exceeds its estimated undiscounted future
cash flows, impairment is recognized to the extent that the carrying value exceeds
its fair value. Fair value is determined through various valuation
techniques, including discounted cash flow models, quoted market values,
and third-party independent appraisals, as considered necessary.
For the years ended December
31, 2024 and 2023, the Company did not record an impairment of its long-lived and finite-lived intangible assets.
Comprehensive
Loss
The Company
follows FASB ASC 220.10, “Reporting Comprehensive Income (Loss).” Comprehensive 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 loss. Since the
Company has no items of other comprehensive loss, comprehensive loss is equal to net loss.
Recently Adopted Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting
(Topic 280): Improvements to Reportable Segment Disclosures, which requires
public entities to disclose significant segment expenses
and other segment items on an interim and annual basis and provide in interim periods all
disclosures about a reportable segment's profit
or loss and assets that are currently required annually. The ASU does not change how a public entity
identifies its operating segments,
aggregates them, or applies the quantitative threshold to determine its reportable segments. The new disclosure
requirements are also
applicable to entities that account and report as a single operating segment entity. ASU 2023-07 is effective for fiscal years beginning
after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. The Company adopted the guidance
for the annual
reporting period ended December 31, 2024. There was no impact on the Company’s reportable segments identified and
additional required disclosures have
been included in Note 14 - Segment Reporting.
Recently Issued Accounting Pronouncements Not Yet
Adopted
ASU 2023-09 – Income Taxes
(Topic 740) requires disclosures related to the rate reconciliation and income taxes paid disclosures improve the
transparency of income
tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2)
income
taxes paid disaggregated by jurisdiction. The other amendments in this Update improve the effectiveness and comparability of disclosures
by (1)
adding disclosures of pretax income (or loss) and income tax expense (or benefit) to be consistent with U.S. Securities and Exchange
Commission (SEC)
Regulation S-X 210.4-08(h), Rules of General Application—General Notes to Financial Statements: Income Tax Expense,
and (2) removing disclosures
that no longer are considered cost beneficial or relevant. For public business entities, the amendments in
this Update are effective for annual periods
beginning after December 15, 2024. The Company does not expect this ASU to have material
impact on its disclosures in the year of adoption.
F-14
LIGHTWAVE LOGIC, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024 AND 2023
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Recently Issued Accounting Pronouncements Not
Yet Adopted (Continued)
ASU 2024-03 – Income Statement –
Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40) requires disclosure, in the
notes to
financial statements, of specified information about certain costs and expenses, such as the amounts of purchases of inventory,
employee
compensation, depreciation, intangible asset amortization, included in each relevant expense caption; disclosure of a
qualitative description of the amounts
remaining in relevant expense captions that are not separately disaggregated quantitatively;
and disclosure of the total amounts of selling expenses. For
public business entities, the amendments in this Update are effective
for annual periods beginning after December 15, 2026 and interim reporting period
within fiscal years beginning after December 15,
2027. Early adoption is permitted. The Company is evaluating the impact of this ASU on its financial
statement disclosures.
NOTE 2 – MANAGEMENT’S PLANS
The Company’s future expenditures and capital
requirements will depend on numerous factors, including: the progress of our research and development
efforts; the rate at which the
Company can, directly or through arrangements with original equipment manufacturers, introduce and sell its polymer
materials technology;
the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; market acceptance
of
the Company’s products and competing technological developments; and the Company’s ability to establish cooperative development,
joint venture and
licensing arrangements. The Company expects that it will incur approximately $1,727,000 of
expenditures per month over the next 12 months. The
Company’s current cash position enables it to finance its operations through
April 2026. On March 17, 2025, the Company entered into a purchase
agreement with an institutional investor to sell up to $30,000,000
of common stock over a 36-month period. As of the date of this filing, $30,000,000
remains available to the Company per the agreement. On February 28, 2023, the Company entered into a purchase agreement
with an institutional investor
to sell up to $30,000,000
of common stock over a 36-month period (described in Note 10). Pursuant to the purchase agreement, the Company received
$1,486,983
during the period from January 1 through March 18, 2025 and the remaining available amount of $0
is available to the Company per the
agreement. On December 9, 2022, the Company entered into a sales agreement with an investment
banking company whereby the Company may offer and
sell shares of its common stock having an aggregate offering price of up to $35,000,000
from time to time through or to the investment banking company,
as sales agent or principal (described in Note 10). Pursuant to
the sales agreement, the Company received $116,435
during the period from January 1
through March 18, 2025 and the remaining available amount of $31,482,032
is available to the Company per the agreement. The Company's first
commercial agreement occurred in May 2023 from a material supply
and license agreement that incorporates the Company's patented electro-optic polymer
materials for use in manufacturing photonic devices
(described in Note 3). For the year ended December 31, 2024, the Company recognized $81,855
in
revenue related to this agreement. The Company’s cash requirements are expected to increase at a rate consistent with
the Company’s path to revenue as it
expands its activities and operations with the objective of increasing its revenue stream from
commercialization of its electro-optic polymer technology.
The Company currently has no debt to service.
NOTE 3 – REVENUE
The Company's first commercial agreement occurred in May 2023, in the form
of a four-year material supply and license agreement (the “License
Agreement”) that incorporates the Company's patented
electro-optic polymer materials for use in manufacturing of photonic devices (the “Licensed
Product”). The licensee shall
pay the Company a running royalty with a minimum royalty paid on an annual basis over the term of the License Agreement
the minimum royalty
payments and milestone license fees. The License Agreement is a non-exclusive material supply and license agreement.
F-15
LIGHTWAVE LOGIC, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024 AND 2023
NOTE 3 – REVENUE (CONTINUED)
Additional future revenue will be
generated from royalties from the licensee’s sale of Licensed Product that exceed the minimum royalty payments and
milestone
license fees.
During 2024, the Company also performed device processing
work for a customer.
Timing of Revenue Recognition and Contract Balances
Revenues related
to the initial license fee and a minimum annual royalty are recognized over time commencing with the License Agreement in May 2023.
An
up-front license fee in the amount of $50,000 was paid during the period ended December 31, 2023. $23,208 and $39,875 of this amount is
recorded as
a contract liability in current liabilities on the Company’s balance sheets as of December 31, 2024 and December 31,
2023, respectively. For the years
ended December 31, 2024 and December 31, 2023, the Company recognized
$81,855 and $40,502 in revenue related to this agreement.
In March 2024, the Company completed device processing
work on the devices supplied by a customer. Revenue for this contract was recognized at the
time of shipment of the devices back to the
customer and amounted to $13,750 for the year ended December 31, 2024.
Contract balances
are as follows:
December
31, 2024
December
31, 2023
Accounts receivable, net
$
45,565 $
30,376
Short-term contract assets
$
— $
—
Long-term contract assets
$
— $
—
Short-term contract liability
$
23,208 $
39,875
Significant changes in the contract balances
for the years ended December 31, 2024 are as follows:
Year Ended December 31, 2024
Assets
Liabilities
Balance at December 31, 2023
$
30,376 $
(39,875)
Revenue recognized that was previously included in contract liability
—
16,667
Decreases/increases due to cash received
(63,884)
—
Billed receivables recorded
109,449
—
Transferred to receivables from unbilled receivables
(95,564)
—
Unbilled receivables recorded
65,188
—
Balance at December 31, 2024
$
45,565 $
(23,208)
A rollforward of contract balances is
not disclosed for the year ended December 31, 2023 since there were no contracts as of December 31, 2022.
Assets Recognized for the Costs to
Obtain a Contract
There are no assets recognized for the
costs to obtain the License Agreement.
F-16
LIGHTWAVE LOGIC, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024 AND 2023
NOTE 4 – PREPAID EXPENSES AND OTHER CURRENT
ASSETS
Prepaid expenses and other current assets consist of the following:
December 31, 2024
December 31, 2023
Insurance
$
154,945 $
237,791
License
151,451
241,936
Prototype devices
44,134
161,267
Rent
36,525
36,525
Other
9,415
53,373
Investor relations
5,271
6,313
Materials fabrication
—
475,936
Deposit for equipment
—
20,000
Lease incentive receivable
—
4,480
Prepaid expenses and other current assets
$
401,741 $
1,237,621
NOTE 5 –
LOAN RECEIVABLE
On September 7, 2022, the Company entered into a
convertible loan agreement (the “Loan”) with an entity and issued a loan on September 12, 2022 in the
amount of EUR 600,000
bearing interest at 7% per annum with a maturity date of March 31, 2023. The Company recorded $13,375 of interest income for
the year
ended December 31, 2022. The exchange rates used for the conversion of the EUR denominated loan were the December 31, 2022 reporting
period end date exchange rate for the loan principal resulting in a balance of $642,120 and interest receivable resulting in a balance
of $13,669 and the
average exchange rate for the period ended December 31, 2022 for interest income. The loan and interest were repaid
in February and March 2023. The
Company recorded $11,125 of interest income for the period ended December 31, 2023 and used the average
exchange rate for the conversion of the EUR
denominated interest income for the period.
F-17
LIGHTWAVE LOGIC, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024 AND 2023
NOTE 6 – PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
December 31, 2024
December 31, 2023
Office equipment
$
155,511 $
146,196
Lab equipment
10,953,487
8,937,847
Furniture
54,493
74,119
Leasehold improvements
432,400
396,111
Software
133,377
111,077
11,729,268
9,665,350
Less: Accumulated depreciation
6,037,723
4,674,560
$
5,691,545 $
4,990,790
Depreciation expense for the years ended December
31, 2024 and 2023 was $1,563,477 and $1,035,620, respectively. During the year ended December 31,
2024, the Company retired property and
equipment with a cost of $203,480 and accumulated depreciation of $200,314 for a loss of $3,166. During the year
ended December 31, 2023,
the Company disposed of equipment for proceeds of $590, trade-in credit of $216,090 and a gain of $215,509.
NOTE 7 – INTANGIBLE ASSETS
Intangible assets represent 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:
December 31, 2024
December 31, 2023
Patents
$
2,127,076 $
1,913,751
Less: Accumulated amortization
771,631
659,250
Intangible assets - net
$
1,355,445 $
1,254,501
Amortization expense for the years ended
December 31, 2024 and 2023 was $119,283
and $83,521,
respectively. During the year ended December 31,
2024, the Company retired certain expired patent applications and patents with a
cost of $217,176 and
accumulated amortization of $6,902
for a loss of
$210,274
included in the statements of comprehensive loss in the (Loss) gain on disposal of property and equipment and intangible assets.
There were no
patent costs written off for the year ended December 31, 2023.
F-18
LIGHTWAVE LOGIC, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024 AND 2023
NOTE 8 – LEASES
On October 30, 2017, the Company entered into a lease
agreement (the “Lease”) to lease approximately 13,420 square feet of office, chemistry, clean room
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. In January 2022, the term was
extended for an
additional twenty-four (24) months.
On November 22, 2022, the Company entered into an
amendment to the Lease (“the Amended Lease”) to lease an additional approximately 9,684 square
feet of adjacent office and
warehouse space. The term of the Amended Lease is one hundred twenty (128) months, with an effective date of June 1, 2023.
Base
rent through January 31, 2024 of the Amended Lease term is approximately $30,517 per month. The base rent for the next full year of the
Amended
Lease term is approximately $377,288, with an increase in annual base rent of approximately 3% in each subsequent year of the
lease term. Commencing
on June 1, 2023, 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 Amended Lease also provides
an allowance of up to $43,216 to be used solely for the cost of
renovations to the additional lease premises. As of June 1, 2023, the
operating lease right-of-use asset and operating lease liability amounted to $2,945,322
and $2,984,058, respectively. As of December 30,
2024, the operating lease right-of-use asset and operating lease liability amounted to $2,645,723 and
$2,766,971, respectively.
For purposes of calculating operating lease liability,
lease term includes the initial non-cancelable term plus any term under renewal options that are
reasonably assured. Any rent escalations,
along with rent abatements, are included in the computation of rent expense calculated on a straight-line basis
over the lease term. The
interest rate implicit in lease contracts is typically not readily determinable and as such the Company uses the appropriate
incremental
borrowing rate based on information available at the lease commencement date in determining the present value of the lease payments.
Undiscounted future minimum lease payments under
the Amended Lease as of December 31, 2024, by year and in aggregate, including the extended term,
are as follows:
YEARS ENDED
DECEMBER 31,
AMOUNT
2025
387,666
2026
399,199
2027
411,174
2028
423,612
2029
436,300
Thereafter
1,921,271
3,979,222
Less discounted interest
(1,212,251)
TOTAL
$
2,766,971
The Company has elected not to recognize right-of-use
assets and lease liabilities arising from short-term leases. There are no other material operating
leases.
The following table presents weighted average assumptions
used to compute the Company’s right-of-use assets and lease liabilities:
December 31, 2024
Weighted average remaining lease term (in years)
9.08
Weighted average discount rate
8.25%
As of December 31, 2024, current operating leases
had remaining terms between 13 months and 9 years, with some leases having options to extend the
lease terms.
Current lease agreements do not contain any residual
value guarantees or material restrictive covenants. As of December 31, 2024, the Company did not
have any finance leases.
Operating and short-term lease costs totaling $513,428
and $102,077 are included in research and development and general and administrative expenses for
the year ended December 31, 2024. Operating
and short-term lease costs totaling $334,051 and $79,083 are included in research and development and
general and administrative expenses
for the year ended December 31, 2023.
F-19
LIGHTWAVE LOGIC, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024 AND 2023
NOTE 9 – 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:
2024
2023
Current
$
— $
—
Deferred
(4,220,000)
(6,526,000)
Change in valuation allowance
4,220,000
6,526,000
Total
$
— $
—
The reconciliation of the statutory federal rate to the Company’s
effective income tax rate is as follows:
2024
2023
Amount
%
Amount
%
Income tax benefit at U.S. federal income tax rate
$
(4,732,000)
(21) $
(4,418,000)
(21)
State tax benefit, net of federal tax effect
(763,000)
(3)
(957,000)
(5)
Federal deduction net of tax
—
—
44,000
—
Non-deductible share-based compensation
—
—
1,653,000
8
Exercised share based compensation
(280,000)
(1)
(2,850,000)
(13)
Other
1,555,000
6
2,000
—
Change in valuation allowance
4,220,000
19
6,526,000
31
$
—
— $
—
—
The components of deferred tax assets as of December 31, 2024 and 2023
are as follows:
2024
2023
Deferred tax asset for NOL carryforwards
$
29,737,000 $
29,018,000
Share-based compensation
4,901,000
3,889,000
Section 174 research and development expenses
4,932,000
—
Section 481(a) adjustment
(2,264,000)
—
Other
(281,000)
(102,000)
Valuation allowance
(37,025,000)
(32,805,000)
Total
$
— $
—
The valuation allowance for deferred tax assets as
of December 31, 2024 and 2023 was $37,025,000 and $32,805,000, respectively. The change in the total
valuation for the year ended December
31, 2024 was an increase of $4,220,000, and for the year ended December 31, 2023 was an increase of $6,526,000.
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.
F-20
LIGHTWAVE LOGIC, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024 AND 2023
NOTE 9 – INCOME TAXES (CONTINUED)
As of December 31, 2024, the Company had net operating
loss carry forwards of approximately $121,349,000, comprised of net operating losses in the
amount of approximately $36,485,000 recorded
in tax years beginning prior to January 1, 2018 expiring through the year ending December 31, 2038 and
net operating losses recorded in
tax years beginning January 1, 2018 and after in the amount of approximately $84,864,000 which are allowed for an
indefinite carryforward
period but may be subject to limitations. 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.
The Company follows 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
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, 2024,
the Company had no unrecognized tax benefits and no charge during 2024, and accordingly, the Company did not
recognize any interest or
penalties during 2024 related to unrecognized tax benefits. There is no accrual for uncertain tax positions as of December 31,
2024.
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
ended on December 31, 2021 and
thereafter are subject to examination by the relevant taxing authorities.
NOTE 10 – 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
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 and expired on July 8, 2024.
On July 26, 2024, the Company filed a new $100,000,000
universal shelf registration statement with the U.S. Securities and Exchange Commission which
became effective on August 5, 2024.
F-21
LIGHTWAVE LOGIC, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024 AND 2023
NOTE 10 – STOCKHOLDERS’ EQUITY (CONTINUED)
Common Stock (Continued)
On October 4, 2021, the Company entered
into a purchase agreement with an 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 period October 4, 2021 through December 31, 2023, the institutional investor purchased
3,632,456 shares of common stock for proceeds of
$33,000,000 and the Company issued 60,623 shares of common stock as additional commitment
fee, valued at $694,531 fair value. During the year ended
December 31, 2023, pursuant to the purchase agreement, the institutional investor
purchased 779,945 shares of common stock for proceeds of $3,847,307
and the Company issued 7,069 shares of common stock as additional
commitment fee, valued at $38,161 fair value. All of the registered shares under the
purchase agreement have been issued as of December
31, 2023.
On February 28, 2023, the Company entered into a
purchase agreement with an institutional investor to sell up to $30,000,000
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 50,891
shares of common stock to the institutional investor as an initial commitment fee valued at $279,391,
fair value, and 101,781
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 period February 28, 2023 through December 31, 2024, the institutional investor purchased 6,720,455
shares of common stock for proceeds of
$28,513,017
and the Company issued 96,735
shares of common stock as additional commitment fee, valued at $510,236
fair value, leaving 5,046
in reserve
for additional commitment fees. During the year ended December 31, 2024, pursuant to the purchase agreement, the institutional
investor
purchased 3,850,000
shares of common stock for proceeds of $12,366,965,
and the Company issued 41,956
shares of common stock as additional
commitment fee, valued $154,210
fair value. During the period February 28, 2023 through December 31, 2023, the institutional investor purchased
2,870,455
shares of common stock for proceeds of $16,146,052
and the Company issued 54,779
shares of common stock as additional commitment fee,
valued at $356,026
fair value. During the period from January 1, 2025 through March 18, 2025, pursuant to the purchase agreement, the institutional
investor purchased 1,035,881
shares of common stock for proceeds of $1,486,983
and the Company issued 5,046
shares of common stock as additional
commitment fee, valued at $8,029
fair value, leaving zero in reserve for additional commitment fees.
On December 9, 2022, the Company entered into a sales agreement with an
investment banking company. In accordance with the terms of this sales
agreement, the Company may offer and sell shares of its common
stock having an aggregate offering price of up to $35,000,000 from time to time through
or to the investment banking company, as sales
agent or principal. Sales of shares of the Company’s common stock, if any, may be made by any method
deemed to be an “at the
market offering”. The sales agent is entitled to compensation under the terms of the sales agreement at a commission rate equal
to
3% of the gross proceeds of the sales price of common stock that they sell.
F-22
LIGHTWAVE LOGIC, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024 AND 2023
NOTE 11 – STOCK BASED COMPENSATION
Common Stock (Continued)
During the year ended December 31, 2024, pursuant
to the sales agreement, the investment banking company sold 551,501
shares of the Company’s
common stock for proceeds of $1,779,976
after a payment of the commission in the amount of $55,054
to the investment banking company. During the
year ended December 31, 2023, pursuant to the sales agreement, the investment banking
company sold 202,115
shares of the Company’s common stock for
proceeds of $1,515,878
after a payment of the commission in the amount of $46,884
to the investment banking company. During the period from January
1, 2025 through March 18, 2025, pursuant to the sales agreement,
the investment banking company sold 50,000
shares of the Company’s common stock for
proceeds of $116,435
after a payment of the commission in the amount of $3,601
to the investment banking company.
Common Stock Options and Warrants
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, 2024, options to purchase 2,053,000 shares of common stock have been issued
and are outstanding.
During 2016, the Board of Directors of the Company
adopted the 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. Effective May 25, 2023, the
number
of shares of the Company’s common stock available for issuance under the 2016 Plan was increased from 8,000,000 to 13,000,000 shares
and
awards of restricted stock units are authorized for issuance. As of December 31, 2024, options to purchase 7,446,859 shares of common
stock have been
issued and are outstanding and 356,061 restricted shares of common stock have been granted. As of December 31, 2024, 3,480,845
shares of common
stock remain available for grants under the 2016 Plan.
F-23
LIGHTWAVE LOGIC, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024 AND 2023
NOTE 11 – STOCK BASED COMPENSATION (CONTINUED)
Common Stock Options and Warrants (Continued)
Both plans are administered by the Company’s
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, (as defined
in the 2016 Plan), 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.
The Company uses the Black-Scholes option pricing
model to calculate the grant-date fair value of an award, with the following assumptions for 2024: no
dividend yield, expected volatility,
based on the Company’s historical volatility, 76.3% to 78.5%, risk-free interest rate between 3.73% to 4.47% and
expected option
life of 10 years, which is based on the legal contractual life of the options.
The Black-Scholes option pricing model assumptions
for 2023 are as follows: no dividend yield, expected volatility, based on the Company’s historical
volatility, 73.7% to 77.2%, risk-free
interest rate between 3.37% to 4.82% and expected option life of 10 years.
As of December 31, 2024, there was $2,755,783 of unrecognized
compensation expense related to non-vested market-based share awards that is expected
to be recognized through December 2027. As of December
31, 2023, there was $3,295,335 of unrecognized compensation expense related to non-vested
market-based share awards.
Share-based compensation was recognized as follows:
2024
2023
2007 Employee Stock Option Plan
$
— $
—
2016 Equity Incentive Plan
4,440,003
6,459,387
2016 Equity Incentive Plan restricted stock awards
446,628
262,697
Warrants
—
—
Total share-based compensation
$
4,886,631 $
6,722,084
F-24
LIGHTWAVE LOGIC, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024 AND 2023
NOTE 11 – STOCK BASED COMPENSATION (CONTINUED)
Common Stock Options and Warrants (Continued)
The following tables summarize all stock option
and warrant activity of the Company during the years ended December 31, 2024 and 2023:
Non-Qualified
Stock Options and Warrants Outstanding and Exercisable
Number
of
Exercise
Weighted
Average
Shares
Price
Exercise
Price
Outstanding, December 31, 2022
8,073,173
$0.51 - $16.81 $
1.91
Granted
1,959,667
$4.28 - $7.67 $
5.24
Forfeited
(39,625)
$6.25 - $8.93 $
7.12
Exercised
(1,183,408)
$0.67 - $5.22 $
0.86
Outstanding, December 31, 2023
8,809,807
$0.51 - $16.81 $
2.76
Granted
1,628,000
$1.96 - $5.00 $
4.05
Forfeited
(43,948)
$4.28 - $7.67 $
5.70
Exercised
(494,000)
$0.57 - $1.15 $
0.68
Outstanding, December 31, 2024
9,899,859
$0.51 - $16.81 $
3.07
Exercisable, December 31, 2024
8,848,908
$0.51 - $16.81 $
3.00
The aggregate intrinsic value of options and warrants outstanding and exercisable
as of December 31, 2024 was $6,418,443 and $6,400,033, respectively.
