U.S. Securities and Exchange Commission
                          Washington D.C.  20549

                              FORM 10-KSB

(Mark One)

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
      SECURITIES EXCHANGE ACT OF 1934

      For the fiscal year ended December 31, 2007

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
      SECURITIES EXCHANGE ACT OF 1934

      For the transition period from __________ to ___________


Commission file Number 0-52567


                          Lightwave Logic, Inc.
             ----------------------------------------------
             (Name of small business issuer in its charter)

            Nevada                                  82-049-7368
-------------------------------                -------------------
(State or other jurisdiction of                 (I.R.S. Employer
incorporation or organization)                 Identification No.)

2601 Annand Dr., Suite #16, Wilmington, Delaware       19808
------------------------------------------------     ----------
 (Address of principal executive offices)            (Zip Code)

              Issuer's telephone number (302) 998-8824

Securities registered pursuant to Section 12(b) of the Exchange Act:

                                                  Name of exchange
     Title of each class                        on which registered
     -------------------                        -------------------
            None                                        None

Securities registered under Section 12(g) of the Exchange Act:

                   Common Stock, $0.001 Par Value
                   ------------------------------
                           (Title of Class)

Check whether issuer is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act. [ ].

Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was

<PAGE>

required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]   No [ ]

Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB  [X]

Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).  Yes [ ]   No [X]

State issuer's revenues for its most recent fiscal year......$0.00

State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the
price at which the common equity was sold, or the average bid and
asked prices of such common equity, as of a specified date within
the past 60 days. (See definition of affiliate in Rule 12b-2 of
the Exchange Act).

The aggregate market value of the voting and non-voting common
equity held by non-affiliates was $41,041,484 (20,520,742 shares
at $2.00 per share), as computed by reference to the last sale
price of the Company's Common Stock, as reported by the OTC
Bulletin Board on March 31, 2008.

               (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practical date.........

As of March 31, 2008, there were approximately 34,021,742 shares
of common stock, $0.001 par value, issued and outstanding.

Transitional Small Business Disclosure Format (check one)

             Yes [ ]                       No [X]











                                2
<PAGE>

                          TABLE OF CONTENTS

PART I

Item 1.   Description of Business.........................................5
Item 2.   Description of Property........................................37
Item 3.   Legal Proceedings..............................................38
Item 4.   Submission of Matters to a Vote of Security Holders............39

PART II

Item 5.   Market for Common Equity, Related Stockholder Matters
          and Small Business Issuer Purchases of Equity Securities.......39
Item 6.   Management's Discussion and Analysis or Plan of Operation......43
Item 7.   Financial Statements...........................................52
Item 8.   Changes in and Disagreements with Accountants on
          Accounting and Financial Disclosure............................53
Item 8.A. Controls and Procedures........................................53
Item 8.B. Other Information..............................................53

PART III

Item 9.   Directors, Executive Officers, Promoters, Control Persons
          and Corporate Governance; Compliance with Section 16(a)
          of the Exchange Act............................................53
Item 10.  Executive Compensation.........................................57
Item 11.  Security Ownership of Certain Beneficial Owners and
          Management and Related Stockholder Matters.....................59
Item 12.  Certain Relationships and Related Transactions; and
          Director Independence..........................................61
Item 13.  Exhibits.......................................................61
Item 14.  Principal Accountant Fees and Services.........................62










                                3
<PAGE>


                    Forward-Looking Statements

     This report on Form 10-KSB contains forward-looking
statements. These statements relate to future events or future
financial performance and involve known and unknown risks,
uncertainties and other factors that may cause our Company or its
industry's actual results, levels of activity, performance or
achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or
implied by the forward-looking statements.

     In some cases, you can identify forward-looking statements
by terminology such as "may," "will," "should," "expects,"
"plans," "anticipates," "believes," "estimates," "predicts,"
"potential," or the negative of these terms or other comparable
terminology. These statements are only predictions. Actual events
or results may differ materially. Although our Company believes
that the expectations reflected in the forward-looking statements
are reasonable, our Company cannot guarantee future results,
levels of activity, performance or achievements. The forward-
looking statements are based on our beliefs, assumptions and
expectations of our future performance, taking into account
information currently available to us. These beliefs, assumptions
and expectations can change as a result of many possible events
or factors, including those events and factors described by us in
"Description of Business-Risk Factors Related to Our Business,"
not all of which are known to us.

     Further, this report on Form 10-KSB contains forward looking
statements that involve substantial risks and uncertainties. Such
statements include, without limitation, all statements as to
expectation or belief and statements as to our future results of
operations, the progress of any research and product development,
the need for, and timing of, additional capital and capital
expenditures, partnering prospects, the protection of and the
need for additional intellectual property rights, effects of
regulations, the need for additional facilities and potential
market opportunities. Our Company's actual results may vary
materially from those contained in such forward-looking
statements because of risks to which our Company is subject, such
as lack of available funding, competition from third parties,
intellectual property rights of third parties, regulatory
constraints, litigation and other risks to which our Company is
subject.

    You should not place undue reliance on these forward-looking
statements. Statements regarding the following subjects are
forward-looking by their nature:

    *    Our business strategy.
    *    Our future operating results.
    *    Our ability to obtain external financing.
    *    Our understanding of our competition.
    *    Industry and market trends.
    *    Future capital expenditures.
    *    The impact of technology on our products, operations and
         business.



                                4
<PAGE>


                              PART I

Item 1.   Description of Business.

                     Our Business Development

     PSI-TEC Corporation ("PSI-TEC") was founded in 1991 and
incorporated under the laws of the State of Delaware on September
12, 1995. PSI-TEC was founded in Upland, Pennsylvania by Dr.
Frederick J. Goetz where he established a laboratory with a small
amount of private funding.  PSI-TEC subsequently moved its
operations to laboratory space provided by the U.S. Army on the
Aberdeen Proving Grounds in cooperation with a division of the
Department of Defense for the advancement of ultra wide-bandwidth
satellite telecommunications. Thereafter, PSI-TEC commenced
operations of its own organic synthesis and thin-films laboratory
in Wilmington, Delaware.

     In order to become a non-reporting publicly-traded
corporation, in July 2004 PSI-TEC reorganized with our Company
pursuant to a reorganization agreement between PSI-TEC and all of
its shareholders, and our Company's sole officer, director and
majority shareholder. Pursuant to the reorganization agreement,
(i) our Company changed its name from Eastern Idaho Internet
Services, Inc. to PSI-TEC Holdings, Inc.; (ii) our Company
acquired all of the issued and outstanding shares of PSI-TEC
stock; (iii) PSI-TEC became the wholly-owned operating subsidiary
of our Company; and (iv) our Company's then sole officer and
director resigned, PSI-TEC's nominees were elected to our
Company's board of directors and new management was appointed.
For accounting purposes, this acquisition transaction was
accounted for as a reverse-acquisition, whereby PSI-TEC was
deemed to have purchased our Company. As a result, the historical
financial statements of PSI-TEC became the historical financial
statements of our Company.

     Immediately prior to the time of the reorganization
transaction, our Company was a non-reporting development stage
company whose stock was traded on the OTC: Pink Sheets and that
was seeking other business opportunities; it had no substantive
business operations. Our Company was originally incorporated
under the laws of the State of Nevada on June 24, 1997 as Eastern
Idaho Internet Services, Inc. to operate as an Internet services
marketing firm. It was unsuccessful in this venture, and in June
1998 it ceased its operations and sold all of its operating
assets.

     On October 20, 2006, in order to consolidate the operations
of PSI-TEC Holdings, Inc. and PSI-TEC Corp. (PSI-TEC Holdings,
Inc.'s wholly owned subsidiary), PSI-TEC Holdings, Inc. and PSI-
TEC Corp. merged; and PSI-TEC Holdings, Inc., a Nevada
corporation, survived and changed its name to Third-Order
Nanotechnologies, Inc. No change of control or domicile occurred
as a result of the merger.

     On March 10, 2008, Third-order Nanotechnologies, Inc.
changed its name to Lightwave Logic, Inc. to better suit its
strategic business plan and to facilitate stockholder recognition
of the Company and its business.


                                5
<PAGE>


     Unless the context otherwise requires, all references to the
"Company," "we," "our" or "us" and other similar terms means
Lightwave Logic, Inc., a Nevada corporation.

     Our principal executive office is located at 2601 Annand
Dr., Suite #16, Wilmington, Delaware 19808, and our telephone
number is (302) 998-8824. Our website address is
www.lightwavelogic.com. No information found on our website is
part of this report. Also, this report includes the names of
various government agencies and the trade names of other
companies. Unless specifically stated otherwise, the use or
display by us of such other parties' names and trade names in
this report is not intended to and does not imply a relationship
with, or endorsement or sponsorship of us by, any of these other
parties.

                             Overview

     We are a development stage research and development company.
We have developed and are continuing to develop high-activity,
high-stability electro-optic polymers which we believe could have
a broad range of applications in the electro-optic device market.

     Electro-optic devices convert data from electric signals
into optical signals for use in communications systems and in
optical interconnects for high-speed data transfer. We expect our
patented and patent-pending technologies when completed and
tested to be utilized by electro-optic device manufacturers, such
as telecommunications component and systems manufacturers,
networking and switching suppliers, semiconductor companies,
aerospace companies and government agencies.

     Our electro-optic polymers (plastics) are property-engineered
at the molecular level (nanotechnology level) to meet the exacting
thermal, environment and performance specifications demanded by
electro-optic devices. We believe that our patented technologies will
enable us to design electro-optic polymers that are free from the
numerous diverse inherent flaws that plague competitive polymer
technologies employed by other companies and research groups. We
engineer our polymers with the intent to have temporal, thermal,
chemical and photochemical stability within our patented
molecular architectures.

     Our patented molecular architectures are based on a well-
understood chemical and quantum mechanical occurrence known as
aromaticity. Aromaticity provides a high degree of molecular
stability. Aromaticity is what will enable our core molecular
structures to maintain stability under a broad range of
polymerization conditions that otherwise appear to affect other
current polymer molecular designs.  Polymers, polymer-based
devices and the processes used to create them are often
patentable, which can provide the developers of such technology
with a significant competitive advantage. We consider our
proprietary intellectual property to be unique.

          Glossary of Select Technology Terms Used Herein

All-optical devices. All-optical devices convert data in the form
-------------------
of input light signals to a secondary light data stream. The
future market of all-optic devices is expected to include all-
optical transistors.


                                6
<PAGE>


All-optical transistors. All-optical transistors are devices
-----------------------
currently underdevelopment that use an input light signal to
switch a secondary light signal. All-optical transistors are
expected to enable the fabrication of an entirely new high-speed
generation of computers that operate on light instead of
electricity, which in turn should significantly improve
computation speeds.

Aromaticity. Aromaticity causes an extremely high degree of
-----------
molecular stability. It is a molecular arrangement wherein atoms
combine into a ring or rings and share their electrons among each
other.  Aromatic compounds are extremely stable because the
electronic charge distributes evenly over a great area preventing
hostile moieties, such as oxygen and free radicals, from finding
an opening to attack.

CLD-1.  An electro-optic material based upon unstable polyene
-----
molecular architectures.  Unlike our own molecular designs, CLD-1
is not a CSC model molecule and exhibits thermal degradation at
low temperatures (~250 C) which makes it less suitable for
commercial and military applications.

CSC (Cyclical Surface Conduction) theory. Most charge-transfer
----------------------------------------
dyes (e.g. Disperse Red 1, CLD, FTC) are based upon a polyene
architecture wherein the ground state and first excited state
differ by the alteration of single and double bonds.  CSC model
molecules use nitrogenous heterocyclical structures.

Electro-optic devices. Electro-optic devices convert data from
---------------------
electric signals into optical signals for use in communications
systems and in optical interconnects for high-speed data
transfer.

Electro-optic materials. Electro-optic materials are materials
-----------------------
that are engineered at the molecular level. Molecular level
engineering is commonly referred to as "nanotechnology."

Electro-optic modulators. Electro-optic modulators are electro-
------------------------
optic devices that perform electric-to-optic conversions within
the infrastructure of the Internet.

Nanotechnology. Nanotechnology refers to the development of
--------------
products and production processes at the molecular level, which
is a scale smaller than 100 nanometers (a nanometer is one-
billionth of a meter).

Nitrogenous heterocyclical structure. A multi-atom molecular ring
------------------------------------
or combination of rings that contain nitrogen.

Plastics/Polymers. Polymers, also known as plastics, are large
-----------------
carbon-based molecules that bond many small molecules together to
form a long chain. Polymer materials can be engineered and
optimized using nanotechnology to create a system in which unique
surface, electrical, chemical and electro-optic characteristics
can be controlled. Materials based on polymers are used in a
multitude of industrial and consumer products, from automotive
parts to home appliances and furniture, as well as scientific and
medical equipment.

Polymerization. Polymerization is a molecular engineering process
--------------
that provides the environmental and thermal stability necessary
for functional electro-optical devices. Polymer materials can be


                                7
<PAGE>


engineered and optimized using nanotechnology to create a system
in which unique surface, electrical, chemical and electro-optic
characteristics can be controlled.

Thermal Gravimetric Analysis (TGA).   The basic principle in TGA
----------------------------------
is to measure the mass of a sample as a function of temperature.
This, in principle, simple measurement is an important and
powerful tool in solid state chemistry and materials science. The
method for example can be used to determine water of
crystallisation, follow degradation of materials, determine
reaction kinetics, study oxidation and reduction, or to teach the
principles of stoichiometry, formulae and analysis.

Zwitterionic-aromatic push-pull. Most charge-transfer dyes (e.g.
-------------------------------
Disperse Red 1, CLD, FTC) have an excited state (such as during
photonic absorption) wherein a full charge is separated across
the molecule.  Such a molecule is said to be excited-state
zwitterionic. Within such a molecular system the zwitterionic
state is unstable and the molecule typically collapses rapidly
into its lower dipole ground state.  In our molecular designs,
the excited state is further stabilized by the aromatization of
the molecular core.  In that aromaticity stabilizes this excited
state, it is said to "pull" the molecule into this higher energy
state; on the other hand, the unstable zwitterionic state is said
to "push" the molecule out of the excited state.

                           Our Business

     Lightwave Logic, Inc., is developing a new generation of
advanced electro-optic plastics that convert high-speed
electronic signals into optical (light) signals. Electro-optic
material is the core active ingredient in high-speed fiber-optic
telecommunication systems. Utilizing our proprietary technology,
we are in the process of engineering advanced electro-optic
plastics which we believe may lead to significant performance
advancements, component size and cost reduction, ease of
processing, and thermal and temporal stability. We believe that
polymer materials engineered at the molecular level may have a
significant role in the future development of commercially
significant electro-optic related products.

     In order to transmit digital information over long or
intermediate distances at extremely high-speeds (wide bandwidth),
electrical signals, such as those produced by a computer or
telephone, must be converted into optical signals for
transmission over long-distance fiber-optic cable.  Within the
infrastructure of the Internet, a device known as an electro-
optic modulator performs the electric-to-optic conversion. Within
the electro-optic modulator, an electro-optic material performs
the actual conversion of electricity to an optical signal. These
materials change their optical properties in the presence of an
electric field at extremely high frequencies (wide bandwidths).

     Currently, the core electro-optic material contained in most
modulators is a crystalline material, such as lithium niobate or
gallium arsenide, which must be manufactured in strict dust-free
conditions since even slight contamination can render them
inoperable. As a result, these crystalline materials are
expensive to produce. Current electro-optic crystals are limited
to telecommunication speeds that are less than 40Gb/s (40 billion
digital bits of data per second). Lithium niobate devices require
large power levels (modulation voltages) to operate and are large
in size -- typically measuring about four inches long.
Considering that most integrated circuits are literally invisible


                                8
<PAGE>


to the naked eye, these devices are enormous. Additionally, it is
important to note that these crystalline-based electro-optic
modulators require expensive mechanical packaging (housings)
generally comprised of materials, such as gold-plated Kovar, in
order to assure operational integrity over required time and
operating temperature ranges.

     Unlike crystals, electro-optic plastics appear to be capable
of being tailored at the molecular level for optimal performance
characteristics. Additionally, electro-optic plastics are
inexpensive to manufacture and demand significantly lower power
requirements (modulation voltages).  The electro-optic plastics
have demonstrated the ability to perform many times faster
(>100Gb/s) than existing crystalline technology.

     We consider electro-optic plastics to be the most feasible
technology for future high-speed (wide bandwidth) electronic-
optical conversion. Due to the ease of processing afforded by
electro-optic plastics, as well as their capacity to foster
component size reduction, we believe electro-optic plastics have
the potential to replace existing high-speed fiber-optics
components that are used today in many commercial and military
applications.

     We also believe that the extreme miniaturization provided by
advanced electro-optic plastics may allow for the successful
fabrication of chip-to-chip (backplane) optical interconnect
devices for computers that create the high-speed data
transmission necessary for extremely high-speed computations.
Further, we believe that additional potential applications for
electro-optic plastics may include phased array radar, cable
television (CATV), electronic counter measure (ECM) systems,
ultra-fast analog-to-digital conversion, land mine detection,
radio frequency photonics, spatial light modulation and all-
optical (light-switching-light) signal processing.

Our Electro-Optic Technology

     For the past two decades, diverse corporate interests,
including, to our knowledge, IBM, Lockheed Martin, DuPont, AT&T
Bell Labs, Corning, Honeywell and 3M, as well as numerous
universities and U.S. Government Agencies, have been attempting
to produce high-performance, high-stability electro-optic plastics
for high-speed (wide bandwidth) telecommunication applications. These
efforts have largely been unsuccessful due, in our opinion, to the
industry's singular adherence to an industry pervasive engineering
model known as the Bond Length Alternation ("BLA") theory model. The
BLA model, like all other current industry-standard molecular
designs, consists of molecular designs containing long strings of
atoms called polyene chains. Longer polyene chains provide higher
electro-optic performance, but are also more susceptible to
environmental threats, which result in unacceptably low-
performing, thermally unstable electro-optic plastics.

     As a result, high frequency modulators engineered with
electro-optic plastics designed on the BLA model or any other
polyene chain design model are unstable over typical operating
temperature ranges, and often exhibit performance degradation
within days, hours or even minutes. Similarly, lower frequency
modulators exhibit comparable failings, but to a lesser extent.
These flaws have prevented commercial quality polymer-based
modulators operating at 10-40 Gb/s from entering the commercial
marketplace. The thermal stability of these devices does not
generally meet the minimum Telcordia GR-468 operating temperature


                                9
<PAGE>


range (-40 degrees Celsius to +85 degrees Celsius) much less the
more harsh MILSPEC 883D (military specification) range of -55
degrees Celsius to 150 degrees Celsius.

     None of our molecular designs rely on the BLA polyene chain
design model. Our proposed solution lies in a far less
mainstream, yet firmly established, scientific phenomenon called
aromaticity. Aromaticity causes a high degree of molecular
stability. It is a molecular arrangement wherein atoms combine
into multi-membered rings and share their electrons among each
other. Aromatic compounds are stable because the electronic
charge distributes evenly over a great area preventing hostile
moieties, such as oxygen and free radicals, from finding an
opening to attack. To our knowledge, no one has previously been
able to demonstrate molecular designs that could effectively
exploit aromaticity in the design of a high-performance electro-
optic plastic.

     Our research and findings in this area resulted in our
Company being the sole recipient of the 2006 Electro-Optic
Materials Technology Innovation of the Year Award by Frost &
Sullivan. Frost & Sullivan's Technology Innovation of the Year
Award is bestowed upon candidates whose original research has
resulted in innovations that have, or are expected to bring,
significant contributions to multiple industries in terms of
adoption, change, and competitive posture. This award recognizes
the quality and depth of our Company's research and development
program as well as the vision and risk-taking that enabled us to
undertake such an endeavor. Our Company did not actively elicit
consideration or apply to receive this award.  Frost & Sullivan
independently contacted our Company and conducted several
interviews which included chemical and technical experts in the
field of electro-optics who were supplied with detailed public
information regarding our Company's technological innovations.

Our Patents

     We hold one patent and thirty pending patent applications
(consisting of five patent applications in each of Australia,
Canada, China, European Patent Convention, Japan and the U.S.
based on the PCT applications below) in the field of nonlinear
optic chromophore design as follows:

6,041,157        - Environmentally sensitive compositions of
                   matter based on 3H-fluoren-3-ylidenes and
                   process for making same;
PCT/US05/39212   - Tricyclic Spacer Systems for Nonlinear
                   Optical Devices;
PCT/US05/39664   - Anti-Aromatic Chromophore Architectures;
PCT/US05/39213   - Heterocyclical Anti-Aromatic Chromophore
                   Architectures;
PCT/US05/39010   - Heterocyclical Chromophore Architectures;
PCT/US06/11637   - Heterocyclical Chromophore Architectures with
                   Novel Electronic Acceptor Systems.


Heterocyclical Anti-Aromatic Systems. Two of our provisional
------------------------------------
patents cover heterocyclical anti-aromatic electronic conductive
pathways, which are the heart of our high-performance, high-
stability molecular designs. The completely heterocyclical nature
of our molecular designs "lock" conductive atomic orbitals into a
planar (flat) configuration, which provides improved electronic


                                10
<PAGE>


conduction and a significantly lower reaction to environmental
threats (e.g. thermal, chemical, photochemical, etc.) than the
BLA design paradigm employed by other competitive electro-optic
polymers.

     The anti-aromatic nature of these structures dramatically
improves the "zwitterionic-aromatic push-pull" of the systems,
providing for low energy charge transfer.  Low energy charge
transfer is important for the production of extremely high
electro-optic character.

Heterocyclical Steric Hindering System. This patent describes a
--------------------------------------
nitrogenous heterocyclical structure for the integration of
steric hindering groups that are necessary for the nanoscale
material integration.  Due to the [pi]-orbital configuration of
the nitrogen bridge, this structure has been demonstrated not to
interfere with the conductive nature of the electronic conductive
pathway and thus is non-disruptive to the electro-optic character
of the core molecular construction.  The quantum mechanical
design of the system is designed to establish complete molecular
planarity (flatness) for optimal performance.

Totally Integrated Material Engineering System. This patent
----------------------------------------------
covers material integration structures under a design strategy
known as Totally Integrated Material Engineering. These
integration structures provide for the "wrapping" of the core
molecule in sterically hindering groups that maximally protect
the molecule from environmental threats and maximally protect it
from microscopic aggregation (which is a major cause of
performance degradation and optical loss) within a minimal
molecular volume.  These structures also provide for the
integration of polymerizable groups for integration of materials
into a highly stable cross-linked material matrix.

Our Latest Tests and Results

     Prior to our recent experimental results, in 2004, quantum
mechanical calculations were independently performed on our novel
electro-optic plastic designs at government laboratories located
at the Naval Air Warfare Center Weapons Division in China Lake,
California. The results of these calculations suggest that our
initial aromatic molecules perform two and a half (2.5) to three
and three-tenths (3.3) times more efficiently than currently
available telecom grade electro-optic plastics. Logical
extensions of this novel molecular design paradigm further
suggest even greater performance improvements.  Subsequently, top
scientists and engineers at Wright-Patterson Air Force Base
reviewed these calculations and concluded that our molecular
designs show promise of a five to ten times improvement over
existing commercial polymeric architectures. Our conclusion is
that performance improvements of this magnitude indicate a
significant breakthrough in the field of fiber-optic
telecommunication.

     In May and June of 2006, we initiated performance
evaluations of one of our first extremely high-performance
electro-optic materials. The initial tests were performed by
electro-optic expert, Dr. C.C. Teng, co-inventor of the renowned
Teng-Man test, the industry-wide standard method of evaluating
the material performance of electro-optic plastics, and
subsequently confirmed by the University of Arizona's College of
Optical Sciences, one of the most respected and fastest growing
optical sciences departments in the world.  Under identical
laboratory conditions at low molecular loadings, one of our
recent molecular designs outperformed one of the industry's


                                11
<PAGE>


highest performance electro-optic systems by a factor as high as
650%.

     We believe results of the Teng-Man test have established the
validity of our novel, patented molecular design paradigm known
as CSC (Cyclical Surface Conduction) theory. We believe the
success of CSC theory has the potential to establish the
fundamental blueprint of electro-optic material design for
decades to come, and to have broad application in commercial and
military telecommunication and advanced computational systems.

     On September 25, 2006 we obtained independent laboratory
results that confirmed the thermal stability of our Perkinamine
electro-optic materials. Thermal stability as high as 350 degrees
Celsius was confirmed, significantly exceeding many other
commercially available high performance electro-optic materials,
such as CLD-1 which exhibits thermal degradation in the range of
250 degrees Celsius to 275 degrees Celsius. This high temperature
stability of our materials eliminates a major obstacle to
vertical integration of electro-optic polymers into standard
microelectronic manufacturing processes (e.g. wave/vapor-phase
soldering) where thermal stability of at least 300 degrees
Celsius is required. In independent laboratory tests, ten-percent
material degradation, a common evaluation of overall thermal
stability, did not occur until our Perkinamine material base was
exposed to temperatures as high as 350 degrees Celsius, as
determined by Thermo-Gravimetric Analysis (TGA).

