ROANOKE, Va., Sept. 7 /PRNewswire-FirstCall/ -- Luna Innovations
Incorporated (NASDAQ:LUNA), in an open letter to stockholders
issued today and attached to this press release, provided guidance
for its estimated revenues and net loss for the second half of
2006. The Company's revenues and earnings estimates for the second
half of 2006 are expected to be lower than generally held
expectations. In the letter, Chairman and Chief Executive Officer
Kent A. Murphy said the Company expects revenues to be in the range
of $11.5 million to $12.5 million and its net loss to be between
$4.5 million and $5.5 million, or ($0.46) to ($0.56) per share on a
diluted basis, respectively, for the six month period ending
December 31, 2006. The Company said that currently anticipated
revenues of between $21.0 million and $22.0 million for the full
year ending December 31, 2006 will reflect an increase of
approximately 28 percent to 34 percent year over year from the
prior year ended December 31, 2005. On a pro forma basis, giving
effect to its September 2005 acquisition of Luna Technologies, Inc.
as if such acquisition had occurred on January 1, 2005, the
increase in estimated revenues from the prior year is expected to
be in the range of approximately 13 percent to 19 percent. (Logo:
http://www.newscom.com/cgi-bin/prnh/20060627/LUNALOGO ) The Company
stated that it expects results for fiscal year 2006 to be
negatively affected by the previously announced lag in the
recruitment of personnel to work on recently awarded contracts, as
well as by lower than expected sales of products, especially the
sales of advanced technology products related to sensing systems
and sales of advanced materials. In the letter, Murphy reviewed
operations and identified certain milestones that he said are
important for the Company's growth. Despite the Company's
expectations as to its 2006 financial outlook, Murphy wrote to
investors that, "We are encouraged by our progress in the
substantive work that will ultimately be responsible for our
success." He asked that investors measure the Company's progress by
both the achievement of financial goals and the accomplishment of
key product milestones, some of which are identified in his letter
to stockholders. About Luna Innovations Luna Innovations
researches, develops and commercializes innovative technologies in
molecular technology and sensing solutions. Luna accelerates the
process of bringing new and innovative products to market by
focusing on technologies that can fulfill identified market needs
and then takes these technologies from the applied research stage
through commercialization. Since its inception, Luna has
successfully developed products for the energy, telecommunications,
life sciences and defense industries. Headquartered in Roanoke,
Virginia, the company has research, development and manufacturing
facilities in Blacksburg, Charlottesville, Hampton, and Danville,
Virginia, and a sales office in McLean, Virginia. Additional
information can be found at the company's website,
http://www.lunainnovations.com/. FORWARD LOOKING STATEMENTS This
press release includes information that constitutes
"forward-looking statements" made pursuant to the safe harbor
provision of the Private Securities Litigation Reform Act of 1995,
including but not limited to: the Company's estimate of its
expected revenue, net loss and net loss per share for the six
months and full fiscal year ended December 31, 2006; the impact of
the lag in hiring contract research technical personnel; expected
sales of products (particularly products related to sensing systems
and advanced materials); and the impact of its recent product
development accomplishments on future performance. The Company has
attempted, whenever possible, to identify these forward-looking
statements by words such as "intends," "will," "plans,"
"anticipates," "expects," "may," "estimates," "believes," "should,"
"projects," or "continue," or the negative of those words and other
comparable words. Similarly, statements that describe the Company's
business strategy, goals, prospects, opportunities, outlook,
objectives, plans or intentions are also forward-looking
statements. Luna Innovations wishes to take advantage of the "safe
harbor" provided by the Private Securities Litigation Reform Act of
1995 and you are cautioned that actual events or results may differ
materially from the expectations expressed in such forward-looking
statements as a result of various factors, including risks and
uncertainties, many of which are beyond Luna Innovations' control.
