Luna Reports Fourth Quarter 2012 and Full Year Financial Results

  Luna Reports Fourth Quarter 2012 and Full Year Financial Results

 Revenues decreased 5% from prior year quarter and 9% for the year; Net loss
                             flat year over year

Business Wire

ROANOKE, Va. -- March 26, 2013

Luna Innovations Incorporated (NASDAQ: LUNA) today announced its financial
results for the fourth quarter and year ended December 31, 2012.

For the fourth quarter of 2012, Luna realized a net loss attributable to
common stockholders of $0.6 million, or $0.04 per share, compared to a net
loss attributable to common stockholders of $0.4 million, or $0.03 per share,
for the fourth quarter of 2011. Revenues decreased 5% to $7.8 million in the
fourth quarter of 2012 from $8.1 million in the fourth quarter of the
preceding year, reflecting $0.2 million growth in the Technology Development
segment more than offset by a decrease of $0.6 million in revenue from the
Products and Licensing segment. Gross profit remained relatively unchanged at
approximately $2.7 million for the most recent quarter and for the fourth
quarter of last year.

For the year, total revenues decreased 9% to $32.3 million for 2012 compared
to $35.6 million in 2011. Products and Licensing revenue was $11.3 million in
2012 compared to $13.2 million in 2011, while full year revenues in the
company’s technology development segment declined to $21.1 million in 2012
compared to $22.4 million in 2011. Gross profit decreased to $12.2 million for
2012 compared to gross profit of $13.2 million in 2011. Net loss attributable
to common stockholders remained unchanged at $1.5 million, or $0.11 per common
share, for 2012 and 2011.

Adjusted EBITDA, a non-GAAP measure, which is earnings before interest, taxes,
and non-cash expenses of share-based compensation, depreciation, amortization
and warrant expense, decreased to $0.2 million for the fourth quarter of 2012
compared to $0.6 million for the fourth quarter of 2011 and to $1.9 million
for full year 2012 from $2.6 million in 2011.

On March 4, 2013, the company announced that it had sold its Secure Computing
and Communications (“SCC”) group effective March 1, 2013, a component of the
Technology Development segment. Revenues for 2012 included approximately $6
million associated with SCC.

“The sale of our SCC group allowed us to increase liquidity while continuing
to focus on the growth potential of our core fiber-optic technologies,” said
My Chung, chief executive officer of Luna. “With the completion of this
transaction, we have accelerated the monetization of our secure computing
technologies and generated cash to mitigate our risk of reductions in
government spending.”

Fourth Quarter Financial and Business Summary

-- Total revenues decreased by 5%, to $7.8 million for the fourth quarter of
2012, from $8.1 million for the fourth quarter of 2011.

-- Technology development revenues increased by 4%, to $5.2 million for the
fourth quarter of 2012, from $5.0 million for the fourth quarter of 2011.

-- Products and licensing revenues decreased by 19%, to $2.5 million in the
fourth quarter of 2012, from $3.1 million in the fourth quarter of 2011,
including a decrease of approximately $0.3 million in sales of fiber optic
test and measurement equipment and approximately $0.3 million of reductions in
funded product development activities.

-- Gross profit decreased to $2.6 million for the fourth quarter of 2012, from
$2.7 million for the fourth quarter of 2011.

-- Selling, general and administrative expenses increased by 7% to $2.6
million, or 34% of total revenues for the fourth quarter of 2012, from $2.4
million, or 30% of total revenues, for the fourth quarter of 2011.

-- Total operating expenses remained relatively unchanged at $3.2 million, or
41% of total revenues, for the fourth quarter of 2012 and 39% of total
revenues for the fourth quarter of 2011.

-- Adjusted EBITDA decreased to $0.2 million for the fourth quarter of 2012,
from $0.6 million for the fourth quarter of 2011.

-- Net loss attributable to common stockholders declined to $0.6 million, or
($0.04) per basic and diluted common share, for the fourth quarter of 2012,
compared to a net loss attributable to common stockholders of $0.4 million, or
($0.03) per basic and diluted common share, for the fourth quarter of 2011.

-- Cash and cash equivalents totaled $6.3 million at December 31, 2012, as
compared to $8.9 million at December 31, 2011. Outstanding principal on our
term loan decreased from $5.3 million at December 31, 2011, to $3.6 million at
December 31, 2012.

-- Introduced the OBR 5T-50 in November of 2012 to address the production line
needs of the telecommunications industry.

Year Ended December 31, 2012 Financial Summary

-- Total revenue decreased $3.3 million, or 9%, to $32.3 million for the year
ended December 31, 2012, compared to $35.6 million for the year ended December
31, 2011.

