ROANOKE, Va., March 5 /PRNewswire-FirstCall/ -- Luna Innovations Incorporated today announced its financial results for the fourth quarter and full year ended December 31, 2006.
Kent Murphy, Chairman and Chief Executive Officer, commented, “The top- line growth and gross margin expansion we experienced in the fourth quarter and full year of 2006 were largely propelled by the growth of higher margin revenues from the sale of products. We are beginning to experience the benefits and validation of the Luna business model. Product and license sales accounted for 28% of our revenue, compared to 20% in fourth quarter of 2005, and 19% in the third quarter of 2006, and as we experienced that growth, our overall gross profit margin grew from 17% in the fourth quarter of 2005 to 30% in the fourth quarter of 2006.”
Revenues for the fourth quarter of 2006 increased 51% to $8.0 million from $5.3 million for the same quarter of 2005, reflecting growth in technology development (contract research) revenues of approximately $1.5 million and growth in product and license revenues of approximately $1.2 million. Gross profit increased to $2.4 million, or 30% of revenues, in the fourth quarter of 2006, from $0.9 million, or 17% of revenues, in the fourth quarter of 2005. Operating expenses were $5.3 million in the fourth quarter of 2006, compared to $4.1 million in the third quarter of 2006 and $3.1 million in the fourth quarter of 2005. The increase in year over year operating expense reflects the company’s strategy, begun in late 2005, to increase its product portfolio and product sales, which included the acquisition of Luna Technologies in September 2005. Operating expenses in the fourth quarter of 2006 were also higher than the prior quarter because increased product sales resulted in higher commissions for the company’s internal sales force and third party re- sellers, the company expanded its leased facilities to accommodate growth, and additional resources were devoted to preparation of bids and proposals for new technology development opportunities. During the quarter, the company also incurred approximately $0.2 million in expenses related to engineering and other start-up costs associated with recently acquired product lines and $0.3 million in legal and related costs associated with the successful resolution of a contractual dispute. The company incurred a loss from operations of $2.9 million in the fourth quarter of 2006, versus a loss from operations of $2.1 million for the prior year’s comparable quarter.
The net loss applicable to common stockholders for the fourth quarter of 2006 was $2.7 million, or $0.27 per share on a diluted basis, compared to a net loss applicable to common stockholders of $1.7 million or $0.33 per share, for the fourth quarter of 2005.
Murphy added, “Our Luna Technologies subsidiary saw record fourth quarter revenue of $1.8 million and record bookings of $2.0 million. We signed 12 new customers in the fourth quarter, including many top tier companies, and we signed eight contracts with repeat customers, which resulted in a 70% growth rate within Luna Technologies compared to the fourth quarter of 2005. We also acquired the rights to manufacture and sell a line of swept tunable lasers. We expect the technology will allow us to compete more effectively in our existing fiber optic test and measurement markets and open up new markets in industrial and medical sensing. On the healthcare products side, we continued to ship units of our Emboli Detection and Classification (EDAC(TM)) product to research institutions and are currently working through a third party to obtain FDA clearance for clinical use.”
For the year ended December 31, 2006, total revenues were $23.5 million, compared to $16.5 million 2005. Technology development revenue for 2006 increased $3.4 million, or 22%, over 2005. Product and license revenue was $4.8 million in 2006. Gross profit increased to $7.1 million, or 30% of revenues, for 2006, from $3.5 million, or 21% of revenues, in 2005. Operating expenses were $17.1 million in 2006, compared to $6.0 million in 2005. The increase in year over year operating expenses reflects the company’s strategy to increase its product portfolio and product sales. Operating expenses in 2006 also include share-based compensation expense as well as administrative costs associated with the company’s growing employee base and its transformation to a public company. The company incurred a loss from operations of $10.0 million in 2006, versus a loss from operations of $2.5 million for the prior year.
The net loss applicable to common stockholders for 2006 was $9.4 million, or $1.14 per share on a diluted basis, compared to a net loss applicable to common stockholders of $2.0 million, or $0.53 per share, for the previous year.
