Item 1A. Risk Factors.
Risks Related to our Business
Investing in our common stock
is risky. In addition to the other information contained in this Annual Report on Form 10-K, you should consider carefully the following
risk factors in evaluating our business and us. If any of the following events actually occur, our business, operating results, prospects
or financial condition could be materially and adversely affected. This could cause the trading price of our common stock to decline
and you may lose all or part of your investment. References to past events are provided by way of example only and are not intended to
be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring
in the future. The risks described below are not the only ones that we face. Additional risks not presently known to us or that we currently
deem immaterial may also significantly impair our business operations and could result in a complete loss of your investment.
We have incurred substantial operating losses since our inception
and will continue to incur substantial operating losses for the foreseeable future.
Since our inception, we
have been engaged primarily in the research and development of our electro-optic polymer materials technologies and products. As a result
of these activities, we have incurred significant losses and have experienced negative cash flow since our inception. We incurred a net
loss of $20,313,797 for the year ended December 31, 2025, and a net loss of $22,535,041 for the year ended December 31, 2024. As of December
31, 2025, we had an accumulated deficit of $167.3 million. We anticipate that we will continue to incur operating losses through at least
2027.
We may not be able to generate
significant revenue either through customer contracts for our existing or future products or technologies or through development contracts
from the U.S. government or government subcontractors. We expect to continue to make significant operating and capital expenditures for
research and development and to improve and expand production, sales, marketing and administrative systems and processes. As a result,
we will need to generate significant revenue to achieve profitability. We cannot assure you that we will ever achieve profitability.
We are subject to the risks frequently experienced by early-stage
companies.
The likelihood of our success
must be considered in light of the risks frequently encountered by early-stage companies, especially those formed to develop and market
new technologies. These risks include our potential inability to:
• Establish significant product sales and marketing capabilities;
• Identify, attract, retain and motivate qualified personnel;
• Maintain our reputation and build trust with customers.
Our failure to effectively manage our growth
and effectively transition from our focus on research and development activities to commercial operations could harm our business.
Failure to manage growth
of operations could harm our business. To date, a large number of our activities and resources have been directed at the research and
development of our technologies and development of potential related products including work in association with external partners. The
transition from a focus on research and development to being a vendor of products requires effective planning and management. Additionally,
growth arising from expected synergies from any future acquisitions will require effective planning and management. Future expansion
will be expensive and will likely strain management and other resources.
In order to effectively manage growth, we must:
• Hire, train and integrate new personnel in all areas of our business;
• Expand our facilities and increase capital investments; and
• Continue to successfully partner with silicon-based foundries.
We cannot assure you that
we will be able to accomplish these tasks effectively or otherwise effectively manage our growth.
We will require additional capital to continue
to fund our operations and if we do not obtain additional capital, we may be required to substantially limit our operations.
Our business does not presently
generate the cash needed to finance our current and anticipated operations. Based on our current operating plan and budgeted cash requirements,
we believe that we have sufficient funds to finance our operations through at least December 2027; however, we will need to obtain additional
future financing after that time to finance our operations until such time that we can conduct profitable revenue-generating activities.
We expect that we will need to seek additional funding through public or private financings, including equity financings, and through
other arrangements, including collaborative arrangements. Poor financial results, unanticipated expenses or unanticipated opportunities
could require additional financing sooner than we expect. Other than with respect to the Roth Sales Agreement for up to $35 million we
entered into with Roth Capital on December 9, 2022, we have no plans or arrangements with respect to the possible acquisition of additional
financing, and such financing may be unavailable when we need it or may not be available on acceptable terms. We currently have a remaining
amount of $12.2 million that is available to our Company pursuant to the Roth Sales Agreement.
Our forecast of the period
of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves
risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere
in this Annual Report on Form 10-K. We have based this estimate on assumptions that may prove to be wrong, and we could use our available
capital resources sooner than we currently expect.
Additional financing may
not be available to us, due to, among other things, our Company not having a sufficient credit history, income stream, profit level,
asset base eligible to be collateralized, or market for its securities. If we raise additional funds by issuing equity or convertible
debt securities, the percentage ownership of our existing shareholders may be reduced, and these securities may have rights superior
to those of our common stock. If adequate funds are not available to satisfy our long-term capital requirements, or if planned revenues
are not generated, we may be required to substantially limit our operations.
We are entering new markets, and if we fail to accurately predict
growth in these new markets, we may suffer substantial losses.
We are initially targeting
applications in fiber optic data communications and telecommunications markets, in particular ultra-high bandwidth optical connections
deployed inside and between datacenters and/or AI clusters. In addition, we are exploring other applications that include automotive/LIDAR,
sensing, displays, storage, aerospace and defense, satellites, quantum computing etc., for our polymer technology platform. We expect
to continue to develop products for these markets and to seek to identify new markets. These markets change rapidly, and we cannot assure
you that they will grow or that we will be able to accurately forecast market demand, or lack thereof, in time to respond appropriately.
Our investment of resources to develop products for these markets may either be insufficient to meet actual demand or result in expenses
that are excessive in light of actual sales volumes. Failure to predict growth and demand accurately in new markets may cause us to suffer
substantial losses. In addition, as we enter new markets, there is a significant risk that:
• The market may not accept the price and/or performance of our products;
Our plan to develop relationships with strategic partners may
not be successful.
