Lightwave Logic, Inc. (OTCMKTS:LWLG) Tanks as Shareholders Lose their Patience

Lightwave Logic, Inc. (OTCMKTS:LWLG) is still a development stage company and as such, a potential investment in its stock can be very risky – a point hammered home by Friday’s performance. Just six and a half hours of intense trading was enough for the ticker to wipe out around 19% of its value while recording a trading volume nearly twelve times higher than the three-month average. So, what seems to be the problem?

A conference call was held on Thursday afternoon in which the management team wanted to update their shareholders on the developments around the company. Having listened through a replay which is available on LWLG‘s website, we can see that investors aren’t really happy with the way things are going.

Part of the problem lies with the time frame. Ever since the beginning, LWLG was viewed by most people as a long term investment. The business plan and the materials and products that they’re developing have certainly captured the imagination of quite a lot of investors but it’s been nearly a decade since they started and the lack of revenues is resulting in some frustrated shareholders.

What’s more, not everything is going according to plan. They tried to battle the lack of significant sales with an acquisition of a smaller company that has already gone through the development stage. The management team did a lot of due diligence, sifted through many merger candidates, picked one, and made an offer. Unfortunately, it got rejected.

To top it all off, the people running the company admitted that they have been a touch too optimistic with their revenue projections. Thomas Zelibor, LWLG‘s CEO, said in a previous conference call that the company should generate some sales by the end of the year but from the latest update, we learn that this isn’t going to happen. A small order is expected to be received during the first quarter of 2014, but once again, there can be no guarantees.

Predictably, some angry shareholders called in to ask for a specific deadline for the start of the commercialization process, but the management team wasn’t able to give one which, we’re sure, isn’t helping boost investors’ confidence.

On the bright side, LWLG is easily distinguishable from other development stage enterprises by the comfort of a relatively solid balance sheet. Here’s a quick summary of the most important figures as of September 30:

• cash: $2.6 million
• total assets: $3.6 million
• total liabilities: $383 thousand
• quarterly net loss: $997 thousand

We read in the 10-Q that the cash reserves should get them through to October 2014, but even if they manage to burn through them faster, they have a securities purchase agreement to sell up to $20 million worth of common stock to Lincoln Park Capital Fund which means that money shouldn’t really be a problem.

Another plus point is the lack of paid promotions. It’s rare to see a penny stock with no alerts in our database and it’s even more astonishing considering the interesting and potentially lucrative business plan. Hopefully, LWLG will manage to dodge the paid pumpers in the future as well since, as the charts for Minerco Resources Inc (OTCMKTS:MINE) and Makism 3D Corp (OTCBB:MDDD) show, such practices often result in some horrific drops.

LWLG set out to develop a really interesting piece of technology and if they manage to finish off what they started, they could potentially make a breakthrough. Forward-looking statements however, raise the expectations too high and some of the investors feel misled by the management team. If the people running LWLG fail to stick to their plan in the future, drops such as the one witnessed on Friday can be expected which is why, carefully considering the risks of a potential investment is absolutely crucial.