Lumera Corporation (NASDAQ:LMRA), a leader in photonics
communication, today reported financial results for the first
quarter 2008. Revenues totaled $484,000 for the three months ended
March 31, 2008 compared to $860,000 for the same period in 2007.
Lumera�s net loss totaled $6,041,000 or $0.30 per share for the
first quarter of 2008 compared with a net loss of $2,696,000 or
$0.13 per share for the same period in 2007. "Needless to say, the
biggest event of the quarter was the announcement of our proposed
merger with GigOptix, LLC. We plan to file a Form S-4 merger proxy
statement / prospectus with the SEC which will give you a
substantial amount of information on why we believe the proposed
merger is a positive development for Lumera shareholders," said Dr.
Joe Vallner, Interim Chief Executive Officer of Lumera. �We also
were pleased to announce the signing of four government contracts
late in the quarter which will total approximately $5.6 million in
revenue over the year." Summary Discussion of First Quarter Events
Electro-Optics Lumera�s electro-optic business unit is developing a
new generation of electro-optic modulators and other devices for
optical networks and systems based on proprietary polymer
materials. Early in the quarter, Lumera announced that it had
reached agreement with Lockheed Martin to extend its material
transfer agreement through December 31, 2009 and had received a
second purchase order for electro-optic materials, and are
currently working on a third order to be delivered in the second
quarter. Also during the quarter, Lumera announced that it had
received four government contract awards. The Defense Advanced
Research Projects Agency (DARPA) formally awarded the company $2.4
million for Phase III of a contract initially begun in July 2006.
DARPA also awarded Lumera a Small Business Innovation Research
(SBIR) contract, Phase I of which totals $98,933 to design and
fabricate polymer devices. Upon successful completion of certain
Phase I milestones, Lumera could receive a subsequent contract
phase in the range of $750,000. The US Air Force Research
Laboratory awarded the company a contract valued at approximately
$2.2 million to fabricate low driving voltage, reliable
electro-optic modulators using Lumera�s high performance organic
polymers. RF photonics, in which optical components and optical
fibers are used to process and distribute high speed electrical
signals, may provide the high bandwidth, reduced weight and size,
and the immunity to electromagnetic interference that are crucial
for future high-performance satellites and phased array radars. Due
to the intrinsic dielectric properties of organic polymers and the
great diversity of techniques used to design materials at the
molecular level, electro-optic polymer devices are well suited to
meeting these challenges. The fourth contract awarded was an
extension to a U.S. government contract initially begun in 2001
that continues the development of technologically advanced wideband
optical modulators. The contract is valued at approximately
$900,000. Based upon our continued success in delivering contract
milestones, the overall funding value of this contract has now
reached approximately $7.8 million. The objective of this contract
is to fabricate low Vpi electro-optic modulators from high
performance organic polymers recently scaled up or developed at
Lumera. The low Vpi is crucial for development of phased array
radar and high performance satellite systems. Proposed Merger with
GigOptix, LLC On March 27, 2008, Lumera Corporation and GigOptix,
LLC (�GigOptix�) announced that a definitive agreement was signed
to merge the two companies. The Merger Agreement has been approved
by the Boards of Lumera and GigOptix. Upon completion of the
merger, which is subject to certain terms and conditions described
in the Merger Agreement, existing securities holders of Lumera and
GigOptix will each own approximately 50% of the outstanding
securities of a new holding company named �GigOptix, Inc.� which
will trade on the NASDAQ Global Market under the ticker symbol
�GIGX.� Consummation of the merger, which requires the approval of
the Lumera stockholders, is subject to registering GigOptix, Inc.�s
common stock issued to Lumera stockholders in the merger, and the
listing of said stock on the NASDAQ Global Market. Restructuring
Lumera also announced in March 2008 that it had elected to cease
investing in Plexera Bioscience LLC, Lumera's life science tools
subsidiary. Day to day operations in Plexera ceased in order to
minimize cash expenses. Lumera also implemented additional
cost-cutting measures related to its overall restructuring which,
together with costs associated with closing Plexera, resulted in
restructuring costs totaling $934,000 recorded in operating
expenses during the current quarter. Included in the restructuring
costs was a $534,000 provision for severance costs resulting from
the elimination of 29 positions, 23 of which were Plexera related,
to be paid out over the second and third quarters of 2008, a
$243,000 provision for the estimated impairment of Plexera�s fixed
assets and a provision for contract and license termination costs
of $157,000. Lumera is currently seeking ways to realize value from
Plexera's assets and intellectual property. Asyrmatos Investment As
previously announced, on February 20, 2008, we entered into an
