Wednesday, August 16, 2023 12:58:48 PM
For background about my experiences with Lightwave and why I'm writing this, see THIS POST: https://investorshub.advfn.com/boards/read_msg.aspx?message_id=172611159
This is a post about red flags. Counter-arguments and posts about positive developments can be found elsewhere. In the face of much opposition I accurately predicted no 'mind blowing' ECOC last fall, no PDK by year end 2022, the company not being "on-track" as they said at the end of 2022, and the first commercial agreement being trumped up as more than it is with Polariton. I may not know the tech very well (no one here seems to as it is extremely complicated), but my position is there are numerous other ways to evaluate the company.
After a year of many questions, a lot of thought and research, and interactions with all kinds of viewpoints, here are the top 3 most concerning flags to me.
Each are fleshed out below in detail, with links for easy verification:
1. Credibility: Questionable Company Practices
2. Viability: Missing Evidence for Commercial Viability
3. Validation: Lack of Validation by the Marketplace
RED FLAG #1: CREDIBILITY: QUESTIONABLE COMPANY PRACTICES
History of Messaging re Commercialization
From 2008 through 2018 the company stated every year that they had an objective to commercialize their technology during that year. This is a HUGE RED FLAG given that during none of those years did they do so. It is very difficult to believe a company could continually miss yearly goals for that long of a time period. It is hard to believe it was not intentional, rather than continued poor planning. Either way it is a big blow to management credibility.
https://www.sec.gov/Archives/edgar/data/1325964/000094344007000568/sept07-10q.txt (page 22)
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.
https://www.sec.gov/Archives/edgar/data/1325964/000094344009000293/form10k2008.htm (page 48)
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 the Company’s path to revenue growth as we expand our activities and operations with the objective of commercializing our electro-optic plastic technology during the latter portion of 2009.
https://www.sec.gov/Archives/edgar/data/1325964/000094344010000254/lwgl2009final_10k.htm (page 35)
Our cash requirements are expected to increase at a rate consistent with the Company’s path to revenue growth as we expand our activities and operations with the objective of commercializing our electro-optic plastic technology during the latter portion of 2010.
https://www.sec.gov/Archives/edgar/data/1325964/000094344011000152/lwlg2010_10k.htm )[page 40)
Our cash requirements are expected to increase at a rate consistent with the Company’s path to revenue growth as we expand our activities and operations with the objective of commercializing our electro-optic polymer technology during the latter portion of 2011.
https://www.sec.gov/Archives/edgar/data/1325964/000094344012000284/lwlg123111_10k.htm (page 46)
Our cash requirements are expected to increase at a rate consistent with the Company’s path to revenue growth as we expand our activities and operations with the objective of commercializing our electro-optic polymer technology during 2012.
https://www.sec.gov/Archives/edgar/data/1325964/000094344013000360/lwlg123112_10k.htm (page 47)
We expect that we will incur approximately $3,000,000 of expenditures over the next 12 months. Our cash requirements are expected to increase at a rate consistent with the Company’s path to revenue growth as we expand our activities and operations with the objective of commercializing our electro-optic polymer technology during 2013.
https://www.sec.gov/Archives/edgar/data/1325964/000155335014000315/lwlg_10k.htm (page 43)
We expect that we will incur approximately $3,240,000 of expenditures over the next 12 months. Our cash requirements are expected to increase at a rate consistent with the Company’s path to revenue growth as we expand our activities and operations with the objective of commercializing our electro-optic polymer technology during 2014.
https://www.sec.gov/Archives/edgar/data/1325964/000155335015000254/lwlg_10k.htm (page 39)
We expect that we will incur approximately $3,500,000 of expenditures over the next 12 months. Our cash requirements are expected to increase at a rate consistent with the Company’s path to revenue growth as we expand our activities and operations with the objective of commercializing our electro-optic polymer technology during 2015.
https://www.sec.gov/Archives/edgar/data/1325964/000155335016001731/lwlg_10k.htm (page 39)
We expect that we will incur approximately $3,540,000 of expenditures over the next 12 months. Our cash requirements are expected to increase at a rate consistent with the Company’s path to revenue growth as we expand our activities and operations with the objective of commercializing our electro-optic polymer technology during 2016.
https://www.sec.gov/Archives/edgar/data/1325964/000155335017000281/lwlg_10k.htm (page 31)
We expect that we will incur approximately $3,960,000 of expenditures over the next 12 months. Our cash requirements are expected to increase at a rate consistent with the Company’s path to revenue growth as we expand our activities and operations with the objective of commercializing our electro-optic polymer technology during 2017.
https://www.sec.gov/Archives/edgar/data/1325964/000155335018000222/lwlg_10k.htm (page 41)
We expect that we will incur approximately $475,000 of expenditures over the next 12 months. Our cash requirements are expected to increase at a rate consistent with the Company’s path to revenue growth as we expand our activities and operations with the objective of commercializing our electro-optic polymer technology during 2018.