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
$2.10 for the Company’s common stock on
December 31, 2024. During the year ending December 31, 2024, 375,000 options with the aggregate intrinsic
value of $1,399,958 were exercised
for proceeds of $246,100. During the year ending December 31, 2024, 119,000 warrants with the aggregate intrinsic
value of $171,550 were
exercised for proceeds of $91,250. During the year ending December 31, 2023, 914,408 options with the aggregate intrinsic value
of $4,698,996
were exercised for proceeds of $777,674. During the year ending December 31, 2023, 269,000 warrants with the aggregate intrinsic value
of
$1,162,230 were exercised for proceeds of $236,250.
F-25
LIGHTWAVE LOGIC, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024 AND 2023
NOTE 11 – STOCK BASED COMPENSATION (CONTINUED)
Common Stock Options and Warrants (Continued)
Non-Qualified
Stock Options and Warrants Outstanding
Range of
Exercise Prices
Number Outstanding
Currently Exercisable
at December 31, 2024
Weighted Average
Remaining
Contractual Life
Weighted Average
Exercise Price of Options and
Warrants Currently Exercisable
$0.51 - $16.81
8,848,908
5.3 Years
$
3.00
Restricted
Stock Awards
On March 16, 2023, the Compensation Committee of the
Board of Directors approved grants totaling 99,616 Restricted Stock Awards to the Company’s
four outside directors. Each RSA had
a grant date fair value of $5.22 which shall be amortized on a straight-line basis over the vesting period into director’s
compensation
expenses within the Statement of Comprehensive Loss. Such RSAs were granted under the 2016 Equity Incentive Plan (“2016 Plan”)
and
vest in total 8,338 shares on March 16, 2023, with the remaining vesting in 33 equal monthly installments in total of 2,766 shares
beginning April 1, 2023.
On August 1, 2023, the Compensation Committee of the
Board of Directors approved a grant totaling 6,238 Restricted Stock Awards to the Company’s
outside director. Each RSA had a grant
date fair value of $6.68 which shall be amortized on a straight-line basis over the vesting period into director’s
compensation
expenses within the Statement of Comprehensive Loss. Such RSA was granted under the 2016 Plan. 218 shares from this grant vested on
August
1, with the remaining vesting in 28 equal monthly installments in total of 215 shares beginning September 1, 2023.
On June 18, 2024, the Compensation Committee of the
Board of Directors approved grants totaling 92,475 Restricted Stock Awards to the Company’s five
outside directors. Each RSA had
a grant date fair value of $3.33 which shall be amortized on a straight-line basis over the vesting period into director’s
compensation
expenses within the Statement of Comprehensive Loss. Such RSAs were granted under the 2016 Equity Incentive Plan (“2016 Plan”)
and
vested in total 15,455 shares on June 18, 2024, with the remaining vesting in 10 equal quarterly installments in total of 7,702 shares
beginning July 1, 2024.
On August 1, 2024, the Compensation Committee of the
Board of Directors approved a grant totaling 12,924 Restricted Stock Awards to the Company’s
outside director. Each RSA had a grant
date fair value of $3.16 which shall be amortized on a straight-line basis over the vesting period into director’s
compensation
expenses within the Statement of Comprehensive Loss. Such RSA was granted under the 2016 Equity Incentive Plan (“2016 Plan”)
and vests
in 9 equal quarterly installments of 1,436 shares beginning September 1, 2024.
On September 4, 2024, the Compensation Committee of
the Board of Directors approved a grant totaling 11,488 Restricted Stock Awards to the Company’s
outside director. Each RSA had
a grant date fair value of $2.68 which shall be amortized on a straight-line basis over the vesting period into director’s
compensation
expenses within the Statement of Comprehensive Loss. Such RSA was granted under the 2016 Equity Incentive Plan
(“2016 Plan”) and vests
in 8 equal quarterly installments of 1,436 shares beginning October 1, 2024.
F-26
LIGHTWAVE LOGIC, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024 AND 2023
NOTE 11 – STOCK BASED COMPENSATION (CONTINUED)
Restricted
Stock Awards (Continued)
On December 10, 2024, the Compensation Committee of
the Board of Directors approved a grant totaling 110,000 Restricted Stock Awards to the two
Company’s executives and an outside
director for consulting services. Each RSA had a grant date fair value of $2.65 which shall be amortized on a
straight-line basis over
the vesting period into stock-based compensation expenses within the Statement of Comprehensive Loss. The RSAs were granted
under the
2016 Equity Incentive Plan (“2016 Plan”) and cliff vest on March 10, 2025 for an outside director and on June 10, 2025 for
the executives.
Upon the occurrence of a Change in Control, 100% of
the unvested Restricted Stock shall vest as of the date of the Change in Control. Upon vesting, the
restrictions on the shares lapse.
The fair value of restricted stock awards is estimated
by the market price of the Company’s common stock at the date of grant. Restricted stock activity
during the year ending December
31, 2024 and 2023 are as follows:
Restricted Stock Awards
Year Ended
December 31, 2024
December 31, 2023
Number of
Shares
Weighted Average
Grant Date Fair
Value per Share
Number of
Shares
Weighted Average
Grant Date Fair
Value per Share
Non-vested, beginning of period
78,452 $
5.71
13,816 $
9.65
Granted
226,887
2.96
105,854
5.31
Vested
(77,847)
4.79
(41,218)
6.00
Cancelled and forfeited
—
—
—
—
Non-vested, end of period
227,492 $
3.28
78,452 $
5.71
Restricted stock awards are being amortized to expense
over the vesting period. As of December 31, 2024 and 2023, the unamortized value of the restricted
stock awards was $656,735 and $432,292,
respectively.
NOTE 12 – RELATED PARTY
During the years ended December 31, 2024, and 2023,
the Company engaged in transactions with related parties, including consultants, directors, and
entities affiliated with members of the
Board of Directors. These transactions primarily relate to legal services, consulting fees, director compensation,
accounting services,
and expense reimbursements.
Related
Party Transactions for the Year Ended December 31, 2024
• The Company incurred $90,360
in legal fees with a related party law firm, of which $90,360
remained accrued as of December 31, 2024.
• The Company incurred $207,269 in accounting and
IT service fees and expense reimbursements to related parties, with $8,326 accrued as of
December
31, 2024.
• The Company incurred $251,194 in fees and travel
expenses to directors, with $72,748 accrued as of December 31, 2024.
• The Company incurred $438,716 in consulting fees
and travel reimbursements to advisory board members, with $29,345 accrued as of December 31,
2024.
F-27
LIGHTWAVE LOGIC, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024 AND 2023
NOTE 12 – RELATED PARTY (CONTINUED)
Related
Party Transactions for the Year Ended December 31, 2023:
• The
Company incurred $175,737 in legal fees with a related party law firm, of which $115,160 remained accrued as of December 31, 2023.
• The Company incurred
$382,910 in accounting and IT service fees and expense reimbursements to related parties, with $102,351 accrued as of
December 31, 2023.
• The Company incurred $207,563 in fees and travel expenses to directors, with $62,226 accrued
as of December 31, 2023.
• The Company incurred $390,483 in consulting fees and travel reimbursements to advisory board
members, with $33,746 accrued as of December 31,
2023.
NOTE 13 – RETIREMENT PLAN
The Company established a 401(k)
retirement plan covering all eligible employees beginning November 15, 2013. The plan offers two types of elected
deferrals: pre-tax
deferrals and Roth deferrals. The Company matches 100% of each participant contribution, up to 4% for all eligible employees.
Matching
contributions vest immediately. Participants are entitled to receive distributions of all vested amounts beginning at age 59 1/2.
Matching
contributions to all eligible non-executive participants charged to expense were $134,766
and $72,520 for the years
ending December 31, 2024 and 2023,
respectively. The plan is subject to the annual IRS elective deferral limit of $23,000
per employee for 2024 and $7,500
catch-up for 50 and over.
NOTE 14 – SEGMENT REPORTING
The Company operates as a single reportable segment, as
the Chief Operating Decision Maker (“CODM”), the Chief Executive Officer (“CEO”), evaluates
the business on a consolidated
basis and does not receive discrete financial information for multiple business units.
Measure of Segment Profit or Loss
The CODM assesses the Company's financial performance based
on operating loss, which aligns with the amount reported in the statements of
comprehensive loss. The following table presents a
reconciliation of segment operating loss to net loss:
2024
2023
NET SALES
$
95,605 $
40,502
COST OF SALES
7,395
2,513
GROSS PROFIT
88,210
37,989
OPERATING EXPENSES
Research and development
16,806,548
15,903,689
General and administrative
6,370,805
5,359,565
23,177,353
21,263,254
SEGMENT OPERATING LOSS
(23,089,143)
(21,225,265)
OTHER INCOME (EXPENSE)
Interest income
926,854
657,546
Commitment fee
(154,210)
(673,578)
(Loss) gain on disposal of property and equipment and intangible assets
(213,440)
215,509
Other (expense)
(5,102)
(12,244)
NET LOSS
$
(22,535,041) $
(21,038,032)
F-28
LIGHTWAVE LOGIC, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2024 AND 2023
Significant Segment Expenses
The Company considers the following as significant expenses
in evaluating its segment performance:
• Research and Development: includes costs related to personnel, laboratory and wafer
fabrication materials and supplies, prototype device development
and wafer fabrication expenses, and third-party consulting costs aimed
at developing high-performance electro-optic polymer materials.
• General and Administrative: includes personnel costs, professional fees, and other overhead
expenses.
• Cost of Sales: represents labor costs, material costs and manufacturing overhead costs
associated with the production of materials transferred to the
customer under the technology license and material supply agreement at
the Company’s facility.
Since the Company has only one reportable segment, no additional
segment disclosures are required beyond entity-wide disclosures presented below.
Entity-Wide Disclosures
• Geographic Revenue Information: For the year ended December 31,
2024, 14%
of the Company's net sales were generated in the United States and
86%
internationally. For the year ended December 31, 2023, 100% of the Company’s
net sales were generated internationally.
• Major Customers: The Company has one customer that accounted for 10% or more of total
revenue.
Chief Operating Decision Maker (CODM)
The CODM of the Company is the Chief Executive Officer (CEO),
who is responsible for evaluating financial results and making resource allocation
decisions.
NOTE
15 – SUBSEQUENT EVENTS
On March 17, 2025, the Company entered into a purchase
agreement with an institutional investor to sell up to $30,000,000
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.
F-29
EXHIBIT 4.1
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
Lightwave Logic, Inc. (the “Company”
or “we” or “our”) has one class of securities registered under Section 12 of the Securities Exchange Act of
1934,
our common stock, par value $0.001 per share (the “common stock”).
Description of Common Stock
The following description of our
common stock is a summary and does not purport to be complete. It is subject to and qualified in its entirety by
reference to our Articles
of Incorporation, as amended (the “articles of incorporation”) and our Amended and Restated Bylaws (the “bylaws”),
each of
which are incorporated by reference as an exhibit to the Annual Report on Form 10-K of which this exhibit is a part. We encourage
you to read our articles
of incorporation, our bylaws and the applicable provisions of the Nevada Revised Statutes for additional information.
Authorized Share Capital. The
Company’s authorized capital stock consists of 250,000,000 shares of common stock, par value $0.001 per share
and 1,000,000 shares
of preferred stock, par value $0.001 per share.
Voting. Each outstanding
share of common stock is entitled to one vote on all matters to be submitted to a vote of the shareholders. Holders do not
have preemptive
rights, so we may issue additional shares that may reduce each holder’s voting and financial interest in our Company. Cumulative
voting
does not apply to the election of directors, so holders of more than 50% of the shares voted for the election of directors can
elect all of the directors. All
elections for directors shall be decided by a plurality vote; all other questions shall be decided by
majority vote except as otherwise provided by Nevada
Revised Statutes. Our bylaws permit the holders of the same percentage of all shareholders
entitled to vote at a meeting to take action by written consent
without a meeting.
Dividend Rights. Holders
of common stock are entitled to receive dividends when, as and if declared by the board of directors out of funds legally
available therefor.
Liquidation Preferences.
In the event of liquidation, dissolution or winding up of our Company, holders of common stock are entitled to share
ratably in all assets
remaining available for distribution to them after payment of liabilities and after provision has been made for each class of stock, if
any,
having preference over the common stock.
Other Terms. Holders of
common stock do not have any conversion, redemption provisions or other subscription rights. All of the outstanding
shares of common stock
are fully paid and non-assessable.
Anti-Takeover Provisions
Certain of our charter, statutory
and contractual provisions could make the removal of our management and directors more difficult and may
discourage transactions that
otherwise could involve payment of a premium over prevailing market prices for our common stock. Furthermore, the
existence of the foregoing
provisions could lower the price that investors might be willing to pay in the future for shares of our common stock. They could
also
deter potential acquirers of our Company, thereby reducing the likelihood that you could receive a premium for your common stock in an
acquisition.
Charter and Bylaw Provisions
Our articles of incorporation
and bylaws contain the following provisions that may have the effect of discouraging unsolicited acquisition
proposals:
•
authorize our board of directors to create and issue, without stockholder approval, preferred stock, thereby increasing the number of
outstanding shares, which can deter or prevent a takeover attempt;
•
prohibit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director
candidates;
•
empower our board of directors to fill any vacancy on our board of directors, whether such vacancy occurs as a result of an increase in the
number of directors or otherwise;
•
provide that our board of directors be divided into three classes, with approximately one-third of the directors to be elected each year;
•
provide that special meetings of our stockholders may only be called by the chairperson, president or chief executive officer, or by resolution
of the board of directors or at the request in writing of stockholders owning 66 2/3% in amount of the entire capital stock of the Company
issued and outstanding and entitled to vote;
•
establish advance notice procedures with regard to stockholder proposals relating to stockholder nominees for director and other stockholder
proposals;
•
provide that our board of directors is expressly authorized to adopt, amend or repeal our bylaws; and
•
provide that our directors will be elected by a plurality of the votes cast in the election of directors.
These provisions could lower the price that future
investors might be willing to pay for shares of our common stock.
Nevada Law
Nevada Revised Statutes sections
78.378 to 78.3793 provide state regulation over the acquisition of a controlling interest in certain Nevada
corporations unless the articles
of incorporation or bylaws of the corporation provide that the provisions of these sections do not apply. Our articles of
incorporation
and bylaws do not state that these provisions do not apply. The statute creates a number of restrictions on the ability of a person or
entity to
acquire control of a Nevada company by setting down certain rules of conduct and voting restrictions in any acquisition attempt,
among other things. The
statute contains certain limitations and it may not apply to our Company. These provisions may have the effect
of deterring hostile takeovers or delaying
changes in control, which could depress the market price of our common stock and deprive shareholders
of opportunities to realize a premium on shares of
common stock held by them.
Contractual Provisions
Our employee stock option agreements
include change-in-control provisions that allow us to grant options or stock purchase rights that may
become vested immediately upon a
change in control. The terms of change of control provisions contained in certain of our senior executive employee
agreements may also
discourage a change in control of our Company.
Our board of directors also has
the power to adopt a shareholder rights plan that could delay or prevent a change in control of our Company even
if the change in control
is generally beneficial to our shareholders. These plans, sometimes called “poison pills,” are oftentimes criticized by institutional
investors or their advisors and could affect our rating by such investors or advisors. If our board of directors adopts such a plan, it
might have the effect of
reducing the price that new investors are willing to pay for shares of our common stock.
Together, these charter, statutory
and contractual provisions could make the removal of our management and directors more difficult and may
discourage transactions that
otherwise could involve payment of a premium over prevailing market prices for our common stock. Furthermore, the
existence of the foregoing
provisions, could limit the price that investors might be willing to pay in the future for shares of our common stock. They could
also
deter potential acquirers of our Company, thereby reducing the likelihood that you could receive a premium for your common stock in an
acquisition.
Listing
Our common stock is listed on
the NASDAQ Capital Market under the symbol "LWLG."
Transfer Agent and Registrar
The transfer agent and registrar
for our common stock is Broadridge.
Preferred Stock
Our common stock is subject to
the express terms of the Company’s preferred stock and any series thereof. The board of directors may issue
preferred stock with
voting, dividend, liquidation and other rights that could adversely affect the relative rights of the holders of the common stock.
(a)
(b)
(c)
(d)
(e)
Exhibit 10.33
PURCHASE
AGREEMENT
THIS
PURCHASE AGREEMENT (the “Agreement”), dated as of March 17, 2025 is made by and between LIGHTWAVE LOGIC, INC.,
a
Nevada corporation (the “Company”), and LINCOLN PARK CAPITAL FUND, LLC, an Illinois limited liability
company (the “Investor”).
WHEREAS:
Subject
to the terms and conditions set forth in this Agreement, the Company wishes to sell to the Investor, and the Investor wishes to buy from
the Company, up to Thirty Million Dollars ($30,000,000) of the Company’s common stock, $0.001 par value per share (the “Common
Stock”). The shares
of Common Stock to be purchased hereunder are referred to herein as the “Purchase Shares.”
NOW
THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the
receipt
and adequacy of which are hereby acknowledged, the Company and the Investor hereby agree as follows:
1.
CERTAIN
DEFINITIONS.
For
purposes of this Agreement, the following terms shall have the following meanings:
“Accelerated Purchase Date” means, with respect to any Accelerated Purchase
made pursuant to Section 2(b) hereof, the Business Day
immediately following the applicable Purchase Date with respect to the
corresponding Regular Purchase referred to in Section 2(a) hereof.
“Accelerated Purchase Minimum Price Threshold” means, with respect to
any Accelerated Purchase made pursuant to Section 2(b)
hereof, any minimum per share price threshold set forth by the Company
in the applicable Accelerated Purchase Notice.
“Accelerated Purchase Notice” means, with respect to an Accelerated Purchase
made pursuant to Section 2(b) hereof, an irrevocable
written notice from the Company to the Investor directing the Investor to
purchase the applicable Accelerated Purchase Share Amount at the Accelerated
Purchase Price on the Accelerated Purchase Date for such
Accelerated Purchase in accordance with this Agreement, and specifying any Additional
Accelerated Purchase Minimum Price Threshold determined
by the Company.
“Accelerated Purchase Price” means, with respect to an Accelerated Purchase
made pursuant to Section 2(b) hereof, the lower of (i)
ninety-six and one half percent (96.5%) of the VWAP for the period beginning
at 9:30:01 a.m., Eastern time, on the applicable Accelerated Purchase Date,
or such other time publicly announced by the Principal Market
as the official open (or commencement) of trading on the Principal Market on such
applicable Accelerated Purchase Date (the “Accelerated
Purchase Commencement Time”), and ending at the earliest of (A) 4:00:00 p.m., Eastern time, on
such applicable Accelerated
Purchase Date, or such other time publicly announced by the Principal Market as the official close of trading on the Principal
Market
on such applicable Accelerated Purchase Date, (B) such time, from and after the Accelerated Purchase Commencement Time for such Accelerated
Purchase, that the total number (or volume) of shares of Common Stock traded on the Principal Market has exceeded the applicable Accelerated
Purchase
Share Volume Maximum, and (C) such time, from and after the Accelerated Purchase Commencement Time for such Accelerated Purchase,
that the Sale
Price has fallen below the applicable Accelerated Purchase Minimum Price Threshold (such earliest of (i)(A), (i)(B) and
(i)(C) above, the “Accelerated
Purchase Termination Time”), and (ii) the Closing Sale Price of the Common Stock on
such applicable Accelerated Purchase Date (to be appropriately
adjusted for any reorganization, recapitalization, non-cash dividend,
stock split, reverse stock split or other similar transaction).
“Accelerated Purchase Share Amount” means, with respect to an Accelerated
Purchase made pursuant to Section 2(b) hereof, the number
of Purchase Shares directed by the Company to be purchased by the Investor
in an Accelerated Purchase Notice, which number of Purchase Shares shall
not exceed the lesser of (i) 300% of the number of Purchase
Shares directed by the Company to be purchased by the Investor pursuant to the corresponding
Regular Purchase Notice for the corresponding
Regular Purchase referred to in Section 2(b) hereof (subject to the Purchase Share limitations contained in
Section 2(a)
hereof) and (ii) an amount equal to (A) the Accelerated Purchase Share Percentage multiplied by (B) the total number (or volume) of shares
of
Common Stock traded on the Principal Market during the period on the applicable Accelerated Purchase Date beginning at the Accelerated
Purchase
Commencement Time for such Accelerated Purchase and ending at the Accelerated Purchase Termination Time for such Accelerated
Purchase.
1
(f)
(g)
(h)
(i)
(j)
(k)
“Accelerated Purchase Share Percentage” means, with respect to an Accelerated
Purchase made pursuant to Section 2(b) hereof, thirty
percent (30%).
“Accelerated Purchase Share Volume Maximum” means, with respect to an
Accelerated Purchase made pursuant to Section 2(b) hereof, a
number of shares of Common Stock equal to (i) the applicable Accelerated
Purchase Share Amount properly directed by the Company to be purchased by
the Investor in the applicable Accelerated Purchase Notice
for such Accelerated Purchase, divided by (ii) the Accelerated Purchase Share Percentage (to be
appropriately adjusted for any reorganization,
recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction).
“Additional Accelerated Purchase Date” means, with respect to an Additional
Accelerated Purchase made pursuant to Section 2(c)
hereof, the Business Day (i) that is the Accelerated Purchase Date with respect
to the corresponding Accelerated Purchase referred to in Section 2(b) hereof
and (ii) on which the Investor receives, prior to
1:00 p.m., Eastern time, on such Business Day, a valid Additional Accelerated Purchase Notice for such
Additional Accelerated Purchase
in accordance with this Agreement.
“Additional Accelerated Purchase Minimum Price Threshold” means, with
respect to an Additional Accelerated Purchase made pursuant
to Section 2(c) hereof, any minimum per share price threshold set
forth by the Company in the applicable Additional Accelerated Purchase Notice.
“Additional Accelerated Purchase Notice” means, with respect to an Additional
Accelerated Purchase made pursuant to Section 2(c)
hereof, an irrevocable written notice from the Company to the Investor directing
the Investor to purchase the applicable Additional Accelerated Purchase
Share Amount at the Additional Accelerated Purchase Price for
such Additional Accelerated Purchase in accordance with this Agreement, and specifying
any Additional Accelerated Purchase Minimum Price
Threshold determined by the Company.