Part of our business strategy
is to maintain and develop strategic relationships with private firms, such as packaging companies and silicone-based foundries, and
to a lesser extent, government agencies and academic institutions, to conduct research and development and testing of our products and
technologies. For these efforts to be successful, we must identify partners whose competencies complement ours. We must also successfully
enter into agreements with them on terms attractive to us, and integrate and coordinate their resources and capabilities with our own.
We may be unsuccessful in entering into agreements with acceptable partners or negotiating favorable terms in these agreements. Also,
we may be unsuccessful in integrating the resources or capabilities of these partners. In addition, our strategic partners may prove
difficult to work with or less skilled than we originally expected. If we are unsuccessful in our collaborative efforts, our ability
to develop and market products could be severely limited.
The failure to establish and maintain collaborative relationships
may have a materially adverse effect on our business.
We are initially targeting
applications in fiber optic data communications and telecommunications markets, in particular ultra-high bandwidth optical connections
deployed inside and between datacenters and/or AI clusters. In addition, we are exploring other applications that include automotive/LIDAR,
sensing, displays, storage, aerospace and defense, satellites, quantum computing etc., for our polymer technology platform. Our ability
to generate significant revenues depends significantly on the extent to which potential customers and other potential industry partners
develop, promote and sell systems that incorporate our products, which, of course, we cannot control. Any failure by potential customers
and other potential industry partners to successfully develop and market systems that incorporate our products could adversely affect
our sales. The extent to which potential customers and other industry partners develop, promote and sell systems incorporating our products
is based on a number of factors that are largely beyond our ability to control.
We may participate in joint ventures that expose us to operational
and financial risk.
We may participate in one
or more joint ventures for the purpose of assisting us in carrying out our business expansion, especially with respect to new product
and/or market development. We may experience with our joint venture partner(s) issues relating to disparate communication, culture, strategy,
and resources. Further, our joint venture partner(s) may have economic or business interests or goals that are inconsistent with ours,
exercise their rights in a way that prohibits us from acting in a manner which we would like, or they may be unable or unwilling to fulfill
their obligations under the joint venture or other agreements. We cannot assure you that the actions or decisions of our joint venture
partners will not affect our operations in a way that hinders our corporate objectives or reduces any anticipated cost savings or revenue
enhancement resulting from these ventures.
If we fail to develop and introduce new
or enhanced products on a timely basis, our ability to attract and retain customers could be impaired and our competitive position could
be harmed.
We plan to operate in a
dynamic environment characterized by rapidly changing technologies and industry standards and technological obsolescence. To compete
successfully, we must design, develop, market and sell products that provide increasingly higher levels of performance and reliability
and meet the cost expectations of our customers. The introduction of new products by our competitors, the market acceptance of products
based on new or alternative technologies, or the emergence of new industry standards could render our anticipated products obsolete.
Our failure to anticipate or timely develop products or technologies in response to technological shifts could adversely affect our operations.
In particular, we may experience difficulties with product design, manufacturing, marketing or certification that could delay or prevent
our development, introduction or marketing of products. If we fail to introduce products that meet the needs of our customers or penetrate
new markets in a timely fashion our Company will be adversely affected.
Our future growth will suffer if we do not achieve sufficient
market acceptance of our organic nonlinear optical materials.
We expect our patented and
patent-pending optical materials along with trade secrets and licensed materials, to be the core of and the enabling technology for future
generations of optical devices, modules, sub-systems and systems that we will develop or out-license to electro-optic device manufacturers.
Most of our materials are still in the development stage, and we do not know when a market for our materials will develop, if at all.
Our success depends, in part, upon our ability to gain market acceptance of our organic nonlinear optical materials. To be accepted,
our materials must meet the technical and performance requirements of our potential customers. OEMs, suppliers or government agencies
may not accept polymer-based materials. In addition, even if we achieve some degree of market acceptance for our materials in one industry,
we may not achieve market acceptance in other industries that we are targeting. Also, certain large corporations may be predisposed against
doing business with a company of our limited size and operating history.
Our potential customers require our products
to undergo a lengthy and expensive qualification process, which does not assure product sales.
Prior to purchasing our
products, our potential customers will require that our products undergo extensive qualification processes. These qualification processes
may continue for several months or more. However, qualification of a product by a customer does not assure any sales of the product to
that customer. Even after successful qualification and sales of a product to a customer, a subsequent revision to the product, changes
in our customer’s manufacturing process or our selection of a new supplier may require a new qualification process, which may result
in additional delays. Also, once one of our products is qualified, it could take several additional months or more before a customer
commences volume production of components or devices that incorporate our products. Despite these uncertainties, we are devoting substantial
resources, including design, engineering, sales, marketing and management efforts, to qualifying our products with customers in anticipation
of sales. If we are unsuccessful or delayed in qualifying any of our products with a customer, sales of our products to a customer may
be precluded or delayed, which may impede our growth and cause our business to suffer.
Obtaining a sales contract with
a potential customer does not guarantee that a potential customer will not decide to cancel or change its product plans, which could
cause us to generate no revenue from a product and adversely affect our results of operations.