Sources of Funding:
After 15 years of private development by Fred Goetz, he took his company public via the OTC marketplace in 2004. Early funding came by way of individual investors in the public market. Beginning in 2011 most funding has been provided by Lincoln Park Capital. LPC sells their shares after they get them, so the retail investor picks up the tab. No links provided as they are easily found in the sec filings.
Companies on the verge of commercialization with large market potential are normally able to raise significant funds to launch their product via Venture Capital or equity investments from savvy "in the know" companies and individuals. Relying on private individuals in the public market and a short-term oriented lender such as Lincoln Park Capital after saying they were on the verge of commercialization was a possible red flag at the time.
The fact that they STILL are relying on Lincoln Park Capital while simultaneously predicting near term commercialization is also a red flag.
Given their annual claim of planning to commercialize from 2008 through 2018, and similar claims being reinstated by Dr Lebby at the 2023 Annual Shareholder Meeting, one must ask:
Have they been stringing investors along with misleading information re the proximity to commercialization all these years in order to keep the funding going? And now that they are claiming to have "commercial acceptance" by the industry, are they once again doing the same thing? Is it really a case of "this time it's different"?
Because LPC desires to fund at the lowest price possible and sell at the highest price possible, they benefit from price swings. Retail investors can't track their sales. Timing of company announcements, message board rumors and 'pumping' or 'bashing', shorting, etc.. are all possible mechanisms that could be employed to manipulate the price. I do not have evidence that is happening, but it could. There is one individual who arrived on the IHUB message board early in 2012 who has been steadfastly predicting commercialization every year since his arrival, and is the most prolific poster on the board, averaging 10 posts a day (in 2023) consisting of the same cut and paste info. The poster attempts to squash any contrary information as soon as it appears. Is this person a lone wolf or is there something more sinister going on? The possibility is something a cautious investor may want to keep in mind.
2021 Executive Bonuses
Mr. Marcelli, President and COO, and Dr Michael Lebby, CEO both were awarded a $2.6m bonuses. The reason given was as follows:
However, during 2021 the Compensation Committee considered certain financial, strategic and operational goals that were achieved by our Company during 2021, in addition to benchmark results against historical stock performance and the stock performance of peers to determine cash bonus compensation. Although the Compensation Committee does not utilize these factors as a component for executive compensation, the creation of sustainable shareholder value is important to the long-term interests of the shareholders and it was a one-time consideration for the determination of cash bonuses for our overall executive compensation program during 2021.
It is rare for a company to organically uplist to Nasdaq from the OTC. It requires a stock price of $4 and a solid financial position. Thanks to funding by LPC (which really is by faithful retail investors) the financial position was solid, but the stock had waffled between .50 and $2 for years and going into the 2021 ASM was at around $1.50.
At the ASM something happened that changed everything: Dr Lebby announced that the company was in foundries - ie semi-conductor fab companies. He said they were working on Process Development KIts (PDK) that would enable large semi-conductors to offer the devices with Lightwave Technology to data centers and that he expected their devices to become 'ubiquitous'. The stock went nuts, rocketing to over $12 in 6 weeks time. The continued excitement - fueled by a fully 5X increase in postings on the IHUB board and lots of social media buzz, enabled the company to ring the Nasdaq bell on September 1. WOW - a 3 months rally and they suddenly organically uplist to Nasdaq!
The red flag issues are these
1. The amounts paid are very high.$5.2m in bonuses for a company that has yet to prove they have a viable product is questionable. And shareholders - many who were very supportive of the company and still are, were not happy to see it:
KCC: Bonuses totaled about $400k a month for 2021. That’s half the burn rate.
Couldn’t wait till after a DEAL?!!!!!
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=168718166&txt2find=bonus
LOVELWLG: I have been giving themselves raises and bonuses for years now. It would be nice if they would complete a deal or generate revenue before getting a bonus. I'm ok with raises but what is the bonus for????
