Company Achieves 51% Revenue Growth for the Fourth Quarter 2006;
Gross Profits Improve to 30% from 17% in Fourth Quarter 2005;
Company Provides Guidance for Fiscal Year 2007 ROANOKE, Va., March
5 /PRNewswire-FirstCall/ -- Luna Innovations Incorporated
(NASDAQ:LUNA) today announced its financial results for the fourth
quarter and full year ended December 31, 2006. Kent Murphy,
Chairman and Chief Executive Officer, commented, "The top- line
growth and gross margin expansion we experienced in the fourth
quarter and full year of 2006 were largely propelled by the growth
of higher margin revenues from the sale of products. We are
beginning to experience the benefits and validation of the Luna
business model. Product and license sales accounted for 28% of our
revenue, compared to 20% in fourth quarter of 2005, and 19% in the
third quarter of 2006, and as we experienced that growth, our
overall gross profit margin grew from 17% in the fourth quarter of
2005 to 30% in the fourth quarter of 2006." Revenues for the fourth
quarter of 2006 increased 51% to $8.0 million from $5.3 million for
the same quarter of 2005, reflecting growth in technology
development (contract research) revenues of approximately $1.5
million and growth in product and license revenues of approximately
$1.2 million. Gross profit increased to $2.4 million, or 30% of
revenues, in the fourth quarter of 2006, from $0.9 million, or 17%
of revenues, in the fourth quarter of 2005. Operating expenses were
$5.3 million in the fourth quarter of 2006, compared to $4.1
million in the third quarter of 2006 and $3.1 million in the fourth
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 fourth quarter of 2006 were also higher than the
prior quarter because increased product sales resulted in higher
commissions for the company's internal sales force and third party
re- sellers, the company expanded its leased facilities to
accommodate growth, and additional resources were devoted to
preparation of bids and proposals for new technology development
opportunities. During the quarter, the company also incurred
approximately $0.2 million in expenses related to engineering and
other start-up costs associated with recently acquired product
lines and $0.3 million in legal and related costs associated with
the successful resolution of a contractual dispute. The company
incurred a loss from operations of $2.9 million in the fourth
quarter of 2006, versus a loss from operations of $2.1 million for
the prior year's comparable quarter. The net loss applicable to
common stockholders for the fourth quarter of 2006 was $2.7
million, or $0.27 per share on a diluted basis, compared to a net
loss applicable to common stockholders of $1.7 million or $0.33 per
share, for the fourth quarter of 2005. Murphy added, "Our Luna
Technologies subsidiary saw record fourth quarter revenue of $1.8
million and record bookings of $2.0 million. We signed 12 new
customers in the fourth quarter, including many top tier companies,
and we signed eight contracts with repeat customers, which resulted
in a 70% growth rate within Luna Technologies compared to the
fourth quarter of 2005. We also acquired the rights to manufacture
and sell a line of swept tunable lasers. We expect the technology
will allow us to compete more effectively in our existing fiber
optic test and measurement markets and open up new markets in
industrial and medical sensing. On the healthcare products side, we
continued to ship units of our Emboli Detection and Classification
(EDAC(TM)) product to research institutions and are currently
working through a third party to obtain FDA clearance for clinical
use." For the year ended December 31, 2006, total revenues were
$23.5 million, compared to $16.5 million 2005. Technology
development revenue for 2006 increased $3.4 million, or 22%, over
2005. Product and license revenue was $4.8 million in 2006. Gross
profit increased to $7.1 million, or 30% of revenues, for 2006,
from $3.5 million, or 21% of revenues, in 2005. Operating expenses
were $17.1 million in 2006, compared to $6.0 million in 2005. The
increase in year over year operating expenses reflects the
company's strategy to increase its product portfolio and product
sales. Operating expenses in 2006 also include share-based
compensation expense as well as administrative costs associated
with the company's growing employee base and its transformation to
a public company. The company incurred a loss from operations of
$10.0 million in 2006, versus a loss from operations of $2.5
million for the prior year. The net loss applicable to common
stockholders for 2006 was $9.4 million, or $1.14 per share on a
diluted basis, compared to a net loss applicable to common
stockholders of $2.0 million, or $0.53 per share, for the previous
year. Fourth Quarter Business Highlights Technology Development --
Booked more than $4 million in new technology development contracts
in the fourth quarter 2006, for a total of more than $22 million in
new technology development contracts during the full year 2006.