“Additional Accelerated Purchase Price” means, with respect to an Additional
Accelerated Purchase made pursuant to Section 2(c)
hereof, the lower of (i) ninety-six and one half percent (96.5%) of the VWAP
for the period on the applicable Additional Accelerated Purchase Date,
beginning at the latest of (A) the applicable Accelerated Purchase
Termination Time with respect to the corresponding Accelerated Purchase referred to in
Section 2(c) hereof on such Additional
Accelerated Purchase Date, (B) the applicable Additional Accelerated Purchase Termination Time with respect to
the most recently completed
prior Additional Accelerated Purchase on such Additional Accelerated Purchase Date, as applicable, and (C) the time at which
all Purchase
Shares subject to all prior Accelerated Purchases and Additional Accelerated Purchases (as applicable), including, without limitation,
those
that have been effected on the same Business Day as the applicable Additional Accelerated Purchase Date with respect to which the
applicable Additional
Accelerated Purchase relates, have theretofore been received by the Investor as DWAC Shares in accordance with
this Agreement (such latest of (i)(A), (i)
(B) and (i)(C) above, the “Additional Accelerated Purchase Commencement Time”),
and ending at the earliest of (X) 4:00 p.m., Eastern time, on such
Additional Accelerated Purchase Date, or such other time publicly
announced by the Principal Market as the official close of trading on the Principal
Market on such Additional Accelerated Purchase Date,
(Y) such time, from and after the Additional Accelerated Purchase Commencement Time for such
Additional Accelerated Purchase, that the
total number (or volume) of shares of Common Stock traded on the Principal Market has exceeded the applicable
Additional Accelerated
Purchase Share Volume Maximum, and (Z) such time, from and after the Additional Accelerated Purchase Commencement Time
for such Additional
Accelerated Purchase, that the Sale Price has fallen below the applicable Additional Accelerated Purchase Minimum Price Threshold
(such
earliest of (i)(X), (i)(Y) and (i)(Z) above, the “Additional Accelerated Purchase Termination Time”), and (ii) the
Closing Sale Price of the Common
Stock on such Additional Accelerated Purchase Date (to be appropriately adjusted for any reorganization,
recapitalization, non-cash dividend, stock split,
reverse stock split or other similar transaction).
2
(l)
(m)
(n)
(o)
(p)
(q)
(r)
(s)
(t)
(u)
“Additional Accelerated Purchase Share Amount” means, with respect to
an Additional Accelerated Purchase made pursuant to Section
2(c) hereof, the number of Purchase Shares directed by the Company
to be purchased by the Investor on an Additional Accelerated Purchase Notice, which
number of Purchase Shares shall not exceed the lesser
of (i) 300% of the number of Purchase Shares directed by the Company to be purchased by the
Investor pursuant to the corresponding Regular
Purchase Notice for the corresponding Regular Purchase referred to in Section 2(a) hereof (subject to the
Purchase Share limitations
contained in Section 2(a) hereof) and (ii) an amount equal to (A) the Additional Accelerated Purchase Share Percentage
multiplied
by (B) the total number (or volume) of shares of Common Stock traded on the Principal Market during the period on the applicable Additional
Accelerated Purchase Date beginning at the Additional Accelerated Purchase Commencement Time for such Additional Accelerated Purchase
and ending
at the Additional Accelerated Purchase Termination Time for such Additional Accelerated Purchase.
“Additional Accelerated Purchase Share Percentage” means, with respect
to an Additional Accelerated Purchase made pursuant to
Section 2(c) hereof, thirty percent (30%).
“Additional Accelerated Purchase Share Volume Maximum” means, with respect
to an Additional Accelerated Purchase made pursuant
to Section 2(c) hereof, a number of shares of Common Stock equal to (i) the
applicable Additional Accelerated Purchase Share Amount properly directed
by the Company to be purchased by the Investor in the applicable
Additional Accelerated Purchase Notice for such Additional Accelerated Purchase,
divided by (ii) the Additional Accelerated Purchase
Share Percentage (to be appropriately adjusted for any reorganization, recapitalization, non-cash
dividend, stock split, reverse stock
split or other similar transaction).
“Alternate Adjusted Regular Purchase Share Limit”
means, with respect to a Regular Purchase made pursuant to Section 2(a) hereof, the
maximum number of Purchase Shares which, taking
into account the applicable per share Purchase Price therefor calculated in accordance with this
Agreement, would enable the Company
to deliver to the Investor, on the applicable Purchase Date for such Regular Purchase, a Regular Purchase Notice
for a Purchase
Amount equal to, or as closely approximating without exceeding, One Hundred Thousand Dollars ($100,000).
“Available Amount” means, initially, Thirty Million Dollars ($30,000,000)
in the aggregate, which amount shall be reduced by the
Purchase Amount each time the Investor purchases shares of Common Stock pursuant
to Section 2 hereof.
“Bankruptcy Law” means Title 11, U.S. Code, or any similar federal or
state law for the relief of debtors.
“Base Prospectus” means the Company’s final base prospectus, dated
August 5, 2024, as amended, as updated on August 9, 2024,
including the documents incorporated by reference therein.
“Business Day” means any day on which the Principal Market is open for
trading, including any day on which the Principal Market is
open for trading for a period of time less than the customary time.
“Closing Sale Price” means, for any security as of any date, the last
closing sale price for such security on the Principal Market as
reported by the Principal Market.
“Confidential Information” means any information disclosed by either party
to the other party, either directly or indirectly, in writing,
orally or by inspection of tangible objects (including, without limitation,
documents, prototypes, samples, plant and equipment), which is designated, either
orally or in writing, as “Confidential,”
“Proprietary” or some similar designation. Information communicated orally shall be considered Confidential
Information if
such information is confirmed in writing as being Confidential Information within ten (10) Business Days after the initial disclosure.
Confidential Information may also include information disclosed to a disclosing party by third parties. Confidential Information shall
not, however, include
any information which (i) was publicly known and made generally available in the public domain prior to the time
of disclosure by the disclosing party; (ii)
becomes publicly known and made generally available after disclosure by the disclosing party
to the receiving party through no action or inaction of the
receiving party; (iii) is already in the possession of the receiving party
without confidential restriction at the time of disclosure by the disclosing party as
shown by the receiving party’s files and
records immediately prior to the time of disclosure; (iv) is obtained by the receiving party from a third party
without a breach of such
third party’s obligations of confidentiality; (v) is independently developed by the receiving party without use of or reference
to the
disclosing party’s Confidential Information, as shown by documents and other competent evidence in the receiving party’s
possession; or (vi) is required by
law to be disclosed by the receiving party, provided that the receiving party gives the disclosing
party prompt written notice of such requirement prior to
such disclosure and assistance in obtaining an order protecting the information
from public disclosure.
3
(v)
(w)
(x)
(y)
(z)
(aa)
(bb)
(cc)
“Custodian” means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
“DTC” means The Depository Trust Company, or any successor performing
substantially the same function for the Company.
“DWAC Shares” means shares of Common Stock that are (i) issued in electronic
form, (ii) freely tradable and transferable and without
restriction on resale and (iii) timely credited by the Company, once a DWAC notice
is received, to the Investor’s or its designee’s specified
Deposit/Withdrawal at Custodian (DWAC) account with DTC under
its Fast Automated Securities Transfer (FAST) Program, or any similar program
hereafter adopted by DTC performing substantially the same
function.
“Exchange Act” means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
“Fully Adjusted Regular Purchase Share Limit” means, with respect to any
reorganization, recapitalization, non-cash dividend, stock
split, reverse stock split or other similar transaction from and after the
date of this Agreement, the Regular Purchase Share Limit (as defined in Section 2(a)
hereof) in effect on the applicable date
of determination, after giving effect to the full proportionate adjustment thereto made pursuant to Section 2(a)
hereof for or
in respect of such reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction.
“Initial Prospectus Supplement” means the prospectus supplement of the
Company relating to the Securities, including the accompanying
Base Prospectus, to be prepared and filed by the Company with the SEC
pursuant to Rule 424(b)(5) under the Securities Act and in accordance with
Section 5(a) hereof, together with all documents and
information incorporated therein by reference.
“Material Adverse Effect” means any material adverse effect on (i) the
enforceability of any Transaction Document, (ii) the results of
operations, assets, business or financial condition of the Company and
its Subsidiaries (as defined below), taken as a whole, other than any material adverse
effect that resulted exclusively from (A) any
change in the United States or foreign economies or securities or financial markets in general that does not
have a disproportionate
effect on the Company and its Subsidiaries, taken as a whole, (B) any change that generally affects the industry in which the
Company
and its Subsidiaries operate that does not have a disproportionate effect on the Company and its Subsidiaries, taken as a whole, (C)
any change
arising in connection with earthquakes, hostilities, acts of war, sabotage or terrorism or military actions or any escalation
or material worsening of any such
hostilities, acts of war, sabotage or terrorism or military actions existing as of the date hereof,
(D) any action taken by the Investor, its affiliates or its or
their successors and assigns with respect to the transactions contemplated
by this Agreement, (E) the effect of any change in applicable laws or accounting
rules that does not have a disproportionate effect on
the Company and its Subsidiaries, taken as a whole, or (F) any change resulting from compliance with
terms of this Agreement or the consummation
of the transactions contemplated by this Agreement, or (iii) the Company’s ability to perform in any material
respect on a timely
basis its obligations under any Transaction Document to be performed as of the date of determination.
“Maturity Date” means the first day of the month immediately following
the thirty-six (36) month anniversary of the Commencement
Date.
4
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“PEA Period” means the period commencing at 9:30 a.m., Eastern time, on
the tenth (10th) Business Day immediately prior to the filing
of any post-effective amendment to the Registration Statement
(as defined herein) or New Registration Statement (as such term is defined in the
Registration Rights Agreement), and ending at 9:30
a.m., Eastern time, on the Business Day immediately following, the effective date of any post-effective
amendment to the Registration
Statement (as defined herein) or New Registration Statement (as such term is defined in the Registration Rights
Agreement).
“Person” means an individual or entity including but not limited to any
limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or
any department or agency thereof.
“Principal Market” means The Nasdaq Capital Market (or any nationally
recognized successor thereto); provided, however, that in the
event the Company’s Common Stock is ever listed or traded on The
Nasdaq Global Select Market, The Nasdaq Global Market, the New York Stock
Exchange, the NYSE American, the NYSE Arca, or the OTCQX or
OTCQB operated by the OTC Markets Group, Inc. (or any nationally recognized
successor to any of the foregoing), then the “Principal
Market” shall mean such other market or exchange on which the Company’s Common Stock is then
listed or traded.
“Prospectus” means the Base Prospectus, as supplemented from time to time
by any Prospectus Supplement (including the Initial
Prospectus Supplement), including the documents and information incorporated by reference
therein.
“Prospectus Supplement” means any prospectus supplement to the Base Prospectus
(including the Initial Prospectus Supplement) filed
with the SEC pursuant to Rule 424(b) under the Securities Act in connection with
the transactions contemplated by this Agreement, including the
documents and information incorporated by reference therein.
“Purchase Amount” means, with respect to any Regular Purchase, any Accelerated
Purchase, or any Additional Accelerated Purchase
made hereunder, as applicable, the portion of the Available Amount to be purchased by
the Investor pursuant to Section 2 hereof.
“Purchase Date” means, with respect to a Regular Purchase made pursuant
to Section 2(a) hereof, the Business Day on which the
Investor receives, after 4:00 p.m., Eastern time, but prior to 6:00 p.m.,
Eastern time, on such Business Day, a valid Regular Purchase Notice for such
Regular Purchase in accordance with this Agreement.
“Purchase Price” means, with respect to a Regular Purchase made pursuant
to Section 2(a) hereof, the lower of: (i) the lowest Sale Price
on the Purchase Date for such Regular Purchase and (ii) the arithmetic
average of the three (3) lowest Closing Sale Prices for the Common Stock during the
ten (10) consecutive Business Days ending on the
Business Day immediately preceding such Purchase Date for such Regular Purchase (in each case, to be
appropriately adjusted for any reorganization,
recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction that occurs on
or after the date of
this Agreement).
“Registration Rights Agreement” means that certain Registration Rights
Agreement, of even date herewith between the Company and the
Investor.
“Registration Statement” has the meaning set forth in the Registration
Rights Agreement.
“Regular Purchase Notice” means, with respect to a Regular Purchase pursuant
to Section 2(a) hereof, an irrevocable written notice from
the Company to the Investor directing the Investor to buy a specified
number of Purchase Shares (subject to the Purchase Share limitations contained in
Section 2(a) hereof) at the applicable Purchase
Price for such Regular Purchase in accordance with this Agreement.
“Sale Price” means any trade price for the shares of Common Stock on the
Principal Market as reported by the Principal Market.
5
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(a)
“SEC” means the U.S. Securities and Exchange Commission.
“Securities” means, collectively, the Purchase Shares and the Commitment
Shares (as defined below).
“Securities Act” means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
“Shelf Registration Statement” has the meaning set forth in the Registration
Rights Agreement.
“Subsidiary” means any Person the Company wholly-owns or controls, or
in which the Company, directly or indirectly, owns a majority
of the voting stock or similar voting interest, in each case that would
be disclosable pursuant to Item 601(b)(21) of Regulation S-K promulgated under the
Securities Act.
“Transaction Documents” means, collectively, this Agreement and the schedules
and exhibits hereto, the Registration Rights Agreement
and the schedules and exhibits thereto.
“Transfer Agent” means Broadridge Corporate Issuer Solutions, Inc., or
such other Person who is then serving as the transfer agent for
the Company in respect of the Common Stock.
“VWAP” means in respect of an Accelerated Purchase Date and an Additional
Accelerated Purchase Date, as applicable, the volume
weighted average price of the Common Stock on the Principal Market, as reported
on the Principal Market.
2.
PURCHASE
OF COMMON STOCK.
Subject
to the terms and conditions set forth in this Agreement, the Company has the right, but not the obligation, to sell to the Investor,
in the
Company’s sole and absolute discretion, and the Investor has the obligation to purchase from the Company, Purchase Shares
as follows:
Commencement of Regular Sales of Common Stock. Beginning one (1) Business Day following
the satisfaction of the conditions set
forth in Sections 7 and 8 hereof (the “Commencement” and the
date of satisfaction of such conditions, the “Commencement Date”) and thereafter, the
Company shall have the right,
but not the obligation, to direct the Investor, by its delivery to the Investor of a Regular Purchase Notice from time to time on
any
Purchase Date, to purchase up to Two Hundred Fifty Thousand (250,000) Purchase Shares, subject to adjustment as set forth below in this
Section 2(a)
(such maximum number of Purchase Shares, as may be adjusted from time to time, the “Regular Purchase Share
Limit”), at the Purchase Price on the
Purchase Date (each such purchase a “Regular Purchase”); all of which
share and dollar amounts shall be appropriately proportionately adjusted for any
reorganization, recapitalization, non-cash dividend,
stock split, reverse stock split or other similar transaction; provided that if, after giving effect to the full
proportionate
adjustment to the Regular Purchase Share Limit therefor, the Fully Adjusted Regular Purchase Share Limit then in effect would preclude
the
Company from delivering to the Investor a Regular Purchase Notice hereunder for a Purchase Amount (calculated by multiplying (X)
the number of
Purchase Shares equal to the Fully Adjusted Regular Purchase Share Limit, by (Y) the Purchase Price per Purchase Share
covered by such Regular
Purchase Notice on the applicable Purchase Date therefor) equal to or greater than the Alternate Adjusted Regular
Purchase Share Limit, the Regular
Purchase Share Limit for such Regular Purchase Notice shall not be fully adjusted to equal the applicable
Fully Adjusted Regular Purchase Share Limit,
but rather the Regular Purchase Share Limit for such Regular Purchase Notice shall be adjusted
to equal the applicable Alternate Adjusted Regular
Purchase Share Limit as of the applicable Purchase Date for such Regular Purchase
Notice; and provided, further, however, that the Investor’s committed
obligation under any single Regular
Purchase, other than any Regular Purchase with respect to which an Alternate Adjusted Regular Purchase Share Limit
shall apply, shall
not exceed Three Million Dollars ($3,000,000) and provided, further, however, that the parties may mutually agree
to increase the Regular
Purchase Share Limit for any Regular Purchase to a number of shares greater than the Regular Purchase Share limit
then in effect. If the Company delivers
any Regular Purchase Notice for a Purchase Amount in excess of the limitations contained in the
immediately preceding sentence, such Regular Purchase
Notice shall be void ab initio only with respect to the extent of the amount
by which the number of Purchase Shares set forth in such Regular Purchase
Notice exceeds the number of Purchase Shares which the Company
is permitted to include in such Purchase Notice in accordance herewith, and the
Investor shall have no obligation to purchase such excess
Purchase Shares in respect of such Regular Purchase Notice; provided, however, that the Investor
shall remain obligated
to purchase the number of Purchase Shares which the Company is permitted to include in such Regular Purchase Notice. The
Company may
deliver multiple Regular Purchase Notices to the Investor as often as every Business Day, so long as the Company has not failed to deliver
Purchase Shares for the most recent prior Regular Purchase. Notwithstanding the foregoing, the Company shall not deliver any Regular
Purchase Notices
during the PEA Period.
6
(b)
(c)
Accelerated Purchases. Subject to the terms and conditions of this Agreement, from
and after one (1) Business Day following the
Commencement Date, in addition to purchases of Purchase Shares as described in Section
2(a) hereof, the Company shall also have the right, but not the
obligation, to direct the Investor, by its delivery to the Investor
of an Accelerated Purchase Notice from time to time in accordance with this Agreement, to
purchase the applicable Accelerated Purchase
Share Amount at the Accelerated Purchase Price on the Accelerated Purchase Date therefor in accordance
with this Agreement (each such
purchase, an “Accelerated Purchase”); provided however, that the parties may mutually agree to increase the
Accelerated
Purchase Share Amount. The Company may deliver an Accelerated Purchase Notice to the Investor only on a Purchase Date on
which the Company also
properly submitted a Regular Purchase Notice providing for a Regular Purchase of a number of Purchase Shares not
less than the Regular Purchase Share
Limit then in effect on such Purchase Date in accordance with this Agreement (including, without
limitation, giving effect to any automatic increase to the
Regular Purchase Share Limit as a result of the Closing Sale Price of the
Common Stock exceeding certain thresholds set forth in Section 2(a) hereof on
such Purchase Date and any other adjustments to
the Regular Purchase Share Limit, in each case pursuant to Section 2(a) hereof). If the Company delivers
any Accelerated Purchase
Notice directing the Investor to purchase an amount of Purchase Shares that exceeds the Accelerated Purchase Share Amount
that the Company
is then permitted to include in such Accelerated Purchase Notice, such Accelerated Purchase Notice shall be void ab initio only
with
respect to the extent of the amount by which the number of Purchase Shares set forth in such Accelerated Purchase Notice exceeds
the Accelerated
Purchase Share Amount that the Company is then permitted to include in such Accelerated Purchase Notice (which shall
be confirmed in an Accelerated
Purchase Confirmation), and the Investor shall have no obligation to purchase such excess Purchase Shares
in respect of such Accelerated Purchase Notice;
provided, however, that the Investor shall remain obligated to purchase
the Accelerated Purchase Share Amount which the Company is permitted to include
in such Accelerated Purchase Notice. Within one (1) Business
Day after completion of each Accelerated Purchase Date for an Accelerated Purchase, the
Investor will provide to the Company a written
confirmation of such Accelerated Purchase setting forth the applicable Accelerated Purchase Share Amount
and Accelerated Purchase Price
for such Accelerated Purchase (each, an “Accelerated Purchase Confirmation”). Notwithstanding the foregoing, the
Company
shall not deliver any Accelerated Purchase Notices during the PEA Period.
Additional Accelerated Purchases. Subject to the terms and conditions of this Agreement,
from and after one (1) Business Day following
the Commencement Date, in addition to purchases of Purchase Shares as described in Section
2(a) and Section 2(b) hereof, the Company shall also have
the right, but not the obligation, to direct the Investor, by its
timely delivery to the Investor of an Additional Accelerated Purchase Notice on an Additional
Accelerated Purchase Date in accordance
with this Agreement, to purchase the applicable Additional Accelerated Purchase Share Amount at the applicable
Additional Accelerated
Purchase Price therefor in accordance with this Agreement (each such purchase, an “Additional Accelerated Purchase”);
provided
however, that the parties may mutually agree to increase the Additional Accelerated Purchase Share Amount for any Additional
Accelerated Purchase. The
Company may deliver multiple Additional Accelerated Purchase Notices to the Investor on an Additional Accelerated
Purchase Date; provided, however,
that the Company may deliver an Additional Accelerated Purchase Notice to the Investor
only (i) on a Business Day that is also the Accelerated Purchase
Date for an Accelerated Purchase with respect to which the Company properly
submitted to the Investor an Accelerated Purchase Notice in accordance
with this Agreement on the applicable Purchase Date for a Regular
Purchase of a number of Purchase Shares not less than the Regular Purchase Share
Limit then in effect in accordance with this Agreement
(including, without limitation, giving effect to any automatic increase to the Regular Purchase Share
Limit as a result of the Closing
Sale Price of the Common Stock exceeding certain thresholds set forth in Section 2(a) hereof on such Purchase Date and
any other
adjustments to the Regular Purchase Share Limit, in each case pursuant to Section 2(a) hereof), and (ii) if all Purchase Shares
subject to all prior
Regular Purchases, Accelerated Purchases and Additional Accelerated Purchases, including, without limitation, those
that have been effected on the same
Business Day as the applicable Additional Accelerated Purchase Date with respect to which the applicable
Additional Accelerated Purchase relates, in each
case have theretofore been received by the Investor as DWAC Shares in accordance with
this Agreement. If the Company delivers any Additional
Accelerated Purchase Notice directing the Investor to purchase an amount of Purchase
Shares that exceeds the Additional Accelerated Purchase Share
Amount that the Company is then permitted to include in such Additional
Accelerated Purchase Notice, such Additional Accelerated Purchase Notice shall
be void ab initio only with respect to the extent
of the amount by which the number of Purchase Shares set forth in such Additional Accelerated Purchase
Notice exceeds the Additional
Accelerated Purchase Share Amount that the Company is then permitted to include in such Additional Accelerated Purchase
Notice (which
shall be confirmed in an Additional Accelerated Purchase Confirmation), and the Investor shall have no obligation to purchase such excess
Purchase Shares in respect of such Additional Accelerated Purchase Notice; provided, however, that the Investor shall remain
obligated to purchase the
Additional Accelerated Purchase Share Amount which the Company is permitted to include in such Additional Accelerated
Purchase Notice. Within one
(1) Business Day after completion of each Additional Accelerated Purchase Date, the Investor will provide
to the Company a written confirmation of each
Additional Accelerated Purchase on such Additional Accelerated Purchase Date setting forth
the applicable Additional Accelerated Purchase Share
Amount and Additional Accelerated Purchase Price for each such Additional Accelerated
Purchase on such Additional Accelerated Purchase Date (each, an
“Additional Accelerated Purchase Confirmation”). Notwithstanding
the foregoing, the Company shall not deliver any Additional Accelerated Purchase
Notices during the PEA Period.
