Lightwave Logic Inc

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 company focused on the development of next generation electro-optic photonic devices made on its P 2 IC™ technology platform which we have detailed as: 1) Polymer Stack™, 2) Polymer Plus™, and 3) Polymer Slot™. Our unique polymer technology platform uses in-house proprietary high-activity and high-stability organic polymers. Electro-optical devices called modulators convert data from electric signals into optical signals for multiple applications.

Our differentiation at the modulator device level is in higher speed, lower power consumption, simplicity of manufacturing, small footprint (size), and reliability. We have demonstrated higher speed and lower power consumption in packaged devices, and during 2022 and 2023, we continued to make advances in techniques to translate material properties to efficient, reliable modulator devices with commercial foundries. We are currently focused on testing and demonstrating the simplicity of manufacturability and reliability of our devices, including in conjunction with the silicon photonics manufacturing ecosystem. In 2022 we discussed the addition of several silicon-based foundry partners to help scale in volume our polymer modulator devices and we started to receive working modulator chips from the foundries. We have advanced our interactions with our foundries, and we continue to receive working modulator chips for prototyping. Silicon-based foundries are large semiconductor fabrication plants developed for the electronics IC business, that are now engaging with silicon photonics to increase their wafer throughput. Partnering with silicon-based foundries not only demonstrates that our polymer technology can be transferred into standard production lines using standard equipment, it also allows us to efficiently utilize our capital. The foundry partnerships will allow us to scale our high-performance polymer optical engines quickly and efficiently.

Our extremely strong and broad patent portfolio allows us to optimize our business model in three areas: 1) Traditional focus on product development, 2) Patent licensing and 3) Technology transfer to foundries. We are continually looking to strengthen our patent portfolio both by internal inventions and acquisition of intellectual property.

We are initially targeting applications in fiber optic data communications and telecommunications markets and are exploring other applications that include automotive/LIDAR, sensing, displays etc., for our polymer technology platform. Our goal is to have our unique polymer technology platform become ubiquitous.

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. 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 are important today: density, speed, and low power and these are very well aligned with our high performance electro-optic polymers. 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.

Commencement of Commercial Operations

We commenced commercial operations in May 2023. Presently, our commercial operations consist of amaterial 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 device 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 direct sale of our electro-optic device components.

Business Strategy

Our first revenue stream was obtained fromour 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 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 direct sale of our electro-optic device components.

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 device components. Our objective is to be a leading provider of proprietary technology and know-how in the electro-optic device market. In order to meet this objective, we intend to continue to:

Create Organic Polymer-Enabled Electro-Optic Modulators

We intend to utilize our proprietary optical polymer technology to create an initial portfolio of commercial electro-optic polymer product devices with applications for various markets, including telecommunications, data communications and data centers. These product devices will be part of our proprietary photonics integrated circuit (PIC) technology platform.

We expect our initial modulator products will operate at symbol rates at least 112 Gigabaud which is roughly 200Gbps when utilized with PAM4 encoding schemes. Our devices are highly linear and can also enable the performance required to take advantage of more advance complex encoding schemes if required.

Capital Requirements

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.

Comparison of year ended December 31, 2023 to year ended December 31, 2022 and year ended December 31, 2022 to year ended December 31, 2021

Revenues

During the year ended December 31, 2023, we recognized $40,502 of licensing and royalty revenue. As a development stage company during the years ended December 31, 2022 and December 31, 2021, we had no revenues. The Company is in various stages of photonic device and materials development and evaluation with potential customers and strategic partners, and commercialization. The Company expects to continue obtaining a revenue stream from technology licensing agreements, to obtain additional revenue streams from technology transfer agreements and direct sale of its own electro-optic device components.

Cost of Sales

During the year ended December 31, 2023, we recognized $2,513 in Cost of Sales, and $0 in Cost of Sales during the years ended December 31, 2022 and 2021.

Operating Expenses

Research and development expenses increased for the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to increases in research and development salary and bonus expenses, research and development non-cash stock option and RSA amortization, recruiting fees, employee relocation expenses, rent expense, chemistry and wafer fabrication materials and supplies, testing expenses, software expenses, research and development consulting expenses, and travel expenses, offset by a decrease in prototype expenses.

