Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
 
 
FORM 8-K
 
 
 
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 20, 2018
 
 
 
Luna Innovations Incorporated
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
000-52008
 
54-1560050
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
301 1st Street SW, Suite 200
Roanoke, Virginia 24011
(Address of principal executive offices, including zip code)
540-769-8400
(Registrant’s telephone number, including area code)
 
(Former name or former address, if changed since last report)
 
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





Item 2.02.
Results of Operations and Financial Condition

On March 20, 2018, Luna Innovations Incorporated (the “Company”) issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2017, as well as information regarding a conference call to discuss these financial results. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
The information in this Current Report on Form 8-K and the exhibit attached hereto is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.


Item 9.01.
Financial Statements and Exhibits

(d)
Exhibits.
Exhibit
  
Description
 
 
 
99.1
  






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Luna Innovations Incorporated
 
 
 
By:
 
/s/ Scott A. Graeff
 
 
Scott A. Graeff
President and Chief Executive Officer
Date: March 20, 2018



Exhibit


Exhibit 99.1

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12140440&doc=3
Luna Innovations Reports Strong Fourth Quarter and Full Year 2017 Financial Results

Revenue of $13.2 million and $46.2 million for the quarter and full fiscal year ended December 31, 2017, up 12.1% and 10.4%, respectively versus same periods prior year
Net income from continuing operations of $0.2 million, which includes effects of a one-time pre-tax charge of $0.7 million, and adjusted EBITDA of $1.2 million for the quarter ended December 31, 2017, compared to $0.3 million and $1.0 million, respectively, for the same period last year
Net loss from continuing operations of less than $0.1 million, which includes effects of a one-time pre-tax charge of $0.7 million, and Adjusted EBITDA of $2.5 million for the full year ended December 31, 2017, each up $2.6 million versus the prior full year

(ROANOKE, VA, March 20, 2018) - Luna Innovations Incorporated (NASDAQ: LUNA), a leader in advanced optical technology, today announced its financial results for the fourth quarter and year ended December 31, 2017.
“We are extremely pleased about our continued progress strategically and operationally, which resulted in our strong financial performance both for the fourth quarter and the full year ended December 31, 2017,” said Scott Graeff, President and Chief Executive Officer of Luna. “We delivered $0.7 million in income from continuing operations for the fourth quarter of 2017 when normalized for the $0.7 million one-time charge related to the departure of My Chung. We achieved double-digit growth in revenues year over year and recognized positive income from continuing operations for the fourth quarter. I'm incredibly proud of the whole Luna team, whose sharp focus allowed us to deliver these results. The demand for our test and measurement products is growing and this was reflected in our robust fourth quarter and 2017 full year results. Silicon photonics and its applications in high speed networks and data centers is driving the telecommunications test segment, and our ODiSI platform continues to gain traction with the ever-expanding use of composite materials in manufacturing. We believe the macro trends behind the growing demand in these markets leave us well positioned to continue our growth into 2018 and beyond."
Total revenues for the three months ended December 31, 2017, were $13.2 million, compared to $11.8 million for the three months ended December 31, 2016. Technology development revenues grew to $5.1 million for the three months ended December 31, 2017, from $4.5 million for the three months ended December 31, 2016. Products and licensing revenues were $8.1 million for the three months ended December 31, 2017, compared to $7.3 million for the three months ended December 31, 2016.
The company recognized income from continuing operations of $0.2 million for the three months ended December 31, 2017, compared to $0.3 million for the three months ended December 31, 2016. The 2017 results include the effects of a one-time pre-tax charge of $0.7 million in association with the retirement of the company's former chief executive officer in October 2017. Adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA") was $1.2 million for the three months ended December 31, 2017, compared to adjusted EBITDA of $1.0 million for the three months ended December 31, 2016. Adjusted EBITDA is a non-GAAP financial measure used by management to measure operating performance and is reconciled to income from continuing operations for the respective periods within the table included at the end of this release. Net income attributable to common stockholders was $0.4 million for the three months ended December 31, 2017 compared to $0.3 million for the three months ended December 31, 2016.