agreement with Asyrmatos, Inc, a privately held Boston-based
company, pursuant to which we transferred our intellectual
property, other assets related to millimeter wave communication
technologies and $500,000 in cash. In consideration for the
transfer, we acquired shares which represent 25% of the current
outstanding preferred and common shares of Asyrmatos and we
received an option to acquire all of the outstanding stock of
Asyrmatos, Inc. in 2012. In addition, we were issued a $500,000
Note Receivable due February 19, 2010. Asyrmatos intends to
continue the development and commercialization of wireless
millimeter wave communication systems based in part on technology
developed at Lumera. Committed Equity Financing Facility As
previously announced, on February 21, 2008, we entered into a
three-year $25 million Committed Equity Financing Facility (the
�CEFF�) with Kingsbridge Capital (�Kingsbridge�). Under the CEFF,
subject to certain conditions and limitations, we may require
Kingsbridge to purchase up to 10 million shares or $25 million of
our common stock, whichever is less, at a predetermined discount
allowing us to raise capital in amounts and intervals that we deem
suitable. We are not obligated to sell any of the $25 million of
common stock available under the CEFF, and there are no minimum
commitments or minimum use penalties. The CEFF does not contain any
restrictions on our operating activities. We filed a registration
statement in late March 2008 with respect to the resale of 4
million of the shares to potentially be issued pursuant to the
CEFF. The registration statement is not yet effective. Summary
Financial Discussion Revenues totaled $484,000 for the three months
ended March 31, 2008 compared to $860,000 for the same period in
2007, a 44 percent decrease over the prior year. Government
contract revenue totaled $472,000 for the current three month
period, a decrease of $303,000 from $775,000 in 2007. The decline
in our current quarter government contract revenue, as expected, is
entirely related to the timing of contract awards completed late in
the current quarter. Product revenues for the three months ended
March 31, 2008 totaled $12,000 consisting of electro-optic
modulators and materials. Product revenues for the same period in
2007 totaled $85,000. Operating expenses for the three months ended
March 31, 2008 totaled $6,410,000 compared to $3,434,000 for the
same period in 2007. The increase in operating expenses is due to a
$1,023,000 increase in research and development expense, due
primarily to lower contract revenues in the current period which
caused an increase in direct labor and related overhead costs
applied to research and development expense, a $1,953,000 increase
in marketing, general and administrative expense due primarily to
legal and financial advisory fees of $1,020,000, restructuring
costs of $934,000, and a $500,000 collectability reserve against
the Note Receivable from Asyrmatos. These increases in operating
expenses were partially offset by a decrease in non-cash
stock-based compensation costs of $699,000 primarily due to
forfeiture related adjustments following the reduction in work
force. Lumera�s net loss totaled $6.04 million or $0.30 per share
for the three months ended March 31, 2008 compared with $2.7
million or $0.13 per share for the same period in 2007. Conference
Call Lumera will host a conference call to discuss results of its
first quarter 2008 on Tuesday, May 6, at 4:30 p.m. EDT. 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 800-435-1261
ten minutes prior to the start of the conference. International
participants can dial 617-614-4076. The conference passcode number
is 65359868. A telephone replay of the call will be available
through March 18, and can be accessed by dialing 888-286-8010 (for
U.S. participants) or 617-801-6888 (for international
participants). The replay passcode is 85031524. A replay of the
conference call will be available on the company's web site. About
Lumera Lumera is a leader in photonic communications. The company
designs electro-optic components based on proprietary polymer
compounds for the telecommunications and computing industries. 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. Lumera will file with the SEC a registration
statement on Form S-4, which will contain a proxy
statement/prospectus regarding the proposed merger transaction, as
well as other relevant documents concerning the transaction. WE
URGE INVESTORS AND SECURITY HOLDERS TO READ THE REGISTRATION
STATEMENT AND PROXY STATEMENT/PROSPECTUS AND THESE OTHER DOCUMENTS
WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT LUMERA, GIGOPTIX LLC AND THE PROPOSED
TRANSACTION. A definitive proxy statement/prospectus will be sent
to Lumera�s stockholders seeking their approval of Lumera�s
issuance of shares in the transaction and to members of GigOptix
LLC. Investors and security holders may obtain a free copy of the
registration statement and proxy statement/prospectus (when
available) and other documents filed by Lumera with the SEC at the
SEC�s web site at www.sec.gov. Free copies of Lumera�s SEC filings
are available on Lumera�s web site at www.lumera.com and also may
be obtained without charge by directing a request to Lumera
Corporation, 19910 North Creek Parkway, Bothell, WA 98011-3008,
Attention: Investor Relations or by telephoning us at 425-398-6546.