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=168720800&txt2find=bonus
Egidio77: I'm reading this as another indication that massive deals are already done and they are paying Lebby a CEO compensation comprabale to the value of Lightwave taking off this year and next.
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=168721224&txt2find=bonus
2. Tying bonuses to the stock price is not considered a good idea by many experts:
https://www.cooley.com/news/insight/2013/should-executive-comp-really-be-tied-to-stock-price The price increase was a direct response to positive messaging about working with foundries, and Dr Lebby's expectation of becoming ubiquitous - neither of which were actual ACHIEVEMENTS. To work with a foundry, you pay them. Price increases, contrary to a popular view, do not always reflect actual achievements, and in 2020-2021 penny stock trading volume soared by 20x as more individuals took up stock trading as a hobby--which meant a 'perfect' storm existed for exciting story or 'meme' situtations to push the stock price up, whether it was deserved or not. https://markets.businessinsider.com/news/stocks/penny-stock-trading-volume-soars-2000-amid-retail-trading-boom-2021-3-1030224239
3. The previous policy was to not award any bonuses while the company was still pre-revenue, and there was no guarantee whatsoever that working with a foundry would lead to any revenues in the future:
Cash bonuses are typically not included as part of our executive compensation program given that our Company is in the development stage.
The company had as one of it's goals a commercial deal by May 2022. None was announced.
EVEN IF the deal announced without any meaningful detail in May of 2023 is of some value, I don't see any justification for taking such large bonuses when they did. It looks greedy, and is therefore why it listed here as a red flag.
Questionable Director Compensation In 2022 the lowest director compensation was $459,800, which for all 5 included option awards of nearly $380,000. https://www.sec.gov/ix?doc=/Archives/edgar/data/1325964/000155335023000280/lwlg_14a.htm page 25.
This seems excessive for a pre-revenue company of Lightwave's size.
According to Investopedia,
The median compensation for members of private company boards of directors was $44,850 in 2021, according to a global study by Lodestone Global.
According to the company's 2021 proxy statement, Walmart’s compensation program for outside directors offers base compensation of a $175,000 annual stock grant and a $100,000 annual retainer.
Apple’s non-employee directors each receive approximately $250,000 worth of restricted stock units per year, which are granted at the annual shareholder meeting and vest on Feb. 1 of the following year. Non-employee directors also receive an annual cash retainer of $100,000.
Dr Lebby's Missed Goals
As shown in the first item the company has a long history of making and badly missing goals. It hasn't been one goal each year. They have led investors to expect all kinds of specific achievements, which typically are delayed and never seem to lead to commercialization. That's not to say they haven't made progress or done some impressive things. A world record using polymer chromophores is impressive. But, in the big picture, one wonders why they have had such a terrible track record.
For some, ALL activity Pre-Dr Lebby is irrelevant. Cautious investors may want to think that through carefully, as this didn't suddenly become a new company when Dr Lebby became CEO. In fact he had already been with the company - while it was making projections that it kept missing - as a director since August 2015. He became CEO in May, 2017. The 10k for 2015, 2016, 2017, and 2018 ALL retained the wording about plans to commercialize their product that same year. The last 2 were when Dr Lebby was CEO.
Nevertheless people tend to give the company a pass, and Dr. Lebby a pass for such "oversights". They say "this time it will be different". Well, let's see:
Dr Lebby laid out the following goals at the 2021 ASM - the one that got investors very excited because he talked about working with foundries:
1. PolymerPlus Chips 70GH < 3V -> tested silicon photonic chips. In 2022 he confirmed they have tested some chips
2. Packaged PolymerPlus Prototypes -> packaged prototypes for sampling: In 2022 he said "in progress". That sounds more like a MISS than a HIT.
3. Qualified Foundry and Packaging Partners -> Establish design rules, freeze process. In 2022 he said "we have qualified partners". What? Did they establish design freeze process or not? I assume they had qualified partners before the year began..So sounds like a possible MISS.
4. Reliability, stability, and hermeticity testing -> Perform QA and reliability testing. In 2022 he said "we are continually testing".
5. Qualification of materials/chips -> QA and reliability testing results. In 2022 he said "QA and reliability testing ongoing". That doesn't sound like "results". MISS.
6. Live traffic trials in customer system -> Reliability qualification. In 2022 he said "we are engaged with customers". This is evasive. It sounds like a MISS.
