Lightwave Logic, Inc. (LWLG) Earnings Call Transcript & Summary

This is the 2024 Annual Meeting of Shareholders. And I'm going to go through the formal part of the presentation. Good morning, ladies and gentlemen. My name is Dr. Michael Lebby. I'm Chair of the Board of Lightwave Logic. It is my pleasure to welcome you to the company's 2024 Annual Meeting of Shareholders. This meeting is also being webcast live, and the webcast will be posted on our website for a period of time after the meeting. Welcome to those shareholders participating by webcast. The meeting will follow an agenda, copies of which have been placed on each chair. As it indicates, there will be a time for shareholder questions at the end of the meeting. Before we begin the meeting, I would like to introduce the company's directors who are with us today. I encourage you to take a moment and meet them after the meeting. As I call your name, please stand. Jim Marcelli, who is our President, CFO and Secretary; Ron Bucchi, who is our Lead Director and the Chair of our Audit Committee; Dr. Frederick Leonberger, who is the chair of our Nominating and Corporate Governance Committee; Siraj Nour El-Ahmadi, who is the Chair of our Compensation Committee; Dr. Craig Ciesla; and Ms. Laila S. Partridge. Today's meeting will be in 2 phases. First, we will conduct the formal part of the business meeting to consider each of the proposals listed in the notice of Annual Meeting of Shareholders dated April 11, 2024, and to conduct such other business as may properly come before the meeting. The second part of the meeting will be my management presentation, followed by a question-and-answer session. Jim Marcelli, our Corporate Secretary, will be reporting in the minutes of this meeting. David L. Sidell, a duly appointed representative of Broadridge Financial Solutions, Inc. has been appointed to serve as the inspector of election for the annual meeting. Mr. Sidell, would you please stand? Mr. Sidell has signed the oath of office, which will be filed with the minutes of the meeting. For the formal part of the meeting, I will now call on our Corporate Secretary, Jim Marcelli, to establish that we have met the necessary corporate requirements for this meeting. Jim?

We have proof that the notice of the meeting is duly given and at the notice of the Annual Meeting of Shareholders, proxy statement and proxy were mailed on or about April 11, 2024, to all shareholders of record at the close of business on March 25, 2024. The affidavit together with copies of the notice, proxy statement and proxy will be filed with the minutes of the meeting. As of March 25, 2024, the record date of the meeting, there were 119,599,565 shares outstanding. We have 60,952,004 shares present by person or proxy at this meeting, which is over 33 1/3% of the outstanding shares and constitutes a quorum permitting transaction of business. Each year entitled the holder to one vote on each matter that may become -- come before the meeting. A list of registered shareholders entitled to vote is available for examination by the shareholders.

Thank you, Jim. Since a quorum is present, I will now call the meeting to order. The meeting will proceed as provided for in the agenda. The items to be voted upon are: number one, to elect 2 directors for the Board of Directors to serve until the 2027 Annual Meeting of Shareholders or until their successors have been duly elected or appointed and qualified. Number two, to ratify the appointment of Morison Cogen LLP to serve as the company's independent registered public accounting firm for the fiscal year ending December 31, 2024. Number three, to hold an advisory vote on the compensation of our named executive officers. Number four, to hold an advisory vote on how frequently we should seek an advisory vote on the compensation of our named executive officers. And number five, to consider and take action upon such other business as may properly come before the annual meeting or any adjournments thereof. Jim, would you please describe the voting procedures?

We will be voting by proxy ballot on the agenda items described in the proxy statement previously sent to you. If you already turned in a proxy card and you do not intend to change your vote, it is not necessary for you to vote again. However, for those of you who did not turn in a proxy card, or if you wish to change your vote, please get a blank ballot from -- card from Mr. Sidell, our Inspector of Elections, to use for voting today. If you take a ballot, please print your name and the number of shares you are voting on the ballot. And if you have previously sent in a proxy card and you're changing your vote, please note that on your ballot. The ballot must be signed by the shareholders. After you complete the ballot card, please give them Mr. Sidell as soon as possible as the result of the voting will be announced at the end of the formal portion of this meeting.

The first item of business is the election of 2 Class I directors to the Board of Directors to serve until the 2027 Annual Meeting of Shareholders or until their successors have been duly elected or appointed and qualified. The Board of Directors is comprised of 7 directors and is divided into 3 classes, currently comprised of one, 2 Class I directors, whose terms expire at the 2024 Annual Meeting; two, 3 Class II directors, whose terms expire at the 2025 Annual Meeting; and three, 2 Class III directors, whose terms expire at the 2026 Annual Meeting. The Board of Directors has nominated 2 Class I incumbent directors for reelection and recommends a vote for the election of the 2 Class I incumbent directors. Our Corporate Secretary will now place the names of the nominees in the nomination, Jim?

The Board of Directors has nominated following Class I directors to serve a term of 3 years or until their successors are elected and qualified. Siraj Nour El-Ahmadi and Dr. Frederick J. Leonberger. Advanced notice must be given to the Secretary of shareholders' intent to nominate other persons as directors of the company. No such notice has been received. Accordingly, nominations for the directors are now closed. The nominee for directors receiving the highest number of votes will be elected to the Board of Directors. The proxies solicited by management will be voted in favor of the director nominees. I hereby move that Siraj Nour El-Ahmadi and Dr. Frederick J. Leonberger be elected as a Class I directors to serve for a term of 3 years or until their successors are elected and qualified.

The next item of business is the ratification of the appointment of Morison Cogen LLP as the company's independent registered public accounting firm for 2024. The vote required to ratify the appointment of Morison Cogen LLP to serve as our independent registered public accounting firm for fiscal year 2024 is the affirmative vote of the holders of a majority of the votes cast at the annual meeting entitled to vote on the matter.

I hereby move that the appointment of Morison Cogen LLP as the company's independent registered public accounting firm for the year ending 2024 be ratified.

