Lumera Reports Third Quarter Results and Updates Product Development Efforts

Nov 03, 2004, 00:00 ET from Lumera Corporation

    BOTHELL, Wash., Nov. 3 /PRNewswire-FirstCall/ -- Lumera Corporation,
 (Nasdaq:   LMRA), an emerging leader in the field of nanotechnology, today
 reported financial results for the third quarter of 2004 and released
 information regarding its current product development efforts.
     "We are in the process of transitioning from primarily providing custom
 materials under government contracts to developing commercial products," said
 Tom Mino, CEO of Lumera.  "While we had expected to begin generating modest
 product sales of our wireless antennas and biochips during the third quarter,
 we continue to be very excited by the long-term potential of our technology
 and our team.  We think that our current products and products under
 development have the potential to significantly change the way our customers
 solve important technical problems.
     "We are continuing actively to introduce our proprietary materials to
 potential customers and are working internally and with partners to refine and
 improve our products.  We remain very optimistic that our proprietary
 technologies, together with a seasoned management team, and cash resources
 from our recently completed initial public offering, will allow us to
 accomplish our long-term objectives," Mino concluded.
                          Summary Financial Discussion
     Revenue for the three months ended September 30, 2004, was $292,000
 compared to $676,000 for the same period in 2003.  Revenue for the nine months
 ended September 30, 2004, was $896,000 compared to $1,441,000 for the same
 period in 2003.  Revenues for both the current year periods are lower
 primarily due to a government sub-contract awarded during 2003 that has not
 been renewed due to defense spending priorities.  Additionally, Lumera has
 reallocated personnel and technical resources from revenue-generating
 government contracts to product development work for applications in future
 commercial markets, which has reduced current revenue.
     Research and development expense for the three months ended September 30,
 2004 was $1,592,000, compared to $1,886,000 for the same period in 2003.
 Research and development expense for the nine months ended September 30, 2004
 was $2,662,000, compared to $5,926,000 for the same period in 2003.   Research
 and development expense decreased for both comparative periods primarily due
 to lower expenses in 2004 associated with agreements between Lumera and the
 University of Washington.
     Marketing, general and administrative expense for the three months ended
 September 30, 2004 was $1,513,000, compared to $268,000 for the same period in
 2003.  Marketing, general and administrative expense for the nine months ended
 September 30, 2004 was $3,404,000, compared to $889,000 for the same period in
 2003.  Marketing, general and administrative expense increased in both
 comparative periods primarily due to non-cash stock based compensation costs
 associated with stock options granted with exercise prices below the fair
 value of the common stock at the date of issue, additional executive
 headcount, and the costs of being a public company.
     Lumera reported a net loss of $3,176,000 or $0.24 per share for the third
 quarter of 2004 compared to a net loss of $1,848,000 or $0.30 per share in the
 same period in 2003. For the nine months ended September 30, 2004, the company
 reported a net loss of $6,500,000 or $0.75 per share compared to $6,054,000 or
 $0.98 per share for the same period in 2003.
     We completed our initial public offering in July 2004, raising net
 proceeds of $38.7 million before offering expenses, which totaled $2.0 million
 to date.  As of September 30, 2004, we had net cash and securities of
                   Summary Discussion of Product Development
     Lumera develops proprietary polymer materials and is working on a number
 of products based on these materials for a broad range of applications.  To
 date, substantially all of Lumera's revenues have come from contracts to
 develop custom-made electro-optic materials and devices for government
 agencies. Lumera is developing products for three distinct markets which we
 believe address significant market opportunities, including biotechnology
 disposables, electro-optic devices and wireless antennas and systems. Lumera
 has not yet generated commercial sales of its products in any of these
     The status of Lumera's product commercialization efforts in each of these
 markets is summarized below:
     Biotechnology Disposables
     Lumera is developing various disposable biochips that are fabricated with
 a proprietary polymer coating and process.  These biochips enable biologists
 to isolate DNA and protein samples for testing.  Delays in product testing
 efforts by a prospective customer have slowed our plan to begin pilot
 production orders of our biochips.  We continue to work with prospective
 customers and currently expect that pilot production could begin in early
     Electro-Optic Devices
     We recently announced a new polymer material with improved electro-optic
 properties that we believe will lead to substantial opportunities in the
 commercial and government markets. We have supplied samples of this material
 to multiple government agencies and potential industrial partners. The
 applications for this advanced material include electro-optic components such
 as modulators and ring oscillators, polymer electronics such as high
 performance diodes and transistors, and optical interconnects for high speed
 (greater than 20 billion cycles per second) inter and intra semiconductor chip
     Lumera recently acquired exclusive rights to a flexible polymer modulator
 design and process from the University of Southern California that has the
 potential to increase revenue from military and high volume metro access
 telcom applications.
     During the 4th quarter Lumera expects to deliver high speed, low power
 modulators to a U.S. government agency under an existing contract, which could
 result in additional dollars being allocated to this project by the funding
 agency during 2005.
     Wireless Antennas and Systems
     Over the last several months, we have re-evaluated our plans to start
 production of 2.4 and 5.2 GHz Wi-Fi antennas.  After reviewing recent market
 data, we developed a new product strategy that refocuses resources on our
 "smart antenna" applications, which feature polymer-based technology that
 provides electronic rather than mechanical beam steering.  Our smart antenna
 has no moving parts, which we expect will improve its accuracy and durability
 compared to antennas that use mechanical beam steering.   We believe that
 smart antennas represent a potential opportunity for Lumera and we will have
 prototypes available for test marketing in early 2005.  We have not yet begun
 commercial production of smart antennas.
     Conference Call
     Lumera will host a conference call to discuss its third quarter 2004
 financial results at 4:30 p.m. EST today. The call will be broadcast over the
 Internet and can be accessed from the company's web site at
 Additionally, U.S. participants may join the conference call by dialing 888-
 396-2384 ten minutes prior to the start of the conference.  International
