Lumera Corporation (Nasdaq:LMRA), an emerging leader in the field
of nanotechnology, today reported financial results for the third
quarter of 2005 and released information regarding its current
product development progress. Revenues for the three months ended
September 30, 2005, increased by $389,000 to $681,000 compared to
$292,000 for the same period in 2004. For the nine months ended
September 30, 2005, revenues increased by $373,000 to $1,269,000
compared to $896,000 for the same period in 2004. Lumera's net loss
was $2,034,000 or $0.12 per share for the third quarter of 2005
compared to a net loss of $3,176,000 or $0.24 per share in the same
period in 2004. For the nine month period, Lumera's net loss was
$7,838,000 or $0.47 per share compared to a net loss of $6,500,000
or $0.75 per share in the same period in 2004. "The third quarter
marked the first shipments of both our electro-optic and biochip
products," said Lumera Chief Executive Officer Tom Mino. "We view
these shipments as important milestones for the company and are
hopeful that these initial transactions will develop into long term
relationships and sustainable commercial sales." Summary Discussion
of Product Development Lumera develops proprietary polymer
materials which are in turn used in products developed for the
bioscience and communications/computing marketplaces. During the
quarter, Lumera shipped limited quantities of products in both of
these markets. Further details are in the market summaries below.
Bioscience Using its nanotechnology inspired solutions for the
biotechnology and pharmaceutical markets, Lumera's products are
based on the premise that current high throughput methods in
biology and medicine are limited by their dependence on molecular
labels. Lumera's label free technology provides researchers with
enhanced methods for solving complex problems in systems biology,
biomarker discovery, and drug discovery. During the quarter, Lumera
shipped sample-sized orders of NanoCapture-OH(TM) -- its DNA
biochip -- to the Institute for Systems Biology ("ISB"), with whom
it has a collaborative agreement announced in February 2005, and
also to a large international biotech company. Based upon ISB's
favorable results with these biochips, a paper has been submitted
to "Methods in Enzymology" and is currently in the peer review
process. For printed arrays, the patterned chemistry resulted in
improved sensitivity, precision, and dynamic range in analyzing the
samples' structure. Lumera continues to develop its protein biochip
-- NanoCapture-HPT(TM) -- with a strategic partner. These chips
combine Lumera's proprietary nanosurface modification chemistry
with Helix Biopharma's Heterodimer Protein Technology(TM) (HPT) to
which the Company has an exclusive license. These arrays are
expected to, for the first time, allow researchers to build
biologically active, high density protein arrays from simple,
widely available cDNA libraries. Also during the quarter, Lumera
demonstrated high throughput and high sensitivity non-labeled
protein binding in a 1032-spot protein microarray using surface
plasmon resonance ("SPR"). This ProteomicProcessor(TM) is designed
to allow high throughput detection and analysis of possible drug
candidates that target protein molecules, biomarker discovery, and
pathway elucidation. This is the second generation prototype Lumera
has developed. The Company expects to have equipment ready for
customer evaluation in the fourth quarter of 2005. Electro-Optic
Devices Lumera is developing a new generation of electro-optic
modulators and other devices for optical networks and systems based
on its proprietary polymer materials. Lumera's polymer-based
modulators can operate at speeds up to five times faster than
existing inorganic crystal-based electro-optic modulators. During
the quarter, the Company announced that it had made shipments of
electro-optic modulators and samples of specialized electro-optic
polymer material to multiple customers including Raytheon Company,
undisclosed defense contractors, and government agencies. A
semiconductor chip company also is evaluating Lumera's modulators
for board and chip level optical interconnects. Lumera anticipates
that these initial shipments may lead to long term relationships
and sustainable commercial sales of its modulators and optical
material. Lumera continues to add to its growing portfolio of
intellectual property. During the quarter, the company was awarded
a patent based on its proprietary optic modulators, which perform
with significantly less optical loss and voltage than prior
available technology -- both crucial performance factors for
components in optical networks. This new patent further protects
its technology investments. Lumera solved fabrication issues for
this modulator by using two layers of different electro-optic
polymers. The combination of increased thickness and more
electro-optic activity lowered both the optical loss and the
operating voltage. Lumera is currently working on three government
contracts to produce polymer-based modulators for use in defense
communications and detection systems and phased array radar. Each
of Lumera's government contracts are in their renewal period.