     The test results supported our Company's progress to
introduce our materials into commercial applications such as
optical interconnections, high-speed telecom and datacom
modulators, and military/aerospace components.

     In July 2007, our Company developed an innovative process to
integrate our unique architecture into our anticipated commercial
devices, whereby dendritic spacer systems are attached to its
core chromophore. In the event we are successful in developing a
commercially viable product, we believe these dendrimers will
reduce the cost of manufacturing materials and reduce the cost
and complexity of tailoring the material to specific customer
requirements.

     In March 2008, we commenced production of our first
prototype photonic chip, which we delivered to our partner,
Photon-X, LLC who will fabricate a prototype polymer optical
modulator and measure its technical properties. We hope to be
able to demonstrate this prototype early in the second quarter.
We intend to utilize the services of Dr. Robert Norwood at the
University of Arizona Photonics Department to perform the
necessary proof of concept tests, as we have in the past. We may
incur delays in this process due to slower than expected material
production within our laboratories and/or delays caused by the
testing procedures at the University of Arizona.  Should these
tests produce a functional 10 Gb/s or greater modulator we expect
to go forward with product marketing and development in the
telecommunication market with partners in the telecommunication
field. We cannot anticipate the details of the customer adoption
cycle until we have produced a functional prototype to create a
credible technology offering.


                                12
<PAGE>


                  The Electro-Optic Device Market

General

     Electro-optic devices such as fiber-optic modulators
translate electric signals into optical signals. Such devices are
used in communication systems to transfer data over fiber-optic
networks. Optical data transfer is significantly faster and more
efficient than transfer technologies using only electric signals,
permitting more cost-effective use of bandwidth for broadband
Internet and voice services.

     Two distinct technologies currently exist for the
fabrication of fiber-optic devices, such as fiber-optic
modulators. The first, which is the more traditional technology,
utilizes an electro-optically active inorganic core crystalline
material (e.g. lithium niobate). The second, which is the up-and-
coming technology, involves the exploitation of electro-optic
plastics.

Traditional Technology - Inorganic Crystals

     Traditional technology translates electric signals into
optical signals generally relying upon electro-optic materials,
such as lithium niobate or gallium arsenide. Six of the largest
inorganic fiber-optic component manufactures hold approximately
85% of the electro-optic modulator component market. They are JDS
Uniphase, Sumitomo, Avanex, Covega, Fujitsu, and Bookham. These
companies are heavily invested in the production of crystalline-
based electro-optic modulator technologies, as well as the
development of novel manufacturing techniques and integrated
laser/modulator designs. While each company possesses their own
modulator design and processing patents, the underlying core
constituents (lithium niobate, gallium arsenide, indium
phosphide) occur in nature and as such cannot be patented.

New Technology - Organic Plastics

     Our developing technology that translates electric signals
into optical signals relies upon organic electro-optic materials,
such as electro-optic plastics. Electro-optic plastics involve
the material integration of specifically engineered organic
(carbon-based) compounds. The molecular designs of these
compounds are precise and do not occur naturally; thus they may
be protected under patent law.

     Plastic-based electro-optic modulators may provide
considerable advantages over traditional inorganic fiber-optic
technology in terms of:

     *    Costs.
     *    Size and versatility.
     *    Modulating/switching speed.
     *    Optical transmission properties.
     *    Lower operating voltages.

     Other than our own Company, we are aware of only one other
group, Lumera Corporation ("Lumera"), in collaboration with the
University of Washington, which has designed and patented


                                13
<PAGE>


potentially commercially feasible electro-optic plastics. Prior
to our own technological developments, Lumera held an exclusive
monopoly on this area of technology because Lumera holds an
exclusive present and future license to all electro-optic
polymeric technology developed within the University of
Washington. Lumera has yet, to our knowledge, to publicly
demonstrate a robust, stable commercial modulator capable of low
cost volume production.

     As a result, no significant commercial market developments
have occurred with electro-optic plastic devices. This is because
all previously known electro-optic polymer design strategies
incorporate molecular structures that adversely react to the
requisite polymerization processes that thermally-stabilize the
material matrix. This inherent design flaw causes the polymer to
melt at unreasonably low temperatures, which corrupts the
polymer's electro-optic performance.

     Our Company holds an extensive amount of internally
developed intellectual property in the field of electro-optic
molecular design that, as a whole, attempts to fundamentally
solve these and other problems associated with these molecular
structures. We believe our provisional patents describe broad,
highly unique techniques for novel paradigms in molecular design.

     Our innovative solution lies in a very well-known scientific
phenomenon called aromaticity, which causes a high degree of
molecular stability. Aromaticity is a molecular arrangement
wherein atoms combine into multi-membered rings and share their
electrons among each other.  Aromatic compounds are extremely
stable because the electronic charge distributes evenly over a
great area preventing hostile moieties, such as oxygen and free
radicals, from finding an opening to attack. Until now, to our
knowledge, no one has been able to propose molecular designs that
could effectively exploit aromaticity in the design of a high-
performance electro-optic plastic.

     We believe now that we have fabricated electro-optic
molecular architectures that do in fact exhibit extremely high
thermal stability, our technologies may soon replace inorganic
electro-optic materials in the marketplace due to their
considerable advantages over traditional inorganic fiber-optic
materials.

                     Our Target Markets

     Our proprietary electro-optic plastics are designed at the
molecular level for potentially superior performance, stability
and cost-efficiency and we believe may have the potential to
replace more expensive, lower-performance materials used in fiber-
optic ground, wireless and satellite communication networks. We
believe our electro-optic plastics may have broad applications in
civilian and military telecommunications and advanced
computational systems. Potential future applications may include:
(i) telecommunications; (ii) backplane optical interconnects;
(iii) entertainment; (iv) medical applications; (v) satellite
reconnaissance; (vi) navigational systems; (vii) radar
applications; and (viii) all-optical transistors.


                              14
<PAGE>


Telecommunications

     Telecommunications is the primary initial target application
for electro-optic plastics.  Electro-optic plastics could not
only simplify the device design of key components, such as
modulators, significantly reducing packaging costs, but could
also provide for higher speed devices with greater system
miniaturization. Current crystalline (e.g. lithium niobate) fiber-
optic modulators are difficult and expensive to manufacture due
to the complexities of producing single crystalline ingots of
sufficient diameter (3 to 5 inches). Also, strict environmental
controls must be enforced during the growth of the core
crystalline material. Plastics are not inherently costly to
produce nor do they require such strict environmental conditions.
Due to their material flexibility (e.g. ability to more easily
mold into specific topologies) they are expected to enable
smaller, cheaper, faster, less expensive, and more integrated
network components. In many laboratory tests, electro-optic
polymers have demonstrated substantial (3-10x) transmission data
speed improvements over crystalline technologies (lithium
niobate, gallium arsenide, indium phosphide).

Backplane Optical Interconnects

     It is reported that backplane optical interconnects are
envisioned by members within leading corporations (including IBM,
Intel and Agilent Technologies) as the future of high-speed
computation. These components could speed the transmission of
information within an integrated circuit, among integrated
circuit chips in a module, and across circuit boards at speeds
unattainable with traditional metallic interconnections and bus
structures. In the future, all-optical (light switching light)
signal processing could become possible using an advanced version
of our chemistry.

Entertainment

     Entertainment applications, including CATV and Internet, are
a highly important potential application subdivision of the
telecommunication market.  The ever-increasing number of
entertainment services such as VOD (video on demand) and digital
cable, as well as the future ability to download television and
movies real-time from the Internet, drives the demand for ever-
increasing bandwidth. Flexible displays utilizing organic light
emitting diodes are inherently compatible with our polymer
waveguides.

Medical Applications

     Medical Applications for electro-optic plastics have been
proposed for many varied applications, including dentistry,
oncology and protein identification.  Although experimental, it
is believed that the successful fabrication of high-stability
electro-optic plastics could open up many future applications
such as these. Other medical applications such as the higher-
speed transmission of medical records, X-ray and MRI scans over
the Internet would be improved by the broadening of Internet
bandwidths.





                              15
<PAGE>


Satellite Reconnaissance

     Satellite reconnaissance applications include a specific
target market within the Department of Defense, the 14-member
Intelligence Community and their contractors.  Electro-optic
plastics have historically been seen as attractive for potential
application in this market due to the constant need for the
fastest bandwidth transmission to meet the needs of national
security.

Navigational Systems

     Navigational systems for both advanced aerial and missile
guidance require the use of electro-optic gyroscopes.  These
devices are currently fabricated out of lithium niobate or
similar electro-optic materials; the application of electro-optic
plastics would facilitate the development of more accurate and
architecturally simple device designs.

Radar Applications

     Radar Applications, specifically phased array radar, has
been traditionally understood as a potential application for
successful electro-optic material designs, along with electronic
counter measure systems (ECM) systems, ultra-fast analog-to-
digital conversion, land mine detection, radio frequency
photonics and spatial light modulation.

All-Optical Transistors

     All-optical transistors are expected to be included in the
future market of all-optic devices. All-optical devices convert
data in the form of input light signals to a secondary light data
stream. Some experts anticipate that all-optical transistors will
replace traditional transistors used today in microprocessors.
All-optical transistors are expected to enable the fabrication of
an entirely new high-speed generation of "plastic" computers that
operate on light instead of electricity, which in turn should
significantly improve computation speeds.

                       Our Business Strategy

     Our economic model anticipates that our revenue stream will
be derived from one or some combination of the following: (i)
technology licensing for specific product application; (ii) joint
venture relationships with significant industry leaders; or (iii)
the production and direct sale of our own electro-optic device
components. Our objective is to be a leading provider of
proprietary technology and know-how in the electro-optic device
market. In order to meet this objective, we intend, subject to
successful testing of our technology and having available
financial resources, to:

     *    Develop electro-optic product devices.
     *    Continue to develop proprietary intellectual property.
     *    Streamline our product development process.
     *    Develop a comprehensive marketing plan.
     *    Maintain/develop strategic relationships with government
          agencies, private firms, and academic institutions.



                              16
<PAGE>


     *    Attract seasoned executives to join in senior management
          positions.
     *    Expand into a state-of-the-art development, testing and
          manufacturing facility.

Develop Electro-Optic Product Devices

     We intend to utilize our proprietary technology to create an
initial portfolio of commercially feasible electro-optic plastic
product devices and applications for various markets, including
telecommunications and government. We expect our initial product
device line to include high speed 40Gb/s modulators and system
applications.

Continue to Develop Proprietary Intellectual Property

     We plan to advance our core competence in electro-optic
plastic technology by continuing to develop proprietary
materials, processes, designs and devices. We also plan to
protect our technology by filing patent applications where
appropriate, obtaining exclusive technology rights where
available, and taking other appropriate steps to secure and
protect our intellectual property.

Streamline Our Product Development Process

     We intend to streamline our development process and to
design, test and fabricate potential electro-optic plastic
devices in order to position our Company to take advantage of
emerging market opportunities.

Develop a Comprehensive Marketing Plan

     We intend to build a sales and marketing organization
dedicated to developing customers and multiple distribution
channels for our products. We plan to aggressively pursue sales
of our potential products through the use of industry-specific
sales representation organizations, such as electro-optic
component distributors. In addition, we plan to target market
leaders as initial customers and to leverage relationships with
these market leaders to obtain future contracts and sales
references.

     In January 2008, we retained TangibleFuture, Inc., a San
Francisco based technology analysis and business development
consulting company, to generate an independent assessment of our
business opportunities in the fiber-optic telecommunications and
optical computing sectors and develop strategies to penetrate
those potential markets.

Maintain/Develop Strategic Relationships with Government
Agencies, Private Firms, and Academic Institutions

     Almost since our inception, we have had beneficial strategic
relationships with various government agencies that have provided
us with funding and access to important technology. We intend to
re-establish our relationship with DARPA, the Defense Advance
Research Project Agency (the agency in the Intelligence Community
credited with the origination of the Internet), by sharing the
technical data and test results on our aromatic molecular
materials. DARPA previously provided our Company with funding in


                              17
<PAGE>


order to advance of our technologies and to bring them to the
public market, but due to a change in focus at DARPA our funding
was not renewed.

     As we advanced towards the commercialization phase of our
strategic plan, we commenced discussions with several potential
strategic alliance partners ranging from micro-electronic
component firms to large-scale computer companies, as well as
petrochemical companies having very large volume production
capabilities. We believe strategic alliances and/or technology
licensing will be a crucial step in commercializing our novel
technologies and achieving competitive advantages. We entered
into a memorandum of understanding with Photon-X, LLC, a
technology solutions provider for polymer waveguides that works
in conjunction with various government agencies.

     We have also developed an excellent relationship with the
University of Delaware, an institution well known for excellence
in chemical engineering, which we intend to maintain and
strengthen.

Attract Seasoned Executives to Join in Senior Management
Positions

     Since we reached certain in-house technological milestones
with respect to our aromatic polyheterocyclical ring molecule, we
are recruiting seasoned executive managers to assist our Company
with product commercialization. From September 2005 to February
2007, we engaged the services of Mr. Ronald Genova as our Interim
Chief Executive Officer. Mr. Genova is the former Vice-President
of JDS Uniphase's Telecom Optical Modules division and has nearly
30 years in optoelectronics and semiconductor industries.

     In March 2007 we engaged Mr. Harold R. Bennett, a corporate
restructuring advisor, to join our board of directors in
anticipation of an internal restructuring of our entire corporate
management team that will be required to successfully incorporate
our technology into functional commercial products, and in April
2007, we named him as our Chief Executive Officer.

     On May 15, 2007, we retained Dr. David F. Eaton as a
consultant to serve as our Interim Chief Technology Officer and
in January 2008, Dr. Eaton became our permanent Chief Technology
Officer. Previously, Dr. Eaton spent thirty years with DuPont
where worked in research & development, research & development
management and business leadership positions. Dr. Eaton
spearheaded DuPont's entry into polymer-based components for
fiber optic telecommunication by founding DuPont Photonics
Technology, a wholly owned subsidiary of DuPont.

     On January 8, 2008, we appointed William C. Pickett to our
board of directors. Mr. Pickett's experience with business and
finance includes thirty-two years with DuPont. Most recently Mr.
Pickett served as chief financial officer of Invista, DuPont's
man-made fibers company, prior to its sale to Koch Industries,
Inc.  Mr. Pickett has held positions on the boards of directors
of several regional and international corporate joint ventures
and philanthropic foundations.


                              18
<PAGE>


     On March 14, 2008, we retained Terry Turpin, a former
advisor on our Company's Science and Commercialization Board, as
our Optical Computing Guru. Mr. Turpin began his engineering
career developing computing engines for the National Security
Agency (NSA) where he served as Chief of the Advanced Processing
Technologies Division, representing the NSA on the Tri-Service
Optical Processing Committee organized by the Under Secretary of
Defense for Research and Engineering. Mr. Turpin is a former
Director and Senior Vice President and Chief Scientist for Essex
Corporation, which was recently acquired by Northrop Grumman
Space & Mission Systems Corp. Mr. Turpin holds patents for an
analog optical processor, currently in use by government
agencies, which represents up to a fifty thousand-time
improvement over conventional digital processors.

Expand Into A State-Of-The-Art Development, Testing and
Manufacturing Facility

     We plan to expand into a state-of-the-art development,
testing and manufacturing facility in order to advance our
technology platforms, attract additional key industry talent,
streamline our product development processes and minimize our
time to market. We have already begun to integrate our operations
with respect to streamlining our product development process and
minimizing the time to market for our potential products through
a multifaceted approach to material development. We are able to
accomplish this because our technology provides us with the
flexibility to create tailored material properties for a
multitude of specific applications, and also to allow for the
specific tailoring of materials for compatibility with silicon,
glass, metals or many plastics.

     In August 2006, we executed a co-location agreement with a
New Jersey-based micro-optics company, InPlane Photonics that
allowed our scientists to advance our organic material
development. The agreement with InPlane was terminated in early
2007 in favor of a strategic alliance formed in December, 2006
with Photon-X, LLC, a Pennsylvania-based company that has
significant experience in polymer waveguide production. Photon-X
is working as a strategic ally with our Company to establish a
pre-production line in order to test and integrate our organic
materials into waveguide devices and system prototypes as a first
step toward product commercialization.  The agreement affords our
Company access to a full suite of fabrication facilities capable
of producing commercial quantities of precision micro-optic
devices such as high-speed 40Gb/s telecom modulators, optical
filters, and optical interconnects important to military and
civilian global information movement and management markets.

                Our Research and Development Process

     Our research and development process consists of the
following steps:

     *    We develop novel polymer materials utilizing our
          patented technology to meet certain performance
          specifications. We then develop methods to synthesize
          larger quantities of such material.

     *    We conduct a full battery of tests at the completion of
          the synthesis of each new polymer material to evaluate
          its characteristics. We also create development
          strategies to optimize materials to meet specifications
          for specific applications.


                              19
<PAGE>


     *    We integrate data from the material characterization and
          test results to fabricate devices. We analyze device-
          testing results to refine and improve fabrication
          processes and methods.  In addition, we investigate
          alternative material and design variations to possibly
          create more efficient fabrication processes.

     *    We create an initial device design using simulation
          software. Following device fabrication, we run a series
          of optical and electronic tests on the device.

                Our Current Strategic Partners

Photon-X, LCC

     We entered into a memorandum of understanding with Photon-X,
LLC, a technology solutions provider for polymer waveguides that
works in conjunction with various government agencies. In
connection therewith, we will provide Photon-X with our unique
polymeric material to be tested and used on certain niche devices
for anticipated military and commercial applications.  If the
tests are successful, our management believes that our alliance
with Photon-X will serve to simultaneously lead its
commercialization as well as publicly validate its scientific
findings, creating a new standard in electro-optic polymers.

Universal Capital Management, Inc.

     We have an advisory relationship with Universal Capital
Management, Inc. ("Universal"), a Delaware based Business
Development Company. Universal is a public venture capital
company that invests largely in start-up or mature stage
companies that demonstrate significant upside potential.
Universal provides us with both capital and managerial
experience, and is assisting us in creating an awareness of our
developing technology in both the government and commercial
markets as we move closer to the commercialization phase of our
strategic plan. Universal's professionals participate in selected
Company's planning and operations by providing us with
managerial, strategic and financial expertise.

TangibleFuture, Inc.

     We recently retained TangibleFuture, Inc., a San Francisco
based technology analysis and business development consulting
company, to generate an independent assessment of our business
opportunities in the fiber-optic telecommunications and optical
computing sectors. TangibleFuture, Inc. has substantial expertise
in photonics and fiber optic telecommunications; and their team
has experience in running and developing photonics related
companies.

           Our Past Government Program Participation

     Our Company has been a participant in several vital
government sponsored research and development programs with
various government agencies that protect the interests of our
country. The following is a list of some of the various divisions
of government agencies that have provided us with advisory,
financial and/or materials support in the pursuit of high-speed
electro-optic materials. We are not partnered with, strategically
related to, or financially supported by any governmental agency
at this time.


                              20
<PAGE>


National Reconnaissance Office (NRO)

     During 1998 and 1999, we worked with the NRO to advance the
development of extremely high performance electro-optic polymers
pursuant to an unclassified Director's Innovative Initiative. The
NRO is a member of the Department of Defense Agency and plays a
primary role in achieving information superiority for the U.S.
Government and Armed Forces. The NRO designs, builds, and
operates reconnaissance satellites, assists in military operation
preparedness, and monitors the environment. NRO products are
paramount to national security and are provided to an expanding
list of users including the Central Intelligence Agency and the
Department of Defense.

Army Research Laboratory (ARL)

     During 1998 through 2000, we were provided strong support
for our electro-optic materials development by the Process and
Properties Branch of the Army Research Laboratory on the Aberdeen
Proving Grounds in Aberdeen, Maryland. This support was in
cooperation with other government agencies and included the
advisory support of the Army Missile Command at Redstone Arsenal.
The Army Research Laboratory provided us with access to its
highly advanced organic chemical development laboratories and
state-of-the-art analytic equipment. PSI- TEC operated out of
more than five laboratories at the Army Research Laboratory.
During the nascent stages of our technological development, this
support provided us with the strong foundations we needed to
progress electro-optic technology into its second generation. The
technically skilled members at Army Missile Command provided our
engineers instruction on the latest advancements of the
military's research and development in the area of polymeric
materials and device fabrication. Much of our initial work at the
Army Research Laboratory was based upon revolutionary
advancements of our Chief Technical Officer's (Dr. Frederick J.
Goetz) highly unique electro-optic polymeric design as exhibited
in our U.S. Patent #6,041,157: "Environmentally sensitive
compositions of matter based on 3H-fluoren-3-ylidenes and process
for making same."

Defense Advance Research Project Agency (DARPA)

    DARPA, the agency in the Intelligence Community credited with
the origination of the Internet, provided our Company with
funding for the advancement of our technologies and bridging
these technologies to the public market. Under the auspices of
DARPA initiatives, the MORPH (Molecular Photonics) and C2OI (Chip-
to-Chip Optical Interconnects) programs, our advanced
technologies were reviewed by the Naval Air Warfare Center
Weapons Division (NAVAIR) and the Air Force Research Laboratory
(AFRL). DARPA works to maintain the technological superiority of
the U.S. military and to prevent technological surprise from
harming our national security by sponsoring revolutionary, high-
payoff research that bridges the gap between fundamental
discoveries and their military use.

Naval Air Warfare Center Weapons Division (NAVAIR)

     Under the auspices of the Defense Advance Research Projects
Agency (DARPA), high-level scientists at the Naval Air Warfare
Center Weapons Division in China Lake, California reviewed our


                              21
<PAGE>


electro-optic molecular design paradigms in 2004. Computer
calculations regarding the quantum mechanical performance of our
electro-optic molecular designs were repeated and verified by
NAVAIR staff. These calculations suggest an improvement in
electro-optic performance over the current state-of-the-art.

     Our unique, proprietary technology was demonstrated through
detailed computer calculations to improve existing approaches in
the production of ultra fast frequencies (wide bandwidths).
Calculations performed at NAVAIR regarding our preliminary, first-
stage next-generation molecular architectures indicate an
improvement of hyperpolarizability (electro-optic character) of
several times existing state-of-the-art molecular designs.

     These computer calculations have been validated by
independent tests performed on our recently developed electro-
optic materials at the University of Arizona.

Air Force Research laboratory (AFRL)

     In cooperation with the Defense Advance Research Projects
Agency (DARPA), our molecular design technologies were reviewed
by top-level and senior engineers and scientists at the Air Force
Research Laboratory at Wright-Patterson Air Force Base in Dayton,
Ohio. An Air Force Research Laboratory senior scientist and
engineer, in connection with a National Science Foundation
proposal and as a result of reviews conducted under the Defense
Advance Research Projects Agency's C2OI  (Chip-to-Chip Optical
Interconnects) and MORPH (Molecular Photonics), concluded that,
"[our] molecular designs show promise of a five to ten times
improvement over existing commercial polymeric architectures." In
review of detailed calculations performed on our future material
designs, Air Force Research Laboratory personnel further note,
"Computer simulations and modeling indicate that [our] approach
to materials synthesis has the potential for realizing high
nonlinearity (i.e., high electro-optic performance). This, in
turn, could result in five to ten times lower drive voltages for
devices." "Synthesis of [our] materials to verify the properties
predicted by the computer models is essential for new NLO
(electro-optic) polymer material development.... This is a very
novel and promising approach that has the potential for high
payoff."

     These predictions have been validated by independent tests
performed on our recently developed electro-optic materials at
the University of Arizona, which performed approximately seven
times better than other competitive technologies.

     In regards to applications of our materials, an Air Force
Research Laboratory senior scientist states, "Highly active NLO
(electro-optic) polymer materials are key for the realization of
next generation electro-optic devices and render high application
potential for high-speed fiber-optic telecommunication (i.e.,
Internet, HDTV), satellite reconnaissance (i.e., homeland
security), and navigation and guidance systems."

                        Our Competition

     The markets we are targeting for our electro-optic polymer
technology are intensely competitive. Among the largest fiber-
optic component manufactures are JDS Uniphase, Avanex, Sumitomo,


                              22
<PAGE>


Fujitsu, Mitsubishi, Corning, Bookham, OpNext and FiBest.
Additional significant domestic component manufacturers include
Covega, Apogee, Multiplex, and CyOptics. All of these companies
are heavily invested in the production of crystalline-based
electro-optic modulator technologies as well as the development
of novel manufacturing techniques and modulator designs.

