Luna Innovations Incorporated (NASDAQ:LUNA), a company focusing
on sensing, instrumentation and nanotechnology, today announced its
financial results for the third quarter and nine months ended
September 30, 2010.
As compared to the same quarter last year, total revenue
decreased by 3%, from $8.9 million in the third quarter of 2009 to
$8.6 million in the third quarter of 2010. Revenue in the company’s
product and license segment improved by 49%, from $2.4 million in
the third quarter of 2009 to $3.6 million in the third quarter of
2010. Technology development revenues decreased by 23% to $5.0
million for the third quarter of 2010 from $6.5 million for the
third quarter of 2009.
Operating expenses improved by $1.7 million, or 31%, primarily
due to the non-recurring litigation and reorganization costs in
2009 and to the company’s ongoing expense savings initiatives. The
company reported a net loss attributable to common stockholders of
$0.5 million, or $0.04 per common share, for the third quarter of
2010, as compared to a net loss of $2.0 million, or $0.18 per
common share for the third quarter of 2009.
Adjusted EBITDA less litigation- and reorganization-related
items improved to $0.9 million for the third quarter of 2010, as
compared to $0.8 million for the third quarter of 2009. Adjusted
EBITDA reflects the company’s earnings before interest, taxes,
depreciation and amortization, non-cash stock-based compensation
expense, warrant expense, and non-cash charges for impairment of
intangible assets. In addition, the company achieved positive cash
flow for the quarter of $0.9 million.
Dale Messick, Interim President and Chief Operating Officer,
provided this overview of Luna’s results: “We are extremely pleased
to report positive cash flow for the quarter along with a nearly
50% growth in our product and license revenues. As we have
anticipated, with the elimination of last year’s litigation and
Chapter 11 reorganization expenses from our quarterly results, we
have realized significant improvement in our bottom line and in our
cash flow.”
Third Quarter Financial and Business
Highlights
-- Product and license revenues improved by 49%, from $2.4
million in the third quarter of 2009 to $3.6 million in the third
quarter of 2010. Technology development revenues decreased by 23%
to $5.0 million for the third quarter of 2010 from $6.5 million for
the third quarter of 2009.
-- Gross profit for the third quarter of 2010 decreased 2% from
$3.5 million in the third quarter 2009 to $3.4 million in 2010.
-- Selling, general and administrative expenses decreased by
$0.5 million to $3.4 million, or 39% of total revenues for the
third quarter of 2010, from $3.9 million, or 44% of total revenues,
for the third quarter of 2009, driven by a reduction in legal
expenses.
-- Total operating expenses decreased by 31%, from $5.4 million
in the third quarter of 2009 to $3.7 million in the third quarter
of 2010, primarily driven by a reduction in litigation and Chapter
11 reorganization expenses, as well as by the company’s ongoing
expense savings initiatives.
-- Adjusted EBITDA excluding litigation and
reorganization-related items increased to $0.9 million in the third
quarter of 2010 from $0.8 million in the third quarter of 2009.
-- Net loss attributable to common stockholders improved to $0.5
million for the third quarter of 2010, compared to a net loss
attributable to common stockholders of $2.0 million for the third
quarter of 2009.
-- Cash and cash equivalents totaled $7.2 million at September
30, 2010, as compared to $5.7 million at September 30, 2009 and
$5.2 million at December 31, 2009. At September 30, 2010, $2.5
million continued to be outstanding under the company’s $5.0
million revolving line of credit.
-- Launched the Optical Backscatter Reflectometer™(OBR) 4600
product in the third quarter offering high resolution, high
sensitivity measurements of optical fiber assemblies and networks
up to two kilometers in length with substantially increased speed
over predecessor versions of the OBR.
--Increased the backlog for future technology development to
$29.6 million at September 30, 2010 compared to $23.5 million at
September 30, 2009.
Outlook for 2010
Based on information as of November 9, 2010, the company
continues to expect a net loss for the year in the range of $3.0
million to $4.0 million. The company also expects revenue for the
year to be in the range of $33.0 million to $34.0 million, a
narrowing of the company’s previous revenue guidance of $33.0
million to $35.5 million.
Non-GAAP Measures
In evaluating the operating performance of its business, Luna’s
management excludes certain charges and credits that are required
by generally accepted accounting principles (“GAAP”). These
non-GAAP results provide useful information to both management and
investors by excluding items that the company believes may not be
indicative of its operating performance, because either they are
non-cash items or they are unusual items that the company does not
expect to recur in the ordinary course of its business or are
unrelated to the ongoing operation of the business in the ordinary
course. These non-GAAP measures should be considered in addition to
results and guidance prepared in accordance with GAAP, but should
not be considered a substitute for, or superior to, GAAP results.
