1137399--3/29/2007--LUMERA

related topics

{product, market, service}

{customer, product, revenue}

{product, candidate, development}

{property, intellectual, protect}

{acquisition, growth, future}

{control, financial, internal}

{regulation, government, change}

{cost, regulation, environmental}

{product, liability, claim}

{personnel, key, retain}

{stock, price, operating}

{operation, natural, condition}

{operation, international, foreign}

{regulation, change, law}

We have incurred substantial operating losses since our inception and will continue to incur substantial operating losses for the foreseeable future. We are subject to the risks frequently experienced by early stage companies. We are entering new markets, and if we fail to accurately predict growth in these new markets, we may suffer substantial losses. The establishment and maintenance of original equipment manufacturer and other collaborative relationships is critical to the success of our business. Our future growth will suffer if we do not achieve sufficient market acceptance of our products. Successful commercialization of our current and future products will require us to maintain a high level of technical expertise. Many of our products will have long sales cycles, which may cause us to expend resources without an acceptable financial return and which makes it difficult to plan our expenses and forecast our revenues. We may require additional capital to continue to fund our operations. If we do not obtain additional capital, we may be required to substantially limit our operations. We currently rely heavily on a small number of development contracts with the U.S. Department of Defense and government contractors. The termination or non-renewal of one or more of these contracts could significantly reduce our revenue. Some of our products in development are directed at the telecommunications and networking markets, which continue to be subject to overcapacity and slow growth or decline. Our quarter-to-quarter performance may vary substantially, and this variance, as well as general market conditions, may cause our stock price to fluctuate greatly and potentially expose us to litigation. We cannot predict the pace of marketable products we may generate, and any inability to generate a sufficient number of marketable products would reduce our revenues and harm our business. The failure to compete successfully could harm our business. We may be unable to establish sales and marketing capabilities necessary to successfully commercialize our potential products. We may be unable to obtain effective intellectual property protection for our potential products and technology. We may be subject to patent infringement claims, which could result in substantial costs and liability and prevent us from commercializing our potential products. The technology we license from various third parties may be subject to government rights and retained rights of the originating research institution. The loss of our chief executive officer, or any inability to attract and retain additional personnel, could impair our ability to maintain or expand our business. If we fail to develop and maintain the quality of our manufacturing processes, our operating results would be harmed. If we decide to make commercial quantities of products at our facilities, we may be required to make significant capital expenditures to increase capacity or purchase wafers or components from contract manufacturers. We may not be able to manufacture products at competitive prices. We conduct all of our operations at a single facility, and circumstances beyond our control may result in significant interruptions. We could be exposed to significant product liability claims that could be time-consuming and costly and impair our ability to obtain and maintain insurance coverage. If we fail to effectively manage our growth, our business could suffer. We are subject to regulatory compliance related to our operations. We may be unable to export our potential products or technology to other countries, convey information about our technology to citizens of other countries or sell certain products commercially, if the products or technology are subject to United States export or other regulations. We may incur liability arising from the use of hazardous materials. Acquisitions or investments may be unsuccessful and may divert our management s attention and consume significant resources. Our plan to develop relationships with strategic partners may not be successful. As our business grows, if we need to establish global operations, we will be subject to various risks. Our limited operating history makes financial forecasting difficult for us and for others that may publish estimates of our future financial results.

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1137399--3/29/2007--LUMERA_CORP