The next item of business is to hold an advisory vote on the compensation of our named executive officers. This proposal, commonly known as a say-on-pay proposal gives our shareholders the opportunity to express their views on the compensation of our named executive officers. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in our proxy statement. Because this vote is advisory, it will not be binding on our Board of Directors or the company. However, our Board of Directors values the opinions of our shareholders and will take into account the outcome of the shareholder vote on this proposal when considering future executive compensation arrangements. The votes required for approval of the compensation of our main executive officers is the affirmation vote of the holders of a majority of the votes cast at the annual meeting entitled to vote in person or by proxy and entitled to vote on the matter. The Board of Directors recommends a vote for the approval of the compensation of our named executive officers as disclosed in our proxy statement.

I hereby move that the compensation of the company's named executive officers as disclosed in the proxy statement pursuant to the compensation disclosure rules of the SEC, including the compensation discussion and analysis, the summary compensation table and other related tables and disclosures be approved.

The next item of business is to hold an advisory vote on how frequently we should seek an advisory vote on the compensation of our named executive officers. The purpose of this proposal is to assess stockholder preferences on the frequency of future advisory votes on executive compensation. And as such, there will be no approval or adoption of a resolution establishing the frequency of future advisory votes on executive compensation. The option of 1 year, 2 years or 3 years that receives the highest number of votes cast by shareholders will be considered the frequency for the advisory vote on executive compensation that is preferred by our shareholders.

I hereby move that shareholders vote in favor of one of the following options for holding stockholders' advisory vote on the company's executive compensation, either 1 year -- every year or every 2 years or once every 3 years.

There being no other items to be brought before our shareholders for our votes at this meeting, voting is now complete. All ballots must be turned into Mr. Sidell at this time. The Inspector of Election has tabulated the votes, and Mr. Sidell will now give us the report of the inspector of election. David?

All of the votes have now been counted. The preliminary results are as follows: Mr. El-Ahmadi and Dr. Leonberger have been elected as a Class I Director to serve for a term of 3 years or until their successors are elected and qualified. Morison Cogen LLP has been duly appointed as the company's independent registered public accounting firm for 2024. The compensation of the company's named executive officers is approved, and the frequency that the company should hold an advisory vote on the compensation of the company's named executive officers is once every 1 year.