Luna Innovations cannot guarantee future results, levels of
activity, performance, or achievements. Factors that could cause
the Company's actual results to differ materially from the
expectations expressed in such forward-looking statements include,
but are not limited to: (1) the assumptions underlying its
financial estimates may be incorrect, (2) it may continue to face
difficulty in, or increased costs related to, hiring, training and
retaining skilled employees, (3) it may continue to experience
lower than expected sales of products, (4) it may not be able to
realize the expected benefits, if any, from its recent product
development activities, (5) it may not be successful in identifying
market needs for new products, (6) it may be unable to manage its
growth effectively, (7) it may experience continuing losses, (8) it
will continue to rely on contract research, including government
grants and contracts available only to small businesses, for a
significant portion of its revenue, (9) it may become ineligible
for small business government grants and contracts in the future,
(10) it faces substantial competition in its markets, (11) its
proprietary rights may be insufficient to protect its technologies,
(12) third parties may claim that it infringes their intellectual
property rights, (13) as a provider of contract research for the
U.S. government, it may be subject to federal audits and
investigations, (14) its ability to develop and market certain of
our products may be delayed by U.S. Food and Drug Administration or
other regulatory requirements, (15) it has limited manufacturing
experience and may experience unanticipated manufacturing or supply
problems, (16) changes in customer demand for its products and
product candidates, (17) the impact of a slowdown in the overall
economy, and (18) the uncertainty of the current global political
environment and the potential for terrorist attacks. Additional
factors that may affect the future results of Luna Innovations are
set forth in its Registration Statement on Form S-1, its quarterly
report on Form 10-Q and other filings with the Securities and
Exchange Commission ("SEC"), which are available at the SEC's
website at http://www.sec.gov/, and at Luna Innovations' website at
http://www.lunainnovations.com/. These risk factors are updated
from time to time through the filing of periodic reports and
registration statements with the SEC. The statements made in this
press 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 herein
after the date of this press release. SHAREHOLDER LETTER FOLLOWS
The following letter was provided by Kent A. Murphy, Chairman and
Chief Executive Officer of Luna Innovations Incorporated to
stockholders on September 7, 2006: At the same time that we are
providing this open letter to our stockholders, we are issuing a
press release that describes our financial outlook for the balance
of the year and also provides guidance for our estimated revenues
and net loss for the full year ending December 31, 2006. In the
release, which is attached to this letter, we state that our
revenues are expected to be lower and our net loss is expected to
be greater than generally held expectations. I would like to
provide a more detailed analysis of our performance and prospects,
focusing on some of our recent accomplishments and future
milestones that we believe will be important to our ultimate
success. Review of Financial Outlook: We currently expect revenues
for the year ending December 31, 2006 to be in the range of $21
million to $22 million. Compared to the year ended December 31,
2005, these revenues would reflect an estimated increase of
approximately 28 percent to 34 percent year over year. On a pro
forma basis, including a full year of operations of Luna
Technologies, which we acquired in September 2005, the increase in
2006 revenues over the prior year is expected to be in the range of
approximately 13 percent to 19 percent. In our second quarter 2006
earnings conference call, we reported that revenues from contract
research did not grow as quickly as we had expected because of the
lag in the recruitment of highly-skilled technical personnel needed
to work on recently awarded contracts. While we have increased our
recruitment efforts and have largely caught up with our existing
personnel needs, we expect that the longer hiring and training
timetables will continue to contribute to lower revenues, with the
impact expected to decrease as the year progresses. We also
anticipate lower than expected revenues in the second half of the
year from the sale of some of our products, especially our sensing
systems. Given the magnitude of the average selling price of these
products relative to our total product revenue, fluctuations of
just a few sales can result in a significant impact on our
financial performance. Additionally, revenue from advanced
materials sales and licensing arrangements have taken longer than
anticipated to realize. The lower revenues will, of course, have an
impact on our expected net loss. We have, therefore, strengthened
measures intended to further control expenses to mitigate the size
of the loss and to manage cash flow without jeopardizing our
commercialization strategy. We now expect our net loss to be
between $4.5 million and $5.5 million, or net loss of $0.46 to
$0.56 per share on a diluted basis, for the second half of 2006.