Healthcare Products -- Submitted 510(k) documentation for the
company's EDAC product to an FDA-accredited third-party reviewer.
The purpose of this review is to shorten the overall timeframe
required to receive FDA clearance and begin marketing the product
for clinical use. -- Completed preliminary animal testing for the
non-invasive diagnosis of compartment syndrome using the company's
EN-TACT(TM) (Emergency Noninvasive Tissue and Compartment Testing)
product. -- Validated improved MRI image contrast performance using
Trimetasphere(TM) nanomaterials. Improved image contrast is
expected, together with improved safety, to be one of the primary
potential advantages of the company's MRI contrast agent product
candidates over current commercially available products.
Instrumentation, Test and Measurement Products -- Introduced a new
distributed sensing technique that is expected to significantly
reduce the expense associated with the deployment and maintenance
of fiber optics. -- Acquired the rights to manufacture and sell an
existing line of swept tunable lasers. The company anticipates the
technology will allow it to compete more effectively in the fiber
optic test and measurement markets by providing customers with
fast, flexible and cost-effective test and measurement products.
This laser technology also allows the company to aggressively
pursue business opportunities in new markets such as industrial and
medical sensing. -- Booked over $2 million in product orders during
the quarter. Fourth Quarter Financial Highlights -- Revenues for
the fourth quarter of 2006 increased 51% compared to the fourth
quarter of 2005 and 33% compared to the third quarter of 2006. --
Product revenues represented over 27% of total revenues in the
fourth quarter of 2006, versus 20% in the fourth quarter of 2005,
and 19% in the third quarter of 2006. Product revenues grew to
approximately $2.2 million in the fourth quarter of 2006, versus
$1.2 million in the third quarter of 2006. -- Gross profit for the
fourth quarter of 2006 increased to $2.4 million, or 30% of
revenues, from $0.9 million, or 17% of revenues, for the
corresponding period of 2005. -- The company reported a loss per
share for the fourth quarter of 2006 of $0.27 per share, on a
diluted basis, compared to a loss per share of $0.33 for the fourth
quarter of 2005. -- Cash and cash equivalents totaled $17.9 million
at December 31, 2006, compared to $12.5 million at December 31,
2005. Outlook for Fiscal Year 2007 The company anticipates
continued strong growth in both its product and technology
development divisions in 2007. For fiscal year 2007, the company
expects total revenue to be in the range of $30.0 million to $32.0
million, consisting of product and license revenue of $7.0 to $8.0
million and technology development revenue of $23.0 to $24.0
million. For the full year 2007, the company anticipates a net loss
in the range of $9.0 to $9.5 million. For the first quarter of
2007, the company expects revenue of approximately $6.9 million and
a net loss of approximately $3.3 million. The company plans to
discuss its fiscal year 2007 guidance on its investor conference
call to be held later today. 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
fourth quarter and full year 2006 financial results. The company
will also discuss expectations for 2007. The call can be accessed
by dialing 1.800.638.5495 domestically or 1.617.614.3946
internationally prior to the start of the call. The access code is
46756966. 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 ) Safe Harbor
Statement under the Private Securities Litigation Reform Act of
1995 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 acquisition of the swept
tunable laser technology will allow the company to compete more
effectively in its existing fiber optic test and measurement
markets and open up new markets in industrial and medical sensing,
(ii) the company will aggressively pursue opportunities for its
newly acquired tunable laser technology in industrial and medical
sensing markets, (iii) the FDA- accredited third party review may
shorten the overall time required to receive FDA clearance for the
company's EDAC product, (iv) the company's new distributed sensing
technique is expected to significantly reduce the expense
associated with the deployment and maintenance of fiber optics, (v)
the company anticipates continued strong growth in both its product
and technology development divisions in 2007, and (vi) statements
regarding revenue and net loss guidance for fiscal year 2007. The
company attempts, whenever possible, to identify 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 the company's control.