This concludes the formal part of the annual meeting, and the formal portion of the Annual Meeting of Shareholders is adjourned. At this stage, I'm going to give the management presentation. So can I just have a show of hands of how many folks are interested in doing the tour afterward. Oh, I see. So this is a popular request. One of the things that we're going to be -- there's good news and bad news here. The good news is that when you visit high-tech companies in Silicon Valley or around the world, you have to find when you go in NDAs, and we're not going to require that. We thought about that, but we're not going to acquire it. But we don't want anybody to bring electronics in. And so if you do have your phone on you, then Amy is going to seal it in a sealed bag and sign that off and keep that while you do the tour. Because at this point, we really don't want our competition seeing a lot of what we're doing. So please respect that because we're trying to be really competitive here. At this point, let's see if that works. Good. I will start the business presentation, and I'm really excited to give this year's business presentation. And I'll give a little bit more details on the logistics of how to get to. We have a van set up after my talk. So it gives me great pleasure to have the Annual Shareholder Meeting here in Colorado again and to give a management update. Now I know I recognize a lot of you from previous years, I recognize a lot of you from investor meetings, especially ones over in Belgium recently. So some of you have seen the slides, but there are some new slides here, and I'm really excited to share them. And so why don't we just get started? So we're a public company, of course, and so we have to show a safe harbor slide. So why live and why now? So before I get into the content of the talk, it's just one question that I think everybody should realize why are we all in this room, why are we trying to do what we're trying to do? And why am I, as a leader of the company, really excited about what we're doing. And so this is a simple slide. Silicon photonics, now you've heard me talk about that if you've seen my presentations before. It's hit a wall in performance. And that has given a great opportunity for a new technology platform. And over the last few years, we've developed electro-optic polymer material to world-class standards. And as an example, in the top right-hand corner, that's what it looks like, comes a little [indiscernible]. And so you put it with solvents and you can make it into a solution and you can spin it on to wafer. So that's really what we're looking at. And what we can do with it is we can turbo boost the silicon photonics that's struggling in performance, so we can give it an extended runway. And that, when you put it on to silicon wafers, you get pictures like this. This is a big 200-millimeter silicon wafer. With that wafer, you can cut into small chips and you can use as an optical modulator. And we showed these results earlier this year, and that really generated tons of excitement in a data center environment. So in just 3 simple photographs or images, we've gone from our polymer material putting it onto silicon waste and generated world-class performance. And that is really one slide why we're here. This is really exciting. It's a brand-new technology platform. So let's go to the outline, and I'm going to cover today the usual sections in the presentation, corporate overview, a little bit about market dynamics, what the polymer road map would look like, so we can see what's happening in the industry and how it's progressing forward. Some commercial activity, which I'm sure everybody wants to hear about. Business model, typical questions and summary. So I've sort of dotted this with a few image photographs, but the most exciting one is this one here. I don't usually show a photograph of myself, especially as my board had. But that was the instant when I showed the results at the big conference at OFC, and there was an audience of 300 to 400 people. Only the speaker can see the reaction on the faces of the audience. And I saw the reaction in the faces of the audience when we presented those results and probably within for 3 seconds of that photo being taken by, I think, [indiscernible] took that photograph. And that was one of those times when you're standing on a podium, you've got world-class results, and everybody in the audience realizes it. It just makes you feel so great. And it's one of those filings that doesn't come that often. Anyway, so let's move on. The corporate overview of the company. We have a large and growing market. As you can see, I've got a little -- some symbols here. We have proprietary electro-optic polymer material. We're underway with commercialization. We've really built up our patent portfolio, and we keep adding to that. We've got a very experienced leadership, not only our Board of Directors, who -- a lot of them are extremely technical, well versed in business practices, but also a technical advisory board. And we've also built together, over the last few years, a world-class team. So really good thanks to the Lightwave team, is now working really well together to produce world-class results. And we have a robust balance sheet. Our last public report says we have enough cash to last this in the next 18 months. And as you can see from the right-hand side, we do feel the company is undervalued by the market. There's no question about that. We have cash equivalents, $31 million. We don't have any debt. and our headquarters are here. So we feel we're in a good solid financial position, and we are progressing very well with our new technology platform. So a little bit about the market. This is a slide I simplified for this meeting because before I had too many words and running in the audience, you don't want to read too many words. But what does this really say? This has got 3 demand drivers by the industry, usually it's a type of space. You're going to a data set type building. They're quarter-mile along and they go racks and racks of equipment. So real estate efficiency is really a big problem for these guys. And so we have a technology that is really small, really tiny. It's micro and we fit into that very well. And that is a huge driver. The need for speed, and I'm not talking about Formula 1 or anything like that here. People have to be able to send information much faster in the Internet. And it's really been driven -- well, it was driven in COVID because we all worked at home, and we all used our sort of computers to send information backwards and forth on the Internet. And so that was a little bit of a bubble. But post-COVID, it's artificial intelligence that's really driving a lot of the traffic on the Internet, and that driving is, of course, a data center folks to upgrade their equipment much, much faster than expected. And so there is now a big demand to go faster, high-performance pluggable transceivers, which is we were aiming at in the data center environment and cloud services. That need for speed doesn't look like it's going away. And the reason I say that is because if you look at the capital spend of these data center type companies, they're not just saying AI is here to stay, and it's really sort of excited, they're spending capital to upgrade their data centers. And if you start looking at those numbers, those are huge numbers. And so I actually asked the really tough question to the CEOs at OFC when I was doing the panel. Is this a bubble, or is this here to stay? Now these are companies -- these are guys who run multibillion-dollar companies in our space. And every one of them said, this is here to say, this is not a bubble as we see it. So that sign is good. And then the need for green, I think everybody is aware, we've got to reduce power consumption, and we have a technology to help do that. And so a lot of these