     Other than our own Company, we are aware of only one other
group, Lumera Corporation ("Lumera"), in collaboration with the
University of Washington, that has designed and patented a
commercially feasible electro-optic plastic. Prior to our own
technological developments, Lumera held an exclusive monopoly on
this area of technology. Lumera holds an exclusive present and
future license to all electro-optic polymeric technology
developed within the University of Washington.

     As one of only two companies known to us that are actively
pursuing the development of high-performance electro-optic
materials for application and development in the high-speed
telecommunication markets, we believe that upon the
commercialization of our technology, that we will be poised to
obtain a significant portion of the component manufacturing
market.  Electro-optic plastics demonstrate several advantages
over other technologies, such as crystalline-based technologies,
due to their reduced manufacturing and processing costs, higher
performance and lower power requirements.  Our electro-optic
plastics are CSC model molecules that have demonstrated
significant stability advantages over our sole known competitor's
(Lumera) materials.  In the expectation of becoming the sole
producer of high-performance, high-stability electro-optic
materials, we hope to capture all or some of this potential
electro-optic component market.

     We believe the principal competitive factors in our target
markets are:

     *   The ability to develop and commercialize highly stable
         polymer-based products, including obtaining appropriate
         patent and proprietary rights protection.

     *   Low cost, high production yield for these products.

     *   The ability to enable integration and implement advanced
         technologies.

     *   Strong sales and marketing channels for access to products.

     We believe that our current business planning will position
our Company to compete adequately with respect to these factors.
Our future success is difficult to predict because we are an
early stage company with all of our potential products still in
development.

     Many of our existing and potential competitors have
substantially greater research and product development
capabilities and financial, scientific, marketing and human
resources than we do. As a result, these competitors may:

     *   Succeed in developing products that are equal to or
         superior to our potential products or that achieve greater
         market acceptance than our potential products.


                                23
<PAGE>


     *   Devote greater resources to developing, marketing or selling
         their products.

     *   Respond more quickly to new or emerging technologies or
         scientific advances and changes in customer requirements,
         which could render our technologies or potential products
         obsolete.

     *   Introduce products that make the continued development of
         our potential products uneconomical.

     *   Obtain patents that block or otherwise inhibit our ability
         to develop and commercialize our potential products.

     *   Withstand price competition more successfully than we can.

     *   Establish cooperative relationships among themselves or
         with third parties that enhance their ability to address the
         needs of our prospective customers.

     *   Take advantage of acquisition or other opportunities more
         readily than we can.

                   Our Laboratory Facilities

     Our Company operates an organic synthesis and thin-films
laboratory in Wilmington, Delaware. These facilities include
state-of-the-art equipment including NMR, IR, UV/VIS and HPLC
analytical systems, profilometry evaluation and electro-optic
(r33) materials characterization necessary to produce next
generation fiber-optic organic materials.  We also utilize an
electro-optic test facility in conjunction with local
universities to perform critical evaluation tests (eg. R33) on
our polymer material films and future electro-optic devices, such
as our waveguides, modulators, and all-optical transistors.

               Risk Factors Related To Our Business

     Investing in our common stock is risky. In addition to the
other information in this report, you should consider carefully
the following risk factors in evaluating us and our business. If
any of the events described in the following risk factors were to
occur, our business, financial condition or results of operations
likely would suffer. In that event, the trading price of our
common stock could decline, and you could lose all or a part 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 polymer materials technologies
and potential products. As a result of these activities, we
incurred significant losses and experienced negative cash flow
since our inception. We incurred a net loss of $4,223,449 for the
year ended December 31, 2007 and $2,933,809 for the year ended
December 31, 2006. We anticipate that we will continue to incur
operating losses through at least 2008.


                                24
<PAGE>


     We may not be able to generate significant revenue either
through development contracts from the U.S. government or
government subcontractors or through customer contracts for our
potential products or technologies. 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 additional revenue to
achieve profitability. We cannot assure you that we will ever
achieve profitability.

     These conditions raise substantial doubt to our auditors
about our ability to continue as a going concern. Successful
completion of our research and development program and,
ultimately, the attainment of profitable operations is dependent
upon future events, including our ability to obtain adequate
financing to fulfill our development activities and achieving a
level of sales adequate to support our Company's cost structure.

Our independent auditors have expressed substantial doubt about
our ability to continue as a going concern.

     Our independent auditors have included an explanatory
paragraph in their audit report issued in connection with our
financial statements which states that our significant losses and
negative cash flow during our development stage raise substantial
doubt about our ability to continue as a going concern. Our
financial statements do not include any adjustments that might
result from the outcome of this uncertainty. Our ability to
continue as a going concern is dependent upon our ability to
successfully complete our development program and, ultimately,
attain profitable operations, which is dependent upon future
events, including obtaining adequate financing to fulfill our
development activities and achieving a level of revenue adequate
to support our cost structure. We cannot assure you that we will
be able to secure the necessary financing and/or equity
investment or achieve an adequate sales level.

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 product sales and marketing capabilities;
     *   establish and maintain markets for our potential products;
     *   identify, attract, retain and motivate qualified personnel;
     *   continue to develop and upgrade our technologies to keep
         pace with changes in technology and the growth of markets
         using polymer materials;
     *   develop expanded product production facilities and outside
         contractor relationships;
     *   maintain our reputation and build trust with customers;
     *   improve existing and implement new transaction-processing,
         operational and financial systems;
     *   scale up from small pilot or prototype quantities to large
         quantities of product on a consistent basis;


                                25
<PAGE>


     *   contract for or develop the internal skills needed to
         master large volume production of our products; and
     *   fund the capital expenditures required to develop volume
         production due to the limits of our available financial
         resources.

We are entering new markets, and if we fail to accurately predict
growth in these new markets, we may suffer substantial losses.

     We are devoting significant resources to engineer next-
generation electro-optic plastics for future applications to be
utilized by electro-optic device manufacturers, such as
telecommunications component and systems manufacturers,
networking and switching suppliers, semiconductor companies,
aerospace companies and government agencies. 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;
     *   there may be issued patents we are not aware of that
         could block our entry into the market or could result in
         excessive litigation; and
     *   the time required for us to achieve market acceptance of
         our products may exceed our capital resources which would
         require additional investment.

The establishment and maintenance of collaborative relationships
is critical to the success of our business.

     We expect to sell many of our products directly to
commercial customers or through potential industry partners. For
example, we expect to sell our electro-optic plastic products to
electro-optic device manufacturers, such as telecommunications
component and systems manufacturers, networking and switching
suppliers, semiconductor companies, aerospace companies and
government agencies. Our ability to generate revenues depends
significantly on the extent to which potential customers and
other potential industry partners develop, promote and sell
systems that incorporate our products. 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.

Our future growth will suffer if we do not achieve sufficient
market acceptance of our electro-optic plastic products.

     We are developing our electro-optic polymer products to be
utilized by electro-optic device manufacturers, such as
telecommunications component and systems manufacturers,


                              26
<PAGE>


networking and switching suppliers, semiconductor companies,
aerospace companies and government agencies. All of our potential
products are still in the development stage, and we do not know
when a market for these products will develop, if at all. Our
success depends, in part, upon our ability to gain market
acceptance of our products. To be accepted, our products must
meet the technical and performance requirements of our potential
customers. OEMs, suppliers or government agencies may not accept
polymer-based products. In addition, even if we achieve some
degree of market acceptance for our potential products in one
industry, we may not achieve market acceptance in other
industries for which we are developing products. If the markets
we are targeting fail to accept polymer-based products or
determine that other products are superior, we may not be able to
achieve market acceptance of our products.

     Achieving market acceptance for our products will require
marketing efforts and the expenditure of financial and other
resources to create product awareness and demand by customers. We
may be unable to offer products that compete effectively due to
our limited resources and operating history. Also, certain large
corporations may be predisposed against doing business with a
company of our limited size and operating history. Failure to
achieve broad acceptance of our products by customers and to
compete effectively would harm our operating results.

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:

     *   accurately predict the needs of our target customers and
         develop, in a timely manner, the technology required to
         support those needs;
     *   provide products that are not only technologically
         sophisticated but are also available at a price acceptable
         to customers and competitive with comparable products;
     *   establish and effectively defend our intellectual property;
         and
     *   enter into relationships with other companies that have
         developed complementary technology into which our products
         may be integrated.

We cannot assure you that we will be able to achieve any of these
objectives.

Two of our significant target markets are the telecommunications
and networking markets, which continue to be subject to
overcapacity and slow growth or decline.

     Two of our significant target markets are the
telecommunications and networking markets, and developments that
adversely affect the telecommunications or networking markets,
including delays in traffic growth and changes in U.S. government
regulation, could slow down, or even halt our efforts to enter
into these markets. Reduced spending and technology investment by
telecommunications companies may make it more difficult for our
products to gain market acceptance. Such companies may be less
willing to purchase new technology such as ours or invest in new
technology development when they have reduced capital expenditure
budgets.


                              27
<PAGE>


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
revenues.

     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, device certification, 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.

We will require additional capital to continue to fund our
operations. 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 will be able to fund our operations through the second
quarter of 2008. We will require additional capital to continue
to fund our operations in future periods. 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. We currently 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. 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 stockholders may be reduced, and these securities may
have rights superior to those of our common stock. If adequate
funds are not available to satisfy either short-term or long-term
capital requirements, or if planned revenues are not generated,
we may be required to limit our operations substantially. These
limitations of operations may include reductions in capital
expenditures and reductions in staff and discretionary costs.

We may incur debt in the future that might be secured with our
intellectual property as collateral, which could subject our
Company to the risk of loss of all of our intellectual property.

     If we incur debt in the future, we may be required to secure
the debt with our intellectual property, including all of our
patents and patent pendings. In the event we default on the debt,
we could incur the loss of all of our intellectual property,
which would materially and adversely affect our Company and cause
you to lose your entire investment in our Company.


                              28
<PAGE>


Our quarter-to-quarter performance may vary substantially, and
this variance, as well as general market conditions, may cause
our stock price to fluctuate greatly and potentially expose us to
litigation.

     We have generated no sales to date and we cannot accurately
estimate future quarterly revenue and operating expenses based on
historical performance. Our quarterly operating results may vary
significantly based on many factors, including:

     *   fluctuating demand for our potential products and
         technologies;
     *   announcements or implementation by our competitors of
         technological innovations or new products;
     *   amount and timing of our costs related to our marketing
         efforts or other initiatives;
     *   the status of particular development programs and the
         timing of performance under specific development
         agreements;
     *   timing and amounts relating to the expansion of our
         operations;
     *   product shortages requiring suppliers to allocate minimum
         quantities;
     *   announcements or implementation by our competitors of
         technological innovations or new products;
     *   the status of particular development programs and the
         timing of performance under specific development
         agreements;
     *   our ability to enter into, renegotiate or renew key
         agreements;
     *   timing and amounts relating to the expansion of our
         operations;
     *   costs related to possible future acquisitions of
         technologies or businesses; or
     *   economic conditions specific to our industry, as well as
         general economic conditions.

     Our current and future expense estimates are based, in large
part, on estimates of future revenue, which is difficult to
predict. We expect to continue to make significant operating and
capital expenditures in the area of research and development and
to invest in and expand production, sales, marketing and
administrative systems and processes. We may be unable to, or may
elect not to, adjust spending quickly enough to offset any
unexpected revenue shortfall. If our increased expenses are not
accompanied by increased revenue in the same quarter, our
quarterly operating results would be harmed.

     In one or more future quarters, our results of operations
may fall below the expectations of investors and the trading
price of our common stock may decline as a consequence. We
believe that quarter-to-quarter comparisons of our operating
results will not be a good indication of our future performance
and should not be relied upon to predict the future performance
of our stock price. In the past, companies that have experienced
volatility in the market price of their stock have often been
subject to securities class action litigation. We may be the
target of this type of litigation in the future. Securities
litigation against us could result in substantial costs and
divert our management's attention from other business concerns,
which could seriously harm our business.


                              29
<PAGE>


We cannot predict the pace of marketable products we may
generate, and any inability to generate a sufficient number of
marketable products would reduce our revenues and harm our
business.

     Our future revenues and profitability are dependent upon our
ability to create marketable products, whether through our own
research and development efforts or through collaborations with
customers or industry partners. Because of the inherently
uncertain nature of research and development activities, we
cannot predict the pace of new product introductions. We must
undertake additional research and development before we are able
to develop additional products for commercial sale. Product
development delays by us or potential product development
partners, or the inability to enter into relationships with these
potential partners, may delay or prevent us from introducing
products for commercial sale. In addition, our product candidates
may not result in products having the commercial potential we
anticipate. Any of these factors could reduce our potential
commercial sales and lead to inability to generate revenue and
attain profitability.

Our failure to compete successfully could harm our business.

     The markets that we are targeting for our electro-optic
polymer technology 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:

     *   succeed in developing products that are equal to or
         superior to our potential products or that will achieve
         greater market acceptance than our potential products;
     *   devote greater resources to developing, marketing or
         selling their products;
     *   respond more quickly to new or emerging technologies or
         scientific advances and changes in customer requirements,
         which could render our technologies or potential products
         obsolete;
     *   introduce products that make the continued development
         of our potential products uneconomical;
     *   obtain patents that block or otherwise inhibit our ability
         to develop and commercialize our potential products;
     *   withstand price competition more successfully than we can;
     *   establish cooperative relationships among themselves or
         with third parties that enhance their ability to address
         the needs of our prospective customers; and
     *   take advantage of acquisitions or other opportunities more
         readily than we can.

     The failure to compete successfully against these existing
or future competitors could harm our business.



                              30
<PAGE>


We may be unable to establish sales and marketing capabilities
necessary to successfully commercialize our potential products.

     We currently have limited sales and marketing capabilities.
To date, we have relied upon our strategic partners to assist us
in creating an awareness of our developing technology in both the
government and commercial markets. We will need to either hire
sales personnel with expertise in the markets we intend to
address or contract with others to provide for sales support.
Although our potential products are all based on our polymer
materials technology, the potential products themselves address
different markets and can be offered through multiple sales
channels. Addressing each market effectively will require sales
and marketing resources tailored to the particular market and to
the sales channels that we choose to employ. In addition, the
markets in which we operate are highly complex and technical; we
may not have the adequate expertise to adequately market our
products. We may be unable to establish marketing and sales
capabilities necessary to commercialize and gain market
acceptance for our potential products. Co-promotion or other
marketing arrangements with others to commercialize products
could significantly limit the revenues we derive from these
products, and these parties may fail to commercialize such
products successfully.

We may be unable to obtain effective intellectual property
protection for our potential 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 ground
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


                              31
<PAGE>

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
commercializing our potential products.

     Third parties may claim that our potential 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
potential 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
commercialize our potential 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 potential 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 and retained
research institution rights.

     We may have obligations to government agencies or
universities 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. In addition, academic research
partners often retain certain rights, including the right to use
the technology for noncommercial academic and research use, to
publish general scientific findings from research related to the
technology, and to make customary scientific and scholarly
disclosures of information relating to the technology. It is
difficult to monitor whether our partners will limit their use of
the technology to these uses, and we could incur substantial
expenses to enforce our rights to our licensed technology in the
event of misuse.



                              32
<PAGE>


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
Harold R. Bennett our chief executive officer and Frederick J.
Goetz, Jr. our president. We currently do not have a written
employment agreement with Frederick J. Goetz, Jr., and we
currently do not maintain key person life insurance on any
executive officer. Accordingly, the loss of the services of any
of these persons would adversely affect our business and our
ability to timely 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 processes, our operating results would be harmed.

     The manufacture of our potential products is a multi-stage
process that requires the use of high-quality materials and
advanced manufacturing technologies. Also, polymer-related device
development and manufacturing 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 on our manufacturing processes or to maintain
stringent quality controls, or if contamination problems arise,
our operating results would be harmed.

We may utilize third parties to manufacture our current products
and our revenues could decline if these third parties do not
timely complete our orders and our reputation could suffer if we
do not maintain high quality standards.

     We may enter into manufacturing arrangements with third
party manufacturers and we intend to enter into agreements with
additional corporate partners, OEMs and other third parties. We
expect to contract with manufacturing companies to perform
various portions of our product manufacturing, testing, assembly
and shipping and purchase components to be used in our potential
products from third-party vendors. If these third parties do not
timely complete our orders, or do not properly manufacture our
products, our reputation could be harmed, and our revenues could
decline. We cannot assure you that we will be able to negotiate
arrangements with these third parties on acceptable terms, if at
all, or that these arrangements will be successful in yielding
commercially viable products. If we cannot maintain our current
relationships or establish new arrangements, we will require
additional capital to undertake those activities on our own and
will require manufacturing expertise that we do not currently
possess and that may be difficult to obtain.


                              33
<PAGE>


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 or construct 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. If we are unable to expand
internal production capacity on a timely basis to meet increases
in demand, we could lose market opportunities for sales. Further,
we cannot assure you that any increased demand for our potential
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
potential products in large quantities. In the event of
significant demand for our potential 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 products for
research, development and demonstration 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
commercial quantities, our financial results will be harmed.

We conduct significantly all of our research and development
activities at a single facility, and circumstances beyond our
control may result in considerable interruptions.

     We conduct significantly all of our research and development
activities at a single facility in Wilmington, Delaware. A
disaster such as a fire, flood or severe storm at or near this
facility could prevent us from further developing our
technologies or manufacturing our potential products, which would
harm our business.

We could be exposed to significant product liability claims that
could be time-consuming and costly and impair our ability to
obtain and maintain insurance coverage.

     We may be subject to product liability claims if any of our
potential products are alleged to be defective or harmful.
Product liability claims or other claims related to our potential
products, regardless of their outcome, could require us to spend
significant time and money in litigation, divert our management's
time and attention from other business concerns, require us to
pay significant damages, harm our reputation or hinder acceptance
of our potential products. Any successful product liability claim
may prevent us from obtaining adequate product liability
insurance in the future on commercially reasonable terms. Any
inability to obtain sufficient insurance coverage at an
acceptable cost or otherwise to protect against potential product


                              34
<PAGE>


liability claims could impair our ability to commercialize our
potential products.

We may be unable to effectively implement new transaction
accounting, operational and financial systems.

     To manage the expected growth of our operations and
personnel, we will be required to implement complex transaction
accounting, operational and financial systems, procedures and
controls and to retain personnel experienced in the use of these
systems. Deficiencies in the design and operation of our systems,
procedures and controls, including internal controls, could
adversely affect our ability to record, process, summarize and
report material financial information. We cannot assure you that
our current and planned systems, procedures and controls will be
adequate to support our future operations.

Our failure to effectively manage and support our growth could
adversely affect our business.

     Failure to effectively manage and support our growth could
adversely affect our business. To date, substantially all of our
activities and resources have been directed at the research and
development of our technology and development of potential
products. The transition from research and development to a
product vendor or licensor will create significant additional
demands on our infrastructure and will require effective planning
and management. We cannot assure you that our resources will be
adequate to support our future growth. In addition, future
expansion will be expensive and will likely strain our management
and other resources. In order to effectively manage growth, we
must:

     *   manage in-house our operating and financial control
         systems;
     *   continue to develop an effective planning and management
         process to implement our business strategy;
     *   hire, train and integrate new personnel in all areas of
         our business; and
     *   expand our facilities and increase our capital
         investments.

     We cannot assure you that we will be able to accomplish
these tasks effectively or otherwise effectively manage our
growth.

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 be unable to export our potential 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.


                              35
<PAGE>


     We are developing 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 these
potential products into other countries, exporting our technology
to those countries, conveying information about our technology to
citizens of other countries or selling these potential products
to commercial customers. We may be unable to obtain export
licenses for products or technology if necessary. We currently
cannot assess whether national security concerns would affect our
potential products and, if so, what procedures and policies we
would have to adopt to comply with applicable existing or future
regulations.

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. The
waste created by use of these materials is transported off-site
by an unaffiliated waste hauler. 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 plan to develop relationships with strategic partners may not
be successful.

     Part of our business strategy is to maintain and develop
strategic relationships with government agencies, private firms,
and academic institutions to conduct research and development of
technologies and products. 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.


                              36
<PAGE>


As our business grows, if we need to establish global operations,
we will be subject to various risks.

     Many of the markets that we propose to address are global
and may require us to conduct foreign operations, including the
establishment of sales, manufacturing and possible research and
development facilities in other countries. While the specific
risks that will apply to these activities would depend on the
circumstances, we could become subject to risks relating to
foreign currency fluctuations, political and social unrest, local
regulatory systems and varying standards for the protection of
intellectual property. The existence of any of these risks will
complicate our business and may lead to unexpected and adverse
effects on our business. If we are required to conduct
significant foreign operations, we will also need expertise in
such operations, which we do not presently have.

Our limited operating history makes financial forecasting
difficult for us and for others that may publish estimates of our
future financial results.

     As a result of our limited operating history, it is
difficult to accurately forecast our revenue and results,
including product sales, cost of revenue, research and
development expenses, marketing, general and administrative
expenses and other financial and operating data. We have a
limited amount of meaningful historical financial data upon which
to base projected revenue or expenses. We base our current
expense levels and estimates of future expense levels on our
operating plans and estimates of future revenue, and our future
expenses will be dependent in large part upon our future levels
of product sales. Sales and results are difficult to forecast
because we do not currently have any commercial customers or
government contracts, we are uncertain of the extent of orders
for our products and the mix, volume and timing of any such
orders. As a result, we may be unable to make accurate financial
forecasts of revenue or expenses. Financial analysts and others
that may seek to project our future performance face similar
difficulties. This inability to accurately forecast our revenue
and expenses could cause our financial results to differ
materially from any projected financial results and could cause a
decline in the trading price of our common stock.

Item 2.   Description of Property.

     We share approximately 1,200 square feet of office space
with Universal Capital Management, Inc. for our executive and
business office headquarters that are located at 2601 Annand Dr.
#16, Wilmington, Delaware 19808. We coordinate our operations and
market our services from this space. Universal Capital
Management, Inc. allows us to utilize this office space free of
charge on a month-to-month basis.

     We also lease approximately 1,400 square feet of laboratory
space at 41A Germay Drive, Wilmington, Delaware 19804-1100. We
operate an organic synthesis and thin-films laboratory from this
facility, which has state-of-the-art equipment including NMR, IR,
UV/VIS and HPLC analytical systems, profilometry evaluation and
electro-optic (r33) materials characterization necessary to
produce next generation fiber-optic organic materials. We lease
this space at fair market value rates from a third party. The
lease expires on December 31, 2008 and annual rent for the space
is $8,593.



                              37
<PAGE>


     We believe our executive and business office headquarters
are adequate for our reasonably foreseeable needs.

Item 3.   Legal Proceedings.

     During the spring of 2005, we raised $1,000,000 through the
sale of 4,000,000 shares of our common stock in a limited
offering to persons considered to be accredited investors. Our
Company received a legal opinion from outside counsel as to the
availability of an exemption from registration with the
Securities and Exchange Commission (the "SEC" or "Commission")
with respect to the limited offering.

     In December 2005, we were informed by the Commission that it
is investigating the circumstances surrounding the $1,000,000
offering described above including the subsequent public resale
of certain shares originally sold in the offering, along with
related matters. Our Company has further been informed that the
original issuance of the stock and subsequent resale thereof may
have been done, in the opinion of the Commission, in violation of
the registration provisions of the Securities Act of 1933, as
amended. These matters could lead to enforcement action by the
Commission. Our Company has committed to cooperate fully with the
Commission with the intention that all issues will be resolved as
quickly as possible.

     Ronald R. Genova v. Third-Order Nanotechnologies, Inc., PSI-
     ------------------------------------------------------------
TEC Holdings, Inc. and Universal Capital Management
---------------------------------------------------

     This case was filed in Philadelphia County, Court of Common
Pleas, on July 23, 2007. Ronald R. Genova is the Plaintiff. Third-
Order Nanotechnologies, Inc., PSI-TEC Holdings, Inc. and
Universal Capital Management are each a Defendant. The case is in
the early stages.

     Ronald R. Genova ("Genova") served as a consultant and then
as the interim chief executive officer of our Company. The
Company terminated Genova effective February 28, 2007. On March
26, 2007 the Company paid Genova $9,806, which the Company
determined was the full amount the Company owed Genova. Genova
sued, claiming he was owed an additional $84,650 plus interest
for unpaid consulting fees in the amount of $32,516, a
performance bonus in the amount of $50,000, and an expense
reimbursement in the amount of $2,135. Pursuant to the complaint,
Genova is alleging breach of contract, fraud and promissory
estoppel in an amount in excess of $180,000, in addition to the
right to exercise his options, that expired on May 30, 2007,
until February 13, 2016 or a judgment in an additional amount
equal to the monetary value of such options plus punitive
damages, interest and costs. Our position is that Genova has been
fully paid all amounts due to him, that Genova's options expired
and that he is not entitled to exercise such options at any time
now or in the future.

