LUNA INNOVATIONS INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - May 11, 2015

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Exhibit 99.1
 
Luna Innovations Incorporated Reports First Quarter 2015 Financial Results
Total revenues increased 19% during the first quarter of 2015 compared to the first quarter of 2014; products and licensing revenues increased 37% compared to the first quarter of 2014
(ROANOKE, VA, May 11, 2015) – Luna Innovations Incorporated (NASDAQ: LUNA) today announced its financial results for the three months ended March 31, 2015.
•
Total revenues for the quarter were $5.3 million, an increase of 19% compared to the same quarter last year
•
Products and licensing revenues were $2.5 million, an increase of 37% compared to the first quarter in 2014
•
Gross profit for the quarter was $2.3 million, an increase of 47% compared to the same period last year
“I am very pleased with our continued growth in revenues and improved operating results,” said My Chung, president and chief executive officer of Luna. "Our enhanced revenues and continued expense control resulted in a $1.1 million improvement in our quarterly Adjusted EBITDA, which excludes the transaction-related costs that we recognized associated with our merger with Advanced Photonix, Inc. With our improving operating results, the additional growth that we expect to recognize as a result of the merger, and the expected synergies of the combined companies, we are excited by our potential for accelerated growth and enhanced profitability.”
First Quarter Financial and Business Summary

Total revenues for the three months ended March 31, 2015, increased 19% to $5.3 million, compared to $4.5 million for the same period of 2014. The increase resulted primarily from an increase in our products and licensing segment, whose revenues grew by 37% to $2.5 million during the first quarter of 2015, compared to $1.8 million during the same period in 2014. Technology development revenues increased 7% to $2.9 million compared to $2.7 million for the three months ended March 31, 2014, driven by growth in our optical systems group and our nano-materials group.
Gross profit increased to $2.3 million, or 43% of total revenues, for the three months ended March 31, 2015, compared to gross profit of $1.6 million, or 35% of total revenues, for the same period in 2014. The improved margin resulted from the revenue mix, with products and licensing revenues, which typically provide a higher gross margin than technology development revenues, representing a higher proportion of total revenues in the first quarter of 2015.
Selling, general and administrative expenses increased 66% to $4.6 million for the first quarter of 2015, compared to $2.8 million for the first quarter of 2014. Selling, general and administrative expenses of $4.6 million in the first quarter of 2015 included $1.8 million of non-recurring costs associated with the merger with Advanced Photonix, Inc. Research, development and engineering expenses decreased to $0.3 million for the first quarter of 2015 compared to $0.7 million for the first quarter of 2014, principally due to $0.2 million in lower labor charges following the sale of the medical shape sensing business in January 2014.
Growth in revenues and margins offset by increased operating expenses resulted in a $0.7 million increase in operating loss to $2.6 million during the first quarter of 2015 compared to $1.9 million for the same period last year. Excluding the non-recurring transaction expenses, net loss would have been $0.8 million for the first quarter of 2015, an improvement of $1.1 million compared to the first quarter of 2014.
Net loss attributable to common stockholders for the first quarter of 2015 was $2.7 million compared to a net income of $8.5 million during the first quarter of 2014 due to the gain on the sale of our medical shape sensing business.
Adjusted EBITDA improved to $(0.4) million for the first quarter of 2015, compared to $(1.5) million for the first quarter of 2014.
Luna-API Merger





On May 8, 2015, the stockholders of Luna Innovations Incorporated and Advanced Photonix, Inc. approved the merger of the two companies and the merger was completed. The combined company provides greater capabilities across a broadened market base, enhancing our opportunity for growth. The combined company has a strong foundation from Luna’s core test & measurement products and API’s High Speed Optical Receiver (HSOR) and Optosolutions product lines, and a pipeline of emerging opportunities through API's Terahertz platform and our technology development division.
 
