|
ý
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
|
54-1560050
|
(State or Other Jurisdiction of
Incorporation or Organization)
|
|
(I.R.S. Employer
Identification Number)
|
Title of each class
|
Trading Symbol
|
Name of each exchange on which registered
|
Common Stock, $0.001 par value per share
|
LUNA
|
The Nasdaq Stock Market LLC
|
|
ITEM 1.
|
||
ITEM 2.
|
||
ITEM 3.
|
||
ITEM 4.
|
||
ITEM 1.
|
||
ITEM 1A.
|
||
ITEM 2.
|
||
ITEM 3.
|
||
ITEM 4.
|
||
ITEM 5.
|
||
ITEM 6.
|
||
ITEM 1.
|
FINANCIAL STATEMENTS
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
|
(unaudited)
|
|
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
24,580,006
|
|
|
$
|
42,460,267
|
|
Accounts receivable, net
|
13,505,444
|
|
|
13,037,068
|
|
||
Receivable from sale of HSOR business
|
2,500,375
|
|
|
2,500,000
|
|
||
Contract assets
|
2,829,186
|
|
|
2,422,495
|
|
||
Inventory
|
9,996,054
|
|
|
6,873,742
|
|
||
Prepaid expenses and other current assets
|
1,087,416
|
|
|
935,185
|
|
||
Total current assets
|
54,498,481
|
|
|
68,228,757
|
|
||
Long-term contract assets
|
359,166
|
|
|
336,820
|
|
||
Property and equipment, net
|
3,845,748
|
|
|
3,627,886
|
|
||
Intangible assets, net
|
11,309,181
|
|
|
3,302,270
|
|
||
Goodwill
|
10,345,249
|
|
|
101,008
|
|
||
Other assets, net
|
3,205,983
|
|
|
1,995
|
|
||
Total assets
|
$
|
83,563,808
|
|
|
$
|
75,598,736
|
|
Liabilities and stockholders’ equity
|
|
|
|
||||
Liabilities:
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Current portion of long-term debt obligations
|
$
|
247,726
|
|
|
$
|
619,315
|
|
Current portion of capital lease obligations
|
—
|
|
|
40,586
|
|
||
Accounts payable
|
4,945,927
|
|
|
2,395,984
|
|
||
Accrued liabilities
|
8,599,225
|
|
|
6,597,458
|
|
||
Contract liabilities
|
2,792,119
|
|
|
2,486,111
|
|
||
Total current liabilities
|
16,584,997
|
|
|
12,139,454
|
|
||
Long-term deferred rent
|
—
|
|
|
1,035,974
|
|
||
Other long-term liabilities
|
2,970,879
|
|
|
—
|
|
||
Long-term capital lease obligations
|
—
|
|
|
68,978
|
|
||
Total liabilities
|
19,555,876
|
|
|
13,244,406
|
|
||
Commitments and contingencies
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock, par value $0.001, 1,321,514 shares authorized, issued and outstanding at March 31, 2019 and December 31, 2018
|
1,322
|
|
|
1,322
|
|
||
Common stock, par value $0.001, 100,000,000 shares authorized, 29,398,818 and 29,209,506 shares issued, 28,145,713 and 27,956,401 shares outstanding at March 31, 2019 and December 31, 2018, respectively
|
30,329
|
|
|
30,120
|
|
||
Treasury stock at cost, 1,253,105 shares at March 31, 2019 and December 31, 2018
|
(2,116,640
|
)
|
|
(2,116,640
|
)
|
||
Additional paid-in capital
|
86,355,322
|
|
|
85,744,750
|
|
||
Accumulated deficit
|
(20,262,401
|
)
|
|
(21,305,222
|
)
|
||
Total stockholders’ equity
|
64,007,932
|
|
|
62,354,330
|
|
||
Total liabilities and stockholders’ equity
|
$
|
83,563,808
|
|
|
$
|
75,598,736
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(unaudited)
|
||||||
Revenues:
|
|
|
|
||||
Technology development
|
$
|
6,640,743
|
|
|
$
|
4,636,776
|
|
Products and licensing
|
8,192,375
|
|
|
4,131,754
|
|
||
Total revenues
|
14,833,118
|
|
|
8,768,530
|
|
||
Cost of revenues:
|
|
|
|
||||
Technology development
|
4,816,146
|
|
|
3,353,501
|
|
||
Products and licensing
|
3,249,338
|
|
|
1,575,403
|
|
||
Total cost of revenues
|
8,065,484
|
|
|
4,928,904
|
|
||
Gross profit
|
6,767,634
|
|
|
3,839,626
|
|
||
Operating expense:
|
|
|
|
||||
Selling, general and administrative
|
6,207,318
|
|
|
3,333,490
|
|
||
Research, development and engineering
|
1,457,893
|
|
|
879,592
|
|
||
Total operating expense
|
7,665,211
|
|
|
4,213,082
|
|
||
Operating loss
|
(897,577
|
)
|
|
(373,456