7. Commercial agreement with customer -> Agreement to supply product. In 2022 he said "in discussion". MISS
8. Qualification for approved vendor list (AVL) -> Addition to customers AVL. In 2022 he said "in discussion". MISS.
At the ASM Dr Lebby admitted to missing the last 2 goals - the most important one being a commercial aggrement. HOWEVER, it appears the only ones they HIT were #1 and #4, with #4 being very easy to meet. ALL of others either were definitely missed or sound much like a MISS. So, their track record with foundries in the first 12 months was not very successful.
2021 Goals link: https://youtu.be/rcY5vhsWHKo 23:46 mark
2022 Review of 2021 Goals link: https://youtu.be/wRLtxYwX9Gg 41:15 mark
Dr Lebby laid out these goals during ASM 2022 for the next 12 months:
1. Polymer Plus Prototypes -> Beta/Qualification plan
2. Polymer Slot Prototypes -> Beta/Qualification plan
3. Establish deal with partner -> Announcement of partner
4. Establish deal with foundry -> Announcement of partner
5. Qualification of product -> Published data/specification
6. Licensing of polymers -> 1 licensee
7. Technology transfer -> 1 tech transfer to manufacturing
So, how well did they do? Dr Lebby decided to NOT REVIEW THE 12 MONTH GOALS as 2023 ASM!!!!! Who does that?
Investors had been waiting for 12 months to find out how much the work with Foundries had progressed, and while Dr Lebby spent a great deal of time during the 2023 ASM discussing how well their technology fits into Foundries, and even estimating a small commercial rollout sometime in 2024, he completely side-stepped a review. He provided a reason: They had attained commercial acceptance.
This reason given is IMO highly suspect, and I will discuss it below. Even if it is correct, it doesn't suddenly erase the prior year's goals...
Here's what seems most true:
The ONLY goal above which the company has unequivocably confirmed is part of #3, and all of #6 - they announced a deal with a partner to license their polymer to that customer. Since none of the others have been clearly confirmed the default conclusion is that they missed them all. Re #5 - they referenced a "data sheet" during the ASM with various specificiation on it, but they didn't provide any detail on it or indicate that it is qualified. Regarding the deal they announced, it was as vague as possible and may investors now believe that it had nothing to do with the foundries they have ben working with. Rather it is believed by some - and myself - to be with another small company looking to innovate products - Polariton. That's not exactly the kind of partner investors thought was meant when the goals were laid out in May of 2022.
We KNOW some of the goals were missed so the reason of attaining commercial acceptance doesn't automatically remove them, or their value. The final conclusion is that nearly all of the 2022 goals were missed, especially as they pertain to Foundries they are or were working with.
Additional goals were indicated in a slide last December:
As shown, Polymer Slot Initial Chip Scale Packaging, Reliability Results, and ALD results were to occur in 1H23, and LIfetime results in 2H23. Polymer Plus ALD were to occur in 1H23, and Lifetime and Package results in 2H23. NONE of these have been confirmed to date.
And in the December 2022 shareholder letter:
Further, we are advancing our poling techniques and processes toward full wafer poling. We are evaluating partners for wafer-based fully automated poling that will be ideal for high-volume production.
One must conclude that Dr Lebby's ability to set and meet goals has been sub-par in the last couple of years. This brings into question his credibility re setting and achieving goals - especially as they pertain to working with the Foundries. He himself has indicated that the company is very much at the mercy of the Foundry -- they do the work when they do the work..Normally timelines are 6-9 months, so after 2 years it makes one wonder much one can rely on Dr Lebby's future goals. But it also causes one to ask "how close are they?".
2022 Goals link: https://youtu.be/wRLtxYwX9Gg 42:24 mark
2022 Goals and the Vague Commercial Agreement
The 2021 and 2022 goals are primarily focused on achievements working with Foundries.
On the day of 2023 ASM, they announce a commercial agreement for supply materials. The PR doesn't say it is related to the work they are doing with the Foundries. https://www.otcmarkets.com/stock/LWLG/news/story?e&id=2538954
If the agreement had been with a partner who would be utilizing one of these foundries, that means they have had achieved all of their goals with that foundry, or that it was anticipated by the partner that they would be doing so at some time in the future. However, when given the opportunity Dr Lebby never validated any specific achievements with foundries - re PDK finalization, scalability, or even general - ready for commercialization. NONE of his comments were about being commercially ready. They were about having made progress with the foundries during the year. Some were not very positive sounding:
I'll be honest with you, working with foundries is, yes, they love using the technology, and it's not difficult for them to utilize our designs because we are compatible with silicon processing. But they're doing the fabrication and not us. It takes time to make sure that they're following the recipes correctly. But what I can say is that the chips we're getting back from the foundries are performing really well. We've been very happy with that progress.