data center type environments are consuming tons of power. And it's actually a big concern. People are worried this is going to take a significant percentage of the national grid. And so these guys are looking for ways to reduce energy, reduce power consumption. So moving on to the market. Now I showed this slide last year, and I believe I had the blue line and the red line. I actually didn't put the green line on. And so in the space of 1 year, the demand is now everybody in the conference is not talking about 800G, which I think I mentioned last year, they're not talking about 3,200. And this is because of the drivers of artificial intelligence to upgrade the equipment in the data. And we're just looking at one segment here. This is one segment of the fiber optic market. So I haven't tried to confuse everybody with the whole market or different applications within the communications market. This is just one segment for datacom, and you can look out the next few years. And you can see this is a huge opportunity. And our technology will actually benefit other fiber optic communications market. But just in this one segment, this is a huge opportunity. And so this is really, really exciting. And the interesting thing is that these guys, they want the next level of performance, and they are open for new technologies. Usually, when you've got a technology that works, you don't really -- so you're going to incumbent technology, you don't really want to displace it unless it doesn't really perform where you want it to be. Well, we have that situation right now. People really are wanting to upgrade their performance and are looking at new technologies. So this is a new set of slides that I put together for this meeting. So I don't think anybody has seen these before. Now this is -- we've taken an industry road map, and this is one from InfiniBand. It's similar to Ethernet. An InfiniBand is a market that is really mostly owned by NVIDIA. NVIDIA not only makes the big GPU chip that powers the AI, they also do a lot of transceivers and optical interconnect. And a lot of those products work under the InfiniBand standard, which is very similar to the Ethernet standard, but I'm using this as an example. Now what does this wrap really tell us. Well, you've got bandwidth on the vertical, up here, to a very high number, 4.8 terabytes per second. And you got years on the bottom going out to 2026. Now you've heard me talk about 800G before. This is a pluggable transceiver. And so I've [indiscernible] 800G. And what these guys have done is this plot, it has to get to 800G. Well, you can have 1 lane and 1 channel going at 800 gigabits per second, but nobody can do that. And so that's sort of impossible. You could do that back here. I see this is 1x, 2x, 4x and 8x. So this is 8 lanes, this is 4 lanes, this is 2 lanes, this is 1 lane. This is 1 line, this is 2 lanes, this is 4 lanes. And today, we're seeing 800G, we've seen some prototypes go out there, 8 lanes at 100G because that's all people can do. So what's actually happened is the artificial intelligence guys have put the pressure on the data center guys to say, we need to upgrade to 800. They can't do it. So what they're doing is they're doing whatever they can. What the industry really wants is a 4-channel solution. But right now, all they get is 8x100. And actually, people are really working hard for that great spot there. But that gives you an idea. This is sort of the how things are looking. We've progressed pretty significantly since 2014. And you can see these curves are going up. So the next big area is 800G. So let me just think about that a second. So this is what the industry really needs. You need to do 800G, you need to do 4 channels of 200 or 200 per lane. And so -- but the industry is not going to be happy here. This is just a [ stuff. ] They want to go in this direction. They want to go to 1,600 or we actually say 1.6T or 3.2T, and that's the same as 1,600G. And so the industry is looking for solutions not only to support 800G today, but they want some headroom. They want the headroom and say, okay, if we invest in your technology, we want it to last the next generation and then the next generation and the generation after that. They don't just want to invest in the new technology [indiscernible] generation and then say, well, what are we going to do now? And so they're really looking at this road map very carefully. And so this result here, this is where we're [ winning ] that. This is where the industry is right today. And so 4 lanes of 200 is this spot here. I've written a 4 in that dot. I made it a little bit bigger. Our foundry results that we presented back in March are 200G per lanes. But what really got the industry excited is we did it at one road. So we did it a world-class performance. And clearly, we're going to be challenged to do this very, very quickly. And then what we also did with collaboration with Polariton and ETH Zurich in a paper that was presented at the OFC conference, we actually showed with some research work, we can do a single channel 400G. So we're actually showing that our technology, polymer-based technology, can go to 400. Okay. So it's not ready and it's still in R&D stage. But you need to do it. You need to show the customers that you don't just have a technology for one generation. You have a technology for many generations. And so the 2 things to take away on this slide is we've got this, and we're showing this. And this is really exciting. So this puts us on the road map. So let's go -- and this is the results that put us on the road map. This is that talk I gave at OFC where I showed the eye diagram, and it's very difficult to explain what an eye diagram is, but the takeaway from this slide is if you don't have open spaces, then you're not working right. If you call open spaces, the eye is open, the digital signal between the 1s and the 0s is open, and you can convey information pretty much [ over it. ] And so this is what everybody looks for. I'm not going to give you a technical lecture about eye diagrams, but we'll call them eye diagram, but I think the message is if the eyes are closed, just be aware. If the eyes are open, then you can get information sent with good integrity. And this -- if you look at the top there, 1 volt, 200 gigabits per second. That's another way to say it in the technical language 100-gigabaud, PAM4, but that is what the industry is looking for right now. And this was the result we did with Polariton and ETH Zurich to show we have the technology to go to the next level of 400G. And it's very difficult to see the open eyes, but it's much, much smaller. But you can see here, we actually got high diagrams. These were our material put into a device by Polariton that was tested by ETH. So it was a collaboration, but this is world-class results. And this tells the industry we're not only good for 800, but we're good for 1.6 and 3.2 and that puts us in a very nice position vis-a-vis, the customer base, the data center environment. And so what's next. So if you start thinking about this, this is today's results. This is where we got the ETH, Polariton, Zurich results. Clearly, next is 4-channel of 200 and 4-channel of 400. And these 2 actually will put us in front of everybody in the industry. So we're absolutely focused on making sure we fill this road map. But the interesting thing is doing these 2 is just a start for us. We have technology to fill these spaces as well. And this is way more advanced than everybody else. So when you start looking at the road map and look -- if you look very carefully, I've added dotted lines because the original NVIDIA roadmap doesn't go out that far. But you can see, if you just extrapolate, we're on a really exciting road map with our technology platform. And as I said here, polymers filled the road map. The one thing I would add is that when you do talk to customers, they