|
)
|
||
Other income/(expense):
|
|
|
|
||||
Investment income
|
171,225
|
|
|
75,912
|
|
||
Other expense
|
(1,729
|
)
|
|
(10,854
|
)
|
||
Interest expense
|
(11,187
|
)
|
|
(40,647
|
)
|
||
Total other income
|
158,309
|
|
|
24,411
|
|
||
Loss from continuing operations before income taxes
|
(739,268
|
)
|
|
(349,045
|
)
|
||
Income tax benefit
|
(1,865,147
|
)
|
|
(76,967
|
)
|
||
Net income/(loss) from continuing operations
|
1,125,879
|
|
|
(272,078
|
)
|
||
Income from discontinued operations, net of income tax of $0 and $78,363
|
—
|
|
|
420,754
|
|
||
Net income from discontinued operations
|
—
|
|
|
420,754
|
|
||
Net income
|
1,125,879
|
|
|
148,676
|
|
||
Preferred stock dividend
|
83,058
|
|
|
64,425
|
|
||
Net income attributable to common stockholders
|
$
|
1,042,821
|
|
|
$
|
84,251
|
|
Net income/(loss) per share from continuing operations:
|
|
|
|
||||
Basic
|
$
|
0.04
|
|
|
$
|
(0.01
|
)
|
Diluted
|
$
|
0.03
|
|
|
$
|
(0.01
|
)
|
Net income per share from discontinued operations:
|
|
|
|
||||
Basic
|
$
|
—
|
|
|
$
|
0.02
|
|
Diluted
|
$
|
—
|
|
|
$
|
0.02
|
|
Net income per share attributable to common stockholders:
|
|
|
|
||||
Basic
|
$
|
0.04
|
|
|
$
|
—
|
|
Diluted
|
$
|
0.03
|
|
|
$
|
—
|
|
Weighted average common shares and common equivalent shares outstanding:
|
|
|
|
||||
Basic
|
28,039,080
|
|
|
27,204,989
|
|
||
Diluted
|
33,479,935
|
|
|
27,204,989
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(unaudited)
|
||||||
Cash flows provided by/(used in) operating activities
|
|
|
|
||||
Net income
|
$
|
1,125,879
|
|
|
$
|
148,676
|
|
Adjustments to reconcile net income to net cash provided by/(used in) operating activities
|
|
|
|
||||
Depreciation and amortization
|
617,309
|
|
|
307,852
|
|
||
Share-based compensation
|
342,765
|
|
|
94,606
|
|
||
Deferred taxes
|
(1,889,266
|
)
|
|
—
|
|
||
Change in assets and liabilities
|
|
|
|
||||
Accounts receivable
|
1,052,571
|
|
|
(229,535
|
)
|
||
Contract assets
|
(429,037
|
)
|
|
221,386
|
|
||
Inventory
|
(527,849
|
)
|
|
(110,095
|
)
|
||
Other current assets
|
(41,549
|
)
|
|
133,293
|
|
||
Accounts payable and accrued expenses
|
1,196,425
|
|
|
(1,456,154
|
)
|
||
Contract liabilities
|
149,435
|
|
|
(1,650,363
|
)
|
||
Net cash provided by/(used in) operating activities
|
1,596,683
|
|
|
(2,540,334
|
)
|
||
Cash flows used in investing activities
|
|
|
|
||||
Acquisition of property and equipment
|
(215,251
|
)
|
|
(129,720
|
)
|
||
Intangible property costs
|
(60,639
|
)
|
|
(113,108
|
)
|
||
Acquisition of General Photonics Corporation
|
(19,004,250
|
)
|
|
—
|
|
||
Net cash used in investing activities
|
(19,280,140
|
)
|
|
(242,828
|
)
|
||
Cash flows used in financing activities
|
|
|
|
||||
Payments on finance lease obligations
|
(6,763
|
)
|
|
(13,611
|
)
|
||
Payments of debt obligations
|
(375,000
|
)
|
|
(458,333
|
)
|
||
Repurchase of common stock
|
—
|
|
|
(306,041
|
)
|
||
Proceeds from the exercise of options and warrants
|
184,959
|
|
|
22,288
|
|
||
Net cash used in financing activities
|
(196,804
|
)
|
|
(755,697
|
)
|
||
Net decrease in cash and cash equivalents
|
(17,880,261
|
)
|
|
(3,538,859
|
)
|
||
Cash and cash equivalents—beginning of period
|
42,460,267
|
|
|
36,981,533
|
|
||
Cash and cash equivalents—end of period
|
$
|
24,580,006
|
|
|
$
|
33,442,674
|
|
Supplemental disclosure of cash flow information
|
|
|
|
||||
Cash paid for interest
|
$
|
12,062
|
|
|
$
|
39,071
|
|
Cash paid for income taxes
|
$
|
—
|
|
|
$
|
1,396
|
|
Non-cash investing and financing activities
|
|
|
|
||||
Contingent liability for business combination
|
900,000
|
|
|
—
|
|
||
Dividend on preferred stock, 19,823 shares of common stock issuable
|
$
|
83,058
|
|
|
$
|
64,425
|
|
1.