Fourth Quarter Financial Highlights
Gross profit increased to $5.4 million, or 41% of total revenues, for the three months ended December 31, 2017, compared to gross profit of $4.7 million, or 40% of total revenues, for the three months ended December 31, 2016.
Selling, general and administrative expenses increased to $4.4 million for the three months ended December 31, 2017, compared to $3.5 million for the three months ended December 31, 2016. Selling, general and administrative expenses for the three months ended December 31, 2017 included $0.7 million of costs incurred in association with the retirement of the company's former chief executive officer in October 2017, including both cash and share-based costs. Research, development and engineering expenses increased to $0.9 million for the three months ended December 31, 2017, compared to $0.8 million for the three months ended December 31, 2016.
Before taxes, the company achieved essentially break-even results from continuing operations for the three months ended December 31, 2017, compared to pre-tax income from continuing operations of $0.4 million for the three months ended December 31, 2016. Excluding the impact of the expenses recognized in connection with the retirement of the company's former chief executive officer, the pre-tax income from continuing operations for the three months ended December 31, 2017 would have been $0.7 million. After tax, the company recognized income from continuing operations of $0.2 million for the three months ended December 31, 2017, compared to $0.3 million for the three months ended December 31, 2016.
The company had income from discontinued operations of $0.2 million for the three months ended December 31, 2017 compared to a loss from discontinued operations of less than $0.1 million for the three months ended December 31, 2016.
Net income attributable to common stockholders was $0.4 million for the three months ended December 31, 2017, compared to $0.3 million for the three months ended December 31, 2016. Adjusted EBITDA was $1.2 million for the three months ended December 31, 2017, compared to adjusted EBITDA of $1.0 million for the three months ended December 31, 2016.
Cash and cash equivalents were $37.0 million as of December 31, 2017, and $12.8 million as of December 31, 2016. The company purchased approximately 483,000 shares of its common stock during the three months ended December 31, 2017.
Full Year 2017 Financial Highlights
Total revenues were $46.2 million for the year ended December 31, 2017, compared to $41.9 million for the year ended December 31, 2016. Technology development revenues increased to $18.6 million for the year ended December 31, 2017 compared to $16.3 million for the year ended December 31, 2016. Products and licensing revenues increased to $27.7 million for the year ended December 31, 2017, compared to $25.6 million for the year ended December 31, 2016.
Gross profit for the year ended December 31, 2017, grew to $18.1 million compared to $15.8 million for the year ended December 31, 2016. The gross margin was 39% of total revenues for the year ended December 31, 2017 and 38% for the year ended December 31, 2016.
Selling, general and administrative expenses remained flat at $14.8 million for the years ended December 31, 2017 and 2016. Selling, general and administrative expenses for 2017 included $0.7 million of costs related to the retirement of the company's former chief executive officer as described above.
Research, development and engineering expenses were $3.5 million for the years ended December 31, 2017 and 2016.
The company's resulting pre-tax loss from continuing operations improved to $0.3 million for the year ended December 31, 2017, compared to a pre-tax loss from continuing operations of $2.8 million for the year ended December 31, 2016. After tax, the company recognized a loss from continuing operations of less than $0.1 million for the year ended December 31, 2017, compared to $2.7 million for the year ended December 31, 2016.
For the year ended December 31, 2017, the company recognized income from discontinued operations of $14.7 million related to the after-tax gain associated with the sale of the company's HSOR business.
The company recognized net income attributable to common stockholders of $14.5 million for the year ended December 31, 2017, compared to a net loss attributable to common stockholders of $2.5 million for the year ended December 31, 2016. The net income for 2017 resulted from the income from discontinued operations discussed above. Adjusted EBITDA improved to $2.5 million for the year ended December 31, 2017, compared to $0.2 million for the year ended December 31, 2016.

Non-GAAP Measures
In evaluating the operating performance of its business, the company'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, the company will conduct an investor conference call at 5:00 p.m. (EDT) today to discuss its financial results and business developments for the fourth quarter of 2017 and the full year ended December 31, 2017. The call can be accessed by dialing 844.578.9643 domestically or 270.823.1522 internationally prior to the start of the call. The participant access code is 3184618. 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 company's 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 leader in advanced optical technology, providing unique capabilities in high speed optoelectronics and high performance fiber optic test products for the telecommunications industry and distributed fiber optic sensing for the aerospace and automotive industries. The company is organized into two business segments, which work closely together to turn ideas into products: a Technology Development segment and a Products and Licensing segment. The company's business model is designed to accelerate the process of bringing new and innovative technologies to market.
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 the company's expectations regarding the company’s potential for continued growth in 2018 and beyond. 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 ("SEC"). Such filings are available on the SEC’s website at www.sec.gov and on 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 the company 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 December 31,
 
Years ended December 31,
 
2017
 
2016
 
2017
 
2016
 
(unaudited)
 
 
 
(unaudited)
 
 
Revenues:
 
 
 
 
 
 
 
Technology development revenues
$
5,147,954

 
$
4,508,851

 
$
18,576,383

 
$
16,280,582

Products and licensing revenues
8,067,243

 
7,284,556

 
27,660,891

 
25,587,187

Total revenues
13,215,197

 
11,793,407

 
46,237,274

 
41,867,769

Cost of revenues:
 
