Luna Innovations Reports Second Quarter 2009 Financial Results;
Revenues Decline by $1.2 Million Compared to Second Quarter 2008; Net Loss Increases by $0.6 Million
ROANOKE, Va.–Sep. 9, 2009–Luna Innovations Incorporated (NASDAQ:LUNA), a company focusing on sensing & instrumentation and pharmaceutical nanomedicines, today announced its financial results for the quarter endedJune 30, 2009.
As compared to the same quarter last year, second quarter 2009 revenues decreased from$9.9 million to $8.7 million, gross profit decreased from$4.1 million to $3.3 million, and loss per share increased from$0.16to$0.21. The increase in loss per share resulted from lower product sales in addition to higher costs associated with continuing litigation activities, partially offset by improvements in other areas of operating expenses.
Kent Murphy, Chairman and Chief Executive Officer, provided this comment related to the second quarter results and the companyâ€™s decision to file for reorganization under Chapter 11 in July: â€œThe slowdown in product sales that began in the fourth quarter of last year with the countryâ€™s overall economic decline continued to affect our product sales in the second quarter. While the costs of our ongoing litigation withHansen Medicalalso continue to adversely impact our bottom-line results, we have made significant improvements in the efficiency of our operations and continue to conduct business in the ordinary course. Our costs associated with legal matters increased approximately$1 million, to$1.6 million, in the second quarter of 2009 compared with approximately$0.8 millionin the second quarter of 2008. Excluding that increase in our legal costs, our operating expenses for the most recent quarter would have decreased by approximately$1 millioncompared to the same period last year. When we filed for reorganization in mid-July, our objective was to protect the interests of all of our stakeholders while trying to resolve our legal matters as quickly as possible. If we are able to emerge from Chapter 11 quickly and in accordance with the plan that we have filed with the court, we will be positioned for continued success into the future.â€
The company also announced today that it received notice onSeptember 8, 2009, that theNasdaq Listing Qualifications Paneldecided to transfer its common stock from theNASDAQ Global Marketto theNASDAQ Capital Marketand continue listing of its common stock. The company had previously received a delisting letter onJuly 17, 2009, and the company had appealed the proposed delisting to the Panel. The hearing on the appeal was held onAugust 27, 2009. The companyâ€™s continued listing is subject to several conditions, including its emergence from Chapter 11 reorganization byDecember 31, 2009.
Second Quarter Financial Highlights
- Total revenues for the second quarter of 2009 decreased by$1.2 million to $8.7 millioncompared to$9.9 millionduring the second quarter of 2008.
- Product and license revenues decreased$0.7 millionto approximately$2.2 millionin the second quarter of 2009 compared to$2.9 millionin the second quarter of 2008.
- Technology Development Division revenues decreased by$0.5 millionas compared to the second quarter of 2008.
- Gross profit for the second quarter of 2009 decreased to$3.3 millionfrom$4.1 millionfor the corresponding period of 2008.
- Operating expenses decreased to$5.6 millionin the second quarter of 2009 from$5.8 millionduring the second quarter of 2008, notwithstanding an increase in legal fees of approximately$1 million.
- Net loss per share for the second quarter of 2009 was$0.21per share, an increase from a loss per share of$0.16for the second quarter of 2008.
- Cash and cash equivalents decreased to$12.1 millionatJune 30, 2009, as compared to$13.2 millionatMarch 31, 2009and$15.5 millionatDecember 31, 2008.
Second Quarter Business Highlights
Technology Development Division
- Awarded$1.5 millioncorrosion test methods contract
- Selected for negotiations in NRELâ€™s Photovoltaic Technology Pre-Incubator Program
- Demonstrated advanced material technologies in hydrophobic watershedding coatings for windshields and impact damage indicating paints during the Warrior 2009 demonstration sponsored by theAir Force Research Laboratory (AFRL), which highlights promising new technologies in the field during actual military exercise scenarios
- With the Mayo Clinic, published a paper in the international journal Annals of Biomedical Engineering discussing a next-generation fiber optic pressure microsensor that improves size and performance over previous generation sensors
Pharmaceuticals / Nanomedicine
- Published a paper titled â€œFullerene nanomaterials potentiate hair growthâ€ in the international, peer-reviewed journal Nanomedicine: Nanotechnology, Biology, and Medicine (NBM)
Instrumentation, Test & Measurement
- Launched our distributed sensing system with potential application in areas such as structural health monitoring of carbon fiber reinforced materials of new aircraft, aviation electronic systems and sink hole monitoring systems for railways
Outlook for Remainder of 2009
Given the uncertainties associated with Lunaâ€™s Chapter 11 reorganization and the Hansen litigation, the company is unable to provide a reasonable projection for its expected results of operations for the remainder of 2009 at this time.