I will also say that some foundries are better than others, and you would expect that anyway. Not all foundries are the same. Not all foundries have the same type of teams and take the same approach. There is some variability.
From the transcript found here: https://investorshub.advfn.com/boards/read_msg.aspx?message_id=172010080&txt2find=transcript
"the chips we're getting back from foundries" That doesn't sound like any different than the message 9 months ago. What about qualification? PDK finalizaion? High volume production trials? Proof of scalability? Number of units? NONE Of that.
The conclusion is clear: NONE OF THE FOUNDRIES ARE READY FOR COMMERCIALIZATION. For those that dispute this, here's an exact quote where he admits this:
But I'm not going to go into the number of foundries like last year, because I think it's much more important now as we're much closer to commercialization.
"much closer" than last year..who really knows how close that is, but it doesn't matter. They are NOT ready.
The industry therefore cannot be seen as giving their blessing, or "accepting" Lightwave's solution. The "industry" is the large manufacturers, transceiver companies, technology partners, and end users. If the Foundries aren't ready for commercialization, then the "industry" certainly isn't anywhere close.
WHY IS THIS AN ISSUE?
Because commercial acceptance is the reason Dr Lebby gave for not addressing the prior year goals or setting new goals, particularly with regard to progress with Foundries:
Unidentified Company Representative
One other question on the presentation. You didn't really cover anything as far as the goals and—previous goals and forward goals for next year. One thing that comes to mind is the tech transfer agreement. Can you tell us what is left to finalize the PDK and get a tech transfer agreement? You had spoken about joint PRs at some point. Can you give us some indication as to where we stand and what might be needed still in order to get the finalization of a PDK and what goals we might have for next year?
Michael Lebby
Last year and the year before, I gave yearly goals. I think that's okay if you're pre-commercial. But what we gave here is we gave more of a licensing roadmap. That's more what you would expect from a commercial company. Doing yearly goals, I think, should step aside to real commercial goals.
And earlier he said re the PR:
The impact of this is commercial market acceptance. That's really the impact. We have to look at what's really important with the press release this morning. We made some commercial traction. The market accepts what we have
As I write this on Aug 15, 2023 - 10 weeks after the commercial announcement, there is not yet a purchase request for material. There is no sign that the agreement is evidence of market acceptance, and we know the Foundries aren't yet commercially ready.
This brings into question Dr Lebby's decision to not review the Foundry goals and set new ones. Instead of using the vague commercial PR as proof of market acceptance
Could there be another, much simpler reason for Dr Lebby's silence and evasiveness? Could it be that a review of goals would reveal that they really didn't achieve much progress with foundries?
Notice too the following:In the past 2 years Dr Lebby went through pre-written questions and answers in the Investors section:
In 2021 he covered 14 questions, taking 3 1/2 minutes beginning at minute mark 24:07
In 2022 he covered 26 questions, taking 8 minutes 47 seconds, beginning at 44:10
In 2023 he covered ZERO pre-written questions.
No-one really knows how close or far away commercialization with foundries is, and this is critical because without that there will be no ubiquity.
Overcoming technical hurdles, cost hurdles, and being able to ramp up to high volume (scaling) all MUST happen in order to be viable commercially. Back in 2017 Dr Lebby showed a graph with over 20 major roadblocks to commercial viability. https://youtu.be/Msun9G-ujwg 42 minute mark. How many of those are still remaining, unsolved, that Lightwave MUST solve before true industry/market acceptance? What did Dr Lebby mean when he said this about scaling, when asked at this year's ASM?:
In terms of scaling, we are much more comfortable this year with scaling than we were last year
He won't tell us, he will no longer be accountable to us.
What's the upshot re Foundries and their true proximity to commercialization? Dr Lebby is basically saying "Trust Me we got this.". Why should we?: Given his rather large misses on Foundry Goals in 2021, apparent large misses in 2022, his claim to commercial acceptance in the absence of any corroborating evidence, his sudden decision to clam up entirely regarding where things stand with Foundry work, his stating at best things are progressing in certain ways and that they are more comfortable with things like scaling than they were last year (what does that mean?), while simultaneously being dependent on them to act only when they want to, a 12-18 month of 'kitchen recipe" issues - given all of these things - knowing that each foundry cycle takes 6-9 months, should we Trust that they are on the verge of being on the verge of commercial success, much less of being commercially viable at all?