 
 
 
 
 
 
Technology development costs
3,943,118

 
3,486,897

 
13,988,378

 
12,473,211

Products and licensing costs
3,919,842

 
3,634,871

 
14,120,071

 
13,589,858

Total cost of revenues
7,862,960

 
7,121,768

 
28,108,449

 
26,063,069

Gross profit
5,352,237

 
4,671,639

 
18,128,825

 
15,804,700

Operating expense:
 
 
 
 
 
 
 
Selling, general and administrative
4,427,717

 
3,467,323

 
14,770,986

 
14,763,709

Research, development, and engineering
887,719

 
750,426

 
3,469,193

 
3,540,227

Total operating expense
5,315,436

 
4,217,749

 
18,240,179

 
18,303,936

Operating income/(loss)
36,801

 
453,890

 
(111,354
)
 
(2,499,236
)
Other expense:
 
 
 
 
 
 
 
Other income/(expense), net
175

 
15,002

 
(4,498
)
 
13,071

Interest expense, net
(38,647
)
 
(82,253
)
 
(218,506
)
 
(319,334
)
Total other expense
(38,472
)
 
(67,251
)
 
(223,004
)
 
(306,263
)
(Loss)/income from continuing operations before income taxes
(1,671
)
 
386,639

 
(334,358
)
 
(2,805,499
)
Income tax (benefit)/expense
(235,915
)
 
38,233

 
(295,753
)
 
(135,567
)
Income/(loss) from continuing operations
234,244

 
348,406

 
(38,605
)
 
(2,669,932
)
Income/(loss) from discontinued operations, net of income taxes
201,085

 
(42,246
)
 
14,653,510

 
300,440

Net income/(loss)
435,329

 
306,160

 
14,614,905

 
(2,369,492
)
Preferred stock dividend
49,558

 
30,527

 
146,889

 
105,258

Net income/(loss) attributable to common stockholders
$
385,771

 
$
275,633

 
$
14,468,016

 
$
(2,474,750
)
Net income/(loss) per share from continuing operations:
 
 
 
 
 
 
 
Basic
$
0.01

 
$
0.01

 
$

 
$
(0.10
)
       Diluted
$
0.01

 
$
0.01

 
$

 
$
(0.10
)
Net income/(loss) per share from discontinued operations:
 
 
 
 
 
 
 
Basic
$
0.01

 
$

 
$
0.53

 
$
0.01

       Diluted
$
0.01

 
$

 
$
0.53

 
$
0.01

Net income/(loss) per share attributable to common stockholders:
 
 
 
 
 
 
 
Basic
$
0.01

 
$
0.01

 
$
0.52

 
$
(0.09
)
       Diluted
$
0.01

 
$
0.01

 
$
0.52

 
$
(0.09
)
Weighted average shares:
 
 
 
 
 
 
 
Basic
27,485,278

 
27,543,882

 
27,579,988

 
27,547,217

Diluted
31,790,418

 
32,568,289

 
27,579,988

 
27,547,217







Luna Innovations Incorporated
Consolidated Balance Sheets
 

 
December 31, 2017
 
December 31, 2016
 
(unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
36,981,533

 
$
12,802,458

Accounts receivable, net
9,857,009

 
10,269,012

Receivable from sale of HSOR business
4,000,976

 

Inventory, net
6,951,110

 
6,848,835

Prepaid expenses
1,220,650

 
1,375,659

Current assets held for sale

 
5,801,629

Total current assets
59,011,278

 
37,097,593

Property and equipment, net
3,453,741

 
3,482,687

Intangible assets, net
3,237,593

 
3,367,217

Goodwill
502,000

 
502,000

Other assets
18,024

 
38,194

Non-current assets held for sale

 
10,509,282

Total assets
$
66,222,636

 
$
54,996,973

Liabilities and stockholders’ equity
 
 
 
Current Liabilities:
 
 
 
Current portion of long term debt obligation
1,833,333

 
1,833,333

Current portion of capital lease obligation
43,665

 
52,128

Accounts payable
2,962,863

 
2,954,742

Accrued liabilities
8,959,935

 
7,913,544

Deferred revenue
1,026,339

 
837,906

Current liabilities held for sale

 
2,376,703

Total current liabilities
14,826,135

 
15,968,356

Long-term deferred rent
1,184,438

 
1,319,402

Long-term debt obligation
603,007

 
2,420,032

Long-term capital lease obligation
71,275

 
114,940

Non-current liabilities held for sale

 
84,555

Total liabilities
16,684,855

 
19,907,285

Commitments and contingencies
 
 
 
Stockholders’ equity:
 
 
 
