Luna Reports First Quarter 2013 Financial Results

  Luna Reports First Quarter 2013 Financial Results

 Company posts net income of $2.8 million following sale of Secure Computing
  and Communications group; net loss from continuing operations increased to
                                 $1.1 million

Business Wire

ROANOKE, Va. -- May 09, 2013

Luna Innovations Incorporated (NASDAQ: LUNA) today announced its financial
results for the first quarter ended March 31, 2013.

Luna recorded net income attributable to common stockholders of $2.8 million,
or $0.17 per diluted share, for the first quarter of 2013 compared to a net
loss attributable to common stockholders of $0.4 million, or ($0.03) per
diluted share in the first quarter of 2012. The net income in the first
quarter of 2013 included a net after-tax gain of $4.0 million realized on the
sale of the company’s Secure Computing and Communications group (“SCC”) in
March. Total revenues from continuing operations decreased to $4.5 million in
the first quarter of 2013 compared to $6.7 million in the first quarter of
2012, reflecting a decrease of $1.3 million in the Technology Development
segment and a decrease of $0.8 million in the Products and Licensing segment.
This decrease in revenue was driven primarily by decreased contract research
revenue within our optical systems group and lower sales of telecom related
test and measurement equipment. Gross profit decreased to $1.4 million for the
first quarter of 2013 compared to $2.7 million for the first quarter of 2012.
Luna’s operating expenses remained steady at $3.3 million in the first quarter
of 2013, comparable to the first quarter of the prior year. The resulting net
loss from continuing operations, which excludes the effects of SCC’s
operations prior to its sale and the gain associated with the sale, was $1.1
million for the first quarter of 2013 compared to a net loss from continuing
operations of $0.7 million for the first quarter of 2012.

Adjusted EBITDA, a non-GAAP measure, which is earnings before interest, taxes,
and non-cash expenses of stock based compensation, depreciation, amortization
and warrant expense, and excludes the effects of discontinued operations,
declined to ($1.3) million for the first quarter of 2013, as compared to $0.1
million for the first quarter of 2012. With the proceeds from the sale of SCC,
our cash and cash equivalents increased to $10.3 million at March 31, 2013
from $7.9 million at March 31, 2012.

"The sale of SCC during the first quarter added significant liquidity to our
balance sheet,” said My Chung, chief executive officer of Luna. “We are now
continuing to focus on our two remaining strategic initiatives for future
revenue growth -- shape sensing for minimally invasive medical applications
and fiber optic measurement of strain and temperature for a wide variety of
industries. We’re optimistic about developments in the telecommunications
industry pointing to investment in upgrading networks, which provides
increased opportunity for our technological solutions. At the same time, we’re
making great strides with our shape-sensing technology, transitioning toward
product integration."

First Quarter Financial and Business Highlights

-- Total revenues decreased by 32%, from $6.7 million in the first quarter of
2012 to $4.5 million in the first quarter of 2013.

-- Technology development revenues decreased by 33%, to $2.6 million for the
first quarter of 2013 from $3.9 million for the first quarter of 2012.
Products and licensing revenue decreased by 31%, from $2.7 million in the
first quarter of 2012 to $1.9 million in the first quarter of 2013.

-- Gross profit for the first quarter of 2013 decreased to $1.4 million, or
31% of total revenues, from $2.7 million, or 41% of total revenues, for the
corresponding period of 2012.

-- Selling, general and administrative expenses decreased by 5% to $2.5
million for the first quarter of 2013 from $2.6 million for the first quarter
of 2012.

-- Total operating expenses remained consistent at $3.3 million for the first
quarter of 2013 and 2012.

-- Adjusted EBITDA decreased to ($1.3) million in the first quarter 2013 from
$0.1 million in the first quarter of 2012.

-- Net income attributable to common stockholders improved to $2.8 million for
the first quarter of 2013 compared to a net loss attributable to common
stockholders to $0.4 million for the first quarter of 2012.

-- Cash and cash equivalents totaled $10.3 million at March 31, 2013 as
compared to $7.9 million at March 31, 2012.

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. (EDT) today to discuss its financial results and business developments
for the first quarter of 2013 and expectations for the remainder of 2013. The
call can be accessed by dialing 866.515.2907 domestically or 617.399.5121
internationally prior to the start of the call. The participant access code is
23732056. 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.

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 demand
for the company’s fiber optic equipment and technologies 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 March 31,
                                             2013             2012
                                             (Unaudited)        (Unaudited)
                                                                
Revenues:
Technology development                       $ 2,627,241        $ 3,942,700
Products and licensing                        1,869,676        2,713,814  
Total                                         4,496,917        6,656,514  
                                                                
Cost of revenues:
Technology development costs                   2,184,914          2,699,197
Products and licensing costs                  919,482          1,247,494  
Total                                         3,104,396        3,946,691  
                                                                
Gross Profit                                  1,392,521        2,709,823  
                                                                
Operating expense:
Selling, general and administrative            2,511,884          2,646,782
Research, development, and engineering        837,256          694,972    
Total                                         3,349,140        3,341,754  
                                                                
Operating loss                                (1,956,619 )      (631,931   )
                                                                
Other income/(expense)
Other income, net                              71,234             23,265
Interest (expense)                            (58,179    )      (79,658    )
Total                                         13,055           (56,393    )
                                                                
Loss before income taxes                       (1,943,564 )       (688,324   )
                                                                
Income tax expense                            (795,200   )      4,421      
                                                                
Loss from continuing operations                (1,148,364 )       (692,745   )
Income from discontinued operations, net      3,933,961        357,997    
of income taxes
                                                                
