U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the quarterly period ended September 30, 2004
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File Number 000-50862
LUMERA CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 91-2011728 | |
| (State or Other Jurisdiction of Incorporation or organization) |
(I.R.S. Employer Identification No.) |
19910 North Creek Parkway, Bothell, Washington 98011-3008
(Address of Principal Executive Offices) (Zip Code)
(425) 415-6900
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No
As of November 1, 2004, 16,523,680 shares of the Company’s common stock, $0.001 par value, were outstanding.
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Page | ||
| PART I FINANCIAL INFORMATION |
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| Item 1 - Financial Statements (unaudited) | ||
| Condensed Balance Sheets as of September 30, 2004 and December 31, 2003 |
3 | |
| Condensed Statements of Operations for the three and nine months ended September 30, 2004 and 2003 |
4 | |
| 5 | ||
| Condensed Statements of Cash Flows for the nine months ended September 30, 2004 and 2003 |
6 | |
| 7 | ||
| Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 | |
| Item 3 - Quantitative and Qualitative Disclosures About Market Risk | 42 | |
| Item 4 - Controls and Procedures | 42 | |
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PART II OTHER INFORMATION |
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| Item 1 - Legal Proceedings | 43 | |
| Item 2 - Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities | 43 | |
| Item 6 - Exhibits and Reports on Form 8-K | 44 | |
2
CONDENSED BALANCE SHEETS
(Unaudited)
| September 30, 2004 |
December 31, 2003 |
|||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents |
$ | 8,183,000 | $ | 560,000 | ||||
| Investment securities, available-for-sale, current |
9,081,000 | — | ||||||
| Accounts receivable, net of allowances |
28,000 | 151,000 | ||||||
| Costs and estimated earnings in excess of billings on uncompleted contracts |
155,000 | 166,000 | ||||||
| Prepaid stock-based research costs |
— | 159,000 | ||||||
| Other current assets |
487,000 | 55,000 | ||||||
| Total current assets |
17,934,000 | 1,091,000 | ||||||
| Investment securities, available-for-sale, long-term |
15,831,000 | — | ||||||
| Property and equipment, net |
2,074,000 | 2,867,000 | ||||||
| Other assets |
— | 100,000 | ||||||
| TOTAL ASSETS |
$ | 35,839,000 | $ | 4,058,000 | ||||
| LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY (DEFICIT) |
||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable |
$ | 509,000 | $ | 159,000 | ||||
| Payable to related party |
45,000 | 42,000 | ||||||
| Current portion of research liability |
27,000 | — | ||||||
| Accrued liabilities |
1,214,000 | 576,000 | ||||||
| Total current liabilities |
1,795,000 | 777,000 | ||||||
| Research liability |
— | 1,948,000 | ||||||
| Other long-term liabilities |
— | 16,000 | ||||||
| Total liabilities |
1,795,000 | 2,741,000 | ||||||
| COMMITMENTS AND CONTINGENCIES (Note 7) | — | — | ||||||
| MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK | ||||||||
| Mandatorily redeemable convertible preferred stock, no par value, 5,500,000 shares authorized; 0 and 3,735,025 issued and outstanding at September 30, 2004 and December 31, 2003, respectively |
— | 27,206,000 | ||||||
| SHAREHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Common stock, $0.001 par value, 120,000,000 shares authorized; 16,523,680 shares issued and outstanding at September 30, 2004 |
70,372,000 | — | ||||||
| Class A Common stock, no par value, 20,000,000 shares authorized; 802,414 shares issued and outstanding at December 31, 2003 |
— | 3,361,000 | ||||||
| Class B Common stock, no par value, 10,000,000 shares authorized; 5,370,000 issued and outstanding at December 31, 2003 |
— | 105,000 | ||||||
| Deferred stock-based compensation |
(977,000 | ) | (31,000 | ) | ||||
| Accumulated other comprehensive gain (loss) |
(27,000 | ) | — | |||||
| Accumulated deficit |
(35,324,000 | ) | (29,324,000 | ) | ||||
| Total shareholders’ equity (deficit) |
34,044,000 | (25,889,000 | ) | |||||
| TOTAL LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY (DEFICIT) |
$ | 35,839,000 | $ | 4,058,000 | ||||
The accompanying notes are an integral part of these condensed financial statements.