Even after we secure a sales
contract with a potential customer, we may experience delays in generating revenue from our products as a result of a lengthy development
cycle that may be required. Potential customers will likely take a considerable amount of time to evaluate our products; it could take
12 to 24 months from early engagement by our sales team to actual product sales. The delays inherent in these lengthy sales cycles increase
the risk that a customer will decide to cancel, curtail, reduce or delay its product plans, causing us to lose anticipated sales. In
addition, any delay or cancellation of a customer’s plans could materially and adversely affect our financial results, as we may
have incurred significant expense and generated no revenue. Finally, our customers’ failure to successfully market and sell their
products could reduce demand for our products and materially and adversely affect our business, financial condition and results of operations.
If we were unable to generate revenue after incurring substantial expenses to develop any of our products, our business would suffer.
Many of our products will have long sales
cycles, which may cause us to expend resources without an acceptable financial return and which makes it difficult to plan our expenses
and forecast our revenue.
Many of our products will
have long sales cycles that involve numerous steps, including initial customer contacts, specification writing, engineering design, prototype
fabrication, pilot testing, regulatory approvals (if needed), sales and marketing and commercial manufacture. During this time, we may
expend substantial financial resources and management time and effort without any assurance that product sales will result. The anticipated
long sales cycle for some of our products makes it difficult to predict the quarter in which sales may occur. Delays in sales may cause
us to expend resources without an acceptable financial return and make it difficult to plan expenses and forecast revenues.
Successful commercialization of our current and future products
will require us to maintain a high level of technical expertise.
Technology in our target
markets is undergoing rapid change. To succeed in our target markets, we will have to establish and maintain a leadership position in
the technology supporting those markets. Accordingly, our success will depend on our ability to:
• Establish and effectively defend our intellectual property; and
We cannot assure you that we will be able to achieve any
of these objectives.
One of our significant target markets is
the telecommunications market, which historically has not accepted polymer modulators.
One of our significant target
markets is the telecommunications market, which demands high reliability optical components. Historically, polymer modulators have not
been accepted into this market even though polymer modulators have achieved TelcordiaTM based specifications. It is clear that the
telecommunications market is demanding higher and higher data rates for its optical components, and may again decide that polymer based
modulators are not suitable even if higher data rates, high reliability, and low power consumption are demonstrated.
Another of our significant target markets
is the data communications (datacenter and/or high performance computing) market, which may be subject to heavy competition from other
PIC based technologies such as silicon photonics and Indium Phosphide.
Another of our significant
target markets is the fiber optic data communications market, in particular ultra-high bandwidth optical connections deployed inside
and between datacenters and/or AI clusters, which may be subject to heavy competition from other PIC based technologies such as silicon
photonics and Indium Phosphide. As the demands for high performance, low cost ($/Gbps) is implemented into next generation architectures,
polymer modulators and polymer based PIC products may be subject to significant competition. Furthermore, there is a potential that technologies
such as silicon photonics and Indium Phosphide might reach the metric of $1/Gbps at 800Gbps before ours. Customers may then be less willing
to purchase new technology such as ours or invest in new technology development such as ours for next generation systems.
Our inability to successfully acquire and
integrate other businesses, assets, products or technologies could harm our business and cause us to fail at achieving our anticipated
growth.
We may grow our business
through strategic acquisitions and investments, and we are actively evaluating acquisitions and strategic investments in businesses,
products or technologies that we believe could complement or expand our product offering, create and/or expand a client base, enhance
our technical capabilities or otherwise offer growth or cost-saving opportunities. From time to time, we may enter into letters of intent
with companies with which we are negotiating potential acquisitions or investments or as to which we are conducting due diligence. Although
we are currently not a party to any binding material definitive agreement with respect to potential investments in, or acquisitions of,
complementary businesses, products or technologies, we may enter into these types of arrangements in the future, which could materially
decrease the amount of our available cash or require us to seek additional equity or debt financing. We have limited experience in successfully
acquiring and integrating businesses, products and technologies. We may not be successful in negotiating the terms of any potential acquisition,
conducting thorough due diligence, financing the acquisition or effectively integrating the acquired business, product or technology
into our existing business and operations. Our due diligence may fail to identify all of the problems, liabilities or other shortcomings
or challenges of an acquired business, product or technology, including issues related to intellectual property, product quality or product
architecture, regulatory compliance practices, revenue recognition or other accounting practices, or employee or customer issues.
Additionally, in connection
with any acquisitions we complete, we may not achieve the synergies or other benefits we expected to achieve, and we may incur write-downs,
impairment charges or unforeseen liabilities that could negatively affect our operating results or financial position or could otherwise
harm our business. If we finance acquisitions using existing cash, the reduction of our available cash could cause us to face liquidity
issues or cause other unanticipated problems in the future. If we finance acquisitions by issuing convertible debt or equity securities,
the ownership interest of our existing stockholders may be diluted, which could adversely affect the market price of our stock. Further,
contemplating or completing an acquisition and integrating an acquired business, product or technology could divert management and employee
time and resources from other matters, which could harm our business, financial condition and operating results.
Our failure to compete successfully could harm our business.