Non-GAAP Measures
In evaluating the operating performance of its business, Luna’s management considers Adjusted EBITDA, which excludes certain charges and credits that are required by generally accepted accounting principles (“GAAP”). Adjusted EBITDA provides useful information to both management and investors by excluding the effect of certain non-cash expenses and 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. Adjusted EBITDA should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. Adjusted EBITDA has 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 2015. The call can be accessed by dialing 866.700.6067 domestically or 617.213.8834 internationally prior to the start of the call. The participant access code is 32924143. 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 a public company composed of scientists, engineers, and business professionals developing and manufacturing a new generation of technologies and products. It has been successful in taking innovative technologies from applied research to product development and ultimately to the commercial market, driving breakthroughs in fields such as aerospace, automotive, telecommunications, healthcare, energy, and defense.
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 company’s operating results and future growth of the company’s business, greater capabilities as a combined company, broader market base, pipeline of opportunities, other synergies from the merger with Advanced Photonix, Inc., and potential for improved 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, failure of demand for the company’s products and services to meet expectations, integration or other operational issues related to the merger, 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
Consolidated Statements of Operations
 
 
Three Months Ended 
 March 31,
 
2014
 
2015
 
(unaudited)
Revenues:
 
 
 
Technology development revenues
$
2,675,452

 
$
2,875,515

Products and licensing revenues
1,796,429

 
2,463,587

Total revenues
4,471,881

 
5,339,102

Cost of revenues:
 
 
 
Technology development costs
2,025,155

 
2,083,624

Products and licensing costs
894,640

 
966,689

Total cost of revenues
2,919,795

 
3,050,313

Gross Profit
1,552,086

 
2,288,789

Operating expense:
 
 
 
Selling, general and administrative
2,755,078

 
4,569,107

Research, development and engineering
749,154

 
334,891

Total operating expense
3,504,232

 
4,903,998

Operating loss
(1,952,146
)
 
(2,615,209
)
Other income/(expense):
 
 
 
Other income, net
82,106

 
—

Interest expense
(32,365
)
 
(9,137
)
Total other income/(expense)
49,741

 
(9,137
)
Loss from continuing operations, before income taxes
(1,902,405
)
 
(2,624,346
)
Income tax (benefit)/expense
(769,190
)
 
2,808

Net loss from continuing operations
(1,133,215
)
 
(2,627,154
)
Income from discontinued operations, net of income taxes
9,673,439

 
—

Net income/(loss)
8,540,224

 
(2,627,154
)
Preferred stock dividend
29,536

 
26,560

Net income/(loss) attributable to common stockholders
$
8,510,688

 
$
(2,653,714
)
Net loss per share from continuing operations:
 
 
 
Basic and diluted
$
(0.08
)
 
$
(0.17
)
Net income per share from discontinued operations:
 
 
 
Basic and diluted
$
0.66

 
$
—

Net income/(loss) per share attributable to common stockholders:
 
 
 
Basic and diluted
$
0.58

 
$
(0.18
)
Weighted average common shares and common equivalent shares outstanding:
 
 
 
Basic and diluted
14,653,262

 
15,117,679





Luna Innovations Incorporated
Consolidated Balance Sheets
 
 
December 31, 2014
 
March 31, 2015
 
 
 
(unaudited)
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
14,116,969

 
$
13,296,415

Accounts receivable, net
5,689,615

 
4,817,836

Inventory, net
3,364,233

 
3,807,294

Prepaid expenses
523,553

 
425,133

Other current assets
191,749

 
221,411

Total current assets
23,886,119

 
22,568,089

Property and equipment, net
3,497,057

 
3,379,214

Intangible assets, net
199,277

 
181,491

Other assets
1,995

 
1,995

Total assets
$
27,584,448

 
$
26,130,789

Liabilities and stockholders’ equity
 
 
 
Liabilities:
 
 
 
Current Liabilities:
 
 
 
Current portion of long-term debt obligation
$
625,000

 
$
250,000

Current portion of capital lease obligation
70,725

 
66,492

Accounts payable
1,447,177

 
2,266,437

Accrued liabilities
3,965,945

 
4,522,346

Deferred revenue
861,081

 
811,918

Total current liabilities
6,969,928

 
7,917,193

Long-term deferred rent
1,570,377

 
1,536,067

Long-term lease obligation
39,582

 
26,529

Total liabilities
8,579,887

 
9,479,789

Commitments and contingencies
 
 
 