|
Basis of Presentation and Significant Accounting Policies
|
•
|
Level 1—Quoted prices for identical instruments in active markets
|
•
|
Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets
|
•
|
Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable
|
|
Balance at
|
|
Adjustment for
|
|
Adjusted balance at
|
|||
|
December 31, 2018
|
|
ASC 842
|
|
January 1, 2019
|
|||
Assets:
|
|
|
|
|
|
|||
Property and equipment, net
|
3,627,886
|
|
|
(26,004
|
)
|
|
3,601,882
|
|
Other assets, net
|
1,995
|
|
|
3,471,643
|
|
|
3,473,638
|
|
|
|
|
|
|
|
|||
Liabilities:
|
|
|
|
|
|
|||
Accrued liabilities
|
6,597,458
|
|
|
1,242,669
|
|
|
7,840,127
|
|
Current portion of capital lease obligations
|
40,586
|
|
|
(40,586
|
)
|
|
—
|
|
Long-term deferred rent
|
1,035,974
|
|
|
(1,035,974
|
)
|
|
—
|
|
Long-term operating lease liability
|
—
|
|
|
3,271,705
|
|
|
3,271,705
|
|
Long-term capital lease obligations
|
68,978
|
|
|
(68,978
|
)
|
|
—
|
|
Long-term finance lease liability
|
—
|
|
|
76,803
|
|
|
76,803
|
|
2.
|
Business Combinations
|
|
|
Preliminary Allocation
|
||||||
|
|
MOI
|
|
GP
|
||||
Accounts receivable
|
|
$
|
1,742,693
|
|
|
$
|
1,520,950
|
|
Inventory
|
|
1,435,606
|
|
|
2,698,000
|
|
||
Other current assets
|
|
69,951
|
|
|
763,873
|
|
||
Property and equipment
|
|
996,460
|
|
|
286,000
|
|
||
Identifiable intangible assets
|
|
1,650,000
|
|
|
8,200,000
|
|
||
Goodwill
|
|
101,008
|
|
|
10,315,490
|
|
||
Accounts payable and accrued expenses
|
|
(450,985
|
)
|
|
(3,880,063
|
)
|
||
Total purchase consideration
|
|
$
|
5,544,733
|
|
|
$
|
19,904,250
|
|
|
|
Estimated
|
|
Estimated Fair Value
|
||||||
|
|
Useful Life
|
|
MOI
|
|
GP
|
||||
Developed technology
|
|
5 - 8 years
|
|
$
|
1,200,000
|
|
|
$
|
7,200,000
|
|
In process research and development
|
|
7 years
|
|
200,000
|
|
|
—
|
|
||
Trade names and trademarks
|
|
3 years
|
|
150,000
|
|
|
400,000
|
|
||
Customer base
|
|
7 - 15 years
|
|
100,000
|
|
|
600,000
|
|
||
|
|
|
|
$
|
1,650,000
|
|
|
$
|
8,200,000
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2019
|
|
2018
|
||||
|
|
|
|
|
||||
Revenue
|
|
$
|
16,862,410
|
|
|
$
|
13,118,836
|
|
|
|
|
|
|
||||
Income/(loss) from continuing operations
|
|
$
|
2,337,820
|
|
|
$
|
(343,496
|
)
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(unaudited)
|
||||||
Net revenues
|
$
|
—
|
|
|
$
|
3,424,642
|
|
Cost of revenues
|
—
|
|
|
2,238,150
|
|
||
Operating expenses
|
—
|
|
|
698,023
|
|
||
Other income
|
—
|
|
|
10,648
|
|
||
Income before income taxes
|
—
|
|
|
499,117
|
|
||
Allocated tax expense
|
—
|
|
|
78,363
|
|
||
Operating income from discontinued operations
|
—
|
|
|
420,754
|
|
||
Net income from discontinued operations
|
$
|
—
|
|
|
$
|
420,754
|
|
5.