Net income/(loss)                              2,785,597          (334,748   )
                                                                
Preferred stock dividend                      23,629           34,096     
                                                                
Net income/(loss) attributable to common     $ 2,761,968       $ (368,844   )
stockholders
                                                                
Net loss per share from continuing
operations:
Basic                                        $ (0.08      )     $ (0.05      )
Diluted                                      $ (0.08      )     $ (0.05      )
Net income per share from discontinued
operations:
Basic                                        $ 0.28             $ 0.03
Diluted                                      $ 0.24             $ 0.02
Net income/(loss) per share attributable
to common stockholders:
Basic                                        $ 0.20             $ (0.03      )
Diluted                                      $ 0.17            $ (0.03      )
Weighted average common shares and common
equivalent shares outstanding
Basic                                          14,011,814         13,850,667
Diluted                                        16,615,574         16,322,294
                                                                

                                           
Luna Innovations Incorporated
Condensed Consolidated Balance Sheets
                                                           
                                            March 31,          December 31,
                                            2013               2012
                                            (Unaudited)
                                                               
Assets
Current assets
Cash and cash equivalents                   $ 10,266,998       $ 6,340,461
Accounts receivable, net                      5,625,212          7,059,635
Inventory, net                                3,521,920          3,336,916
Prepaid expenses                              646,960            667,773
Other current assets                         70,208           35,629      
Total current assets                          20,131,298         17,440,414
                                                               
Property and equipment, net                   2,268,109          2,426,638
Intangible assets, net                        358,963            437,839
Other assets                                 99,085           152,877     
                                                               
Total assets                                $ 22,857,455      $ 20,457,768  
                                                               
Liabilities and stockholders’ equity
Liabilities
Current Liabilities
Current portion of long term debt           $ 1,625,000        $ 1,500,000
obligation
Current portion of capital lease              54,906             54,091
obligation
Accounts payable                              1,562,304          1,797,571
Accrued liabilities                           2,803,982          2,747,175
Deferred credits                             573,395          832,822     
Total current liabilities                     6,619,587          6,931,659
                                                               
Long-term debt obligation                     1,750,000          2,125,000
Long-term lease obligation                   114,881          128,917     
                                                               
Total liabilities                            8,484,468        9,185,576   
                                                               
Commitments and contingencies
Stockholders’ equity:
Preferred stock                               1,322              1,322
Common stock                                  14,269             14,245
Additional paid-in capital                    61,700,308         61,361,505
Accumulated deficit                          (47,342,912 )     (50,104,880 )
Total stockholders’ equity                   14,372,987       11,272,192  
                                                               
Total liabilities and stockholders’         $ 22,857,455      $ 20,457,768  
equity
                                                               


Luna Innovations Incorporated
Condensed Consolidated Statements of Cash Flows
                                          
                                             Three Months Ended March 31,
                                             2013             2012
                                             (Unaudited)        (Unaudited)
                                                                
Cash flows(used in)/provided by
operating activities
Net income/(loss)                            $ 2,785,597        $ (334,748   )
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization                  228,267            284,101
Share-based compensation                       313,516            454,584
Warrant expense                                -                  11,886
Gain on sale, net of income taxes              (4,029,210 )       -
Tax benefit from utilization of net            (861,071   )       -
operating loss carryforward
Change in assets and liabilities:
Accounts receivable                            2,039,952          (866,444   )
Inventory                                      (185,004   )       57,389
Other current assets                           (127,333   )       139,670
Other assets                                   53,792             18,791
Accounts payable and accrued expenses          (231,431   )       (60,923    )
Deferred credits                              (259,427   )      (250,631   )
                                                                
Net cash used in operating activities         (272,352   )      (546,325   )
                                                                
Cash flows (used in)/provided by
investing activities
Acquisition of property and equipment          (50,255    )       (104,719   )
Intangible property costs                      (11,777    )       (48,246    )
Proceeds from sale of discontinued            4,522,460        -          
operations, net of fees
                                                                
Net cash provided by/(used in) investing      4,460,428        (152,965   )
activities
                                                                
Cash flows used in financing activities
                                                                
Payments on capital lease obligations          (13,221    )       (12,453    )
Payment of debt obligations                    (250,000   )       (375,000   )
Proceeds from exercise of options and         1,682            26,979     
warrants
                                                                
Net cash used in financing activities         (261,539   )      (360,474   )
                                                                
Net change in cash                             3,926,537          (1,059,764 )
Cash and cash equivalents, beginning of       6,340,461        8,939,127  
period
                                                                
Cash and cash equivalents, end of period     $ 10,266,998      $ 7,879,363  
                                                                


Luna Innovations Incorporated
Reconciliation of Net Loss to EBITDA and Adjusted EBITDA
                                            
                                               Three Months Ended March 31,
                                               2013              2012
                                               (Unaudited)        (Unaudited)
                                                                  
Net income/ (loss)                             $ 2,785,597        $ (334,748 )
Less income from discontinued operations,       3,933,961        357,997  
net of income taxes
Loss from continuing operations                  (1,148,364 )       (692,745 )
Interest expense                                 58,179             79,658
Tax (benefit)/expense                            (795,200   )       4,421
Depreciation and amortization                   228,267          284,101  
                                                                  
EBITDA                                           (1,657,118 )       (324,565 )
                                                                  
Share-based compensation                         313,516            454,584
Warrant expense                                  --                11,886
                                                                  
Adjusted EBITDA                                $ (1,343,602 )     $ 141,905  
                                                                  

Contact:

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