Lightwave Logic, Inc.

DECEMBER 31, 2025 AND 2024

NOTE 1 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

History and Nature of Business

Lightwave Logic, Inc. is a specialty materials and intellectual property company focused on the development and commercialization of proprietary electro-optic (“EO”) polymer materials designed to enable high-speed optical modulators for data communications and other photonic applications.

Our Perkinamine® family of EO polymer materials is engineered for integration into silicon photonics (“SiPh”) and other photonic integrated circuit (“PIC”) platforms. When incorporated into device architectures, these materials are designed to support high-speed, high-bandwidth optical modulation with lower drive voltage requirements relative to certain conventional silicon-based approaches and certain other traditional photonic material systems, including III-V–based technologies. The electro-optic properties of these materials can allow shorter interaction lengths in modulator designs, which can contribute to more compact device footprints and increased integration density. In addition, our materials are intended to be compatible with complementary metal-oxide-semiconductor (“CMOS”) fabrication processes, which may facilitate integration into established semiconductor foundry workflows. Reduced drive voltage operation may enable lower system-level power consumption and simplified driver electronics in specific implementations.

We do not manufacture optical transceivers, photonic devices, or complete optical modules. Instead, our strategy is to commercialize our technology through a combination of material sales, intellectual property licensing, process design kit (“PDK”) enablement, and royalty or other fee-based arrangements tied to customer production.

Our customers and prospective customers include semiconductor foundries, silicon photonics device designers, optical module manufacturers, and system integrators serving artificial intelligence (“AI”), cloud computing, data center, and telecommunications markets. We pursue customer adoption through a structured commercialization process designed to support evaluation, integration, qualification, and production readiness within established semiconductor manufacturing ecosystems.

Lightwave Logic, Inc. was organized under the laws of the State of Nevada in 1997, and it commenced with its current business plan in 2024.

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, primarily cash and accounts receivable. At December 31, 2025, the Company maintained cash balances at financial institutions in excess of FDIC-insured limits. Cash uninsured by FDIC totaled approximately $68,767,354 at December 31, 2025 and $27,417,964 at December 31, 2024. The Company monitors the creditworthiness of the financial institutions in which it maintains deposits.

The Company is also exposed to concentrations of credit risk with respect to its customers. For the year ended December 31, 2025, the Company had two customers that accounted for 55% and 45% of total revenue. As of December 31, 2025, two customers accounted for 68% and 32% of total accounts receivable, respectively. For the year ended December 31, 2024, the Company had two customers that accounted for 86% and 14% of total revenue. As of December 31, 2024, one customer accounted for 100% of total accounts receivable. The Company performs ongoing credit evaluations of its customers and generally does not require collateral.

LIGHTWAVE LOGIC, INC.NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2025 AND 2024

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 0 as of December 31, 2025 and 2024.

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 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:

The Company’s primary revenue streams includes technology license and material supply agreements and non-recurring engineering revenue from joint development agreements.

LIGHTWAVE LOGIC, INC.NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2025 AND 2024

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.

Joint Development Agreement

The Company entered into a memorandum of agreement (“MOA”) with a customer to specify certain binding terms related to the joint development of electro-optical polymer-based modulators on silicon photonics for use in communication applications. The MOA was executed in January 2026; however, the Company commenced work under the arrangement during 2025. The development work consists of preparing reference documentation and support of a multi-project wafer chip produced at a mutually agreed upon foundry, the design and post processing of fabricated chips, and complete product verification and volume manufacturing preparation, with each party to the agreement having responsibility over various deliverables for each phase.

The Company evaluated the arrangement under ASC 808, Collaborative Arrangements, and concluded the arrangement meets the definition of a collaborative arrangement. The Company also concluded that certain promised services within the arrangement represent units of account with a customer and therefore are within the scope of ASC 606. Consideration received from the customer for such services is presented as net sales in the accompanying financial statements.

The arrangement includes development services to be performed in phases. The Company evaluated the promised goods and services within each phase and concluded they are not separately identifiable because they are highly interdependent and represent inputs to a combined output that is delivered and accepted at the phase level. Accordingly, each phase is accounted for as a single combined performance obligation. Phases 1 and 2 are within the scope of ASC 606.

Phase 1 consideration was $130,000, which the Company recognized in net sales upon completion and delivery to the customer of the Phase 1 products and services. Phase 2 consideration was $200,000, payable in installments subject to customer’s confirmation of completion and acceptance of the related deliverables. Deliverables and consideration for Phase 3 have not been determined.