7
(e)
(d)
Compliance with Principal Market Rules. Notwithstanding
anything in this Agreement to the contrary, and in addition to the limitations set
forth in Section 2(f) hereof, the Company shall
not issue more than 24,910,904 shares (including the Commitment Shares) of Common Stock for less than
$1.06 (the “Minimum
Price”) under this Agreement, which equals 19.99% of the Company’s outstanding shares of Common Stock as of the date
hereof
(the “Exchange Cap”), unless stockholder approval is obtained to issue shares of Common Stock in excess of
the Exchange Cap and otherwise in
accordance with the applicable rules of the Principal Market. Notwithstanding the foregoing, the Company
shall not be required or permitted to issue, and
the Investor shall not be required to purchase, any shares of Common Stock under this
Agreement if such issuance would violate the rules or regulations of
the Principal Market. The Company may, in its sole discretion, determine
whether to obtain stockholder approval to issue and sell shares in excess of the
Exchange Cap at a price less than the Minimum Price
if such issuance would require stockholder approval under the rules or regulations of the Principal
Market. The Exchange Cap shall be
reduced, on a share-for-share basis, by the number of shares of Common Stock issued or issuable that may be
aggregated with the transactions
contemplated by this Agreement under applicable rules of the Principal Market.
Payment for Purchase Shares. For each Regular Purchase, the Investor shall pay to
the Company an amount equal to the Purchase
Amount with respect to such Regular Purchase, as applicable, as full payment for such Purchase
Shares via wire transfer of immediately available funds on
the same Business Day that the Investor receives such Purchase Shares, if
such Purchase Shares are received by the Investor before 1:00 p.m., Eastern time,
or, if such Purchase Shares are received by the Investor
after 1:00 p.m., Eastern time, the next Business Day. For each Accelerated Purchase and each
Additional Accelerated Purchase, the Investor
shall pay to the Company an amount equal to the Purchase Amount with respect to such Accelerated
Purchase and Additional Accelerated
Purchase, respectively, as full payment for such Purchase Shares via wire transfer of immediately available funds on
the second (2nd)
Business Day following the date that the Investor receives such Purchase Shares. If the Company or the Transfer Agent shall fail for
any
reason or for no reason to electronically transfer any Purchase Shares as DWAC Shares with respect to any Regular Purchase, Accelerated
Purchase or
Additional Accelerated Purchase (as applicable) within two (2) Business Days following the receipt by the Company of the
Purchase Price, Accelerated
Purchase Price or Additional Accelerated Purchase Price, respectively, therefor in compliance with this Section
2(e), and if on or after such Business Day
the Investor purchases (in an open market transaction or otherwise) shares of Common Stock
to deliver in satisfaction of a sale by the Investor of such
Purchase Shares that the Investor anticipated receiving from the Company
in respect of such Regular Purchase, Accelerated Purchase or Additional
Accelerated Purchase (as applicable), then the Company shall,
within two (2) Business Days after the Investor’s request, either (i) pay cash to the Investor
in an amount equal to the Investor’s
total purchase price (including customary brokerage commissions, if any) for the shares of Common Stock so
purchased (the “Cover
Price”), at which point the Company’s obligation to deliver such Purchase Shares as DWAC Shares shall terminate, or (ii)
promptly
honor its obligation to deliver to the Investor such Purchase Shares as DWAC Shares and pay cash to the Investor in an amount
equal to the excess (if any)
of the Cover Price over the total Purchase Amount paid by the Investor pursuant to this Agreement for all
of the Purchase Shares to be purchased by the
Investor in connection with such purchases. The Company shall not issue any fraction of
a share of Common Stock upon any Regular Purchase,
Accelerated Purchase or Additional Accelerated Purchase. If the issuance would result
in the issuance of a fraction of a share of Common Stock, the
Company shall round such fraction of a share of Common Stock up or down
to the nearest whole share. All payments made under this Agreement shall be
made in lawful money of the United States of America or wire
transfer of immediately available funds to such account as the Company may from time to
time designate by written notice in accordance
with the provisions of this Agreement. Whenever any amount expressed to be due by the terms of this
Agreement is due on any day that
is not a Business Day, the same shall instead be due on the next succeeding day that is a Business Day.
8
(f)
(a)
(b)
(c)
(d)
Beneficial Ownership Limitation. Notwithstanding anything to the contrary contained
in this Agreement, the Company shall not issue or
sell, and the Investor shall not purchase or acquire, any shares of Common Stock under
this Agreement which, when aggregated with all other shares of
Common Stock then beneficially owned by the Investor and its affiliates
(as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3
promulgated thereunder), would result in the beneficial ownership
by the Investor and its affiliates of more than 4.99% of the then issued and outstanding
shares of Common Stock (the “Beneficial
Ownership Limitation”). Upon the written or oral request of the Investor, the Company shall promptly (but not
later than one
(1) Business Day) confirm orally or in writing to the Investor the number of shares of Common Stock then outstanding. The Investor, upon
written notice to the Company, may increase the Beneficial Ownership Limitation provisions of this Section 2(f), provided that
the Beneficial Ownership
Limitation in no event exceeds 9.99% of the number of shares of Common Stock outstanding immediately after giving
effect to the issuance of shares of
Common Stock pursuant to this Agreement and the provisions of this Section 2(f) shall continue
to apply. Any increase in the Beneficial Ownership
Limitation will not be effective until the sixty-first (61st) day after such written
notice is delivered to the Company. The provisions of this paragraph shall
be construed and implemented in a manner otherwise than in
strict conformity with the terms of this Section 2(f) to correct this paragraph (or any portion
hereof) which may be defective
or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements
necessary or desirable
to properly give effect to such limitation. The Investor and the Company shall each cooperate in good faith in the determinations
required
hereby and the application hereof. The Investor’s written certification to the Company of the applicability of the Beneficial Ownership
Limitation,
and the resulting effect thereof hereunder at any time, shall be conclusive with respect to the applicability thereof and
such result absent manifest error.
3.
INVESTOR’S
REPRESENTATIONS AND WARRANTIES.
The
Investor represents and warrants to the Company that as of the date hereof and as of the Commencement Date:
Organization, Authority. Investor is an entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of
its organization, with the requisite power and authority to enter into and to
consummate the transactions contemplated by this Agreement and the other
Transaction Documents to which it is a party and otherwise to
carry out its obligations hereunder and thereunder.
Investment Purpose. The Investor is acquiring the Securities as principal for its
own account for investment only and not with a view to
or for distributing or reselling such Securities or any part thereof in violation
of the Securities Act or any applicable state securities law, has no present
intention of distributing any of such Securities in violation
of the Securities Act or any applicable state securities law and has no direct or indirect
arrangement or understandings with any other
Persons to distribute or regarding the distribution of such Securities in violation of the Securities Act or any
applicable state securities
law (this representation and warranty not limiting the Investor’s right to sell the Securities at any time pursuant to the
Registration
Statement described herein or otherwise in compliance with applicable federal and state securities laws). The Investor is acquiring the
Securities hereunder in the ordinary course of its business.
Accredited Investor Status. The Investor is an “accredited investor” as
that term is defined in Rule 501(a)(3) of Regulation D
promulgated under the Securities Act.
Information. The Investor understands that its investment in the Securities involves
a high degree of risk. The Investor (i) is able to bear
the economic risk of an investment in the Securities including a total loss thereof,
(ii) has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of the
proposed investment in the Securities and (iii) has had an opportunity to ask questions of and
receive answers from the officers of the
Company concerning the financial condition and business of the Company and other matters related to an
investment in the Securities.
Neither such inquiries nor any other due diligence investigations conducted by the Investor or its representatives shall modify,
amend
or affect the Investor’s right to rely on the Company’s representations and warranties contained in Section 4 hereof.
The Investor has sought such
accounting, legal and tax advice as it has considered necessary to make an informed investment decision
with respect to its acquisition of the Securities and
is not relying on any accounting, legal tax or other advice from the Company or
its officers, employees or representatives. The Investor acknowledges and
agrees that the Company neither makes nor has made any representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section 4 hereof.
9
(e)
(f)
(g)
(h)
(a)
(b)
No Governmental Review. The Investor understands that no U.S. federal or state agency
or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities or the fairness
or suitability of an investment in the Securities nor
have such authorities passed upon or endorsed the merits of the offering of the
Securities.
Validity; Enforcement. This Agreement and the other Transaction Documents have been
duly and validly authorized, executed and
delivered on behalf of the Investor and each is a valid and binding agreement of the Investor
enforceable against the Investor in accordance with its terms,
subject as to enforceability to general principles of equity and to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement
of applicable creditors’ rights and remedies.
Residency. The Investor’s principal place of business is located in of the State
of Illinois.
No Short Selling. The Investor represents and warrants to the Company that at no time
prior to the date of this Agreement has any of the
Investor, its agents, representatives or affiliates engaged in or effected, in any
manner whatsoever, directly or indirectly, any (i) “short sale” (as such term is
defined in Rule 200 of Regulation SHO of
the Exchange Act) of the Common Stock or (ii) hedging transaction, which establishes a net short position with
respect to the Common
Stock.
4.
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants to the Investor that, as of the date hereof and as of the Commencement Date:
Organization and Qualification. The Company and each of its Subsidiaries is an entity
duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its incorporation
or organization, with the requisite corporate power and authority to own
and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any of its Subsidiaries are in violation or
default of any of the provisions of its respective
certificate or articles of formation or incorporation, bylaws or other organizational or charter documents.
Each of the Company and its
Subsidiaries are duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each
jurisdiction
in which the nature of the business conducted or property owned by it makes such qualification necessary, and no proceeding has been
instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority
or qualification, except
where the failure to be so qualified or in good standing or such proceeding, as the case may be, would not reasonably
be expected to result in a Material
Adverse Effect. The Company has no Subsidiaries except as disclosed in the SEC Documents.
Authorization; Enforcement; Validity. The Company has the requisite corporate power
and authority to enter into and perform its
obligations under this Agreement and each of the other Transaction Documents, and to issue
the Securities in accordance with the terms hereof and thereof.
The execution and delivery of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated hereby and
thereby, including without limitation, the issuance of the Commitment
Shares (as defined below in Section 5(e)), the reservation for issuance and the
issuance of the Purchase Shares issuable under
this Agreement, have been duly authorized by the Company’s board of directors, or a validly authorized
committee thereof (collectively,
the “Board of Directors”), and no further consent or authorization is required by the Company, its Board of Directors
or
any committee thereof, or its stockholders (save to the extent provided in this Agreement). This Agreement has been, and each other
Transaction Document
shall be on the Commencement Date, duly executed and delivered by the Company, and this Agreement constitutes, and
each other Transaction Document
upon its execution on behalf of the Company, shall constitute, the valid and binding obligations of the
Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or affecting generally,
the enforcement of creditors’ rights and remedies. The Board of
Directors of the Company has approved all applicable resolutions
(the “Signing Resolutions”) to authorize the Company to enter into and deliver this
Agreement and to perform the transactions
contemplated hereby. The Signing Resolutions are valid, in full force and effect and have not been modified or
supplemented in any respect.
The Company has delivered to the Investor a true and correct copy of a unanimous written consent adopting the Signing
Resolutions executed
by all of the members of the Board of Directors of the Company. Except as set forth in this Agreement, no other approvals or
consents
of the Board of Directors, any other authorized committee thereof, and/or stockholders is necessary under applicable laws and the Company’s
articles of incorporation, as amended (the “Articles of Incorporation”), and/or bylaws, as amended (the “Bylaws”),
to authorize the execution and delivery
of this Agreement or any of the transactions contemplated hereby, including, but not limited
to, the issuance of the Commitment Shares and the issuance of
the Purchase Shares.
10
(c)
(d)
Capitalization. As of the date hereof, the authorized capital stock of the Company
consists of 250,000,000 shares of $0.001 par value
Common Stock and 1,000,000 shares of $0.001 par value preferred stock. Except as disclosed
in the SEC Documents (as defined below), (i) no shares of
the Company’s capital stock are subject to preemptive rights or any other
similar rights or any liens or encumbrances suffered or permitted by the
Company, (ii) there are no outstanding debt securities, (iii)
there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of
any character whatsoever relating
to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, or
contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries are or may become bound to issue additional
shares of
capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of
any character
whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of
its Subsidiaries, (iv) there are no
agreements or arrangements under which the Company or any of its Subsidiaries are obligated to register
the sale of any of their securities under the
Securities Act (except the Registration Rights Agreement and those registration rights
for which a registration statement has been filed and is effective), (v)
there are no outstanding securities or instruments of the Company
or any of its Subsidiaries which contain any redemption or similar provisions, and there
are no contracts, commitments, understandings
or arrangements by which the Company or any of its Subsidiaries are or may become bound to redeem a
security of the Company or any of
its Subsidiaries, (vi) there are no securities or instruments containing anti-dilution or similar provisions that will be
triggered by
the issuance of the Securities as described in this Agreement and (vii) the Company does not have any stock appreciation rights or “phantom
stock” plans or agreements or any similar plan or agreement. The Company has furnished to the Investor true and correct copies
of the Articles of
Incorporation and the Bylaws, each as in effect on the date hereof, and copies of any documents containing the material
rights of holders of securities
convertible or exercisable for Common Stock, to the extent not filed as an exhibit to the Company’s
Annual Report on Form 10-K for the fiscal year ended
December 31, 2023 or other Exchange Act reports.
Issuance of Securities. Upon issuance and payment therefor in accordance with the terms and conditions
of this Agreement, the Purchase
Shares shall be validly issued, fully paid and nonassessable and free from all taxes, liens, charges,
restrictions, rights of first refusal and preemptive rights
with respect to the issue thereof, with the holders being entitled to all
rights accorded to a holder of Common Stock. Five Million (5,000,000) shares of
Common Stock have been duly authorized and reserved for
issuance upon purchase under this Agreement as Purchase Shares. Two Hundred Forty-Five
Thousand Ninety-Eight (245,098) shares of Common
Stock (subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend,
stock split, reverse stock split or
other similar transaction) have been duly authorized and reserved for issuance as Initial Commitment Shares (as defined
below in Section
5(e)) in accordance with this Agreement. The Initial Commitment Shares shall be validly issued, fully paid and nonassessable and free
from all taxes, Liens, charges, restrictions, rights of first refusal and preemptive rights with respect to the issue thereof, with the
holders being entitled to all
rights accorded to a holder of Common Stock. Four Hundred Ninety Thousand One Hundred Ninety-Six (490,196)
shares of Common Stock (subject to
equitable adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse
stock split or other similar transaction) have been duly
authorized and reserved for issuance as Additional Commitment Shares (as defined
below in Section 5(e)) in accordance with this Agreement. When issued
in accordance with this Agreement, the Additional Commitment
Shares shall be validly issued, fully paid and nonassessable and free from all taxes, liens,
charges, restrictions, rights of first refusal
and preemptive rights with respect to the issue thereof, with the holders being entitled to all rights accorded to a
holder of Common
Stock. The Securities are being issued pursuant to the Registration Statement, and the issuance of the Securities has been registered
by
the Company pursuant to the Securities Act. Upon receipt of the Purchase Shares and the Commitment Shares, the Investor will have good
and marketable
title to such Securities and such Securities will be immediately freely tradable on the Principal Market by any holder
who is not an “affiliate” under the Act.
11
(e)
(f)
No Conflicts. The execution, delivery and performance of the Transaction Documents
by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without limitation,
the reservation for issuance and issuance of the Purchase
Shares and the Commitment Shares) will not (i) result in a violation of the
Articles of Incorporation, any Certificate of Designations, Preferences and
Rights of any outstanding series of preferred stock of the
Company or the Bylaws or (ii) conflict with, or constitute a default (or an event which with notice
or lapse of time or both would become
a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material
agreement, indenture
or instrument to which the Company or any of its Subsidiaries is a party, or result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations and the rules and regulations of the Principal Market
applicable to the
Company or any of its Subsidiaries) or by which any property or asset of the Company or any of its Subsidiaries is
bound or affected, except in the case of
conflicts, defaults, terminations, amendments, accelerations, cancellations and violations under
clause (ii), which would not reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor its Subsidiaries
are in violation of any term of or in default under its Articles of Incorporation,
any Certificate of Designation, Preferences and Rights
of any outstanding series of preferred stock of the Company or Bylaws or their organizational
charter or bylaws, respectively. Neither
the Company nor any of its Subsidiaries are in violation of any term of or are in default under any material contract,
agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company or its
Subsidiaries,
except for possible conflicts, defaults, terminations or amendments that would not reasonably be expected to have a Material Adverse
Effect.
The business of the Company and its Subsidiaries is not being conducted, and shall not be conducted, in violation of any law,
ordinance or regulation of
any governmental entity, except for possible violations, the sanctions for which either individually or in
the aggregate would not reasonably be expected to
have a Material Adverse Effect. Except as specifically contemplated by this Agreement
and as required under the Securities Act or applicable state
securities laws and the rules and regulations of the Principal Market, the
Company is not required to obtain any consent, authorization or order of, or make
any filing or registration with, any court or governmental
agency or any regulatory or self-regulatory agency in order for it to execute, deliver or perform
any of its obligations under or contemplated
by the Transaction Documents in accordance with the terms hereof or thereof. Except as set forth elsewhere in
this Agreement, (i) all
consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence
on or prior to the date hereof or on or prior to the Commencement Date shall be obtained or effected on or prior to the date hereof and
on or prior to the
Commencement Date, respectively, and (ii) all consents, authorizations, orders, filings and registrations which the
Company is required to obtain pursuant
to the preceding sentence with respect to the Commencement shall be obtained or effected on or
prior to the Commencement Date.
SEC Documents; Financial Statements. The Company has filed all reports, schedules,
forms, statements and other documents required to
be filed by the Company under the Securities Act and the Exchange Act, including pursuant
to Section 13(a) or 15(d) thereof, for the twelve (12) months
preceding the date hereof (or such shorter period as the Company was required
by law or regulation to file such material) (the foregoing materials,
including the exhibits thereto and documents incorporated by reference
therein, together with each Prospectus, being collectively referred to herein as the
“SEC Documents”) on a timely
basis or has received a valid extension of such time of filing and has filed any such SEC Documents prior to the expiration
of any such
extension. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Securities
Act and
the Exchange Act, as applicable. None of the SEC Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material
fact required to be stated therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC Documents comply
in all material respects with applicable accounting
requirements and the rules and regulations of the SEC with respect thereto as in
effect at the time of filing. Such financial statements have been prepared in
accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (“GAAP”), except as may
be otherwise specified
in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required
by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and
for the dates thereof
and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited financial
statements, to normal, immaterial, year-
end audit adjustments. Except as publicly available through the SEC’s Electronic Data Gathering,
Analysis, and Retrieval system (EDGAR) or in
connection with a confidential treatment request submitted to the SEC, the Company has received
no notices or correspondence from the SEC for the one
(1) year preceding the date hereof other than SEC comment letters relating to the
Company’s filings under the Exchange Act and the Securities Act. There
are no outstanding or unresolved comments in comment letters
received from the SEC staff with respect to any of the SEC Documents. To the Company’s
knowledge, the SEC has not commenced
any enforcement proceedings against the Company or any of its Subsidiaries.
12
(g)
(h)
(i)
(j)
(k)
Absence of Certain Changes. Except as disclosed in the SEC Documents, since September 30, 2024,
there has been no material adverse
change in the business, properties, operations, financial condition or results of operations of the
Company or its Subsidiaries. For purposes of this
Agreement, neither a decrease in cash or cash equivalents or in the market price of
the Common Stock nor losses incurred in the ordinary course of the
Company’s business shall be deemed or considered a material
adverse change. The Company has not taken any steps, and does not currently expect to take
any steps, to seek protection pursuant to
any Bankruptcy Law nor does the Company or any of its Subsidiaries have any knowledge or reason to believe
that its creditors intend
to initiate involuntary bankruptcy or insolvency proceedings. The Company is financially solvent and is generally able to pay its
debts
as they become due.
Absence of Litigation. Except as disclosed in the SEC Documents, there is no action,
suit, proceeding, inquiry or investigation before or
by any court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company or any of its
Subsidiaries, threatened against the Company, the Common Stock or any of the
Company’s or its Subsidiaries’ officers or directors in their capacities as
such, which could reasonably be expected to have
a Material Adverse Effect.
Acknowledgment Regarding Investor’s Status. The Company acknowledges and agrees
that the Investor is acting solely in the capacity of
arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby. The Company further
acknowledges that the Investor is not acting as a financial advisor
or fiduciary of the Company (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated
hereby and thereby and any advice given by the Investor or any of its representatives or agents in connection
with the Transaction Documents
and the transactions contemplated hereby and thereby is merely incidental to the Investor’s purchase of the Securities. The
Company
further represents to the Investor that the Company’s decision to enter into the Transaction Documents has been based solely on
the independent
evaluation by the Company and its representatives and advisors.
No Aggregated Offering. Neither the Company, nor any of its affiliates, nor any Person
acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to buy any
security, under circumstances that would cause this offering of the
Securities to be integrated or aggregated with prior offerings by
the Company in a manner that would require stockholder approval pursuant to the rules of
the Principal Market on which any of the securities
of the Company are listed or designated. The issuance and sale of the Commitment Shares hereunder do
not, and subject to the terms of
this Agreement, the issuance and sale of the additional Purchase Shares will not, contravene the rules and regulations of the
Principal
Market.
Intellectual Property Rights. The Company and its Subsidiaries own or possess adequate
rights or licenses to use all material trademarks,
trade names, service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their
respective businesses as now conducted. None of the Company’s material trademarks,
trade names, service marks, service mark registrations,
service names, patents, patent rights, copyrights, inventions, licenses, approvals, government
authorizations, trade secrets or other
intellectual property rights have expired or terminated, or, by the terms and conditions thereof, could expire or
terminate within two
(2) years from the date of this Agreement, except as would not reasonably be expected to have a Material Adverse Effect. Except as
set
forth in the SEC Documents, the Company and its Subsidiaries do not have any knowledge of any infringement by the Company or its Subsidiaries
of
any material trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks,
service mark registrations,
trade secret or other similar rights of others, or of any such development of similar or identical trade
secrets or technical information by others, and there is
no claim, action or proceeding that has been brought against, or to the Company’s
knowledge, being threatened against, the Company or its Subsidiaries
regarding trademark, trade name, patents, patent rights, invention,
copyright, license, service names, service marks, service mark registrations, trade secret
or other infringement, which could reasonably
be expected to have a Material Adverse Effect.
13
(l)
(m)
(n)
(o)
(p)
Environmental Laws. To the Company’s knowledge, the Company and its Subsidiaries
(i) are in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to the protection of
human health and safety, the environment or hazardous or toxic substances
or wastes, pollutants or contaminants (“Environmental
Laws”), (ii) have received all permits, licenses or other approvals required of them under applicable
Environmental Laws to
conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval,
except where, in each of the three foregoing clauses, the failure to so comply could not reasonably be expected to have, individually
or in the aggregate, a
Material Adverse Effect.
