SAN DIEGO--(BUSINESS WIRE)--JMAR Technologies, Inc. (OTCBB: JMAR.OB), a leading innovator in the development and commercialization of sensing systems for the detection of chemical, biological, radiological, nuclear and explosive (CBRNE) materials, today reported financial results for the third quarter and nine months ended September 30, 2008.

Revenues for the third quarter ended September 30, 2008 totaled $71,145, compared to $93,306 in the third quarter of 2007. Of the 2008 third quarter revenues, $59,245, or approximately 83%, was generated from the Company’s Laser Products Group, which now includes the programs previously belonging to the deactivated Research Division. The remaining $11,900, or approximately 17% of revenues, stems from a new revenue stream generated by the Spectral Systems Group, which JMAR formed in August 2008 to design and develop systems to detect, locate and identify chemical, biological, radiological/nuclear and conventional explosive threats.

The Company also announced a number of new contracts in the third quarter from its Sensor Products Group, which manufactures several BioSentry™ products to monitor water supplies for harmful microorganisms. Similarly, the Laser Products Group booked two custom laser development contracts. Revenues for these contracts will be recognized upon shipment, expected to occur in the current fourth quarter.

In the third quarter of 2007, $53,184, or 57% of revenues, was derived from the Company’s former Research Division, renamed the Laser Products Group, with the remaining $40,122, or 43% of revenues, produced by the Sensor Products Group.

Gross profit for the third quarter of 2008 was $12,233, or 17.2% of revenues, compared to $7,088, or 7.6% of revenues a year earlier. The widening of gross margins year-over-year was due primarily to higher margins earned on its contract under the Federal Small Business Innovation Research (SBIR) program in 2008 than on its SBIR and BioSentry revenue in 2007.

Sales, general and administrative (SG&A) expenses rose in the third quarter of 2008 to $1.9 million from $667,674 in the third quarter of 2007. The increase was primarily due to a year-over-year increase of $739,815 in professional fees – including legal, accounting and proxy services – along with increases in stock-based compensation, salaries and benefits, marketing support, advertising and industry show expenses, and recruitment and relocation costs. The majority of these expenses were due to the addition of key personnel to prepare for the Company’s progress towards commercialization.

Research, development and engineering (RD&E) expenses for the third quarter of 2008 totaled $349,408, up from $63,431 a year earlier. These expenses exclude customer-funded RD&E, primarily for the Company’s SBIR contract, which is included in the cost of revenues. The year-over-year increase was due mainly to higher product development expenditures related to the Company’s DP-LIBS and UV laser products.

Operating loss for the third quarter of 2008 was $2.24 million, compared with an operating loss of $724,017 in the third quarter of 2007. The year-earlier figure excludes a loss of $108,766 for JMAR’s Vermont operations, which were discontinued on September 30, 2007.

Interest and other expense for the third quarter of 2008 was $1.27 million, compared to $5.88 million in the third quarter of 2007. The higher expense in the year-earlier quarter was principally due to a $5.59 million increase in derivative liability related to warrants attached to term notes held by JMAR’s primary lender. Cash interest was higher by $73,000 in the third quarter of 2007, while expense due to amortization of debt discount was higher in 2008 by $917,970.

JMAR recorded basic net income available to common shareholders totaling $8.66 million, $0.15 basic per share, or $8.86 million, $0.04 per fully diluted share, in the third quarter of 2008. This is up from a loss of $1.47 million, or ($0.03) basic per share, in the third quarter of 2007. The difference in net income and loss was largely due to a change in fair value of derivative liability, which was a positive $12.36 million in the third quarter of 2008 compared to a positive $5.75 million in the third quarter of 2007.