The markets that we are
targeting for our proprietary electro-optic polymer systems and photonic devices are intensely competitive. Most of our present and potential
competitors have or may have substantially greater research and product development capabilities, financial, scientific, marketing, manufacturing
and human resources, name recognition and experience than we have. As a result, these competitors may:
• devote greater resources to developing, marketing or selling their products;
• withstand price competition more successfully than we can; and
Our failure to compete successfully against these existing
or future competitors could harm our business.
The loss of certain of our key personnel,
or any inability to attract and retain additional personnel, could impair our ability to attain our business objectives.
Our future success depends
to a significant extent on the continued service of our key management personnel, particularly Yves LeMaitre, our Chief Executive Officer,
Aref Chowdhury, Chief Technology Officer, Lance Thompson, Vice President of Engineering, and Robert Blum, Senior Vice President of Sales.
Accordingly, the loss of the services of any of these persons would adversely affect our business and our ability to continue to commercialize
our products, and impede the attainment of our business objectives.
Our future success will
also depend on our ability to attract, retain and motivate highly skilled personnel to assist us with product development and commercialization.
Competition for highly educated qualified personnel in the polymer industry is intense. If we fail to hire and retain a sufficient number
of qualified management, engineering, sales and technical personnel, we will not be able to attain our business objectives.
If we fail to develop and maintain the
quality of our manufacturing integration and design processes, our operating results would be harmed.
The manufacture and integration
of our materials for devices is a multi-stage process that requires the use of high-quality materials and advanced manufacturing technologies
and design. Also, polymer-related device development and manufacturing, whether performed by a silicon photonics design house or elsewhere,
must occur in a highly controlled, clean environment to minimize particles and other yield and quality-limiting contaminants. In spite
of stringent quality controls, weaknesses in process control or minute impurities in materials may cause a substantial percentage of
a product in a lot to be defective. If we are not able to develop and continue to improve our manufacturing design processes, if stringent
quality controls are not maintained, or if contamination problems arise, our operating results would be harmed.
The complexity of our organic nonlinear
optical materials may lead to errors, defects and bugs, which could result in the necessity to redesign materials and could negatively
impact our reputation with customers.
Organic nonlinear optical
materials as complex as those we market and intend to market might contain errors, defects and bugs when first introduced or as new versions
are released. Delivery and integration of materials with production defects or reliability, quality or compatibility problems could significantly
delay or hinder market acceptance of our materials or result in a costly recall and could damage our reputation and adversely affect
our ability to sell our materials. If our organic nonlinear optical materials experience defects, we may need to undertake a redevelopment
of the materials, a process that may result in significant additional expenses.
We may also be required
to make significant expenditures of capital and resources to resolve such problems. There is no assurance that problems will not be found
in new products after commencement of commercial production, despite testing by our suppliers, our customers and us.
If we decide to make commercial quantities
of products at our facilities, we will be required to make significant capital expenditures to increase capacity.
We lack the internal ability
to manufacture products at a level beyond the stage of early commercial introduction. To the extent we do not have an outside vendor
to manufacture our products, we will have to increase our internal production capacity and we will be required to expand our existing
facilities or to lease new facilities or to acquire entities with additional production capacities. These activities would require us
to make significant capital investments and may require us to seek additional equity or debt financing. We cannot assure you that such
financing would be available to us when needed on acceptable terms, or at all. Further, we cannot assure you that any increased demand
for our products would continue for a sufficient period of time to recoup our capital investments associated with increasing our internal
production capacity.
In addition, we do not have
experience manufacturing our products in large quantities. In the event of significant demand for our products, large-scale production
might prove more difficult or costly than we anticipate and lead to quality control issues and production delays.
We may not be able to manufacture products at competitive prices.
To date, we have produced
limited quantities of materials for license and sale and materials and devices for research, development, demonstration and prototype
purposes. The cost per unit for these products currently exceeds the price at which we could expect to profitably sell them. If we cannot
substantially lower our cost of production as we move into sales of products in significant commercial quantities, our financial results
will be harmed.
We may be unable to export our products
or technology to other countries, convey information about our technology to citizens of other countries or sell certain products commercially,
if the products or technology are subject to United States export or other regulations.
We develop certain polymer-based
products that we believe the United States government and other governments may be interested in using for military and information gathering
or antiterrorism activities. United States government export regulations may restrict us from selling or exporting certain products into
other countries, exporting our technology to those countries, conveying information about our technology to citizens of other countries
or selling certain products to commercial customers. We may be unable to obtain export licenses for products or technology, if they become
necessary. We currently cannot assess whether national security concerns would affect our future products and, if so, what procedures
and policies we would have to adopt to comply with applicable existing or future regulations.
We are subject to regulatory compliance related to our operations.
We are subject to various
U.S. governmental regulations related to occupational safety and health, labor and business practices. Failure to comply with current
or future regulations could result in the imposition of substantial fines, suspension of production, alterations of our production processes,
cessation of operations, or other actions, which could harm our business.
We may incur liability arising from the use of hazardous materials.
