Luna Innovations Incorporated (NASDAQ: LUNA), a company focusing
on sensing & instrumentation and pharmaceutical nanomedicines,
today announced its financial results for the fourth quarter and
year ended December 31, 2008.
As compared to the same quarter last year, fourth quarter 2008
revenues decreased by 26%, from $9.9 million to $7.4 million, gross
profit decreased from $3.7 million to $2.3 million, and loss per
share increased from $0.11 to $0.19. For the year, revenues
increased by 10% from $33.7 million to $36.9 million compared to
2007. Gross profit increased from $12.3 million to $14.0 million,
or 14%. The loss per share decreased from $0.77 in 2007 to $0.57 in
2008.
Kent Murphy, Chairman and Chief Executive Officer, provided this
overview of Luna�s results:�Through the first three quarters of
2008, revenues increased 24% over the first three quarters of 2007.
We were having a strong year until the fourth quarter, when the
economy changed dramatically. The lower than expected fourth
quarter 2008 revenues were primarily caused by a decline in orders
for telecommunications products we believe related to customers
reducing their capital expenditures in this uncertain economy. In
recognition of this decline, we took the appropriate steps to
control our expenses and cash flow. We ended 2008 with $15.5
million in cash, a net increase of approximately $0.3 million for
the fourth quarter.
�A major portion of our business is geared toward partnerships
with industry leaders in selected market spaces. During 2008, we
entered into or continued partnership relationships with global
market leaders in surgical robotics, heart bypass equipment,
oilfield services, telecommunications equipment, power generation
equipment and defense systems. The company continues to make
progress towards new opportunities for partnering in solar and wind
energy generation, non-robotic medical devices, pharmaceuticals and
defense solutions.
�In addition, our Technology Development Division, which
provides applied contract research to customers, achieved our
planned revenue growth of 15% in 2008 and has continued to be
successful in attracting new contract awards in early 2009. We
believe our backlog of $29 million as of year-end in new research
opportunities will continue to support product development in
sensors, nanomedicines and defense in accordance with our long-term
business strategy.
�In the fourth quarter, we were awarded work with GE Aviation on
a U.S. Army program to develop an integrated corrosion health
monitoring system. GE Aviation selected Luna for this project due
to our experience and knowledge of aircraft corrosion and materials
and our concurrent development efforts in corrosion monitoring,
modeling, and prediction. The goals of this Army program are to
improve rotorcraft safety, decrease maintenance costs, and increase
rotorcraft readiness.
�We also continue to garner interest in our unique organic solar
cells, which use patented carbon nanomaterials to capture energy
more efficiently than many existing organic solar cells to convert
to electricity. Our research was recently published in Nature
Materials, and demonstrates an entirely new approach of enhancing
organic photovoltaic device performance. We are collaborating with
solar cell manufacturers for testing and evaluation of Luna�s
proprietary nanomaterial technology.�
On the outlook for 2009, Murphy commented, �Given these times of
economic uncertainty, it is difficult to project 2009 revenue. We
currently expect flat to modest revenue growth in 2009. We believe
that our development relationships with industry leaders in
broadband, alternative energy and healthcare markets, in addition
to our opportunities within the federal government, position us to
offset some of the uncertainty in our sensing and instrumentation
product sales. As the economy recovers, we believe our Luna-branded
test & measurement products will be attractive products to
address the needs of broadband access and high speed network
infrastructure in 2009 and beyond.�
Fourth Quarter Financial
Highlights
- Total revenues for the fourth
quarter of 2008 decreased 26% compared to the fourth quarter of
2007.
- Product and license revenues
decreased 63% to approximately $1.4 million in the fourth quarter
of 2008, compared to $3.7 million in the fourth quarter of 2007.
Approximately $0.6 million of this decline is attributable to a
change in the estimated percentage of completion on certain product
development activities.
- Gross profit for the fourth
quarter of 2008 decreased to $2.3 million, or 31% of total
revenues, from $3.7 million, or 37% of total revenues, for the
corresponding period of 2007. The aforementioned
percentage-of-completion adjustment alone reduced the fourth
quarter 2008 gross margin by approximately 8 percentage
points.
- Operating expenses were flat at
$4.9 million in the fourth quarters of 2007 and 2008. Operating
expenses for the fourth quarter of 2008 include a $0.7 million
increase in legal expenses and a reduction of $1.0 million in
incentive compensation costs.
- Net loss per share for the
fourth quarter of 2008 was $0.19 per share from a loss per share of
$0.11 for the fourth quarter of 2007.