really want to hear that you have a technology platform, not just today. They want to see this road map and they want to see the other technology to fill it because they're investing in a new technology platform. They want to make sure it lasts. So commercial activity. So you are going to see -- it looks like everybody in this room is going to see our facility after the talk. So we're going to see the expansion and we're scaling for growth. But if you look at what's written in orange, we have the team and the facilities to make our polymer chromophores and polymer swap modulators and ubiquitous. That's a word I've used many times. But you're going to see a chemistry facility that is world class. We're going to see an expanded facility, that has got state-of-the-art equipment, and I hope we really impress you today. It's an extra 10,000 square feet, we're joining facilities. So it's all linked together. It's about a 70% increase in the space that some of the folks here saw before about, I think, 4 or 5 years ago, I can't remember exactly. And it's fully utilized for manufacturing tests and [indiscernible]. Okay. We're leveraging the silicon ecosystem. One of the things that we've realized and we see vis-a-vis competition today, and you're going to see it in some of the Q&A at the end, is our technology can easily fit into silicon foundries compared to legacy and new exotic materials that are being talked about today. And we looked at some of those materials and the performance of these conferences. And this is one of our main advantages. It's a polymer. They spin it on to wafer and you cure it in ovens, you can take you through [Indiscernible], you can patent it, it is quite easy to use. It's much, much easier than some of the other technologies that are being talked about and trialed in foundries today, and founders are giving us our feedback. And so that is really exciting for us. The polymers, as I said at the start of the call, they extend the silicon photonics performance, and they certainly meet the performance for data center applications. And some of you with good eye sight may have seen this. So this is -- I don't want to drop this. This is what our wafer looks like. And I'm going to pass this around. So please don't touch it, but certainly, you're free to look at it. This is a 200-millimeter silicon commercial wafer, just found in our foundry. Most people are aware we had a press release yesterday, so take out a slide on that in a minute. But this is what they look like. And you really need to have this sized wafers to get to volume scale. And so yes, we mentioned we were working with foundries 2, 3 years ago. And this has been an exciting step forward for us. Well, maybe I could just leave it here, and you can come and look at it at the end here. That's probably a better idea. All right. So one of the foundries we're working with, we went publicly yesterday. And you're probably thinking, well, you're so conservative, you're so secret. You never say anything to anybody. But what do you go public? Because a lot of you here have been asked me the same question for the last 2 or 3 years. Well, they came to us. Yes, we run that wafer through the fab. And yes, we produce world-class results. And they said, our business would really improve if we went public with this. And we are comfortable going public to say we're using devices for polymer-based technology. So they came to us and they really demanded a press release. So we thought about it because we're a very conservative folks. And in the end, we decided, yes, it makes a lot of sense. Now this is the foundry. It's not the biggest silicon foundry out there. There are bigger ones. So this is a foundry that specializes on this type of silicon work, a 200-millimeter wafer. And we -- these are photographs from their website. So it just gives you an idea of their capabilities I'm not here to sell the foundry. What I'm here to say is you've got to be able to be in a position to commercial partner and to get this size of wafer get your technology on to this type of platform. And so this is what we've been doing. I think you saw the PR yesterday morning, and we're pretty excited. But this is not the only foundry we're working. This is one that we've gone public with, where we feel comfortable, they feel comfortable. And I've been asked this question before, why are you so secret. Well, when it makes good business sense to do a press release in terms of collaboration, and we're going to do it. And in this situation, the foundry was really excited and the foundry saw there's going to be good business opportunities for them. And for us, that made a lot of sense, made a lot of business sense. So yes, that's why we did that. And I think it's good. This slide I've shown before, but this really gives you a good overview of what the business model is. And you can see all the technologies on the left and the fabrication process in this chromophore devices. And we're doing a lot of very high-speed design now because we're working at really high speeds and that requires a lot of RF design. But the 3-point strategy still exists. We have one foundry here that is really excited about polymers. And so that is a nice potential for technology transfer. For patent licensing, we did one deal last year. Everybody is probably saying, well, where is the next deal, so I have a slide to address that. And we are advancing our modulators towards product sales. And so we're advancing our prototyping on the top line. But the goals are really importance. We certainly want to make polymers ubiquitous just like organic LEDs. That's our goal. We want to have companies that have device and tech teams use our polymer in their designs. We want lots of people to use our material. We want to supply polymer modulator optical subassemblies for transceivers. And lastly, in the tech transfer, they want foundries to use our polymers to make their business more competitive. And then if they go off into different market verticals, and that will be great for us because that increases the volume. So here's a case study. Now I said this before, in a number of presentations. The company we look at, and I didn't want to write it down on this slide, is Universal Display Corp. That's a company we look up to. That's a company developing polymers in New Jersey. And those polymers go into OLED displays. Now these images are from Samsung of the website, but these are OLED displays. And so polymers are everywhere, and they have a business model where it's part licensing and part material sales. And that's really the business model that we align to very well using our polymer technology. So that's a very successful company. They have very good margins. They're well recognized by the Street. And I think it's a really interesting blueprint for us to commercialize our innovative polymers in the data center industry. And that model has never really been done in the data center type fiber communications industry. But when I see companies like that being super successful, that makes me even more excited that our business model is really good. So patents drive licensing opportunities. We still continue to develop and license polymer-based technologies. We have a very strong moat and a very strong know-how. And we are continuing filing patents. So I think most of you have seen some patents issue earlier this year. You may have seen some patent application publications too and so this is growing. And the focus is on data communications in these segments. But this is not the only segment. We're looking at other market verticals to use our electro-optic polymers as well. The licensing strategy. So this is a new slide. I think, since I was in Brussels because I had a lot of questions in Brussels. The goal of the licensing strategy is to create volume for [indiscernible] materials to become ubiquity. So obviously, we want