Luna Innovations Achieves 53% Revenue Growth for the Third Quarter
2006 ROANOKE, Va., Nov. 6 /PRNewswire-FirstCall/ -- Luna
Innovations Incorporated (NASDAQ:LUNA) today announced its
financial results for the quarter ended September 30, 2006.
Revenues for the 2006 third quarter increased 53% to $6.0 million,
from $3.9 million for the same quarter of 2005, reflecting growth
in contract research revenues of approximately $0.9 million and
product and license revenues of approximately $1.2 million. Gross
profit increased to $1.9 million, or 32% of revenues, in the third
quarter of 2006, from $0.9 million, or 22% of revenues, in the
third quarter of 2005. Operating expenses were $4.1 million in the
third quarter of 2006, compared to $4.3 million in the second
quarter of 2006 and $1.0 million in the third quarter of 2005. The
increase in year over year operating expense reflects the company's
strategy, begun in late 2005, to increase its product portfolio and
product sales, which included the acquisition of Luna Technologies
in September 2005. Operating expenses in the third quarter of 2006
also include an additional $0.4 million in share-based compensation
expense, as well as administrative costs associated with the
company's growing employee base and its transformation to a public
company. As a result of these increases in operating expenses, the
company incurred a loss from operations of $2.2 million in the
third quarter of 2006, versus a loss from operations of $0.2
million for the prior year's comparable quarter. The net loss
applicable to common stockholders for the third quarter of 2006 was
$1.9 million, or $0.20 per share on a diluted basis, compared to a
net loss applicable to common stockholders of $0.1 million or $0.01
per share, for the third quarter of the previous year. Kent Murphy,
Chairman and Chief Executive Officer, commented, "The third quarter
proved to be an excellent one for Luna Innovations. In addition to
over fifty percent top line revenue growth and substantially
improved gross margins, we showed momentum in the core parts of our
business model. "In contract research, we booked over $6.1 million
in new contract awards. On the product side, we launched our
EN-TACT(TM) ultrasonic medical device and entered into a joint
development product agreement with Acterna, a division of JDSU. In
addition, we won a large development contract from a major
Department of Defense prime contractor to help develop an advanced
electronics subsystem for a next generation defense system and also
signed new technology assessment contracts to apply our fiber optic
sensing technology to new medical applications," Murphy reported.
Business Highlights -- Generated the company's most impressive
quarterly customer list to date, including significant deals with
several new customers. The company expanded existing customer
relationships with an international communications and information
technology company, two top-tier semiconductor companies, two major
federal government contractors, an oil and gas field equipment
provider, an optical network component and element manufacturer,
and a fiber optic sensing company. New customers include a leading
producer of supercomputers, a company that produces optical
components on hybrid optical/electrical integrated chips, and a
federal laboratory. -- Announced a joint development agreement
between the Luna Technologies subsidiary and Acterna, a division of
JDSU, that enables both companies to take advantage of new growth
opportunities in the area of fiber optics test and measurement,
particularly new products aimed at platforms for installation and
maintenance testing of modern optic networks. Products that result
from the joint development will be jointly marketed and distributed
under the agreement. -- Launched the EN-TACT(TM) (Emergency
Noninvasive Tissue and Compartment Testing) ultrasonic medical
device that quickly and non-invasively measures and monitors
intramuscular pressures. Based on technology originally developed
for the defense industry, the portable system is designed to be
operated with minimal training and is ideal for traumatic injuries,
sports medicine and military combat situations where compartment
syndrome is common. -- Received the Frost & Sullivan 2006
Patient Monitoring Technology of the Year Award for the innovative
design and the development of the EDAC(TM) (Embolus Detection and
Classification) QUANTIFIER. Based on technology originally
developed for the defense industry, the EDAC system will permit
cardiothoracic surgeons, perfusionists and anesthesiologists to
detect and monitor air bubbles that can occur in the bloodstream
during critical medical procedures such as cardio-pulmonary bypass
surgery. Financial Highlights -- Revenues for the third quarter of
2006 increased 53% compared to the third quarter of 2005 and 23%
compared to the second quarter of 2006. -- Product revenues
represented over 19% of total revenues in the third quarter of
2006, versus 0% in the third quarter of 2005, and 15% in the second
quarter of 2006. Product revenues grew to approximately $1.2
million in the third quarter of 2006, versus $0.8 million in the
second quarter of 2006. -- Gross profit for the third quarter of
2006 increased to $1.9 million, or 32% of revenues, from $0.9
million, or 22% of revenues, for the corresponding period of 2005.