Our business and our facilities
are subject to a number of federal, state and local laws and regulations relating to the generation, handling, treatment, storage and
disposal of certain toxic or hazardous materials and waste products that we use or generate in our operations. Many of these environmental
laws and regulations subject current or previous owners or occupiers of land to liability for the costs of investigation, removal or
remediation of hazardous materials. In addition, these laws and regulations typically impose liability regardless of whether the owner
or occupier knew of, or was responsible for, the presence of any hazardous materials and regardless of whether the actions that led to
the presence were taken in compliance with the law. In our business, we use hazardous materials that are stored on site. We use various
chemicals in our manufacturing process that may be toxic and covered by various environmental controls. An unaffiliated waste hauler
transports the waste created by use of these materials off-site. Many environmental laws and regulations require generators of waste
to take remedial actions at an off-site disposal location even if the disposal was conducted lawfully. The requirements of these laws
and regulations are complex, change frequently and could become more stringent in the future. Failure to comply with current or future
environmental laws and regulations could result in the imposition of substantial fines, suspension of production, alteration of our production
processes, cessation of operations or other actions, which could severely harm our business.
Our data and information systems and network
infrastructure may be subject to hacking or other cybersecurity threats. If our security measures are breached and an unauthorized party
obtains access to our proprietary business information, our information systems may be perceived as being unsecure, which could harm
our business and reputation, and our proprietary business information could be misappropriated which could have an adverse effect on
our business and results of operations.
Our Company stores and transmits
its proprietary information on its computer systems. Despite our security measures, our information systems and network infrastructure
may be vulnerable to cyber-attacks or could be breached due to an employee error or other disruption that could result in unauthorized
disclosure of sensitive information that has the potential to significantly interfere with our business operations. Breaches of our security
measures could expose us to a risk of loss or misuse of this information, litigation and potential liability. Since techniques used to
obtain unauthorized access or to sabotage information systems change frequently and generally are not recognized until launched against
a target, we may be unable to anticipate these techniques or to implement adequate preventive measures in advance of such an attack on
our systems. In addition, we use third party vendors to store our proprietary information who use cyber or “Cloud” storage
of information as part of their service or product offerings, and despite our attempts to validate the security of such services, our
proprietary information may be misappropriated by other parties. In the event of an actual or perceived breach of our security, or the
security of one of our vendors, the market perception of the effectiveness of our security measures could be harmed and we could suffer
damage to our reputation or our business. Additionally, misappropriation of our proprietary business information could prove competitively
harmful to our business.
We conduct significantly all of our research
and development activities at our Englewood, CO facility, and circumstances beyond our control may result in considerable business interruptions.
We conduct significantly
all of our research and development activities at our Englewood, CO facility. Our operations are vulnerable to interruption by fire,
earthquake, floods or other natural disaster, quarantines or other disruptions associated with infectious diseases, national catastrophe,
terrorist activities, war, disruptions in our computing and communications infrastructure due to power loss, telecommunications failure,
human error, physical or electronic security breaches and computer viruses, and other events beyond our control. We do not have a detailed
disaster recovery plan.
Risks Related to our Intellectual Property
We may be unable to obtain effective intellectual property protection
for our products and technology.
Our intellectual property,
or any intellectual property that we have or may acquire, license or develop in the future, may not provide meaningful competitive advantages.
Our patents and patent applications, including those we license, may be challenged by competitors, and the rights granted under such
patents or patent applications may not provide meaningful proprietary protection. For example, numerous patents held by third parties
relate to polymer materials and electro-optic devices. These patents could be used as a basis to challenge the validity or limit the
scope of our patents or patent applications. A successful challenge to the validity or limitation of the scope of our patents or patent
applications could limit our ability to commercialize our polymer materials technology and, consequently, reduce our revenues.
Moreover, competitors may
infringe our patents or those that we license, or successfully avoid these patents through design innovation. To combat infringement
or unauthorized use, we may need to resort to litigation, which can be expensive and time-consuming and may not succeed in protecting
our proprietary rights. In addition, in an infringement proceeding a court may decide that our patents or other intellectual property
rights are not valid or are unenforceable, or may refuse to stop the other party from using the intellectual property at issue on the
grounds that it is non-infringing. Policing unauthorized use of our intellectual property is difficult and expensive, and we may not
be able to, or have the resources to, prevent misappropriation of our proprietary rights, particularly in countries where the laws may
not protect these rights as fully as the laws of the United States.
We also rely on the law
of trade secrets to protect unpatented technology and know-how. We try to protect this technology and know-how by limiting access to
those employees, contractors and strategic partners with a need to know this information and by entering into confidentiality agreements
with these parties. Any of these parties could breach the agreements and disclose our trade secrets or confidential information to our
competitors, or these competitors might learn of the information in other ways. Disclosure of any trade secret not protected by a patent
could materially harm our business.
We may be subject to patent infringement claims, which
could result in substantial costs and liability and prevent us from selling our products.
Third parties may claim
that our products or related technologies infringe their patents. Any patent infringement claims brought against us may cause us to incur
significant expenses, divert the attention of our management and key personnel from other business concerns and, if successfully asserted
against us, require us to pay substantial damages. In addition, as a result of a patent infringement suit, we may be forced to stop or
delay developing, manufacturing or selling products that are claimed to infringe a patent covering a third party’s intellectual
property unless that party grants us rights to use its intellectual property. We may be unable to obtain these rights on terms acceptable
to us, if at all. Even if we are able to obtain rights to a third party’s patented intellectual property, these rights may be non-exclusive,
and therefore our competitors may obtain access to the same intellectual property. Ultimately, we may be unable to sell our products
or may have to cease some of our business operations as a result of patent infringement claims, which could severely harm our business.