-- Products and licensing revenue decreased by 15%, to $11.3 million for the
year ended December 31, 2012, from $13.2 million for the year ended December
31, 2011.

-- Technology development revenues decreased by 6%, to $21.1 million for the
year ended December 31, 2012, from $22.4 million for the year ended December
31, 2011.

-- Gross profit decreased by 8%, to $12.2 million for the year ended December
31, 2012, from $13.2 million for the year ended December 31, 2011.

-- Selling, general and administrative expenses decreased by 8% to $10.8
million, or 33% of total revenues, for the year ended December 31, 2012, from
$11.8 million, or 33% of total revenues, for the year ended December 31, 2011.

-- Total operating expenses decreased by 8% to $13.4 million, or 41% of total
revenues, for the year ended December 31, 2012, from $14.5 million, or 41% of
total revenues, for the year ended December 31, 2011.

-- Adjusted EBITDA decreased to $1.9 million for the year ended December 31,
2012 from $2.7 million for the year ended December 31, 2011.

-- Net loss attributable to common stockholders remained unchanged at $1.5
million, or $0.11 per basic and diluted common share, for the year ended
December 31, 2012 and for the year ended December 31, 2011.

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 will conduct an investor conference call at 5:00
p.m. (EST) today to discuss its financial results and business developments
for the fourth quarter and full year of 2012. The call can be accessed by
dialing 866.713.8565 domestically or 617.597.5324 internationally prior to the
start of the call. The participant access code is 21120821. 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
website, www.lunainc.com, prior to the event. The webcast will be archived
under the “Webcasts and Presentations” section of the Luna website for at
least 30 days following the conference call.

About Luna:

Luna Innovations Incorporated (www.lunainc.com) is focused on sensing and
instrumentation. 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 it serves. 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 the growth
potential of fiber-optic technology and the company’s technical capabilities.
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,
failure of demand for the company’s products and services to meet
expectations, technological challenges and 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
www.sec.gov and at the company’s website at www.lunainc.com. The statements
made in this release are based on information available to the company as of
the date of this release and Luna undertakes no obligation to update any of
the forward-looking statements after the date of this release.


Luna Innovations Incorporated
Condensed Consolidated Statements of Operations


                 Three months ended                  Year ended
                   December 31,                          December 31,
                   2012             2011               2012             2011
                   (unaudited)
Revenues
Technology         $ 5,229,644        $ 5,011,387        $ 21,098,286       $ 22,417,902
development
Products and        2,535,087         3,137,113         11,250,717        13,195,822
licensing
                                                                                         
Total revenues      7,764,731         8,148,500         32,349,003        35,613,724
                                                                                         
Cost of
revenues
Technology           3,680,434          3,882,508          14,928,887         15,793,279
development
Products and        1,420,063         1,530,436         5,242,043         6,589,943
licensing
                                                                                         
Total cost of       5,100,497         5,412,944         20,170,930        22,383,222
revenues
                                                                                         
Gross profit        2,664,234         2,735,556         12,178,073        13,230,502
                                                                                         
Operating
expenses
Selling,
general and          2,620,524          2,448,321          10,804,156         11,788,866
administrative
Research,
development         589,540           724,455           2,558,417         2,674,730
and
engineering
                                                                                         
Total
operating           3,210,064         3,172,776         13,362,573        14,463,596
expenses
                                                                                         
Operating loss       (545,830   )       (437,220   )       (1,184,500 )       (1,233,094 )
Other income
(expense)
Interest             (64,056    )       (85,890    )       (286,529   )       (376,524   )
Other               22,978            169,772           108,061           227,565
                                                                                         
Loss before          (586,908   )       (353,338   )       (1,362,968 )       (376,524   )
income taxes
Income tax          —                 —                 21,417            10,307
expense
                                                                                         
Net loss             (586,908   )       (353,338   )       (1,384,385 )       (1,392,360 )
Preferred           24,780            32,510            119,754           127,462
stock dividend
                                                                                         
Net loss
attributable       $ (611,688   )     $ (385,848   )     $ (1,504,139 )     $ (1,519,822 )
to common
stockholders
                                                                                         
Net loss per
share of
common stock
Basic and          $ (0.04      )     $ (0.03      )     $ (0.11      )     $ (0.11      )
diluted
                                                                                         
Weighted
average shares
Basic and           14,008,772        13,794,361        13,930,267        13,647,555
diluted
                                                                                         

