Tuesday, October 30, 2007

Pickle Skeptics: Is Cyberlux Corp. (CYBL.OB) a real deal?

The penny stocks underworld is abuzz with speculations about Cyberlux (CYBL.OB), a manufacturer of LED lights for both consumer and military applications. Let's take a look at the chart.




What a year it has been.

After giving the chart a brief stare, one may speculate that something positive happened around September. In an ideal world, this positive spike would indicate financial health. Yes, it's easy to get blinded by hindsight, but the fact that a company deep in debt -- 2.5 million dollars deep, to be precise -- has been completely pardoned by compassionate investors following the news of the company and Boeing's BOA (Basic Ordering Agreement) is, well, amusing.

Show me the money.

We all love Boeing. Boeing is spectacular. But a BOA is not a purchase order; it is a contract that outlines terms of sale in case Boeing decides to buy. Boeing did like Cyberlux's price, that's for sure, but so far the only sale we've seen is the one made by the National Guard Bureau for $313,004. Even so, we can't figure out the net profit.

Cyberlux's Products

Cyberlux manufactures LED lights, which are steadily gaining popularity due to the advantages they have over conventional lights. These long-life, color-correct, precisely focused, and energy efficient LED lights are a little too expensive for the consumer market, but they are penetrating into commercial sectors that use expensive machinery (e.g. machine vision systems), where even the price of LEDs is just a fraction of the overall cost.

There are plenty of manufacturers that produce LEDs in this world. In fact, there are too many. Cyberlux will tell you that they have a breakthrough product, but the complexities involved in producing LED key-chain lights are mid-tech at best; most of them are produced by Chinese factories.

However, Cyberlux did acquire two patent pending technologies developed at Rensselaer Polytechnic Institute and University of California Santa Barbara a couple months ago. According to a company-sponsored independent study, they have a combined value of $10 million. It is uncertain if any of these technologies are being put to use in the current line of products.

Also, let's not be misguided; Cyberlux has nothing to do with the aerospace industry. Boeing's involvement in Secure Border Initiative (SBInet) is analogous to the role of a general contractor.

Listen to what we mean, not what we say.

It seems all too clear that we won't see significant profit from Cyberlux for at least another year or so. If by chance Boeing really decides to put in the maximum order of 500 units as outlined in the BOA, the deal would be worth $12,628,000. Guesstimating the net profit at 10%, it could be worth 1.25 million dollars, or half the current debt. What will happen to the stock then? No wonder why there are so many speculations.

Verdict

Cyberlux hasn't proven anything to the investors yet, but if news of Boeing's purchase is forthcoming, it could inflate the price of the stock dramatically. Still, we may not see any news at all. If so, the shareholders are in for a big trouble; the company doesn't have enough cash to sustain itself beyond 2008. One positive factor is that UTEK Corporation (UTEK) currently owns 10% stake in the company.

Pickle Stocks recommends CYBL.OB for day traders only. Readers who want to invest in Cyberlux as a long term investment should wait for the price to fall as low as possible (in reality, $0.005 is the most you should pay right now).

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