If our products infringe
the intellectual property rights of others, we may be required to indemnify customers for any damages they suffer. Third parties may
assert infringement claims against our current or potential customers. These claims may require us to initiate or defend protracted and
costly litigation on behalf of customers, regardless of the merits of these claims. If any of these claims succeed, we may be forced
to pay damages on behalf of these customers or may be required to obtain licenses for the products they use. If we cannot obtain all
necessary licenses on commercially reasonable terms, we may be unable to continue selling such products.
Our technology may be subject to government rights.
We may have obligations
to government agencies in connection with the technology that we have developed, including the right to require that a compulsory license
be granted to one or more third parties selected by certain government agencies. It may be difficult to monitor whether these third parties
will limit their use of our technology to these licensed uses, and we could incur substantial expenses to enforce our rights to our licensed
technology in the event of misuse.
Risks Related to our Common Stock
We could be negatively affected as a result of a proxy contest
and the actions of activist stockholders.
A proxy contest with respect
to election of our directors, or other activist stockholder activities, could adversely affect our business because: (1) responding to
a proxy contest and other actions by activist stockholders can be costly and time-consuming, disruptive to our operations and divert
the attention of management and our employees; (2) perceived uncertainties as to our future direction caused by activist activities may
result in the loss of potential business opportunities, and may make it more difficult to attract and retain qualified personnel and
business partners; and (3) if individuals are elected to our Board of Directors with a specific agenda, it may adversely affect our ability
to effectively and timely implement our strategic plans.
If we fail to maintain an effective system
of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements
or comply with applicable regulations could be impaired.
As a public company, we
are subject to the reporting requirements of the Securities Exchange Act of 1934 (Exchange Act) the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley
Act), the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), and the rules and regulations of The NASDAQ Stock
Market. We expect that compliance with these rules and regulations will continue to increase our legal, accounting and financial compliance
costs, make some activities more difficult, time-consuming and costly, and place significant strain on our personnel, systems and resources.
The Sarbanes-Oxley Act requires,
among other things, that we assess the effectiveness of our internal control over financial reporting annually and the effectiveness
of our disclosure controls and procedures quarterly. In particular, Section 404 of the Sarbanes-Oxley Act, (Section 404), requires us
to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on,
and our independent registered public accounting firm to attest to, the effectiveness of our internal control over financial reporting.
Our compliance with applicable provisions of Section 404 requires that we incur substantial accounting expense and expend significant
management time on compliance-related issues as we implement additional corporate governance practices and comply with reporting requirements.
Moreover, if we are not able to comply with the requirements of Section 404 applicable to us in a timely manner, or if we or our independent
registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material
weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory
authorities, stockholder or other third-party litigation, all of which would require additional financial and management resources.
Furthermore, investor perceptions
of our Company may suffer if deficiencies are found, and this could cause a decline in the market price of our stock or hinder our ability
to raise capital. Irrespective of compliance with Section 404, any failure of our internal control over financial reporting could have
a material adverse effect on our stated operating results and harm our reputation. If we are unable to continue to implement and maintain
these requirements effectively or efficiently, it could harm our operations, financial reporting, or financial results and could result
in an adverse opinion on our internal controls from our independent registered public accounting firm.
The exercise of options and warrants and
other issuances of shares of common stock or securities convertible into common stock will dilute your interest.
Our Board may determine
from time to time that it needs to raise additional capital by issuing additional shares of our common stock or other securities and
we are not restricted from issuing additional common stock, including securities that are convertible into or exchangeable for, or that
represent the right to receive, shares of our common stock. Because our decision to issue securities in any future offering will depend
on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future
offerings, or the prices at which such offerings may be affected. Additional equity offerings may dilute the holdings of existing stockholders
or reduce the market price of our common stock.
As of December 31, 2025,
we have outstanding and exercisable options and warrants to purchase an aggregate of 8,186,290 shares of our common stock at exercise
prices ranging from $0.51 to $16.81 per share with a weighted average exercise price of $3.57 per share. The exercise of options and
warrants at prices below the market price of our common stock could adversely affect the price of shares of our common stock. Additional
dilution may result from the issuance of shares of our capital stock in connection with any collaboration (although none are contemplated
at this time) or in connection with other financing efforts, including pursuant to the Roth Sales Agreement with Roth Capital. Any issuance
of our common stock that is not made solely to then-existing stockholders proportionate to their interests, such as in the case of a
stock dividend or stock split, will result in dilution to each stockholder by reducing his, her or its percentage ownership of the total
outstanding shares. Moreover, if we issue options or warrants to purchase our common stock in the future and those options or warrants
are exercised or we issue restricted stock, stockholders may experience further dilution. Holders of shares of our common stock have
no preemptive rights that entitle them to purchase their pro rata share of any offering of shares of any class or series.
The trading price of our common stock has
been, and may continue to be, volatile, and the value of our common stock may decline. This volatility, as well as general market conditions,
may cause our stock price to fluctuate greatly and even potentially expose us to litigation.
Our common stock may be
subject to continued volatility. During the 52 weeks in 2025, the share price for our common stock ranged from a low of $0.79 to a high
of $6.26. We cannot assure you that the market price for our common stock will be less volatile or will remain at its current level.