Our Business Model & Operating Overview: In its most basic
terms, Luna's business model is a three step process: 1.
Identifying emerging technologies that we believe have the
potential to become high value-added products, and winning
contracts from third parties such as government agencies,
university labs and other businesses to fund our development and
understanding of such technologies; 2. Making appropriate business
decisions about our technology and product development efforts,
such as using our own funds to commercialize applications of a
technology to meet clearly-defined market needs, or entering into
collaboration or licensing agreements with others when appropriate;
and 3. Manufacturing and selling commercially viable products and
technologies. The emerging areas of technology where we are
currently focusing our efforts are: molecular technology solutions
(which involve harnessing the chemical, physical and biological
properties of novel combinations of matter to enhance the
performance characteristics of metals, ceramics, polymers,
nanostructures and composites) and sensing solutions (which involve
the integration of multiple technologies to measure and monitor
chemical, physical and biological properties using, for example,
optical, acoustic and wireless technologies). As we have grown and
attracted highly-qualified scientists and technologists, we have
built our reputation for expertise in these areas, and we believe
that this reputation has translated into our ability to win new
technology research and development contracts. For example, in
recent weeks we have been awarded approximately $4 million in new
development contracts related to our work in nanomaterials. These
contracts, to be performed over several years, are related to
increasing the overall efficiency of the production of
nanomaterials for potential commercial and military uses and the
actual application of nanomaterials in areas such as solar cells,
electro-magnetic interference coatings and military applications.
We expect that other benefits from this initiative will include
furthering our progress in developing disease-targeted MRI contrast
agents. We have already commercialized several products in the test
and measurement area and our test and measurement products are
gaining marketplace recognition. In August, we signed a multi-year
joint development agreement with one of the largest global test and
measurement companies for the development of a handheld fiber optic
test instrument. This product, when completed, is expected to lower
our customers' costs of deploying and maintaining fiber optic
networks. Additionally, our optical backscatter reflectometer
("OBR") technology has been included in the upcoming "Fiber Optic
Test Procedures" to be issued by ARINC as part of the standard
methods and procedures used for outfitting optical fiber on an
airframe. The OBR is currently listed in the forthcoming ARINC
standards as one of only two suitable instruments for testing fiber
on aircraft. We believe that our medical products are also gaining
marketplace acceptance. As we noted during our second quarter 2006
earnings conference call, we recently released our Emboli Detection
and Classification ("EDAC") system to the marketplace. Although we
do not expect to receive FDA clearance to sell the product for
clinical use until 2007, our EDAC(TM) product is available for sale
for investigational use and we have already received orders from
entities researching the effects of gaseous micro-emboli. In
addition, our EDAC product is currently being evaluated by one of
the market leaders in hemodialysis products and services. Based on
the initial encouraging reception for our EDAC product, we have
accelerated the development of our EN- TACT(TM) product, which will
use non-invasive technology on the same product platform as EDAC to
detect compartment syndrome. We currently anticipate introduction
of the EN-TACT product in the fourth quarter of this year for
research purposes and intend to seek FDA clearance for clinical use
beginning in 2007. Outlook: Luna's strategy is to become a leader
in developing and commercializing innovative technologies. To
achieve that goal, we seek to form collaborative relationships with
other public and private institutions for the purpose of building
expertise, then using our own funds to commercialize our
technologies. While we are disappointed in having to discuss with
you the prospects for lower than expected revenues in the
short-term, we are encouraged by our progress in the substantive
work that we believe will ultimately be responsible for our
success. In that regard, I ask you to measure the Company's
progress by the accomplishment of the following important
milestones as well as the achievement of financial goals: * FDA
clearance of our EDAC product and the successful marketing of the
product; * Launch of our EN-TACT product for compartment syndrome;
* Launch of a handheld fiber optic test instrument with our
development partner; and * Entering into new joint development or
