Lumera Reports Third Quarter 2008 Results, Updates Progress on Proposed Merger

  
    
  
  
    
      Lumera Corporation (NASDAQ:LMRA), a leader in photonics communication, 
      today reported financial results for the third quarter 2008.
    
    
      Revenues totaled $1,565,000 for the three months ended September 30, 
      2008 compared to $624,000 for the three months ended September 30, 2007, 
      a 151% increase over the prior year quarter. Lumera’s 
      loss from continuing operations totaled $1,526,000, or $0.06 per share, 
      declined 53% for the three months ended September 30, 2008 compared to a 
      loss of $3,214,000 or $0.16 per share for the three months ended 
      September 30, 2007.
    
    
      Revenues totaled $3,548,000 for the nine months ended September 30, 2008 
      compared to $2,418,000 for the nine months ended September 30, 2007, a 
      47% increase over the prior year-to-date period. Lumera’s 
      loss from continuing operations the nine months ended September 30, 2008 
      totaled $6,752,000, or $0.32 per share, compared to a loss of $7,123,000 
      or $0.35 per share for the nine months ended September 30, 2007.
    
    
      “Our strong revenue growth this quarter 
      reflects the continuing support from our government funding partners," 
      said Dr. Joe Vallner, Interim Chief Executive Officer of Lumera. “We 
      continue to meet our current contract milestones, while also discussing 
      new and continuation projects for 2009 and beyond. Our management team 
      is working closely with the GigOptix team on pre-merger integration 
      planning and the results of that work is evident in both our technology 
      roadmap as well as in creating cost efficiencies. Efforts that we 
      initiated last quarter to trim corporate expenses are beginning to show 
      in our operating results. The technology planning work will help both 
      teams hit the ground running post-merger. We are now in the final stages 
      of the merger process with GigOptix and hope to mail merger proxies to 
      our shareholders in the very near term. We trust that our shareholders 
      will see, as do we, the merits of combining GigOptix and Lumera together 
      and will vote for the merger.”
    
    
      Proposed Merger with GigOptix, LLC
    
    
      On March 27, 2008, Lumera Corporation and GigOptix, LLC (“GigOptix”) 
      announced their entry into a definitive agreement to merge the two 
      companies. Upon completion of the merger, which is subject to Lumera 
      shareholder and other regulatory approval, 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 Market 
      under the ticker symbol “GIGX.”
    
    
      The Company filed the Form S-4 on September 8, 2008 and amended its 
      filing to address initial SEC comments on October 10, 2008 and the SEC 
      is continuing their review. When the SEC completes their review and 
      declares it effective, we will begin mailing proxy statements to 
      shareholders of record. We hope to hold the Annual Shareholder Meeting 
      in early December at the Country Inn & Suites in Bothell, Washington. If 
      the shareholders approve the merger at the meeting, the merger will 
      close shortly thereafter.
    
    
      A presentation by Dr. Avi Katz, current CEO of GigOptix, LLC and future 
      Chairman and CEO of GigOptix, Inc. will be given during Lumera’s 
      investor conference call beginning at 4:30 pm EDT, today, and will also 
      be available for replay in the Investor Relations section of our web 
      site.
    
    
      The Company also announced a management change for the new combined 
      company, GigOptix, Inc. Peter Biere, currently Senior Vice President and 
      Chief Financial Officer of Lumera, will become Chief Financial Officer 
      of GigOptix, Inc. and General Manager of GigOptix Bothell.
    
    
      Summary Financial Discussion
    
    
      Revenues totaled $1,565,000 for the three months ended September 30, 
      2008 compared to $624,000 for the three months ended September 30, 2007, 
      a 151% increase over the prior year quarter. Government contract 
      revenues totaled $1,555,000 for the current three month period, an 
      increase of $931,000 or 149% from $624,000 in 2007. The expected 
      increase in our current quarter contract revenues is related to 
      additional and renewed government contracts awarded late in the first 
      quarter of 2008. Backlog on our government contracts totaled $2.3 
      million at September 30, 2008. Product revenues for the three months 
      ended September 30, 2008 totaled $10,000 consisting of sample 
      electro-optic materials and devices. There were no product revenues in 
      the prior year comparative period.
    