Fourth Quarter Business Highlights Technology Development -- Booked more than $4 million in new technology development contracts in the fourth quarter 2006, for a total of more than $22 million in new technology development contracts during the full year 2006. Healthcare Products -- Submitted 510(k) documentation for the company’s EDAC product to an FDA-accredited third-party reviewer. The purpose of this review is to shorten the overall timeframe required to receive FDA clearance and begin marketing the product for clinical use. -- Completed preliminary animal testing for the non-invasive diagnosis of compartment syndrome using the company’s EN-TACT(TM) (Emergency Noninvasive Tissue and Compartment Testing) product. -- Validated improved MRI image contrast performance using Trimetasphere(TM) nanomaterials. Improved image contrast is expected, together with improved safety, to be one of the primary potential advantages of the company’s MRI contrast agent product candidates over current commercially available products. Instrumentation, Test and Measurement Products -- Introduced a new distributed sensing technique that is expected to significantly reduce the expense associated with the deployment and maintenance of fiber optics. -- Acquired the rights to manufacture and sell an existing line of swept tunable lasers. The company anticipates the technology will allow it to compete more effectively in the fiber optic test and measurement markets by providing customers with fast, flexible and cost-effective test and measurement products. This laser technology also allows the company to aggressively pursue business opportunities in new markets such as industrial and medical sensing. -- Booked over $2 million in product orders during the quarter. Fourth Quarter Financial Highlights -- Revenues for the fourth quarter of 2006 increased 51% compared to the fourth quarter of 2005 and 33% compared to the third quarter of 2006. -- Product revenues represented over 27% of total revenues in the fourth quarter of 2006, versus 20% in the fourth quarter of 2005, and 19% in the third quarter of 2006. Product revenues grew to approximately $2.2 million in the fourth quarter of 2006, versus $1.2 million in the third quarter of 2006. -- Gross profit for the fourth quarter of 2006 increased to $2.4 million, or 30% of revenues, from $0.9 million, or 17% of revenues, for the corresponding period of 2005. -- The company reported a loss per share for the fourth quarter of 2006 of $0.27 per share, on a diluted basis, compared to a loss per share of $0.33 for the fourth quarter of 2005. -- Cash and cash equivalents totaled $17.9 million at December 31, 2006, compared to $12.5 million at December 31, 2005. Outlook for Fiscal Year 2007
The company anticipates continued strong growth in both its product and technology development divisions in 2007. For fiscal year 2007, the company expects total revenue to be in the range of $30.0 million to $32.0 million, consisting of product and license revenue of $7.0 to $8.0 million and technology development revenue of $23.0 to $24.0 million. For the full year 2007, the company anticipates a net loss in the range of $9.0 to $9.5 million. For the first quarter of 2007, the company expects revenue of approximately $6.9 million and a net loss of approximately $3.3 million. The company plans to discuss its fiscal year 2007 guidance on its investor conference call to be held later today.
Conference Call Information
As previously announced, Luna Innovations will conduct an investor conference call at 5:00 p.m. (EST) today to discuss the company’s fourth quarter and full year 2006 financial results. The company will also discuss expectations for 2007. The call can be accessed by dialing 1.800.638.5495 domestically or 1.617.614.3946 internationally prior to the start of the call. The access code is 46756966. 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 researches, develops and commercializes innovative technologies in molecular technology and sensing solutions. Luna Innovations accelerates the process of bringing new and innovative products to market by focusing on technologies that can fulfill identified market needs and then takes these technologies from the applied research stage through commercialization. Since its inception, Luna Innovations has successfully developed products for the energy, telecommunications, life sciences and defense industries. Headquartered in Roanoke, Virginia, the company has research, development and manufacturing facilities in Blacksburg, Charlottesville, Hampton, and Danville, Virginia, and a sales office in McLean, Virginia. Additional information can be found at http://www.lunainnovations.com.