The Company recognizes revenue at a point in time upon completion and customer acceptance of the phase deliverables, as applicable. Customer acceptance is considered the substantive indicator that control of the completed phase deliverables has transferred.

LIGHTWAVE LOGIC, INC.NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2025 AND 2024

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. The Company evaluated costs to fulfill the joint development arrangement under ASC 340-40 and concluded such costs do not meet the capitalization criteria because the costs are not expected to be recovered through the consideration payable under the arrangement.

The Company expenses costs to fulfill the development arrangement as incurred, as the activities are not reimbursable and meet the definition of research and development under ASC 730.

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.

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 and units is estimated by the market price of the Company’s common stock at the date of grant. Restricted stock awards and units are being amortized to expense over the shorter of the requisite service period or the actual vesting period. Performance stock units are subject to both performance-based and service vesting requirements. The grant-date fair value of performance stock units is based on the fair value of the Company’s stock on a grant date and is recognized over the service period based on an assessment of the likelihood that the applicable performance goals will be achieved, and compensation expense is periodically adjusted based on actual and expected performance. 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. 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 2025 and 2024, 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, 2025, the Company had no leases that qualified as financing arrangements.

LIGHTWAVE LOGIC, INC.NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2025 AND 2024

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, 2025 and 2024, the Company didnot 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 December 2023, the FASB issued Accounting Standards Update (ASU) 2023-09 – Income Taxes (Topic 740), which requires disclosures related to the rate reconciliation and income taxes paid 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 adopted the guidance for the annual reporting period ended December 31, 2025.

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires incremental disclosures about reportable segments but does not change the definition of a segment or the guidance for determining reportable segments. The new guidance requires disclosure of significant segment expenses that are (1) regularly provided to (or easily computed from information regularly provided to) the chief operating decision maker (“CODM”) and (2) included in the reported measure of segment profit or loss. The new standard also requires companies to disclose the title and position of the individual (or the name of the committee) identified as the CODM, allows companies to disclose multiple measures of segment profit or loss if those measures are used to assess performance and allocate resources, and is applicable to companies with a single reportable segment. The requirements are effective for annual reporting periods beginning on January 1, 2024, and are required to be applied retrospectively. The Company has adopted the additional disclosure requirements under ASU 2023-07. The additional requirements did not have a material impact on the financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

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 periods 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.

LIGHTWAVE LOGIC, INC.NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2025 AND 2024

NOTE 2 -RESTATEMENT OF FINANCIAL STATEMENTS AND CORRECTION OF PRIOR-PERIOD ERRORS

The Company identified an error related to the accounting for non-cash stock option exercises in previously issued financial statements. As a result, the Company corrected the error by recording the cumulative impact as an adjustment to opening stockholders’ equity.

Error Identified in the Year Ended December 31, 2021

During the year ended December 31, 2021, the Company incorrectly expensed a portion of the value of the net shares issued in connection with non-cash stock option exercises as compensation expense. The Company determined that the value of the net shares issued in non-cash stock option exercises should not have been recognized as compensation expense, resulting in an overstatement of compensation expense in the Company’s previously issued financial statements.

The correction of this error resulted in a decrease to accumulated deficit by $3,407,443 and a corresponding decrease to additional paid-in capital as of December 31, 2021. The cumulative impact of this correction has been reflected as an adjustment to opening accumulated deficit and additional paid-in capital as of December 31, 2023 (the beginning of the earliest period presented), and the comparative stockholders’ equity balances as of December 31, 2024 have been restated to reflect the correction.

Restated Financial Information

The following table presents the effects of the restatement on the Company’s previously reported balance sheet and statement of changes in stockholders’ equity as of December 31, 2023 and 2024.

NOTE 3 –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 joint development, joint venture and licensing arrangements. The Company expects that it will incur approximately $2,400,000 of expenditures per month over the next 12 months. The Company’s current cash position enables it to finance its operations through at least December 2027. On December 15, 2025, the Company entered into an underwriting agreement with an investment bank to sell 13,416,667 shares of its Common Stock. The net proceeds to the Company from this offering were $37,756,627, after deducting underwriting discounts and commissions and other offering expenses payable by the Company. 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 (described in Note 10). This purchase agreement was terminated on December 15, 2025. As of the termination date, pursuant to the purchase agreement, the Company had received $3,646,655 under this 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). As of the date of this filing, pursuant to the sales agreement, the Company has $22,081,511 in shares of common stock, and has $12,235,261 in shares remaining 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 4). For the year ended December 31, 2025, the Company recognized $106,855 in revenue related to this agreement. The Joint Development Agreement also described in Note 4 resulted in the Company recognizing $130,000 in non-recurring engineering revenue for the year ended December 31, 2025. 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.