     On September 4, 2007 our Company answered the complaint
seeking dismissal of all allegations contained in the complaint
and denying that Genova is entitled to any of the relief he is
seeking. Additionally, our Company counter-claimed Genova seeking
an undetermined amount of damages from Genova for fraud, breach
of contract, breach of duty of loyalty, and breach of duty of
disclosure.  No discovery has commenced in this proceeding to
date.  We intend to vigorously contest the matter. Although the
facts ascertained to date indicate a favorable outcome is a


                              38
<PAGE>


likely result, it is too early in the process to provide a
detailed evaluation of the likelihood of success. It is also too
early to provide an estimate of the amount or range of potential
loss, although according to the complaint, Genova is seeking in
excess of $180,000, in addition to the right to exercise his
options, that expired on May 30, 2007, until February 13, 2016 or
a judgment in an additional amount equal to the monetary value of
such options plus punitive damages, interest and costs, so the
assumption can be made that this would be at the high end of that
range.

         Other  than  described herein, we are not aware  of  any
litigation or threatened litigation of a material nature.

Item 4.   Submission Of Matters To A Vote Of Security Holders.

     No matter was submitted to a vote of our security holders
during the fourth quarter of the fiscal year covered by this
report.

                            PART II

Item 5.   Market for Common Equity and Related Stockholder
          Matters and Small Business Issuer Purchases of Equity
          Securities.

                      Market Information

     Our common stock is currently traded under the symbol LWLG
on the on the over-the-counter bulletin board ("OTCBB"). Prior to
January 10, 2008, our common stock was traded on the Pink Sheets'
Electronic Quotation Service (the "Pink Sheets").

     The following table set forth below lists the range of high
and low bids for our common stock for each fiscal quarter for the
last two fiscal years. The prices in the table reflect inter-
dealer prices, without retail markup, markdown or commission and
may not represent actual transactions.

<TABLE>
<CAPTION>
                                   High             Low
                              ---------------   -------------
                               Bid      Asked   Bid     Asked
<S>                           <C>       <C>     <C>     <C>
     2006      1st Quarter    $2.10     $2.15   $2.15   $0.90
               2nd Quarter    $1.87     $2.00   $2.00   $1.10
               3rd Quarter    $1.14     $1.25   $1.25   $0.53
               4th Quarter    $0.83     $0.86   $0.38   $0.42

     2007      1st Quarter    $0.72     $0.74   $0.42   $0.48
               2nd Quarter    $0.92     $0.95   $0.56   $0.59
               3rd Quarter    $0.77     $0.79   $0.40   $0.45
               4th Quarter    $0.91     $0.94   $0.55   $0.58
</TABLE>



                              39
<PAGE>

                            Holders

    As of the date of this annual report, we have a total of
34,021,742 shares of common stock outstanding, held of record by
approximately 2423 shareholders. We do not have any shares of
preferred stock outstanding.

                           Dividends

     No cash dividends have been declared or paid on our common
stock to date. No restrictions limit our ability to pay dividends
on our common stock. The payment of cash dividends in the future,
if any, will be contingent upon our Company's revenues and
earnings, if any, capital requirements and general financial
condition. The payment of any dividends is within the discretion
of our board of directors. Our board of director's present
intention is to retain all earnings, if any, for use in our
business operations and, accordingly, the board of directors does
not anticipate paying any cash dividends in the foreseeable
future.

Securities Authorized for Issuance under Equity Compensation Plans

         Equity Compensation Plans as of December 31, 2007.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                                                       Number of securities
                                                                      remaining available for
                                                                       future issuance under
                    Number of securities to     Weighted-average        equity compensation
                    be issued upon exercise      exercise price          plans (excluding
                    of outstanding options,    outstanding options,    securities reflected
                      warrants and rights      warrants and rights         in column (A))
Plan category                  (a)                     (b)                      (c)
==============================================================================================
<S>                        <C>                         <C>                    <C>
Equity compensation
plans approved by
security holders           1,752,000                   $0.72                  1,748,000
==============================================================================================
Equity compensation
plans not approved
by security holders              ---                     ---                        ---
==============================================================================================
         Total             1,752,000                   $0.72                  1,748,000
==============================================================================================
</TABLE>


     In October 2007 we canceled our Company's 2005 Stock Option
Plan and adopted a new 2007 Employee Stock Plan ("2007 Plan") for
the benefit of our directors, officers, employees and
consultants, and we have reserved 3,500,000 shares of common
stock for such persons pursuant to the 2007 Plan.

       Penny Stock Regulations and Restrictions on Marketability

     The SEC has adopted rules that regulate broker-dealer practices in
connection with transactions in penny stocks. Penny stocks are generally
equity securities with a market price of less than $5.00, other than
securities registered on certain national securities exchanges or quoted


                              40
<PAGE>


on the NASDAQ system, provided that current price and volume
information with respect to transactions in such securities is
provided by the exchange or system. The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock, to deliver a
standardized risk disclosure document prepared by the SEC, that: (a)
contains a description of the nature and level of risk in the market
for penny stocks in both public offerings and secondary trading; (b)
contains a description of the broker's or dealer's duties to the
customer and of the rights and remedies available to the customer
with respect to a violation of such duties or other requirements
of the securities laws; (c) contains a brief, clear, narrative
description of a dealer market, including bid and ask prices for
penny stocks and the significance of the spread between the bid
and ask price; (d) contains a toll-free telephone number for
inquiries on disciplinary actions; (e) defines significant terms
in the disclosure document or in the conduct of trading in penny
stocks; and (f) contains such other information and is in such
form, including language, type size and format, as the SEC shall
require by rule or regulation.

     The broker-dealer also must provide, prior to effecting any
transaction in a penny stock, the customer with (a) bid and offer
quotations for the penny stock; (b) the compensation of the
broker-dealer and its salesperson in the transaction; (c) the
number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the
market for such stock; and (d) a monthly account statement
showing the market value of each penny stock held in the
customer's account.

     In addition, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from those
rules, the broker-dealer must make a special written
determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment
of the receipt of a risk disclosure statement, a written
agreement as to transactions involving penny stocks, and a signed
and dated copy of a written suitability statement.

      These  disclosure  requirements  may  have  the  effect  of
reducing  the  trading activity for our common stock.  Therefore,
stockholders may have difficulty selling our securities.

            Recent Sales of Unregistered Securities

     During the period covered by this report, our Company has
sold the following securities without registering the securities
under the Securities Act:

     Common Stock

     During 2006, we authorized the private offering of our
common stock to raise up to an aggregate of $1,000,000, with up
to 20 units to be offered at the offering price of $50,000 per
unit, with each unit comprised of 100,000 shares of common stock,
and a warrant to purchase 50,000 shares of common stock at $0.50
per share. The private offering was closed in March 2007 and
raised a total of $999,000, $574,000 of which was raised during
the first quarter of 2007. We relied on Section 4(2) and Rule 506
of Regulation D of the Securities Act since the transaction does
not involve any public offering.


                              41
<PAGE>


     During February 2007, we issued: (i) 151,785 shares of our
common stock to one accredited investor for stock analyst
services. The shares were valued at approximately $0.70 per share
for an aggregate amount of approximately $106,250; and (ii)
1,000,000 shares of our common stock to one accredited investor
for management advisory services. The shares were valued at
approximately $0.58 per share for an aggregate amount of
approximately $580,000. These persons were the only offerees in
connection with these transactions. Our Company relied on Section
4(2) of the Securities Act since the transaction did not involve
any public offering.

     During April 2007, we issued 100,000 shares of our common
stock to one accredited investor for professional services. The
shares were valued at approximately $0.35 per share for an
aggregate amount of approximately $35,000. This person was the
only offeree in connection with these transactions. We relied on
Section 4(2) and/or Rule 701 of the Securities Act since the
transaction did not involve any public offering.

     Also during April 2007, we authorized a $1,000,000 private
offering of our common stock and warrants to purchase our common
stock. Pursuant to the terms of this private offering, up to 20
units were offered at the offering price of $50,000 per unit,
with each unit comprised of 100,000 shares of common stock, and a
warrant to purchase 50,000 shares of common stock at $0.50 per
share. This private offering raised an aggregate of $667,000. We
relied on Section 4(2) and Rule 506 of Regulation D of the
Securities Act since the transaction does not involve any public
offering.

     During October 2007, we authorized a $1,500,000 private
offering of our common stock and warrants to purchase our common
stock. Pursuant to the terms of this private offering, up to 25
units were offered at the offering price of $60,000 per unit,
with each unit comprised of 100,000 shares of common stock, and a
warrant to purchase 50,000 shares of common stock at $1.00 per
share. As of December 31, 2007, this private offering raised an
aggregate of $1,060,524. We relied on Section 4(2) and Rule 506
of Regulation D of the Securities Act since the transaction does
not involve any public offering.

     Warrants to Purchase Common Stock
<TABLE>
<CAPTION>
                   Shares Underlying
Date  Issued    Warrants/ Exercise Price     Exercise/Expiration Schedule
------------    ------------------------     ----------------------------
<S>             <C>                          <C>
  ----(1)           574,000/$.50             ----(2)(3)

April 17, 2007      100,000/$0.25            100,000 shares from 4/17/07 - 4/17/10(4)
                    300,000/$0.25            300,000 shares from 4/17/07 - 4/17/10(4)
                    150,000/$0.25            150,000 shares from 4/17/07 - 4/17/10(4)
                    100,000/$0.25            100,000 shares from 4/17/07 - 4/17/10(4)
                    500,000/$0.25            500,000 shares from 4/17/07 - 4/17/10(4)
                    500,000/$0.25            500,000 shares from 4/17/07 - 4/17/12(4)

  ----(5)           667,000/$0.50            ----(2)(3)

  ----(6)           833,770/$1.00            ----(2)(3)
</TABLE>


                              42
<PAGE>

___________________
  1.   Issued at various times during 2007 in connection with our
       2006 private offering.
  2.   The warrants are immediately exercisable for a period of two
       (2) years from the date of purchase.
  3.   We relied upon Section 4(2) and Rule 506 of Regulation D of
       the Securities Act since the transaction did not involve any
       public offering.
  4.   The warrants were issued in connection with advisory or
       consulting services provided to our Company and vest at various
       times pursuant to the specific terms of the advisor's or
       consultant's warrant agreement. These persons were the only
       offerees in connection with this transaction. Our Company relied
       on Section 4(2) of the Securities Act since the transaction did
       not involve any public offering.
  5.   Issued at various times during 2007 in connection with our
       April 2007 private offering.
  6.   Issued at various times during 2007 in connection with our
       October 2007 private offering.

     No underwriters were utilized and no commissions or fees
were paid with respect to any of the above transactions.

Item 6. Management's Discussion and Analysis or Plan of Operation.

                        Plan of Operation

     The following plan of operation provides information that
management believes is relevant to an assessment and
understanding of our plans and financial condition. The following
selected financial information is derived from our historical
financial statements and should be read in conjunction with such
financial statements and notes thereto set forth elsewhere herein
and the "Forward-Looking Statements" explanation included herein.

Overview

     Lightwave Logic, Inc., formerly, Third-Order
Nanotechnologies, Inc., formerly, PSI-TEC Holdings, Inc.,
formerly Eastern Idaho Internet Service, Inc. was organized under
the laws of the State of Nevada in 1997, where we engaged in the
business of marketing Internet services until June 30, 1998 when
our operations were discontinued.  We were then inactive until we
acquired PSI-TEC Corporation as our wholly owned subsidiary on
July 14, 2004, at which time our name was changed to PSI-TEC
Holdings, Inc.  On October 20, 2006, we completed a parent-
subsidiary merger with PSI-TEC Corporation whereby we were the
surviving corporation of the merger, and our name was changed to
Third-Order Nanotechnologies, Inc. On March 10, 2008, we changed
our name to Lightwave Logic, Inc. to better suit our strategic
business plan and to facilitate stockholder recognition of our
Company and its business.

     We are a developmental stage company that has developed
and continues to develop high-activity, high-stability electro-
optic polymers (plastics) that we believe could have a broad


                              43
<PAGE>


range of applications in the electro-optic device market. We
engineer our proprietary electro-optic plastics at the molecular
level for superior performance, stability, cost-efficiency and ease
of processability. We expect our electro-optic plastics to broadly
replace more expensive, lower-performance materials that are
currently used in fiber-optic ground, wireless and satellite
communication networks.

     In order to transmit digital information at extremely high-
speeds (wide bandwidth) over the Internet, it is necessary to
convert the electrical signals produced by a computer into
optical signals for transmission over long-distance fiber-optic
cable.  The actual conversion of electricity to an optical signal
may be performed by a molecularly-engineered material known as an
electro-optic plastic.

     We are currently developing electro-optic plastics that
promise performance many times faster than any technology
currently available and that have unprecedented thermal
stability. High-performance electro-optic materials produced by
our Company have demonstrated stability as high as 350 degrees
Celsius.  Stability above 300 degrees Celsius is necessary for
vertical integration into many semi-conductor production lines.
Recent results, independently confirmed by the University of
Arizona, have demonstrated that the molecular performance of some
of our Company's molecular designs perform 650% better than
competitive electro-optic compounds.

     Our revenue model relies substantially on the assumption
that we will be able to successfully develop electro-optic
products for applications within the industries described below.
When appropriate, we intend to create specific materials for each
of these applications and use our proprietary knowledge base to
continue to enhance its discoveries.

  * Satellite Reconnaissance
  * Navigational Systems
  * Radar Applications
  * Telecommunications
  * Backplane Optical Interconnects
  * Entertainment
  * Medical Applications

To be successful, we must, among other things:

  * Develop and maintain collaborative relationships with
    strategic partners;
  * Continue to expand our research and development efforts for
    our products;
  * Develop and continue to improve on our manufacturing
    processes and maintain stringent quality controls;
  * Produce commercial quantities of our products at
    commercially acceptable prices;
  * Rapidly respond to technological advancements;
  * Attract, retain and motivate qualified personnel; and
  * Obtain and retain effective intellectual property protection
    for our products and technology.


                              44
<PAGE>


     We believe that Moore's Law (a principle which states the
number of transistors on a silicon chip doubles approximately
every eighteen months) will create markets for our high-
performance electro-optic material products.

Plan of Operation

     Since our inception, we have been engaged primarily in the
research and development of our polymer materials technologies
and potential products. We are devoting significant resources
to engineer next-generation electro-optic plastics for future
applications to be utilized by electro-optic device
manufacturers, such as telecommunications component and systems
manufacturers, networking and switching suppliers, semiconductor
companies, aerospace companies and government agencies. We expect
to continue to develop products that we intend to introduce to
these rapidly changing markets and to seek to identify new
markets. We expect to continue to make significant operating and
capital expenditures for research and development activities.

     As we move from a development stage company to a product
vendor, we expect that our financial condition and results of
operations will undergo substantial change. In particular, we
expect to record both revenue and expense from product sales, to
incur increased costs for sales and marketing and to increase
general and administrative expense. Accordingly, the financial
condition and results of operations reflected in our historical
financial statements are not expected to be indicative of our
future financial condition and results of operations.

     On August 8, 2006, we contracted with Triple Play
Communications Corporation, a design and market consulting
company, to deliver a comprehensive market opportunity
assessment report for high speed 40G (commercial) & 100G+
(military/aerospace) modulators and system applications.

     In August, 2006 we entered into a co-location agreement with
InPlane Photonics, a New Jersey-based micro-optics company that
allowed our scientists to establish a pre-production line in
order to test and integrate our organic materials into waveguide
devices and system prototypes as a first step toward product
commercialization. This agreement was terminated at the end of
January 2007 so that we could focus on pursuing a strategic
relationship with Photon-X LLC, a Pennsylvania-based firm with
extensive experience in polymer waveguide processing. We entered
into a non-binding memorandum of understanding with Photon-X, LLC
in December 2006 to work towards creating a "fee for services"
agreement with Photon-X, LLC to design, develop, produce and
market electro-optic components based upon our polymer
technology. Such an agreement with Photon-X, LLC would afford our
Company access to a full suite of fabrication facilities capable
of producing commercial quantities of precision micro-optic
devices such as high-speed (40GHz) telecom modulators, optical
filters, and optical interconnects important to military and
civilian global information movement and management markets.

     On September 25, 2006 we obtained independent laboratory
results that confirmed the thermal stability of our Perkinamine
electro-optic materials. Thermal stability as high as 350 degrees
Celsius was confirmed, significantly exceeding many other commercially
available high performance electro-optic materials, such as CLD-1 which
exhibits thermal degradation in the range of 250 degrees Celsius to 275
degrees Celsius. This high temperature stability of our


                              45
<PAGE>


materials eliminates a major obstacle to vertical integration
of electro-optic polymers into standard microelectronic manufacturing
processes (e.g. wave/vapor-phase soldering) where thermal stability of
at least 300 degrees Celsius is required. In independent laboratory
tests, ten-percent material degradation, a common evaluation of overall
thermal stability, did not occur until our Perkinamine material base
was exposed to temperatures as high as 350 degrees Celsius, as
determined by Thermo-Gravimetric Analysis (TGA). The test results
supported our Company's progress to introduce our materials into
commercial applications such as optical interconnections, high-
speed telecom and datacom modulators, and military/aerospace
components.

     In July 2007, our Company developed an innovative process to
integrate our unique architecture into our anticipated commercial
devices, whereby dendritic spacer systems are attached to its
core chromophore. In the event we are successful in developing a
commercially viable product, we believe these dendrimers will
reduce the cost of manufacturing materials and reduce the cost
and complexity of tailoring the material to specific customer
requirements.

     In January 2008, we retained TangibleFuture, Inc., a San
Francisco based technology analysis and business development
consulting company, to generate an independent assessment of our
business opportunities in the fiber-optic telecommunications and
optical computing sectors and develop strategies to penetrate
those potential markets.

     In March 2008, we commenced production of our first
prototype photonic chip, which we delivered to our partner,
Photon-X, LLC who will fabricate a prototype polymer optical
modulator and measure its technical properties. We hope to be
able to demonstrate this prototype early in the second quarter.
We intend to utilize the services of Dr. Robert Norwood at the
University of Arizona Photonics Department to perform the
necessary proof of concept tests, as we have in the past. We may
incur delays in this process due to slower than expected material
production within our laboratories and/or delays caused by the
testing procedures at the University of Arizona.  Should these
tests produce a functional 10 Gb/s or greater modulator we expect
to go forward with product marketing and development in the
telecommunication market with partners in the telecommunication
field. We cannot anticipate the details of the customer adoption
cycle until we have produced a function prototype to create a
credible technology offering.

     We ultimately intend to use our next-generation electro-
optic plastics for future applications vital to the following
industries. We expect to create specific materials for each of
these applications as appropriate:

  * Satellite Reconnaissance
  * Navigational Systems
  * Radar Applications
  * Telecommunications
  * Backplane Optical Interconnects
  * Entertainment
  * Medical Applications


                              46
<PAGE>


     In an effort to maximize our future revenue stream from our
electro-optic polymer products, we are currently evaluating each
of or some combination of the following approaches:

  * Licensing our technology for individual specific
    applications;
  * Entering into collaborative or joint venture agreements with
    one or a number of partners; or
  * Selling our products directly to commercial customers.

     Additionally, we must create an infrastructure, including
operational and financial systems, and related internal controls,
and recruit qualified personnel. Failure to do so could adversely
affect our ability to support our operations.

     We have incurred substantial net losses since inception. We
have satisfied our capital requirements since inception primarily
through the issuance and sale of our common stock. During 2004 we
raised approximately $529,000 from the issuance of convertible
promissory notes, of which $30,000 was converted into common
stock of the company during 2004 and the remaining $499,000
converted in 2005. Also, during 2005, we raised an aggregate of
$1,000,000 from the private sale of our common stock. During
2006, we raised approximately $425,000 from the private sale of
our common stock, of which $200,000 was rescinded during 2007.
During 2007, we raised approximately $2,301,524 from the private
sale of our common stock. We have also issued shares of our
common stock and warrants to purchase shares of our common stock
in exchange for services rendered to our company, including
professional services.

Award

     On September 26, 2006, we were awarded the 2006 Electro-
Optic Materials Technology Innovation of the Year Award by Frost
& Sullivan.  Frost & Sullivan's Technology Innovation of the Year
Award is bestowed upon candidates whose original research has
resulted in innovations that have, or are expected to bring,
significant contributions to multiple industries in terms of
adoption, change, and competitive posture. This award recognizes
the quality and depth of our Company's research and development
program as well as the vision and risk-taking that enabled us to
undertake such an endeavor.

Results of Operations

Comparison of Fiscal 2007 to Fiscal 2006

     Revenues

     We had no revenues in fiscal 2007 or 2006 since we are a
development stage company that has yet to commence revenue
creating operations.

     Operating Expenses

     Our operating expenses were $4,228,748 and $2,994,749
for the years ended December 31, 2007 and 2006, respectively,
for an increase of $1,233,999. This increase in operating


                              47
<PAGE>


expenses was due primarily to our hiring additional personnel,
significantly increasing our research and development activities,
and legal, accounting, investor relations and other costs associated
with being a fully reporting public company.

     Included in our operating expenses for 2007 was $1,305,333
for research and development expenses compared to $1,179,997 for
2006. Research and development expenses currently consist
primarily of compensation for employees and contractors engaged
in internal research and product development activities;
laboratory operations, outsourced development and processing
work; fees and expenses related to patent applications and
intellectual property protection; costs incurred in acquiring and
maintaining licenses; and related operating expenses.

     We expect to continue to incur substantial research and
development expense to develop commercial products that utilize
our electro-optic plastics. These expenses could increase as a
result of continued development and commercialization of our
electro-optic materials technology; subcontracting work to
potential development partners; expanding and equipping in-house
laboratories; hiring additional technical and support personnel;
pursuing other potential business opportunities; and incurring
related operating expenses.

     General and administrative expense consists primarily of
compensation and support costs for management and administrative
staff, and for other general and administrative costs, including
executive, investor relations, accounting and finance, legal,
consulting and other operating expenses, including laboratory
space rental costs.

     General and administrative expenses increased $1,108,663 to
$2,923,415 for 2007 compared to $1,814,752 for 2006. The increase
is due primarily to our increases in accounting and auditing fee,
legal fee, management fees, investor relations fees, and wages
and salaries, which were offset by a decrease in rent, insurance,
state income taxes, travel and entertainment, and other costs.

     Accounting and auditing fees were $112,452 and $83,933 in
2007 and 2006. The increase of $28,519 was primarily due to the
fees associated with filing a registration statement with the
Securities and Exchange Commission and becoming a fully reporting
company. Legal fees increased $42,513 to $185,224 in 2007
compared to $142,711 in 2006 due to fees associated with the
preparation of the Form 10-SB and other legal services provided
to our Company.

     Wages and salaries increased $210,711 from $425,502 in 2006
to $636,213 in 2007 due to the amortization of employee options
and an increase in pay for some of the officers.  Consultant
expense was $649,648 in 2006 and $954,821 in 2007.  The increase
of $305,173 was due to additional consultants being used during
2007.

     Management fees increased $454,788 to $773,333 from $318,545
in 2006 as a result of an additional contract signed in February
2007. Investor relations fees increased $436,000 from $0 in 2006
to $436,000 due to the Company becoming fully reporting with the
SEC and switching from the Pink Sheets to the Over-the-Counter
Bulletin Board.


                              48
<PAGE>


     State income tax of $0 and $20,169 was paid during 2007 and
2006 for taxes on payroll in prior years. The decrease of $20,169
is due to the prior years' taxes being settled during 2006.

     Rent decreased $9,850 from $20,275 in 2006 to $10,425 in
2007 due to the lease in the New Jersey lab being cancelled by
the Company of $3,000 per month.  Insurance expenses decreased
$8,287 from $60,721 in 2006 to $52,434 in 2007 due to a decrease
in the directors' and officers' insurance from 2006 to 2007.

     Travel expenses decreased $22,781 to $14,919 in 2007
compared to $37,700 in 2006 due to expenses in 2006 for
conferences that the Company did not attend in 2007 and for a
consultant that was traveling in 2006.

     We expect general and administrative expense to increase in
future periods as we increase the level of corporate and
administrative activity, including increases associated with our
operation as a public company; and significantly increase
expenditures related to the future production and sales of our
products.

     Other Income (Expense)

     Other income was $5,299 in the year ended December 31, 2007,
consisting of $10,548 of interest income on cash deposits and
short term investments, $637 of realized gain on investment and
$5,886 of interest expense compared to other income of $60,940 in
the year ended December 31, 2006, consisting of $243 of interest
income on cash deposits and short term investments, $1,527 of
dividend income, $63,187 of realized gain on investment and
$4,017 of interest expense.

     Net Loss

     Net loss was $4,223,449 and $2,933,809 for the years ended
December 31, 2007 and 2006, respectively, for an increase of
$1,289,640, primarily resulting from research and development and
general and administrative expenses incurred as described above.