A decrease in the market price for our shares could result in substantial losses for investors. The market price of our common stock
may be significantly affected by one or more of the following factors, many of which are beyond our control, including:
• our Company’s ability to execute on its business plan;
• issuance of new or updated research or reports by securities analysts;
• large trades, block trades or short selling of our common stock;
• changes in laws or regulations applicable to our products or industry;
• additions or departures of key personnel;
• capital-raising activities or commitments;
• product shortages requiring suppliers to allocate minimum quantities;
• the commencement or conclusion of legal proceedings that involve us;
• costs related to possible future acquisitions of technologies or businesses;
Furthermore, the stock markets
frequently experience extreme price and volume fluctuations that affect the market prices of equity securities of many companies. These
fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry
fluctuations, as well as general economic, political, and market conditions such as recessions, elections, interest rate changes, or
international currency fluctuations, may negatively impact the market price of our common stock. As a result of such fluctuations, you
may not realize any return on your investment in us and may lose some or all of your investment. In the past, companies that have experienced
volatility in the market price of their stock have been subject to securities class action litigation or derivative litigation.
A sale of a substantial number of shares
of our common stock may cause the price of our common stock to decline and may impair our ability to raise capital in the future.
Our common stock is traded
on The NASDAQ Capital Market and, despite certain increases of trading volume from time to time, there have been periods when the market
for our common stock could be considered “thinly-traded,” meaning that the number of persons interested in purchasing our
common stock at or near bid prices at any given time may be relatively small. Finance transactions or option/warrant exercises resulting
in a large amount of newly issued shares that become readily tradable, or other events that cause current stockholders to sell shares,
could place downward pressure on the trading price of our stock the trading price of our stock could decline.
If our existing stockholders
sell, or the market perceives that our stockholders intend to sell, substantial amounts of our common stock in the public market, including
shares issued upon the exercise of outstanding options or warrants or pursuant to the Roth Sales Agreement, the market price of our common
stock could decline. Sales of a substantial number of shares of our common stock may make it more difficult for us to sell equity or
equity-related securities in the future at a time and price that we deem reasonable or appropriate.
Our common stock will be subject to potential
delisting if we do not maintain the listing requirements of the Nasdaq Capital Market.
Our common stock commenced
trading on The NASDAQ Capital Market on September 1, 2021. We cannot assure you that an active trading market for our common stock will
continue to be sustained. Nasdaq has rules for continued listing, including, without limitation, minimum market capitalization and other
requirements. Failure to maintain our listing, or de-listing from Nasdaq, would make it more difficult for stockholders to dispose of
our securities and more difficult to obtain accurate price quotations on our securities. This could have an adverse effect on the price
of our common stock. Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing
we may need in the future, may also be materially and adversely affected if our common stock and/or other securities are not traded on
a national securities exchange.
If securities or industry analysts do not
publish research or reports about our business, or if they change their recommendations regarding our stock adversely, our stock price
and trading volume could decline.
The trading market for most
listed companies’ securities depends in part on the research and reports that securities or industry analysts publish about them
or their business. We currently have no independent research analysts that cover our stock and we may not obtain research coverage by
securities and industry analysts until our products are commercialized and we obtain revenues, and there is no assurances that we will
ever obtain independent research analysts coverage. If no securities or industry analysts commence coverage of us, the trading price
for our common stock could be negatively affected. In the event any analyst who covers us downgrades our securities, the price of our
securities would likely decline. If one or more of these analysts ceases to cover us or fails to publish regular reports on us, interest
in the purchase of our securities could decrease, which could cause the price of our common stock and its trading volume to decline.
Our Board of Directors has the authority,
without stockholder approval, to issue preferred stock with terms that may not be beneficial to existing common stockholders and with
the ability to affect adversely stockholder voting power and perpetuate their control over us.
Our articles of incorporation,
as amended, allow us to issue shares of preferred stock without any vote or further action by our stockholders. Our Board of Directors
has the authority to fix and determine the relative rights and preferences of preferred stock. Our Board of Directors also has the authority
to issue preferred stock without further stockholder approval, including large blocks of preferred stock. As a result, our Board of Directors
could authorize the issuance of a series of preferred stock that would grant to holders thereof the preferred right to our assets upon
liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock or other preferred
stockholders and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock or existing
preferred stock, if any.
Preferred stock could be
used to dilute a potential hostile acquirer. Accordingly, any future issuance of preferred stock or any rights to purchase preferred
stock may have the effect of making it more difficult for a third party to acquire control of us. This may delay, defer or prevent a
change of control or an unsolicited acquisition proposal. The issuance of preferred stock also could decrease the amount of earnings
attributable to, and assets available for distribution to, the holders of our common stock and could adversely affect the rights and
powers, including voting rights, of the holders of our common stock and preferred stock.
Our articles of incorporation and amended
and restated bylaws, and certain provisions of Nevada corporate law, as well as certain of our contracts, contain provisions that could
delay or prevent a change in control even if the change in control would be beneficial to our stockholders.
