Luna Innovations Incorporated (NASDAQ:LUNA) today announced its
financial results for the second quarter ended June 30, 2008. As
compared to the same quarter last year, revenues grew by 26%, from
$7.9 million to $9.9 million, gross profit increased from $2.9
million to $4.1 million, and loss per share declined from $0.21 to
$0.16. Kent Murphy, Chairman and Chief Executive Officer, provided
this overview of Luna�s results: �We continue to move forward in
our growth strategy at a significant pace, which is evident from
our financial results and in our operational achievements during
the second quarter. I�m particularly pleased with the growth of the
product and license side of our business, up 46% from the same
quarter of last year. As a result of that strong growth, our gross
profit margins have continued to expand, from 37% in the second
quarter of 2007 to 41% in our most recent quarter. We also
strengthened our cash position with a credit facility, which is
expected to support our working capital needs as we execute our
business model of developing and commercializing our market-driven
technologies into viable products and businesses.� In reviewing
Luna�s operational achievements, Murphy said, �We have made strides
across all of our business areas. Product and license growth was
largely driven by an expanding market acceptance of the Luna
Technologies� brand of fiber optic test and measurement products.
Additionally, our Technology Development Division continued to sign
several large multi-year contracts that support our research and
development infrastructure and are a source of innovations for
potential commercial products. �A key project that we announced
during the second quarter is the $3.9 million subcontract to
continue to improve the performance of nanomaterials for military
applications in support of the Air Force Research Laboratory. Under
this program, Luna expects to demonstrate various potential
commercial applications of carbon nanotechnologies for diagnostics
and therapeutics for military medicine and alternative energy
solutions using organic solar cells. �More recently in the
Pharmaceuticals / Nanomedicine area, we announced a $1.6 million
funded development project from the National Institutes of Health
(NIH). Allergic conditions and other autoimmune diseases affect
millions of people worldwide, and we believe that this research
program may one day generate a new therapeutic option for treating
allergies and other conditions that play a central role in
inflammatory reactions, such as arthritis and multiple sclerosis.
�We were also awarded another multi-year contract by the NIH to
develop a novel therapeutic for infectious diseases. Anti-infective
therapeutics have become increasingly critical as possible
biodefense agents because of the potential to weaponize pathogens
in biowarfare. Furthermore, anti-infective therapeutics have also
shown promise for the treatment of other conditions such as cancer
and arthritis,� Murphy concluded. Second Quarter Financial
Highlights -- Total revenues for the second quarter of 2008
increased 26% compared to the second quarter of 2007. -- Product
and license revenues grew 46% to approximately $2.9 million in the
second quarter of 2008, compared to $2.0 million in the second
quarter of 2007. -- Gross profit for the second quarter of 2008
increased to $4.1 million, or 41% of total revenues, from $2.9
million, or 37% of total revenues, for the corresponding period of
2007. -- Operating expenses increased 12% to $5.8 million, or 59%
of total revenues, from $5.2 million, or 66% of total revenues in
the second quarter of 2007. The overall increase in operating
expenses is primarily attributed to increased legal fees associated
with outstanding litigation matters as of June 30, 2008. -- Net
loss per share for the second quarter of 2008 was $0.16 per share,
which is an improvement on a loss per share of $0.21 for the second
quarter of 2007. -- Entered into a $10 million credit facility with
Silicon Valley Bank, including a four-year term debt of $5 million
outstanding as of June 30, 2008 and a remaining facility available
under a four-year revolving line of credit. No cash amounts were
drawn under the revolving line of credit during the second quarter.