Backlog on Lumera's governmental contracts totaled $162,000 at
September 30, 2005. Wireless Antennas and Systems Lumera's "smart
antenna" application was being developed for a customer specific
niche market, which has not developed fast enough to warrant
further business development efforts. In reviewing its market
opportunities, the larger revenue opportunities available to the
Company in the bioscience and electro-optics markets coupled with
the increasing interest in these products have resulted in the
strategic re-alignment of resources to fully exploit the
opportunities in these two markets. As a result, Lumera is stopping
development of its smart antenna. Future antenna development, if
any, will be done within the Company's electro-optic device group.
Summary Financial Discussion Revenues for the three months ended
September 30, 2005, increased by $389,000 to $681,000 compared to
$292,000 for the same period in 2004. Contract revenue totaled
$624,000 for the current quarter, an increase of $334,000 from
$290,000 in 2004 due primarily to higher billings on one of the
Company's government research contracts. Product revenues totaled
$56,000 for the current quarter, reflecting sales of electro-optic
modulators and materials and biochips for customer trials. Revenues
for the nine months ended September 30, 2005, increased by $373,000
to $1,269,000 compared to $896,000 for the same period in 2004.
Contract revenue totaled $1,212,000 for the first nine months of
2005, an increase of $333,000 from $879,000 in 2004 due primarily
to higher billings on one of the Company's contracts occurring in
the current quarter. Product revenues increased by $39,000 to
$57,000 for the first nine months of 2005, reflecting increased
sales of electro-optic modulators and materials and biochips in the
current quarter. Lumera's loss from operations for the quarter
ended September 30, 2005, declined $788,000 to $2,189,000 compared
to $2,977,000 for the same period in 2004. This was primarily due
to $427,000 of lower non-cash stock based compensation expenses and
accrued incentive compensation accruals and $498,000 of lower
contract research costs, all compared to the prior year period.
Partially offsetting these increases were $206,000 of increased
general administrative and insurance costs compared to the prior
year period. Lumera's loss from operations for the nine months
ended September 30, 2005, increased $2,601,000 to $8,317,000
compared to $5,716,000 for the same period in 2004. This was
primarily due to $2,721,000 in higher contract research and
technology licensing fees, which increased comparatively due to a
$2.4 million one-time non-cash benefit recorded in the second
quarter of 2004 when Lumera renegotiated its Sponsored Research
Agreement with the University of Washington. Additionally, $407,000
of increased compensation costs and $569,000 of higher general and
administrative and insurance costs, all compared to the prior year
period, contributed to the difference. Partially offsetting these
increases were $956,000 in lower non-cash stock based compensation
expenses and $294,000 in lower accrued incentive compensation
accruals, all compared to the prior year period. Lumera's net loss
was $2,034,000 or $0.12 per share for the third quarter of 2005
compared to a net loss of $3,176,000 or $0.24 per share in the same
period in 2004. Lumera's net loss was $7,838,000 or $0.47 per share
for the first nine months of 2005 compared to a net loss of
$6,500,000 or $0.75 per share in the same period in 2004. There
were approximately 3.1 million and 8.0 million fewer
weighted-average shares outstanding during the quarter and nine
months ended September 30, 2004. Lumera used $1,466,000 in cash to
fund operations and working capital requirements during the third
quarter of 2005, ending the quarter with $23.6 million in cash and
investment securities. The cash requirement for the quarter was
approximately $1.0 million less than cash used in the previous
quarter partly due to a reduction in payments under the UW
Sponsored Research Agreement. Certain other payments, primarily for
professional fees and technology licensing and transfer fees were
also lower during the current quarter. The current quarter's level
of cash expenditure is not necessarily indicative of cash
requirements for future quarters. The company invests cash not
needed to fund near term operations in highly liquid investments
with varying stated maturities, all of which are available for
sale. Conference Call Lumera will host a conference call to discuss
its third quarter of 2005 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 www.lumera.com. Additionally, U.S.