Nevada law, as well
as our articles of incorporation, as amended, and amended and restated bylaws, contain anti-takeover provisions that could delay or prevent
a change in control of our Company, even if the change in control would be beneficial to our stockholders. These provisions could lower
the price that future investors might be willing to pay for shares of our common stock. These anti-takeover provisions:
Nevada Revised Statutes,
the terms of our employee stock option agreements and other contractual provisions may also discourage, delay or prevent a change in
control of our Company. Nevada Revised Statutes sections 78.378 to 78.3793 provide state regulation over the acquisition of a controlling
interest in certain Nevada corporations unless the articles of incorporation or bylaws of the corporation provide that the provisions
of these sections do not apply. Our articles of incorporation, as amended, and amended and restated bylaws do not state that these provisions
do not apply. The statute creates a number of restrictions on the ability of a person or entity to acquire control of a Nevada company
by setting down certain rules of conduct and voting restrictions in any acquisition attempt, among other things. The statute contains
certain limitations and it may not apply to our Company. Our 2025 Equity Incentive Plan includes change-in-control provisions that allow
us to grant options that may become vested immediately upon a change in control. Our Board of Directors also has the power to adopt a
stockholder rights plan that could delay or prevent a change in control of our Company even if the change in control is generally beneficial
to our stockholders. These plans, sometimes called “poison pills,” are oftentimes criticized by institutional investors or
their advisors and could affect our rating by such investors or advisors. If our Board of Directors adopts such a plan, it might have
the effect of reducing the price that new investors are willing to pay for shares of our common stock.
Together, these charter,
statutory and contractual provisions could make the removal of our management and directors more difficult and may discourage transactions
that otherwise could involve payment of a premium over prevailing market prices for our common stock. Furthermore, the existence of the
foregoing provisions, as well as the significant common stock beneficially owned by our founders, executive officers, and members of
our Board of Directors, could limit the price that investors might be willing to pay in the future for shares of our common stock. They
could also deter potential acquirers of our Company, thereby reducing the likelihood that you could receive a premium for your common
stock in an acquisition.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
Cybersecurity Risk
Management and Strategy. We
rely on various software applications, information technology systems, computing infrastructure, and cloud service providers to effectively
conduct business operations. Several of these systems are managed or utilize a third party administrator, implementing their own cybersecurity
measures to safeguard our data.
We
have not experienced a cybersecurity incident that resulted in a material adverse impact to our business or operations; however, there
can be no guarantee that we will not experience such an incident in the future. For
a description of the risks from cybersecurity threats that may materially affect our Company and how they may do so, please see “Risk
Factors” included in Part I, Item 1A of this Annual Report on Form 10-K, including “Our data and information systems and
network infrastructure may be subject to hacking or other cyber security threats. If
our security measures are breached and an unauthorized party obtains access to our proprietary business information, our information
systems may be perceived as being unsecure, which could harm our business and reputation, and our proprietary business information could
be misappropriated which could have an adverse effect on our business and results of operations.”
Cybersecurity Governance.
Our
Vice President of Human Resources and Administration oversees our cybersecurity strategy, supported by an internal IT Manager and a third-party
administrator. This structure ensures that cybersecurity remains a priority at the highest management levels while leveraging specialized
expertise.
We maintain a comprehensive
cyber risk management program that is designed to meet industry-standard best practices and processes to assess, identify, and manage
material risks associated with cybersecurity threats to our information technology systems. Our cybersecurity framework is designed to
proactively address potential vulnerabilities and mitigate risks.
The
IT Manager oversees our information security policies and procedures, and coordinates with the third party administrator to ensure compliance
with our security standards and management of third party risks. The Vice President of Human Resources and Administration provides regular
updates to the audit committee of the Board of Directors, which is responsible for oversight of cybersecurity, as well as to the full
board. Our information security policies and procedures are subject to regular reviews to adapt to evolving threats and to ensure ongoing
compliance with regulatory requirements. By maintaining a robust cybersecurity posture, we protect our assets, safeguard sensitive information,
and ensure the continuity of our operations.
Item 2. Properties.
Our principal executive
office and research and development facility is located at 369 Inverness Parkway, Suite 350, Englewood, Colorado. The 23,104 square feet
facility includes fully functional 1,000 square feet of class 1,000 cleanroom, 500 square feet of class 10,000 cleanroom, chemistry laboratories,
and analytic laboratories, and serves as our office, laboratory and research and development space. Our total annual base rent during
2026 is expected to be approximately $399,199.
Item 3. Legal Proceedings.
We are not a party to any litigation of a material nature,
nor are we aware of any threatened litigation of a material nature.
Item 4. Mine Safety Disclosures.
Not Applicable.
PART II
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters
and Issuer Purchases Of Equity Securities.
Market Information
Our common stock trades on the Nasdaq Capital Market under
the symbol LWLG.
Holders of Common Stock
On March 20, 2026, we had
approximately 68 holders of our common stock, not including persons who hold our common stock in nominee or "street name” accounts
through brokers or banks.
Dividend Policy
Our Company has never paid a cash dividend and has no present
plans to pay cash dividends.
Securities Authorized for Issuance under Equity Compensation Plans
Equity Compensation Plans as of December 31, 2025.
Equity Compensation Plan Information
Equity compensation plans not approved by security holders (2) 275,000 $ 0.60 —
2. Comprised of common stock purchase warrants we issued for services.
Recent Sales of Unregistered Securities
None during the period covered by this Annual Report on Form 10-K