The non-GAAP measures included in this press release have been
reconciled to the nearest GAAP measure in the table following the
financial statements attached to this press release.
Conference Call
Information
As previously announced, Luna Innovations will conduct an
investor conference call at 5:00 p.m. (EST) today to discuss its
financial results and business developments for the third quarter
of 2010. The investor conference call will be available via live
webcast on the Luna Innovations website at
http://www.lunainnovations.com under the tab "Investor Relations."
To participate by telephone, the domestic dial-in number is
866.770.7146 and the international dial-in number is 617.213.8068.
The participant access code is 55009308. Investors are advised to
dial in at least five minutes prior to the call to register. The
webcast will be archived on the company's website under "Webcasts
and Presentations" for 30 days following the conference call.
About Luna Innovations:
Luna Innovations Incorporated (www.lunainnovations.com) is focused on sensing and
instrumentation, and pharmaceutical nanomedicines. Luna develops
and manufactures new-generation products for the healthcare,
telecommunications, energy and defense markets. The company’s
products are used to measure, monitor, protect and improve critical
processes in the markets we serve. Through its disciplined
commercialization business model, Luna has become a recognized
leader in transitioning science to solutions. Luna is headquartered
in Roanoke, Virginia.
Forward Looking Statements:
The statements in this release that are not historical facts
constitute “forward-looking statements” made pursuant to the safe
harbor provision of the Private Securities Litigation Reform Act of
1995 that involve risks and uncertainties. These statements include
our expectations regarding financial results for the full year 2010
and capabilities of the Company’s OBR 4600 product. Management
cautions the reader that these forward-looking statements are only
predictions and are subject to a number of both known and unknown
risks and uncertainties, and actual results, performance, and/or
achievements of the Company may differ materially from the future
results, performance, and/or achievements expressed or implied by
these forward-looking statements as a result of a number of
factors. These factors include, without limitation the fact that
the outlook for full year 2010 could change, and also include,
without limitations, those risks and uncertainties set forth in the
Company’s periodic reports and other filings with the Securities
and Exchange Commission. Such filings are available at the SEC’s
website at http://www.sec.gov, and at the company’s website at
http://www.lunainnovations.com. The statements made in this release
are based on information available to the company as of the date of
this release and Luna Innovations undertakes no obligation to
update any of the forward-looking statements after the date of this
release.
Luna Innovations Consolidated Statements of
Operations Three Months Ended Nine Months
Ended September 30, September 30, 2010
2009 2010 2009 (unaudited)
(unaudited) Revenues: Technology development revenues $
5,027,024 $ 6,493,741 $ 16,929,621 $ 19,795,638 Product and license
revenues 3,558,118 2,381,184
8,539,953 6,234,621 Total revenues
8,585,142 8,874,925 25,469,574 26,030,259 Cost of revenues:
Technology development costs 3,534,089 4,136,935 11,559,351
13,189,007 Product and license costs 1,613,499
1,231,289 4,332,600 3,275,076
Total cost of revenues 5,147,588
5,368,224 15,891,951 16,464,083
Gross Profit 3,437,554 3,506,701 9,577,623 9,566,176
Operating expense: Selling, general and administrative
3,383,121 3,892,238
10,044,549
13,033,818 Research, development, and engineering 307,777 660,836
1,249,385 2,343,176 Litigation reserve — — — 36,303,643 Impairment
of intangible assets — — — 1,310,598 Reorganization expense
53,597 872,644 161,801
872,644 Total operating expense 3,744,495
5,425,718 11,455,735
53,863,879 Operating loss (306,941 )
(1,919,017 ) (1,878,112 ) (44,297,703 ) Other income
(expense): Other income (expense) 10,000 — (5,477 ) (18,167 )
Interest expense (124,756 ) (124,208 )
(352,282 ) (422,702 ) Total other (expense)
(114,756 ) (124,208 ) (357,759 )
(440,869 ) Loss before income taxes (421,697 )
(2,043,225 ) (2,235,871 ) (44,738,572 ) Income tax expense
1,817 — 1,817 600,000
Net loss (423,514 ) (2,043,225 ) (2,237,688 )