Lumera and its directors and executive officers may be deemed,
under SEC rules, to be participants in the solicitation of proxies
from Lumera�s stockholders with respect to the proposed
transaction. Information regarding Lumera�s directors and executive
officers is included in its annual report on Form 10-K filed with
the SEC on March 17, 2008, as amended by Form 10-K/A filed with the
SEC on March 27, 2008. More detailed information regarding the
identity of potential participants and their direct or indirect
interests in the transaction, by securities holdings or otherwise,
will be set forth in the registration statement and proxy
statement/prospectus and other documents to be filed with the SEC
in connection with the proposed transaction. This communication
shall not constitute an offer to sell or the solicitation of an
offer to sell or the solicitation of an offer to buy any
securities, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended. Lumera Corporation � � Balance Sheet (In thousands)
(Unaudited) � March 31, 2008 December 31, 2007 Assets Current
Assets Cash and cash equivalents $ 2,500 $ 7,132 Investment
securities, available-for-sale, current 6,654 7,494 Accounts
receivable, net of allowance 76 57 Costs and estimated earnings in
excess of billings on uncompleted contracts 391 101 Other current
assets � 385 � � 350 � Total current assets 10,006 15,134 �
Property and equipment, net 2,237 2,633 Restricted Investments 700
700 Other assets � 46 � � 46 � Total Assets $ 12,989 � $ 18,513 � �
Liabilities and Shareholders' Equity Liabilities Current
Liabilities Accounts payable $ 1,652 $ 1,377 Accrued liabilities �
2,060 � � 1,585 � Total current liabilities 3,712 2,962 � Deferred
rent, net of current portion � 276 � � 303 � Total liabilities �
3,988 � � 3,265 � � Commitments and contingencies Shareholders'
Equity Common stock, $0.001 par value, 120,000,000 shares
authorized; 20,088,352 shares issued and outstanding at March 31,
2008, and 20,055,352 shares issued and outstanding at December 31,
2007 � 20 20 Additional Paid-in Capital 91,774 91,998 Accumulated
other comprehensive income 22 4 Accumulated deficit � (82,815 ) �
(76,774 ) Total shareholders' equity � 9,001 � � 15,248 � Total
Liabilities and Shareholders' Equity $ 12,989 � $ 18,513 � Lumera
Corporation Statements of Operations (In thousands, except earnings
per share and share data) (Unaudited) � � � Three Months ended
March 31, � 2008 � � 2007 � � � Revenue $ 484 $ 860 Cost of revenue
� 236 � � 443 � Gross Profit � 248 � � 417 � � Research and
development expense 2,294 1,271 Marketing, general and
administrative expense � 4,116 � � 2,163 � � Total operating
expenses � 6,410 � � 3,434 � � Loss from operations (6,162 ) (3,017
) Interest income 121 321 � � � Net Loss $ (6,041 ) $ (2,696 ) �
Net Loss per Share Basic and Diluted $ (0.30 ) $ (0.13 ) � Weighted
Average Shares Outstanding - Basic and Diluted � 20,082,528 � �
20,055,352 �
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