    
      Revenues totaled $3,548,000 for the nine months ended September 30, 2008 
      compared to $2,418,000 for the nine months ended September 30, 2007, a 
      47% increase over the prior year-to-date period. Government contract 
      revenues totaled $3,405,000 for the current nine month period, an 
      increase of $1,078,000 or 46% from $2,327,000 in 2007. Product revenues 
      for the nine months ended September 30, 2008 totaled $143,000 consisting 
      of electro-optic devices and materials primarily for devices shipped to 
      Lockheed Martin and sample electro-optic devices and materials. Product 
      revenues for the same period in 2007 totaled $91,000.
    
    
      Expenses from continuing operations for the three months ended September 
      30, 2008 totaled $2,350,000 compared to $3,760,000 for the same period 
      in 2007, a 38% decline over the prior year quarter. Research and 
      development expense totaled $437,000 in the current quarterly period, 
      declining $501,000 or 53% for the same period in 2007. Increased 
      contract revenues led to lower internal research expenses as we 
      dedicated more science labor hours and materials to contract work. 
      Marketing, general and administrative expense decreased by $909,000 or 
      32% to $1,913,000 during the current quarterly period from $2,822,000 in 
      the same period in 2007. This decline is mostly due to lower salaries 
      and non-cash stock based compensation costs in the current period due to 
      reductions in our executive and administrative workforce and to 
      contractual severance expenses incurred in the prior year quarterly 
      period. Included in the current quarter is $383,000 in professional fees 
      related to preparations for our proposed merger.
    
    
      Expenses from continuing operations for the nine months ended September 
      30, 2008 totaled $8,856,000 compared to $9,158,000 for the same period 
      in 2007, a decline of 3% over the prior year period. Research and 
      development expenses decreased by $139,000 or 6% to $2,009,000 for the 
      nine months ended September 30, 2008 from $2,148,000 in 2007. Higher 
      contract revenues in the current period caused an increase in direct 
      labor and related overhead costs applied to research and development 
      expense, and to higher materials costs associated with device packaging 
      development. Marketing, general and administrative expense decreased by 
      $163,000 or 2% to $6,847,000 for the nine months ended September 30, 
      2008 from $7,010,000 in 2007. Compensation related costs associated with 
      headcount reductions in workforce declined $1.6 million and reductions 
      in general administrative and travel costs totaled $180,000 in the 
      current year to date period. Professional fees associated with our 
      proposed merger totaled $1.6 million during the first nine months of 
      2008. We also recorded a $500,000 collectability reserve against the 
      Note Receivable from Asyrmatos during the first quarter of 2008.
    
    
      Lumera’s loss from continuing operations 
      totaled $1,526,000, or $0.06 per share, declined 53% for the three 
      months ended September 30, 2008, compared to a loss of $3,214,000 or 
      $0.16 per share for the three months ended September 30, 2007.
    
    
      Lumera’s loss from continuing operations 
      totaled $6,752,000, or $0.32 per share, declined 5% for the nine months 
      ended September 30, 2008 compared to a loss of $7,123,000 or $0.35 per 
      share for the nine months ended September 30, 2007.
    
    
      Discontinued Operations
    
    
      As required by the provisions of Statement of Financial Accounting 
      Standards No. 144 Accounting for the Impairment of Disposal of 
      Long-Lived Assets, Lumera began reporting the results of Plexera as 
      discontinued operations in the quarter ended June 30, 2008. As such, the 
      discussion above relates only to Lumera's continuing electro-optics 
      business unless otherwise noted.
    
    
      Lumera's net loss from discontinued operations totaled $2,497,000 during 
      the nine months ended September 30, 2008, or $0.12 per share compared to 
      a net loss of $3,747,000 for the same comparative prior year period, or 
      $0.19 per share. Lumera’s net income from 
      discontinued operations during the three months ended September 30, 2008 
      totaled $4,000 compared to a net loss of $1,617,000 for the prior year 
      quarter.
    
    
      Conference Call
    
    
      Lumera will host a conference call to discuss its third quarter of 2008 
      financial results and introduce Dr. Avi Katz, CEO of GigOptix LLC, on 
      Tuesday, October 21, 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 
      800.561.2718 ten minutes prior to the start of the conference. 
      International participants can dial 617.614.3525. The conference 
      passcode number is 88482835. A telephone replay of the call will be 
      available through October 28, and can be accessed by dialing 
      888-286-8010 (for U.S. participants) or 617-801-6888 (for international 
      participants). The replay passcode is 48728916. 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 and its proposed successor GigOptix Inc., have filed with the SEC 
      a joint proxy/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 [phone].
    
    
      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 and by Form 8-K filed with the SEC on September 5, 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.