Research and development salary and bonus expenses increased by $1,636,577 in the year ended December 31, 2023, compared to the same period in 2022. Research and development non-cash stock option and RSA amortization expenses increased by $690,879 in the year ended December 31, 2023, compared to the same period in 2022. Recruiting fees increased by $195,697 in the year ended December 31, 2023, compared to the same period in 2022. Employee relocation expenses increased by $178,626 in the year ended December 31, 2023, compared to the same period in 2022. Rent expense increased by $153,949 in the year ended December 31, 2023, compared to the same period in 2022. Chemistry and wafer fabrication materials and supplies increased by $143,581 in the year ended December 31, 2023, compared to the same period in 2022. Research and development testing expenses increased by $129,593 in the year ended December 31, 2023 compared to the same period in 2022. Software expenses increased by $126,854 in the year ended December 31, 2023, compared to the same period in 2022. Research and development consulting expenses increased by $112,261 in the year ended December 31, 2023, compared to the same period in 2022. Research and development travel expenses increased by $96,923 in the year ended December 31, 2023, compared to the same period in 2022. These increases were offset by a $483,617 decrease in prototype expenses in the year ended December 31, 2023, compared to the same period in 2022.

Research and development expenses increased for the year ended December 31, 2022, as compared to the year ended December 31, 2021, primarily due to increases in research and development non-cash stock option amortization, prototype device development expenses, research and development salary expenses, laboratory and wafer fabrication materials and supplies, research and development consulting expenses, depreciation and research and development travel expenses offset by a decrease in expense for cashless option exercises and research and development bonus expenses.

Research and development non-cash stock option amortization expenses increased by $3,732,646 in the year ended December 31, 2022, compared to the same period in 2021. Prototype device development expenses increased by $1,460,419 in the year ended December 31, 2022, compared to the same period in 2021. Research and development salary expenses increased by $617,627 in the year ended December 31, 2022, compared to the same period in 2021. Laboratory and wafer fabrication materials and supplies increased by $242,737 in the year ended December 31, 2022, compared to the same period in 2021. Research and development consulting expenses increased by $224,435 in the year ended December 31, 2022, compared to the same period in 2021. Depreciation expenses increased by $173,206 in the year ended December 31, 2022, compared to the same period in 2021. Research and development travel expenses increased by $147,136 in the year ended December 31, 2022, compared to the same period in 2021. The expense for research and development cashless option exercises decreased by $3,382,582 in the year ended December 31, 2022, compared to the same period in 2021. Research and development bonus expenses decreased by $3,003,169 in the year ended December 31, 2022, compared to the same period in 2021.

We expect to continue to incur substantial research and development expense developing and commercializing our photonic devices, and 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; to build photonic device prototypes; 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, 2023, as compared to the year ended December 31, 2022, primarily due to increases in general and administrative salary and bonus expenses, accounting fees, general and administrative consulting fees, general and administrative non-cash stock option and RSA amortization, D&O insurance expenses, investor relations expenses, travel expenses, office expenses, rent expense, general and administrative recruiting fees, and software expenses, offset by a decrease in legal fees.

General and administrative salary and bonus expenses increased by $172,690 in the year ended December 31, 2023, compared to the same period in 2022. Accounting fees increased by $191,803 in the year ended December 31, 2023, compared to the same period in 2022. General and administrative consulting fees increased by $144,600 in the year ended December 31, 2023, compared to the same period in 2022. General and administrative non-cash stock option and RSA amortization expenses increased by $125,863 in the year ended December 31, 2023, compared to the same period in 2022. D&O insurance expenses increased by $99,555 in the year ended December 31, 2023, compared to the same period in 2022. Investor relations expenses increased by $67,670 in the year ended December 31, 2023, compared to the same period in 2022. Travel expenses increased by $58,999 in the year ended December 31, 2023, compared to the same period in 2022. Office expenses increased by $53,949 in the year ended December 31, 2023, compared to the same period in 2022. Rent expense increased by $48,350 in the year ended December 31, 2023, compared to the same period in 2022. General and administrative recruiting fees increased by $43,255 in the year ended December 31, 2023, compared to the same period in 2022. Software expenses increased by $33,222 in the year ended December 31, 2023, compared to the same period in 2022. These increases were offset by a $38,374 decrease in legal fees in the year ended December 31, 2023, compared to the same period in 2022.

General and administrative expenses decreased for the year ended December 31, 2022, as compared to the year ended December 31, 2021, primarily due to decreases in general and administrative bonus and salary expenses and general and administrative expense for cashless option exercises offset by increases general and administrative non-cash stock option amortization, legal expenses, director fees, insurance and general and administrative travel expenses.