-- Cash and cash equivalents totaled $15.3 million at June 30,
2008, as compared to $12.0 million at December 31, 2007. Second
Quarter Business Highlights Pharmaceuticals / Nanomedicine --
Delivered the MRI contrast agent sample materials for the National
Characterization Lab�s (NCL) preclinical studies. In partnership
with the U.S. Food and Drug Administration and the National
Institute of Standards and Technology, the NCL, a newly formed
group under the National Cancer Institute, is intent on
accelerating the transition of basic nanomedicine research into
clinical applications. The preliminary characterization data Luna
expects to obtain through its collaboration with the NCL should be
useful to the expected regulatory approval process necessary prior
to any commercialization of a contrast agent. -- Announced the
award of a $1.6 million Research Project Grant from the NIH to
investigate the use of fullerene-based nanomedicines as a pathway
to treat allergies and other inflammatory diseases. The study will
include evaluating Luna�s exclusive nanomedicine prototypes. --
Published Luna�s next-generation MRI contrast agent breakthrough in
the Journal of Medicinal Chemistry. The paper, co-authored with the
Washington University School of Medicine, describes how Luna�s
contrast agent, in which gadolinium is encapsulated within an
extremely stable carbon nanosphere, allows for safer, extended
presence within the body than contrast agents currently in
widespread use. Instrumentation, Test & Measurement --
Increased revenues from Luna Technologies branded fiber optic
products from $1.2 million in the second quarter of 2007, to $1.8
million in the second quarter of 2008, an increase of 49%. --
Continued to meet expectations under the development and supply
agreement with Intuitive Surgical, Inc. -- Provided electronics
used in the Missile Defense Agency�s successful demonstration
flight test of missile defense interceptors. This exercise,
identified as the Next Generation Sensor Producibility flight test
(NGSP-01), successfully demonstrated the performance of emerging
sensor technologies, materials, and designs that offer improvements
for next-generation missile defense interceptors, or �kill
vehicles�. Technology Development -- Increased Technology
Development Division revenues almost 19% from $5.9 million in the
second quarter of 2007 to $6.9 in second quarter of 2008. --
Awarded a $3.9 million subcontract in support of the Air Force
Research Laboratory to continue work improving the performance of
nanomaterials for military applications. -- Selected by the NIH to
develop a biodefense agent to treat infectious diseases. Under the
$2.1 million program, Luna expects to advance a new class of
anti-infective therapeutics designed to interfere with the ability
of a pathogen to establish infection and survive inside a host
organism. Outlook for Remainder of 2008 For the second half of
2008, the company anticipates continued strong growth in both its
product and license segment and its Technology Development
Division. The company continues to expect total revenue to be in
the range of $40.0 million to $42.0 million for 2008, consisting of
product and license revenue of $14.0 to $15.0 million and
technology development revenue of $26.0 to $27.0 million. Also for
2008, the company anticipates a net loss in the range of $6.5 to
$7.0 million. For the third quarter of 2008, the company expects
revenue of approximately $10.3 million to $10.5 million and a net
loss of approximately $1.8 million to $2.0 million. Conference Call
Information As previously announced, Luna Innovations will conduct
an investor conference call at 5:00 p.m. (EDT) today to discuss its
financial results, business developments and expectations for 2008.
The call can be accessed by dialing 1.800.901.5226 domestically or
1.617.786.4513 internationally prior to the start of the call. The
access code is 33586989. 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 (www.lunainnovations.com) develops and
manufactures new-generation products for the healthcare,
telecommunications, energy and defense markets. Its 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. 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 company�s ability to successfully develop and offer new
therapeutic solutions for treating allergies, infectious diseases
and other conditions, (ii) the company�s ability to obtain
regulatory approval for its nanomedicine prototypes and MRI
contrast agent, (iii) the company�s ability to improve the
performance of nanomaterials for military applications, (iv) the
company�s anticipated growth in its product and license and
technology development divisions in 2008 and increased revenues in
those areas, (v) the company�s ability to meet its working capital
needs using its credit facility and (vi) the company�s financial
outlook for its third quarter 2008 and full fiscal year 2008,
including expected revenues and net loss. 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. 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 transition its revenue mix to product revenues
and the company�s limited experience in manufacturing products on a
commercial scale; the company�s ability to successfully identify
market needs for new products; the company�s ability to attract
skilled employees; 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