Conference Call Information
As previously announced, Luna Innovationswill conduct an investor conference call at 5:00 p.m. (EDT)today to discuss its financial results for the second quarter of 2009. The call can be accessed by dialing 1.866.314.4865 domestically or 1.617.213.8050 internationally prior to the start of the call. The access code is 77289631. The conference call will also be webcast live over the Internet. The webcast can be accessed by logging on to the â€œInvestor Relationsâ€ section of the Luna Innovations website, http://www.lunainnovations.com, prior to the event. The webcast will be archived under the â€œWebcasts and Presentationsâ€ section of theLuna 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. 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 inRoanoke, Virginia.
Forward Looking Statements:
This release includes information that constitutes â€œforward-looking statementsâ€ made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 and SectionÂ 21E of the Securities Exchange Act of 1934, including statements regarding, but not limited to (i) Lunaâ€™s intention to continue to serve its customersâ€™ needs; (ii) improvements in operating efficiencies; (iii) the companyâ€™s position if it can emerge from Chapter 11 quickly under its filed plan of reorganization; (iv) demonstration of material technologies; and (v) the potential expansion of applications for the companyâ€™s distributing sensing technology. The company attempts, whenever possible, to identify forward-looking statements by words such as â€œintends,â€ â€œwill,â€ â€œplans,â€ â€œanticipates,â€ â€œexpects,â€ â€œmay,â€ â€œestimates,â€ â€œbelieves,â€ â€œshould,â€ â€œprojects,â€ or â€œcontinue,â€ or the negative of those words and other comparable words. Similarly, statements that describe the companyâ€™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 companyâ€™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 risks inherent in current or future litigation proceedings, particularly with respect to Hansen Medical, Inc.; the companyâ€™s inability to continue to operate its business in the normal course; whether the company can emerge from Chapter 11 reorganization in the near future; and difficulties with the application of the companyâ€™s technologies. Additional factors that may affect the future results of the company are set forth in the companyâ€™s quarterly and annual reports on Form 10-Q and Form 10-K, respectively, and other filings with the Securities and Exchange Commission (â€œSECâ€), which are available at the SECâ€™s website at http://www.sec.gov, and at the companyâ€™s website at http://www.lunainnovations.com. These risk factors are updated from time to time through the filing of periodic reports with theSEC. The statements made in this press release are based on information available to the company as of the date of this release andLuna 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
|Â||Â||Â||Three Months Ended||Â||Six Months Ended|
|Â||Â||Â||June 30,||Â||June 30,|
|Contract research revenues||Â||Â||$||6,446,971||Â||Â||$||6,947,276||Â||Â||$||13,329,343||Â||Â||$||13,549,023||Â|
|Product and license revenues||Â||Â||Â||2,214,808||Â||Â||Â||2,931,027||Â||Â||Â||3,825,991||Â||Â||Â||5,249,203||Â|
|Cost of revenues:||Â||Â||Â||Â||Â||Â||Â||Â||Â|
|Contract research costs||Â||Â||Â||4,271,252||Â||Â||Â||4,382,001||Â||Â||Â||9,169,008||Â||Â||Â||8,575,648||Â|
|Product and license costs||Â||Â||Â||1,048,249||Â||Â||Â||1,427,553||Â||Â||Â||1,926,850||Â||Â||Â||2,769,232||Â|
|Total cost of revenues||Â||Â||Â||5,319,501||Â||Â||Â||5,809,554||Â||Â||Â||11,095,858||Â||Â||Â||11,344,880||Â|
|Selling, general, and administrative||Â||Â||Â||4,907,564||Â||Â||Â||4,899,559||Â||Â||Â||9,142,073||Â||Â||Â||9,455,192||Â|
|Research, development, and engineering||Â||Â||Â||684,755||Â||Â||Â||934,111||Â||Â||Â||1,681,475||Â||Â||Â||1,638,910||Â|
|Interest expense, net||Â||Â||Â||(139,875||)||Â||Â||(33,576||)||Â||Â||(298,864||)||Â||Â||(9,689||)|