More Strange Miscommunications The December 2022 shareholder letter said this:
We have intensified our reliability testing and expanded our laboratory space by approximately 9,000 square feet.
A recent PR contained this quote of Dr Lebby:
Dr. Michael Lebby, Chairman and Chief Executive Officer of Lightwave Logic, commented: "I am excited to announce the issuance of this exciting new world PCT patent that addresses poling, poling efficiency, and stability of our commercial grade electro-optic materials for foundry based modulator fabrication.
These are just 2 more recent examples that at the least show Dr Lebby over-promoting the company developments in ways that are clearly misleading.
RED FLAG #1 CONCLUSION:
These many examples for Red Flag #1 all demonstrate questionable practices the company has engaged in since it became a public company. Significantly, a large percentage of them have occurred under Dr Lebby's watch. These in aggregate raise substantial concerns about the competency and/or the credibility of those running the company.
RED FLAG #2 VIABILITY: MISSING EVIDENCE FOR COMMERCIAL VIABILITY
It is very difficult to know how close they really are to being able to produce any kind of device for high volume sales. As noted in the Red Flag #1 section, the company has become significantly more secretive while stating they are commercially ready and have commercial acceptance by the market. In addition at the ASM they included device sales estimates they say are obtainable in the coming years.
But we do have some clues:
No PDK incorporating both front and back end, with any Foundry
The company has yet to say they have finalized PDKs in any Foundry.
Scaling Not Validated
As shown in Red Flag #1, Dr Lebby when asked about scaling ability, simply said
In terms of scaling, we are much more comfortable this year with scaling than we were last year
Hodge-Podge Figure of Merit Specifications
Lightwave has announced some exciting and impressive figures - 'meriting' notice as quality results, with regard to speed and power usage, in their work with Polariton: https://www.prnewswire.com/news-releases/lightwave-logic-and-polariton-technologies-announce-world-class-figure-of-merit-for-plasmonic-polymer-optical-modulators-301701474.html
Silorix, a Lightwave partner, has announced meeting specifications across the board for their devices using Lightwave technology. https://youtu.be/Lz4pEiVi5dw beginning at the 5 minute mark.
HOWEVER, he says this:
much of those things we wanted to achieve, we did achieve. NOT ALL IN ONE DEVICE
SO, without knowing how well they can scale, or how good their data numbers (specs) are in a given percentage of devices, there is no way to know if they are viable or not.
No Verification of Production Devices being tested by potential customers
Some have claimed the company has said they have 5 customers who are in "Production Trials". 2 Evidences have been given:
First, this quote from the March 2, 2023 Corporate Update:
This expansion of our IP moat, paired with our acquisition of the mission-critical IP assets of Chromosol Ltd (UK) to strengthen foundry PDK design capabilities with extremely low temperature ALD Processes, is a part of our ability to advance initial production trials with our foundry partners and secure our first licensing agreements in the near-term.
A "production trial" simply means they have produced some chips. It doesn't mean it is for any specific end user. This is not surprising. There is so much more needed to put out a viable commercial product. Of course a foundry is going to 'produce' some units in trial runs in order to work on the various hurdles involved.
Some think it means with end customers, and point to the 'funnel slide' in the 2023 ASM:
the funnel showing that LWLG is in late stage negotiations and running Production trials with GREATER THAN FIVE companies
The reality is the slide says ">5 leads engaged including trial runs of technology."
First, it doesn't say "Production trials". Second, it doesn't say the trial runs are with all 5 -- it could mean they are engaged in some kind of relationship which for 2 of them includes some kind of trial run.
Another argument is that since the company previously indicated they had poled on over 1000 devices, and typically 1000 devices are run at once for Production Trials, that the company in fact had run production trials with that many devices.
It is possible that's what it means, but it is also possible that since they have been testing poling for years - trying and trying to get it to work, they may well have poled over 1000 devices over time straight out of their own lab. Given the timing of the slide mentioning that (in Sep 2022), since Dr Lebby was telling us about the "kitchen recipe" problem at that same time, it seems unlikely that they had gotten that far with foundries by then.