-- The company reported a loss per share for the third quarter of
2006 of $0.20 per share, on a diluted basis, compared to a loss per
share of $0.01 for the third quarter of 2005. -- Cash and cash
equivalents totaled $22.4 million at September 30, 2006, compared
to $12.5 million at December 31, 2005. Conference Call Information
As previously announced, Luna Innovations will conduct an investor
conference call at 5:00 p.m. (EST) today to discuss the company's
third quarter 2006 financial results. The call can be accessed by
dialing 1.866.383.8003 domestically or 1.617.597.5330
internationally prior to the start of the call. The access code is
67270827. The conference call will also be webcast live over the
Internet. The webcast can be accessed by logging on to the
"Investor Relations" section of the Luna Innovations website,
http://www.lunainnovations.com/, prior to the event. The webcast
will be archived under the "Webcasts and Presentations" section of
the Luna Innovations website for at least 30 days following the
conference call. About Luna Innovations Luna Innovations
Incorporated researches, develops and commercializes innovative
technologies in molecular technology and sensing solutions. Luna
Innovations 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 Innovations 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
http://www.lunainnovations.com/. (Logo:
http://www.newscom.com/cgi-bin/prnh/20060627/LUNALOGO ) 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 (i) the company's joint
development agreement with JDSU enables both companies to take
advantage of new growth opportunities in the area of fiber optics
test and measurement, (ii) products developed from the joint
development agreement with JDSU will be jointly marketed, and (iii)
the company's EDAC system will permit cardiothoracic surgeons,
perfusionists and anesthesiologists to detect and monitor air
bubbles that can occur in the bloodstream and that can occur during
critical medical procedures such as cardio-pulmonary bypass
surgery. In general, the company attempts, 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 actual results to differ
materially from the expectations expressed in such forward-looking
statements include, but are not limited to: (1) we may be unable to
manage our growth effectively, (2) we may experience continuing
losses, (3) we may not be successful in identifying market needs
for new products, (4) 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, (5)
we may become ineligible for small business government grants and
contracts in the future, (6) we face substantial competition in our
markets, (7) our proprietary rights may be insufficient to protect
our technologies, (8) third parties may claim that we infringe
their intellectual property rights, (9) as a provider of contract
research for the U.S. government, we may be subject to federal
audits and investigations, (10) our ability to develop and market
certain of our products may be delayed by U.S. Food and Drug
Administration or other regulatory requirements, (11) we may
continue to face difficulty in, or increased costs related to,
hiring, training and retaining skilled employees, (12) we have
limited manufacturing experience and may experience unanticipated
manufacturing or supply problems, (13) we may experience changes in
customer demand for our products and product candidates, (14) our
product sales may be impacted by a slowdown in the overall economy,
and (15) 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. Luna Innovations Incorporated
Consolidated Statements of Operations Three Months Ended Nine
Months Ended September 30, September 30, ----------- ----------
----------- ----------- 2006 2005 2006 2005 ----------- ----------
----------- ----------- (unaudited) (unaudited) Revenues: Contract
research revenues $4,885,854 $3,942,195 $12,977,066 $11,111,721
Product and license revenues 1,163,663 - 2,521,403 - -----------
---------- ----------- ----------- Total revenues 6,049,517
3,942,195 15,498,469 11,111,721 Cost of revenues: Contract research
costs 3,587,280 3,068,372 9,600,404 8,539,567 Product and license
costs 520,699 - 1,194,969 - ----------- ---------- -----------
----------- Total cost of revenues 4,107,979 3,068,372 10,795,373
8,539,567 ----------- ---------- ----------- ----------- Gross
Profit 1,941,538 873,823 4,703,096 2,572,154 Operating expense
4,110,926 1,040,235 11,805,277 2,952,666 ----------- ----------
----------- ----------- Operating loss (2,169,388) (166,412)
(7,102,181) (380,512) ----------- ---------- -----------
----------- Other income (expense) Other income (expense) 934 (782)
10,331 (92) Interest income / (expense), net 232,649 (9,893)
345,794 (75,206) ----------- ---------- ----------- -----------
Total other income (expense) 233,583 (10,675) 356,125 (75,298)
----------- ---------- ----------- ----------- Loss before income
taxes (1,935,805) (177,087) (6,746,056) (455,810) Income tax
expense (benefit) 12,829 (126,396) 12,829 (187,273) -----------
---------- ----------- ----------- Net loss $(1,948,634) $(50,691)
$(6,758,885) $(268,537) =========== ========== ===========
=========== Net loss per share: Basic $(0.20) $(0.01) $(0.87)