Title. Except as set forth in the SEC Documents, the Company and its Subsidiaries
have good and marketable title in fee simple to all real
property owned by them and good and marketable title in all personal property
owned by them that is material to the business of the Company and its
Subsidiaries, taken as a whole, in each case free and clear of
all liens, encumbrances and defects (“Liens”) and, except for Liens as do not materially affect
the value of such
property and do not materially interfere with the use made and proposed to be made of such property by the Company and its Subsidiaries
and Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties. Any
real property and
facilities held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable
leases with which the Company
and its Subsidiaries are in compliance with such exceptions as are not material and do not interfere with
the use made and proposed to be made of such
property and buildings by the Company and its Subsidiaries, taken as a whole, except for
such interference which would not reasonably be expected to have
a Material Adverse Effect.
Insurance. The Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be prudent and customary
in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been refused
any insurance coverage sought or applied for and neither the
Company nor any such Subsidiary has any reason to believe that it will not
be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not materially and adversely
affect the condition, financial or otherwise,
or the earnings, business or operations of the Company and its Subsidiaries, taken as a whole.
Regulatory Permits. Except as disclosed in the SEC Documents, the Company and its
Subsidiaries possess all material certificates,
authorizations and permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct their respective businesses as
currently conducted and neither the Company nor any such Subsidiary has
received any written notice of proceedings relating to the revocation or
modification of any such material certificate, authorization
or permit, except in the case of each of the two foregoing clauses, as would not reasonably be
expected to have a Material Adverse Effect.
Tax Status. The Company and each of its Subsidiaries has made or filed all foreign,
federal and state income and all other material tax
returns, reports and declarations required by any jurisdiction to which it is subject
or otherwise filed timely extensions (unless and only to the extent that
the Company and each of its Subsidiaries has set aside on its
books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and
has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be due on such returns, reports and
declarations, except
those being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for
periods
subsequent to the periods to which such returns, reports or declarations apply.
14
(q)
(r)
(s)
(t)
(u)
(v)
(w)
Transactions With Affiliates. Except as disclosed in
the SEC Documents, none of the Company’s stockholders, officers or directors or
any family member or affiliate of any of the foregoing,
has either directly or indirectly an interest in, or is a party to, any transaction that would be required
to be disclosed as a related
party transaction pursuant to Item 404 of Regulation S-K promulgated under the Securities Act.
Application of Takeover Protections. The Company and its Board of Directors have taken
or will take prior to the Commencement Date
all necessary action, if any, in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under
the Articles of Incorporation or the laws of the state of its incorporation which is or could
become applicable to the Investor as a
result of the transactions contemplated by this Agreement, including, without limitation, the Company’s issuance of
the Securities
and the Investor’s ownership of the Securities.
Disclosure. Except with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents or
any other agreements to be entered into by the Company and the Investor that, in each case,
which shall be timely publicly disclosed by the Company, the
Company confirms that neither it nor any other Person acting on its behalf
has provided the Investor or its agents or counsel with any information that the
Company believes constitutes or would reasonably constitute
material, non-public information which is not otherwise disclosed or incorporated by
reference in the Registration Statement or the SEC
Documents. The Company understands and confirms that the Investor will rely on the foregoing
representation in effecting purchases and
sales of securities of the Company. All of the disclosure furnished by or on behalf of the Company to the Investor
regarding the Company,
its business and the transactions contemplated hereby, including the disclosure schedules to this Agreement, is true and correct in
all
material respects and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order
to make the statements
made therein, in light of the circumstances under which they were made, not misleading. The press releases disseminated
by the Company during the
twelve (12) months preceding the date of this Agreement taken as a whole do not contain any untrue statement
of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made and when
made, not misleading. The Company acknowledges and agrees that the
Investor neither makes nor has made any representations or warranties with respect
to the transactions contemplated hereby other than
those specifically set forth in Section 3 hereof.
Foreign Corrupt Practices. Neither the Company, nor to the knowledge of the Company,
any agent or other Person acting on behalf of the
Company, has (i) directly or indirectly, used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to foreign or
domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds,
(iii) failed to disclose fully any contribution made by the Company (or made by any Person acting on its behalf
of which the Company
is aware) which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of
1977, as amended.
DTC Eligibility. The Company, through the Transfer Agent, currently participates in
the DTC Fast Automated Securities Transfer (FAST)
Program and the Common Stock can be transferred electronically to third parties via
the DTC Fast Automated Securities Transfer (FAST) Program.
Sarbanes-Oxley. The Company is in material compliance with all provisions of the Sarbanes-Oxley
Act of 2002, as amended, which are
applicable to it as of the date hereof.
Certain Fees. No brokerage or finder’s fees or commissions are or will be payable
by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other Person with
respect to the transactions contemplated by the Transaction Documents.
The Investor shall have no obligation with respect to any fees
or with respect to any claims made by or on behalf of other Persons for fees of a type
contemplated in this Section 4(w) that
may be due in connection with the transactions contemplated by the Transaction Documents.
15
(x)
(y)
(z)
(aa)
(bb)
(cc)
(dd)
Investment Company. The Company is not required to be registered as, and immediately
after receipt of payment for the Purchase Shares
will not be required to be registered as, an “investment company” within
the meaning of the Investment Company Act of 1940, as amended.
Listing and Maintenance Requirements. The Common Stock is registered pursuant to Section
12(b) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is likely to have the effect of,
terminating the registration of the Common Stock
pursuant to the Exchange Act nor has the Company received any notification that the
SEC is currently contemplating terminating such registration. The
Securities have been approved for listing on the Principal Market prior
to issuance. The Company has taken no action designed to, or likely to have the
effect of, delisting the Common Stock from the Principal
Market, nor has the Company received any notice from any Person to the effect that the Company
is not in compliance with the listing
or maintenance requirements of the Principal Market. The Company is, and has no reason to believe that it will not in
the foreseeable
future continue to be, in compliance with all such listing and maintenance requirements.
Accountants. The Company’s accountants are set forth in the SEC Documents and,
to the knowledge of the Company, such accountants
are an independent registered public accounting firm as required by the Securities
Act.
No Market Manipulation. The Company has not, and to its knowledge no Person acting
on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
any of the Securities, (ii) sold, bid for, purchased,
or, paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay
to any Person any compensation
for soliciting another to purchase any other securities of the Company in connection with the transactions contemplated in
this Agreement.
Shell Company Status. The Company is not currently an issuer identified in Rule 144(i)(1)
under the Securities Act.
No Disqualification Events. None of the Company, any of its predecessors, any affiliated
issuer, any director, executive officer, other
officer of the Company participating in the offering contemplated hereby, any beneficial
owner of 20% or more of the Company’s outstanding voting equity
securities, calculated on the basis of voting power, nor any promoter
(as that term is defined in Rule 405 under the Securities Act) connected with the
Company in any capacity at the time of sale (each,
an “Issuer Covered Person”) is subject to any of the “Bad Actor” disqualifications described in Rule
506(d)(1)(i)
to (viii) under the Securities Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule
506(d)(2) or (d)(3) under
the Securities Act. The Company has exercised reasonable care to determine whether any Issuer Covered Person
is subject to a Disqualification Event.
Registration Statement. The Company has prepared and filed the Shelf Registration
Statement with the SEC in accordance with the
Securities Act. The Shelf Registration Statement was declared effective by order of the
SEC on August 5, 2024. The Shelf Registration Statement is
effective pursuant to the Securities Act and available for the issuance of
the Securities thereunder. No stop order suspending the effectiveness of the Shelf
Registration Statement has been issued by the SEC,
and no proceeding for that purpose or pursuant to Section 8A of the Securities Act against the
Company or related to the offering of
the Securities has been initiated or, to the knowledge of the Company, threatened by the SEC. The “Plan of
Distribution”
section of the Prospectus permits the issuance of the Securities under the terms of this Agreement. At the time the Shelf Registration
Statement and any amendments thereto became effective, at the date of this Agreement and at each deemed effective date thereof pursuant
to Rule 430B(f)
(2) of the Securities Act, the Shelf Registration Statement and any amendments thereto complied and will comply in all
material respects with the
requirements of the Securities Act and did not and will not contain any untrue statement of a material fact
or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading; and the
Base Prospectus and any Prospectus Supplement thereto, at the time such
Base Prospectus or such Prospectus Supplement thereto was issued
and on the Commencement Date, complied and will comply in all material respects
with the requirements of the Securities Act and did not
and will not contain an untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements
therein, in light of the circumstances under which they were made, not misleading; provided that this representation and
warranty does
not apply to statements in or omissions from any Prospectus Supplement made in reliance upon and in conformity with information relating
to the Investor furnished to the Company in writing by or on behalf of the Investor expressly for use therein. The Company meets all
of the requirements
for the use of a registration statement on Form S-3 pursuant to the Securities Act for the offering and sale of the
Securities contemplated by this Agreement
in reliance on General Instruction I.B.1., and the SEC has not notified the Company of any
objection to the use of the form of the Registration Statement
pursuant to Rule 401(g)(1) of the Securities Act. The Company hereby confirms
that the issuance of the Securities to the Investor in accordance with this
Agreement would not result in non-compliance with the Securities
Act or any of the General Instructions to Form S-3. The Registration Statement, as of its
effective date, meets the requirements set
forth in Rule 415(a)(1)(x) pursuant to the Securities Act. At the earliest time after the filing of the Registration
Statement that the
Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the Securities Act) relating
to
any of the Securities, the Company was, and as of the date of this Agreement the Company is, not an Ineligible Issuer (as defined
in Rule 405 of the
Securities Act). The Company has not distributed any offering material in connection with the offering, issuance and
sale of any of the Securities, other
than the Shelf Registration Statement or any amendment thereto, the Prospectus or any Prospectus
Supplement required pursuant to applicable law or the
Transaction Documents. The Company has not made an offer relating to the Securities
that would constitute a “free writing prospectus” as defined in Rule
405 under the Securities Act.
16
(ee)
(a)
(b)
(c)
Absence of Schedules. In the event that on the date hereof, or the Commencement Date,
the Company does not deliver any disclosure
schedule contemplated by this Agreement, the Company hereby acknowledges and agrees that
each such undelivered disclosure schedule shall be deemed
to read as follows: “Nothing to Disclose.”
5.
COVENANTS.
Filing of Current Report and Initial Prospectus Supplement. The Company agrees that
it shall, within the time required under the
Exchange Act, file with the SEC a Current Report on Form 8-K relating to the transactions
contemplated by, and describing the material terms and
conditions of, the Transaction Documents (the “Current Report”).
The Company further agrees that it shall, within the time required under Rule 424(b)
under the Securities Act, file with the SEC the
Initial Prospectus Supplement pursuant to Rule 424(b) under the Securities Act specifically relating to the
transactions contemplated
by, and describing the material terms and conditions of, the Transaction Documents, containing information previously omitted
at the
time of effectiveness of the Shelf Registration Statement in reliance on Rule 430B under the Securities Act, and disclosing all information
relating to
the transactions contemplated hereby required to be disclosed in the Shelf Registration Statement and the Prospectus as of
the date of the Initial Prospectus
Supplement, including, without limitation, information required to be disclosed in the section captioned
“Plan of Distribution” in the Prospectus. The
Investor acknowledges that it will be identified in the Initial Prospectus
Supplement as an underwriter within the meaning of Section 2(a)(11) of the
Securities Act. The Company shall permit the Investor to review
and comment upon the Current Report and the Initial Prospectus Supplement at least two
(2) Business Days prior to their filing with the
SEC, the Company shall give due consideration to all such comments. The Investor shall use its reasonable
best efforts to provide any
comments upon the Current Report and the Initial Prospectus Supplement within one (1) Business Day from the date the
Investor receives
a substantially complete draft thereof from the Company. The Investor shall furnish to the Company such information regarding itself,
the
Securities held by it and the intended method of distribution thereof, including any arrangement between the Investor and any other
Person relating to the
sale or distribution of the Securities, as shall be reasonably requested by the Company in connection with the
preparation and filing of the Current Report
and the Initial Prospectus Supplement, and shall otherwise cooperate with the Company as
reasonably requested by the Company in connection with the
preparation and filing of the Current Report and the Initial Prospectus Supplement
with the SEC.
Blue Sky. The Company shall take all such action, if any, as is reasonably necessary
in order to obtain an exemption for or to register or
qualify (i) the issuance and the sale of the Securities to the Investor under this
Agreement and (ii) any subsequent resale of all Commitment Shares and all
Purchase Shares by the Investor, in each case, under applicable
securities or “Blue Sky” laws of the states of the United States in such states as is
reasonably requested by the Investor
from time to time, and shall provide evidence of any such action so taken to the Investor.
Listing/DTC. The Company shall use commercially reasonable efforts to maintain, so
long as any shares of Common Stock shall be so
listed, such listing of all Purchase Shares and Commitment Shares from time to time issuable
hereunder. The Company shall use commercially reasonable
efforts to maintain the listing of the Common Stock on the Principal Market
and shall use commercially reasonable efforts to comply in all respects with the
Company’s reporting, filing and other obligations
under the Bylaws or rules and regulations of the Principal Market. The Company shall not take any
action that would reasonably be expected
to result in the delisting or suspension of the Common Stock on the Principal Market. The Company shall
promptly, and in no event later
than the following Business Day, provide to the Investor copies of any notices it receives from any Person regarding the
continued eligibility
of the Common Stock for listing on the Principal Market; provided, however, that the Company shall not be required to provide the
Investor
copies of any such notice that the Company reasonably believes constitutes material non-public information and the Company would not
be
required to publicly disclose such notice in any report or statement filed with the SEC and under the Exchange Act or the Securities
Act. The Company
shall pay all fees and expenses in connection with satisfying its obligations under this Section 5(c). The Company
shall take all commercially reasonable
action necessary to ensure that its Common Stock can be transferred electronically as DWAC Shares.
17
(d)
(e)
Prohibition of Short Sales and Hedging Transactions. The Investor agrees that beginning
on the date of this Agreement and ending on the
date of termination of this Agreement as provided in Section 11 hereof, the Investor
and its agents, representatives and affiliates shall not in any manner
whatsoever enter into or effect, directly or indirectly, any (i)
“short sale” (as such term is defined in Rule 200 of Regulation SHO of the Exchange Act) of
the Common Stock or (ii) hedging
transaction, which establishes a net short position with respect to the Common Stock.
Issuance of Commitment Shares. In consideration for the Investor’s execution and delivery of this
Agreement, the Company shall cause
the Transfer Agent to issue on the date of this Agreement Two Hundred Forty-Five Thousand Ninety-Eight
(245,098) shares of Common Stock (the “Initial
Commitment Shares”) directly to the Investor and shall deliver to the
Transfer Agent the Irrevocable Transfer Agent Instructions in the form as set forth in
Section 6 hereof. For the avoidance of doubt,
all of the Initial Commitment Shares shall be fully earned as of the date of this Agreement, whether or not the
Commencement shall occur
or any Purchase Shares are purchased by the Investor under this Agreement and irrespective of any termination of this
Agreement. In connection
with each Regular Purchase and each Accelerated Purchase of Purchase Shares hereunder, the Company shall issue to the
Investor a number
of shares of Common Stock (the “Additional Commitment Shares” and, together with the Initial Commitment Shares, the
“Commitment
Shares”) equal to the product of (x) Four Hundred Ninety Thousand One Hundred Ninety-Six (490,196) and
(y) the Purchase Amount Fraction. The
“Purchase Amount Fraction” shall mean a fraction, the numerator of which is the
Purchase Amount purchased by the Investor with respect to such Regular
Purchase and Accelerated Purchase (as applicable) of Purchase Shares
and the denominator of which is Thirty Million Dollars ($30,000,000). The
Additional Commitment Shares shall be issued to the Investor
on the same Business Day as Purchase Shares are issued to the Investor in connection with
the applicable Regular Purchase and Accelerated
Purchase (as applicable) in accordance with Section 2 hereof. In no event shall the amount of the
Additional Commitment Shares
to be issued under this Agreement exceed Four Hundred Ninety Thousand One Hundred Ninety-Six (490,196) shares of
Common Stock, provided
that such Additional Commitment Shares shall be equitably adjusted for any reorganization, recapitalization, non-cash dividend,
stock
split, reverse stock split or other similar transaction.
18
(f)
(g)
(h)
(i)
(j)
Due Diligence; Non-Public Information. During the term of this Agreement, the Investor
shall have the right, from time to time as the
Investor may reasonably deem appropriate, and upon reasonable advance notice to the Company,
to perform reasonable due diligence on the Company
during normal business hours. The Company and its officers and employees shall provide
material information and reasonably cooperate with the Investor
in connection with any reasonable request by the Investor related to
the Investor’s due diligence of the Company. Each party hereto agrees not to disclose
any Confidential Information of the other
party to any third party and shall not use the Confidential Information for any purpose other than in connection
with, or in furtherance
of, the transactions contemplated hereby. Each party hereto acknowledges that the Confidential Information shall remain the
property
of the disclosing party and agrees that it shall take all reasonable measures to protect the secrecy of any Confidential Information
disclosed by the
other party. The receiving party may disclose Confidential Information to the extent such information is required to
be disclosed by law, regulation or order
of a court of competent jurisdiction or regulatory authority, provided that the receiving party
shall promptly notify the disclosing party when such
requirement to disclose arises, and shall cooperate with the disclosing party so
as to enable the disclosing party to: (i) seek an appropriate protective order;
and (ii) make any applicable claim of confidentiality
in respect of such Confidential Information; and provided, further, that the receiving party shall
disclose Confidential Information
only to the extent required by the protective order or other similar order, if such an order is obtained, and, if no such
order is obtained,
the receiving party shall disclose only the minimum amount of such Confidential Information required to be disclosed in order to comply
with the applicable law, regulation or order. In addition, any such Confidential Information disclosed pursuant to this section shall
continue to be deemed
Confidential Information. Notwithstanding anything in this Agreement to the contrary, the Company shall not be
obligated to provide the Investor with any
information that constitutes or may reasonably be considered to constitute material, non-public
information pursuant to a request for information hereunder,
and the Company and the Investor agree that neither the Company nor any
other Person acting on its behalf shall provide the Investor or its agents or
counsel with any information that constitutes or may reasonably
be considered to constitute material, non-public information, unless a simultaneous public
announcement thereof is made by the Company
in the manner contemplated by Regulation FD. In the event of a breach of the foregoing covenant by the
Company or any Person acting on
its behalf (as determined in the reasonable good faith judgment of the Investor), in addition to any other remedy provided
herein or
in the other Transaction Documents, if the Investor is holding any Securities at the time of the disclosure of such material non-public
information,
the Investor shall have the right to make a public disclosure, in the form of a press release, public advertisement or otherwise,
of such material, non-public
information without the prior approval by the Company; provided the Investor shall have first provided notice
to the Company that it believes it has
received information that constitutes material, non-public information; and the Company shall
have at least two (2) Business Days from such notice to
either publicly disclose such material, non-public information or to demonstrate
to the Investor that such information does not constitute material, non-
public information, and (assuming the Investor and Investor’s
counsel disagree in their reasonable good faith judgment with the Company’s determination)
prior to any such disclosure by the
Investor; and the Company shall have failed to publicly disclose such material, non-public information. The Investor
shall not have any
liability to the Company, any of its Subsidiaries, or any of their respective directors, officers, employees, stockholders or agents,
for any
such disclosure in accordance with this Section 5(f). The Company understands and confirms that the Investor shall be
relying on the foregoing covenants
in effecting transactions in securities of the Company.
Purchase Records. The Investor and the Company shall each maintain records showing
the remaining Available Amount at any given
time and the dates and Purchase Amounts for each Regular Purchase, Accelerated Purchase and
Additional Accelerated Purchase or shall use such other
method, reasonably satisfactory to the Investor and the Company.
Taxes. The Company shall pay any and all transfer, stamp or similar taxes that may
be payable with respect to the issuance and delivery
of any shares of Common Stock to the Investor made under this Agreement.
Use of Proceeds. The Company will use the net proceeds from the offering for any corporate
purpose at the sole discretion of the
Company.
Other Transactions. The Company shall not enter into, announce or recommend to its
stockholders any agreement, plan, arrangement or
transaction in or of which the terms thereof would restrict, materially delay, conflict
with or impair the ability or right of the Company to perform its
obligations under the Transaction Documents, including, without limitation,
the obligation of the Company to deliver the Commitment Shares to the
Investor in accordance with the terms of the Transaction Documents.
19
(k)
(l)
(a)
(b)
(a)
(b)
(c)
Aggregation. From and after the date of this Agreement, neither the Company,
nor or any of its affiliates will, and the Company shall use
its reasonable best efforts to ensure that no Person acting on their behalf
will, directly or indirectly, make any offers or sales of any security or solicit any
offers to buy any security, under circumstances
that would cause this offering of the Securities by the Company to the Investor to be aggregated with other
offerings by the Company
in a manner that would require stockholder approval pursuant to the rules of the Principal Market on which any of the securities
of the
Company are listed or designated, unless stockholder approval is obtained before the closing of such subsequent transaction in accordance
with the
rules of such Principal Market.
Limitation on Variable Rate Transactions. From and after the date of this Agreement
until the thirty-six (36) month anniversary of the
date of this Agreement (irrespective of any earlier termination of this Agreement),
the Company shall be prohibited from effecting or entering into an
agreement to effect any issuance by the Company or any of its Subsidiaries
of Common Stock involving a Variable Rate Transaction other than with the
Investor. “Variable Rate Transaction” means
an “equity line of credit” or substantially similar transaction whereby an investor is irrevocably bound to
purchase securities
over a period of time from the Company at a price based on the market price of the Company’s Common Stock at the time of each such
purchase, provided, however, that this Section 5(l) shall not be deemed to prohibit the issuance and sale of Common Stock pursuant
to an “at-the-market
offering” by the Company exclusively through a registered broker-dealer acting as agent of the Company
pursuant to a written agreement between the
Company and such registered broker-dealer.
6.
TRANSFER
AGENT INSTRUCTIONS.
Initial Commitment Shares. On the date of this Agreement, the Company shall issue to the Transfer Agent (and any subsequent transfer
agent) irrevocable instructions, in the form agreed to prior to the date hereof (the “Irrevocable Transfer Agent Instructions”),
to issue the Initial
Commitment Shares in accordance with the terms of this Agreement. All Initial Commitment Shares to be issued to
or for the benefit of the Investor
pursuant to this Agreement shall be issued as DWAC Shares. The Company warrants to the Investor that,
while the Agreement is effective, no instruction
other than the Irrevocable Transfer Agent Instructions referred to in this Section
6 will be given by the Company to the Transfer Agent with respect to the
Commitment Shares, and the Commitment Shares shall otherwise
be freely transferable on the books and records of the Company.