(45,338,572 ) Preferred stock dividend 93,000
— 267,633 —
Net loss attributable to common
stockholders
$ (516,514 ) $ (2,043,225 ) $ (2,505,321 ) $ (45,338,572 )
Net loss per share: Basic and Diluted $ (0.04 ) $ (0.18 ) $ (0.19 )
$ (4.05 ) Weighted average shares: Basic and Diluted
13,188,913 11,247,749 12,890,752 11,205,575
Luna Innovations Consolidated Balance Sheets September
30, December 31, 2010 2009
(unaudited) Assets Current assets Cash and cash equivalents
$ 7,152,228 $ 5,228,802 Accounts receivable, net 6,578,187
7,203,203 Inventory, net 2,984,848 2,890,364 Prepaid expenses
508,138 560,964 Other current assets 45,524
729,532 Total current assets 17,268,925 16,612,865
Property and equipment, net 3,428,076 4,129,015 Intangible assets,
net 571,444 580,785 Other assets 322,002
435,259 Total assets $ 21,590,447 $ 21,757,924
Liabilities and stockholders’ equity (deficit)
Liabilities not subject to compromise: Current Liabilities:
Revolving line of credit $ 2,500,000 $ — Current portion of long
term-debt obligation 1,164,005 — Accounts payable 1,279,763
1,142,267 Accrued liabilities 3,234,115 3,386,849 Deferred credits
1,343,348 1,027,016 Total
current liabilities 9,521,231 5,556,132 Long-term debt obligation
2,993,296 — Liabilities subject to compromise —
19,062,000 Total liabilities 12,514,527
24,618,132 Commitments and contingencies Stockholders’
equity (deficit): Preferred stock, par value $0.001, 1,321,514
shares authorized, issued and outstanding at September 30, 2010
1,322 —
Common stock, par value $0.001,
100,000,000 shares authorized, 13,280,696 and 11,351,967 shares
issuedand outstanding at September 30, 2010 and December 31, 2009,
respectively
13,338 11,352 Additional paid-in capital 55,666,838 41,228,698
Accumulated deficit (46,605,578 ) (44,100,258 )
Total stockholders’ equity (deficit) 9,075,920
(2,860,208 ) Total liabilities and stockholders’
equity (deficit) $ 21,590,447 $ 21,757,924
Luna Innovations Consolidated Statements of Cash
Flows Nine months ended September 30, 2010
2009 (unaudited) Cash flows used in operating
activities Net loss $ (2,237,688 ) $ (45,338,572 ) Adjustments
to reconcile net loss to net cash used in operating activities
Depreciation and amortization 953,630 1,504,211 Impairment of
intangible assets — 1,310,598 Share-based compensation 2,616,024
2,378,968 Deferred tax expense
—
600,000 Reorganization expense in excess of cash payments
—
88,210 Reorganization accrual
—
146,964 Change in assets and liabilities: Accounts receivable
625,016 (263,620 ) Inventory (140,220 ) (1,181,901 ) Other current
assets 736,834 — Other assets 71,029 (34,581 ) Accounts payable and
accrued expenses (3,267,285 ) (102,956 ) Litigation reserve —
36,303,643 Deferred credits 316,332 (102,391 )
Net cash used in operating activities (326,328
) (4,691,427 )
Cash flows used in investing
activities Acquisition of property and equipment (50,540 )
(49,295 ) Intangible property costs (152,404 )
(152,011 ) Net cash used in investing activities
(202,944 ) (201,306 )
Cash flows provided
by (used in) financing activities Payments on capital lease
obligations (4,000 ) (7,927 ) Proceeds from debt obligations
2,500,000 — Payment of debt obligations (842,699 ) (5,000,000 )
Proceeds from the exercise of options and warrants 799,397
35,556 Net cash provided by (used in)
financing activities 2,452,698 (4,972,371 )
Net change in cash 1,923,426 (9,865,104 ) Cash and
cash equivalents—beginning of period 5,228,802
15,518,960 Cash and cash equivalents—end of period $
7,152,228 $ 5,653,856
Luna Innovations Incorporated
Reconciliation of Net Loss to EBITDA and Adjusted EBITDA
Three Months Ended Nine Months Ended
September 30,
September 30, 2010 2009 2010
2009 (unaudited) (unaudited)
Net loss $ (423,514 ) $ (2,043,225 ) $ (2,237,688 ) $
(45,338,572 ) Interest 124,756 124,208 352,282 422,702 Taxes
1,817
—
1,817 600,000 Depreciation and amortization 311,652 361,365 953,630
1,504,211 Impairment of intangible assets
—
—
—
1,310,598 EBITDA 14,711 (1,557,652 ) (929,959
) (41,501,061 ) Stock-based compensation 853,009 809,925
2,616,024 2,378,968 Warrant expense 27,667
—
149,850
—
Adjusted EBITDA 895,387 (747,727 ) 1,835,915
(39,122,093 ) Litigation reserve
—
—
—
36,303,643
Fees associated with litigation and
reorganization
53,597 1,556,952 284,193
4,155,008 Adjusted EBITDA less litigation and
reorganization-related items $ 948,984 $ 809,225 $
2,120,108 $ 1,336,558
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