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Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This press release includes information that constitutes “forward-looking statements” made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995, including but not limited to (i) the acquisition of the swept tunable laser technology will allow the company to compete more effectively in its existing fiber optic test and measurement markets and open up new markets in industrial and medical sensing, (ii) the company will aggressively pursue opportunities for its newly acquired tunable laser technology in industrial and medical sensing markets, (iii) the FDA- accredited third party review may shorten the overall time required to receive FDA clearance for the company’s EDAC product, (iv) the company’s new distributed sensing technique is expected to significantly reduce the expense associated with the deployment and maintenance of fiber optics, (v) the company anticipates continued strong growth in both its product and technology development divisions in 2007, and (vi) statements regarding revenue and net loss guidance for fiscal year 2007. 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. Luna Innovations wishes to take advantage of the “safe harbor” provided by the Private Securities Litigation Reform Act of 1995 and you are cautioned that 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: the company’s ability to manage its growth effectively; 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 risk that the company may become ineligible for small business government grants and contracts in the future; the effect of competition in its markets and changes in customer demand; the risk that company’s proprietary rights may be insufficient to protect its technologies, including potential claims by third parties that the company infringes their intellectual property rights; the potential impact of federal audits and investigations; delay in obtaining clearance by the U.S. Food and Drug Administration or other regulatory requirements; continued difficulty in, or increased costs related to, hiring, training and retaining skilled employees; unanticipated manufacturing or supply problems; a slowdown in the overall economy; and uncertainty in the global political environment. Additional factors that may affect the future results of the company are set forth in its Registration Statement on Form S-1, its 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 Luna Innovations’ website at http://www.lunainnovations.com. These risk factors are updated from time to time through the filing of periodic reports and registration statements 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 Balance Sheets December 31, December 31, 2006 2005 -------------- -------------- Assets (unaudited) Current assets Cash and cash equivalents $ 17,866,753 $ 12,514,839 Accounts receivable, net 7,233,406 5,129,911 Refundable income taxes 396,062 514,797 Inventory 843,294 448,475 Other current assets 503,703 227,409 -------------- -------------- Total current assets 26,843,218 18,835,431 Property and equipment, net 5,730,094 2,972,287 Intangible assets, net 2,031,489 999,544 Deferred offering costs - 710,018 Deferred tax asset 600,000 600,000 Other assets 12,413 16,550 -------------- -------------- Total assets $ 35,217,214 $ 24,133,830 ============== ============== Liabilities and stockholders’ equity Current liabilities Current portion of capital lease obligation $ 88,576 $ 98,820 Current portion of long-term debt obligation 214,955 - Accounts payable 2,757,381 3,647,505 Accrued liabilities 3,623,395 1,788,162 Deferred credits 874,676 1,458,393 -------------- -------------- Total current liabilities 7,558,983 6,992,880 Long-term capital lease obligation 28,557 117,134 Long-term debt obligation 5,000,000 5,214,955 Deferred credits and other long term liabilities 554,418 450,000 -------------- -------------- Total liabilities 13,141,958 12,774,969 -------------- -------------- Redeemable Class B common stock, 308,216 shares at December 31, 2005 - 504,984 -------------- -------------- Stockholders’ equity: Preferred stock, par value $0.001, 5,000,000 shares authorized at December 31, 2006, no shares issued and outstanding at December 31, 2006 - - Common stock Common stock, par value $0.001, 100,000,000 and 23,257,094 shares authorized at December 31, 2006 and December 31, 2005, respectively, 9,911,546 shares issued and outstanding at December 31, 2006 9,912 - Class A voting common stock, par value $0.001, 7,164,463 shares authorized at December 31, 2005, 2,834,814 shares issued and outstanding at December 31, 2005 - 2,835 Class B non-voting common stock, par value $0.001, 13,707,297 shares authorized at December 31, 2005, 734,427 shares issued and outstanding at December 31, 2005 - 734 Class C voting common