Purchase Shares. On the date of the Initial Prospectus Supplement, the Company shall issue to the Transfer Agent, and any subsequent
transfer agent, irrevocable instructions in the form agreed to prior to the date hereof (the “Commencement Irrevocable Transfer
Agent Instructions”) to
issue the Purchase Shares and Additional Commitment Shares in accordance with the terms of this Agreement
and the Registration Rights Agreement. All
Purchase Shares and Additional Commitment Shares to be issued from and after Commencement
to or for the benefit of the Investor pursuant to this
Agreement shall be issued only as DWAC Shares. The Company represents and warrants
to the Investor that, while this Agreement is effective, no
instruction other than as contemplated by the Commencement Irrevocable Transfer
Agent Instructions and any Notice of Effectiveness of Registration
Statement (as defined in the Registration Rights Agreement) will be
given by the Company to the Transfer Agent with respect to the Purchase Shares from
and after Commencement, and no instruction or other
communication to the Transfer Agent with respect to the issuance of the Purchase Shares and
Additional Commitment Shares shall be made
without the approval of the Investor. The Company shall provide confirmation of receipt by the Transfer
Agent of all instructions pursuant
to the Commencement Irrevocable Transfer Agent Instructions with respect to Purchase Shares and Additional
Commitment Shares within one
(1) Business Day of delivery of any Purchase Notice. The Purchase Shares and Additional Commitment Shares covered by
the Registration
Statement shall otherwise be freely transferable on the books and records of the Company.
7.
CONDITIONS
TO THE COMPANY’S RIGHT TO COMMENCE SALES OF SHARES OF COMMON STOCK.
The
right of the Company hereunder to commence sales of Purchase Shares is subject to the satisfaction, or where legally permissible, the
waiver
of each of the following conditions:
The Investor shall have executed each of the Transaction Documents and delivered the same
to the Company;
The representations and warranties of the Investor shall be true and correct in all material
respects as of the date hereof and as of the
Commencement Date as though made at that time; and
No stop order with respect to the Registration Statement shall be pending or threatened by
the SEC.
20
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
8.
CONDITIONS
TO THE INVESTOR’S OBLIGATION TO PURCHASE SHARES OF COMMON STOCK.
The
obligation of the Investor to buy Purchase Shares under this Agreement is subject to the satisfaction or, where legally permissible,
the waiver
of each of the following conditions on or prior to the Commencement Date and, once such conditions have been initially satisfied,
there shall not be any
ongoing obligation to satisfy such conditions after the Commencement has occurred:
The Company shall have executed each of the Transaction Documents and delivered the same
to the Investor;
The Company shall have issued or caused to be issued to the Investor a number of shares of
Common Stock equal to the number of
Commitment Shares as DWAC Shares, in each case in accordance with Section 6;
The Common Stock shall be listed on the Principal Market, and the Company shall have filed
with The Nasdaq Capital Market a
Notification Form: Listing of Additional Shares for the listing of the Securities, and Nasdaq shall
have raised no objection to the consummation of the
transactions contemplated by this Agreement;
The Investor shall have received the opinion and negative assurances letter of the Company’s
legal counsel dated as of the
Commencement Date substantially in the forms agreed prior to the date of this Agreement by the Company’s
legal counsel and the Investor’s legal counsel;
The representations and warranties of the Company in this Agreement shall be true and correct
in all material respects (except to the
extent that any of such representations and warranties is already qualified as to materiality
in Section 4 hereof, in which case, such representations and
warranties shall be true and correct without further qualification)
as of the date hereof and as of the Commencement Date as though made at that time
(except for representations and warranties that speak
as of a specific date, which shall be true and correct in all material respects as of such date) and the
Company shall have performed,
satisfied and complied in all material respects with the covenants, agreements and conditions required by the Transaction
Documents to
be performed, satisfied or complied with by the Company at or prior to the Commencement Date. The Investor shall have received a
certificate,
executed by the CEO, President or CFO of the Company, dated as of the Commencement Date, to the foregoing effect in the form attached
hereto as Exhibit A;
The Board of Directors of the Company shall have adopted the Signing Resolutions, which shall
be in full force and effect without any
amendment or supplement thereto as of the Commencement Date;
As of the Commencement Date, the Company shall have reserved out of
its authorized and unissued Common Stock, (i) solely for the
purpose of effecting purchases of Purchase Shares hereunder, Five Million
(5,000,000) shares of Common Stock; and (ii) solely for the purpose of effecting
the issuance of Additional Commitment Shares hereunder,
Four Hundred Ninety Thousand One Hundred Ninety-Six (490,196) shares of Common Stock;
Each of the Irrevocable Transfer Agent Instructions and the Commencement Irrevocable Transfer
Agent Instructions shall have been
delivered to and acknowledged in writing by the Company and the Transfer Agent (or any successor transfer
agent);
The Company shall have delivered to the Investor a certificate evidencing the incorporation
and good standing of the Company in the
State of Nevada issued by the Secretary of State of the State of Nevada and a certificate or
its equivalent evidencing the good standing of the Company as a
foreign corporation in any other jurisdiction where the Company is duly
qualified to conduct business, in each case, as of a date within ten (10) Business
Days of the Commencement Date;
The Company shall have delivered to the Investor a certified copy of the Articles of Incorporation
as certified by the Secretary of State of
the State of Nevada within ten (10) Business Days of the Commencement Date;
21
(k)
(l)
(m)
(n)
(o)
(p)
(q)
(r)
The Company shall have delivered to the Investor a secretary’s certificate executed
by the Secretary of the Company, dated as of the
Commencement Date, in the form attached hereto as Exhibit B;
The Shelf Registration Statement shall continue to be effective and no stop order with respect
to the Shelf Registration Statement shall be
pending or threatened by the SEC. The Company shall have a maximum dollar amount of Common
Stock registered under the Shelf Registration Statement
which is sufficient to issue to the Investor not less than (i) the full Available
Amount worth of Purchase Shares plus (ii) all of the Commitment Shares. The
Current Report and the Initial Prospectus Supplement each
shall have been filed with the SEC, as required pursuant to Section 5(a), and copies of the
Prospectus shall have been delivered
to the Investor in accordance with the terms of the Registration Rights Agreement. The Prospectus shall be current
and available for
issuances and sales of all of the Securities by the Company to the Investor. Any other Prospectus Supplements required to have been filed
by the Company with the SEC under the Securities Act at or prior to the Commencement Date shall have been filed with the SEC within the
applicable
time periods prescribed for such filings under the Securities Act. All reports, schedules, registrations, forms, statements,
information and other documents
required to have been filed by the Company with the SEC at or prior to the Commencement Date pursuant
to the reporting requirements of the Exchange
Act shall have been filed with the SEC within the applicable time periods prescribed for
such filings under the Exchange Act;
No Suspension Event has occurred, and no event which, after notice and/or lapse of time,
would reasonably be expected to become a
Suspension Event has occurred;
The Exchange Cap has not been reached (to the extent the Exchange Cap is applicable pursuant
to Section 2(d) hereof);
All federal, state and local governmental laws, rules and regulations applicable to the transactions
contemplated by the Transaction
Documents and necessary for the execution, delivery and performance of the Transaction Documents and
the consummation of the transactions
contemplated thereby in accordance with the terms thereof shall have been complied with, and all
consents, authorizations and orders of, and all filings and
registrations with, all federal, state and local courts or governmental agencies
and all federal, state and local regulatory or self-regulatory agencies
necessary for the execution, delivery and performance of the
Transaction Documents and the consummation of the transactions contemplated thereby in
accordance with the terms thereof shall have been
obtained or made, including, without limitation, in each case those required under the Securities Act, the
Exchange Act, applicable state
securities or “Blue Sky” laws or applicable rules and regulations of the Principal Market, or otherwise required by the SEC,
the Principal Market or any state securities regulators;
No statute, regulation, order, decree, writ, ruling or injunction shall have been enacted,
entered, promulgated, threatened or endorsed by
any federal, state or local or foreign court or governmental authority of competent jurisdiction
which prohibits the consummation of or which would
materially modify or delay any of the transactions contemplated by the Transaction
Documents;
No action, suit or proceeding before any federal, state, local or foreign arbitrator or any
court or governmental authority of competent
jurisdiction shall have been commenced or threatened, and no inquiry or investigation by
any federal, state, local or foreign governmental authority of
competent jurisdiction shall have been commenced or threatened, against
the Company, or any of the officers, directors or affiliates of the Company,
seeking to restrain, prevent or change the transactions
contemplated by the Transaction Documents, or seeking material damages in connection with such
transactions; and
The Company shall have provided the Investor with the information requested by the Investor
in connection with its due diligence
requests in accordance with the terms of Section 5(f) hereof.
22
(a)
9.
INDEMNIFICATION.
In
consideration of the Investor’s execution and delivery of the Transaction Documents and acquiring the Purchase Shares hereunder
and in
addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend, protect, indemnify
and hold harmless the
Investor and all of its affiliates, stockholders, officers, directors and employees and any of the foregoing Person’s
agents or other representatives (including,
without limitation, those retained in connection with the transactions contemplated by this
Agreement) (collectively, the “Indemnitees”) from and against
any and all actions, causes of action, suits, claims,
losses, costs, penalties, fees, liabilities and damages, and reasonable expenses in connection therewith
(irrespective of whether any
such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’
fees
and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or
relating to (a) any misrepresentation
or breach of any representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document executed
by the Company contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction
Documents or any other certificate, instrument or document executed
by the Company contemplated hereby or thereby, (c) any cause of action, suit or
claim brought or made against such Indemnitee and arising
out of or resulting from the execution, delivery, performance or enforcement of the Transaction
Documents or any other certificate, instrument
or document contemplated hereby or thereby, other than, in the case of clause (c) with respect to
Indemnified Liabilities which directly
and primarily result from the fraud, gross negligence or willful misconduct of an Indemnitee. The indemnity in this
Section 9
shall not apply to amounts paid in settlement of any claim if such settlement is effected without the prior written consent of the Company,
which
consent shall not be unreasonably withheld, conditioned or delayed. To the extent that the foregoing undertaking by the Company
may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible
under applicable law. Payment under this indemnification shall be made within thirty (30) days from
the date the Investor makes written request for it. A
certificate containing reasonable detail as to the amount of such indemnification
submitted to the Company by the Investor shall be conclusive evidence,
absent manifest error, of the amount due from the Company to the
Investor, provided that the Indemnitee shall undertake to repay any amounts paid to it
hereunder if it is ultimately determined, by a
final and non-appealable order of a court of competent jurisdiction, that the Indemnitee is not entitled to be
indemnified against such
Indemnified Liabilities by the Company pursuant to this Agreement. If any action shall be brought against any Indemnitee in
respect of
which indemnity may be sought pursuant to this Agreement, such Indemnitee shall promptly notify the Company in writing, and the Company
shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Indemnitee. Any Indemnitee
shall have the
right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense
of such Indemnitee, except to the extent that (i) the employment thereof has been specifically
authorized by the Company in writing, (ii) the Company has
failed after a reasonable period of time to assume such defense and to employ
counsel or (iii) in such action there is, in the reasonable opinion of such
separate counsel, a material conflict on any material issue
between the position of the Company and the position of such Indemnitee, in which case the
Company shall be responsible for the reasonable
fees and expenses of no more than one such separate counsel.
10.
SUSPENSION
EVENTS.
A
“Suspension Event” shall be deemed to have occurred at any time as any of the following events occurs:
the effectiveness of a Registration Statement registering the sale or resale of the Securities
lapses for any reason (including, without
limitation, the issuance of a stop order or similar order) or such registration statement (or
the prospectus forming a part thereof) is unavailable to the
Investor for sale or resale of any or all of the Securities to be issued
to the Investor under the Transaction Documents that are required to be included
therein, and such lapse or unavailability continues
for a period of ten (10) consecutive Business Days or for more than an aggregate of thirty (30) Business
Days in any 365-day period,
but excluding a lapse or unavailability where (i) the Company terminates a Registration Statement after the Investor has
confirmed in
writing that all of the Securities covered thereby have been resold or (ii) the Company supersedes one Registration Statement with another
Registration Statement, including (without limitation) by terminating a prior Registration Statement when it is effectively replaced
with a new Registration
Statement covering Securities (provided in the case of this clause (ii) that all of the Securities covered by
the superseded (or terminated) Registration
Statement that have not theretofore been resold are included in the superseding (or new)
Registration Statement);
23
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(a)
the suspension of the Common Stock from trading on the Principal Market for a period of at
least one (1) Business Day, provided that the
Company may not direct the Investor to purchase any shares of Common Stock during any such
suspension;
the delisting of the Common Stock from The Nasdaq Capital Market provided, however, that
the Common Stock is not immediately
thereafter trading on The Nasdaq Capital Market, The Nasdaq Global Market, The Nasdaq Global Select
Market, the New York Stock Exchange, the NYSE
American, the NYSE Arca, or the OTCQB or the OTCQX operated by the OTC Markets Group, Inc.
(or any nationally recognized successor to any of the
foregoing);
the failure for any reason by the Transfer Agent to issue (i) the Additional Commitment Shares
to the Investor within two (2) Business
Days after the date on which the Investor is entitled to receive such Additional Commitment Shares
pursuant to Section 5(e) hereof and (ii) Purchase
Shares to the Investor within two (2) Business Days after the applicable Purchase
Date, Accelerated Purchase Date or Additional Accelerated Purchase
Date (as applicable) on which the Investor is entitled to receive
such Securities;
the Company breaches any representation, warranty, covenant or other term or condition under
any Transaction Document if such breach
could have a Material Adverse Effect and except, in the case of a breach of a covenant which
is reasonably curable, only if such breach continues for a
period of at least five (5) Business Days;
if any Person commences a proceeding against the Company pursuant to or within the meaning
of any Bankruptcy Law;
if the Company is at any time insolvent, or, pursuant to or within the meaning of any Bankruptcy
Law, (i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents
to the appointment of a Custodian of it or for all or
substantially all of its property, or (iv) makes a general assignment for the benefit
of its creditors or is generally unable to pay its debts as the same become
due;
a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that
(i) is for relief against the Company in an
involuntary case, (ii) appoints a Custodian of the Company or for all or substantially all
of its property, or (iii) orders the liquidation of the Company;
if at any time the Company is not eligible to transfer its Common Stock electronically as DWAC Shares
or if the Company fails to
maintain the service of its Transfer Agent (or a successor Transfer Agent) with respect to the issuance of
Purchase Shares under this Agreement,
including but not limited to, maintaining the effectiveness of the Commencement Irrevocable Transfer
Instructions, payment of all fees owed to the
Transfer Agent and satisfaction of all conditions required by the Transfer Agent to issue
Purchase Shares pursuant to the Commencement Irrevocable
Transfer Agent Instructions; or
if at any time the Investor’s broker is unable to accept Purchase Shares for deposit.
In
addition to any other rights and remedies under applicable law and this Agreement, so long as (i) a Suspension Event has occurred and
is
continuing, or if any event that, after notice and/or lapse of time, would reasonably be expected to become a Suspension Event, has
occurred and is
continuing or (ii) if at any time after the Commencement Date, the Exchange Cap is reached (to the extent the Exchange
Cap is applicable pursuant to
Section 2(d) hereof), the Company shall not deliver to the Investor any Regular Purchase Notice,
Accelerated Purchase Notice or Additional Purchase
Notice.
11.
TERMINATION
This
Agreement may be terminated only as follows:
If pursuant to or within the meaning of any Bankruptcy Law, the Company commences a voluntary
case or any Person commences a
proceeding against the Company, a Custodian is appointed for the Company or for all or substantially all
of its property, or the Company makes a general
assignment for the benefit of its creditors (any of which would be a Suspension Event
as described in Sections 10(f), 10(g) and 10(h) hereof), this
Agreement shall automatically terminate without any
liability or payment to the Company (except as set forth below) without further action or notice by
any Person.
24
(b)
(c)
(d)
(a)
(b)
At any time after the Commencement Date, the Company shall have the option to terminate this
Agreement for any reason or for no
reason by delivering notice (a “Company Termination Notice”) to the Investor electing
to terminate this Agreement without any liability whatsoever of any
party to any other party under this Agreement (except as set forth
below). The Company Termination Notice shall not be effective until one (1) Business
Day after it has been received by the Investor.
This Agreement shall automatically terminate on the date that the Company sells and the Investor
purchases the full Available Amount as
provided herein, without any action or notice on the part of any party and without any liability
whatsoever of any party to any other party under this
Agreement (except as set forth below).
If, for any reason or for no reason, the full Available Amount has not been purchased in
accordance with Section 2 of this Agreement by
the Maturity Date, this Agreement shall automatically terminate on the Maturity
Date, without any action or notice on the part of any party and without any
liability whatsoever of any party to any other party under
this Agreement (except as set forth below).
Except
as set forth in Sections 11(a) (in respect of a Suspension Event under Sections 10(f), 10(g) and 10(h)), and 11(d),
any termination of this
Agreement pursuant to this Section 11 shall be effected by written notice from the Company to the Investor,
or the Investor to the Company, as the case
may be, setting forth the basis for the termination hereof. The representations and warranties
and covenants of the Company and the Investor contained in
Sections 3, 4, 5, and 6 hereof, the indemnification
provisions set forth in Section 9 hereof and the agreements and covenants set forth in Sections 10, 11 and
12
shall survive the execution and delivery of this Agreement and any termination of this Agreement. No termination of this Agreement
shall (i) affect the
Company’s or the Investor’s rights or obligations under (A) this Agreement with respect to any pending
Regular Purchases, Accelerated Purchases, or
Additional Purchases, and the Company and the Investor shall complete their respective obligations
with respect to any pending Regular Purchases,
Accelerated Purchases and Additional Purchases under this Agreement and (B) the Registration
Rights Agreement, which shall survive any such
termination, or (ii) be deemed to release the Company or the Investor from any liability
for intentional misrepresentation or willful breach of any of the
Transaction Documents.
12.
MISCELLANEOUS.
Governing Law; Jurisdiction; Jury Trial. The corporate laws of the State of Nevada
shall govern all issues concerning the relative rights
of the Company and its stockholders. All other questions concerning the construction,
validity, enforcement and interpretation of this Agreement and the
other Transaction Documents shall be governed by the internal laws
of the State of Illinois, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois
or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the
State of Illinois. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the State of Illinois, County
of
Cook, for the adjudication of any dispute hereunder or under the other Transaction Documents or in connection herewith or therewith,
or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding
is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served
in any such suit, action or proceeding by mailing a copy thereof to
such party at the address for such notices to it under this Agreement and agrees that such
service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to
serve process in any
manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES
NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
Counterparts. This Agreement may be executed in two or more identical counterparts,
all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each party
and delivered to the other party; provided that a signature
delivered by e-mail in a “.pdf” format data file shall be considered
due execution and shall be binding upon the signatory thereto with the same force and
effect as if the signature were an original signature.
25
(c)
(d)
(e)
(f)
Telephone:
E-mail:
Attention:
Telephone:
E-mail:
Attention:
Telephone:
E-mail:
Attention:
Telephone:
Email:
Attention:
Headings. The headings of this Agreement are for convenience of reference and shall
not form part of, or affect the interpretation of, this
Agreement.
Severability. If any provision of this Agreement shall be invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability
shall not affect the validity or enforceability of the remainder of this Agreement
in that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
Entire Agreement. The Transaction Documents supersede all other prior oral or written
agreements between the Investor, the Company,
their affiliates and Persons acting on their behalf with respect to the subject matter
thereof, and this Agreement, the other Transaction Documents and the
instruments referenced herein contain the entire understanding of
the parties with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the
Company nor the Investor makes any representation, warranty, covenant or undertaking with respect to
such matters. The Company acknowledges
and agrees that is has not relied on, in any manner whatsoever, any representations or statements, written or
oral, other than as expressly
set forth in the Transaction Documents. The Investor acknowledges and agrees that it has not relied on, in any manner
whatsoever, any
representations or statements, written or oral, other than as expressly set forth in the Transaction Documents.
Notices. Any notices, consents or other communications required or permitted to be
given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt when delivered
personally; (ii) upon receipt when sent by email (provided confirmation
of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) Business Day after deposit with a
nationally recognized overnight delivery service,
in each case properly addressed to the party to receive the same. The addresses for such communications
shall be:
If to the
Company:
Lightwave Logic, Inc.
369 Inverness Parkway, Suite 350
Englewood, CO 80112
(720) 340-4949
jim@lightwavelogic.com
James S. Marcelli, Chief Financial Officer &
Chief Operating Officer
With a copy to (which shall not
constitute notice or service of process):
K&L Gates, LLP
200 S. Biscayne Blvd.,
Ste. 3900
Miami, Florida 33131
(305)
539-3306
clayton.parker@klgates.com
Clayton E. Parker, Esq.
If to the Investor:
Lincoln Park Capital Fund, LLC
415 N. LaSalle Dr., Suite 700B
Chicago, IL 60654
(312) 822-9300
jscheinfeld@lpcfunds.com/jcope@lpcfunds.com
Josh Scheinfeld/Jonathan
Cope
If to the Transfer Agent:
Broadridge Corporate Issuer Solutions, Inc.
51 Mercedes Way
Edgewood, NY 11717
(979) 218-8194
autumn.tallaksen@broadridge.com
Autumn Tallaksen
or at such other
address, email address and/or to the attention of such other Person as the recipient party has specified by written notice given to each
other
party three (3) Business Days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient
of such notice, consent or
other communication, (B) mechanically or electronically generated by the sender’s email account containing
the time, date, and recipient email address, as
applicable, or (C) provided by a nationally recognized overnight delivery service, shall
be rebuttable evidence of personal service, receipt by email or
receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
26
(g)
(h)
(i)
(j)
(k)
(l)
Successors and Assigns. This Agreement shall be binding upon and inure to the benefit
of the parties and their respective successors and
assigns. The Company shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Investor, including by
merger or consolidation. The Investor may not assign its rights
or obligations under this Agreement.
No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
Publicity. The Company shall afford the Investor and its counsel with the opportunity
to review and comment upon, shall consult with the
Investor and its counsel on the form and substance of, and shall give due consideration
to all such comments from the Investor or its counsel on, the
Prospectus Supplement, any press release or any Current Report on Form
8-K by or on behalf of the Company relating to the Investor, its purchases
hereunder or any aspect to the Transaction Documents or the
transactions contemplated thereby, not less than twenty-four (24) hours prior to the issuance,
filing or public disclosure thereof. The
Investor must be provided with a final version of any such press release or SEC filing at least twenty-four (24) hours
prior to any release,
filing or use by the Company thereof.
