Lightwave Logic, Inc. Stock Compensation Disclosure

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.

 

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:

Schedule of share-based compensation
		2025				2024
Stock options		$	2,051,204			$	4,440,003
Restricted stock awards			551,466				446,628
Restricted stock units			1,278,403				—
Performance stock units			801,595				—
Total share-based compensation		$	4,682,668			$	4,886,631

 

The following tables summarize all stock option and warrant activity of the Company during the years ended December 31, 2025 and 2024:

Schedule of stock option and warrant activity
					Non-Qualified Stock Options and Warrants Outstanding and Exercisable
					Number of Shares				Exercise Price				Weighted Average Exercise Price
	Outstanding, December 31, 2023				8,809,807				$0.51 - $16.81			$	2.76
	Granted				1,628,000				$1.96 - $5.00			$	4.05
	Forfeited				(43,948	)			$4.28 - $7.67			$	5.70
	Exercised				(494,000	)			$0.57 - $1.15			$	0.68
	Outstanding, December 31, 2024				9,899,859				$0.51 - $16.81			$	3.07
	Granted				1,113,586				$0.99 - $3.56			$	2.28
	Expired				(75,000	)			$0.67 - $0.69			$	0.68
	Forfeited				(93,355	)			$0.99 - $5.58			$	3.26
	Exercised				(1,849,012	)			$0.60 - $4.70			$	0.71
	Outstanding, December 31, 2025				8,996,078				$0.51 - $16.81			$	3.47
	Exercisable, December 31, 2025				8,186,290				$0.51 - $16.81			$	3.57

 

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.

Schedule of non-qualified stock options and warrants outstanding
Non-Qualified Stock Options and Warrants Outstanding
Range of Exercise Prices		Number Outstanding Currently Exercisable at December 31, 2025		Weighted Average Remaining Contractual Life			Weighted Average Exercise Price of Options and Warrants Currently Exercisable
$0.51 - $16.81		8,186,290		5.7 Years		$	3.57

 

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:

Schedule of fair value of restricted stock awards
		Restricted Stock Awards																Restricted Stock Units
		Year Ended																Year Ended
		December 31, 2025								December 31, 2024								December 31, 2025								December 31, 2024
			Number of Shares				Weighted Average Grant Date Fair Value per Share				Number of Shares				Weighted Average Grant Date Fair Value per Share				Number of Shares				Weighted Average Grant Date Fair Value per Share				Number of Shares				Weighted Average Grant Date Fair Value per Share
Non-vested, beginning of period			227,492			$	3.28				78,452			$	5.71				—			$	—				—			$	—
Granted			160,000				1.06				226,887				2.96				3,177,499				2.88				—				—
Vested			(216,529	)			2.81				(77,847	)			4.79				(340,757	)			1.30				—				—
Cancelled and forfeited			(17,367	)			4.13				—				—				—				—				—				—
Non-vested, end of period			153,596			$	1.54				227,492			$	3.28				2,836,742			$	3.07				—			$	—

 

 

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.