stock, par value $0.001, 5,656,472 shares authorized at December 31, 2005, 2,131,474 shares issued and outstanding at December 31, 2005 - 2,131 Additional paid-in capital 31,585,762 10,935,049 Accumulated deficit (9,520,418) (86,872) -------------- -------------- Total stockholders’ equity 22,075,256 10,853,877 -------------- -------------- Total liabilities and stockholders’ equity $ 35,217,214 $ 24,133,830 ============== ============== Luna Innovations Incorporated Consolidated Statements of Operations Three Months Ended Twelve Months Ended December 31, December 31, ------------ ------------ ------------ ------------ 2006 2005 2006 2005 ------------ ------------ ------------ ------------ (unaudited) (unaudited) Revenues: Contract research revenues $ 5,810,797 $ 4,267,946 $18,787,863 $15,379,667 Product and license revenues 2,236,376 1,074,221 4,757,779 1,074,221 ------------ ------------ ------------ ------------ Total revenues 8,047,173 5,342,167 23,545,642 16,453,888 Cost of revenues: Contract research costs 4,631,659 4,012,555 14,232,063 12,552,122 Product and license costs 983,166 409,772 2,178,135 409,772 ------------ ------------ ------------ ------------ Total cost of revenues 5,614,825 4,422,327 16,410,198 12,961,894 ------------ ------------ ------------ ------------ Gross Profit 2,432,348 919,840 7,135,444 3,491,994 Operating expense 5,303,766 3,050,978 17,109,043 6,003,644 ------------ ------------ ------------ ------------ Operating loss (2,871,418) (2,131,138) (9,973,599) (2,511,650) ------------ ------------ ------------ ------------ Other income (expense) Other income (expense) 22,548 1,684 32,879 1,592 Interest income / (expense), net 170,024 33,955 515,818 (41,251) ------------ ------------ ------------ ------------ Total other income (expense) 192,572 35,639 548,697 (39,659) ------------ ------------ ------------ ------------ Loss before income taxes (2,678,846) (2,095,499) (9,424,902) (2,551,309) Income tax expense (benefit) - (369,979) 12,829 (557,252) ------------ ------------ ------------ ------------ Net loss $(2,678,846) $(1,725,520) $(9,437,731) $(1,994,057) ============ ============ ============ ============ Net loss per share: Basic $ (0.27) $ (0.33) $ (1.14) $ (0.53) ============ ============ ============ ============ Diluted $ (0.27) $ (0.33) $ (1.14) $ (0.53) ============ ============ ============ ============ Weighted average shares: Basic 9,883,057 5,254,336 8,283,074 3,735,811 ============ ============ ============ ============ Diluted 9,883,057 5,254,336 8,283,074 3,735,811 ============ ============ ============ ============ Luna Innovations Incorporated Consolidated Statements of Cash Flows Twelve Months Ended December 31, ---------------------------- 2006 2005 ------------- ------------- (unaudited) Cash flows used in operating activities Net loss $ (9,437,731) $ (1,994,057) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 1,134,777 540,145 Deferred income taxes - (157,251) Share-based compensation 1,762,899 168,926 Change in assets and liabilities: Accounts receivable (2,103,495) (1,314,485) Refundable income taxes 118,735 362,005 Other assets (654,560) (26,194) Accounts payable and accrued expenses 723,445 1,911,095 Deferred revenues (679,299) 422,227 ------------- ------------- Net cash used in operating activities (9,135,229) (87,589) ------------- ------------- Cash flows used in investing activities Acquisition of property and equipment (2,828,046) (877,144) Intangible property costs (558,909) (430,847) Net cash from acquisition of Luna Technologies - 33,676 Capitalized software development costs - (122,642) ------------- ------------- Net cash used in investing activities (3,386,955) (1,396,957) ------------- ------------- Cash flows from financing activities Net payments on line of credit - (1,500,000) Payments on capital lease obligations (98,819) (107,177) Proceeds from convertible debt 5,000,000 Proceeds from the issuance of common stock, net 17,881,900 9,912,468 Proceeds from the exercise of options and warrants 91,017 84,458 ------------- ------------- Net cash from financing activities 17,874,098 13,389,749 ------------- ------------- Net change in cash 5,351,914 11,905,203 Cash - beginning of period 12,514,839 609,636 ------------- ------------- Cash - end of period $ 17,866,753 $ 12,514,839 ============= ============= Supplemental disclosure of cash flow information Cash paid for interest $ 45,341 $ 108,211 Cash paid for income taxes $ 12,829 $ - Property and equipment financed by capital leases $ - $ 11,700
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CONTACT: Media: Karin Clark of Luna Innovations Incorporated,+1-540-769-8400, kclark@lunainnovations.com; Investors: Sally Beerbower ofQorvis Communications, +1-703-744-7800, ir@lunainnovations.com, for LunaInnovations Incorporated
Web site: http://www.lunainnovations.com/
