Luna Innovations Incorporated (NASDAQ: LUNA), a company focusing
on sensing, instrumentation and nanotechnology, today announced its
financial results for the first quarter ended March 31, 2010.
As compared to the same quarter last year, product and license
revenue increased by 29%, from $1.6 million in the first quarter of
2009 to $2.1 million in the first quarter of 2010, while total
revenue decreased by 7%, from $8.5 million in the first quarter of
2009 to $7.9 million in the first quarter of 2010. The decrease in
total revenue was largely the result of lower pass-through costs
for subcontracts and materials under a research contract in the
company’s technology development business segment. Gross profit
increased from $2.7 million for the first quarter of 2009 to $2.8
million for the first quarter of 2010. The company reported a net
loss attributable to common shareholders of $1.3 million, or $0.10
per common share, for the first quarter of 2010, as compared to a
net loss of $40.9 million, or $3.66 per common share for the first
quarter of 2009. The net loss for the first quarter of 2009
included one-time charges of $36.3 million for a litigation reserve
and $1.3 million for the impairment of intangible assets, and a
$0.6 million charge related to the valuation allowance provided
against the company’s deferred tax asset. Adjusted EBITDA, which is
earnings before interest, taxes, depreciation and amortization,
excluding non-cash stock-based compensation expense, non-cash
charges for impairment of intangible assets and charges related to
the company’s litigation with Hansen Medical, Inc. and its Chapter
11 reorganization, improved to positive $0.5 million for the first
quarter of 2010, as compared to negative $0.3 million for the first
quarter of 2009. The company consummated a settlement of its
litigation with Hansen and emerged from Chapter 11 reorganization
in January 2010.
Kent Murphy, Chief Executive Officer, provided this overview of
Luna’s results: “I am very pleased with our results since emerging
from Chapter 11 reorganization in January. Recovery in demand for
our fiber optic equipment during the quarter, along with our
continued focus on operating expenses, has resulted in significant
improvement in our core operating results that we believe represent
progress toward profitability.”
First Quarter Financial
Highlights
-- Total revenues decreased by 7%, from $8.5 million for the
first quarter of 2009 to $7.9 million for the first quarter of
2010.
-- Product and license revenues increased by 29% to
approximately $2.1 million for the first quarter of 2010 from $1.6
million for the first quarter of 2009. Technology development
revenues decreased by 16% to $5.8 million for the first quarter of
2010 from $6.9 million for the first quarter of 2009, primarily due
to lower pass-through costs included in 2010 revenues.
-- Gross profit for the first quarter of 2010 increased to $2.8
million, or 36% of total revenues, from $2.7 million, or 32% of
total revenues, for the corresponding period of 2009.
-- Selling, general and administrative expenses decreased by 19%
to $3.4 million, or 43% of total revenues for the first quarter of
2010, from $4.2 million, or 50% of total revenues, for the first
quarter of 2009.
-- Total operating expenses, excluding litigation and
reorganization costs, decreased to $3.5 million, or 45% of total
revenues for the first quarter of 2010, from $4.4 million, or 52%
of total revenues, for the first quarter of 2009.
-- Adjusted EBITDA excluding litigation and bankruptcy related
items increased to $0.5 million in the first quarter of 2010 from
negative $0.3 million in the first quarter of 2009.
-- Net loss improved to $1.3 million for the first quarter of
2010, compared to a net loss of $40.9 million for the first quarter
of 2009, primarily driven by reductions in amounts accrued with
respect to the Hansen litigation in 2009 as well as expenses
recognized with respect to impairment of intangible assets and the
valuation of deferred tax assets as of March 2009.
-- Cash and cash equivalents totaled $6.5 million at March 31,
2010, as compared to $13.2 million at March 31, 2009. The company
executed a revolving line of credit providing up to $5 million in
borrowing capacity. At March 31, 2010, $2.5 million was outstanding
under the line of credit.
First Quarter Business
Highlights
-- The company emerged from Chapter 11 reorganization on January
12, 2010 with a court approved reorganization plan that provided
for payment of 100% of valid claims and allowed stockholders to
retain their equity shares.
-- The first Optical Vector Analyzer™ (OVA) 5000 products were
shipped to customers. The OVA 5000 is a device for
single-measurement, all-parameter analysis of fiber optic
components and assemblies.