On the balance sheet, the Company reported cash and cash equivalents of $159,833 on September 30, 2008, compared to $174,879 on December 31, 2007. Working capital deficit as of September 30, 2008 was $22.73 million compared to a deficit of $6.38 million on December 31, 2007. The decrease in working capital is primarily due to a $9.88 million increase in the Company’s derivative liabilities, which will not require payment in cash and a $6.29 million increase in current debt. JMAR’s cash requirements will continue to be significant, and the Company in September 2008 accepted interim financing of $1.75 million. Based on budget projections and discussion with its primary lender, the Company anticipates receiving additional funding to cover continuing operations through year-end and beyond.

CEO Notes Progress Towards Commercialization, Profitability

“The big story for us in the third quarter, as in the quarter before, is JMAR’s continued progress toward meeting the commercialization milestones we announced in May,” said JMAR Technologies’ CEO C. Neil Beer, Ph.D. “We believe we remain on track to see accelerated revenue growth in coming quarters and to reach our financial target of operating income during 2009.”

Dr. Beer continued, “Briefly, the milestones are 1) to enter a strategic partnership with a commercial firm to launch BioSentry in substantial numbers, 2) to develop a marketable BioSentry “sensor suite” for end-to-end water quality monitoring and analysis, 3) to develop a double-pulse laser product for military and commercial applications, and 4) to design and prototype one or more custom commercial laser applications. During and after the third quarter, we have made substantial progress toward the first milestone through negotiation with a major global water management company. Similarly we are moving toward achieving the second and third milestones, while we have already achieved success on the fourth milestone through commercial laser contracts with Zebra Imaging and the Johns Hopkins University Applied Physics Laboratory.”

“We also solidified our reputation for advanced technology in October when the respected consulting firm Frost & Sullivan named BioSentry the 2008 North American Biological Detection Product of the Year,” said Beer.

Another significant development in the third quarter was setting up JMAR’s Spectral Systems Group to design and develop equipment to detect, locate and identify radiological/nuclear threats with minimum intrusion. Leading Spectral Systems is James H. Winso, who brings with him more than three decades of experience developing nuclear detection and measurement systems.

Company Details Nine-Month Results

For the nine months ended September 30, 2008, JMAR reported revenues of $284,106, compared to $433,102 in the first nine months of 2007. Of the 2008 revenues, $197,679, or 69.6% of revenues were generated from the newly formed Laser Products Group, $11,900, or 4.2% of revenues, was produced by Spectral Systems Group, and the remaining $74,527, or 26.2% of revenues, was generated from the Sensor Products Group. In the first nine months of 2007, the former Research Division, now renamed the Laser Products Group, contributed $261,033, or 60.3% of revenues, with the remaining $172,069, 39.7% of revenues from Sensor Products.

The Company noted the decrease in revenues was due to a $116,754 reduction from its SBIR contract and a $97,542 reduction in revenues in the Sensor Products Group. Partially offsetting these decreases was an increase of $53,400 in the Laser Products Group’s BriteLight sales during the first nine months of 2008, compared to the first nine months of 2007.

Gross profit for the first nine months of 2008 was $4,617, or 1.6% of revenues, compared to $120,546, or 27.8% of revenues, in the first nine months of 2007. The Company said the narrowing of gross margin was due mainly to a loss on the sale of a laser product in the first quarter of 2008.

SG&A expenses for the first nine months of 2008 totaled $4.03 million, up from $2.47 million a year earlier. As in the third quarter of 2008, most of the year-over-year difference was due to an increase in professional fees with smaller increases for stock-based compensation, salaries and benefits, marketing support, advertising, industry show expenses, recruitment fees and relocation costs for new employees.

RD&E expenses for the first nine months of 2008 totaled $1.29 million, up from $479,609 a year earlier. As with the third quarter, the year-over-year increase was primarily due to increased product development expenditures related to the DP-LIBS and UV laser.

Interest and other expense for the first nine months of 2008 totaled $3.79 million, down from $7.33 million in the year-earlier period. The decrease was due primarily to the $6.59 million derivative liability in 2007 related to warrants attached to its term notes, offset largely by amortization of debt discount of $3.03 million in 2008 compared to $187,500 in 2007, along with an increase in cash interest expense of $199,012 for 2008. The latter expense items were largely due to the greater utilization of the Company’s $7.5 million term note.

