Lumera Reports First Quarter 2008 Results and Updates Revenue Expectations

Business Wire, May 6, 2008

BOTHELL, Wash. -- 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.