-- Luna began work under the development and supply agreement
with Hansen Medical, entered into as part of the litigation
settlement, pursuant to which Luna is integrating its fiber optic
shape sensing technology into Hansen’s medical robotic
instruments.
-- Luna’s technology development division was awarded 12
contracts in the first quarter, including eight Phase Is, two Phase
2s, one option to continue a contract and one subcontract on a
Phase I.
Outlook 2010
Based on information as of May 11, 2010, the company continues
to expect total revenue for 2010 to be in the range of $35.5
million to $38.0 million, consisting of product and license revenue
of $9.5 million to $11.0 million and technology development revenue
of $26.0 million to $27.0 million. Also for 2010, the company
anticipates a GAAP net loss in the range of $2.8 million to $3.5
million, with positive adjusted EBITDA of $2.4 million to $3.9
million. For the second quarter of 2010, the company expects
revenue of approximately $8.5 million to $9.5 million and a net
loss of approximately $0.5 million to $1.0 million.
Non-GAAP
Measures
In evaluating the operating performance of its business, Luna’s
management excludes certain charges and credits that are required
by generally accepted accounting principles (“GAAP”). These
non-GAAP results provide useful information to both management and
investors by excluding items that the company believes may not be
indicative of its operating performance, because either they are
unusual and the company does not expect them to recur in the
ordinary course of its business or they are unrelated to the
ongoing operation of the business in the ordinary course. These
non-GAAP measures should be considered in addition to results and
guidance prepared in accordance with GAAP, but should not be
considered a substitute for, or superior to, GAAP results. The
non-GAAP measures included in this press release have been
reconciled to the nearest GAAP measure in the table following the
financial statements attached to this press release.
Conference Call
Information
As previously announced, Luna Innovations will conduct an
investor conference call at 5:00 p.m. (ET) today to discuss its
financial results and business developments for the first quarter
of 2010. The call can be accessed by dialing 866.383.8003
domestically or 617.597.5330 internationally prior to the
start of the call. The access code is 33764338. Investors
are advised to dial in at least five minutes prior to the call to
register. 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. The
company’s 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:
The statements in this release that are not historical facts
constitute “forward-looking statements” made pursuant to the safe
harbor provision of the Private Securities Litigation Reform Act of
1995 that involve risks and uncertainties. These statements include
our expectations regarding financial results for the second quarter
and full year 2010 and the Company’s future profitability.
Management cautions the reader that these forward-looking
statements are only predictions and are subject to a number of both
known and unknown risks and uncertainties, and actual results,
performance, and/or achievements of the Company may differ
materially from the future results, performance, and/or
achievements expressed or implied by these forward-looking
statements as a result of a number of factors. These factors
include, without limitation the fact that the outlook for the
second quarter of and full year 2010 could change, and also
include, without limitations, those risks and uncertainties set
forth in the Company’s periodic reports and other filings with the
Securities and Exchange Commission. Such filings are available at
the SEC’s website at http://www.sec.gov, and at the company’s
website at http://www.lunainnovations.com. The statements made in
this 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 after
the date of this release.