product licensing agreements with major corporate partners. Thank
you for your interest and support. FORWARD LOOKING STATEMENTS This
letter includes information that constitutes "forward-looking
statements" made pursuant to the safe harbor provision of the
Private Securities Litigation Reform Act of 1995, including but not
limited to: estimates of our expected revenue, net loss and net
loss per share for the six-month period and full fiscal year ended
December 31, 2006; the impact of the lag in hiring contract
research technical personnel; expected sales of products
(particularly products related to sensing systems and advanced
materials); our expectation of benefits from recently awarded
nanomaterial contracts, including the ability of such contracts to
further our progress in developing disease-targeted MRI contrast
agents; the lowering of customer costs for deploying and
maintaining fiber optic networks arising from the joint development
of our handheld fiber optic test instrument; the anticipated timing
of product initiation and FDA clearance for our EDAC and EN-TACT
medical device products; and the impact of its recent product
development accomplishments on future performance. We have
attempted, whenever possible, to identify these forward- looking
statements by words such as "intends," "will," "plans,"
"anticipates," "expects," "may," "estimates," "believes," "should,"
"projects," or "continue," or the negative of those words and other
comparable words. Similarly, statements that describe our business
strategy, goals, prospects, opportunities, outlook, objectives,
plans or intentions are also forward-looking statements. Luna
Innovations wishes to take advantage of the "safe harbor" provided
by the Private Securities Litigation Reform Act of 1995 and you are
cautioned that actual events or results may differ materially from
the expectations expressed in such forward-looking statements as a
result of various factors, including risks and uncertainties, many
of which are beyond Luna Innovations' control. Luna Innovations
cannot guarantee future results, levels of activity, performance,
or achievements. Factors that could cause our actual results to
differ materially from the expectations expressed in such
forward-looking statements include, but are not limited to: (1) the
assumptions underlying our financial estimates may be incorrect,
(2) we may continue to face difficulty in, or increased costs
related to, hiring, training and retaining skilled employees, (3)
we may continue to experience lower than expected sales of
products, (4) we may not be able to realize the expected benefits,
if any, from our recent product development activities, (5) we may
not be successful in identifying market needs for new products, (6)
we may be unable to manage our growth effectively, (7) we may
experience continuing losses, (8) we will continue to rely on
contract research, including government grants and contracts
available only to small businesses, for a significant portion of
our revenue, (9) we may become ineligible for small business
government grants and contracts in the future, (10) we face
substantial competition in our markets, (11) our proprietary rights
may be insufficient to protect our technologies, (12) third parties
may claim that we infringe their intellectual property rights, (13)
as a provider of contract research for the U.S. government, we may
be subject to federal audits and investigations, (14) our ability
to develop and market certain of our products may be delayed by
U.S. Food and Drug Administration or other regulatory requirements,
(15) we have limited manufacturing experience and may experience
unanticipated manufacturing or supply problems, (16) changes in
customer demand for our products and product candidates, (17) the
impact of a slowdown in the overall economy, and (18) the
uncertainty of the current global political environment and the
potential for terrorist attacks. Additional factors that may affect
our future results are set forth in our Registration Statement on
Form S-1, our quarterly report on Form 10-Q and other filings with
the Securities and Exchange Commission ("SEC"), which are available
at the SEC's website at http://www.sec.gov/, and at Luna
Innovations' website at http://www.lunainnovations.com/. These risk
factors are updated from time to time through the filing of
periodic reports and registration statements with the SEC. The
statements made in this letter are based on information available
to Luna Innovations as of the date of this release and we undertake
no obligation to update any of the forward-looking statements
herein after the date of this letter.
http://www.newscom.com/cgi-bin/prnh/20060627/LUNALOGO
http://photoarchive.ap.org/ DATASOURCE: Luna Innovations
Incorporated CONTACT: Media: Mildred Cooper of Luna Innovations
Incorporated, +1-540-557-7561, , or Investor: Sally Beerbower of
Qorvis Communications, +1-703-744-7800, , for Luna Innovations
Incorporated Web site: http://www.lunainnovations.com/
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