Packaged modulators testing
https://youtu.be/sphK5HVDWvA minute 30 A respected poster has suggested the thermal testing graph labeled "packaged parts aging test" is on external foundry produced devices, and that this is a sign that they had achieved "initial chip scale production" goal in the December 2022 slide, and were getting the final result via a transceiver partner. That is possible, but all the company has confirmed is that it is on polymer modulators, and that company polymer modulators are made in foundries..yet we know they have in-house capability to make polymer modulators...in any case, it could be on the Polymer Stack modulators, which this same respected poster has posted he believes will be first to market. Those are stand alone with a far smaller target market, and are not the focus of the foundry work with Polymer Plus and Polymer Stack. If the Polymer Stack is first to market, as the poster believes, why wouldn't those also be packaged and tested first? This poster refuses to address this question.
In any case, EVEN IF they are getting some packaged results on Polymer Slot or Plus, EVEN IF some customers are even testing those results - if the scaling just isn't there and the specifications still are too low, it is of little assurance. Some posters say "we have nothing until we have everything". This is true, as is "we have nothing until we can have a quality product to produce at quantity", which still may be years away if ever.
The same respected poster above said that they should get to 2000 hours of thermal testing by what would be sometime in Aug or Sep of 2023, so perhaps we will get some input at that time...but EVEN THEN without some indication of how well devices meet specs and how far along they are with scaling, we still won't know if any large orders are likely or just a pipe dream at this point.
Expansion - No Hurry The company has over $25m for nearly a year. IF they really were on the verge of being able to commercialize their work with Foundries it is hard to understand why they would wait 8 months for the expansion space to become available, with that kind of cash on hand, and funding in place for more.
Dr Lebby TOLD US what the expansion would be used for
Some of the things that we're going to be doing...But this is what is going to be useful. Production device test and evaluation, production reliability, laser characterization, SCM analysis and a big area of expansion of our chemical synthesis production line.
No Announcement of a Big Partner Despite it being a stated goal of the company to actually NAME their deal and foundry partners, none have been named. Secrecy for competitive reasons has been mentioned as a possible reason, but it was a stated goal and it hasn't happened.
I believe, as do perhaps the marjority of investors, that the commercial announcement was with Polariton This is for a simple reason: Anyone can determine from Polariton's website that they are offering products now, and that Lightwave is supplying some of the material - that is Lightwave is a commercial partner of Polariton.
It is quite a stretch to think that Lightwave after 15 years of first announcing their intention to offer a commercial product in 2008, they finally commercialized with a first entity and then within just a few weeks they commercialized separately with Polariton, without issuing a press release announcing a second agreement with Polariton. Why would a Polariton agreement be a secret? There is no good reason commercially. But there is a VERY GOOD reason in terms of shareholder communications: A Polariton agreement is not seen to be anything with near term volume potential like a Foundry agreement would be. Shareholders at ASM were led to believe that Foundry commercialism was near because of the PR that day, as if one is related to the other. But since they aren't, it further suggests the Foundry work has quite a ways to go. I see the last minute announcement as a desperate attempt to mislead investors re their true status with Foundries via a bait and switch.
RED FLAG #2 CONCLUSION
Despite very strong attempts by the company to lead investors to believe the company is on the verge of ubiquity due to near term commercialization by Foundries, there is little evidence that the technology is ready. In reality, what we have been told can just as easily be construed as an indication that while they have made progress, they are nowhere close to having a scaleable, commercially viable product to offer via one of the Foundries they have been working with in the last couple of years.
RED FLAG #3: VALIDATION: LACK OF VALIDATION BY THE MARKETPLACE
No analysts
Dr Lebby said in the recent ASM:
We will get research analyst coverage. I just can't tell you exactly when. But what I can say is that there's at least a half dozen people watching us really closely that I'm personally interacting with.
No analysts coverage. They don't just do this when the company is ready. They do it when they think they've seen enough to warrant an opinion. They do it after the company they work for has bought shares or sold them short based on their findings. The fact that there aren't any means at the least that no analyst has found the company to be a compelling offer at the price the stock has been at - ever.
No large individual investors
Big money finds opportunities early. There are no billionaires buying in here. Andy Bechtolsheim is worth $10 billion. He is a very intelligent scientist, and is CEO of Arista, which supplies transceivers to data centers. He has met one on one with Dr Lebby, and he is very interested in the future needs of the industry. A 5% ownership position in Lightwave would be a modest investment for him, but neither he, his company, or his billionaire friends have taken a stake. He said at the 2023 OFC that he doesn't yet think the technology has been proven to be reliable and if it is it won't be in production before 2026. There may well be a few individuals in the photonics area with shares, but no one has a 5% stake.
