Lightwave Logic, Inc. (LWLG), the telecommunications company using organic electro-optic polymer systems for applications in high-speed fiber-optic data communications, has recently surprised investors with the appointment of a new CEO, and achieving bandwidth suitable for 25 Gbps data rates. Traders celebrated the news by pushing up the company's shares from $0.8 to $1.05 in the last ten days. Additionally, share volume has been rather significant. Hence, we decided that our subscribers would appreciate a piece about the company. Before we assess the technology, take a look at the recent share price movements:SourceBusiness History and TechnologyThe business entity is very old. It was founded on June 24, 1997 and has been growing via acquisitions since then. The most relevant transaction was the acquisition of PSI-TEC Corp. in 2014. This target was founded by Dr. Frederick J. Goetz in 1991 and was incorporated in 1991. Hence, it is another old company. The company acquired finally the name Lightwave Logic, Inc. in 2008. According to the annual report, the company is headquartered in Longmont, Colorado.The company runs two business segments . It has a materials development segment with operations in Newark, Delaware, and photonic device design and development segment located in the Colorado Office.In its materials segment proprietary, the company develops electro-optic polymers, designed to perform, and to be cheaper than the materials and devices used in fiber-optic ground, wireless and satellite communication networks. The company has 25 patents and 3 patent-pending designs that are already registered in the balance sheet as Intangible Assets; $667,000 as of December 31, 2016.The following is a picture of different devices that use this materials, its uses and potential customers:SourceWhat it the strategy?The company stated in its annual report that the main objective is to use the valuable patents owned to develop the "future generations of optical devices, modules, subsystems and systems that we will develop or potentially out-license to electro-optic device manufacturers." What does it mean, and what is our take? In our opinion, the company is already very satisfied with the patents obtained in the last 10 years and is not interested in buying new ones. If the managers believe that this proprietary knowledge is enough for sustaining the future growth of the company, in our opinion, its technology should be quite valuable and it may be targeted by bigger companies. Think about it; the company is quite small and has a market cap of just $73 million. It would not be the first time that a company like this is acquired for just the intangible assets. In our opinion, if potential clients, such as Netflix or IBM, start requiring faster technologies, the company will become a target. Just to be clear here, if the company is bought out, shareholders will make decent returns.Recent DevelopmentsNew CEO and New technologyThe most recent news received by the market was the appointment of a new CEO, Michael Lebby. The new elected business executive sent a letter to investors , wherein the company's strategy was restated. This is what we believe investors appreciate the most:
"For 2017, our development route is now clear. We need to scale the performance of the ridge waveguide modulator to a point where customers will ask to evaluate the device. As we noted in our December 27, 2016 press release, one of the major opportunities over the next decade is the 100Gbps node which is composed of 4 channels, each operating at 25Gbps)—and that is where we are focusing our development efforts. Our press release last week reported that we now have seen high speed performance from our modulator to enable 100Gbps solutions in the market place, which is extremely exciting for us. " Source
In addition, the CEO made a comment about the supply and demand for the 25 Gbps devices that the company develops.
"At the start of 2017, I took on the challenge to explore the market trends in the datacom and telecom market segments, and produced internal data to forecast which markets would be attractive to us over the next decade. It quickly became evident that market demand for 100Gbps devices (using 25Gbps devices) is explosive with demand exceeding supply." Source
Regarding these 25 Gbps devices, the market got very excited when they got to know that the company was able to produce such data rates. The market reaction was already mentioned in the beginning of the article. The most relevant words of the previous CEO when the new milestone was announced were:
"We expect that the 25Gbps device will generate significant industry attention as we squarely address powerful, cost-effective miniaturized solutions for both today's 100Gbps, and future 400Gbps higher performance markets." Source
In our opinion, in the long run, this technology will be necessary and demanded if telecommunications operators require higher speed at low price. Time will tell whether we are right.Balance SheetLike other very old R&D telecommunications companies, the most important part of the balance sheet is the amount of intangible assets and the cash on hand:Period Ending12/31/201612/31/201512/31/2014Current AssetsCash And Cash Equivalents1,956.8443,730.7053,165.94Short Term Investments---Net Receivables---Inventory---Other Current Assets136.942264.491128.227Total Current Assets2,093.7863,995.1963,294.167Long Term Investments---Property Plant and Equipment425.65495.062375.227Goodwill---Intangible Assets667.972619.767610.029Accumulated Amortization---Other Assets---Deferred Long Term Asset Charges---Total Assets3,187.4085,110.0254,279.423SourceAdditionally, we appreciate in this company that the liabilities are quite small and they are with other companies, not with banks . Have a look:Current LiabilitiesAccounts Payable127.886102.957221.841Short/Current Long Term Debt---Other Current Liabilities---Total Current Liabilities127.886102.957221.841Long Term Debt---Other Liabilities---Deferred Long Term Liability Charges---Minority Interest---Negative Goodwill---Total Liabilities127.886102.957221.841SourceThe amount of shares outstanding seems large. Hence, we believe that the company should decrease this amount to make the company more interesting for new investors.Institutional InsidersWe did not really find a lot of institutional funds in this company, but we did find insider activity. There is one director, who has been buying a large amount of shares very recently. Have a look:InsiderTransactionTypeValueDateShares
Acquisition (Non Open Market) at $0.69 per share.Direct1,992Apr 7, 20172,888
Acquisition (Non Open Market) at $0.68 per share.Direct1,999Mar 8, 20172,941
Acquisition (Non Open Market) at $0.78 per share.Direct2,003Feb 8, 20172,569
Acquisition (Non Open Market) at $0.58 per share.Direct1,989Jan 6, 20173,430
Acquisition (Non Open Market) at $0.59 per share.Direct1,989Dec 9, 20163,372
Acquisition (Non Open Market) at $0.63 per share.Direct2,004Nov 9, 20163,182SourceIt's always a positive sign to see a CEO buying shares of his own company, regardless of the amount.ConclusionLWLG is making interesting announcements about its new technology that seem to interest investors. The news about the new 25 Gbps devices saw a big jump in LWLG's share price. Additionally, we made an assessment of the firm and found out some positive facts. First, the company has a large amount of patents that may interest other companies. Furthermore, the CEO has been buying shares in the market. Conversely, we believe that the amount of shares outstanding may not help bring new shareholders to the firm. In any case, there is a lot to like in this company. We will be updating our subscribers as soon as we know more. For the latest updates on LWLG, sign up below!Disclosure: We have no position in LWLG and have not been compensated for this article.
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