Factors that could cause actual results to differ materially from
the expectations expressed in such forward-looking statements
include, but are not limited to: the company's ability to manage
its growth effectively; the company's ability to successfully
identify market needs for new products; the company's continued
reliance on contract research, including government grants and
contracts available only to small businesses, for a significant
portion of its revenue; the risk that the company may become
ineligible for small business government grants and contracts in
the future; the effect of competition in its markets and changes in
customer demand; the risk that company's proprietary rights may be
insufficient to protect its technologies, including potential
claims by third parties that the company infringes their
intellectual property rights; the potential impact of federal
audits and investigations; delay in obtaining clearance by the U.S.
Food and Drug Administration or other regulatory requirements;
continued difficulty in, or increased costs related to, hiring,
training and retaining skilled employees; unanticipated
manufacturing or supply problems; a slowdown in the overall
economy; and uncertainty in the global political environment.
Additional factors that may affect the future results of the
company are set forth in its Registration Statement on Form S-1,
its quarterly and annual reports on Form 10-Q and Form 10-K,
respectively, 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 Balance Sheets December 31, December 31, 2006 2005
-------------- -------------- Assets (unaudited) Current assets
Cash and cash equivalents $ 17,866,753 $ 12,514,839 Accounts
receivable, net 7,233,406 5,129,911 Refundable income taxes 396,062
514,797 Inventory 843,294 448,475 Other current assets 503,703
227,409 -------------- -------------- Total current assets
26,843,218 18,835,431 Property and equipment, net 5,730,094
2,972,287 Intangible assets, net 2,031,489 999,544 Deferred
offering costs - 710,018 Deferred tax asset 600,000 600,000 Other
assets 12,413 16,550 -------------- -------------- Total assets $
35,217,214 $ 24,133,830 ============== ============== Liabilities
and stockholders' equity Current liabilities Current portion of
capital lease obligation $ 88,576 $ 98,820 Current portion of
long-term debt obligation 214,955 - Accounts payable 2,757,381
3,647,505 Accrued liabilities 3,623,395 1,788,162 Deferred credits
874,676 1,458,393 -------------- -------------- Total current
liabilities 7,558,983 6,992,880 Long-term capital lease obligation
28,557 117,134 Long-term debt obligation 5,000,000 5,214,955
Deferred credits and other long term liabilities 554,418 450,000
-------------- -------------- Total liabilities 13,141,958
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 December 31, 2006, no shares
issued and outstanding at December 31, 2006 - - Common stock Common
stock, par value $0.001, 100,000,000 and 23,257,094 shares
authorized at December 31, 2006 and December 31, 2005,
respectively, 9,911,546 shares issued and outstanding at December
31, 2006 9,912 - 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 31,585,762 10,935,049 Accumulated
deficit (9,520,418) (86,872) -------------- -------------- Total
stockholders' equity 22,075,256 10,853,877 --------------
-------------- Total liabilities and stockholders' equity $
35,217,214 $ 24,133,830 ============== ============== Luna
Innovations Incorporated Consolidated Statements of Operations
Three Months Ended Twelve Months Ended December 31, December 31,
------------ ------------ ------------ ------------ 2006 2005 2006
2005 ------------ ------------ ------------ ------------
(unaudited) (unaudited) Revenues: Contract research revenues $
5,810,797 $ 4,267,946 $18,787,863 $15,379,667 Product and license
revenues 2,236,376 1,074,221 4,757,779 1,074,221 ------------
------------ ------------ ------------ Total revenues 8,047,173
5,342,167 23,545,642 16,453,888 Cost of revenues: Contract research