Critical Accounting Policies

     The Company's accounting policies are more fully described
in Note 1 of Notes to Financial Statements. As disclosed in Note
1 of Notes to Financial Statements, the preparation of financial
statements in conformity with accounting principles generally
accepted in the United States requires management to make
estimates and assumptions about future events that affect the
amounts reported in the financial statements and accompanying
notes. Future events and their effects cannot be determined with
absolute certainty. Therefore, the determination of estimates
requires the exercise of judgment. Actual results inevitably will
differ from those estimates, and such differences may be material
to the financial statements. The Company believes that, of its
significant accounting policies, the following may involve a
higher degree of judgment, estimation, or complexity than other
accounting policies.


                              49
<PAGE>


Merger

     On July 14, 2004, the Company acquired PSI-TEC.  Under the
terms of the merger agreement, the stockholders of PSI-TEC
received 15,600,000 shares of common stock in exchange for its
2,206,280 shares.  Following the merger, the Company changed its
name to PSI-TEC Holdings, Inc.  Under accounting principles
generally accepted in the United States, the share exchange is
considered to be a capital transaction in substance rather than a
business combination.  That is, the share exchange is equivalent
to the issuance of stock by PSI-TEC Holdings, Inc. for the net
monetary assets of PSI-TEC, accompanied by a recapitalization,
and is accounted for as a change of capital structure.
Accordingly, the accounting for the share exchange will be
identical to that resulting from a reverse acquisition, except no
goodwill will be recorded.  Under reverse takeover accounting,
the post-reverse acquisition comparative historical financial
statements of the legal acquirer, PSI-TEC Holdings, Inc., are
those of the legal acquiree, PSI-TEC, which is considered to be
the accounting acquirer. On October 20, 2006, PSI-TEC Holdings,
Inc. and PSI-TEC merged and changed its name to Third-Order
Nanotechnologies, Inc. On March 10, 2008, Third-Order
Nanotechnologies, Inc. changed its name to Lightwave Logic, Inc.

Stock Based Compensation

     In December 2004, the Financial Accounting Standards Board
("FASB") issued SFAS 123 (revised 2004), Share-Based Payment
("SFAS 123R").  SFAS 123(R) supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees, and amends SFAS No. 95,
Statement of Cash Flows.  Generally, the approach in SFAS 123(R)
is similar to the approach described in SFAS 123.  However, SFAS
123(R) requires share-based payments to employees, including
grants of employee stock options, to be recognized in the income
statement based on their fair values at the date of grant.  Pro
forma disclosure is no longer an alternative.

     On January 1, 2006, the Company adopted SFAS 123(R) using
the modified prospective method as permitted under SFAS 123(R).
Under this transition method, compensation cost recognized in the
first quarter of 2006 includes compensation cost for all share-
based payments granted prior to but not yet vested as of December
31, 2005, based on the grant-date fair value estimated in
accordance with the provisions of SFAS 123.  In accordance with
the modified prospective method of adoption, the Company's
results of operations and financial position for prior periods
have not been restated.

     The Company uses the Black-Scholes option pricing model to
calculate the grant-date fair value of an award.

Liquidity and Capital Resources

     During 2007, net cash used in operating activities was
$1,434,681 and net cash used in investing activities was
$182,384, which was primarily for patents and equipment. Net cash
provided by financing activities during 2007 was $2,095,988. At
December 31, 2007, our cash and cash equivalents totaled
$479,451, our assets totaled $871,271, our liabilities totaled
$218,091, and we had stockholders' equity of $653,180.


                              50
<PAGE>


     During 2006, net cash used in operating activities was
$742,675 and net cash provided by investing activities was
$166,873, which was derived primarily by proceeds from the sale
of available securities. Net cash provided by financing
activities during 2006 was $426,303. At December 31, 2006, our
cash and cash equivalents totaled $528, our assets totaled
$839,746, our liabilities totaled $264,974, and we had
stockholders' equity of $574,772.

Sources and Uses of Cash

     Our future expenditures and capital requirements will depend
on numerous factors, including: the progress of our research and
development efforts; the rate at which we can, directly or
through arrangements with original equipment manufacturers,
introduce and sell products incorporating our plastic materials
technology; the costs of filing, prosecuting, defending and
enforcing any patent claims and other intellectual property
rights; market acceptance of our products and competing
technological developments; and our ability to establish
cooperative development, joint venture and licensing arrangements.
We expect that we will incur in excess of $1,200,000 of expenditures
over the next 12 months. Our cash requirements are expected to
increase at a rate consistent with revenue growth as we expand
our activities and operations with the objective of commercializing
our electro-optic plastic technology during 2008.

     Our business does not presently generate the cash needed to
finance our current and anticipated operations. We believe we
have raised sufficient capital to finance our operations for the
next three (3) months, however, we will need to obtain additional
future financing during the remaining part of 2008 to finance our
operations until such time that we can conduct profitable revenue-
generating activities. Such future sources of financing may
include cash from equity offerings, exercise of warrants and
stock options and proceeds from debt instruments; but we cannot
assure you that such equity or borrowings will be available or,
if available, will be at rates or prices acceptable to us.  If
adequate funds are not available to satisfy either short-term or
long-term capital requirements, or if planned revenues are not
generated, we may be required to substantially limit our
operations. This limitation of operations may include reductions
in capital expenditures and reductions in staff and discretionary
costs.

     We expect that our cash used in operations will increase
during 2008 and beyond as a result of the following planned
activities:

  * The addition of management, sales, marketing, technical and
    other staff to our workforce;
  * Increased spending for the expansion of our research and
    development efforts, including purchases of additional laboratory
    and production equipment;
  * Increased spending in marketing as our products are
    introduced into the marketplace;
  * Developing and maintaining collaborative relationships with
    strategic partners;
  * Developing and improving our manufacturing processes and
    quality controls; and
  * Increases in our general and administrative activities
    related to our operations as a reporting public company and
    related corporate compliance requirements.


                              51
<PAGE>


Analysis of Cash Flows

For the year ended December 31, 2007

     Net cash used in operating activities was $1,434,681 for
the year ended December 31, 2007, consisting of payments for
management, legal, professional and consulting expenses, rent
and other expenditures necessary to develop our business
infrastructure, offset by $1,550,442 in deferred charges,
$690,362 in warrants issued for services, $102,999 in options
issued for services, $530,292 in common stock issued for
services, $2,059 in prepaid expenses and $30,952 in accrued
expenses.

     Net cash used in investing activities was $182,384 for the
year ended December 31, 2007, consisting of $132,045 for the
purchase of intangibles (patents) and $50,339 for the purchase of
equipment.

     Net cash provided by financing activities was $2,095,988 for
the year ended December 31, 2007 and consisted of $2,301,524 of
proceeds from the sale of our common stock, offset by $200,000
for a subscription agreement that was rescinded by a shareholder,
the repayment of $4,068 of notes payable and the repayment of
$1,468 of advances from officers.

For the year ended December 31, 2006

     Net cash used in operating activities was $742,675 for
the year ended December 31, 2006, consisting of payments for
management, legal, professional and consulting expenses, rent
and other expenditures necessary to develop our business
infrastructure, offset by $1,502,562 in deferred charges, $66,500
in warrants issued for services, $428,888 in options issued for
services, $75,000 in receivables, $153,763 in accounts payable
and $24,800 in accrued expenses.

     Net cash provided by investing activities was $166,873 for
the year ended December 31, 2006, consisting of proceeds from the
sale of available for sale securities of $175,387, offset by
$8,514 for intangibles.

     Net cash provided by financing activities was $426,303 for
the year ended December 31, 2006 and consisted of $425,000 of
proceeds from the sale of our common stock, and $6,500 from a
subscription receivable, offset by the repayment of $5,197 of
notes payable.

Inflation and Seasonality

     We do not believe that our operations are significantly
impacted by inflation. Our business is not seasonal in nature.

Item 7.   Financial Statements.

     Our Financial Statements of are attached as Appendix A
(following Exhibits) and included as part of this Form 10-KSB
Report.  A list of our Financial Statements is provided in
response to Item 13 of this Form 10-KSB Report.


                              52
<PAGE>


Item 8.   Changes In and Disagreements with Accountants on
          Accounting and Financial Disclosure.

     Not Applicable

Item 8A.  Controls and Procedures.

     As of the end of the period covered by this report, an
evaluation was performed under the supervision and with the
participation of the Company's principal executive officers and
financial officers of the effectiveness of the design and
operation of the Company's disclosure controls and procedures (as
such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act) as of the end of the period covered by this report.
The evaluation revealed to the Company's principal executive
officers and financial officers that the design and operation of
the Company's disclosure controls and procedures were effective
as of the end of the period covered by this report.

     There have been no significant changes in the Company's
internal controls and in other factors that could significantly
affect internal controls subsequent to the date of the above-
described evaluation period.

Item 8B.  Other Information.

     Not Applicable

PART III

Item 9.   Directors, Executive Officers, Promoters and Control
          Persons and  Corporate  Governance; Compliance with
          Section 16(a) Of the Exchange Act.

(a)  Identity of directors, executive officers and significant employees.
<TABLE>
<CAPTION>
       Name               Age  Position                    Term/Period Served
--------------------      ---  --------                    ------------------
<S>                       <C>  <C>                         <C>
Harold R. Bennett         50   Director, Chief Executive   1 yr./Since 2007
                               Officer

Frederick J. Goetz, Jr.   32   Director, President         1 yr./Since 2004

Frederick J. Goetz        64   Chief Science Officer       ----/Since
                                                           Inception (1)

David F. Eaton            60   Chief Technology Officer    ---

Andrew J. Ashton          31   Director, Senior Vice       1 yr./Since 2004
                               President, Treasurer,
                               Secretary

William C. Pickett, III   64   Director                    (2)/Since 2008

Terry Turpin              65   Optical Computing           Since March 2008
                               Guru(3)
</TABLE>



                              53
<PAGE>



________________________
  1.  Dr. Goetz was the founder of PSI-TEC Corporation and has
      served as an officer and until 2005, a director, of our Company
      since its inception.
  2.  In January 2008 our board of directors increased the number
      of board members from three to four and appointed Mr. Pickett
      to fill the vacancy on the board of directors. Mr. Pickett's
      term will continue until the next annual stockholder's meeting
      or until his successor is duly appointed.
  3.  Optical Computing Guru is not an executive officer position,
      but our Company anticipates that Mr. Turpin's expertise in
      optical computing and his respect in the optical computing
      community will significantly contribute to the development of
      our Company.

(b) Business experience of directors, executive officers, and
significant employees.

     Mr. Harold R. Bennett.  Mr. Bennett has served as an officer
and director of our Company since March 2007. Since January 2008,
Mr. Bennett also serves as a director of Theater Xtreme
Entertainment Group, Inc., a publicly traded company. Since 1994
to the present, Mr. Bennett has acted as an independent
management consultant serving as a corporate restructuring
advisor for large high-tech corporations, including DuPont,
Silicon Graphics, 3M and Sun Microsystems. Most recently, Mr.
Bennett successfully implemented a program for DuPont to
outsource innovation by creating a new business model for DuPont
Ventures. Prior to 1994, Mr. Bennett gained extensive experience
in starting and growing companies in Silicon Valley, including
Aprex, West End Partners Imaging and Digital Research. Mr.
Bennett has a degree in Mathematical Physics from Stanford
University and is named on several U.S. Patents.

     Mr. Frederick J. Goetz, Jr. Mr. Goetz has served as an
officer and director of our Company since July 2004. Mr. Goetz is
in charge of the day-to-day operations of our Company and its
movement to a fully functioning commercial corporation. He is a
leader in the corporate coding and operation of electrostatic
simulation software for nonlinear optic materials development and
aids in the development of novel molecular designs and quantum
mechanical interpretation at our Company. Prior to joining our
Company, Mr. Goetz began his career at Lawrence Berkeley
Laboratory and the Army Research Laboratory on Aberdeen Proving
Grounds after graduating first in his class in physics from the
University of Delaware in 1997. He holds a degree in physics and
currently serves as technical advisor on the board of Universal
Capital Management. Frederick J. Goetz, Jr. is Dr. Goetz's son.

     Dr. Frederick J. Goetz. Dr. Goetz founded our Company in
1991 and has served as an officer and until 2005, a director, of
our Company since its inception. Dr. Goetz has dedicated his life
to the advancement of electro-optics. A recognized industrial
expert in polyheterocyclic organic chemistry, his distinguished
career began at American Aniline Products, where he served as a
research project team leader. He went on to lead groups at
American Color and Chemical Corporation, Hooker Chemical and
Plastics, Occidental Petroleum (Senior Scientist), Occidental


                              54
<PAGE>


Chemical, DuPont Experimental Station (Research Associate),
Pennwalt, and Atochem North America. Dr. Goetz established an
electro-optics program at Atochem, before founding PSI-TEC
Corporation in 1991. Dr. Goetz is Frederick J. Goetz, Jr.'s
father.

     Dr. David F. Eaton.  Mr. Eaton has served as an officer of
our Company since May 2007. For over 30 years, Mr. Eaton was
employed in DuPont's chemical division, with his most recent
appointment being its technology director. Most recently, from
September 2003 to present, Mr. Eaton founded and is the principal
of Light Insights, LLC, a consulting firm, and from March 2005 to
present, Mr. Eaton has served as vice president of technology for
software company Precision Cure, LLC.  Mr. Eaton has a bachelor's
degree in chemistry from Wesleyan University and a Ph.D. in
chemistry from the California Institute of Technology.

     Mr. Andrew J. Ashton.  Mr. Ashton has served as an officer
and director of our Company since July 2004. Since that time his
assistance in the creation of the synthetic chemistry of our
novel molecular architecture has been fundamental to our
Company's success.  His current duties include the development of
chemical synthesis, providing extensive analytical support and
assisting with our Company's management goals. Mr. Ashton is a
skilled computer scientist and organic chemist who began his
career in 1998 at the Army Research Laboratory on the Aberdeen
Proving Grounds where he helped to design and implement computer
interfaces for fiberglass composite analysis.  At that time he
joined PSI-TEC Corporation as a financial manager and was
responsible for day to day administrative duties.  He was
instrumental in securing government funding, PSI-TEC's sole
financial source, until 2003.

     Mr. William C. Pickett, III. Mr. Picket has served as a
director of our Company since January 2008. Mr. Pickett enjoyed a
32 year career with E.I. DuPont de Nemours & Co., where he worked
in numerous financial leadership positions, including serving
from February 2002 to April 2004 as Chief Financial Officer of
Invista, DuPont's $7 billion man-made fibers company, which was
ultimately sold to Koch Industries, Inc. Since February 2005 Mr.
Pickett has been serving as a member of the Board of Directors,
Executive Committee, Treasurer and Chair of the Finance Committee
of the Ronald McDonald House of Delaware; and since December
2004, Mr. Picket has been serving as Chair of Audit Committee and
Chief Compliance Officer of the Operation Warm charity. Mr.
Pickett received his MBA from Harvard Business School and a BA
from Trinity College.

     Mr. Turpin has served as our Optical Computing Guru since
March 2008. Since October 2006, Mr. Turpin has been a member of
the UMBC College of Natural Science and Mathematics Advisory
Board. Until January 2007, when Essex Corporation was acquired by
Northrop Grumman Space & Mission Systems Corp., Mr. Turpin was a
director of Essex Corporation. Mr. Turpin remained Senior Vice
President and Chief Scientist for Essex Corporation after its
acquisition until April 2007. Mr. Turpin was appointed as a
director of Essex Corporation in January 1997 and became its
Senior Vice President and Chief Scientist in 1996. He joined
Essex Corporation through a merger with SEDC where he was Vice
President and Chief Scientist from September 1984 through June
1989. From December 1983 to September 1984 he was an independent
consultant. From 1963 through December 1983, Mr. Turpin was
employed by the National Securities Agency (NSA). He was Chief of
the Advanced Processing Technologies Division for ten years. He
holds patents for optical computers and adaptive optical components.


                              55
<PAGE>


Mr. Turpin represented the NSA on the Tri-Service Optical Processing
Committee organized by the Under Secretary of Defense for Research
and Engineering. He received a Bachelor of Science degree in
Electrical Engineering from the University of Akron in 1966 and
a Master of Science degree in Electrical Engineering from Catholic
University in Washington, D.C. in 1970.

     Each Director of the Company holds such position until the
next annual meeting of shareholders and until his successor is
duly elected and qualified.  The officers hold office until the
first meeting of the board of directors following the annual
meeting of shareholders and until their successors are chosen and
qualified, subject to early removal by the board of directors.

     Audit Committee Financial Expert

     During the period covered by this report, the Company did
not have an audit committee financial expert on its audit
committee. This is due to the Company's development stage, lack
of business operations, the small number of executive officers
involved with the Company, and the fact that the Company operates
with few employees. Our board of directors will continue to
evaluate, from time to time, whether its audit committee should
appoint an audit committee financial expert on its audit
committee.

     Audit Committee

     During the period covered by this report, the Company did
not have a separately designated standing audit committee in
place; the Company's entire board of directors served, and
currently serves, in that capacity. This is due to the Company's
development stage, lack of business operations, the small number
of executive officers involved with the Company, and the fact
that the Company operates with few employees. Our board of
directors will continue to evaluate, from time to time, whether a
separately designated standing audit committee should be put in
place.

     Section 16(a) Beneficial Ownership Reporting Compliance

     To the best of our knowledge, no officer, director and/or
beneficial owner of more than 10% of our Common Stock, failed to
file reports as required by Section 16(a) of the Exchange Act
during the period covered by this report.

     Code of Ethics

     The Company has not yet adopted a code of ethics for its
principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions or any other position due to its development
stage, the small number of executive officers involved with the
Company, and the fact that the Company operates with few employees.
Our board of directors will continue to evaluate, from time to time,
whether a code of ethics should be developed and adopted.


                              56
<PAGE>


Item 10.   Executive Compensation.

Executive Compensation

           The table below summarizes all compensation awarded
to, earned by, or paid to our current executive officers for the
fiscal years ended December 31, 2007 and 2006.

<TABLE>
<CAPTION>
                    Summary Compensation Table
                    --------------------------
                                                                              Nonqualified
Name                                                           Non-Equity       Deferred
and                                       Stock     Option   Incentive Plan   Compensation     All Other
principal                Salary   Bonus   Awards    Awards    Compensation      Earnings     Compensation     Total
position           Year   ($)      ($)     ($)       ($)          ($)             ($)            ($)           ($)
--------           ----  ------   -----   ------   --------  --------------   ------------   ------------   -------
<S>                <C>   <C>      <C>     <C>       <C>           <C>             <C>            <C>           <C>
Harold R.          2007  114,000    0    288,000    447,379        0              0            189,228    1,038,607
Bennett
Director
CEO(1)

Ronald R.          2007   25,806    0      0         33,540        0               0               0          59,346
Genova,            2006   96,000    0      0        473,737        0               0               0         569,737
Interim
CEO(2)

Frederick J.       2007   88,000  45,000   0           0           0               0              5,000(4)   133,000
Goetz, Jr.,        2006   96,000    0      0           0           0               0              6,000(4)   102,000
President,
Director(3)
</TABLE>

(1) Mr.  Bennett was appointed to serve as our Chief  Executive
    Officer in March 2007. Mr. Bennett receives $12,000 per month for
    his services as the Company's chief executive officer. On April
    17, 2007, Mr.  Bennett received a warrant to purchase up to
    300,000 shares of common stock at a purchase price of Twenty-Five
    Cents ($0.25) per share. On November 17, 2007, pursuant to the
    Company's 2007 Plan, the Company issued 400,000 shares  of the
    Company's restricted common stock and an option to purchase up to
    750,000 shares of the Company's restricted common stock at an
    exercise price of $0.72 per share to Mr. Bennett for his services
    as the Company's chief executive officer.
(2) From September 2005 to February 2007, Mr. Genova served  as
    our  Interim Chief Executive Officer. Mr. Genova received $8,000
    per month for serving as our interim chief executive officer. Mr.
    Genova deferred payment of $24,000 owed to him during 2006 due to
    our limited operating capital.  Previously, on May 6, 2005, we
    entered into an Advisory Board Agreement with Mr. Genova whereby
    we  named  Mr. Genova to our Advisory Board to provide  advisory
    services to our Company, and pursuant to that agreement we issued
    to Mr. Genova a warrant to purchase 100,000 shares of our common
    stock at an exercise price of $2.10 per share. On February 14,
    2006, we canceled  that warrant and granted  Mr. Genova stock
    options to purchase up to 500,000 shares of our common stock at
    the exercise price of $1.00 per share pursuant to our 2005 Stock
    Option Plan, all of which are expired.


                              57
<PAGE>


(3) We have no written employment agreement with Fred Goetz, Jr.
    Mr. Goetz receives  an  annual salary  of  $96,000.  Mr. Goetz
    deferred payment of $8,000 owed to him during 2006.
(4) We provided an automobile that Mr. Fred Goetz, Jr. utilized
    at a cost to us of approximately $5,000 to $6,000 per year, which
    was discontinued in October 2007.

Summary of Options Grants

      Set forth below is a summary of our option awards to
executive officers outstanding as of  December 31, 2007, our
latest fiscal year end.
<TABLE>
<CAPTION>
                                                                                                              Equity
                                                                                                              Incentive Plan
                                       Equity                                                                 Awards:
                                       Incentive Plan                             Market     Equity Incentive Market or
                         Number of     Awards:                         Number of  Value of   Plan Awards:     Payout Value
          Number of      Securities    Number of                       Shares or  Shares or  Number of        of Unearned
          Securities     Underlying    Securities                      Units of   Units of   Unearned Shares, Shares, Units
          Underlying     Unexercised   Underlying  Option              Stock That Stock That Units or Other   or Other
          Unexercised    Options       Unexercised Exercise Option     Have Not   Have Not   Rights That Have Rights That
          Options (#)    (#)           Unearned    Price    Expiration Yet        Yet        Not Yet          Have Not
Name      Exercisable(1) Unexercisable Options(#)  ($)      Date       Vested(#)  Vested(#)  Vested(#)        Vested($)
----      -----------    ------------- ----------  ---      ----       ---------  ---------  ---------        ---------
<S>       <C>            <C>           <C>         <C>

Harold R.   300,000          75,000        ---     $0.25  04/17/2010      ---        ---        ---              ---
Bennett     750,000           ---        687,500   $0.72  11/17/2012      ---        ---        ---              ---
</TABLE>

(1) We  grant stock options to our executive officers based  on
    their level of experience and contributions to our Company.  The
    aggregate  fair value of these options are computed in accordance
    with FAS 123R and are reported in the Summary Compensation Table
    above in the column titled "Option Awards." On April 17, 2007,
    Mr. Bennett received a warrant to purchase up to 300,000 shares
    of common stock at a purchase price of $0.25 per share. 25,000
    shares  vested on April 17, 2007 and the remaining 275,000 shares
    vest in 11 equal monthly installments of 25,000 shares per month
    commencing on the 15th day of each month following  April 17,
    2007. On November 17, 2007, pursuant to the Company's 2007 Plan,
    the Company  issued  400,000 shares of the Company's restricted
    common stock and an option to purchase up to 750,000 shares of
    the Company's  restricted common stock at an exercise price of
    $0.72 per share to Mr. Bennett for his services as the Company's
    chief executive officer. 62,500 shares underlying  the options
    vest at  the end of every three month period commencing November
    17, 2007.  At no time during the last fiscal year was any
    outstanding option otherwise modified or re-priced, and there was
    no  tandem feature, reload feature, or tax-reimbursement feature
    associated  with  any  of the stock options  we  granted to our
    executive officers or otherwise.

                    Compensation of Directors

     During fiscal years 2006 and 2007, no officer or director
received any type of compensation from our Company for serving as
such.



                              58
<PAGE>


Compensation Committee

     Our Board of Directors currently has no formal committees,
such as a compensation committee or an audit committee.


Employee Stock Plan

     We adopted our 2007 Plan for the benefit of our directors,
officers, employees and consultants, and we have reserved
3,500,000 shares of common stock for such persons pursuant to the
2007 Plan.

Item 11.  Security Ownership of Certain Beneficial Owners and Management.