$(0.08) =========== ========== =========== =========== Diluted
$(0.20) $(0.01) $(0.87) $(0.08) =========== ========== ===========
=========== Weighted average shares: Basic 9,842,265 3,839,512
7,743,885 3,229,683 =========== ========== =========== ===========
Diluted 9,842,265 3,839,512 7,743,885 3,229,683 ===========
========== =========== =========== Luna Innovations Incorporated
Consolidated Balance Sheets September 30, December 31, 2006 2005
---------------- ---------------- Assets (unaudited) Current assets
Cash and cash equivalents $22,442,016 $12,514,839 Accounts
receivable, net 5,194,447 5,129,911 Refundable income taxes 396,062
514,797 Inventory 681,559 448,475 Other current assets 535,076
227,409 ---------------- ---------------- Total current assets
29,249,160 18,835,431 Property and equipment, net 3,831,631
2,972,287 Intangible assets, net 1,425,852 999,544 Deferred
offering costs - 710,018 Deferred tax asset 600,000 600,000 Other
assets 13,447 16,550 ---------------- ---------------- Total assets
$35,120,090 $24,133,830 ================ ================
Liabilities and stockholders' equity Current liabilities Current
portion of capital lease obligation $91,507 $98,820 Current portion
of long-term debt obligation 214,955 - Accounts payable 1,639,717
3,647,505 Accrued liabilities 2,554,166 1,788,162 Deferred credits
1,076,549 1,458,393 ---------------- ---------------- Total current
liabilities 5,576,894 6,992,880 Long-term capital lease obligation
50,216 117,134 Long-term debt obligation 5,000,000 5,214,955
Deferred credits 354,418 450,000 ---------------- ----------------
Total liabilities 10,981,528 12,774,969 ----------------
---------------- Redeemable Class B common stock, 308,216 shares at
December 31, 2005 - 504,984 ---------------- ----------------
Stockholders' equity: Preferred stock, par value $0.001, 5,000,000
shares authorized at September 30, 2006, no shares issued and
outstanding at September 30, 2006 - - Common stock Common stock,
par value $0.001, 100,000,000 and 23,257,094 shares authorized at
September 30, 2006 and December 31, 2005, respectively, 9,858,806
shares issued and outstanding at September 30, 2006 9,859 - Class A
voting common stock, par value $0.001, 7,164,463 shares authorized
at December 31, 2005, 2,834,814 shares issued and outstanding at
December 31, 2005 - 2,835 Class B non-voting common stock, par
value $0.001, 13,707,297 shares authorized at December 31, 2005,
734,427 shares issued and outstanding at December 31, 2005 - 734
Class C voting common stock, par value $0.001, 5,656,472 shares
authorized at December 31, 2005, 2,131,474 shares issued and
outstanding at December 31, 2005 - 2,131 Additional paid-in capital
30,970,277 10,935,049 Accumulated deficit (6,841,574) (86,872)
---------------- ---------------- Total stockholders' equity
24,138,562 10,853,877 ---------------- ---------------- Total
liabilities and stockholders' equity $35,120,090 $24,133,830
================ ================ Luna Innovations Incorporated
Consolidated Statements of Cash Flows Nine Months Ended September
30, ----------------------------- 2006 2005 ----------- ----------
(unaudited) Cash flows used in operating activities Net loss
$(6,758,885) $(268,537) Adjustments to reconcile net loss to net
cash provided by operating activities: Depreciation and
amortization 792,725 355,026 Deferred income taxes - (4,358)
Share-based compensation 1,164,709 137,829 Change in assets and
liabilities: Accounts receivable (64,536) (509,743) Refundable
income taxes 118,735 570,162 Other assets (524,201) (406,035)
Accounts payable and accrued expenses (545,211) (175,595) Deferred
revenues (477,426) (154,341) ----------- ---------- Net cash used
in operating activities (6,294,090) (455,592) -----------
---------- Cash flows used in investing activities Acquisition of
property and equipment (1,377,466) (452,762) Intangible property
costs (282,840) (159,749) Net cash from acquisition of Luna
Technologies - 33,713 Capitalized software development costs -
(14,468) ----------- ---------- Net cash used in investing
activities (1,660,306) (593,266) ----------- ---------- Cash flows
from financing activities Payments on capital lease obligations
(74,229) (73,343) Proceeds from the issuance of common stock, net
17,866,241 7,000,000 Proceeds from the exercise of options and
warrants 89,561 76,575 ----------- ---------- Net cash from
financing activities 17,881,573 7,003,232 ----------- ----------
Net change in cash 9,927,177 5,954,374 Cash - beginning of period
12,514,839 609,636 ----------- ---------- Cash - end of period
$22,442,016 $6,564,010 =========== ========== Supplemental
disclosure of cash flow information Cash paid for interest $30,690
$72,151 Cash paid for income taxes $12,829 $25,927 Property and
equipment financed by capital leases $ - $11,700 DATASOURCE: Luna
Innovations Incorporated CONTACT: Media: Mildred Cooper of Luna
Innovations Incorporated, +1-540-557-7561, ; or Investors: Sally
Beerbower of Qorvis Communications, +1-703-744-7800, , for Luna
Innovations Incorporated Web site: http://www.lunainnovations.com/
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