Preferred stock, par value $0.001, 1,321,514 shares authorized, issued and outstanding at December 31, 2017 and 2016
1,322

 
1,322

Common stock, par value $0.001, 100,000,000 shares authorized, 28,354,822 and 27,988,104 shares issued, 27,283,918 and 27,541,277 shares outstanding at December 31, 2017 and 2016, respectively
29,186

 
28,600

Treasury stock at cost, 1,070,904 and 446,827 shares at December 31, 2017 and 2016, respectively
(1,649,746
)
 
(517,987
)
Additional paid-in capital
83,563,208

 
82,451,958

Accumulated deficit
(32,406,189
)
 
(46,874,205
)
Total stockholders’ equity
49,537,781

 
35,089,688

Total liabilities and stockholders’ equity
$
66,222,636

 
$
54,996,973







Luna Innovations Incorporated
Consolidated Statements of Cash Flows
 

 
 
Years ended December 31,
 
 
2017
 
2016
 
 
(unaudited)
 
 
Cash flows provided by/(used in) operating activities:
 

 
 
Net income/(loss)
 
$
14,614,905

 
$
(2,369,492
)
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
 
 
 
 
Depreciation and amortization
 
2,526,609

 
3,713,879

Stock-based compensation
 
715,094

 
860,215

Loss on disposal of fixed assets
 
3,640

 

Gain on sale of discontinued operations, net of income taxes
 
(15,671,028
)
 

Bad Debt
 
99,888

 
305,593

Changes in operating assets and liabilities:
 
 
 
 
Accounts receivable
 
1,152,055

 
(3,568,761
)
Inventory
 
(1,902,311
)
 
492,932

Other assets
 
83,428

 
(238,736
)
Accounts payable and accrued expenses
 
(896,534
)
 
564,689

Deferred credits
 
189,296

 
(160,156
)
Net cash provided by/(used in) operating activities
 
915,042

 
(399,837
)
Cash flows provided by/(used in) investing activities:
 
 
 
 
Acquisition of property and equipment
 
(1,352,531
)
 
(1,509,984
)
Proceeds from sale of property and equipment
 
3,000

 

Intangible property costs
 
(495,597
)
 
(490,200
)
Proceeds from sale of discontinued operations, net
 
28,026,528

 

Net cash provided by/(used in) investing activities
 
26,181,400

 
(2,000,184
)
Cash flows used in financing activities:
 
 
 
 
Payments on debt obligations
 
(1,833,333
)
 
(1,871,635
)
Payments on capital lease obligation
 
(52,128
)
 
(56,873
)
Purchase of treasury stock
 
(1,131,759
)
 
(333,053
)
Borrowings under term loans
 

 

Proceeds from the exercise of options
 
99,853

 

Net cash used in financing activities
 
(2,917,367
)
 
(2,261,561
)
Net change in cash and cash equivalents
 
24,179,075

 
(4,661,582
)
Cash and cash equivalents—beginning of period
 
12,802,458

 
17,464,040

Cash and cash equivalents—end of period
 
$
36,981,533

 
$
12,802,458

Supplemental disclosure of cash flow information
 
 
 
 
Cash paid for interest
 
$
209,497

 
$
308,116

Dividend on preferred stock, 79,292 shares of common stock issuable for each of the years ended December 31, 2017 and 2016
 
$
146,889

 
$
105,258

Cash paid for income taxes
 
$
377,907

 
$
233,732

Cash received for income tax refunds
 
$

 
$
67,127







Luna Innovations Incorporated
Reconciliation of Income/(Loss) from Continuing Operations to EBITDA and Adjusted EBITDA
 
 
Three months ended 
 December 31,
 
Year ended 
December 31,
 
2017
 
2016
 
2017
 
2016
 
(unaudited)
 
(unaudited)
Income/(loss) from continuing operations
$
234,244

 
$
348,406

 
$
(38,605
)
 
$
(2,669,932
)
Interest expense
38,647

 
82,253

 
218,506

 
319,334

Income tax (benefit)/expense
(235,915
)
 
38,233

 
(295,753
)
 
(135,567
)
Depreciation and amortization
375,049

 
376,931

 
1,261,768

 
1,466,171

EBITDA
412,025

 
845,823

 
1,145,916

 
(1,019,994
)
Share-based compensation
238,667

 
194,861

 
715,094

 
860,215

CEO separation costs other than share-based compensation
595,992

 

 
595,992

 

Adjusted EBITDA
$
1,246,684

 
$
1,040,684

 
$
2,457,002

 
$
(159,779
)

###
Investor Contact:
Dale Messick, CFO
Luna Innovations Incorporated
Phone: 1.540.769.8400
Email: IR@lunainc.com