Net loss applicable to common shares for the first nine months of 2008 was $19.41 million, or ($0.36) per fully diluted share, compared to a loss of $4.03 million, or ($0.09) per share, in the first nine months of 2007. The difference in net loss was largely due to a change in fair value of derivative liability, which was negative, at $10.37 million, in the 2008 period compared to positive, at $6.43 million, in the first nine months of 2007.

To be added to JMAR Technologies’ investor lists, please contact Haris Tajyar at htajyar@irintl.com or at 818-382-9702.

About JMAR

JMAR Technologies, Inc. (OTCBB: JMAR.OB) is a leading innovator in the development and commercialization of sensing systems for the detection of chemical, biological, radiological, nuclear and explosive (CBRNE) materials. Coupled with its established expertise in building advanced laser systems, JMAR provides solutions for a broad range of military, industrial and commercial applications. The Company draws on more than twenty years of experience and thirty patents in photonics, laser and detection technologies to develop products and solutions that address some of the world’s most pressing issues such as water quality, hazard detection and homeland security. JMAR’s vision is to continue to develop innovative technologies and products that support the advancement of global health, safety, and security initiatives. For further information on JMAR Technologies, please visit www.jmar.com.

Forward Looking Statements: This news release contains certain “forward-looking statements.” Forward-looking statements are based on current expectations and assumptions and are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, and many of which are beyond the Company’s control. Actual results could differ materially from these forward-looking statements as a result of a number of factors, including the uncertainty of acceptance in the market for our products and technologies or the acceptance of our customers’ products or technologies which incorporate our products and technologies, the failure of our technology to perform as predicted, competition from alternative technologies, uncertainties as to the size of the markets, cost and margins for JMAR’s products, current or future government regulations affecting the use of JMAR’s products, the lack of availability of critical components, the degree of protection from future patents, other risks associated with the development or acquisition of new products or technologies and those risks detailed in the Company’s Form 10-K for the year ended December 31, 2007 filed with the SEC. Given these risks and uncertainties, investors are cautioned not to place undue reliance on such forward-looking statements and no assurances can be given that such statements will be achieved. JMAR Technologies, Inc. does not assume any duty to publicly update or revise the material contained herein.

JMAR TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Nine Months Ended September 30, 2008 and 2007
(Unaudited)
	Three Months Ended								Nine Months Ended
	September 30, 2008				September 30, 2007				September 30, 2008				September 30, 2007
Revenues	$	71,145			$	93,306			$	284,106			$	433,102
Costs of revenues		58,912				86,218				279,489				312,556
Gross profit		12,233				7,088				4,617				120,546
Operating expenses:
Selling, general and administrative		1,901,147				667,674				4,029,991				2,474,539
Research and development		349,408				63,431				1,293,998				479,609
Impairment of long-lived assets		-				-								125,117
Total operating expenses		2,250,555				731,105				5,323,989				3,079,265
Operating loss from continuing operations		(2,238,322	)			(724,017	)			(5,319,372	)			(2,958,719	)
Interest and other income		-				73,882				61,352				122,426
Interest and other expense		(1,266,921	)			(5,883,261	)			(3,785,474	)			(7,331,001	)
Change in fair value of derivative liability		12,358,365				5,748,355				(10,374,040	)			6,432,152
Other Income		11,000				708				11,000				531,167
Income/ (loss) from continuing operations		8,864,122				(784,333	)			(19,406,534	)			(3,203,975	)
Income/(loss) from discontinued operations		-				(108,766	)							576,616
Net income (loss)	$	8,864,122			$	(893,099	)		$	(19,406,534	)		$	(2,627,359	)
Less: Preferred stock dividends		(205,678	)			(578,467	)			(736,897	)			(1,404,850	)
Income (loss) available to common stockholders - basic	$	8,658,444			$	(1,471,566	)		$	(20,143,431	)		$	(4,032,209	)
Deemed preferred stock dividends		205,678				-				-				-
Income (loss) available to common stockholders - fully diluted	$	8,864,122			$	(1,471,566	)		$	(20,143,431	)		$	(4,032,209	)
Earnings per common share
Basic earnings per share
Continuing operations	$	0.15			$	(0.03	)		$	(0.36	)		$	(0.10	)
Discontinued operations		0.00				(0.00	)			0.00				0.01
Basic EPS	$	0.15			$	(0.03	)		$	(0.36	)		$	(0.09	)
Fully diluted earnings per share
Continuing operations	$	0.04			$	(0.03	)		$	(0.36	)		$	(0.10	)
Discontinued operations		0.00				(0.00	)			0.00				0.01
Fully diluted EPS	$	0.04			$	(0.03	)		$	(0.36	)		$	(0.09	)
Weighted average number of common shares outstanding - basic		58,141,217				50,091,351				55,381,078				44,821,188
Weighted average number of common shares outstanding - fully diluted		217,262,157				50,091,351				55,381,078				44,821,188