General and administrative bonus and salary expenses decreased by $2,054,916 in the year ended December 31, 2022, compared to the same period in 2021 primarily for bonus expenses in the year ended December 31, 2021. The expense for general and administrative cashless option exercises decreased by $170,137 in the year ended December 31, 2022, compared to the same period in 2021. General and administrative non-cash stock option amortization increased by $1,138,708 in the year ended December 31, 2022, compared to the same period in 2021. Legal expenses increased by $417,624 in the year ended December 31, 2022, compared to the same period in 2021. Director fees increased by $149,750 in the year ended December 31, 2022, compared to the same period in 2021. Insurance expenses increased by $136,771 in the year ended December 31, 2022, compared to the same period in 2021. General and administrative travel expenses increased by $75,652 in the year ended December 31, 2022, compared to the same period in 2021.

Other Income (Expense)

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.

Other expenses decreased for the year ended December 31, 2022, as compared to the year ended December 31, 2021, primarily due to a decrease in commitment fee associated with the purchase of shares by an institutional investor for sale under a stock purchase agreement in the amount of $1,849,755 offset by the forgiveness by the Small Business Administration during 2021 of a loan funding from the Paycheck Protection Program in the amount of $410,700.

Net Loss

Net loss was $21,038,032 and $17,230,480 for the year ended December 31, 2023 and 2022, respectively, for an increase of $3,807,552 due primarily to increases in salary and bonus expense, non-cash stock option and RSA amortization, commitment fee associated with the purchase of shares by an institutional investor for sale under a stock purchase agreement, consulting fees, recruiting fees, rent expense, accounting fees, research and development employee relocation costs, software costs, research and development travel expenses, chemistry and wafer fabrication materials and supplies, testing expenses, D&O insurance, investor relations fees, and office expenses, offset by decrease primarily related to prototype and legal expenses, a higher interest income earned on money market account, and a gain on property and equipment disposal.

Net loss was $17,230,480 and $18,631,381 for the year ended December 31, 2022 and 2021, respectively, for a decrease of $1,400,901 due primarily to decreases in expense for cashless option exercises, bonus expenses and commitment fee associated with the purchase of shares by an institutional investor for sale under a stock purchase agreement offset by increases in non-cash stock option amortization, prototype device development expenses, research and development salary expenses, legal expenses, the forgiveness by the Small Business Administration during 2021 of a loan funding from the Paycheck Protection Program, laboratory and wafer fabrication materials and supplies, research and development consulting fees, travel expenses, depreciation, director fees and insurance expenses.

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 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 11 to the Financial Statements and below, proceeds received pursuant to the exercise of options and warrants and a proceed received under a material supply and license agreement of which $39,875 is recorded as deferred revenue as of December 31, 2023.

All of the registered shares under the January 21, 2019 purchase agreement with Lincoln Park have been issued as of June 30, 2021. On July 2, 2021, the Company filed a $100 million universal shelf registration statement which became effective on July 9, 2021. On October 4, 2021, our Company entered into the 2021 purchase agreement with Lincoln Park to sell up to $33 million of 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 June 30, 2023. On February 28, 2023, our Company entered into the 2023 purchase agreement with Lincoln Park to sell up to $30 million of common stock over a 36-month period, with $10.5 million remaining on the 2023 purchase agreement as of the date of this filing. 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 $35,000,000 in shares of our common stock, from time to time through Roth Capital. As of the date of this filing $33.4 million remains available to our Company pursuant to the at the market sale agreement.

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 deferred revenue as of December 31, 2023. During the year ended December 31, 2022, the Company received $12,775,268 in proceeds pursuant to the 2021 purchase agreement with Lincoln Park and $653,895 in proceeds pursuant to the exercise of options and warrants. During the year ended December 31, 2021, the Company received $30,350,674 in proceeds pursuant to purchase agreements with Lincoln Park and $2,379,225 in proceeds pursuant to the exercise of options and warrants.

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. During the year ended December 31, 2022, our primary sources of cash outflows from operations included payroll, rent, utilities, payments to vendors including prototypes development and foundries expenses, third-party service providers and payroll taxes related to cashless option exercise. During the year ended December 31, 2021, our primary sources of cash outflows from operations included payroll and bonus, payroll taxes related to cashless option exercise, rent, utilities, payments to vendors including prototypes development and foundries expenses and third-party service providers.

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, continue to 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 or continue to establish cooperative development, joint venture and licensing arrangements. We expect that we will incur approximately $1,830,000 of expenditures per month over the next 12 months.