participants may join the conference call by dialing 866-383-7998
ten minutes prior to the start of the conference. International
participants can dial 617-597-5329. The conference passcode number
is 41751883. A telephone replay of the call will be available
through November 9, 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 37972790. 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 the bioscience and
communications/computing industries, both of which present large
market opportunities. The company also has developed proprietary
processes for fabricating such devices. For more information,
please visit www.lumera.com Certain statements contained in this
release 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: market acceptance
of our technologies and products; our ability to obtain financing;
our financial and technical resources relative to those of our
competitors; our ability to keep up with rapid technological
change; 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 and to develop partnership opportunities; the timing of
commercial product launches; the ability to achieve key technical
milestones in key products; and other risk factors identified from
time to time in the company's SEC reports, including its Annual
Report on Form 10-K, and its Quarterly Reports on Form 10-Q. -0- *T
Lumera Corporation Condensed Balance Sheets (In thousands)
(Unaudited) Sept. 30, Dec. 31, Assets 2005 2004 -------- --------
Current assets Cash and cash equivalents $ 7,486 $ 3,505 Investment
securities, available-for-sale 16,071 15,460 Accounts receivable 58
32 Costs and estimated earnings in excess of billings on
uncompleted contracts 233 3 Other current assets 415 623 --------
-------- Total current assets 24,263 19,623 Investment securities,
available-for-sale - 11,216 Property and equipment, net 1,399 2,047
-------- -------- Total assets $ 25,662 $ 32,886 ======== ========
Liabilities and Shareholders' equity Current liabilities Accounts
payable $ 346 $ 416 Current portion of research liability - 101
Accrued liabilities 903 976 -------- -------- Total current
liabilities 1,249 1,493 Commitments and contingencies Shareholders'
equity Common stock at par value 16 16 Additional paid-in capital
70,821 70,435 Deferred stock-based compensation (275) (666)
Accumulated other comprehensive loss (64) (145) Accumulated deficit
(46,085) (38,247) -------- -------- Total shareholders' equity
24,413 31,393 -------- -------- Total liabilities and shareholders'
equity $ 25,662 $ 32,886 ======== ======== Lumera Corporation
Condensed Statements of Operations (In thousands, except earnings
per share and share data) (Unaudited) Three months ended Nine
months ended September 30, September 30,
------------------------------------------------- 2005 2004 2005
2004 ----------- ----------- ----------- ---------- Revenue $ 681 $
292 $ 1,269 $ 896 Cost of revenue 466 164 851 546 -----------
----------- ----------- ---------- Gross profit 215 128 418 350
----------- ----------- ----------- ---------- Research and
development expense 1,408 1,592 5,033 2,662 Marketing, general and
administrative expense 996 1,513 3,702 3,404 -----------
----------- ----------- ---------- Total operating expenses 2,404
3,105 8,735 6,066 ----------- ----------- ----------- ----------
Loss from operations (2,189) (2,977) (8,317) (5,716) Interest
income 155 63 479 64 Interest expense - (262) - (348) -----------
----------- ----------- ---------- Net loss $ (2,034) $ (3,176) $
(7,838) $ (6,000) Deemed dividend upon issuance of mandatorily
redeemable convertible preferred stock - - - (500) -----------
----------- ----------- ---------- Net loss available to common
shareholders $ (2,034) $ (3,176) $ (7,838) $ (6,500) ===========
=========== =========== ========== Net loss per share- basic and
diluted $ (0.12) $ (0.24) $ (0.47) $ (0.75) =========== ===========
=========== ========== Weighted-average shares outstanding - basic
and diluted 16,600,440 13,485,804 16,582,891 8,627,996 ===========
=========== =========== ========== *T
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