Further Assurances. Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to consummate
and make effective, as soon as reasonably possible, the Commencement, and
to carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
No Financial Advisor, Placement Agent, Broker or Finder. The Company represents and
warrants to the Investor that it has not engaged
any financial advisor, placement agent, broker or finder in connection with the transactions
contemplated hereby. The Investor represents and warrants to
the Company that it has not engaged any financial advisor, placement agent,
broker or finder in connection with the transactions contemplated hereby. The
Company shall be responsible for the payment of any fees
or commissions, if any, of any financial advisor, placement agent, broker or finder relating to or
arising out of the transactions contemplated
hereby. The Company shall pay, and hold the Investor harmless against, any liability, loss or expense
(including, without limitation,
reasonable attorneys’ fees and out of pocket expenses) arising in connection with any such claim made by a third party for
any
such fees or commissions.
No Strict Construction. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their
mutual intent, and no rules of strict construction will be applied against any party.
27
(m)
(n)
(o)
Remedies, Other Obligations, Breaches and Injunctive Relief. The Investor’s
remedies provided in this Agreement, including, without
limitation, the Investor’s remedies provided in Section 9, shall
be cumulative and in addition to all other remedies available to the Investor under this
Agreement, at law or in equity (including a
decree of specific performance and/or other injunctive relief). No remedy of the Investor contained herein shall
be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein shall limit the Investor’s right to pursue actual
damages for any failure by the Company to comply with the terms of this Agreement. The Company acknowledges that a breach by it of its
obligations
hereunder will cause irreparable harm to the Investor and that the remedy at law for any such breach may be inadequate. The
Company therefore agrees
that, in the event of any such breach or threatened breach, the Investor shall be entitled, in addition to all
other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and without any bond
or other security being required.
Enforcement Costs. If: (i) this Agreement is placed by the Investor in the hands of
an attorney for enforcement or is enforced by the
Investor through any legal proceeding; (ii) an attorney is retained to represent the
Investor in any bankruptcy, reorganization, receivership or other
proceedings affecting creditors’ rights and involving a claim
under this Agreement; or (iii) subject to Section 9, an attorney is retained to represent the
Investor in any other proceedings
whatsoever in connection with this Agreement, then the Company shall pay to the Investor, as incurred by the Investor,
all reasonable
costs and expenses including attorneys’ fees incurred in connection therewith, in addition to all other amounts due hereunder.
Amendment and Waiver; Failure or Indulgence Not Waiver. No provision of this Agreement
(i) may be amended other than by a written
instrument signed by both parties hereto and (ii) may be waived other than in a written instrument
signed by the party against whom enforcement of such
waiver is sought. No failure or delay in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege.
* * * * *
28
IN
WITNESS WHEREOF, the Investor and the Company have caused this Purchase Agreement to be duly executed as of the date first written
above.
THE
COMPANY:
LIGHTWAVE
LOGIC, INC.
By:
/s/ James S. Marcelli
Name:
James S. Marcelli
Title:
Chief Financial Officer & Chief Operating Officer
THE INVESTOR:
LINCOLN PARK CAPITAL FUND, LLC
BY: LINCOLN PARK CAPITAL, LLC
BY: ROCKLEDGE CAPITAL CORPORATION
By: /s/ Joshua Scheinfeld
Name: Joshua Scheinfeld
Title: President
29
Exhibit
A
Exhibit
B
EXHIBITS
Form of Officer’s Certificate
Form of Secretary’s Certificate
EXHIBIT
A
FORM OF
OFFICER’S CERTIFICATE
This
Officer’s Certificate (“Certificate”) is being delivered pursuant to Section 8(e) of that certain Purchase
Agreement dated as of March 17, 2025,
(“Purchase Agreement”), by and between LIGHTWAVE LOGIC, INC., a Nevada
corporation (the “Company”), and LINCOLN PARK CAPITAL
FUND, LLC (the “Investor”). Terms
used herein and not otherwise defined shall have the meanings ascribed to them in the Purchase Agreement.
The
undersigned, Yves LeMaitre, Chief Executive Officer of the Company, hereby certifies, on behalf of the Company and not in his individual
capacity, as follows:
1.
I am the Chief Executive Officer of the Company;
2.
The representations and warranties of the Company contained in the Purchase Agreement are true and correct in all material
respects (except
to the extent that any of such representations and warranties is already qualified as to materiality in Section 4 of the Purchase
Agreement, in which case, such representations and warranties are true and correct without further qualification) as of the date of the
Purchase
Agreement and as of the Commencement Date as though made at that time (except for representations and warranties that speak
as of a specific
date, in which case such representations and warranties are true and correct in all material respects as of such date);
3.
The Company has performed, satisfied and complied in all material respects with covenants, agreements and conditions
required by the
Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the Commencement Date, to
the extent
not otherwise waived.
4.
The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any
Bankruptcy Law
nor does the Company or any of its Subsidiaries have any knowledge or reason to believe that its creditors intend to initiate
involuntary
bankruptcy or insolvency proceedings. The Company is financially solvent and is generally able to pay its debts as they become due.
IN
WITNESS WHEREOF, I have hereunder signed my name on this ___ day of ___________, 2025.
__________________________________________
Name:
Yves LeMaitre
Title:
Chief Executive Officer
A-1
EXHIBIT
B
FORM OF
SECRETARY’S CERTIFICATE
This
Secretary’s Certificate (“Certificate”) is being delivered pursuant to Section 8(k) of that certain Purchase
Agreement dated as of March 17, 2025
(“Purchase Agreement”), by and between LIGHTWAVE LOGIC, INC., a Nevada
corporation (the “Company”), and LINCOLN PARK CAPITAL
FUND, LLC (the “Investor”), pursuant to which the
Company may sell to the Investor up to Thirty Million Dollars ($30,000,000) of the Company’s
Common Stock, $0.001 par value per
share (the “Common Stock”). Terms used herein and not otherwise defined shall have the meanings ascribed to them
in the Purchase
Agreement.
The
undersigned, James S. Marcelli, Secretary of the Company, hereby certifies, on behalf of the Company and not in his individual capacity,
as
follows:
1.
I am the Secretary of the Company.
2.
Attached hereto as Exhibit A and Exhibit B are true, correct and complete copies of
the Company’s Restated Bylaws (“Bylaws”) and
Articles of Incorporation, as amended (“Charter”),
and no action has been taken by the Company, its directors, officers or stockholders, in
contemplation of the filing of any further amendment
relating to or affecting the Bylaws or Charter.
3.
Attached hereto as Exhibit C are true, correct and complete copies of the resolutions duly
adopted by the Board of Directors of the
Company by unanimous written consent effective as of March 17, 2025. Such resolutions have not
been amended, modified or rescinded and remain
in full force and effect and such resolutions are the only resolutions adopted by the
Board of Directors, or any committee thereof, or the stockholders
of the Company relating to or affecting (i) the entering into and performance
of the Purchase Agreement, or the issuance, offering and sale of the
Purchase Shares and the Commitment Shares and (ii) and the performance
of the Company of its obligation under the Transaction Documents as
contemplated therein.
4.
As of the date hereof, the authorized, issued and reserved capital stock of the Company is as set
forth on Exhibit D hereto.
B-1
IN
WITNESS WHEREOF, I have hereunder signed my name on this ___ day of ____________, 2025.
_____________________________________
Secretary
The undersigned as Chief Executive Officer
of LIGHTWAVE LOGIC, INC., a Nevada corporation, hereby certifies that James S. Marcelli is the duly
elected, appointed, qualified
and acting Secretary of Lightwave Logic, Inc., and that the signature appearing above is his genuine signature.
_____________________________________
Chief Executive
Officer
B-2
A.
B.
(a)
(b)
(c)
(d)
Exhibit 10.34
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT
(this “Agreement”), dated as of March 17, 2025, is entered into by and
between
LIGHTWAVE LOGIC, INC., a Nevada corporation (the “Company”), and LINCOLN PARK CAPITAL FUND, LLC,
an Illinois limited liability
company (together with its permitted assigns, the “Investor”). Capitalized terms
used herein and not otherwise defined herein shall have the respective
meanings set forth in the Purchase Agreement by and between the
parties hereto, dated as of the date hereof (as amended, restated, supplemented or
otherwise modified from time to time, the “Purchase
Agreement”).
WHEREAS:
Upon
the terms and subject to the conditions of the Purchase Agreement, (i) the Company has agreed to issue to the Investor, and the
Investor
has agreed to purchase, up to Thirty Million Dollars ($30,000,000) of the Company's common stock, par value $0.001 per share (the
“Common
Stock”), pursuant to the Purchase Agreement (such shares, the “Purchase Shares”), and (ii) the
Company has agreed to issue to the Investor such number of
shares of Common Stock as is required pursuant to the Purchase Agreement (the
“Commitment Shares”); and
To
induce the Investor to enter into the Purchase Agreement, the Company has agreed to provide certain registration rights under the
Securities
Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the “Securities
Act”), and
applicable state securities laws.
NOW, THEREFORE, in consideration
of the promises and the mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which
are hereby acknowledged, the Company and the Investor hereby agree as follows:
1.
DEFINITIONS.
For purposes of this Agreement,
the following terms shall have the following meanings:
“Register,” “Registered,” and “Registration”
refer to a registration effected by preparing and filing one or more registration
statements of the Company in compliance with the Securities
Act and providing for offering securities on a continuous basis, and the declaration or
ordering of effectiveness of such registration
statement(s) by the SEC.
“Registrable Securities” means the Purchase Shares that may from time to time
be issued or issuable to the Investor upon
purchases of the Available Amount under the Purchase Agreement (without regard to any limitation
or restriction on purchases), the Commitment Shares
issued or issuable to the Investor, and any Common Stock issued or issuable with
respect to the Purchase Shares, the Commitment Shares or the Purchase
Agreement as a result of any stock split, stock dividend, recapitalization,
exchange or similar event, without regard to any limitation on purchases under the
Purchase Agreement.
“Registration Statement” means the Shelf Registration Statement and any other
registration statement of the Company that
Registers Registrable Securities, including a New Registration Statement, as amended when
each became effective, including all documents filed as part
thereof or incorporated by reference therein, and including any information
contained in a Prospectus subsequently filed with the SEC.
“Shelf Registration Statement” means the Company’s existing registration
statement on Form S-3 (File No. 333-281059).
1
(a)
(b)
(c)
(d)
2.
REGISTRATION.
Mandatory
Registration. The Company agrees that it shall, within the time required under Rule 424(b) under the Securities Act,
file with
the SEC the Initial Prospectus Supplement pursuant to Rule 424(b) under the Securities Act specifically relating to the transactions contemplated
by, and describing the material terms and conditions of, the Transaction Documents, containing information previously omitted at the time
of effectiveness
of the Registration Statement in reliance on Rule 430B under the Securities Act, and disclosing all information relating
to the transactions contemplated
hereby required to be disclosed in the Registration Statement and the Prospectus as of the date of the
Initial Prospectus Supplement, including, without
limitation, information required to be disclosed in the section captioned “Plan
of Distribution” in the Prospectus. The Investor acknowledges that it will be
identified in the Initial Prospectus Supplement as
an underwriter within the meaning of Section 2(a)(11) of the Securities Act. The Company shall permit
the Investor to review and comment
upon the Initial Prospectus Supplement at least two (2) Business Days prior to its filing with the SEC, the Company
shall give due consideration
to all such comments, and the Company shall not file the Initial Prospectus Supplement with the SEC in a form to which the
Investor reasonably
objects. The Investor shall use its reasonable best efforts to comment upon the Initial Prospectus Supplement within one (1) Business
Day from the date the Investor receives a substantially complete draft thereof from the Company. The Investor shall furnish to the Company
such
information regarding itself, the Securities held by it and the intended method of distribution thereof, including any arrangement
between the Investor and
any other Person relating to the sale or distribution of the Securities, as shall be reasonably requested by
the Company in connection with the preparation
and filing of the Initial Prospectus Supplement, and shall otherwise cooperate with the
Company as reasonably requested by the Company in connection
with the preparation and filing of the Initial Prospectus Supplement with
the SEC.
Effectiveness.
The Company shall use its reasonable best efforts to keep the Registration Statement effective pursuant to Rule
415 promulgated under
the Securities Act, and to keep the Registration Statement and the Prospectus current and available for issuances and sales of all
possible
Registrable Securities by the Company to the Investor, and for the resale of all of the Registrable Securities by the Investor, at all
times until the
earlier of (i) the date on which the Investor shall have sold all the Securities and no Available Amount remains under
this Agreement and (ii) 180 days
following the earlier of termination of this Agreement and the Maturity Date (the "Registration
Period"). Without limiting the generality of the foregoing,
during the Registration Period, the Company shall (a) take all action
necessary to cause the Common Stock to continue to be Registered as a class of
securities under Section 12(b) of the Exchange Act and
shall not take any action or file any document (whether or not permitted by the Exchange Act) to
terminate or suspend such registration
and (b) file or furnish on or before their respective due dates all reports and other documents required to be filed or
furnished by the
Company pursuant to Sections 13(a), 13(c), 14, 15(d) or any other provision of or under the Exchange Act, and shall not take any action
or
file any document (whether or not permitted by the Exchange Act) to terminate or suspend its reporting and filing obligations under
the Exchange Act. The
Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall
not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements therein, in light
of the circumstances in which they were made, not
misleading.
Prospectus
Amendments or Supplements. Except as provided in this Agreement and other than periodic and current reports
required to be filed pursuant
to the Exchange Act, the Company shall not file with the SEC any amendment to the Registration Statement or any
supplement to the Base
Prospectus that refers to the Investor, the Transaction Documents or the transactions contemplated thereby (including, without
limitation,
any Prospectus Supplement filed in connection with the transactions contemplated by the Transaction Documents), in each case with respect
to
which (a) the Investor shall not previously have been advised and afforded the opportunity to review and comment thereon at least two
(2) Business Days
prior to filing with the SEC, as the case may be, (b) the Company shall not have given due consideration to any comments
thereon received from the
Investor or its counsel, or (c) the Investor shall reasonably object, unless the Company reasonably has determined
that it is necessary to amend the
Registration Statement or make any supplement to the Prospectus to comply with the Securities Act or
any other applicable law or regulation, in which case
(i) the Company shall promptly (but in no event later than twenty-four (24) hours)
inform the Investor, (ii) the Investor shall be provided with a reasonable
opportunity to review and comment upon any disclosure referring
to the Investor, the Transaction Documents or the transactions contemplated thereby, as
applicable, and (iii) the Company shall expeditiously
furnish to the Investor a copy thereof. In addition, for so long as, in the reasonable opinion of counsel
for the Investor, the Prospectus
is required to be delivered in connection with any acquisition or sale of Securities by the Investor, the Company shall not
file any Prospectus
Supplement with respect to the Securities without furnishing to the Investor as many copies of such Prospectus Supplement, together
with
the Prospectus, as the Investor may reasonably request.
Sufficient
Number of Shares Registered. In the event the number of shares available under the Shelf Registration Statement at
any time
is insufficient to cover the Registrable Securities, the Company shall, to the extent necessary and permissible, amend the Shelf Registration
Statement or file a new registration statement (together with any prospectuses or prospectus supplements thereunder, a “New Registration
Statement”), so
as to cover all of such Registrable Securities as soon as reasonably practicable, but in any event not later
than ten (10) Business Days after the necessity
therefor arises. The Company shall use its reasonable best efforts to have such
amendment and/or New Registration Statement become effective as soon as
reasonably practicable following the filing thereof.
2
(e)
(a)
(b)
(c)
(d)
(e)
Offering.
If the SEC seeks to characterize any offering pursuant to a Registration Statement filed pursuant to this Agreement as
constituting an
offering of securities that does not permit such Registration Statement to become effective and be used by the Investor under Rule 415
at
then-prevailing market prices (and not fixed prices), or if after the filing of the Initial Prospectus Supplement with the SEC pursuant
to Section 2(a) hereof,
the Company is otherwise required by the Staff or the SEC to reduce the number of Registrable Securities
included in such initial Registration Statement,
then the Company shall reduce the number of Registrable Securities to be included in
such initial Registration Statement (with the prior consent, which
shall not be unreasonably withheld, of the Investor and its legal counsel
as to the specific Registrable Securities to be removed therefrom) until such time as
the SEC shall so permit such Registration Statement
to become effective and be used as aforesaid. In the event of any reduction in Registrable Securities
pursuant to this paragraph, the
Company shall file one or more New Registration Statements in accordance with Section 2(d) hereof until such time as all
Registrable
Securities have been included in Registration Statements that have been declared effective and the prospectuses contained therein is available
for use by the Investor.
3.
RELATED OBLIGATIONS.
With respect to the Registration
Statement and whenever any Registrable Securities are to be Registered pursuant to Section 2 hereof, including on
the Shelf Registration
Statement or on any New Registration Statement, the Company shall use its reasonable best efforts to effect the registration of the
Registrable
Securities in accordance with the intended method of disposition thereof and, pursuant thereto, the Company shall have the following
obligations:
Notifications.
The Company will notify the Investor promptly of the time when any subsequent amendment to the Shelf
Registration Statement or any New
Registration Statement, other than documents incorporated by reference, has been filed with the SEC and/or has
become effective or where
a receipt has been issued therefor or any subsequent supplement to a Prospectus has been filed and of any request by the SEC
for any amendment
or supplement to the Registration Statement, any New Registration Statement or any Prospectus or for additional information.
Amendments.
The Company will prepare and file with the SEC, promptly upon the Investor’s request, any amendments or
supplements to the Shelf
Registration Statement, any New Registration Statement or any Prospectus, as applicable, that, in the reasonable opinion of the
Investor
and the Company, may be necessary or advisable in connection with any acquisition or sale of Registrable Securities by the Investor (provided,
however, that the failure of the Investor to make such request shall not relieve the Company of any obligation or liability hereunder).
Investor
Review. The Company will not file any amendment or supplement to the Registration Statement, any New Registration
Statement or any
Prospectus, other than documents incorporated by reference, relating to the Investor, the Registrable Securities or the transactions
contemplated
hereby unless (A) the Investor shall have been advised and afforded the opportunity to review and comment thereon at least two (2) Business
Days prior to filing with the SEC, (B) the Company shall have given due consideration to any comments thereon received from the Investor
or its counsel,
and (C) the Investor has not reasonably objected thereto (provided, however, that the failure of the Investor to make
such objection shall not relieve the
Company of any obligation or liability hereunder), and the Company will furnish to the Investor at
the time of filing thereof a copy of any document that
upon filing is deemed to be incorporated by reference into the Registration Statement
or any Prospectus, except for those documents available via EDGAR.
Form
S-3. The Company will cause each amendment or supplement to the Prospectus, other than documents incorporated by
reference, to be
filed with the SEC as required pursuant to the rules of Form S-3.
Copies
Available. The Company will furnish to the Investor and its counsel (at the expense of the Company) copies of the
Registration Statement,
the Prospectus (including all documents incorporated by reference therein), any Prospectus Supplement, any New Registration
Statement
and all amendments and supplements to the Registration Statement, the Prospectus or any New Registration Statement that are filed with
the
SEC during the Registration Period (including all documents filed with or furnished to the SEC during such period that are deemed
to be incorporated by
reference therein), in each case as soon as reasonably practicable upon the Investor’s request and in such
quantities as the Investor may from time to time
reasonably request and, at the Investor’s request, will also furnish copies of
the Prospectus to each exchange or market on which sales of the Registrable
Securities may be made; provided, however, that the Company
shall not be required to furnish any document (other than the Prospectus) to the Investor to
the extent such document is available on
EDGAR.
3
(f)
(g)
(h)
Qualification.
The Company shall take all such action, if any, as is reasonably necessary in order to obtain an exemption for or to
qualify (i) the issuance
of the Commitment Shares and the sale of the Purchase Shares to the Investor under this Agreement and (ii) any subsequent resale
of all
Commitment Shares and all Purchase Shares by the Investor, in each case, under applicable securities or “Blue Sky” laws of
the states of the United
States in such states as is reasonably requested by the Investor during the Registration Period, and shall provide
evidence of any such action so taken to the
Investor. During the Registration Period, the Company shall promptly notify the Investor
of the receipt by the Company of any notification with respect to
the suspension of the registration or qualification of any of the Registrable
Securities for sale under the securities or “blue sky” laws of any jurisdiction in
the United States or its receipt of actual
notice of the initiation or threat of any proceeding for such purpose.
Notification
of Stop Orders; Material Changes. The Company shall advise the Investor promptly (but in no event later than
twenty-four (24) hours)
and shall confirm such advice in writing, in each case: (i) of the Company’s receipt of notice of any request by the SEC or any
other federal or state governmental authority for amendment of or a supplement to the Registration Statement or any Prospectus or for
any additional
information; (ii) of the Company’s receipt of notice of the issuance by the SEC or any other federal or state governmental
authority of any stop order
suspending the effectiveness of the Registration Statement or prohibiting or suspending the use of the Prospectus
or Prospectus Supplement, or any New
Registration Statement, or of the Company’s receipt of any notification of the suspension of
qualification of the Registrable Securities for offering or sale in
any jurisdiction or the initiation or contemplated initiation of any
proceeding for such purpose; and (iii) of the Company becoming aware of the happening
of any event, which makes any statement of a material
fact made in the Registration Statement or any Prospectus untrue or which requires the making of
any additions to or changes to the statements
then made in the Registration Statement or any Prospectus in order to state a material fact required by the
Securities Act to be stated
therein or necessary in order to make the statements then made therein (in the case of any Prospectus, in light of the
circumstances under
which they were made) not misleading, or of the necessity to amend the Registration Statement or any Prospectus to comply with the
Securities
Act or any other law. If at any time the SEC, or any other federal or state governmental authority shall issue any stop order suspending
the
effectiveness of the Registration Statement or prohibiting or suspending the use of the Prospectus or Prospectus Supplement, the Company
shall use its
reasonable best efforts to obtain the withdrawal of such order at the earliest practicable time. The Company shall furnish
to the Investor, without charge, a
copy of any correspondence from the SEC or the staff of the SEC, or any other federal or state governmental
authority to the Company or its
representatives relating to the Shelf Registration Statement, any New Registration Statement or any Prospectus,
or Prospectus Supplement as the case may
be. The Company shall not deliver to the Investor any Regular Purchase Notice, Accelerated Purchase
Notice or Additional Accelerated Purchase Notice,
and the Investor shall not be obligated to purchase any shares of Common Stock under
the Purchase Agreement, during the continuation or pendency of
any of the foregoing events. If at any time the SEC shall issue any stop
order suspending the effectiveness of the Registration Statement or prohibiting or
suspending the use of the Prospectus or any Prospectus
Supplement, the Company shall use its reasonable best efforts to obtain the withdrawal of such
order at the earliest practicable time.
The Company shall furnish to the Investor, without charge, a copy of any correspondence from the SEC or the staff of
the SEC to the Company
or its representatives relating to the Registration Statement or the Prospectus, as the case may be.
