Cyberlux Corporation President/CEO Mark D. Schmidt's letter to
shareholders:
The text of the letter follows below:
September 23, 2009
Dear Fellow Cyberlux Shareholder:
I’m writing you a little more than 15 months after I was named
Chief Executive Officer of Cyberlux Corporation. Let me first say
thank you for your continued support and patience as we continue to
build Cyberlux into the company we all believe it can be. Without
question, this has been the most challenging, most difficult year
I’ve experienced in my 20 year business career. The financial
market collapse of the past year has caused all investors, no
matter what the quality of the security or the investment risk
involved, to re-evaluate their investment strategies and their
allocation of capital. Cyberlux Corporation is thankful to continue
to be an investment selection for you.
From the macro-economic factors such as the performance of the
capital markets to the micro-economic reality of the restricted
availability of small business credit, Cyberlux, like many small
companies, has had to focus in the last year on its core business
opportunities and the long-term growth and prosperity of the
Company, sometimes at the expense of the Company’s short-term
objectives.
In this business environment, Cyberlux Management has focused
the company on our patented LED technology, our proprietary
knowledge and our product development and manufacturing capability.
In the existing Department of Defense (DoD) and Homeland
Security/First Responder channels, Management has significantly
changed our model from competing as the prime contractor for DoD
contracts. In January, we transformed our Go-to-Market strategy
from competing as a prime contractor to being the supplier who
supports existing prime contractors and existing contracts. In
addition, Management has also significantly changed our retail
product strategy to become the product innovator and supplier to
large existing retail marketing companies that have the scale and
capability to bring a product to market world-wide.
These Go-to-Market strategy changes are significant and have
far-reaching implications for how Cyberlux Corporation creates
value in the marketplace, how the business scales and grows, how
brand equity is created and how the value in the underlying equity
of the company grows. In the past, Cyberlux Corporation was
competing on a very large, very sophisticated playing field against
companies that were either better positioned or better capitalized
to secure contracts and large purchase commitments.
In fact, Cyberlux found itself in this very position with the
United States Air Force (USAF) contract. Despite having developed
the best products directly with the USAF customer, the contract was
awarded to another company who underbid us and, to our knowledge,
did not have a real product in market at the time of the award.
This was a significant setback which Management appealed to the
USAF, then to the Government Accountability Office (GAO) and the
situation is still unresolved and Cyberlux may ultimately seek
legal damages as events present an opportunity to do so.
Nonetheless, the USAF contract battle was a clear indication that a
Go-to-Market strategy shift was not only necessary but
fundamentally required, where Cyberlux would serve those companies
with existing contracts as an OEM supplier and sub-contractor
rather than compete in an arena where we cannot win.
Cyberlux Corporation has continued to make hard-fought progress
in the marketplace, which has required some drastic measures
appropriate for the times and the circumstances, but, nonetheless
progress has been made towards the Company’s sustainability and
future growth. On the cost control side, Management has reduced all
non-essential personnel, cut all available operating costs and
asked the senior management team, beginning in 3Q 2008, to defer
compensation until the Company is in a good operating condition.
This has resulted in a reduction of true operating expense of over
75% this year. Management is continuing the very difficult task for
aligning expense to revenue, and the Company should be well
positioned to take advantage of our new cost structure as we make
revenue gains going forward.
Remarkably, the Company has introduced five new, very exciting
product families in order to expand our military and commercial
product offerings, despite the cost reduction initiatives. In the
first six months of 2009, Cyberlux launched the Portable Shelter
Lighting products for tents and portable structures, the Outdoor
Overhead and Outdoor Area Lighting products for municipal and
military street lighting opportunities, the ArcLight LED products
to address the traditional fluorescent lighting replacement
opportunities, the BrightEye Solar-powered Trailer-mounted Lighting
System for the DoD ‘green’ initiatives, and the WhiteEye product as
a white light version of the BrightEye for lower cost tactical
lighting needs.
With the Company’s change in strategy, these new products and
the existing products, are being offered to prime contractors and
companies with existing contracts that contain lighting
requirements. The OEM LED lighting market is approximately $2
billion per year, and our products represent a market opportunity
of approximately $400M. If we capture a realistic market share of
1% to 3%, we would experience a rational level of growth.
Management is beginning to see results that will be forthcoming
over the next two quarters of performance.
Management believes these changes in Cyberlux strategy will
accelerate the growth of the Company, driving Cyberlux into a
sustainable, fully operating company with important customers who
have ongoing needs for our products. This process is challenging,
requiring significant effort and creative problem solving from
every Cyberlux employee. As Cyberlux begins to grow again, the
Company is committed to excellence with a vigilant focus on quality
and execution, where every commitment we make is also a commitment
we make to excellence. There is no shortcut; there is only
consistent, day-in and day-out action, where excellence is achieved
through the constant ‘whatever it takes’ effort the Cyberlux
employees make across our engineering, sales, marketing,
manufacturing, accounting, legal and management functions.
Given the trials and challenges Cyberlux has faced during the
past year, I am reminded of one of my favorite passages from a
speech entitled ‘The Man in the Arena’ by Theodore Roosevelt, a
passage I’ve shared with Cyberlux employees first over a year ago.
President Roosevelt’s words are an inspiring reminder of the
individual responsibilities each Cyberlux employee has in the
collective effort to build a successful company. I share this
passage with you, our faithful shareholders, because I believe it
represents the character of Cyberlux Corporation and how we are
tenaciously resolved to drive the Company to success. President
Roosevelt said:
“It is not the critic who counts, not the man who points out how
the strong man stumbled, or where the doer of deeds could have done
better. The credit belongs to the man who is actually in the arena,
whose face is marred by dust and sweat and blood, who strives
valiantly, who errs and comes short again and again, who knows the
great enthusiasms, the great devotions, and spends himself in a
worthy cause, who at best knows achievement and who at the worst if
he fails at least fails while daring greatly so that his place
shall never be with those cold and timid souls who know neither
victory nor defeat”.
Cyberlux Management and employees have the great responsibility
for building the business into a sustainable and profitable
enterprise, both an arduous and noble task. Each individual bears
the responsibility for creating the future of Cyberlux, for
striving for excellence, for doing the right thing, not just the
easy thing. Within the ‘Cyberlux Arena’, Management is seeing the
results of our actions and our change in strategy. We are committed
to the building of a great company, have a deep belief in our
capabilities to serve a wide range of customers and our ability to
meet production and engineering challenges.
Your Management sincerely thanks you for your past and
continuing support.
Best regards,
Mark D. Schmidt
President/CEO
Cyberlux Corporation
Cyberlux (PK) (USOTC:CYBL)
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