company�s ability to remain eligible for small business government
grants and contracts in the future; the company�s ability to
maintain sufficient proprietary rights to protect its technologies;
the potential adverse effects of nanotechnology, whether real or
perceived; the potential limitations of regulatory requirements in
obtaining clearance by the U.S. Food and Drug Administration or
other regulatory agencies for the company�s products; and risks
inherent in current or future litigation proceedings. Additional
factors that may affect the future results of the company are set
forth in the Company�s 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 the Company�s website at
http://www.lunainnovations.com. These risk factors are updated from
time to time through the filing of periodic reports 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 � Six Months Ended June 30, June
30, 2008 � 2007 2008 � 2007 (unaudited) (unaudited) (unaudited)
(unaudited) Revenues: Contract research revenues $ 6,947,276 $
5,852,109 $ 13,549,023 $ 11,138,706 Product and license revenues �
2,931,027 � � 2,003,171 � � 5,249,203 � � 3,786,747 � Total
revenues 9,878,303 7,855,280 18,798,226 14,925,453 Cost of
revenues: Contract research costs 4,382,001 4,048,424 8,575,648
7,898,039 Product and license costs � 1,427,553 � � 911,768 � �
2,769,232 � � 1,712,189 � Total cost of revenues � 5,809,554 � �
4,960,192 � � 11,344,880 � � 9,610,228 � Gross profit 4,068,749
2,895,088 7,453,346 5,315,225 Operating expense � 5,833,670 � �
5,185,965 � � 11,094,102 � � 10,400,984 � Operating loss �
(1,764,921 ) � (2,290,877 ) � (3,640,756 ) � (5,085,759 ) Other
income (expense) Other income - - - 519 Interest income, net �
(33,576 ) � 113,107 � � (9,689 ) � 225,375 � Total other income �
(33,576 ) � 113,107 � � (9,689 ) � 225,894 � Loss before income
taxes (1,798,497 ) (2,177,770 ) (3,650,445 ) (4,859,865 ) Income
tax expense � - � � - � � - � � - � Net loss $ (1,798,497 ) $
(2,177,770 ) $ (3,650,445 ) $ (4,859,865 ) Net loss per share:
Basic $ (0.16 ) $ (0.21 ) $ (0.34 ) $ (0.48 ) Diluted $ (0.16 ) $
(0.21 ) $ (0.34 ) $ (0.48 ) Weighted average shares: Basic �
10,935,370 � � 10,136,446 � � 10,858,367 � � 10,053,371 � Diluted �
10,935,370 � � 10,136,446 � � 10,858,367 � � 10,053,371 � � � Luna
Innovations Incorporated Consolidated Balance Sheets � � � June 30,
December 31, 2008 2007 � Assets (unaudited) Current assets Cash and
cash equivalents $ 15,252,639 $ 12,046,945 Accounts receivable, net
8,496,352 9,716,610 Refundable income taxes 390,661 396,062
Inventory 2,280,710 1,675,239 Other current assets � 498,091 � �
333,105 � Total current assets 26,918,453 24,167,961 Property and
equipment, net 5,771,855 5,859,515 Intangible assets, net 1,883,646
1,911,132 Deferred tax asset 600,000 600,000 Other assets � 135,690
� � 10,270 � Total assets $ 35,309,644 � $ 32,548,878 � Liabilities
and stockholders' equity Current liabilities Current portion of
capital lease obligation $ 12,039 $ 23,885 Current portion of
long-term debt obligation 714,286 - Accounts payable 3,083,539
3,024,973 Accrued liabilities 5,041,519 5,331,798 Deferred credits
� 1,374,705 � � 1,672,400 � Total current liabilities 10,226,088
10,053,056 Long-term capital lease obligation - 4,671 Long-term
debt obligation 9,285,714 5,000,000 Deferred credits and other long
term liabilities � 354,418 � � 354,418 � Total liabilities �
19,866,220 � � 15,412,145 � Stockholders' equity: Preferred stock,
par value $0.001, 5,000,000 shares authorized, no shares issued and
outstanding - - Common stock, par value $0.001, 100,000,000 shares
authorized, 10,999,177 and 10,704,456 shares issued and outstanding
10,999 10,704 Additional paid-in capital 36,452,904 34,496,063
Accumulated deficit � (21,020,479 ) � (17,370,034 ) Total
stockholders' equity � 15,443,424 � � 17,136,733 � Total
liabilities and stockholders' equity $ 35,309,644 � $ 32,548,878 �
� � � Luna Innovations Incorporated Consolidated Statements of Cash
Flows � Six months ended June 30, 2008 2007 (unaudited) (unaudited)
Cash flows used in operating activities Net loss $ (3,650,445 ) $
(4,859,865 ) Adjustments to reconcile net loss to net cash used in
operating activities: Depreciation and amortization 958,953 892,838
Share-based compensation 1,422,902 1,096,555 Change in assets and
liabilities: Accounts receivable 1,220,259 (766,573 ) Inventory
(605,471 ) (491,325 ) Other assets (154,961 ) 56,721 Accounts
payable and accrued expenses 138,964 76,216 Deferred credits �
(297,695 ) � 1,443,585 � Net cash used in operating activities �
(967,494 ) � (2,551,848 ) Cash flows used in investing activities
Acquisition of property and equipment (552,355 ) (1,171,747 )
Intangible property costs � (291,452 ) � (196,790 ) Net cash used
in investing activities � (843,807 ) � (1,368,537 ) Cash flows from
financing activities Proceeds from / (Payments on) debt obligations
4,928,150 (214,955 ) Payments on capital lease obligations (16,517
) (42,504 ) Proceeds from the exercise of options and warrants �
105,362 � � 244,206 � Net cash used in financing activities �
5,016,995 � � (13,253 ) Net change in cash 3,205,694 (3,933,638 )
Cash - beginning of period � 12,046,945 � � 17,866,753 � Cash - end
of period $ 15,252,639 � $ 13,933,115 � �
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