LIGHTWAVE LOGIC, INC.NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2025 AND 2024

NOTE 4 –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.

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.

In December 2025, Company entered into a memorandum of agreement (also referred to as “joint development agreement”) under which it, along with other parties, performs its respective part of the development work to develop an electro-optical polymer-based modulator chip for use in communication applications. The development work consists of preparing reference documentation and support of a multi-project wafer chip produced at a mutually agreed upon foundry, the design and post processing of fabricated chips, and complete product verification and volume manufacturing preparation, with each party to the agreement having responsibility over various deliverables for each phase.

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. $6,541 and $23,208 of this amount is recorded as a contract liability in current liabilities on the Company’s balance sheets as of December 31, 2025 and December 31, 2024, respectively. For the years ended December 31, 2025 and December 31, 2024, the Company recognized $106,855 and $81,855 in revenue related to this agreement.

Revenues related to the joint development agreement are recognized at a point of time, when control over the performance obligations is transferred to a customer. For the year ended December 31, 2025, the Company recognized $130,000 in non-recurring engineering 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:

Significant changes in the contract balances for the years ended December 31, 2025 and December 31, 2024 are as follows:

LIGHTWAVE LOGIC, INC.NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2025 AND 2024

NOTE 4 – REVENUE (CONTINUED)

Assets Recognized for the Costs to Obtain a Contract

There are no assets recognized for the costs to obtain the License Agreement.

NOTE 5 –PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:

NOTE 6 –PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

Depreciation expense for the years ended December 31, 2025 and 2024 was $1,821,084 and $1,563,477, respectively. During the year ended December 31, 2025, the Company traded in property and equipment with a cost and accumulated depreciation of $25,140 for a gain of $28,800. During the year ended December 31, 2025, the Company retired property and equipment with a cost of $40,266 and accumulated depreciation of $31,484 for a loss of $8,782. 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.

LIGHTWAVE LOGIC, INC.NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2025 AND 2024

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 is recorded for remaining patent applications since patents on these applications have yet to be granted

Intangible assets consist of the following:

Amortization expense for the years ended December 31, 2025 and 2024 was $82,284 and $119,283, respectively. During the year ended December 31, 2025, the Company retired certain expired patents and patent applications with a cost of $425,314 and accumulated amortization of $380,144 for a loss of $45,170. 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.

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 was 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-eight (128) months, with an effective date of June 1, 2023. Base rent through January 31, 2024 of the Amended Lease term was 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 December 31, 2025, the operating lease right-of-use asset and operating lease liability amounted to $2,440,369 and $2,598,681, respectively. As of December 31, 2024, the operating lease right-of-use asset and operating lease liability amounted to $2,645,723 and $2,766,971, respectively.

LIGHTWAVE LOGIC, INC.NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2025 AND 2024

NOTE 8 – LEASES (CONTINUED)

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, 2025, by year and in aggregate, including the extended term, are as follows:

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:

As of December 31, 2025, current operating leases had remaining terms between 12 months and 8.08 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, 2025, the Company did not have any finance leases.

Operating and short-term lease costs totaling $372,282 and $107,140 are included in research and development and general and administrative expenses for the year ended December 31, 2025. 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.

LIGHTWAVE LOGIC, INC.NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2025 AND 2024

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.

Loss before provision for income taxes for the years ended December 31, 2025 and 2024 was as follows:

The income tax (benefit) provision consists of the following:

Upon adoption of ASU 2023-09, Improvements to Income Tax Disclosures, the reconciliation of the statutory federal rate to the Company’s effective income tax rate for the year ended December 31, 2025 was as follows:

The reconciliation of the statutory federal rate to the Company’s effective income tax rate for the year ended December 31, 2024 in accordance with the guidance prior to the adoption of ASU 2023-09 was as follows:

LIGHTWAVE LOGIC, INC.NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2025 AND 2024

NOTE 9 – INCOME TAXES (CONTINUED)

The components of deferred tax assets as of December 31, 2025 and 2024 are as follows:

The valuation allowance for deferred tax assets as of December 31, 2025 and 2024 was $41,389,874 and $37,024,998. The change in the total valuation for the year ended December 31, 2025 was an increase of $4,364,876, and for the year ended December 31, 2024 was an increase of $4,219,770.