Stockholders’ equity:
 
 
 
Preferred stock, par value $ 0.001, 1,321,514 shares authorized, issued and outstanding at December 31, 2014 and March 31, 2015
1,322

 
1,322

Common stock, par value $ 0.001, 100,000,000 shares authorized, 15,110,924 and 15,117,744 shares issued, 15,088,199 and 15,095,017 shares outstanding at December 31, 2014 and March 31, 2015
15,541

 
15,567

Less treasury stock at cost, 22,725 shares at December 31, 2014 and March 31, 2015
(32,221
)
 
(32,221
)
Additional paid-in capital
64,147,666

 
64,447,793

Accumulated deficit
(45,127,747
)
 
(47,781,461
)
Total stockholders’ equity
19,004,561

 
16,651,000

Total liabilities and stockholders’ equity
$
27,584,448

 
$
26,130,789






Luna Innovations Incorporated
Consolidated Statements of Cash Flows
 
 
Three months ended March 31,
 
2014
 
2015
 
(unaudited)
Cash flows used in operating activities
 
 
 
Net income/(loss)
$
8,540,224

 
$
(2,627,154
)
Adjustments to reconcile net income/(loss) to net cash used in operating activities
 
 
 
Depreciation and amortization
202,305

 
165,081

Share-based compensation
230,939

 
271,077

Gain on sale of discontinued operations, net of income taxes
(9,701,515
)
 
—

              Tax benefit from utilization of loss from current year operations
(787,318
)
 
—

Change in assets and liabilities
 
 
 
Accounts receivable
896,194

 
871,779

Inventory
13,314

 
(443,061
)
Other current assets
112,286

 
68,758

Other assets
18,792

 
—

Accounts payable and accrued expenses
(821,763
)
 
1,341,352

Deferred revenue
(138,593
)
 
(49,163
)
Net cash used in operating activities
(1,435,135
)
 
(401,331
)
Cash flows provided by/(used in) investing activities
 
 
 
Acquisition of property and equipment
(67,944
)
 
(18,321
)
Intangible property costs
(126,091
)
 
(11,131
)
Proceeds from sale of discontinued operations, net of fees
4,958,891

 
—

Net cash provided by/(used in) investing activities
4,764,856

 
(29,452
)
Cash flows used in financing activities
 
 
 
Payments on capital lease obligations
(16,282
)
 
(17,286
)
Payment of debt obligations
(375,000
)
 
(375,000
)
       Purchase of treasury stock
—

 
—

Proceeds from the exercise of options and warrants
169,035

 
2,515

Net cash used in financing activities
(222,247
)
 
(389,771
)
Net increase in cash or cash equivalents
3,107,474

 
(820,554
)
Cash and cash equivalents-beginning of period
7,778,541

 
14,116,969

Cash and cash equivalents-end of period
$
10,886,015

 
$
13,296,415






Luna Innovations Incorporated
Reconciliation of Net (Loss)/Income to EBITDA and Adjusted EBITDA
 
 
Three Months Ended 
 March 31,
 
2014
 
2015
 
(unaudited)
Net income/(loss)
$
8,540,224

 
$
(2,627,154
)
Less income/(loss) from discontinued operations, net of income taxes
9,673,439

 
—

Net loss from continuing operations
(1,133,215
)
 
(2,627,154
)
Interest expense
(32,365
)
 
(9,137
)
Tax benefit
(769,190
)
 
2,808

Depreciation and amortization
202,305

 
165,081

EBITDA
(1,732,465
)
 
(2,468,402
)
Share-based compensation
250,209

 
278,468

Fees associated with merger
—

 
1,801,215

Adjusted EBITDA
$
(1,482,256
)
 
$
(388,719
)
###
Investor Contact:
Dale Messick, CFO
Luna Innovations Incorporated
Phone: 1.540.769.8400
Email: IR@lunainc.com



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