|Total other income||Â||Â||Â||(157,119||)||Â||Â||(33,576||)||Â||Â||(317,031||)||Â||Â||(9,689||)|
|Loss before income taxes||Â||Â||Â||(2,407,160||)||Â||Â||(1,798,497||)||Â||Â||(42,695,344||)||Â||Â||(3,650,445||)|
|Income tax expense||Â||Â||Â||–||Â||Â||Â||–||Â||Â||Â||600,000||Â||Â||Â||–||Â|
|Net loss per share:||Â||Â||Â||Â||Â||Â||Â||Â||Â|
|Weighted average shares:||Â||Â||Â||Â||Â||Â||Â||Â||Â|
Luna Innovations Incorporated Consolidated Balance Sheets
|Â||Â||Â||June 30,||Â||December 31,|
|Cash and cash equivalents||Â||Â||$||12,110,258||Â||Â||$||15,518,960||Â|
|Accounts receivable, net||Â||Â||Â||6,879,920||Â||Â||Â||7,332,034||Â|
|Refundable income taxes||Â||Â||Â||98,092||Â||Â||Â||98,092||Â|
|Other current assets||Â||Â||Â||418,980||Â||Â||Â||342,598||Â|
|Total current assets||Â||Â||Â||22,358,831||Â||Â||Â||26,120,675||Â|
|Property and equipment, net||Â||Â||Â||4,710,871||Â||Â||Â||5,363,957||Â|
|Intangible assets, net||Â||Â||Â||175,862||Â||Â||Â||1,813,643||Â|
|Deferred tax asset||Â||Â||Â||–||Â||Â||Â||600,000||Â|
Liabilities and stockholdersâ€™ equity
|Current portion of capital lease obligation||Â||Â||$||11,782||Â||Â||$||17,396||Â|
|Current portion of long-term debt obligation||Â||Â||Â||4,285,715||Â||Â||Â||1,428,572||Â|
|Total current liabilities||Â||Â||Â||49,736,764||Â||Â||Â||11,128,750||Â|
|Long-term debt obligation||Â||Â||Â||5,000,000||Â||Â||Â||8,571,428||Â|
Preferred stock, par value $0.001, 5,000,000 shares authorized, no shares issued and outstanding
Common stock, par value $0.001, 100,000,000 shares authorized, 11,209,836 and 11,137,882 shares issued and outstanding
|Additional paid-in capital||Â||Â||Â||39,550,593||Â||Â||Â||37,960,928||Â|
Total stockholdersâ€™ equity
Total liabilities and stockholdersâ€™ equity
Luna Innovations Incorporated Consolidated Statements of Cash Flows
|Â||Â||Â||Six months ended|
|Cash flows used in operating activities||Â||Â||Â||Â||Â|
Adjustments to reconcile net loss to net cash used in operating activities:
|Depreciation and amortization||Â||Â||Â||1,142,846||Â||Â||Â||958,953||Â|
|Impairment of intangible assets||Â||Â||Â||1,310,598||Â||Â||Â||–||Â|
|Deferred tax expense||Â||Â||Â||600,000||Â||Â||Â||–||Â|
|Change in assets and liabilities:||Â||Â||Â||Â||Â|
|Refundable income taxes||Â||Â||Â||–||Â||Â||Â||5,401||Â|
|Accounts payable and accrued expenses||Â||Â||Â||(559,125||)||Â||Â||138,964||Â|
|Net cash used in operating activities||Â||Â||Â||(2,546,919||)||Â||Â||(967,494||)|
|Cash flows used in investing activities||Â||Â||Â||Â||Â|
|Acquisition of property and equipment||Â||Â||Â||(41,445||)||Â||Â||(552,355||)|
|Intangible property costs||Â||Â||Â||(121,132||)||Â||Â||(291,452||)|
|Net cash used in investing activities||Â||Â||Â||(162,577||)||Â||Â||(843,807||)|
|Cash flows from financing activities||Â||Â||Â||Â||Â|
|Proceeds from/ (Payments on) debt obligations||Â||Â||Â||(714,285||)||Â||Â||4,928,150||Â|
|Payments on capital lease obligations||Â||Â||Â||(5,614||)||Â||Â||(16,517||)|
|Proceeds from the exercise of options and warrants||Â||Â||Â||20,693||Â||Â||Â||105,362||Â|
|Net cash used in financing activities||Â||Â||Â||(699,206||)||Â||Â||5,016,995||Â|
|Net change in cash||Â||Â||Â||(3,408,702||)||Â||Â||3,205,694||Â|
|Cash – beginning of period||Â||Â||Â||15,518,960||Â||Â||Â||12,046,945||Â|
|Cash – end of period||Â||Â||$||12,110,258||Â||Â||$||15,252,639||Â|
Luna Innovations Incorporated Reconciliation of EBITDA and Adjusted EBITDA to Net Loss
|Luna Innovations Incorporated|
|Reconciliation of EBITDA and Adjusted EBITDA to Net Loss|
|Â||Â||Â||Three Months Ended||Â||Â||Six Months Ended|
|Â||Â||Â||June 30,||Â||Â||June 30,|
|Depreciation and amortization||Â||Â||Â||523,058||Â||Â||Â||477,121||Â||Â||Â||Â||1,142,846||Â||Â||Â||958,953||Â|
|Share based compensation||Â||Â||Â||779,532||Â||Â||Â||663,260||Â||Â||Â||Â||1,569,043||Â||Â||Â||1,422,902||Â|
|Impairment of intangible assets||Â||Â||Â||–||Â||Â||Â||–||Â||Â||Â||Â||1,310,598||Â||Â||Â||–||Â|