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.

As of December 31, 2025, the Company had federal net operating loss carry forwards of approximately $140,064,567, comprised of federal net operating losses in the amount of approximately$34,755,366 recorded in tax years beginning prior to January 1, 2018 expiring through the year ending December 31, 2037 and federal net operating losses recorded in tax years beginning January 1, 2018 and after in the amount of approximately $105,309,201 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 limitations 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, 2025, the Company hadno unrecognized tax benefits and no charge during 2025, and accordingly, the Company didnot recognize any interest or penalties during 2025 related to unrecognized tax benefits. There isno accrual for uncertain tax positions as of December 31, 2025.

The Company files U.S. income tax returns and state income tax returns. With few exceptions, the U.S. and state income tax returns filed for the tax years ended on December 31, 2022 and thereafter are subject to examination by the relevant taxing authorities.

On July 4, 2025, the U.S. H.R.1, an act to provide for reconciliation pursuant to title II of H. Con. Res. 14. (the “OBBBA”) was enacted. The OBBBA introduces multiple tax law and other legislative changes, including modifications to income tax provisions such as existing 21% corporate income tax rate made permanent, domestic research and development expenses, the restoration of 100% bonus depreciation, changes to Section 163(j) interest limitations, and U.S. taxation of international earnings; the repeal or acceleration of the sunset of certain tax credits under the 2022 Inflation Reduction Act and elimination of certain penalties for violations of certain regulatory credit programs. The Company recognized the effects of the OBBBA provisions in its financial results to the extent they are applicable to the year ended December 31, 2025 and will continue to evaluate the impact of these provisions on its 2026 and subsequent consolidated financial statements.

LIGHTWAVE LOGIC, INC.NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2025 AND 2024

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 26, 2024, the Company filed a $100,000,000 universal shelf registration statement with the U.S. Securities and Exchange Commission which became effective on August 5, 2024.

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 were 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, 2025, the institutional investor purchased 7,756,336 shares of common stock for proceeds of $30,000,000 and the Company issued 101,781 shares of common stock as additional commitment fee, valued at $518,265 fair value, leaving zero in reserve for additional commitment fees. During the year ended December 31, 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. 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. As of December 31, 2025, no amounts remain available under this purchase agreement.

On March 17, 2025, the Company entered into a new purchase agreement with the same 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 245,098 shares of common stock to the institutional investor as an initial commitment fee valued at $222,990 fair value, and 490,196 shares of common stock were reserved for additional commitment fees to the institutional investor in accordance with the terms of the purchase agreement.

During the year ended December 31, 2025, pursuant to the purchase agreement, the institutional investor purchased 2,050,000 shares of common stock for proceeds of $3,646,655 and the Company issued 59,586 shares of common stock as additional commitment fee, valued at $139,292 fair value. This purchase agreement was terminated on December 15, 2025 in conjunction with an offering to sell shares of the Company’s common stock to an investment bank.

On December 17, 2025, the Company closed the offering with an investment bank to sell up to 13,416,667 shares of its common stock, including up to 1,750,000 shares to cover over-allotments. Pursuant to the underwriting agreement for the offering, the Company agreed to issue to the underwriter warrants to purchase up to 350,000 shares of common stock, or three percent (3%) of the total number of shares of common stock sold in the offering, as well as additional underwriter warrants to purchase up to an aggregate of 52,500 shares of common stock in connection with the exercise of the option by the underwriter. During the year ended December 31, 2025, the Company sold 11,666,667 shares under this agreement for the net proceeds of $32,825,700, after deducting underwriting discounts and commissions and other offering expenses payable by the Company. The underwriter warrants will be immediately exercisable at an exercise price of $3.45 per share during the five-year 5 period following the date of the underwriting agreement. As of the year ended December 31, 2025,350,000 underwriter warrants were outstanding. No underwriting warrants were exercised during the year ended December 31, 2025.