       Security Ownership of Certain Beneficial Owners

     The following table sets forth, as of February 29, 2008, the
names, addresses, amount and nature of beneficial ownership and
percent of such ownership of each person or group known to our
Company to be the beneficial owner of more than five percent (5%)
of our common stock:
<TABLE>
<CAPTION>
Name and Address              Amount and Nature
of Beneficial Owner (1)     of Beneficial Ownership(3)   % of Class Owned (5)
-----------------------     --------------------------   --------------------
<S>                                <C>                        <C>
Frederick J. Goetz, Jr. (2)        3,372,000                    9.99%
Frederick J. Goetz (2)             6,597,000 (4)               19.56%
Mary Goetz (2)                     6,597,000 (4)               19.56%
Andrew J. Ashton                   3,132,000                    9.29%
</TABLE>
___________________________
1. In care of our Company at 2601 Annand Dr. #16, Wilmington,
   Delaware 19808.
2. Frederick J. Goetz and Mary Goetz are Husband and wife, and
   Frederick J. Goetz, Jr. is their son.
3. To our best knowledge, as of the date hereof, such holders
   had the sole voting and investment power with respect to the
   voting securities beneficially owned by them, unless otherwise
   indicated herein. Includes the person's right to obtain
   additional shares of common stock within 60 days from the date
   hereof.
4. Consists of (i) 3,465,000 shares of common stock owned by
   Frederick J. Goetz; and (ii) 3,132,000 shares of common stock
   owned by Mary Goetz. Each of Frederick J. Goetz and Mary Goetz
   disclaim any beneficial ownership of their spouse's shares of
   common stock.
5. Based on 33,721,742 shares of common stock outstanding on
   February 29, 2008. Does not include shares underlying: (i)
   options to purchase shares of our common stock under our 2007
   Plan, or (ii) outstanding warrants to purchase shares of our
   common stock.


                              59
<PAGE>


                 Security Ownership of Management

     The following table sets forth, as of February 29, 2008, the
names, addresses, amount and nature of beneficial ownership and
percent of such ownership of our common stock of each of our
officers and directors, and officers and directors as a group:
<TABLE>
<CAPTION>
Name and Address               Amount and Nature
of Beneficial Owner (1)  of Beneficial Ownership (2)  % of Class Owned (3)(4)
-----------------------  ---------------------------  -----------------------
<S>                             <C>                              <C>
Harold R. Bennett               762,500 (5)                       2.26%
Director, Chief Executive
Officer

Frederick J. Goetz, Jr. (6)   3,372,000                           9.99%
Director, President

Andrew J. Ashton              3,132,000                           9.29%
Director, Executive
Vice President, Treasurer
Secretary

Frederick J. Goetz (6)        6,597,000 (7)                      19.56%
Chief Science Officer

David Eaton                     191,750 (8)                         *
Chief Technology Officer

William C. Pickett, III          25,000 (9)                         *
Director

Directors  and  Officers     13,905,250                             41%
as a Group ( 6 Persons)
</TABLE>
____________________________
* Less than 1%.
1. In care of our Company at 2601 Annand Dr. #16, Wilmington,
   Delaware 19808.
2. To our best knowledge, as of the date hereof, such holders
   had the sole voting and investment power with respect to the
   voting securities beneficially owned by them, unless otherwise
   indicated herein. Includes the person's right to obtain
   additional shares of common stock within 60 days from the date
   hereof.
3. Based on 33,721,742 shares of common stock outstanding on
   February 29, 2008. Does not include shares underlying: (i)
   options to purchase shares of our common stock under our 2007
   Plan, or (ii) outstanding warrants to purchase shares of our
   common stock.
4. If a person listed on this table has the right to obtain
   additional shares of common stock within 60 days from the date
   hereof, the additional shares are deemed to be outstanding for
   the purpose of computing the percentage of class owned by such
   person, but are not deemed to be outstanding for the purpose of
   computing the percentage of any other person.


                              60
<PAGE>


5. Consists of 400,000 shares of common stock; an option to
   purchase up to 62,500 shares of common stock exercisable within
   60 days from the date hereof; and a warrant to  purchase up to
   300,000 shares of common stock exercisable within 60 days from
   the date hereof.
6. Frederick J. Goetz and Mary Goetz are Husband and wife, and
   Frederick J. Goetz, Jr. is their son.
7. Consists of (i) 3,465,000 shares of common stock owned by
   Frederick J. Goetz; and (ii) 3,132,000 shares of common stock
   owned by Mary Goetz. Frederick J. Goetz disclaims any beneficial
   ownership of the 3,132,000 shares of common stock owned by Mary
   Goetz, his wife.
8. Consists of an option to purchase up to 41,750 shares of
   common stock and a warrant to  purchase up to 150,000 shares of
   common stock exercisable within 60 days from the date hereof.
9. Consists of an option to purchase up to 25,000 shares of
   common stock exercisable within 60 days from the date hereof.

      We are not aware of any arrangements that could result in a
change of control.

  Securities Authorized for Issuance under Equity Compensation Plans

     Our Company currently has 3,500,000 securities authorized
for issuance under our 2007 Employee Stock Plan ("2007 Plan").
Information regarding our compensation plans under which our
equity securities are authorized for issuance can be found in
Part II -Item 5 of this report.

Item  12.  Certain Relationships and Related Transactions;  and
           Director Independence.

     Not applicable.

Item 13.  Exhibits.

INDEX TO EXHIBITS.

Exhibit No.    Description of Exhibit             Sequential Page No.

 (2) Charter and Bylaws.
     2.1   Certificate of Amendment to Articles of Incorporation**
     2.2   Bylaws*

(3)  Instruments defining the rights of security holders.
     3.1   Certificate of Amendment to Articles of Incorporation**
     3.2   Bylaws*

(10) Material Contracts.
     10.1  Employment Agreement - Harold R. Bennett



                              61
<PAGE>


     10.2  Employment Agreement - David F. Eaton
     10.3  Employment Agreement - Terry Turpin
     10.4  Director Agreement-William C. Pickett, III***
     10.5  Facility Lease*
     10.6  Photon-X, LLC Memorandum of Understanding*
     10.7  Triple Play Communications Corporation Agreement*
     10.8  Universal Capital Management, Inc. Agreement*
     10.9  2007 Employee Stock Plan**

(31)
     31.1  Certification of the CEO of Lightwave Logic, Inc.
           pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     31.2  Certification of the Treasurer of Lightwave Logic, Inc.
           pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(32)
     32.1  Certification of the CEO of Lightwave Logic, Inc.
           pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     32.2  Certification of the Treasurer of Lightwave Logic, Inc.
           pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*   Incorporated by reference to Registrant's Form 10-SB filed
April 13, 2007.

**  Incorporated by reference to Registrant's Definitive
Schedule 14C Information Statement filed on February 19, 2008.

*** Incorporated by reference to Registrant's Form 8-K filed
March 26, 2008.

Item 14. Principal Accountant Fees and Services

Audit Fees.
----------

     The aggregate fees billed for the years ended December 31,
2007 and 2006 for professional services rendered by Morison
Cogen, LLP for the audit of the Company's annual financial
statements and review of financial statements included in the
Company's Form 10-QSB or services that are normally provided by
the accountant in connection with statutory and regulatory
filings or engagements for the year ended December 31, 2007 was
$31,600; and for the year ended December 31, 2006 was $30,500.

Audit-Related Fees.
------------------

     No fees were billed for the years ended December 31, 2007
and 2006 for assurance and related services by Morison Cogen, LLP
that are reasonably related to the performance of the audit or
review of the Company's financial statements and are not reported
under the category Audit Fees described above.


                              62
<PAGE>


Tax Fees.
--------

     No fees were billed for the years ended December 31, 2007
and 2006 for tax compliance, tax advice, or tax planning by
Morison Cogen, LLP.

All Other Fees.
--------------

     No fees were billed for the fiscal years ended December 31,
2007 and 2006 for products and services provided by Morison
Cogen, LLP other than the services reported in the Audit Fees,
Audit-Related Fees, and Tax Fees categories above.

Audit Committee Pre-Approval Policies.
-------------------------------------

     The Company's audit committee currently does not have any
pre-approval policies or procedures concerning services performed
by Morison Cogen, LLP. All the services performed by Morison
Cogen, LLP that are described above were pre-approved by the
Company's audit committee.

     None of the hours expended on Morison Cogen, LLP 's
engagement to audit the Company's financial statements for the
years ended December 31, 2007 were attributed to work performed
by persons other than Morison Cogen, LLP's full-time, permanent
employees.

                           SIGNATURES

          Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended, the Registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

LIGHTWAVE LOGIC, INC.

By: /s/ Harold R. Bennett
   ---------------------------
    Harold R. Bennett,
    Chief Executive Officer

Date: April 9, 2008

          Pursuant to the requirements of the Securities Exchange
Act of 1934, as amended, this report has been signed below by the
following persons on behalf of the Registrant and in the
capacities and on the dates indicated.

Signature                Title                         Date
---------                -----                         ----
Harold R. Bennett        Chief Executive Officer,      April 9, 2008
                         Director

Frederick J. Goetz, Jr.  President, Director           April 9, 2008

Andrew J. Ashton         Senior Vice President,        April 9, 2008
                         Treasurer, Secretary
                         Director



                              63
<PAGE>



                           Appendix A
                     Financial Statements.

        The  following Audited Financial Statements are filed  as
part of this Form 10-KSB Report:

CONTENTS

PAGE  F-1     INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM'S REPORT

PAGE F-2      BALANCE SHEETS

PAGE F-3      STATEMENTS OF OPERATIONS

PAGE F-4      STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

PAGE  F-5     STATEMENTS OF CASH FLOWS

PAGES F-6-F-8 NOTES TO FINANCIAL STATEMENTS




                              64
<PAGE>






                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                (A Development Stage Company)

                    FINANCIAL STATEMENTS

                 DECEMBER 31, 2007 AND 2006










<PAGE>




                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                (A Development Stage Company)





                          CONTENTS

                                                               PAGE

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM         F-1

BALANCE SHEETS                                                  F-2

STATEMENTS OF OPERATIONS                                        F-3

STATEMENT OF COMPREHENSIVE LOSS                                 F-4

STATEMENTS OF STOCKHOLDERS' EQUITY                              F-5

STATEMENTS OF CASH FLOWS                                     F-6 - F- 7

NOTES TO FINANCIAL STATEMENTS                                F-8 - F-25



<PAGE>



   REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors

Lightwave Logic, Inc.
(Formerly Third-Order Nanotechnologies, Inc.)
Wilmington, DE

We have audited the accompanying balance sheets of Lightwave
Logic, Inc. (Formerly Third-Order Nanotechnologies, Inc.),
as of December 31, 2007 and 2006 and the related statements
of operations, comprehensive loss, stockholders' equity and
cash flows for the years then ended and for the period from
January 1, 2004 (inception of development stage) through
December 31, 2007.  These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with standards of the
Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free from material misstatement.   The
Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal
control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control over
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Lightwave Logic, Inc. (Formerly Third-Order
Nanotechnologies, Inc.), as of December 31, 2007 and 2006
and results of its operations and its cash flows for the
years then ended and for the period from January 1, 2004
(inception of development stage) through December 31, 2007
in conformity with accounting principles generally accepted
in the United States.

The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern.
The Company is in the development stage at December 31,
2007. As discussed in Note 2 to the financial statements,
successful completion of the Company's development program
and, ultimately, the attainment of profitable operations is
dependent upon future events, including obtaining adequate
financing to fulfill its development activities and
achieving a level of sales adequate to support the Company's
cost structure.  These factors raise substantial doubt about
the ability of the Company to continue as a going concern.
The financial statements do not include any adjustments that
might result from the outcome of these uncertainties.

/s/ MORISON COGEN LLP
----------------------
Bala Cynwyd, Pennsylvania
April 1, 2008







                             F-1
<PAGE>


                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                (A Development Stage Company)
                       BALANCE SHEETS

<TABLE>
<CAPTION>
                                                           December 31,   December 31,
                                                              2007           2006
                                                           -----------    -----------
<S>                                                        <C>            <C>
                           ASSETS

CURRENT ASSETS
 Cash and cash equivalents                                 $   479,451    $       528
 Deferred charges                                               12,395        586,171
 Prepaid expenses                                                7,294          9,353
 Note receivable                                               100,000            100
 Interest receivable                                             1,244              -
                                                           -----------    -----------
                                                               600,384        596,152

AVAILABLE FOR SALE SECURITIES
 Related party                                                  26,779         59,265
 Other                                                           2,411          2,535
                                                          -----------    -----------
                                                                29,190         61,800

PROPERTY AND EQUIPMENT - NET                                    67,276         42,335

OTHER ASSETS
 Deferred charges                                                    -         97,083
 Intangible assets                                             174,421         42,376
                                                           -----------    -----------

TOTAL ASSETS                                               $   871,271    $   839,746
                                                           ===========    ===========

                 LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
 Loan payable - current portion                            $         -    $     4,977
 Accounts payable                                              103,426        100,714
 Accounts payable - related party                                    -         65,339
 Accrued expenses                                              114,665         83,712
 Officer loans                                                       -          1,468
                                                           -----------    -----------
                                                               218,091        256,210

CONTINGENCY                                                          -              -

LOAN PAYABLE - NET OF CURRENT PORTION                                -          8,764
                                                           -----------    -----------

TOTAL LIABILITIES                                              218,091        264,974
                                                           -----------    -----------

                         STOCKHOLDERS' EQUITY

 Preferred stock, $0.001 par value, 1,000,000 authorized
 No shares issued or outstanding                                     -              -
 Common stock $0.001 par value, 100,000,000 authorized
 33,690,075 and 27,888,750 issued and outstanding at
 December 31, 2007 and 2006                                     33,690         27,889
 Additional paid-in-capital                                 10,449,763      5,966,430
 Deferred charges                                             (154,667)             -
 Unrealized loss on Available for Sale Securities              (58,610)       (26,000)
 Accumulated deficit                                           (15,827)       (15,827)
 Deficit accumulated during development stage               (9,601,169)    (5,377,720)
                                                           -----------    -----------

TOTAL STOCKHOLDERS' EQUITY                                     653,180        574,772
                                                           -----------    -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                 $   871,271    $   839,746
                                                           ===========    ===========
</TABLE>


The accompanying notes are an integral part of these financial statements.

                             F-2
<PAGE>


                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                (A Development Stage Company)
                  STATEMENTS OF OPERATIONS
 FOR THE YEARS ENDING DECEMBER 31, 2007 AND 2006 AND FOR THE
 PERIOD JANUARY 1, 2004 (INCEPTION OF DEVELOPMENT STAGE) TO
                      DECEMBER 31, 2007
<TABLE>
<CAPTION>

                                         Cumulative      For the        For the
                                           Since        Year Ending      Year Ending
                                         Inception  December 31, 2007 December 31, 2006
                                       ------------ ----------------- -----------------
<S>                                    <C>            <C>               <C>
NET SALES                              $          -   $          -      $          -

COST AND EXPENSE
Research and development                  3,562,757      1,305,333         1,179,997
General and administrative                6,091,183      2,923,415         1,814,752
                                       ------------  -------------     -------------
                                          9,653,940      4,228,748         2,994,749

LOSS FROM OPERATIONS                     (9,653,940)    (4,228,748)       (2,994,749)

OTHER INCOME (EXPENSE)
Interest income                              18,025         10,548               243
Dividend income                               1,527              -             1,527
Realized gain on investment                  63,187              -            63,187
Realized gain on disposal of assets             637            637                 -
Interest expense                            (30,605)        (5,886)           (4,017)
                                       ------------  -------------     -------------

NET LOSS                               $ (9,601,169)  $ (4,223,449)     $ (2,933,809)
                                       ============  =============     =============

Basic and Diluted Loss per Share                      $      (0.14)     $      (0.11)
                                                      ============     =============

Basic and Diluted Weighted Average Number of Shares     30,983,663        27,190,449
                                                      ============     =============
</TABLE>


The accompanying notes are an integral part of these financial statements.

                             F-3
<PAGE>




                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                (A Development Stage Company)
              STATEMENTS OF COMPREHENSIVE LOSS
 FOR THE YEARS ENDING DECEMBER 31, 2007 AND 2006 AND FOR THE
 PERIOD JANUARY 1, 2004 (INCEPTION OF DEVELOPMENT STAGE) TO
                      DECEMBER 31, 2007
<TABLE>
<CAPTION>
                                                   Cumulative        For the              For the
                                                    Since          Year Ending          Year Ending
                                                   Inception     December 31, 2007   December 31, 2006
                                                 -------------   -----------------   -----------------
<S>                                              <C>             <C>                 <C>
NET LOSS                                         $  (9,601,169)    $ (4,223,449)       $  (2,933,809)

OTHER COMPREHENSIVE LOSS
 Unrealized loss on Available for Sale Securities      (58,610)         (32,610)             (26,000)
                                                 -------------   --------------      ---------------

COMPREHENSIVE LOSS                               $  (9,659,779)    $ (4,256,059)       $  (2,959,809)
                                                 =============   ==============        =============
</TABLE>


The accompanying notes are an integral part of these financial statements.

                             F-4
<PAGE>


                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                (A Development Stage Company)
              STATEMENT OF STOCKHOLDERS' EQUITY
  FOR THE PERIOD JANUARY 1, 2004 (INCEPTION OF DEVELOPMENT
                 STAGE) TO DECEMBER 31, 2007
<TABLE>
<CAPTION>
                                                                                          Deficit
                                                                                        Accumulated
                                                                                           During     Unrealized
                         Number of   Common  Paid-in  Subscription Deferred Accumulated Develoment     Loss on
                           Shares    Stock   Capital   Receivable   Charges   Deficit      Stage      Securities    Total
                         ---------- ------- ----------- --------- ---------  --------   -----------   ---------- -----------
<S>                      <C>        <C>     <C>         <C>       <C>        <C>        <C>           <C>        <C>
ENDING BALANCE AT
DECEMBER 31, 2003               100 $     1 $         - $     -   $       -  $(15,827)  $         -    $      -  $   (15,826)

 Retroactive
  recapitalization
  upon reverse
  acquisition               706,973     706        (706)      -           -         -             -           -            -
                         ---------- ------- ----------- --------- ---------  --------   -----------   ---------- -----------
BALANCE AT
JANUARY 1, 2004             707,073     707        (706)      -           -   (15,827)            -           -      (15,826)

 Common stock
  issued to
  founders               13,292,927  13,293     (13,293)      -           -         -             -           -            -
 Common stock issued
  for future services
  in July 2004
  at $0.16/share          1,600,000   1,600     254,400       -           -         -             -           -      256,000
 Common stock issued
  at merger               2,000,000   2,000      (2,000)      -           -         -             -           -            -
 Common stock issued
  for future services
  in August 2004
  at $0.12/share            637,500     638      74,362       -           -         -             -           -       75,000
 Conversion of note
  payable in December
  2004 at $0.16/share       187,500     187      29,813       -           -         -             -           -       30,000
 Net loss for the
  year ended
  December 31, 2004               -       -           -       -           -         -      (722,146)          -     (722,146)
                         ---------- ------- ----------- --------- ---------  --------   -----------   ---------- -----------
BALANCE AT
DECEMBER 31, 2004        18,425,000  18,425     342,576       -           -   (15,827)     (722,146)          -     (376,972)

 Common stock
  issued in private
  placement in April
  2005 at $0.25/share     4,000,000   4,000     996,000       -           -         -             -           -    1,000,000
 Conversion of notes
  payable in May 2005
  at $0.16/share          3,118,750   3,119     495,881       -           -         -             -           -      499,000
 Subscription receivable          -       -           -  (6,500)          -         -             -           -       (6,500)
 Common stock issued
  for future services
  in August 2005,
  valued at $2.79/share     210,000     210     585,290       -           -         -             -           -      585,500
 Common stock issued
  for future services
  in August 2005,
  valued at $2.92/share     200,000     200     583,800       -           -         -             -           -      584,000
 Warrants issued for
  services in May 2005,
  vested during 2005,
  valued at $1.13/share           -       -      37,000       -           -         -             -           -       37,000
 Warrants issued for
  services in September
  2005, vested during
  2005, valued at
  $1.45/share                     -       -      24,200       -           -         -             -           -       24,200
 Warrants issued for
  services in October
  2005, vested during 2005,
  valued at $0.53/share           -       -      15,900       -           -         -             -           -       15,900
 Warrants issued for
  future services in
  December 2005, vested
  during 2005, valued
  at $1.45/share                  -       -     435,060       -           -         -             -           -      435,060
 Deferred charges for
  common stock issued
  for future services
  in August 2005, valued
  at $2.92/share                  -       -           -       -    (584,000)        -             -           -     (584,000)
 Amortization of
  deferred charges                -       -           -       -     265,455         -             -           -      265,455
 Exercise of warrants
  in December 2005
  at $0.25/share            300,000     300      74,700       -           -         -             -           -       75,000
 Net loss for the year
  ended December 31, 2005         -       -           -       -           -         -    (1,721,765)          -   (1,721,765)
                         ---------- ------- ----------- --------- ---------  --------   -----------   ---------- -----------
BALANCE AT
DECEMBER 31, 2005        26,253,750  26,254   3,590,407  (6,500)   (318,545)  (15,827)   (2,443,911)          -      831,878

 Common stock issued
  in private placement
  during 2006 at
  $0.50/share               850,000     850     424,150       -           -         -             -           -      425,000
 Common stock issued
  for future services
  in February 2006,
  valued at $0.90/share     300,000     300     269,700       -           -         -             -           -      270,000
 Common stock issued
  for future services
  in May 2006, valued
  at $1.55/share            400,000     400     619,600       -           -         -             -           -      620,000
 Common stock issued
  for future services
  in June 2006, valued
  at $1.45/share             25,000      25      36,225       -           -         -             -           -       36,250
 Common stock issued
  for future services
  in November 2006,
  valued at $0.49/share      60,000      60      29,340       -           -         -             -           -       29,400
 Warrants issued for
  services in September
  2005, vested during 2006,
  valued at $1.45/share           -       -      66,500       -           -         -             -           -       66,500
 Warrants issued for
  future services in
  June 2006, vested
  during 2006, valued
  at $1.55/share                  -       -     465,996       -           -         -             -           -      465,996
 Options issued for
  services in February
  2006, vested during 2006,
  valued at $1.01/share           -       -     428,888       -           -         -             -           -      428,888
 Contributed capital
  related to accrued interest     -       -      35,624       -           -         -             -           -       35,624
 Subscription receivable          -       -           -   6,500           -         -             -           -        6,500
 Amortization of deferred
  charges                         -       -           -       -     318,545         -             -           -      318,545
 Unrealzed gain (loss)
  on securities                   -       -           -       -           -         -             -     (26,000)     (26,000)
 Net loss for the year
  ending December 31, 2006        -       -           -       -           -         -    (2,933,809)          -   (2,933,809)
                         ---------- ------- ----------- --------- ---------  --------   -----------   ---------- -----------

BALANCE AT
DECEMBER 31, 2006        27,888,750  27,889   5,966,430       -           -   (15,827)   (5,377,720)    (26,000)     574,772

 Common stock issued
  in private placement
  during 2007 at
  $0.50/share             2,482,000   2,482   1,238,518       -           -         -             -           -    1,241,000
 Common stock issued
  in private placement
  during 2007 at
  $0.60/share             1,767,540   1,768   1,058,756       -           -         -             -           -    1,060,524
 Common stock
  subscription rescinded
  during 2007 at
  $0.50/share              (400,000)   (400)   (199,600)      -           -         -             -           -     (200,000)
 Common stock issued
  for future services
  in February 2007,
  valued at $0.70/share     151,785     152     106,098       -           -         -             -           -      106,250
 Common stock issued for
  future services in
  March 2007,
  valued at $0.58/share   1,000,000   1,000     579,000       -           -         -             -           -      580,000
 Common stock issued for
  services and settlement
  for accounts payable in
  April 2007, valued
  at $0.35/share            100,000     100      34,900       -           -         -             -           -       35,000
 Common stock issued
  for services in
  October 2007, valued
  at $0.68/share            150,000     150     101,850       -           -         -             -           -      102,000
 Common stock issued
  for services in
  October 2007, valued
  at $0.90/share            150,000     150     134,850       -           -         -             -           -      135,000
 Common stock issued
  for services in
 November 2007, valued
  at $0.72/share            400,000     400     287,600       -           -         -             -           -      288,000
 Warrants issued
  for services in
  September 2005, vested
  during 2007, valued
  at $1.45/share                  -       -      36,370       -           -         -             -           -       36,370
 Warrants issued
  for services in
  March 2007, vested
  during 2007, valued
  at $0.63/share                  -       -      52,180       -           -         -             -           -       52,180
 Warrants issued for
  services in April 2007,
  vested during 2007,
  valued at $0.69/share           -       -     293,476       -           -         -             -           -      293,476
 Warrants issued for
  services in April 2007,
  vested during 2007,
  valued at $0.63/share           -       -     140,490       -           -         -             -           -      140,490
 Warrants issued for
  services in May 2007,
  vested during 2007,
  valued at $0.56/share           -       -      52,946       -           -         -             -           -       52,946
 Warrants issued for
  services in October 2007,
  vested during 2007,
  valued at $0.61/share           -       -      61,449       -           -         -             -           -       61,449
 Warrants issued for
  services in October 2007,
  vested during 2007, valued
  at $0.78/share                  -       -      52,292       -           -         -             -           -       52,292
 Warrants issued for
  services in December 2007,
  vested during 2007, valued
  at $0.55/share                  -       -       1,159       -           -         -             -           -        1,159
 Options issued for
  services in February 2006,
  vested during 2007, valued
  at $1.01/share                  -       -      17,589       -           -         -             -           -       17,589
 Options issued for services
  in February 2006, vested
  during 2007, valued
  at $1.09/share                  -       -      43,757       -           -         -             -           -       43,757
 Options issued for services
  in November 2007, vested
  during 2007, valued
  at $0.60/share                  -       -      41,653       -           -         -             -           -       41,653
 Warrants issued for
  future services in
  April 2007, vested
  during 2007, valued
  at $0.70/share                  -       -     348,000       -           -         -             -           -      348,000
 Deferred charges for
  common stock issued
  for future services
  in March 2007, valued
  at $0.58/share                  -       -           -       -    (928,000)        -             -           -     (928,000)
 Amortization of
  deferred charges                -       -           -       -     773,333         -             -           -      773,333
 Unrealzed gain (loss)
  on securities                   -       -           -       -           -         -             -     (32,610)     (32,610)
 Net loss for the year
  ending December 31, 2007        -       -           -       -           -         -    (4,223,449)          -   (4,223,449)
                         ---------- ------- ----------- --------- ---------  --------   -----------   ---------- -----------
BALANCE AT
DECEMBER 31, 2007        33,690,075 $33,690 $10,449,763 $     -   $(154,667) $(15,827)  $(9,601,169)   $(58,610) $   653,180
                         ========== ======= =========== ========= =========  ========   ===========   ========== ===========
</TABLE>


The accompanying notes are an integral part of these financial statements.