to increase the number of license and deals to supply the material. So that goes without saying. We want to utilize our first licensees product from market effects. Our polymers are being sold today in packaged parts. And so that's electro-optic material verification, that's electro-optic materials stability because it's going in another companies' parts and has electro-optic material performance. And so that is what we want to use in terms of getting products out on the market using somebody else's device. And we're also, as I indicated in Brussels, are focusing on the big customers. But to get the volume scale, you want to get the big customers bought in. But these guys are big companies, and there's many levels and it's complex. But what we're really focusing on is the volume scale material supply, volume-scale licensee device design and volume scale licensee manufacturing, that's what we want. It's -- to some degree, it's similar to the OLED model, but you have to get the volume scale. This is what UDC did and this is what we're doing. So I haven't updated this slide for about 4 years or maybe even 5 years, but I decided to update it because I thought it was important. Now I graded out some of the early [indiscernible]. I know some of you invested in the company way back in this gray section and predated me, but I really just highlighted 2020 onwards, and I wanted to give everybody a feel of the direction where we're going. We're definitely going towards commercial partner. You can see we progressed over the years. You can see different things I've called out 2024, the 200 gigabit per second [Indiscernible] slot demonstrations and foundry. So you're seeing a lot more information. But as we move forward, we're going to increase the intensity there. And so the whole focus here is commercial focus. We have a great technology platform, but this is where we have to be. We want to be in doing reference designs for pluggable transceivers. I had a couple of folks tell me this morning, where is the transceiver, I'm waiting for the transceiver. Well, we're working on it. This is what it looks like. Now I haven't showed this slide before, but I'm not going to give you any scale or the size of the bottles. But this is what the polymer chromophore looks like. And these materials are ready for volume scale today. So you'll see the facility and we can scale this material in volume. Obviously, we can't scale wafers. That's why we have to go to our foundry. We're not going to raise tons of money to put a silicon foundry in place when [indiscernible] go to. And this gives you some idea. This is a new slide. I just wanted to put this up. There's not a lot of technical data in here. And so -- let me explain this slide. This is the number of lots on the bottom. So you can see there's a whole bunch of lots here. And there's 3 different technical metrics. And when you have lots of lots, what you really want is consistency and uniformity. So really, if you're not technical, if those lines are straight, that's a good sign. And what we're showing here is when we make our materials, our chromophore materials, we're again excellent lot uniformity and again, excellent consistency. And so yes, the metrics here, I don't know if you can read it. The top one is R33 and excellent purity. You can see our purity is high 99%. And then the last one is glass transition temperature, and we designed this for lifetime of the material. And we always design around about 180. And so the average, you can see we can just above 180, which is an excellent number for the material. And so this slide just gives you an indication of how far we've come over the last 5 to 10 years. I mean, this is -- I'm really proud of this work. I'm proud of the materials team that put this together. And so I updated this slide. I mean, I think the last time you saw this slide was 3 or 4 years ago. And what I've done here is up for 3 sections. There's materials, there's new materials, there's fix and silicon photonics and its package. These are the key things that we're looking at. To the top, we all know that the Perkinamine series platform is already there. So we're very happy with that. But we've also got the 6 series and we're really focusing on the next generation, which is the 400G. It's the higher-end performance, high R33 higher stability. And so that one is in qualification. We know we demonstrated a single channel of 200 gigabits per second before channels coming because we know what the industry wants. And the last one here is we've got to be able to put this in some type of package so the customers can put it in to transceiver. So this one is being worked on as well. So this gives you a very simple overview of the product road map where we're going, all going towards 4-channel 200 gigabits per second of 4 lane 200 gigabits effect. So near-term commercial activities. Now there really astute folks in the audience who realized the words have changed and the numbers have changed. So there are folks that have seen this chart before, I've changed it a little, and the reason I've changed it is because we've had a lot of really good interest since our demonstrations of our technology, which you're going to see today. And so the industry dynamics and clearly, artificial intelligence, [Indiscernible] silicon photonics going towards the [indiscernible] performance, a lot more prospects now than we have before, a lot more leads, a lot more interest now that we've achieved these metrics. And this we're working through this election. And so if you look at the takeaway of this slide, engagement with companies for both materials supply license as well as polymer modulator prototypes. Now remember, we're not a big company, so we can't work with everybody. So we have to pick and choose. So this box here is a really important one. We have to make sure that the people we really engage with the people we want to engage with and people that we trust. So we're going through that process. The commercial interest is growing. So if you look really carefully, I don't know you can see as the back of the room. I mean, this is something we're really proud of. I mean this is igniting and an exciting environment. And so if you read through some of the [indiscernible], yes, we have world-class results. But the type of visitors want to come visit. So we're getting the hyperscaler data center companies, we're getting telecom system companies, optical system corporations, optical component transceiver companies, OSATs. What is an OSAT? It's an outsourced semiconductor assembly and test with a back-end contract manufacturer. And then you've got contract manufacturers that do the assembly and build as well as silicon foundries. We've had analysts, even some of the most negative analysts talk negatively about polymers are actually not so negative anymore. Now I'm waiting for them to be positive, but it's coming. Universities, defense industry. And so there is a lot of interest that's been generated over the last 3 or 4 months, and that's really exciting. And here's a couple of photographs. And you will see something like some of these setups and everything works well, you're going to see the eye. So this one, it's not wide open eyes or black eyes, but they've got to be open. I don't know what you're going to say today. I haven't talked for the guys, but I think it will be wide open. Typical questions, so there's a lot of questions here, and I'll try and work from them one by one because even today, I had questions that came through on the Internet. In fact, I was a little surprised when the press release went out yesterday morning at 6:30 a.m. about the silicon foundry, AMF. And I looked at my e-mail and my phone at 7:30, and there wasn't one investor that commented. And I thought, come on, guys. You're usually pretty good. Something comes out, you usually are making a comment within a few minutes.