3
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenue |
$ | 292,000 | $ | 676,000 | $ | 896,000 | $ | 1,441,000 | ||||||||
| Cost of revenue |
164,000 | 373,000 | 546,000 | 756,000 | ||||||||||||
| GROSS PROFIT | 128,000 | 303,000 | 350,000 | 685,000 | ||||||||||||
| Research and development expense |
1,592,000 | 1,886,000 | 2,662,000 | 5,926,000 | ||||||||||||
| Marketing, general and administrative expense |
1,513,000 | 268,000 | 3,404,000 | 889,000 | ||||||||||||
| Total operating expenses |
3,105,000 | 2,154,000 | 6,066,000 | 6,815,000 | ||||||||||||
| Loss from operations |
(2,977,000 | ) | (1,851,000 | ) | (5,716,000 | ) | (6,130,000 | ) | ||||||||
| Interest income |
63,000 | 3,000 | 64,000 | 37,000 | ||||||||||||
| Interest expense |
(262,000 | ) | (348,000 | ) | ||||||||||||
| Realized gain on sale of investment securities |
— | — | — | 39,000 | ||||||||||||
| Net loss | (3,176,000 | ) | (1,848,000 | ) | (6,000,000 | ) | (6,054,000 | ) | ||||||||
| Deemed dividend upon issuance of mandatorily redeemable convertible preferred stock |
— | — | (500,000 | ) | — | |||||||||||
| NET LOSS AVAILABLE TO COMMON SHAREHOLDERS | $ | (3,176,000 | ) | $ | (1,848,000 | ) | $ | (6,500,000 | ) | $ | (6,054,000 | ) | ||||
| 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 | ||||||||||||
The accompanying notes are an integral part of these condensed financial statements.
4
LUMERA CORPORATION
C ONDENSED STATEMENTS OF CHANGES IN MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY (DEFICIT) FOR THE PERIOD FROM JANUARY 1, 2003 TO SEPTEMBER 30, 2004
(Unaudited)
| Shareholders’ Equity (Deficit) |
|||||||||||||||||||||||||||||||||||||
| Common Stock |
Deferred Stock-based Compensation |
Accumulated Other Comprehensive Income |
Accumulated Deficit |
Total Shareholders’ Equity (Deficit) |
|||||||||||||||||||||||||||||||||
| Mandatorily Redeemable Convertible Preferred Stock |
Class A |
Class B |
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| Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
||||||||||||||||||||||||||||||||
| Balance at January 1, 2003 |
2,400,000 | 24,603,000 | 802,000 | $ | 3,325,000 | 5,370,000 | $ | 105,000 | $ | — | $ | — | $ | (21,241,000 | ) | $ | (17,760,000 | ) | |||||||||||||||||||
| Issuance of mandatorily redeemable convertible preferred stock for cash, net of issuance costs of $67,000 |
1,335,000 | 2,603,000 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
| Issuance of options for services |
— | 36,000 | (36,000 | ) | — | ||||||||||||||||||||||||||||||||
| Amortization of deferred compensation |
— | — | — | — | — | — | 13,000 | — | — | 13,000 | |||||||||||||||||||||||||||
| Other comprehensive income |
(59,000 | ) | (59,000 | ) | |||||||||||||||||||||||||||||||||
| Net loss |
— | — | — | — | — | — | — | — | (8,083,000 | ) | (8,083,000 | ) | |||||||||||||||||||||||||
| Balance at December 31, 2003 |
3,735,000 | 27,206,000 | 802,000 | 3,361,000 | 5,370,000 | 105,000 | (31,000 | ) | — | (29,324,000 | ) | (25,889,000 | ) | ||||||||||||||||||||||||
| Issuance of mandatorily redeemable convertible preferred stock and related beneficial conversion feature |
250,000 | 500,000 | 500,000 | ||||||||||||||||||||||||||||||||||
| Deemed dividend related to beneficial conversion feature |
— | 500,000 | — | (500,000 | ) | — | — | — | — | — | (500,000 | ) | |||||||||||||||||||||||||
| Issuance of Common Stock, net of offering costs of $1,995,000 |
— | — | 6,328,000 | 36,736,000 | — | — | — | — | — | 36,736,000 | |||||||||||||||||||||||||||
| Conversion of mandatorily redeemable convertible preferred stock and Common B to Common Stock |
(3,985,000 | ) | (27,706,000 | ) | 9,355,000 | 27,811,000 | (5,370,000 | ) | (105,000 | ) | 27,706,000 | ||||||||||||||||||||||||||
| Deferred compensation related to options issued |
2,032,000 | ||||||||||||||||||||||||||||||||||||