                             F-5
<PAGE>


                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                  STATEMENTS OF CASH FLOWS
     FOR THE YEARS ENDING DECEMBER 31, 2007 AND 2006 AND
  FOR THE PERIOD JANUARY 1, 2004 (INCEPTION OF DEVELOPMENT
                 STAGE) TO DECEMBER 31, 2007

<TABLE>
<CAPTION>


                                                             Cumulative        For the            For the
                                                               Since         Year Ending        Year Ending
                                                             Inception     December 31, 2007  December 31, 2006
                                                            ------------     ------------       ------------
<S>                                                         <C>              <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
 Net loss                                                   $ (9,601,169)    $ (4,223,449)      $ (2,933,809)
 Adjustment to reconcile net loss to net cash
  used in operating activities
   Amortization of deferred charges                            3,893,394        1,550,442          1,502,562
   Warrants issued for services                                  833,962          690,362             66,500
   Stock options issued for services                             865,387          102,999            428,888
   Common stock issued for services                              530,292          530,292                  -
   Depreciation                                                   45,138           16,362             12,161
   Realized gain on investments                                  (63,187)               -            (63,187)
   Realized gain on disposal of assets                              (637)            (637)                 -
   (Increase) decrease in assets
    Receivables                                                  (31,705)        (101,144)            75,000
    Prepaid expenses                                              (7,294)           2,059             (9,353)
   Increase (decrease) in liabilities
    Accounts payable                                             191,341           32,420             89,424
    Accounts payable - related party                                   -          (65,339)            64,339
    Accrued expenses                                              49,150           30,952             24,800
                                                            ------------     ------------       ------------

Net cash used in operating activities                         (3,295,328)      (1,434,681)          (742,675)
                                                            ------------     ------------       ------------
CASH FLOWS FROM INVESTING ACTIVITIES
   Cost of intangibles                                          (174,421)        (132,045)            (8,514)
   Proceeds from sale of available for sale securities           175,387                -            175,387
   Purchase of available for sale securities                    (200,000)               -                  -
   Purchase of equipment                                         (75,164)         (50,339)                 -
                                                            ------------     ------------       ------------

Net cash (used in) provided by investing activities             (274,198)        (182,384)           166,873
                                                            ------------     ------------       ------------
CASH FLOWS FROM FINANCING ACTIVITIES
   Issuance of common stock, private placement                 3,726,524        2,301,524            425,000
   Common stock rescinded, private placement                    (200,000)        (200,000)                 -
   Proceeds (Repayment) of notes payable                         (14,970)          (4,068)            (5,197)
   Proceeds from subscription receivable                           6,500                -              6,500
   Advances to stockholders                                       (3,435)               -                  -
   Proceeds from convertible notes                               529,000                -                  -
   Advances from officers                                              -           (1,468)                 -
                                                            ------------     ------------       ------------

Net cash provided by financing activities                      4,043,619        2,095,988            426,303
                                                            ------------     ------------       ------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                        474,093          478,923           (149,499)

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD                    5,358              528            150,027
                                                            ------------     ------------       ------------

CASH AND CASH EQUIVALENTS - END OF PERIOD                   $    479,451     $    479,451       $        528
                                                            ============     ============       ============
</TABLE>


The accompanying notes are an integral part of these financial statements.

                             F-6
<PAGE>



                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                  STATEMENTS OF CASH FLOWS
     FOR THE YEARS ENDING DECEMBER 31, 2007 AND 2006 AND
  FOR THE PERIOD JANUARY 1, 2004 (INCEPTION OF DEVELOPMENT
                 STAGE) TO DECEMBER 31, 2007
<TABLE>
<CAPTION>
                                                           Cumulative         For the            For the
                                                              Since         Year Ending        Year Ending
                                                            Inception     December 31, 2007  December 31, 2006
                                                           ------------     ------------       ------------
<S>                                                        <C>              <C>                <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

CASH PAID DURING THE PERIOD FOR:
   Interest                                                $     17,996     $     5,886        $      4,017
                                                           ============     ===========        ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES

Common stock issued in exchange for deferred charges       $  3,142,400     $   686,250        $    926,250

Warrants issued in exchange for deferred charges           $  1,249,056     $   348,000        $          -

Common stock issued as settlement for accounts payable     $     29,708     $    29,708        $          -

Increase/(Decrease) in fair value of investment securities $     58,610     $    32,610        $     26,000

Accrued interest contributed as capital                    $     35,624     $         -        $     35,624

Common stock issued in the conversion of notes payable     $    529,000     $         -        $          -

Acquisition of automobile through loan payable             $     24,643     $         -        $          -

Common stock issued upon exercise of a warrant
    in exchange for receivable                             $     75,000     $         -        $          -

Insurance company pay off of note payable                  $      9,673     $     9,673        $          -
</TABLE>


The accompanying notes are an integral part of these financial statements.

                             F-7
<PAGE>








                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                (A Development Stage Company)
                NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2007 AND 2006




NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

History and Nature of Business
Lightwave Logic, Inc., formerly Third-Order
Nanotechnologies, Inc., formerly PSI-Tec Holdings, Inc.,
formerly Eastern Idaho Internet Service, Inc. (the
"Company") was organized under the laws of the State of
Nevada in 1997.  The Company was engaged in the business of
marketing internet services until June 30, 1998, at which
time the principal assets of the business were sold and
operations were discontinued.  The Company was inactive
until the acquisition of PSI-TEC Corporation ("PSI-TEC") on
July 14, 2004, at which time the name was changed to PSI-TEC
Holdings, Inc.

Development Stage
PSI-TEC was incorporated in 1995 under the laws of the State
of Delaware.  PSI-TEC primarily conducted research for the
United States Government under a contract, which expired in
2003.  Beginning January 1, 2004, PSI-TEC was engaged in the
development of electro-optic polymers for application in the
electro-optic device markets.  PSI-TEC is considered a
development stage company as defined in Statement on
Financial Accounting Standards (SFAS) No. 7 from the
inception of the development stage on January 1, 2004.

Merger
On July 14, 2004, the Company acquired PSI-TEC.  Under the
terms of the merger agreement, the stockholders of PSI-TEC
received 15,600,000 shares of common stock in exchange for
its 2,206,280 shares.  Following the merger, the Company
changed its name to PSI-TEC Holdings, Inc.  Under accounting
principles generally accepted in the United States, the
share exchange is considered to be a capital transaction in
substance rather than a business combination.  That is, the
share exchange is equivalent to the issuance of stock by PSI-
TEC Holdings, Inc. for the net monetary assets of PSI-TEC,
accompanied by a recapitalization, and is accounted for as a
change of capital structure.  Accordingly, the accounting
for the share exchange will be identical to that resulting
from a reverse acquisition, except no goodwill will be
recorded.  Under reverse takeover accounting, the post-
reverse acquisition comparative historical financial
statements of the legal acquirer, PSI-TEC Holdings, Inc.,
are those of the legal acquiree, PSI-TEC, which is
considered to be the accounting acquirer.  On October 20,
2006, PSI-TEC Holdings, Inc. and PSI-TEC merged and changed
its name to Third-Order Nanotechnologies, Inc.  On March 10,
2008, Third-Order Nanotechnologies, Inc. changed its name to
Lightwave Logic, Inc.

Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United
States requires management to make estimates and assumptions
that affect the amounts reported in the financial statements
and accompanying disclosures.  Although these estimates are
based on management's best knowledge of current events and
actions the Company may undertake in the future, actual
results could differ from the estimates.

Cash Equivalents
For the purposes of the statement of cash flows, the Company
considers all highly liquid instruments with maturities of
three months or less at the time of purchase to be cash
equivalents.

Concentration of Credit Risk
Certain financial instruments potentially subject the
Company to concentrations of credit risk.  These financial
instruments consist primarily of cash.  The Company places
its temporary cash investments with high credit quality
financial institutions to limit its credit exposure.


                             F-8
<PAGE>


                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                (A Development Stage Company)
                NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2007 AND 2006


NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Investment
Securities classified as available-for-sale may be sold in
response to changes in interest rates, liquidity needs, and
for other purposes.  Available-for-sale securities are
carried at fair value.  Unrealized gains and losses on
investment securities available for sale are based on the
difference between book value and fair value of each
security.  These gains and losses are credited or charged to
other comprehensive income, whereas realized gains and
losses are recognized in the Company's net income (loss).

Property and Equipment
Equipment is stated at cost.  Depreciation is principally
provided by use of straight-line methods for financial and
tax reporting purposes over the estimated useful lives of
the assets, generally 5 years.

Fair Value of Financial Instruments
The Company's financial instruments consist of cash, note
receivable, accounts payable and accrued expenses.  The
carrying values of cash, accounts payable and accrued
expenses approximate fair value because of their short
maturities.

Income Taxes
The Company follows Statement of Financial Accounting
Standards ("SFAS")  No. 109, "Accounting for Income Taxes,"
which requires an asset and liability approach to financial
accounting and reporting for income taxes.  Deferred income
tax assets and liabilities are computed annually for
temporary differences between the financial statement and
tax bases of assets and liabilities that will result in
taxable or deductible amounts in the future based on enacted
tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred
tax assets to the amount expected to be realized.  Income
tax expense is the tax payable or refundable for the period
plus or minus the change during the period in deferred tax
assets and liabilities.

Loss Per Share
The Company follows SFAS No. 128, "Earnings Per Share,"
resulting in the presentation of basic and diluted earnings
per share.  Because the Company reported a net loss in 2007
and 2006, common stock equivalents, including stock options
and warrants were anti-dilutive; therefore, the amounts
reported for basic and dilutive loss per share were the
same.

Recoverability of Long Lived Assets
The Company follows SFAS No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("Statement
144").  Long-lived assets to be held and used are reviewed
for impairment whenever events or changes in circumstances
indicate that the related carrying amount may not be
recoverable.  When required, impairment losses on assets to
be held and used are recognized based on the excess of the
asset's carrying amount.

Comprehensive Income
The Company follows SFAS No. 130, "Reporting Comprehensive
Income."  Comprehensive income is a more inclusive financial
reporting methodology that includes disclosure of certain
financial information that historically has not been
recognized in the calculation of net income.


                             F-9
<PAGE>


                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                (A Development Stage Company)
                NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2007 AND 2006



NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

Reclassifications
Certain reclassifications were made to the 2006 financial
statements in order to conform to the 2007 financial
statement presentation.

Recently Issued Pronouncements
In June 2006, the Financial Accounting Standards Board
("FASB") issued Interpretation No. 48 ("FIN 48"), Accounting
for Uncertainty in Income Taxes. FIN 48 prescribes detailed
guidance for the financial statement recognition,
measurement and disclosure of uncertain tax positions
recognized in an enterprise's financial statements in
accordance with FASB Statement No. 109, Accounting for
Income Taxes. Tax positions must meet a more-likely-than-not
recognition threshold at the effective date to be recognized
upon the adoption of FIN 48 and in subsequent periods. FIN
48 was effective for fiscal years beginning after
December 15, 2006, and became effective for the Company
beginning with the first quarter of 2007, and the provisions
of FIN 48 will be applied to all tax positions under
Statement No. 109 upon initial adoption. The cumulative
effect of applying the provisions of this interpretation
will be reported as an adjustment to the opening balance of
retained earnings for that fiscal year.  The Company adopted
FIN 48 effective January 1, 2007.  The adoption of FIN 48
did not require an adjustment to the opening balance of
retained earnings as of January 1, 2007.

In September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements). SFAS No. 157 establishes a framework for
measuring fair value and expands disclosures about fair
value measurements. The changes to current practice
resulting from the application of SFAS No. 157 relate to the
definition of fair value, the methods used to measure fair
value and the expanded disclosures about fair value
measurement.  SFAS No. 157 is effective for fiscal years
beginning after November 15, 2007 and interim periods within
those fiscal years.  The Company does not believe that the
adoption of the provisions of SFAS No. 157 will impact the
amounts reported in the financial statements, however,
additional disclosures will be required about the inputs
used to develop the measurements of fair value and the
effect of certain measurements reported on the Statement of
Operations.

In February 2007, the FASB issued SFAS No. 159, The Fair
Value Option for Financial Assets and Financial Liabilities.
SFAS No. 159 permits entities to choose to measure many
financial instruments and certain other items at fair value
that are not currently required to be measured at fair
value.  The objective is to improve financial reporting by
providing entities with the opportunity to mitigate
volatility in reported earnings caused by measuring related
assets and liabilities differently without having to apply
complex hedge accounting provisions.  SFAS No. 159 also
establishes presentation and disclosure requirements
designed to facilitate comparisons between entities that
choose different measurement attributes for similar types of
assets and liabilities.  SFAS No. 159 is effective for
financial statements issued for fiscal years beginning after
November 15, 2007 and will become effective for us beginning
with the first quarter of 2008.  The Company has not yet
determined the impact of the adoption of SFAS No. 159 on its
financial statements and footnote disclosures.


                             F-10
<PAGE>


                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                (A Development Stage Company)
                NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2007 AND 2006


NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recently Issued Pronouncements
On December 4, 2007, the FASB issued SFAS No.141R, Business
Combinations (SFAS No. 141R). SFAS No. 141R requires the
acquiring entity in a business combination to recognize all
the assets acquired and liabilities assumed, establishes the
acquisition date fair value as the measurement objective for
all assets acquired and liabilities assumed, and requires
the acquirer to expand disclosures about the nature and
financial effect of the business combination. SFAS No. 141R
is effective for business combinations for which the
acquisition date is on or after the beginning of the first
annual reporting period beginning on or after December 15,
2008. Since the standard is generally applicable only for
acquisitions completed in the future, we are unable to
determine the effect this standard would have on the
accounting for such acquisitions.


NOTE 2 - GOING CONCERN

The accompanying financial statements have been prepared
assuming the Company will continue as a going concern.  The
Company has incurred significant losses and experienced
negative cash flow during the development stage.  These
conditions raise substantial doubt about the Company's
ability to continue as a going concern.  The financial
statements do not include any adjustments that might result
from the outcome of this uncertainty.

The Company is in the development stage at December 31,
2007.  Currently, the Company is in the process of raising
$1,500,000 to maintain the Company's operations through June
2008.  The Company's development is proceeding on schedule
and they hope to demonstrate a prototype by April 2008.
Successful completion of the Company's development program
and, ultimately, the attainment of profitable operations are
dependent upon future events, including obtaining adequate
financing to fulfill its development activities and
achieving a level of revenue adequate to support the
Company's cost structure for the following three years.  The
Company is in the process of adding qualified directors and
employees to help meet their goals.  Management is in the
process of developing a business plan that it believes will
be attractive enough to investors to raise the necessary
capital.  However, there can be no assurances that the
Company will be able to secure the necessary financing
and/or equity investment or achieve an adequate sales level.


                             F-11
<PAGE>


                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                (A Development Stage Company)
                NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2007 AND 2006



NOTE 3 - DEFERRED CHARGES

Deferred charges represent the unamortized fair value of the
issuance of common stock and warrants for future services to
non-employees which was accounted for in accordance with
Emerging Issue Task Force No. 96-18, Accounting for Equity
Instruments That Are Issued To Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or
Services, as follows:
<TABLE>
<CAPTION>
                                        2007           2006
                                    ------------   ------------
<S>                                 <C>            <C>
Common stock                        $  2,811,400   $  2,125,150
Warrants                               1,249,056        901,056
                                    ------------   ------------
                                       4,060,456      3,026,206
Less: Accumulated Amortization         3,893,394      2,342,952
                                    ------------   ------------
                                         167,062        683,254
Less: Amount reflected as a
      contra-equity account for
      management consulting services     154,667              -
                                    ------------   ------------

                                    $     12,395   $    683,254
                                    ============   ============
</TABLE>


NOTE 4 - NOTE RECEIVABLE

Note Receivable consists of the following:
<TABLE>
<CAPTION>
                                                            December 31
                                                       2007           2006
                                                   ----------      ----------
<S>                                                <C>             <C>
Note Receivable - Theater Xtreme Entertainment     $  100,000      $        -
  Group, Inc., bears interest at 14% per year,
  matures one year from the date of issue
  (August 15, 2008) and may be prepaid at any
  time without penalty. Pursuant to the term of
  the Note, the Company received warrants to
  purchase 50,000 shares of common stock at an
  exercise price of $1.00 per share.  The value
  of the warrant is $2,300 at 12/31/07, using
  the Black-Scholes pricing formula.  This value
  is included in the investments.

Note Receivable                                             -             100
                                                   ----------      ----------

Total                                              $  100,000      $      100
                                                   ==========      ==========
</TABLE>


NOTE 5 - AVAILABLE FOR SALE SECURITIES

Investments consist of available-for-sale equity securities
of a related party reported at fair value of $26,779 and
$59,265 and an equity security reported at fair value at
$2,411 and $2,535 at December 31, 2007 and 2006.  Unrealized
loss on available-for-sale securities at December 31, 2007
and 2006 was $32,610 and $26,000.  The related party is a
stockholder of the Company and also provides services under
a management agreement.


                             F-12
<PAGE>


                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                (A Development Stage Company)
                NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2007 AND 2006


NOTE 5 - AVAILABLE FOR SALE SECURITIES (CONTINUED)

During 2006, the Company sold 56,100 shares of the related
party for proceeds of $175,387 resulting in a short-term
capital gain of $63,187.  No shares were sold during 2007.

During August 2007 in conjunction with a note receivable
(NOTE 4), the Company received a warrant to purchase 50,000
shares of Theater Xtreme Entertainment Group, Inc. at $1.00
per share.  This value of this warrant at December 31, 2007
was $2,300 and it was determined by using the Black-Scholes
option pricing formula.


NOTE 6 - EQUIPMENT

Equipment consists of the following:
<TABLE>
<CAPTION>
                                       2007           2006
                                  -----------    -----------
<S>                               <C>            <C>
 Automobile                       $         -    $    24,643
 Office equipment                      23,752         23,752
 Lab equipment                         75,165         24,825
                                  -----------    -----------
                                       98,917         73,220
 Less: Accumulated depreciation        31,641         30,885
                                  -----------    -----------

                                  $    67,276    $    42,335
                                  ===========    ===========
</TABLE>


Depreciation expense for the years ended December  31,  2007
and 2006 was $16,362 and $12,161.

During  2007, the Company disposed of the automobile  for  a
realized gain of $637.

NOTE 7 - INTANGIBLE ASSETS

This represents legal fees and patent fees associated with
the registration of patents.  The Company has not recorded
any amortization expenses since the patents have yet to be
approved.  Once issued, the cost of the patents will be
amortized over their legal lives, which is generally 20
years.

NOTE 8 - LOAN PAYABLE

During 2004, the Company entered into a loan payable in the
amount of $24,643 to finance an automobile. This loan is
payable in monthly installments of $489, including interest
at 7%, due August 2009, and is secured by the automobile.

The automobile that was financed by this loan was disposed
during 2007 and the loan was paid in full.


                             F-13
<PAGE>


                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                (A Development Stage Company)
                NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2007 AND 2006



NOTE 9 - COMMITMENTS

The  Company is obligated under an operating lease  for  lab
space expiring December 31, 2008.

Aggregate minimum future lease payments are as follows:

               YEARS ENDING
                DECEMBER 31,        AMOUNT
               -------------      ---------
                    2008          $   8,593


Rent  expense approximating $10,425 and $20,275 is  included
in  general and administrative expenses for the years  ended
December 31, 2007 and 2006.

NOTE 10 - INCOME TAXES

As discussed in Note 1, the Company utilizes the asset and
liability method of accounting for income taxes in
accordance with SFAS 109.  The effective tax rates differ
from the statutory rate primarily due to the Company's
historical corporate structure.  The reconciliation of the
statutory federal rate to the Company's historical Income
tax benefit is as follows:
<TABLE>
<CAPTION>
                                                 2007                       2006
                                         ---------------------      ---------------------
                                            Amount          %          Amount          %
                                         ------------    -----      ------------    -----
<S>                                      <C>             <C>        <C>             <C>
Income tax benefit at U.S.
 federal income tax rate                 $ (1,436,000)    (34)      $   (997,000)     (34)
State tax, net of federal tax effect         (380,000)     (9)          (264,000)      (9)
Non-deductible share-based compensation       235,000       3                  -        -
Change in valuation allowance               1,581,000      40          1,261,000       43
                                         ------------    -----      ------------    -----

                                         $          -       -       $          -        -
                                         ============    =====      ============    =====
</TABLE>

The  components  of deferred tax assets as of  December  31,
2007 and December 31, 2006 are as follows:
<TABLE>
<CAPTION>
                                                   2007         2006
                                              ------------  ------------
<S>                                           <C>           <C>
Deferred tax asset for NOL carryforwards      $  3,441,000  $  2,090,000
Share-based compensation                           476,000       246,000
Accrued expenses                                    31,000        31,000
Valuation allowance                             (3,948,000)   (2,367,000)
                                              ------------  ------------

                                              $          -  $          -
                                              ============  ============
</TABLE>


                             F-14
<PAGE>


                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                (A Development Stage Company)
                NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2007 AND 2006


NOTE 10 - INCOME TAXES (CONTINUED)

The valuation allowance for deferred tax assets as of
December 31, 2007 and 2006 was $3,948,000 and $2,367,000.
The change in the total valuation for the years ended
December 31, 2007 and 2006 was an increase of $1,581,000 and
$1,261,000.  In assessing the realization of deferred tax
assets, management considers whether it is more likely than
not that some portion or all of the deferred tax assets will
not be realized.  The ultimate realization of deferred tax
assets is dependant upon the generation of future taxable
income during the periods in which the net operating losses
and temporary differences become deductible.  Management
considered projected future taxable income and tax planning
strategies in making this assessment.  The value of the
deferred tax assets was offset by a valuation allowance, due
to the current uncertainty of the future realization of the
deferred tax assets.

As of December 31, 2007, the Company had net operating loss
carry forwards of approximately $8,000,000, expiring through
the year ending December 31, 2027.  This amount can be used
to offset future taxable income of the Company.

The timing and manner in which the Company can utilize
operating loss carryfowards in any year may be limited by
provisions of the Internal Revenue Code regarding changes in
ownership of corporations.  Such limitation may have an
impact on the ultimate realization of its carryforwards and
future tax deductions.

As of December 31, 2007, the Company had no unrecognized tax
benefits, or any tax related interest of penalties.  Tax
years from 2005 (initial tax year) through 2007 remain
subject to examination by major tax jurisdictions.

NOTE 11 - STOCKHOLDERS' EQUITY

Preferred Stock
Pursuant to our Company's Articles of Incorporation, our
board of directors is empowered, without stockholder
approval, to issue series of preferred stock with any
designations, rights and preferences as they may from time
to time determine.  The rights and preferences of this
preferred stock may be superior to the rights and
preferences of our common stock; consequently, preferred
stock, if issued could have dividend, liquidation,
conversion, voting or other rights that could adversely
affect the voting power or other rights of the common stock.
Additionally, preferred stock, if issued, could be utilized,
under special circumstances, as a method of discouraging,
delaying or preventing a change in control of our business
or a takeover from a third party.

Common Stock and Warrants
The stockholders' deficit at January 1, 2004 has been
retroactively restated for the equivalent number of shares
received in the reverse acquisition at July 14, 2004 (Note
1) after giving effect to the difference in par value with
the offset to additional paid-in-capital.