- Cash and cash equivalents
totaled $15.5 million at December 31, 2008, as compared to $15.2
million at September 30, 2008.
Fourth Quarter Business
Highlights
Sensing and Instrumentation
- Launched the PHOENIX� 1400 swept
tunable benchtop laser, which offers best-in-class wavelength
precision and tuning linearity.
- Demonstrated the feasibility of
removing gaseous emboli from the bloodstream using our acoustic
expertise along with our EDAC�medical device, which detects and
verifies the removal of emboli.
Pharmaceuticals / Nanomedicine
- Demonstrated our
nanomaterial-based hair growth compounds in topical form and
successfully repeated efficacy testing by an independent third
party.
- Selected two contrast media
agent candidates with the core technology for developing targeted
agents for imaging both inside blood vessels, or intravascular, and
in the small structural space between tissues or parts of an organ,
or interstitial sites.
- Demonstrated in vitro that our
TRIMETASPHERE�-based contrast agent can possibly be used to target
and image arterial plaque, which could lead to improved diagnosis
and treatment of coronary artery and other diseases.
Technology Development
- Demonstrated a new approach of
enhancing organic photovoltaic (OPV) device performance using
Luna�s exclusive TRIMETASPHERE� carbon nanomaterials in place of
the empty cage fullerenes. Research published in the prestigious
journal Nature Materials.
- Luna�s nanomaterials were
independently verified at the U.S. Department of Energy�s National
Renewable Energy Lab (NREL) as setting a new record for efficiency
of the commercially available P3HT organic solar cell polymer.
Year-End Financial
Highlights
- For the year ended December 31,
2008, total revenues grew $3.2 million, or 10%, to $36.9 million,
compared to $33.7 million in 2007.
- Technology Development Division
revenues grew 15% in 2008, increasing from $23.4 million for the
year ended December 31, 2007 to $26.8 million for the year ended
December 31, 2008. Product and license revenue was $10.1 million in
2008 as compared to $10.3 million in 2007.
- Gross profit increased to $14
million, or 38% of revenues, for 2008, from $12.3 million, or 37%
of revenues, in 2007.
- Operating expenses were $21.3
million in 2008, compared to $20.6 million in 2007.
- Net loss from operations was
$7.3 million in 2008, versus a loss from operations of $8.3 million
for the prior year, an improvement of 12%.
- For the first nine months of
2008, prior to the global economic crisis, the company had
increased revenues by 24% and improved its net loss by 33% compared
to the first nine months of 2007.
- The net loss applicable to
common stockholders for 2008 was $6.3 million, or $0.57 per share
on a diluted basis, compared to the net loss applicable to common
stockholders of $7.8 million, or $0.77 per share on a diluted
basis, for 2007.
- Entered into a $10 million
credit facility with Silicon Valley Bank, including a four-year
term debt of $5 million outstanding as of December 31, 2008, with
the remaining facility available under a revolving line of
credit.
Year-End Business
Highlights
Sensing and Instrumentation
- Luna Technologies� common
optical platform continues into expanding markets, including
medical devices, both robotic and non-robotic monitoring, energy
generation and delivery monitoring. We are currently meeting the
development objectives and timeline of our partnership with
Intuitive Surgical to adapt Luna�s shape sensing technology for use
in medical robotics for minimally invasive surgery. We are applying
our shape sensing technology to underwater surveillance arrays,
which may allow the Navy to detect and assess enemy threats in the
ocean with greater accuracy. We are also applying our shape
technology in a joint program with a leading global security
company developing a flexible positioning system for manufacturing
metrology.
- Launched Luna�s first tunable
laser (our PHOENIX�1000 device), which provides users with a
high-performance, rugged and cost-effective tunable laser solution
for applications in fiber sensing, metrology, spectroscopy and
instrumentation. Launched the Precision Reflectometer (PR� 4400)
instrument for increased throughput in optical manufacturing.
Pharmaceuticals / Nanomedicine
- Selected to work with the
National Cancer Institutes� National Characterization Labs (NCL) in
preclinical studies, with the intent of accelerating the transition
of basic nanomedicine research into clinical applications.
- Results from animal studies
reinforced findings that Luna�s nanomedicine prototype encourages
existing hair follicles to grow, hair to grow faster and the
numbers of hair follicles to increase.
- During 2008, received several
new projects from the National Institutes of Health (NIH) covering
areas of allergic response, MRI contrast, and nanomedicines.