                                                          
Luna Innovations Incorporated
Condensed Consolidated Balance Sheets
                                                                             
                                                                             
                                           December 31,
                                           2012                2011
                                                                             
Assets
Current Assets
Cash and cash equivalents                  $ 6,340,461         $ 8,939,127
Accounts receivable, net                     7,059,635           5,958,086
Inventory, net                               3,336,916           3,330,773
Prepaid expenses                             667,773             1,071,438
Other current assets                        35,629             35,717
                                                                             
Total current assets                        17,440,414         19,355,141
                                                                             
Property and equipment, net                  2,426,638           2,816,674
Intangible assets, net                       437,839             539,563
Other assets                                152,877            228,043
                                                                             
Total assets                               $ 20,457,768        $ 22,919,421
                                                                             
Liabilities and stockholders’ equity
Current liabilities
Current portion of long term debt          $ 1,500,000         $ 1,625,000
obligation
Current portion of capital lease             54,091              50,949
obligation
Accounts payable                             1,797,571           1,656,602
Accrued liabilities                          2,747,175           3,612,193
Deferred credits                            832,822            1,462,603
                                                                             
Total current liabilities                    6,931,659           8,407,347
Long term debt obligations                   2,125,000           3,625,000
Long term capital lease obligations         128,917            183,008
                                                                             
Total liabilities                           9,185,576          12,215,355
                                                                             
Commitments and contingencies
Stockholders’ equity
Preferred stock                              1,322               1,322
Common stock                                 14,245              13,969
Additional paid-in capital                   61,361,505          59,289,516
Accumulated deficit                         (50,104,880 )      (48,600,741 )
                                                                             
Total stockholders’ equity                  11,272,192         10,704,066
                                                                             
Total liabilities and stockholders’        $ 20,457,768        $ 22,919,421
equity
                                                                             


Luna Innovations Incorporated
Condensed Consolidated Statements of Cash Flows

                                                           
                                             Year ended December 31,
                                             2012               2011
                                                                             
Cash flows from operating activities
Net loss                                     $ (1,384,385 )     $ (1,392,360 )
Adjustments to reconcile net loss to
cash (used in)/ provided by operating
activities
Depreciation and amortization                  1,092,027          1,462,511
Stock-based compensation                       1,862,533          2,163,290
Changes in operating assets and
liabilities
Accounts receivable                            (1,101,549 )       1,711,539
Inventory                                      (10,482    )       (224,173   )
Other assets                                   478,919            (321,430   )
Accounts payable and accrued expenses          (724,050   )       (288,989   )
Deferred credits                              (629,781   )      (119,999   )
                                                                             
Net cash used in operating activities         (416,768   )      2,990,389
                                                                             
Cash from investing activities
Acquisition of property and equipment          (371,390   )       (327,704   )
Intangible property costs                     (224,537   )      (347,813   )
                                                                             
Net cash used in investing activities         (595,927   )      (675,517   )
                                                                             
Cash flows from financing activities
Proceeds from debt obligations                 --                 6,000,000
Payments on debt obligations                   (1,625,000 )       (6,867,393 )
Payment on capital lease obligations           (50,949    )       (42,383    )
Proceeds from exercise of options and         89,978            317,451
warrants
                                                                             
Net cash (used in)/provided by financing      (1,585,971 )      (592,325   )
activities
                                                                             
Net change in cash                             (2,598,666 )       1,722,547
Cash and cash equivalents—beginning of        8,939,127         7,216,580
period
                                                                             
Cash and cash equivalents—end of period      $ 6,340,461        $ 8,939,127
                                                                             


Luna Innovations Incorporated
Reconciliation of Net Loss to EBITDA and Adjusted EBITDA
                                                           
                                                                             
                 Three months ended            Year ended
                 December 31,                  December 31,
                 2012           2011           2012             2011
                 (unaudited)
Reconciliation
of Net Income
(Loss) to
EBITDA and
Adjusted
EBITDA:
Net loss         $ (586,908 )   $ (353,338 )   $ (1,384,385 )   $ (1,392,360 )
Interest           64,057         85,891         286,529          376,524
Taxes              —              —              21,417           10,307
Depreciation
and               277,529       419,811       1,092,027       1,462,511
amortization
                                                                             
EBITDA             (245,322 )     152,364        15,588           456,982
Share based
compensation       450,861        426,018        1,862,533        2,163,290
expense
Warrant           (35,696  )    18,586        17,190          60,338
expense
                                                                             
Adjusted         $ 169,843      $ 596,968      $ 1,895,311      $ 2,680,610
EBITDA
                                                                             

Contact:

Luna Innovations Incorporated
Dale Messick, CFO
1-540-769-8400
IR@lunainc.com
 
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