No known large actively managed institutions
While it is true that Vanguard and Blackrock own a significant percentage of Lightwave shares, the percentage is negligible to them (less than 1/10 or 1% of their own holdings of thousands of companies), and it isn't because they have analyzed the company because these are not actively managed funds. Of the over 200 institutions reporting NONE are large and actively managed despite the company making presentations continually year after year. That is telling.
Limited smart retail
The science involved is VERY complicated. There are no retail investors who understand all of the nuances, and the vast majority barely understand even the most basic information. The retail investors who share ideas on forums are a very low information group. Unfortunately, this makes then vulnerable to whatever positive speculations they prefer, not realizing how unrealistic they are. As mentioned above, one poster named Proto posts long cut and paste info about 10 times every day that is ALWAYS of the most positive nature possible, as a way to try and squash any negative sentiments and to dominate the board presumably to influence newbies. It is a simple matter for someone to show how distorted his positions really are. Many longs even find him to be a detriment because he has no credibiity remaining, after announcing an imminent deal nearly every day for the last 10 years. He looks like a paid pumper. I did take 5 minutes one morning recently to show how easy it is to expose the many flaws in one of his posts: https://investorshub.advfn.com/boards/read_msg.aspx?message_id=172562664
No tech company investments
Not a single tech company has invested in the company. This would not be shocking for a very early stage company with unproven technology, but given their claim to being on the verge of turning the industry upside down and becoming ubiquitous and after discussing and demonstrating their technology for years but dozens of companies, this simple fact is difficult to square. Way back at the 2017 ASM this was confirmed, and here we are 6 years later, still waiting:
the potential there with these partners that they would then want to start investing, so that you don't have to go to banks, you don't have to go to Lincoln Park, or whoever. But, a packaged device is absolutely required, so once we get to that point then Michael can unleash his fury on all of his buddies that exist in the worldwide market..and try to leverage to help finance the company to go to the next level
No insider purchases
It is unlikely that directors has been unable to make insider purchases for extended periods of time, yet in the last 10 years there have been none other than an odd 1,000 share purchase by Dr Lebby after he received his $2.6m cash bonus for 2021. If the wild projections of 10 or even 50x the current stock price within the next 2-4 years is even close one would expect insiders to buy up all the shares they can at market. But since those have to be reported, we know that isn't happening.
The large short position
There is a hefty short position in the stock. No one seems to know who it is comprised of, how it may be churning, etc.. Generally short money is considered "smart", but it's not difficult to see why shorts would be attracted to a stock like LIghtwave: $800 million valuation with no history of revenues and a very murky pathway to possible commercialization at this point in time. Many longs appear to feel persecuted by what they think is a collusion effort by shorts to push the stock down every time it rises. Some think it's a volatility game by institutions colluding with shorts. There is no evidence for that. This writer believes in supply and demand, and the stock movements have coincided very closely with retail sentiment regarding company progress.
RED FLAG #3 CONCLUSION
Almost NONE of the positive signs are there that normally exist when a stock price rise is on the near term horizon, or when a company has proven out their abilities and competitive position to an extent that large entities would be willing to take a large stake in the company. No one seems interested. It defies logic to think that individual retail that knows almost nothing about the science is smarter than experts who know far more about it. The lack of market validation is significant and for most thinking individuals the relyance on silly conspiracies that dominates the thinking of many of the current shareholders (ie passive funds working in collusion with shorts so they can yank out as many shares as possible from retailer's hands), is actually yet another red flag that flies in the face of the reality that those who should be interested if there is really something there, just aren't.
FINAL SUMMARY
I believe the company has some very strong scientists who are working really hard, but that the history proves this is a very large mountain to climb. Unfortunately, there is a plethora of evidence that brings into question the credibility of those at the top of the company, and the true status of the technology within the industry as far as meaningful commercialization is concerned. Therefore my view is that the company is continuing to put on the best face they can and make things look far better than they really are, which whether it is intentional or not, is very unfriendly to shareholders. The end result is a "FAKE IT TILL YOU MAKE IT" approach. And the lack of market validation by numerous entities that normally would be expected to give it validation serves to confirm that viewpoint.
I fully expect another year to go by with no meaningful announcements, and just more scratching of heads by retail shareholders who will continue to speculate about what the company is actual doing and why there is no there, there.
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