Technology Development
- Development milestone met with
the Missile Defense Agency on the contact for development of low
cost common, sensor electronics for use in next-generation
exoatmospheric interceptor kill vehicles for ballistic missile
defense. A successful technology-demonstration flight test was made
from the NASA Wallops Flights Facility, Virginia on June 26,
2008.
- Awarded $3.9 million subcontract
from General Dynamics Information Technology in support of an Air
Force Research Laboratory (AFRL) prime contract to continue work
improving the performance of nanomaterials for military
applications
Outlook 2009
The company expects flat to modest growth in 2009 with total
revenue to be in the range of approximately $37 million to $40
million, consisting of product and license revenue of approximately
$7 to $9 million and technology development revenue of
approximately $30 to $31 million. Also for 2009, the company
anticipates a net loss in the range of approximately $5.5 to $6.0
million.
For the first quarter of 2009, the company expects revenue of
approximately $9 million and a net loss of approximately $2.2
million.
Conference Call
Information
As previously announced, Luna Innovations will conduct an
investor conference call at 11:00 a.m. (EST) today to discuss its
financial results and business developments for 2008 and
expectations for 2009. The call can be accessed by dialing
1.866.770.7129 domestically or 1.617.213.8067
internationally prior to the start of the call. The access code is
54417420. 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) is
focused on sensing and instrumentation, and pharmaceutical
nanomedicines. Luna develops and manufactures new-generation
products for the healthcare, telecommunications, energy and defense
markets. Our 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:
This release includes information that constitutes
�forward-looking statements� made pursuant to the safe harbor
provisions of Section�27A of the Securities Act of 1933 and
Section�21E of the Securities Exchange Act of 1934, including
statements regarding, but not limited to, (i)�expectations
regarding Luna�s customers and the effects of the current economic
crisis; (ii) Luna�s actions to react to a downturn in customer
purchases; (iii) expectations for partnerships with industry
leaders; (iv) expectations regarding Luna�s technology and product
development contracts including those with GE Aviation, the
National Renewable Energy Lab, Intuitive Surgical, the National
Cancer Institutes� National Characterization Lab, the Missile
Defense Agency and General Dynamics; (v) expectations regarding the
successful development and commercialization of certain
technologies including sensors, organic solar cells,
nanomaterial-based hair growth compounds and contrast agents, and
sensor electronics; (vi) expectations regarding Luna�s contract
backlog and continued growth thereof; (vii) expectations of
capabilities and success of new products including the PHOENIXTM
1400 laser; (viii)�anticipated revenues and activity in its product
and license and technology development divisions in 2009 and the
corresponding financial results for each of those areas; and
(ix)�Luna�s financial outlook for its first quarter and full fiscal
year 2009, including expected revenues and net loss as well as the
underlying growth rates assumptions and expected components
thereof. 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,
continued or further weakness in the global economy; the company's
ability to transition its revenue mix to product revenues; risks
inherent in current or future litigation proceedings; 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 company�s ability to
remain eligible for small business government grants and contracts
in the future; technical difficulties in developing or engineering
new products or in meeting contract research requirements; the
company�s ability to manage its cash and costs as well as to raise
additional capital; competition from alternative, more affordable
energy sources; the potential adverse effects of nanotechnology,
whether real or perceived; and 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. 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 Twelve Months Ended
December 31, December 31, �
2008 � � �
2007 � �
2008 � � �
2007 �
(unaudited)
(unaudited) Revenues: Contract research revenues $ 6,042,895
$ 6,265,004 $ 26,838,592 $ 23,356,456 Product and license revenues