We expect the proceeds received pursuant to the 2023 purchase agreement and future purchase agreements with Lincoln Park, 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 July 2025 before we will be required to replenish our cash reserves pursuant to the 2023 Purchase Agreement or the Roth Sales Agreement. 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 2024 and beyond as a result of the following planned activities:

2023 Purchase Agreement 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 limitations) from time to time over a 36-month period. Pursuant to the 2023 purchase agreement, Lincoln Park is obligated to make purchases as the Company directs in accordance with the purchase agreement, which may be terminated by the Company at any time, without cost or penalty. Sales of shares will be made in specified amounts and at prices that are based upon the market prices of our common stock immediately preceding the sales to Lincoln Park. We expect this and any future purchase agreements with Lincoln Park to provide us with sufficient funds to maintain our operations for the foreseeable future. With the additional capital, we expect to achieve a level of revenues attractive enough to fulfill our development activities and adequate enough to support our business model for the foreseeable future.

There are no trading volume requirements or restrictions under the 2023 purchase agreement, and we will control the timing and amount of any sales of our common stock to Lincoln Park. Lincoln Park has no right to require any sales by us, but is obligated to make purchases from us as we direct in accordance with each of the 2023 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 under the 2023 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 $35,000,000 in shares of our common stock, from time to time through Roth Capital. Upon delivery of a placement notice based on our Company’s instructions and subject to the terms and conditions of the 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.

We cannot assure you that we will meet the conditions of the 2023 purchase agreements with Lincoln Park in order to obligate Lincoln Park to purchase our shares of common stock, and we cannot assure you that we will be able to sell any shares under or fully utilize the 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. This limitation of operations may include reductions in capital expenditures and reductions in staff and discretionary costs.

Analysis of Cash Flows

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.

For the year ended December 31, 2022

Net cash used in operating activities was $10,465,880 for the year ended December 31, 2022, primarily attributable to the net loss of $17,230,480 adjusted by $5,813,628 in options issued for services, $91,713 amortization of deferred compensation, $209,709 in common stock issued for services, $1,045,208 in depreciation expenses and patent amortization expenses, ($379,037) in prepaid expenses, ($135,661) in accounts payable, accrued bonuses and accrued expenses and $119,040 in cashless option exercise expense. Net cash used in operating activities consisted of payments for research and development, legal, professional and consulting expenses, rent and other expenditures necessary to develop our business infrastructure.

Net cash used by investing activities was $2,209,722 for the year ended December 31, 2022, consisting of $260,415 in cost for intangibles, $1,307,187 in asset additions for the Colorado headquarter facility and labs and $642,120 in a loan issuance.

Net cash provided by financing activities was $13,345,141 for the year ended December 31, 2022 and consisted of $653,895 in proceeds from exercise of options and warrants, $12,775,268 in proceeds from resale of common stock to an institutional investor offset by $84,022 in cashless option exercise tax payments.

On December 31, 2022, our cash and cash equivalents totaled $24,102,151, our assets totaled $29,263,472, our liabilities totaled $1,710,449 and we had stockholders’ equity of $27,553,023.

For the year ended December 31, 2021

Net cash used in operating activities was $10,038,626 for the year ended December 31, 2021, primarily attributable to the net loss of $18,631,381 adjusted by $11,001 in warrants issued for services, $1,022,985 in options issued for services, $2,059,464 in common stock issued for services, $878,520 in depreciation expenses and patent amortization expenses, ($410,700) in Paycheck Protection Program loan forgiveness, $334,877 in prepaid expenses, $1,023,785 in accounts payable, accrued bonuses and accrued expenses and $3,672,823 in cashless option exercise expense. Net cash used in operating activities consisted of payments for research and development, legal, professional and consulting expenses, rent and other expenditures necessary to develop our business infrastructure.

Net cash used by investing activities was $1,116,179 for the year ended December 31, 2021, consisting of $18,649 in cost for intangibles and $1,097,530 in asset additions primarily for the Colorado headquarter facility and labs.

Net cash provided by financing activities was $31,280,827 for the year ended December 31, 2021 and consisted of $2,379,225 in proceeds from exercise of options and warrants, $30,350,674 in proceeds from resale of common stock to an institutional investor offset by $1,435,965 in cashless option exercise tax payments and $13,107 repayment of equipment purchased.

On December 31, 2021, our cash and cash equivalents totaled $23,432,612, our assets totaled $27,228,575, our liabilities totaled $2,024,303 and we had stockholders’ equity of $25,204,272.

Contractual Obligations

See “Note 8–Commitments” of the notes to the financial statements contained elsewhere within this Annual Report on Form 10-K for a discussion of our operating lease for office and laboratory space.