So let's go to the first question. When is our second license deal coming? So that is a question that came up a lot, and we are focusing on license deals, but we're definitely focusing on license deals with Tier 1, and that is happening, and that takes time. That's not going to be done overnight, but we really are focusing on making sure we can get the volume scale. The next one is when will our foundry partner be named? Well, I actually had to adjust the slide yesterday and one of our foundry partners has been named as AMF, and they are really, really excited. So that's -- from that standpoint, that's really great. How much reliability data is needed to secure more license deals? So we've built a world-class team, and we're generating reliability and lifetime data material that customers have requested. Our reliability data, as you saw, I haven't shown any data stack is reliable and stable. So we're very happy with it. I think what has never happened with electro-optic polymers, as far as I can tell, in the 30 years or so that people will be using it, is nobody really has understood the failure mechanism. So whenever you do reliability like in semiconductors, yes, you should have to show the data, but you also have to show an understanding what are the failure mechanisms and how are you going to mitigate them? And that's really the questions they get up. And we are -- our understanding of failure mechanisms of electrooptic polymers and chromophores in the past 6 to 9 months has really, really increased. And these are the types of questions. Now when you look at the data, you say, okay, you're showing 4,000 hours, what about 6,000 hours or what about 10,000 hours. And yes, you can put stuff and you can keep it cooking for longer. But what people really want to know is, do you understand the failure mechanisms. And do you have ways to mitigate that so that we don't have a problem if we put your technology into service. And we are really focusing on that. And our understanding, I believe, is truly world class. I haven't seen many papers, there's many papers on electro-optic polymers, very few, if any, on failure mechanism, and we have a team to do that, and we're doing really well. What's the next question? Are you going to raise capital? Well, as you can probably tell from Jim and I are in constant contact with the banks and the financial community. And we regularly have meetings, visits and talks. We have a lot of bankers that come visit our facility. They actually want to see the if we're real. So they hear the story. And if they're in town, we had a few visits from folks who wanted to go skin in the winter time. But hey, if they want to come see and see that we're real and we've got a great technology, that's fine too. We will raise money when we feel it's appropriate. I think Jim has done a great job right now, making sure we don't have any debt. We have a runway of 18 months. And so we feel very, very comfortable. What are you going to do to enhance your IR and PR? That question comes up a lot, and we're continually looking at this, and we have to look at this. I mean if you look at the way the market is undervaluing us, that's something that we're going to have to take a careful look at. And this is a continuous thing that we're monitoring. And so this is -- your comments are not being ignored. We feel that we're -- we could do better there. And so we're taking a close look at that. In the meantime, we've had some nice OpEx. We've had some great interviews. So the message is certainly getting out there. And so from that standpoint, from a PR standpoint, I think we're doing pretty well. But is there room for improvement? Maybe. And as a team, that's what we're looking at. Are you building Lightwave to be acquired to operate as a stand-alone company? We are building a stand-alone company. There's no question about that. We have a unique technology platform and we really want to increase commercial value for the shareholders. We have a case study that's been super successful, Universal Display. They have great margins. They have great revenues. They have a great sort of IP license mode. They have a great business model. There's no reason why we can't do the same. Clearly, we'll do whatever is best for our shareholders. But as of right now, we're building a stand-alone company. When will Lightwave give revenue guidance? We will publicize that when they are already. And I think I've given the same answer many times to that question, but that's not changed as of today. What is Lightwave's potential market share and adoption rate? Well, our first market, as you can see, is the hyperscaler datacom data center market as optical engines for pluggable transceivers. And if I read this both by material for chromophore polymers as well as a modulator product. We expect this adoption rate to quickly replace the incumbent technologies. We know silicon is really struggling, some of these other technologies ahead in the wall. And so we expect our technology to replace the incumbent technology. We also see our material being utilized in other markets, instruments, scientific as well as consumer. Is the current state of the technology -- the company's technology enough for commercialization of product polymer modulator? While our current performance is suitable for live trials with the data centers. Another way of saying data centers is what people use today is hyperscalers. I don't know where the word came from. But yes, our performance is suitable for those companies. And we engage with these companies today. And that includes the Tier 1s. And so these companies, we are providing reliability data as well because that's what they want to see. Blue Lightwave supply modulated for transceivers. We're making polymer modulators that are specified to go in as an engine to a pluggable transceiver. And this is what we're looking at is 800G using the material we have today. And the material production will be here as well as the polymer material for licensing. So the materials we're going to keep in Colorado. This is where we generate the materials, nobody else is going to do that. Nonetheless, there's going to be a situation where we'll need a second source, but we haven't come across that yet. While all the modulators be under a volt and over 70 gigahertz, device performance is working well. A lot of people are just really interested under 2 volts today. One volt has really got everybody excited. But you provide something in the under 2-volt range, the 200 gigabit per second, there's a lot of excitement. Bandwidth of 70 gigahertz means you get very clean open eyes at 200 gigabits per second. So those are the key metrics. And if you're under 1 volt, then clearly, you make it easier for these companies to drive the modulators because you can drive it directly from CMOS tips. You don't need dedicated driver chip. We expect competition to take significant market share, which is your biggest competitive threat? We do see other technologies that are positioned now. You've got a new opportunity that is [Audio Gap]. we do see other technologies. Now you've got a situation where you've got a big market opportunity, customers wanting to look at new technologies. Of course, you're not going to be the only player in town. Everybody else is going to look at this, and we'll jump in as well and try and get a piece of the action. So yes, we've seen things like thin film, Lithium Niobate. We've seen things like Barium Titanate, which are exotic materials. It's actually a very difficult to utilize in silicon foundries. But yes, these are -- we've seen silicon rings, but we believe that none of these have the performance headroom, the electrooptic polymers have. And over the next decade to go beyond 200 gigabits per second per lane and go up to the 400 per lane and even 800 per lane. And so we feel, competitively, yes, there's other people there. And in fact, I just got told recently, you've heard of the chip fact in the U.S. and the chip fact in Europe, apparently, there's a chip fact in Korea and close to $10 million has been set aside for electro-optic polymers. And so the Koreans are taking it very soon. And the chip fact in the Europe and a chip fact in the States is really just silicon ICs. There's not all a [indiscernible]. And so the Koreans are certainly taken this seriously, and we expect more competition. That's why we have to be very careful about protecting our technology. How is testing completed at Lightwave or at the foundry [indiscernible] scale and automate it. So testing is undertaken at the Lightwave and at a certain long volume we're going to transfer that to the foundry, which makes more logical sense. You want to have good control of the testing, automate the testing. And then at a certain point, you will let the founders take over because that's what they do. And that's the same in the silicon one. And so we're following the silicon model there. In terms of Poland, as I indicated last year, we do not see Poland as an issue. I know a lot of -- there's been a lot of conjecture out there. A lot of talk about Poland by research scientists and universities and folks, but we did not see this as an issue at all. What's the next one? Will there be standards for modulators will allow for different materials into Lithium Niobate, Barium Titanate, [indiscernible] et cetera? Well, the fact of the matter is standards to take 2 to 4 years. Multi-source agreement, MSAs, took 2 to 3 years. There hasn't been any yet, and I don't think you're going to see a lot because what the demand by the data center folks to say, we just need the technology tomorrow. We're not going to wait for stand. And this is what typically happens. Benders will probably come after technology gets implemented. So I think you will see standards and you will see MSAs, but that's not going to be first. If it's a slow-moving technology, then you're on trying to put standards together, this is fast-moving technology. And so our expectation is the standards will follow not lead. What is the difference between Perkinamine 2, 3, 5 and 6? And how is Perkinamine 6 better? Well, each polymer still has different characteristics. This is not a technical talk, so I'm not going to go into that alignment, so they align with different customer specifications. And so [indiscernible] optical class transition temperature, these are key metrics in PK6, is the higher performer one that we're aiming for the [indiscernible]. What performance is needed for [ 400G ]? Before I answer this question, I just want to introduce everybody to Claudia. Claudia, will you just stand up, wave your hand. Claudia is the CEO of Polariton. And is our collaboration with Claudia that got us to 400G results, and that turned a lot of heads. Yes, certainly, we turned a lot of heads with our 1-volt 200G, but we also showed at the same conference, we can go to the next level. And so this is an important collaboration. Claudia has got a team, designing modulators using our material, and they did some really nice work with EPA third. So from that standpoint, thank you, Claudia. But to answer this question, you need to have a bandwidth to somewhere in the region of 100 to 140 gigahertz. And I think in our last technical presentation, the foundry modulators that I showed at, I think it was 86 gigahertz. They weren't even optimized. We know we can go a little faster. We're not worried. And so we feel that we're going to be in a very strong situation of meeting 400G lanes, both with the collaboration with Polariton as well as our own device work here. So we don't see that as an issue at all. The question in our minds internally, is, what do we say -- what do we do to go beyond that. And we know, we got ideas to do that, but we're not becoming public with that right now. The other questions here, well will come for licensing our product revenue on which to expect to drive company revenues. So clearly, we expect license materials initially then followed by product revenue. We expect both to drive the revenue. I haven't given any public guidance for which it is going to be the higher, which is going to be the lower. But if we use our OLED company as a case study, about 50% of their revenues is licensing and 50% of the revenues is product, product material. So I don't think it'd be too much to them. How long does it take to design in for our data center customer Tier 1? Well, these metrics have changed. The GAI, the generative artificial intelligence, the design cycles have shortened. And between [indiscernible] have found out talking to data center folks. This is in the range of 20% to 50% shortened cycle time. So, the normal cycle time to get qualified to go into fiber optics, it depends on the customer. It could be 2 years. It could be 3 years, sometimes it's 4 years. These are all going to be probably half because people want to upgrade the equipment now. And so that's short [indiscernible] that design in cycle. So that's really exciting for us. We have a flexible business model that allows us to work with the OEMs and the CMs. And so we feel that we're uniquely positioned to take good advantage of that. One question here is can you scale volume efficiently? Well, we can scale the materials and you're going to see that when you come through the lab tours. We can scale the devices used in the foundries and the foundries are the right model to do that. And the press release, what did the press release yesterday really say, here is 1 foundry [indiscernible] any way is really, really excited about increasing their business model, not only our business model, but their business model. And that is something I think is worth of PR. And so I don't know how everybody took the PR, but from our standpoint, that was an exciting announcement yesterday. Summary. So a lot of stuff on this chart. I'm just going to hit the highlights here. We're [indiscernible] in silicon photonics or polymers for commercial traction. We've got the markets, technology, commercialization underway. I will accept that you maybe wanted to see more quantification of that. But I think I've tried to put that in perspective, strong patents, good balance sheet, within a really strong foundation. If some photographs, some of these, you'll see as you go through the lab today. And so the visit logistics, let's see, Jim, do you want to help me on this, because you got -- we have a [indiscernible] and that's going to be at the lobby.