LIGHTWAVE LOGIC, INC.NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2025 AND 2024

NOTE 10 – STOCKHOLDERS’ EQUITY (CONTINUED)

Common Stock (Continued)

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.

During the year ended December 31, 2025, pursuant to the sales agreement, the investment banking company sold 5,885,853 shares of the Company’s common stock for proceeds of $18,785,657 after a payment of the commission in the amount of $581,004 to the investment banking company. 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 period from January 1, 2026 through March 20, 2026, pursuant to the sales agreement, the investment banking company sold 0 shares of the Company’s common stock.

NOTE 11 –STOCK BASED COMPENSATION

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, 2025, options to purchase 350,000 shares of common stock are outstanding under the 2007 Plan.

During 2016, the Board of Directors of the Company adopted the 2016 Equity Incentive Plan (“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 were authorized for issuance. Effective May 15, 2025, the 2016 Plan was terminated. As of December 31, 2025, options to purchase 7,569,828 shares of common stock have been issued and are outstanding,498,694 restricted shares of common stock have been granted, net of forfeitures,1,616,380 restricted stock units have been granted, and 542,566 performance stock units have been issued under the 2016 Plan.

During 2025, the Board of Directors of the Company adopted the 2025 Equity Incentive Plan (“2025 Plan”) that was approved by the shareholders at the 2025 annual meeting of shareholders on May 15, 2025. Under the 2025 Plan, the Company is authorized to grant awards of incentive and non-qualified stock options and restricted stock to purchase up to 6,000,000 shares of common stock to employees, directors and consultants. As of December 31, 2025, options to purchase 451,250 shares of common stock have been issued and are outstanding and 1,561,119 restricted stock units have been granted under the 2025 Plan. As of December 31, 2025,3,987,631 shares of common stock remain available for grants under the 2025 Plan.

LIGHTWAVE LOGIC, INC.NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2025 AND 2024

Common Stock Options and Warrants (Continued)

These 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. Options granted under the 2025 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 the year ended December 31, 2025: no dividend yield, expected volatility, based on the Company’s historical volatility,78.7% to 82.0%, risk-free interest rate between 4.18% to 4.48% 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 2024 are as follows: 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.

As of December 31, 2025, there was $1,524,567 of unrecognized compensation expense related to non-vested option awards that is expected to be recognized through September 2028. As of December 31, 2024, there was $2,755,783 of unrecognized compensation expense related to non-vested option awards.

Share-based compensation was recognized as follows:

LIGHTWAVE LOGIC, INC.NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2025 AND 2024

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, 2025 and 2024:

The aggregate intrinsic value of options and warrants outstanding and exercisable as of December 31, 2025 was $9,210,466 and $8,336,267, 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 $3.24 for the Company’s common stock on December 31, 2025. During the year ending December 31, 2025,1,724,012 options with the aggregate intrinsic value of $1,129,713 were exercised for proceeds of $280,583. Of this amount,1,350,000 options were exercised via cashless settlement. During the year ending December 31, 2025,125,000 warrants with the aggregate intrinsic value of $468,750 were exercised for proceeds of $75,000. 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.

LIGHTWAVE LOGIC, INC.NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2025 AND 2024

Restricted Stock Awards and Units

The Company grants restricted stock units (“RSUs”) and restricted stock awards (“RSAs”) to employees and directors. RSUs represent the right to receive shares of common stock upon vesting, while RSAs are shares issued at the grant date that remain subject to forfeiture until vesting conditions are met. These awards are amortized on a straight-line basis over the vesting period into stock-based compensation expense. The vesting period ranges from immediate vesting to monthly or quarterly vesting.

Upon the occurrence of a Change in Control, 100% of the unvested RSAs and RSUs 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 and units is estimated by the market price of the Company’s common stock at the date of grant. Restricted stock activity during the years ended December 31, 2025 and December 31, 2024 is as follows:

Restricted stock awards and units are being amortized to expense over the shorter of the requisite service period or the vesting period. As of December 31, 2025 and 2024, the unamortized value of the restricted stock awards was $203,458 and $656,735, respectively. As of December 31, 2025 and 2024, the unamortized value of the restricted stock units was $5,836,770 and $0, respectively.

During the years ended December 31, 2025 and 2024, the Company recognized $98,189 and $671,070, respectively, for restricted stock awards issuances, net of forfeitures and share settlement for taxes as deferred compensation.

