Lumenon Is Looking Lame
Technically, this doesn't mean Lumenon is bankrupt, as Kirk Petersen, the company's director of marketing communications, is quick to point out. Lumenon's holding company, which is registered in the U.S., continues to trade as normal, he says. Of course, this doesn't alter the fact that the company is almost out of cash.
Credit protection in Canada gives Lumenon 30 days initially, starting from January 8, in which to restructure its debt obligations. This period could be extended by the court if it feels that a positive outcome is likely. But if the debts cannot be restructured, then Lumenon will be forced to file for Chapter 11 bankruptcy protection in the U.S., which could ultimately lead to its closure.
Lumenon's financial woes won't surprise industry followers. In its September 30 earnings statement, the company reported debts of CDN$8 million (US$12.3 million). Its cash position was CDN$3.0 million (US$1.9 million), yet it reported a net loss in the previous quarter of CDN$5.4 Million (US$3.4 Million) (see Lumenon Reports Q1). Clearly, the money wasn't likely to last for another quarter, even with a reduction in burn rate.
Lumenon's predicament seems typical of integrated optics startups, which often have trouble translating what appears to be a promising technology in the lab into a mass-manufacturable product. This factor has contributed to the demise of a number of startups in the field, including Nanovation and Zenastra (see Nanovation Goes Bust).
In Lumenon's case, its technology was based on a sol-gel process for depositing optical waveguides, called "PHASIC" (short for Photonic Hybrid Active Silica Integrated Circuit). The manufacturing process involves coating a wafer with thin layers of a liquid polymer-glass mixture, which can be patterned directly by ultraviolet light when dry -- a process that Lumenon likens to printing photographs. The company claims this is a simpler process than the conventional lithography and etching used in semiconductor fabrication. It also -- rather unusually -- allows polymers to be included in the final device.
But after nearly four years working on this technology, Lumenon still isn't ready to go to market. "We have shown through limited sampling that the technology is credible," says Petersen. "But it's difficult to translate from samples to volume manufacturing. We're [still] working to meet internal benchmarks, prior to initiating external validation."
Any rescue package will have to take into account that Lumenon is still in a pre-revenue position. Further, it doesn't look as if the market for integrated optics components is going to come back any time soon.
Lumenon's stock, which is listed on the Nasdaq SmallCap market for the time being, dropped suddenly on the news that it had been granted credit protection, from roughly US$0.15 to US$0.08 per share. This makes it appear extremely likely that it will be booted out of the Nasdaq for failing to meet the requirement of trading above $1.00 for more than 10 consecutive days. Nasdaq previously gave Lumenon 180 days notice to meet this requirement, which expires on February 10. Getting jettisoned from Nasdaq could deal a further blow to its share price (see Nasdaq Warns Lumenon).
Footnote: In 2000, Lumenon's stock price reached $60 per share.
— Pauline Rigby, Senior Editor, Light Reading