In July 2004, the Company issued 1,600,000 shares of its
common stock for professional services valued at $256,000,
fair value.

In August 2004, the Company issued 637,500 shares of its
common stock for professional services valued at $75,000,
fair value.

In December 2004, the Company converted a note payable of
$30,000 into 187,500 shares of common stock at a conversion
price of $0.16 per share.


                             F-15
<PAGE>


                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                (A Development Stage Company)
                NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2007 AND 2006


NOTE 11 - STOCKHOLDERS' EQUITY (CONTINUED)

Common Stock and Warrants (Continued)
In April 2005, the Company issued 4,000,000 shares of its
common stock in a private placement for proceeds of
$1,000,000.

On May 4, 2005, the Company converted the notes payable of
$499,000 into 3,118,750 shares of common stock at a
conversion price of $0.16 per share.  An unpaid note payable
in the amount of $6,500 has been reflected as a subscription
receivable.

During August 2005, the Company issued 210,000 shares of
common stock for professional services rendered valued at
$585,500, fair value.  Consulting expense of $375,500 was
recognized during 2005, and at December 31, 2005, the
remaining balance of $210,000 is reflected as a deferred
charge on the balance sheet.  During 2006, consulting
expense of $210,000 was recognized.  This agreement ended in
May 2006.

In August 2005, in conjunction with a management services
contract, the Company issued 200,000 shares of common stock
valued at $584,000.  Management expense of $265,455 was
recognized during 2005, and at December 31, 2005, the
remaining balance of $318,545 is reflected as a deferred
charge in a contra-equity account.  During 2006, management
expense of $318,545 was recognized.  This agreement ended in
June 2006.

During May 2005, the Company issued Stock Purchase Warrants
to purchase 100,000 shares of common stock at an exercise
price of $2.10 in exchange for consulting services. The
warrants are exercisable until May 2008 and vest as follows:
50,000 shares during the first year of the agreement, 25,000
shares during the second year of the agreement, and 25,000
shares during the third year. In accordance with the fair
value method, the Company used the Black-Scholes model to
calculate the grant-date fair value, with the following
assumptions: no dividend yield, expected volatility of 60%,
risk-free interest rate of 3.8% and expected life of option
of three years.  The fair market value of the warrants was
$113,250.  In accordance with the fair value method as
described in accounting requirements of SFAS No. 123, the
Company recognized consulting expense of $37,000 in 2005.
This warrant was cancelled during 2006.

During September 2005, the Company issued Stock Purchase
Warrants to purchase 100,000 shares of common stock at an
exercise price of $2.00 in exchange for consulting services.
The warrants expire in September 2008 and vest as follows:
50,000 shares during the first year of the agreement, 25,000
shares during the second year of the agreement, and 25,000
shares during the third year of the agreement. In accordance
with the fair value method, the Company used the Black-
Scholes model to calculate the grant-date fair value, with
the following assumptions: no dividend yield, expected
volatility of 60%, risk-free interest rate of 3.8% and
expected life of option of three years.  The fair market
value of the warrants was $145,100.  The Company recognized
consulting expense of $36,370, $66,500 and $24,200 for the
years ended December 31, 2007, 2006 and 2005 in conjunction
with this agreement.


                             F-16
<PAGE>


                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                (A Development Stage Company)
                NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2007 AND 2006


NOTE 11 - STOCKHOLDERS' EQUITY (CONTINUED)

Common Stock and Warrants (Continued)
On October 15, 2005, the Company issued Stock Purchase
Warrants to purchase 30,000 shares of common stock at an
exercise price of $1.40 in exchange for consulting services.
The warrants expire in October 2006 and are exercisable
immediately.  In accordance with the fair value method, the
Company used the Black-Scholes model to calculate the grant-
date fair value, with the following assumptions: no dividend
yield, expected volatility of 60%, risk-free interest rate
of 4.15% and expected life of option of one year.  The fair
market value of the warrants was $15,900.   In accordance
with the fair value method as described in accounting
requirements of SFAS No. 123, the Company recognized
consulting expense of $15,900 during 2005.  These warrants
expired in October 2006.

In December 2005, in conjunction with a consulting contract,
the Company issued Stock Purchase Warrants to purchase
300,000 shares of common stock at an exercise price of $0.25
per share valued at $435,060, fair value.  The warrants
expire in December 2007 and were exercisable immediately. In
accordance with the fair value method, the Company used the
Black-Scholes model to calculate the grant-date fair value,
with the following assumptions: no dividend yield, expected
volatility of 60%, risk-free interest rate of 4.41% and
expected life of option of two years.  In accordance with
the fair value method as described in accounting
requirements of SFAS No. 123, the Company recognized
consulting expense of $199,435, and at December 31, 2005,
the remaining balance in deferred charges amounted to
$235,625.  The 300,000 warrants were fully exercised on
December 31, 2005 for $75,000.  The Company recognized
$18,128 and $217,497 in consulting expense in conjunction
with this agreement for the years ended December 31, 2007
and 2006, which was cancelled during 2007.

During 2006, the Company issued 850,000 shares of common
stock and 425,000 warrants for proceeds of $425,000 in
accordance to a private placement memorandum amended
December 18, 2006.  Pursuant to the terms of the amended
offering, up to 20 units were offered at the offering price
of $50,000 per unit, with each unit comprise of 100,000
shares and a warrant to purchase 50,000 shares of common
stock at $0.50 per share.  As of December 31, 2007, the
425,000 warrants are still outstanding.

During February 2006, the Company issued 300,000 shares of
common stock for professional services rendered valued at
$270,000, fair value.  The Company recognized consulting
expense of $16,875 and $118,125 and legal expense of $16,875
and $118,125 during 2007 and 2006.  The contracts expired
during 2007.

During May 2006, the Company issued 400,000 shares of common
stock for professional services rendered valued at $620,000,
fair value.  The Company recognized consulting expense of
$258,333 and $361,667 during 2007 and 2006, and at December
31, 2006.  The contracts expired during 2007.

During June 2006, the Company issued 25,000 shares of common
stock for professional services rendered valued at $36,250,
fair value. The Company recognized legal expense of $16,615
and $19,635 during 2007 and 2006, and at December 31, 2006.
The contracts expired during 2007.

During November 2006, the Company issued 60,000 shares of
common stock for professional services valued at $29,400,
fair value. The Company recognized investor relations
expense of $25,480 and $3,920 during 2007 and 2006.  The
contract expired during 2007.


                             F-17
<PAGE>


                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                (A Development Stage Company)
                NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2007 AND 2006


NOTE 11 - STOCKHOLDERS' EQUITY (CONTINUED)

Common Stock and Warrants (Continued)
In June 2006, in conjunction with an addendum to an existing
consulting contract effective December 2005, the Company
issued Stock Purchase Warrants to purchase 300,000 shares of
common stock at an exercise price of $0.25 per share.  The
warrants expire in June 2008 and were exercisable
immediately. In accordance with the fair value method, the
Company used the Black-Scholes model to calculate the grant-
date fair value, with the following assumptions: no dividend
yield, expected volatility of 186%, risk-free interest rate
of 4.41% and expected life of option of two years.  The fair
market value of the warrants was $465,996.  During 2007 and
2006, the Company recognized consulting expense of $330,948
and $135,048 in conjunction with this agreement.  The
contract was cancelled during 2007.

During 2006, the Company cancelled a warrant issued during
May 2005 to purchase 100,000 shares of the Company's common
stock at an exercise price of $2.10, and issued an option to
purchase 500,000 shares of the Company's common stock at an
exercise price of $1 per share and the same option's
expiration and vesting terms were modified during November
2006 (NOTE #3).  The incremental cost of the modified option
was $394,030 and will be expensed over the vesting terms.
The Company recognized $17,589 and $406,215 as a consulting
expense in 2007 and 2006, which includes $337,290 of the
incremental cost of the modified option.

During February 2006, the Company awarded an employee with
an option to purchase 200,000 shares of common stock at an
exercise price of $1.00 per share under the 2005 Employee
Stock Option Plan.  These options were valued at $217,628
using the Black-Scholes Option Pricing Formula.  The
employee compensation expense recognized during 2007 and
2006 is $43,757 and $22,673.  In June 2007, the employee was
terminated and the vesting ceased.  After September 2007,
the vested options expired.

During 2006, the Company recognized contributed capital of
$35,624 related to the conversion of accrued interest
payable.

During 2006, the Company deemed an outstanding subscription
receivable of $6,500 to be uncollectible.

During 2007, the Company issued 2,482,000 shares of common
stock and 1,241,000 warrants for proceeds of $1,241,000 in
accordance to a private placement memorandum amended
December 18, 2006.  Pursuant to the terms of the amended
offering, up to 20 units were offered at the offering price
of $50,000 per unit, with each unit comprised of 100,000
shares and a warrant to purchase 50,000 shares of common
stock at $0.50 per share.  As of December 31, 2007,
1,041,000 warrants are still outstanding.

During 2007, the Company issued 1,767,540 shares of common
stock and 883,770 warrants for proceeds of $1,060,524 in
accordance to a private placement memorandum issued on
October 3, 2007.  Pursuant to the terms of the offerings, up
to 20 units were offered at the purchase price of $60,000
per unit, with each unit comprised of 100,000 shares and a
warrant to purchase 50,000 shares of common stock at $1.00
per share.  As of December 31, 2007, the 883,770 warrants
are still outstanding.

During 2007, a shareholder that was issued 400,000 shares of
the Company's common stock and a warrant to purchase 200,000
shares of the Company's common stock at $0.50 per share
rescinded his shares and warrant.


                             F-18
<PAGE>


                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                (A Development Stage Company)
                NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2007 AND 2006


NOTE 11 - STOCKHOLDERS' EQUITY (CONTINUED)

Common Stock and Warrants (Continued)
During February 2007, the Company issued 151,785 shares of
common stock for investor relations services valued at
$106,250, fair value, which was recorded as a deferred
charge and amortized over one year, the term of the services
contract.  During 2007, the Company recognized $97,396 in
investor relations expense.

During February 2007, the Company terminated its then CEO.
The 56,000 options that were recorded as deferred charges of
$42,730 were not vested and were forfeited.   The 444,000
options that were vested expired during 2007.

During March 2007, the Company issued 1,000,000 shares of
common stock for management consulting services valued at
$580,000, fair value.  During April 2007, the Company issued
500,000 warrants as an addendum to the original contract for
management consulting services valued at $348,000, fair
value.  This contract was recorded as a contra-equity
deferred charges account and is amortized over one year, the
term of the contract.  Management consulting expense of
$773,333 was recognized during 2007.  The remaining balance
at December 31, 2007 was $154,667.

During April 2007, the Company issued 100,000 shares of
common stock for legal services valued at $35,000, fair
value, to settle $29,708 of accounts payable and as payment
for $5,292 of legal services incurred in April 2007.

During October 2007, the Company issued 150,000 shares of
common stock for investor relations services valued at
$102,000, fair value.  During 2007 the Company recognized
$102,000 in investor relation expense.

During October 2007, the Company issued 150,000 shares of
common stock for investor relation services pursuant to a
contract entered into by the Chief Executive Officer on
behalf of the Company.  The value of these shares is
$135,000, fair value.  During 2007, the Company recognized
$135,000 in investor relations expense.

During November 2007, the Company issued 400,000 shares of
common stock under the 2007 Stock Option Plan to the acting
Chief Executive Officer for services rendered valued at
$288,000, fair value.  The Company recognized $288,000 in
consulting expense during 2007.

During March 2007, the Company issued a warrant to purchase
100,000 shares of common stock for consulting services at an
exercise price of $0.25 per share.  The warrant was valued
at $63,065 using the Black-Scholes Option Pricing Formula
and expensed over the life of the contract associated with
the consulting services, which is one year.  The consulting
expense recognized during 2007 is $52,180.

During April 2007, the Company issued warrants to purchase
900,000 shares of common stock for consulting services at an
exercise price of $0.25 per share.  The warrants were valued
at $604,416 using the Black-Scholes Option Pricing Formula
and expensed over the life of the contracts associated with
the consulting services, which is one year.  The consulting
expense recognized during 2007 is $433,966.


                             F-19
<PAGE>


                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                (A Development Stage Company)
                NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2007 AND 2006


NOTE 11 - STOCKHOLDERS' EQUITY (CONTINUED)

Common Stock and Warrants (Continued)
During May 2007, the Company issued a warrant to purchase
150,000 shares of common stock for consulting services at an
exercise price of $0.25 per share.  The warrant was valued
at $84,390 using the Black-Scholes Option Pricing Formula
and expensed over the life of the contract associated with
the consulting services, which is one year.  The consulting
expense recognized during 2007 is $52,946.

During October 2007, the Company issued a warrant to
purchase 100,000 shares of common stock at a purchase price
of $0.25 per share for accounting services rendered.  The
warrant was valued at $61,449 using the Black-Scholes Option
Pricing Formula.  The Company recognized $61,449 in
accounting expense during 2007.

During October 2007, the Company issued a warrant to
purchase 67,200 shares of common stock at a purchase price
of $0.25 per share for consulting services rendered.  The
warrant was valued at $52,292 using the Black-Scholes Option
Pricing Formula.  During 2007, the Company recognized
$52,292 in consulting expense.

During December 2007, the Company issued a warrant to
purchase 25,000 shares of common stock at a purchase price
of $0.50 per share for accounting services rendered.  The
warrant was valued at $13,646 using the Black-Scholes Option
Pricing Formula and expensed over the life of the contract,
which is one year.  The Company recognized $1,159 in
accounting expense during 2007.

During November 2007, under the 2007 Employee Stock Option
Plan, the Company issued options to purchase 1,752,000
shares of common stock at a purchase price of $0.72 per
share.  The options were valued at $1,045,077 using the
Black-Scholes Option Pricing Formula.  During 2007, the
Company recognized $41,653 in consulting expense.  The value
of the options are being recognized pro rata over the
vesting terms.


NOTE 12 - STOCK BASED COMPENSATION

In December 2004, the Financial Accounting Standards Board
("FASB") issued SFAS 123 (revised 2004), Share-Based Payment
("SFAS 123R").  SFAS 123(R) supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees, and amends SFAS
No. 95, Statement of Cash Flows.  Generally, the approach in
SFAS 123(R) is similar to the approach described in SFAS
123.  However, SFAS 123(R) requires share-based payments to
employees, including grants of employee stock options, to be
recognized in the income statement based on their fair
values at the date of grant.  Pro forma disclosure is no
longer an alternative.

On January 1, 2006, the Company adopted SFAS 123(R) using
the modified prospective method as permitted under SFAS
123(R).  Under this transition method, compensation cost
recognized in the first quarter of 2006 includes
compensation cost for all share-based payments granted prior
to but not yet vested as of December 31, 2005, based on the
grant-date fair value estimated in accordance with the
provisions of SFAS 123.  In accordance with the modified
prospective method of adoption, the Company's results of
operations and financial position for prior periods have not
been restated.


                             F-20
<PAGE>


                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                (A Development Stage Company)
                NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2007 AND 2006


NOTE 12 - STOCK BASED COMPENSATION (CONTINUED)

The Company uses the Black-Scholes option pricing model to
calculate the grant-date fair value of an award, with the
following assumptions: no dividend yield, expected
volatility of 186%, risk-free interest rate between 3.8% and
5.1% and expected option life from three through ten years.

During the year ending December 31, 2007, the Company's net
income was approximately $793,361 lower as a result of stock-
based compensation expense as a result of the adoption of
SFAS 123(R).  As of December 31, 2007, there was
approximately $1,276,059 of unrecognized compensation
expense related to non-vested market-based share awards that
is expected to be recognized.

Stock Options
During 2005, the Board of Directors ("Board") of the Company
adopted  a Stock Option Plan (the "Plan") and reserved
1,000,000 shares of common stock for issuance  under the
Plan.  The Plan is intended to permit stock options granted
to employees  under the 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 Plan, which are not intended to qualify as
Incentive  Stock Options, are deemed  to be non-qualified
options ("Non-Statutory Stock Options").  During  2007, no
options were issued under this plan.  This plan  was
cancelled during 2007 and replaced with a new plan.

During 2007, the Board of Directors ("Board") of the Company
adopted  a Stock Option Plan (the "Plan") and reserved
3,500,000 shares of common stock for  issuance under the
Plan.   The Plan is intended to permit stock options granted
to  employees  under the 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 Plan, which are not intended to qualify as
Incentive  Stock Options, are deemed to be non-qualified
options ("Non-Statutory Stock Options").

Warrants
Warrants are issued to third-parties as payment for services
and/or products.  The warrants are valued using the Black-
Scholes Option Pricing Model (NOTE 11).


                             F-21
<PAGE>


                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                (A Development Stage Company)
                NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2007 AND 2006


NOTE 12 - STOCK BASED COMPENSATION (CONTINUED)

Stock Options (Continued)

The following tables summarize all stock option and warrant
activity of the Company since December 31, 2004:
<TABLE>
<CAPTION>
                                  Non-Qualified Stock Options and  Warrants Outstanding and Exercisable
                                  ---------------------------------------------------------------------
                                           Number of              Exercise        Weighted Avereage
                                            Shares                 Price           Exercise Price
                                        ------------          -------------        --------------
<S>                                     <C>                   <C>                  <C>
Outstanding, December 31, 2004                     -          $           -         $          -

Granted                                      680,000          $0.25 - $2.10         $       0.99
Exercised                                   (300,000)         $        0.25         $       0.25
                                        ------------          -------------        --------------

Outstanding, December 31, 2005               380,000          $1.40 - $2.10         $       0.68

Granted                                    1,000,000          $0.25 - $1.00         $       0.70
Cancelled                                   (260,000)         $1.40 - $2.10         $      (0.48)
Expired                                      (70,000)         $1.40 - $2.00         $      (0.12)
                                        ------------          -------------        --------------

Outstanding, December 31, 2006             1,050,000          $0.25 - $2.00         $       0.83

Granted                                    3,594,200          $0.25 - $0.72         $       0.48
Forfeited                                   (125,019)         $        1.00         $       1.00
Expired                                     (574,981)         $        1.00         $       1.00
                                        ------------          -------------        --------------

Outstanding, December 31, 2007             3,944,200          $0.25 - $2.00         $       0.48

Exercisable, December 31, 2007             1,988,800          $0.25 - $2.00         $       0.40
</TABLE>

<TABLE>
<CAPTION>
                       Non-Qualified Stock Options and Warrants Outstanding
                  -------------------------------------------------------------
                   Number Outstanding    Weighted Average       Weighted Average
   Range of       Currently Exercisable     Remaining      Exercise Price of Options and
Exercise Prices   at December 31, 2007   Contractual Life  Warrants Currently Exercisable
---------------   --------------------   ----------------  ------------------------------
<S>               <C>                    <C>               <C>
 $0.25 - $2.00          1,988,800           2.57 Years             $         0.40

</TABLE>





                             F-22
<PAGE>



                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                (A Development Stage Company)
                NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2007 AND 2006


NOTE 13 - CONTINGENCY

2005 Private Offering
During 2005, the Company raised $1,000,000 through the sale
of 4,000,000 shares of common stock in a limited offering to
persons believed to be accredited investors.  The Company
received a legal opinion from third party outside counsel as
to the availability of an exemption from registration with
the SEC with respect to the limited offering.  In December
2005, the Company was informed by the SEC that it is
investigating the circumstances surrounding the $1,000,000
offering including the subsequent public resale of certain
shares originally sold in the offering, along with related
matters.  The Company has further been informed that the
original issuance of the stock and subsequent resale may
have been done, in the opinion of the SEC, in violation of
the registration provisions of the Securities Act of 1933,
as amended.  These matters could lead to enforcement action
by the SEC.  The Company's management is committed to
cooperate fully with the SEC.

Ronald R. Genova Lawsuit
During July 2007, Ronald R. Genova filed a lawsuit in
Philadelphia County, Court of Common Pleas.  Ronald R.
Genova is the Plaintiff. Third-Order Nanotechnologies, Inc.,
PSI-TEC Holdings, Inc. and Universal Capital Management are
each a Defendant.

Ronald R. Genova ("Genova") served as a consultant and then
as the interim chief executive officer of our Company, Third-
Order Nanotechnologies, Inc. The Company terminated Genova
effective February 28, 2007. On March 26, 2007 the Company
paid Genova $9,806, which the Company determined was the
full amount the Company owed Genova. Genova sued, claiming
he was owed an additional $84,650 plus interest for unpaid
consulting fees in the amount of $32,516, a performance
bonus in the amount of $50,000, and an expense reimbursement
in the amount of $2,135. Pursuant to the complaint, Genova
is alleging breach of contract, fraud and promissory
estoppel in an amount in excess of $180,000, in addition to
the right to exercise his options, that expired on May 30,
2007, until February 13, 2016 or a judgment in an additional
amount equal to the monetary value of such options plus
punitive damages, interest and costs.

The parties attended a settlement conference on February 14,
2008 and are still in the process of trying to resolve the
case without litigation.  The Company intends to vigorously
contest the matter.  Although the facts ascertained to date
indicate a favorable outcome is a likely result, it is too
early in the process to provide a detailed evaluation of the
likelihood of success.  It is also too early to provide an
estimate of the amount or range of potential loss.

NOTE 14 - RELATED PARTY

The Company has available-for-sale securities of a related
party (NOTE 4).  The information is summarized below and is
recorded on the balance sheet as "Available-for-sale
securities".  The unrealized loss on this investment is
included on the Statement of Other Comprehensive Income.

                Number                    Market     Unrealized
               of Shares       Cost       Value         Loss
               ---------       ----      -----          ----
Related party   43,900       $ 87,800   $  26,779   $  (61,021)



                             F-23
<PAGE>


                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                (A Development Stage Company)
                NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2007 AND 2006


NOTE 14 - RELATED PARTY (CONTINUED)

Under the management agreement dated August 1, 2005, the
related party was issued 200,000 shares of common stock with
a fair value of $584,000 which was amortized over the term
of the agreement (one year), which expired in 2006.  In
February 2007, the Company entered into a contract with the
related party and issued 1,000,000 shares of common stock
with a fair value of $580,000.  In addition, the Company
issued a warrant to purchase 500,000 shares of its common
stock with a fair value of $288,428.  The expense for the
years ending December 31, 2007 and 2006 was $773,333 and
$348,000.  The unamortized expense is reflected as deferred
charges in the equity section of the balance sheet.

At December 31, 2007 and 2006, the Company has accounts
payable to a related party of $-0- and $65,339.

At December 31, 2007 and 2006, the Company has an officer
loan payable of $-0- and $1,468.

At December 31, 2007 and 2006, the Company has accrued
officer salaries of $114,665 and $74,706.


NOTE 15 - SUBSEQUENT EVENTS

Through April 1, 2008, the Company issued 31,667 shares of
its common stock and 15,834 warrants for proceeds of
$19,000.  In accordance with Emerging Issue Task Force
("EITF") 00-19, the warrants will be reflected as equity
since the warrant contract requires physical settlement or
net share settlement and does not permit net cash settlement
of the contract.

In January 2008, the Company's common stock began trading on
the over-the-counter bulletin board with the symbol TDON.OB.

In January 2008, the Company added a director to the Board
and he received a warrant to purchase 100,000 shares of the
Company's common stock with a fair value of $59,490.

In January 2008, the Board of Directors and a majority of
the stockholders authorized the Company's name change to
Lightwave Logic, Inc. to better suit the Company's strategic
business plan and facilitate stockholder recognition of the
Company and its business.  The Company's common stock began
trading on the over-the-counter bulletin board with the
symbol LWLG.OB, which was effective on March 10, 2008.

In January 2008, the Board of Directors and a majority of
the stockholders authorized to increase the number of shares
of common stock from 50,000,000 shares to 100,000,000 in
order to assure that a sufficient number of shares of common
stock are available for issuance to accommodate capital
raising and other opportunities involving the issuance of
common stock.  The increase in the authorized shares to
100,000,000 has been given retroactive effect in the balance
sheet.

In March 2008, a warrant to purchase 300,000 shares at $0.25
per share was exercised for $75,000.


                             F-24
<PAGE>


                    LIGHTWAVE LOGIC, INC.
        (FORMERLY THIRD-ORDER NANOTECHNOLOGIES, INC.)
                (A Development Stage Company)
                NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2007 AND 2006


NOTE 15 - SUBSEQUENT EVENTS (CONTINUED)

In March 2008, the Company extended the term of a Management
Agreement dated February 28, 2007, as amended on April 17,
2007 between the Company and Universal Capital Management,
Inc. for an additional one year period for a warrant to
purchase 400,000 shares of Lightwave Logic, Inc.'s common
stock at $0.01 per share.

In March 2008, the Company issued 100,000 shares of the
Company's common stock to legal counsel for services
rendered.






                             F-25
<PAGE>