JMAR TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
As of September 30, 2008 and December 31, 2007
				September 30, 2008			December 31, 2007
				(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents				$	159,833		$	174,879
Accounts receivable					9,963			44,544
Unbilled receivables					20,404			21,180
Inventories					682,198			308,029
Current assets of discontinued operations					-			479,342
Prepaid expenses and other					174,228			160,610
Total current assets					1,046,626			1,188,584
Property and equipment, net					571,825			683,249
Intangible assets, net					1,702,352			1,641,913
Restricted cash					1,181,956			4,251,252
Other assets					222,555			217,302
TOTAL ASSETS					4,725,314			7,982,300
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable				$	263,766		$	534,586
Accrued liabilities					713,796			427,600
Term notes, net of debt discounts					6,290,368			-
Accrued payroll and related costs					214,759			218,562
Working capital line of credit, net					514,744			508,725
Current portion of notes payable and other liabilities, net					125,385			103,375
Current liabilities of discontinued operations					704,333			708,716
Current portion of deferred rent					49,429			49,429
Derivative liabilities					14,904,337			5,022,378
Total current liabilities					23,780,917			7,573,371

JMAR TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
As of September 30, 2008 and December 31, 2007
				September 30, 2008				December 31, 2007
				(unaudited)
STOCKHOLDERS’ DEFICIT
Term notes, net of debt discounts					-				1,505,208
Long-term portion of deferred rent					152,404				250,887
Long-term liabilities of discontinued operations					89,209				89,209
Total liabilities					24,022,530				9,418,675
Redeemable convertible preferred stock: $0.01 par value; 5,000,000 shares authorized; 738,329 shares issued and outstanding at September 30, 2008 and December 31, 2007, net of unamortized discount of $1,312,277 and $1,709,606, respectively					6,545,574				5,974,644
Commitments and contingencies
Stockholders' deficit:
Common stock: $0.01 par value; 380,000,000 shares authorized; 57,701,461 shares issued and outstanding at September 30, 2008, and 53,839,559 shares issued and outstanding at December 31, 2007					577,015				538,395
Additional paid-in-capital					86,840,392				85,191,382
Committed common stock					24,030				-
Accumulated deficit					(113,284,227	)			(93,140,796	)
Total stockholders' deficit					(25,842,790	)			(7,411,019	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT				$	4,725,314			$	7,982,300

At Investor Relations Intl.
Haris Tajyar
Managing Partner
Ph: 818-382-9702
htajyar@irintl.com
or
At JMAR Technologies:
Kathi Kirchmeier
Marketing Communications Manager
Ph: 858-946-6800
kkirchmeier@jmar.com