Luna Innovations Incorporated
Consolidated Statements of Operations
Three months ended, March 31, 2010
2009 (unaudited) Revenues: Technology development $
5,811,094 $ 6,882,372 Product and license 2,074,697
1,611,184 Total revenues 7,885,791
8,493,556 Cost of revenues Technology
development 3,832,342 4,897,756 Product and license
1,219,241 878,601 Total cost of revenues
5,051,583 5,776,357 Gross profit
2,834,208 2,717,199 Operating
expenses: Selling, general and administrative 3,421,262 4,235,588
Research, development and engineering 509,899 995,643 Litigation
reserve - 36,303,643 Impairment of intangible assets -
1,310,598 Total operating expense 3,931,161
42,845,472 Operating loss (1,096,953 )
(40,128,273 ) Other expense Interest expense 84,014 158,988
Other 14,877 923 Total other expense
98,891 159,911 Loss before
income taxes (1,195,844 ) (40,288,184 ) Income tax expense
- 600,000 Net loss (1,195,844 )
(40,888,184 ) Dividends declared on preferred stock 81,633 -
Net loss attributable to common shareholders $
(1,277,477 ) $ (40,888,184 ) Net loss per share of common
stock $ (0.10 ) $ (3.66 )
Luna Innovations Incorporated
Consolidated Balance Sheets
March 31, December 31, 2010 2009
(unaudited) Assets Current assets: Cash and cash equivalents $
6,467,080 $ 5,228,802 Accounts receivable, net 7,754,801 7,203,203
Inventory 2,822,059 2,890,364 Prepaid expenses 672,685 560,964
Other current assets 46,916 729,532
Total current assets 17,763,541 16,612,865 Property and
equipment, net 3,855,226 4,129,015 Intangible assets, net 553,794
580,785 Other assets 359,585 435,259 Total assets $
22,532,146 $ 21,757,924 Liabilities and
stockholders' equity (deficit)
Current liabilities not subject to
compromise:
Line of credit $ 2,500,000 $ - Current portion of long term debt
1,096,981 - Accounts payable 1,881,731 1,142,267 Accrued
liabilities 3,978,413 3,379,339 Deferred credits 1,355,541
1,034,526 Total current liabilities
10,812,666 5,556,132 Long term debt 3,903,019 - Liabilities
subject to compromise - 19,062,000
Total liabilities
14,715,685 24,618,132
Stockholders' equity (deficit) Preferred stock 1,322 - Common stock
12,786 11,352 Stock dividend not yet issued 81,633 - Additional
paid-in capital 53,098,455 41,228,698 Accumulated deficit
(45,377,735 ) (44,100,258 ) Total stockholders'
equity (deficit) 7,816,461 (2,860,208 )
Total liabilities and
stockholders' equity (deficit)
22,532,146 21,757,924
Luna Innovations Incorporated
Consolidated Statements of Cash Flows
Three months ended March 31, 2010
2009 (unaudited) Cash flows used in operating
activities: Net loss $ (1,195,844 ) $ (40,888,184 )
Adjustments to reconcile not loss
to cash used in operating activities:
Depreciation and amortization 328,959 619,788 Impairment of
intangible assets - 1,310,598 Share-based compensation 887,340
789,511 Warrant expense 46,997 - Deferred tax expense - 600,000
Changes in asset and liabilities: Accounts receivable (551,599 )
(589,248 ) Inventory 80,168 (21,336 ) Other current assets 570,896
(5,317 ) Other assets 33,446 17,728 Accounts payable and accrued
expenses (1,970,872 ) (263,459 ) Litigation reserve - 36,303,643
Deferred credits 328,525 200,260 Net
cash used in operating activities (1,441,984 )
(1,926,016 ) Cash flows used in investing activities
Acquisition of property and equipment (11,010 ) (34,037 )
Capitalized intellectual property costs (34,362 )
(30,749 ) Net cash used in investing activities (45,372 )
(64,786 ) Cash flows provided by (used in) financing
activities Payments on capital lease obligation (1,367 ) (2,799 )
Payments on debt obligation - (357,143 ) Borrowings under line of
credit 2,500,000 - Proceeds from exercise of options 227,001
10,824
Net cash provided by (used in)
financing activities
2,725,634 (349,118 ) Net change in cash
1,238,278 (2,339,920 ) Cash at beginning of period
5,228,802 15,518,960 Cash at end of period $
6,467,080 $ 13,179,040
Luna Innovations Incorporated
Reconciliation of EBITDA and Adjusted EBITDA to Net Income/
(Loss)
Three Months Ended March 31, 2010
2009 (unaudited) Reconciliation of net loss to
adjusted EBITDA less litigation Net loss $ (1,195,844 ) $
(40,888,184 ) Interest 84,014 158,988 Taxes - 600,000
Depreciation and amortization 328,959 619,788 Impairment of
intangible assets - 1,310,598 EBITDA
(782,871 ) (38,198,810 ) Share based compensation
934,337 789,511 Adjusted EBITDA 151,466
(37,409,299 ) Litigation reserve - 36,303,643
Fees associated with litigation
and reorganization
382,887 790,381 Adjusted EBITDA less
litigation $ 534,353 $ (315,275 )
Reconciliation of operating
expenses to operating expenses less litigation and reorganization
related costs
Operating expenses $ 3,931,161 $ 42,845,472
Litigation reserve - (36,303,643 ) Intangible asset impairment -
(1,310,598 )
Fees associated with litigation
and reorganization
(382,887 ) (790,381 )
Operating expenses less litigation
and reorganization related costs
$ 3,548,274 $ 4,440,850
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