� 1,353,654 � � 3,671,462 � � 10,059,728 � � 10,325,659 � Total
revenues 7,396,549 9,936,466 36,898,320 33,682,115 Cost of
revenues: Contract research costs 4,067,511 4,626,536 17,626,495
16,546,140 Product and license costs � 1,008,369 � � 1,648,822 � �
5,231,067 � � 4,819,825 � Total cost of revenues � 5,075,880 � �
6,275,358 � � 22,857,562 � � 21,365,965 � Gross Profit 2,320,669
3,661,108 14,040,758 12,316,150 Operating expense � 4,864,826 � �
4,870,622 � � 21,334,655 � � 20,570,479 � Operating loss �
(2,544,157 ) � (1,209,514 ) � (7,293,897 ) � (8,254,329 ) Other
income (expense) - Other income (expense) 530,628 (18,112 )
1,197,755 32,722 Interest income / (expense), net � (147,684 ) �
76,231 � � (189,501 ) � 371,991 � Total other income (expense) �
382,944 � � 58,119 � � 1,008,254 � � 404,713 � Loss before income
taxes (2,161,213 ) (1,151,395 ) (6,285,643 ) (7,849,616 ) Income
tax expense (benefit) � - � � � � Net loss $ (2,161,213 ) $
(1,151,395 ) $ (6,285,643 ) $ (7,849,616 ) Net loss per share:
Basic $ (0.19 ) $ (0.11 ) $ (0.57 ) $ (0.77 ) Diluted $ (0.19 ) $
(0.11 ) $ (0.57 ) $ (0.77 ) Weighted average shares: Basic �
11,118,249 � � 10,465,501 � � 10,974,010 � � 10,219,711 � Diluted �
11,118,249 � � 10,465,501 � � 10,974,010 � � 10,219,711 �
Luna Innovations Incorporated
Consolidated Balance Sheets
� �
December 31, December 31, �
2008 � �
2007 � �
Assets (unaudited) Current assets Cash and
cash equivalents $ 15,518,960 $ 12,046,945 Accounts receivable, net
7,332,034 9,716,610 Refundable income taxes 98,092 396,062
Inventory 2,828,991 1,675,239 Other current assets � 342,598 � �
333,105 � Total current assets 26,120,675 24,167,961 Property and
equipment, net 5,363,957 5,859,515 Intangible assets, net 1,813,643
1,911,132 Deferred tax asset 600,000 600,000 Other assets � 118,292
� � 10,270 �
Total assets $ 34,016,567 �
$ 32,548,878 �
Liabilities and stockholders'
equity Current liabilities Current portion of capital lease
obligation $ 17,396 $ 23,885 Current portion of long-term debt
obligation 1,428,572 - Accounts payable 2,667,192 3,024,973 Accrued
liabilities 5,161,308 5,331,798 Deferred credits � 1,854,282 � �
1,672,400 � Total current liabilities 11,128,750 10,053,056
Long-term capital lease obligation - 4,671 Long-term debt
obligation 8,571,428 5,000,000 Deferred credits and other long term
liabilities � - � � 354,418 � Total liabilities � 19,700,178 � �
15,412,145 � Stockholders' equity:
Preferred stock, par value $0.001,
5,000,000 shares authorized at December 31, 2008, no shares issued
and outstanding at December 31, 2007
- - Common stock
Common stock, par value $0.001,
100,000,000 shares authorized 11,137,882 shares issued and
outstanding at December 31, 2008
11,138 10,704 Additional paid-in capital 37,960,928 34,496,063
Accumulated deficit � (23,655,677 ) � (17,370,034 ) Total
stockholders' equity � 14,316,389 � � 17,136,733 �
Total
liabilities and stockholders' equity $ 34,016,567
�
$ 32,548,878 �
Luna Innovations Incorporated
Consolidated Statements of Cash Flows
� � � �
Twelve Months Ended December 31, �
2008 � �
2007 �
(unaudited) Cash flows used
in operating activities Net loss $ (6,285,643 ) $ (7,849,616 )
Adjustments to reconcile net loss to net cash provided by operating
activities: Depreciation and amortization 1,933,566 1,780,877
Deferred income taxes
-
- Share-based compensation 2,867,487 2,425,143 Change in assets and
liabilities: Accounts receivable 2,384,576 (2,483,204 ) Refundable
income taxes 297,970 - Other assets (1,626,131 ) (659,205 )
Accounts payable and accrued expenses (157,628 ) 1,972,111 Deferred
revenues � (172,536 ) � 597,724 � Net cash used in operating
activities � (758,339 ) � (4,216,170 )
Cash flows used in
investing activities Acquisition of property and equipment
(391,210 ) (1,375,612 ) Intangible property costs � (536,251 ) �
(414,328 ) Net cash used in investing activities � (927,461 ) �
(1,789,940 )
Cash flows from financing activities Borrowings
on term loan 5,000,000 Payments on debt obligation - (214,953 )
Payments on capital lease obligations (11,160 ) (84,695 ) Proceeds
from the exercise of options and warrants � 168,975 � � 485,950 �
Net cash from financing activities � 5,157,815 � � 186,302 �
Net
change in cash 3,472,015 (5,819,808 ) Cash - beginning of
period � 12,046,945 � � 17,866,753 � Cash - end of period $
15,518,960 � $ 12,046,945 �
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