costs 4,631,659 4,012,555 14,232,063 12,552,122 Product and license
costs 983,166 409,772 2,178,135 409,772 ------------ ------------
------------ ------------ Total cost of revenues 5,614,825
4,422,327 16,410,198 12,961,894 ------------ ------------
------------ ------------ Gross Profit 2,432,348 919,840 7,135,444
3,491,994 Operating expense 5,303,766 3,050,978 17,109,043
6,003,644 ------------ ------------ ------------ ------------
Operating loss (2,871,418) (2,131,138) (9,973,599) (2,511,650)
------------ ------------ ------------ ------------ Other income
(expense) Other income (expense) 22,548 1,684 32,879 1,592 Interest
income / (expense), net 170,024 33,955 515,818 (41,251)
------------ ------------ ------------ ------------ Total other
income (expense) 192,572 35,639 548,697 (39,659) ------------
------------ ------------ ------------ Loss before income taxes
(2,678,846) (2,095,499) (9,424,902) (2,551,309) Income tax expense
(benefit) - (369,979) 12,829 (557,252) ------------ ------------
------------ ------------ Net loss $(2,678,846) $(1,725,520)
$(9,437,731) $(1,994,057) ============ ============ ============
============ Net loss per share: Basic $ (0.27) $ (0.33) $ (1.14) $
(0.53) ============ ============ ============ ============ Diluted
$ (0.27) $ (0.33) $ (1.14) $ (0.53) ============ ============
============ ============ Weighted average shares: Basic 9,883,057
5,254,336 8,283,074 3,735,811 ============ ============
============ ============ Diluted 9,883,057 5,254,336 8,283,074
3,735,811 ============ ============ ============ ============ Luna
Innovations Incorporated Consolidated Statements of Cash Flows
Twelve Months Ended December 31, ---------------------------- 2006
2005 ------------- ------------- (unaudited) Cash flows used in
operating activities Net loss $ (9,437,731) $ (1,994,057)
Adjustments to reconcile net loss to net cash provided by operating
activities: Depreciation and amortization 1,134,777 540,145
Deferred income taxes - (157,251) Share-based compensation
1,762,899 168,926 Change in assets and liabilities: Accounts
receivable (2,103,495) (1,314,485) Refundable income taxes 118,735
362,005 Other assets (654,560) (26,194) Accounts payable and
accrued expenses 723,445 1,911,095 Deferred revenues (679,299)
422,227 ------------- ------------- Net cash used in operating
activities (9,135,229) (87,589) ------------- ------------- Cash
flows used in investing activities Acquisition of property and
equipment (2,828,046) (877,144) Intangible property costs (558,909)
(430,847) Net cash from acquisition of Luna Technologies - 33,676
Capitalized software development costs - (122,642) -------------
------------- Net cash used in investing activities (3,386,955)
(1,396,957) ------------- ------------- Cash flows from financing
activities Net payments on line of credit - (1,500,000) Payments on
capital lease obligations (98,819) (107,177) Proceeds from
convertible debt 5,000,000 Proceeds from the issuance of common
stock, net 17,881,900 9,912,468 Proceeds from the exercise of
options and warrants 91,017 84,458 ------------- ------------- Net
cash from financing activities 17,874,098 13,389,749 -------------
------------- Net change in cash 5,351,914 11,905,203 Cash -
beginning of period 12,514,839 609,636 ------------- -------------
Cash - end of period $ 17,866,753 $ 12,514,839 =============
============= Supplemental disclosure of cash flow information Cash
paid for interest $ 45,341 $ 108,211 Cash paid for income taxes $
12,829 $ - Property and equipment financed by capital leases $ - $
11,700 http://www.newscom.com/cgi-bin/prnh/20060627/LUNALOGO
http://photoarchive.ap.org/ DATASOURCE: Luna Innovations
Incorporated CONTACT: Media: Karin Clark of Luna Innovations
Incorporated, +1-540-769-8400, ; Investors: Sally Beerbower of
Qorvis Communications, +1-703-744-7800, , for Luna Innovations
Incorporated Web site: http://www.lunainnovations.com/
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