Listing
on the Principal Market. The Company shall promptly secure the listing, or conditional listing as applicable, of all of the
Purchase
Shares and Commitment Shares to be issued to the Investor hereunder on the Principal Market (subject to standard listing conditions, if
any, for
transactions of this nature, official notice of issuance and the Exchange Cap) and upon each other national securities exchange
or automated quotation
system, if any, upon which the Common Stock are then listed, and shall maintain, so long as any Common Stock shall
be so listed, such listing of all such
Registrable Securities from time to time issuable hereunder. The Company shall use its reasonable
best efforts to maintain the listing of the Common Stock
on the Principal Market and shall comply in all respects with the Company’s
reporting, filing and other obligations under the bylaws or rules and
regulations of the Principal Market. The Company shall not take
any action that would reasonably be expected to result in the delisting or suspension of the
Common Stock on the Principal Market. The
Company shall promptly, and in no event later than the following Business Day, provide to the Investor
copies of any notices it receives
from any Person regarding the continued eligibility of the Common Stock for listing on the Principal Market; provided,
however, that the
Company shall not provide the Investor copies of any such notice that the Company reasonably believes constitutes material non-public
information and that the Company would not be required to publicly disclose such notice in any report or statement filed with the SEC
under the Exchange
Act (including on Form 8-K) or the Securities Act. The Company shall pay all fees and expenses in connection with satisfying
its obligations under this
Section 3(h).
4
(i)
(j)
(k)
(l)
(m)
(n)
(o)
Delivery
of Shares. The Company shall cooperate with the Investor to facilitate the timely preparation and delivery of DWAC
Shares (not bearing
any restrictive legend) representing the Registrable Securities to be offered pursuant to the Shelf Registration Statement or any New
Registration Statement and enable such DWAC Shares to be in such denominations or amounts as the Investor may reasonably request and registered
in
such names as the Investor may request.
Transfer
Agent. The Company shall at all times maintain the services of the Transfer Agent with respect to its Common Stock.
Approvals.
The Company shall use its reasonable best efforts to cause the Registrable Securities covered by any Registration
Statement to be Registered
with or approved by such other governmental agencies or authorities in the United States as may be necessary to consummate
the disposition
of such Registrable Securities.
Confirmation
of Effectiveness. If reasonably requested by the Investor at any time, the Company shall deliver to the Investor a
written confirmation
from Company’s counsel of whether or not the effectiveness of such Registration Statement has lapsed at any time for any reason
(including, without limitation, the issuance of a stop order) and whether or not the Registration Statement is currently effective and
available to the
Company for sale of all of the Registrable Securities.
Further
Assurances. The Company agrees to take all other reasonable actions as necessary and reasonably requested by the
Investor to expedite
and facilitate disposition by the Investor of Registrable Securities pursuant to any Registration Statement.
Suspension
of Sales. The Investor agrees that, upon receipt of any notice from the Company of the existence of any suspension
or stop order as
set forth in Section 3(f) or 3(g) hereof, the Investor will immediately discontinue disposition of Registrable Securities
pursuant to any
Registration Statement covering such Registrable Securities until the Investor's receipt of the copies of a notice regarding
the resolution or withdrawal of
the suspension or stop order as contemplated by Section 3(f) or 3(g) hereof. Notwithstanding
anything to the contrary, the Company shall cause its transfer
agent to promptly deliver to the Investor DWAC Shares without any restrictive
legend in accordance with the terms of the Purchase Agreement in
connection with any sale of Registrable Securities with respect to which
the Investor has entered into a contract for sale prior to the Investor’s receipt of a
notice from the Company of the happening
of any event of the kind described in Section 3(f) or 3(g) hereof and for which the Investor has not yet settled.
Transfer
Agent Instructions. On or before the date the Initial Prospectus Supplement is filed with the SEC, the Company shall
issue to the
Transfer Agent the Commencement Irrevocable Transfer Agent Instructions in the form agreed to prior to the date hereof, and on the date
that
the Initial Prospectus Supplement is filed with the SEC, the Company shall deliver, and shall cause legal counsel for the Company
to deliver, to the
Transfer Agent for such Registrable Securities (with copies to the Investor) confirmation that such Registration Statement
has been declared effective by
the SEC in the form attached as an exhibit to the Commencement Irrevocable Transfer Agent Instructions.
Thereafter, if requested by the Investor at any
time, the Company shall require its legal counsel to deliver to the Investor a written
confirmation whether or not the effectiveness of such Registration
Statement has lapsed at any time for any reason (including, without
limitation, the issuance of a stop order) and whether or not the Registration Statement is
current and available to the Investor for sale
of all of the Registrable Securities.
5
(a)
(b)
(a)
4.
OBLIGATIONS OF THE INVESTOR.
Investor
Information. The Investor has furnished to the Company in Exhibit A hereto such information regarding itself, the
Registrable
Securities held by it, and the intended method of disposition thereof, including any arrangement between the Investor and any other Person
relating to the sale or distribution of the Securities, as required to effect the registration of such Registrable Securities and shall
execute such documents in
connection with such registration as the Company may reasonably request. The Company shall notify the Investor
in writing of any other information the
Company reasonably requires from the Investor in connection with any Registration Statement hereunder.
The Investor will as promptly as practicable
notify the Company of any material change in the information set forth in Exhibit A,
other than changes in its ownership of Common Stock.
Investor
Cooperation. The Investor agrees to cooperate with the Company as reasonably requested by the Company in
connection with the preparation
and filing of any amendments and supplements to any Registration Statement or New Registration Statement hereunder.
5.
EXPENSES OF REGISTRATION.
All reasonable expenses of the Company,
other than sales or brokerage commissions and fees and disbursements of counsel for, and other
expenses of, the Investor, incurred in
connection with registrations, filings or qualifications pursuant to Sections 2 and 3 hereof, including, without
limitation,
all registration, listing and qualifications fees, printers and accounting fees, and fees and disbursements of counsel for the Company,
shall be
paid by the Company.
6.
INDEMNIFICATION.
To
the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend the Investor,
each Person,
if any, who controls the Investor, the members, the directors, officers, partners, employees, members, managers, agents, representatives
of the
Investor and each Person, if any, who controls the Investor within the meaning of the Securities Act or the Exchange Act (each,
an “Indemnified Person”),
against any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs,
reasonable, documented, out-of-pocket attorneys’ fees, amounts
paid in settlement (with the prior consent of the Company, such consent
not to be unreasonably withheld) or other reasonable, documented, out-of-pocket
expenses, (collectively, “Claims”)
reasonably incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or
appeal taken
from the foregoing by or before any court or governmental, administrative or other regulatory agency or body or the SEC, whether pending
or
threatened, whether or not an indemnified party is or may be a party thereto (“Indemnified Damages”), to which any
of them may become subject insofar
as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise
out of or are based upon: (i) any untrue statement or
alleged untrue statement of a material fact in the Shelf Registration Statement,
any New Registration Statement or any post-effective amendment thereto or
in any filing made in connection with the qualification of the
offering under the securities or other “blue sky” laws of any jurisdiction in which Registrable
Securities are offered (“Blue
Sky Filing”), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make
the
statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in the final
Prospectus or the omission
or alleged omission to state therein any material fact necessary to make the statements made therein, in light
of the circumstances under which the
statements therein were made, not misleading, (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any other
law, including, without limitation, any state securities law, or any rule or regulation
thereunder relating to the offer or sale of the Registrable Securities
pursuant to the Shelf Registration Statement or any New Registration
Statement or (iv) any material violation by the Company of this Agreement (the
matters in the foregoing clauses (i) through (iv) being,
collectively, “Violations”). The Company shall reimburse each Indemnified Person promptly as
such expenses are
incurred and are due and payable, for any reasonable, documented, out-of-pocket legal fees or other reasonable expenses incurred by
them
in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (A) shall not apply to a Claim by an Indemnified Person arising out of or based upon
a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the Company by the Investor or such
Indemnified Person expressly for use in
connection with the preparation of the Registration Statement, any New Registration Statement,
the Prospectus or any such amendment thereof or
supplement thereto, if in each such case the foregoing was timely made available by the
Company; (B) with respect to any superseded prospectus, shall not
inure to the benefit of any such Person from whom the Person asserting
any such Claim purchased the Registrable Securities that are the subject thereof (or
to the benefit of any other Indemnified Person) if
the untrue statement or omission of material fact contained in the superseded prospectus was corrected in
the revised prospectus, as then
amended or supplemented, if such revised prospectus was timely made available by the Company pursuant to Section 3(c)
or Section
3(e) hereof, and the Indemnified Person was promptly advised in writing not to use the incorrect prospectus prior to the use giving
rise to a
Violation; and (C) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior
written consent of the
Company, which consent shall not be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by
or on behalf of the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investor pursuant to Section 8 hereof.
6
(b)
(c)
In
connection with the Shelf Registration Statement, any New Registration Statement or Prospectus, the Investor agrees to
indemnify, hold
harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a) hereof, the Company, each of its
directors,
each of its officers who signed the Shelf Registration Statement or signs any New Registration Statement, each Person, if any,
who controls the Company
within the meaning of the Securities Act or the Exchange Act (collectively and together with an Indemnified Person,
an “Indemnified Party”), against any
Claim or Indemnified Damages to which any of them may become subject, under the
Securities Act, the Exchange Act or otherwise, insofar as such Claim
or Indemnified Damages arise out of or are based upon any Violation,
in each case to the extent, and only to the extent, that such Violation occurs in
reliance upon and in conformity with written information
about the Investor set forth on Exhibit A attached hereto or updated from time to time in writing
by the Investor and furnished
to the Company by the Investor expressly for inclusion in the Shelf Registration Statement or Prospectus or any New
Registration Statement
or from the failure of the Investor to provide notice or to deliver or to cause to be delivered the prospectus made available by the
Company,
if such prospectus was timely made available by the Company pursuant to Section 3(c) or Section 3(e) hereof; and, subject
to Section 6(d)
hereof, the Investor will reimburse any reasonable, documented, out-of-pocket legal or other expenses reasonably
incurred by them in connection with
investigating or defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect
to contribution contained in Section 7 hereof shall not apply
to amounts paid in settlement of any Claim if such settlement is effected without the prior
written consent of the Investor, which consent
shall not be unreasonably withheld; provided, further, however, that the Investor shall be liable under this
Section
6(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to the Investor as a result of the
sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless
of any investigation made
by or on behalf of such Indemnified Party and shall survive the transfer of the Registrable Securities by the
Investor pursuant to Section 8 hereof.
Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of
any action or
proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if
a
Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party
a written notice of the
commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with
any other indemnifying party similarly notified, to assume control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that an Indemnified Person or Indemnified Party shall have the
right to retain its own counsel with the
reasonable, documented and out-of-pocket fees and expenses to be paid by the indemnifying party, if, in the
reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the Indemnified Person or Indemnified Party and
the indemnifying
party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The Indemnified Party or Indemnified Person shall cooperate with the indemnifying
party in
connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying
party all
information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or claim. The
indemnifying party shall keep
the Indemnified Party or Indemnified Person fully apprised as to the status of the defense or any settlement
negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or proceeding effected
without its written consent, provided, however, that the
indemnifying party shall not unreasonably withhold, delay or condition its consent.
No indemnifying party shall, without the consent of the Indemnified
Party or Indemnified Person, consent to entry of any judgment
or enter into any settlement or other compromise which does not include as an unconditional
term thereof the giving by the claimant or
plaintiff to such Indemnified Party or Indemnified Person of a release from all liability in respect to such claim or
litigation. Following
indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or
Indemnified
Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The
failure to
deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party
of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to
the extent that the indemnifying party is prejudiced in its
ability to defend such action.
7
(d)
(e)
(a)
Telephone:
E-mail:
Attention:
Telephone:
E-mail:
Attention:
Telephone:
E-mail:
Attention:
Telephone:
Email:
The
indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of
the investigation
or defense, as and when bills are received or Indemnified Damages are incurred. Any Person receiving a payment pursuant to this
Section
6 which person is later determined to not be entitled to such payment shall return such payment to the person making it.
The
indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified
Party or Indemnified
Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.
7.
CONTRIBUTION.
To the extent any indemnification
by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect
to any amounts for which it would otherwise be liable under Section 6 hereof to the fullest extent permitted by law;
provided,
however, that: (i) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities
Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of fraudulent misrepresentation;
and (ii) contribution by
any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such
seller from the sale of such Registrable
Securities.
8.
ASSIGNMENT OF REGISTRATION RIGHTS.
The Company shall not assign this
Agreement or any rights or obligations hereunder without the prior written consent of the Investor;
provided, however, that any transaction,
whether by merger, reorganization, restructuring, consolidation, financing or otherwise, whereby the Company
remains the surviving entity
immediately after such transaction shall not be deemed an assignment. The Investor may not assign its rights under this
Agreement
without the prior written consent of the Company, other than to an affiliate of the Investor controlled by Jonathan Cope or Josh Scheinfeld,
in
which case the assignee must agree in writing to be bound by the terms and conditions of this Agreement.
9.
AMENDMENT OF REGISTRATION RIGHTS.
No provision of this Agreement
may be amended or waived by the parties from and after the date that is one Business Day immediately
preceding the initial filing of the
Initial Prospectus Supplement with the SEC. Subject to the immediately preceding sentence, no provision of this
Agreement may be (i) amended
other than by a written instrument signed by both parties hereto or (ii) waived other than in a written instrument signed by
the party
against whom enforcement of such waiver is sought. Failure of any party to exercise any right or remedy under this Agreement or otherwise,
or
delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.
10. MISCELLANEOUS.
Notices.
Any notices, consents or other communications required or permitted to be given under the terms of this Agreement
must be in writing and
will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by electronic
message
(provided the electronic message is kept on file by the sending party); or (iii) one (1) Business Day after timely deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the party to receive the same. The contact information for such
communications
shall be:
If to the
Company:
Lightwave Logic, Inc.
369 Inverness Parkway, Suite 350
Englewood, CO 80112
(720) 340-4949
jim@lightwavelogic.com
James S. Marcelli, Chief Financial Officer &
Chief Operating Officer
With a copy to (which shall not
constitute notice or service of process):
K&L Gates, LLP
200 S. Biscayne Blvd.,
Ste. 3900
Miami, Florida 33131
(305)
539-3306
clayton.parker@klgates.com
Clayton E. Parker, Esq.
If to the Investor:
Lincoln Park Capital Fund, LLC
415 N. LaSalle Dr., Suite 700B
Chicago, IL 60654
(312) 822-9300
jscheinfeld@lpcfunds.com/jcope@lpcfunds.com
Josh Scheinfeld/Jonathan
Cope
If to the Transfer Agent:
Broadridge Corporate Issuer Solutions, Inc.
51 Mercedes Way
Edgewood, NY 11717
(979) 218-8194
autumn.tallaksen@broadridge.com
Attention:
Autumn Tallaksen
or at such other address, e-mail
address and/or to the attention of such other person as the recipient party has specified by written notice given to
each other party
at least one (1) Business Day prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient
of such
notice, consent, waiver or other communication, (B) electronically generated by the sender’s electronic mail containing
the time, date and recipient email
address or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable
evidence of receipt in accordance with clause (i), (ii), or
(iii) above, respectively. Any party to this Agreement may give any
notice or other communication hereunder using any other means (including messenger
service, ordinary mail or electronic mail), but no
such notice or other communication shall be deemed to have been duly given unless it actually is received
by the party for whom it is
intended.
8
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
No
Waiver. No failure or delay in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor
shall
any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right,
power or privilege.
Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be
governed by the
internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the
State of
Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of
Illinois. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the County
of Cook, in the State of Illinois for the adjudication of
any dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient
forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of
process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the
address
for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice
thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.
If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or enforceability of
any provision of this Agreement in any other jurisdiction. EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES
NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT
OR
ANY TRANSACTION CONTEMPLATED HEREBY.
Integration.
This Agreement, the Purchase Agreement and the other Transaction Documents constitute the entire understanding
among the parties
hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other
than
those set forth or referred to herein and therein. This Agreement, the Purchase Agreement and the other Transaction
Documents supersede all other prior
oral or written agreements between the Investor, the Company, their affiliates and persons acting
on their behalf with respect to the subject matter hereof
and thereof.
No
Third Party Benefits. Subject to the requirements of Section 8 hereof, this Agreement shall inure to the benefit of and be
binding upon the permitted successors and assigns of each of the parties hereto.
Headings.
The headings in this Agreement are for convenience of reference and shall not form part of, or affect the interpretation
of, this Agreement.
Counterparts.
This Agreement may be executed in two (2) or more identical counterparts, all of which shall be considered one
and the same agreement
and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a pdf
(or
other electronic reproduction of a) signature shall be considered due execution and shall be binding upon the signatory thereto with the
same force and
effect as if the signature were an original, not a pdf (or other electronic reproduction of a) signature.
Further
Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and
shall execute
and deliver all such other agreements, certificates, instruments and documents as the other party may reasonably request in order to carry
out
the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
Mutual
Agreement. The language used in this Agreement will be deemed to be the language chosen by the parties to express
their mutual intent
and no rules of strict construction will be applied against any party.
No
Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted
successors
and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
11. TERMINATION.
The obligations of the Company
contained in Sections 2, 3, and 5 of this Agreement shall terminate in their entirety upon the earlier of (i) the
date
on which the Investor shall have sold all the Securities and no Available Amount remains under the Purchase Agreement and (ii) 180
days following the
earlier of (A) the Maturity Date and (B) the date of termination of the Purchase Agreement; provided, that as long
as any of the Securities remain unsold by
the Investor, the Company must make available “current public information” pursuant
to Rule 144 promulgated under the Securities Act until the Investor
may sell the Securities without restriction (including any restrictions
under Rule 144(c) or Rule 144(i)).
[Signature Page Follows]
9
IN WITNESS WHEREOF, the parties have caused this
Registration Rights Agreement to be duly executed as of date first written
above.
THE COMPANY:
LIGHTWAVE LOGIC, INC.
By: /s/ James S. Marcelli
Name: James S. Marcelli
Title: Chief Financial Officer & Chief Operating Officer
THE INVESTOR:
LINCOLN PARK CAPITAL FUND, LLC
BY: LINCOLN PARK CAPITAL, LLC
BY: ROCKLEDGE CAPITAL CORPORATION
By: /s/ Joshua Scheinfeld
Name: Joshua Scheinfeld
Title: President
10
EXHIBIT A
Information About The Investor Furnished To The
Company By The Investor
Expressly For Use In Connection With Each Registration
Statement and Prospectus
Information With Respect to Lincoln Park Capital
Immediately prior to the date
of the Purchase Agreement, Lincoln Park Capital Fund, LLC, beneficially owned 52,255 shares
of Common Stock.
Josh Scheinfeld and Jonathan Cope, the Managing Members of Lincoln Park Capital, LLC, the manager of Lincoln Park Capital
Fund, LLC, are deemed to
be beneficial owners of all of the Common Stock owned by Lincoln Park Capital Fund, LLC. Messrs. Cope and Scheinfeld
have shared voting and
investment power over the shares being offered under the prospectus supplement filed with the SEC in connection
with the transactions contemplated under
the Purchase Agreement. Lincoln Park Capital, LLC is not a licensed broker dealer or an affiliate
of a licensed broker dealer.
A-1
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The Board of Directors of
Lightwave Logic, Inc.
We hereby consent to
the incorporation by reference in the registration statements of Lightwave Logic, Inc. on:
·
Form S-8 (No. 333-273055)
·
Form S-8 (No. 333-234737)
·
Form S-8 (No. 333-213541)
·
Form S-8 (No. 333-189943)
·
Form S-8 (No. 333-198916)
·
Form S-3 (No. 333-281059)
of our reports dated
March 18, 2025, relating to the financial statements of Lightwave Logic, Inc. as of and for the year ended December 31, 2024.
/s/ Stephano Slack LLC
Wayne, Pennsylvania
March 18, 2025
EXHIBIT 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The Board of Directors of
Lightwave Logic, Inc.
We hereby consent to
the incorporation by reference in the registration statements of Lightwave Logic, Inc. on:
·
Form S-8 (No. 333-273055)
·
Form S-8 (No. 333-234737)
·
Form S-8 (No. 333-213541)
·
Form S-8 (No. 333-189943)
·
Form S-8 (No. 333-198916)
·
Form S-3 (No. 333-281059)
of our reports dated
February 29, 2024, relating to the financial statements of Lightwave Logic, Inc. and the effectiveness of internal control over
financial
reporting.
/s/ Morison Cogen LLP
Blue Bell, Pennsylvania
February 29, 2024
EXHIBIT 31.1
CERTIFICATION
I, Yves LeMaitre, certify
that:
1. I
have reviewed this Annual Report on Form 10-K of Lightwave Logic, Inc.;
2. Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered
by this
report;
3. Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The
registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
(b) Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision,
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;
(c) Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and
(d) Disclosed
in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The
registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing
the equivalent functions):
(a) All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal
control over financial reporting.
Date: March 18, 2025
/s/ Yves LeMaitre
Yves LeMaitre
Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 31.2
CERTIFICATION
I, James S. Marcelli, certify
that:
1. I
have reviewed this Annual Report on Form 10-K of Lightwave Logic, Inc.;
2. Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered
by this
report;
3. Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The
registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
(b) Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision,
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;
(c) Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and
(d) Disclosed
in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The
registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing
the equivalent functions):
(a) All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal
control over financial reporting.
Date: March 18, 2025
/s/ James S. Marcelli
James S. Marcelli
Chief Financial Officer
(Principal Financial Officer)
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the
Annual Report on Form 10-K of Lightwave Logic, Inc. (the “Company”) for the year ended December 31, 2024 as filed
with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Yves LeMaitre, Chief Executive Officer of our Company,
certify,
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, Chapter 63 of Title 18, United
States Code), that, to
my knowledge:
1. The
Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The
information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of our
Company.
Date: March 18, 2025
/s/ Yves LeMaitre
Yves LeMaitre
Chief Executive Officer
(Principal Executive Officer)
The foregoing certification is being furnished solely
pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350,
Chapter 63 of Title 18, United States
Code) and is not being filed as part of the Report or as a separate disclosure document.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the
Annual Report on Form 10-K of Lightwave Logic, Inc. (the “Company”) for the year ended December 31, 2024 as filed
with the
Securities and Exchange Commission on the date hereof (the “Report”), I, James S. Marcelli, Chief Financial Officer of our
Company, certify,
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, Chapter 63 of Title
18, United States Code), that, to
my knowledge:
1. The
Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The
information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of our
Company.
Date: March 18, 2025
/s/ James S. Marcelli
James S. Marcelli
Chief Financial Officer
(Principal Financial Officer)
The foregoing certification is being furnished solely
pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350,
Chapter 63 of Title 18, United States
Code) and is not being filed as part of the Report or as a separate disclosure document.