 participants can dial 617-847-8711. The conference passcode number is
 60425681. A telephone replay of the call will be available through November
 17, 2005, and can be accessed by dialing 888-286-8010 (for U.S. participants)
 or 617-801-6888(for international participants. The replay passcode is
 68399754. A replay of the conference call will be available on the company's
 web site.
     About Lumera
     Lumera is an emerging leader in the field of nanotechnology.  The company
 designs proprietary molecular structures and polymer compounds for a broad
 range of electro-optic, RF and specialty coating applications. The company
 also has developed proprietary processes for fabricating such devices. For
 more information, please visit
     Forward-Looking Statements Disclaimer
     Certain statements contained in this release, including expected results,
 projections of future revenues, plans for product development and production
 volume, future development contracts and commercial arrangements, growth in
 demand, future product benefits and future operations, as well as statements
 containing words like "believes", "estimate", "expects", "anticipates",
 "target", "plans", "will", "could" and other similar expressions, are forward-
 looking statements that involve a number of risks and uncertainties. Factors
 that could cause actual results to differ materially from those projected in
 the company's forward-looking statements include the following: our ability to
 raise additional capital when needed; market acceptance of our technologies
 and products; our financial and technical resources relative to those of our
 competitors; our ability to keep up with rapid technological change; our
 dependence on the defense industry and a limited number of government
 development contracts; government regulation of our technologies; our ability
 to enforce our intellectual property rights and protect our proprietary
 technologies; the ability to obtain additional contract awards; the timing of
 commercial product launches and delays in product development; the ability to
 achieve key technical milestones in key products; dependence on third parties
 to develop, manufacture, sell and market our products; potential product
 liability claims and other risk factors identified from time to time in the
 company's SEC reports.  Except as expressly required by the federal securities
 laws, we undertake no obligation to publicly update or revise any forward-
 looking statements, whether as a result of new information, future events,
 changes in circumstances or any other reason.
                           Consolidated Balance Sheet
                                 (In thousands)
                                               September 30,      December 31,
     Assets                                        2004               2003
      Current assets
        Cash and cash equivalents                 $8,183              $560
        Investment securities,
         available-for-sale, current               9,081
        Accounts receivable, net of
         allowances                                   28               151
        Costs and estimated earnings in
         excess of billings on
          uncompleted contracts                      155               166
        Prepaid stock-based research costs            --               159
        Other current assets                         487                55
           Total current assets                   17,934             1,091
      Investment securities,
       available-for-sale, long-term              15,831                --
      Property and equipment, net                  2,074             2,867
      Other assets                                    --               100
          Total assets                           $35,839            $4,058
      Liabilities, mandatorily redeemable
       convertible preferred stock and
        shareholders' equity (deficit)
      Current liabilities
        Accounts payable                            $509              $159
        Payable to related party                      45                42
        Current portion of research liability         27                --
        Accrued liabilities                        1,214               576
             Total current liabilities             1,795               777
      Research liability                              --             1,948
      Other long-term liabilities                     --                16
             Total liabilities                     1,795             2,741
      Commitments and contingencies                   --                --
      Mandatorily redeemable convertible
       preferred stock                                --            27,206
      Shareholders' deficit
         Common stock at par value                70,372                --
         Class A Common stock at par value            --             3,361
         Class B Common stock at par value            --               105
         Deferred stock-based compensation          (977)              (31)
         Accumulated other comprehensive
          gain (loss)                                (27)                -
         Accumulated deficit                     (35,324)          (29,324)
           Total shareholders' equity
            (deficit)                             34,044           (25,889)
      Total liabilities, mandatorily
       redeemable convertible preferred stock
        and shareholders' equity (deficit)       $35,839            $4,058
                                 Lumera Corporation
                        Consolidated Statement of Operations
                   (In thousands, except earnings per share data)
                                Three months ended,       Nine months ended
                                    September 30,            September 30,
                                   2004        2003        2004        2003
      Revenue                      $292        $676        $896      $1,441
      Cost of revenue               164         373         546         756
      Gross Profit                  128         303         350         685
      Research and
       development expense        1,592       1,886       2,662       5,926
      Marketing, general and
       administrative expense     1,513         268       3,404         889
         Total operating
          expenses                3,105       2,154       6,066       6,815
      Loss from operations       (2,977)     (1,851)     (5,716)     (6,130)
      Interest income                63           3          64          37
      Interest expense             (262)                   (348)
      Realized gain on sale
       of investment securities      --          --          --          39
      Net loss                  $(3,176)    $(1,848)    $(6,000)    $(6,054)
      Deemed dividend upon
       issuance of mandatorily
        redeemable convertible
         preferred stock                                   (500)
      Net loss available to
       common shareholders      $(3,176)    $(1,848)    $(6,500)    $(6,054)
      Net loss per share -
       basic and diluted         $(0.24)     $(0.30)     $(0.75)     $(0.98)
      Weighted-average shares
       outstanding - basic
       and diluted            13,485,804   6,172,400    8,627,996   6,172,400

SOURCE Lumera Corporation