Right up front. [Indiscernible]

And it's about -- so for folks that are not here, we'll have a 14-seater van at the front in the lobby. So we'll just keep cycling, it's literally less than a mile away. So we won't take long. You can walk if you want. It's a 1 mile walk. You've walked before? We may make the group a little bigger. I didn't realize we'll have this sort of level of interest, but we'll break it up into groups, and we'll do the 2. And I think that's about it. Yes. I mean if you want to leave your electronics here, that's fine. If you don't, we can fill that out on the entrance. At this point [indiscernible] Q&A has already started. I already got some input here. The question was, can you explain a little bit more of the dynamics of working with the foundry? So when you work with a foundry making these types of [indiscernible], you [indiscernible] typically takes a month to 2 months to make the masks and generate the masks in the layout. But for the [indiscernible] to go through the foundry can range between 5 to 7 months on average. And sometimes, you can pay more to again to run the wafers even faster. So that cycle time is not days. So if you come up with a design, you literally have to wait for the [indiscernible] come back. And this is no different to the IC business. This is normal practice. Some smaller foundries that do smaller wafers, they can give faster turnaround times. But when you're working with the big silicon foundries, it's typically about 6 months on average. And that's -- so when you put in a design, you have to wait 6 months to get that back.

Can I add some?

Yes.

It takes 6 months [Indiscernible].

At this point, let's go to the Q&A. And I think somebody is going to have a microphone. I'm sure I have not answered all your questions. I know every time I go, I get [indiscernible] questions in front of me, but I'm sure there is others [indiscernible].

[Indiscernible] couple of questions if you will, you mentioned failure mechanisms today. It's sort of an obstacle for adoption, [indiscernible] is on Slide 28 that you mentioned in the Q1, or the 10-Q, apologize. There was 4 mentions and 1 was hermeticity, and then they were followed by 3 slides that so we're well along the way in the first [indiscernible], which were in the slides today, but there was no mention of hermeticity, is that still a problem?

It's not a problem. The failure mechanism that we watch more closely than anything else is oxygen. So you have to figure out a way to stop the oxygen coming in. If you want to put it in a hermetic gold box, then you would stop it coming in. But the gold box is expensive, but you've got to look for ways where you don't have to have an expensive package, but you can protect the material to stop the oxygen coming in. And as I think I've given a couple of talks and mention atomic-layer deposition and that is a technique that the OLED industry use, stop moisture going into the TV screens and things, and so we have expertise with Frank SO on our advisory Board is an OLED person, plus we expertise on ALD. So that's something we're working on internally, and we're optimistic and very confident that it's going to work for us, too, to the level we want. And so yes, we explain that to our customers. Yes, that's the question on hermeticity. I don't believe you have to be 100% hermetic. What you have to do is make sure you don't get the oxygen coming. Right?

And then the second part of the question is -- question. We've had 1 year with the first licensee, has the revenue production met your expectation, and what do you think is going on?

I think it has met our expectations. There is now a product out there in the market. It's not in high volume. I will admit to that. But we're looking for that feedback of our material working in a product that's out in the market. So yes, it's a step in the right direction. It hasn't been as fast as everybody would have liked, but it's met our expectation internally. This is amazing, usual like there's 10 hands come up. Thank you. Okay, Kevin. All right, Kevin. I know Kevin's got a list of questions.

Where do I start? I'll start high level, the timing for the 4x200 PIC chip and a completed transceiver is still ambiguous. At the Optica Conference last fall, you said the 4x200 PIC to be ready in 2024. Is that still on target? Have you received prototype 4x200 PICs yet from these wafers?

All I can say is it's in progress.

Okay. Recent presentations showed Vpi uniformity across 4 different devices. A general question is when you receive a wafer with thousands of devices, what do you do with those thousands besides the smaller sample sizes for reliability and for performance testing?

So we have a lot of statistics analysis. We do a lot of measurements, it takes a lot of time. So a lot of tests, a lot of measurements. We have a lot of statistics, and we use those statistics internally to make sure everything is working as we expect. In addition, to look at where you can fine-tune performance. So for example, we do statistics on Vpi and we did statistics on bandwidth. And so that gives us a lot of good information to own the next set of devices that are coming through the fab. I think what we saw was this that -- we did that measuring, we did the statistics. The performance is really good. We also saw opportunities to improve it even more. So I'm not going to go into any detail about how much we can improve it. But we're not at the limit, and we can certainly improve the bandwidth and we can certainly improve the Vpi.

Sure. So the 4 devices, Vpi seemed to range from about 1 to maybe upwards of 3. Do you know why the variations exist? Are these just different device designs, and for example, if someone is willing to pay you whatever it costs to order 25 wafers of the 200G 1 Volt modulator, Is your foundry partner able to produce an entire wafer of those on 1 volt modulators at high yield and basically, is that design locked in?

So the full results you're talking about are package modulators, I just wanted to put out to show we have full package modulators. I didn't put all the statistics up. I mean I just wanted to have a quick sample to serve people that we don't just have chip, and we don't just have chromophore. So you'll probably see a lot more statistics as we go forward in the next 6 to 9 months. There's no question about that because that's what people want to see. They want to see a lot more statistics. In terms of foundry and foundry capability, we've gone public with 1 foundry. They're really excited. There's a reason why they're really excited. I mean they have the confidence like we have. Rather than answering your question in a quantifiable fashion, I would say we are both very comfortable on what's going on there.

So for wafer scale poling, I'm going to bug you about this, is it at the point where it's consistent, high yielding and an economical process. I know my e-mail to you referenced if it takes a week or 2 to pole an entire wafer and your yields are 20%. That's obviously not satisfactory, besides saying you're comfortable with that. Can you give any insight into the extra time and cost and poling yields, please?

Not really.

Not really. Okay.

I mean I'll just reiterate. I mean, the question keeps coming up because people have talked negatively about poling in the past. We've worked really hard at that. And I think I gave the same answer last year. It is not an issue for us. It is a uniform process. There's other things we're more concerned about. It's not something we're concerned about like the outside loading. And I know because of negative discussions or negative talk about it, people talk about all the time. Internally, it's not the issues we worry about, we worry about other issues. So we're comfortable.