Performance Stock Units

On April 18, 2025, the Company granted 2,187,501 performance stock units (PSUs) subject to both performance-based and service vesting requirements to the Company’s executives. Performance vesting requirements are tied to various individual and corporate goals related to the Company’s commercialization, as measured over a one-year performance period. The grant date fair value of the PSUs granted was $2,029,126, as determined by the Company’s closing common stock price on the date of the grant. The grant date fair value per share was $0.93.

On September 12, 2025, in conjunction with entering into a multi-year employment agreement with the Company’s Chief Executive Officer (“CEO”), the Company modified 1,616,380 of the PSUs held by the CEO by removing the performance conditions and converting the awards into RSUs, with vesting subject to continued service. Consistent with ASC 718, $298,311 compensation expense recognized from the grant date through the modification date was based on the original grant-date fair value of $0.93 per share and the probability of achieving performance conditions based on the evaluation as of the modification date. Upon the modification, the Company determined the fair values of the modified and the original awards, and the incremental fair value of the modified award together with the remaining unrecognized original grant-date fair value, totaling $3,365,938 will be recognized prospectively, over the remaining vesting period.

The Company determined that achievement of some performance conditions for the remaining PSUs is probable as of December 31, 2025, and recorded $503,284 stock-based compensation expense related to the PSU vesting. The Company issued 542,566 shares for the PSUs earned based on the achievement of the performance conditions and repurchased 148,490 shares to cover the employee portion of payroll taxes, thus issuing 394,076 net shares. As of December 31, 2025, no PSUs remain outstanding. No PSUs were outstanding or expensed as of and during the year ended December 31, 2024.

LIGHTWAVE LOGIC, INC.NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2025 AND 2024

NOTE 12 –LOSS PER SHARE** **

The Company calculates earnings (loss) per share ("EPS") in accordance with FASB ASC 260, Earnings Per Share. Basic EPS is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For the years ended December 31, 2025 and 2024, the Company reported a net loss; therefore, diluted EPS is calculated the same as basic EPS, as the inclusion of all potentially dilutive securities would be anti-dilutive.

The following securities were excluded from the calculation of diluted loss per share because their effect would have been anti-dilutive:

NOTE 13 –RELATED PARTIES

During the years ended December 31, 2025, and 2024, 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, 2025 were as follows:

Related party transactions for the year ended December 31, 2024 were as follows:

NOTE 14 –RETIREMENT PLAN

The Company established a 401(k) retirement plan covering all eligible employees beginning November 15, 2013, which was amended effective February 15, 2025. 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 $187,630 and $134,766 for the years ending December 31, 2025 and 2024, respectively. The plan is subject to the annual IRS elective deferral limit of $23,500 per employee for 2025,$7,500 catch-up for those aged 50 and over, and $11,250 or 150% of the regular catch-up limit for those aged 60-63.

LIGHTWAVE LOGIC, INC.NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2025 AND 2024

NOTE 15 –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 as a whole and does not receive discrete financial information for separate business units. The CODM is responsible for evaluating financial results and making resource allocation decisions. The Company determined that it has one operating and reportable segment based on the way the CODM organizes, manages, and evaluates the Company’s operations on a consolidated basis.

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 for the years ended December 31, 2025 and 2024:

Significant Segment Expenses

The Company considers the following as significant expenses in evaluating its segment performance:

Other segment items were $0 for the years ended December 31, 2025 and 2024. Other segment items were $0 because cost of sales, research and development, and general and administrative expenses comprise all expenses included in the CODM measure of segment operating loss.

LIGHTWAVE LOGIC, INC.NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2025 AND 2024

NOTE 15 – SEGMENT REPORTING (CONTINUED)

Segment assets

The CODM does not regularly review asset information by segment; accordingly, the Company has not disclosed segment assets.

Entity-Wide Disclosures

NOTE 16 –SUBSEQUENT EVENTS

On January 8, 2026, investment bank exercised an option to purchase from the Company up to 1,750,000 additional shares of common stock for the purpose of covering over-allotments. Pursuant to the underwriting agreement for the offering, the Company issued to the underwriter warrants to purchase up to 52,500 shares of Common Stock. The Company received $4,930,928 in cash proceeds, after deducting underwriting discounts and commissions and other estimated offering expenses payable by the Company. The underwriter warrants will be immediately exercisable at an exercise price of $3.45 per share during the five-year period following the date of the underwriting agreement.