|
Goodwill
|
Balance as of December 31, 2018
|
$
|
101,008
|
|
Goodwill resulting from business combination - GP
|
10,315,490
|
|
|
Goodwill resulting from business combination - MOI
(1)
|
(71,249
|
)
|
|
Balance as of March 31, 2019
|
$
|
10,345,249
|
|
6.
|
Inventory
|
|
March 31,
2019 |
|
December 31,
2018 |
||||
|
(unaudited)
|
|
|
||||
Finished goods
|
$
|
2,057,274
|
|
|
$
|
1,339,832
|
|
Work-in-process
|
1,733,065
|
|
|
643,420
|
|
||
Raw materials
|
6,205,715
|
|
|
4,890,490
|
|
||
Total inventory
|
$
|
9,996,054
|
|
|
$
|
6,873,742
|
|
|
March 31, 2019
|
|
December 31, 2018
|
|
||||
|
(unaudited)
|
|
|
|
||||
Accrued compensation
|
$
|
4,864,146
|
|
|
$
|
4,467,587
|
|
|
Income tax payable
|
296,134
|
|
|
236,636
|
|
|
||
Accrued professional fees
|
107,000
|
|
|
198,062
|
|
|
||
Deferred Rent
|
—
|
|
|
146,542
|
|
|
||
Current operating lease liability
|
1,374,060
|
|
|
—
|
|
|
||
Current finance lease liability
|
45,982
|
|
|
—
|
|
|
||
Royalties
|
84,535
|
|
|
302,428
|
|
|
||
Accrued interest
|
1,615
|
|
|
—
|
|
|
||
Accrued liabilities - other
|
1,282,770
|
|
|
404,752
|
|
|
||
Liability to related party
|
—
|
|
|
298,468
|
|
|
||
Working capital payable
|
542,983
|
|
|
542,983
|
|
|
||
Total accrued liabilities
|
$
|
8,599,225
|
|
|
$
|
6,597,458
|
|
|
8.
|
Debt
|
|
March 31, 2019
|
|
December 31, 2018
|
|
||||
|
(unaudited)
|
|
|
|
||||
Silicon Valley Bank Term Loan
|
$
|
250,000
|
|
|
$
|
625,000
|
|
|
Less: unamortized debt issuance costs
|
2,274
|
|
|
5,685
|
|
|
||
Less: current portion
|
247,726
|
|
|
619,315
|
|
|
||
Total long-term debt
|
$
|
—
|
|
|
$
|
—
|
|
|
9.
|
Leases
|
Lease component
|
Classification
|
March 31, 2019
|
||
Assets
|
|
|
||
ROU assets - operating lease
|
Other assets
|
$
|
3,142,208
|
|
ROU assets - finance lease
|
Other assets
|
27,738
|
|
|
Total ROU assets
|
|
$
|
3,169,946
|
|
|
|
|
||
Liabilities
|
|
|
||
Current operating lease liability
|
Accrued liabilities
|
$
|
1,374,060
|
|
Current finance lease liability
|
Accrued liabilities
|
45,982
|
|
|
Long-term operating lease liability
|
Other liabilities
|
2,914,504
|
|
|
Long-term finance lease liability
|
Other liabilities
|
56,375
|
|
|
Total lease liabilities
|
|
$
|
4,390,921
|
|
|
Three months ended
|
||
|
March 31, 2019
|
||
Operating lease costs
|
$
|
403,899
|
|
Variable rent costs
|
(36,161
|
)
|
|
Total rent expense
|
$
|
367,738
|
|
|
March 31, 2019
|
||
2019 - remaining 9 months
|
$
|
1,218,577
|
|
2020
|
1,467,701
|
|
|
2021
|
640,800
|
|
|
2022
|
544,704
|
|
|
2023
|
544,704
|
|
|
2024 and beyond
|
544,704
|
|
|
Total future minimum lease payments
|
$
|
4,961,190
|
|
Less: Interest
|
672,626
|
|
|
Total operating lease liabilities
|
$
|
4,288,564
|
|
|
|
||
Current operating lease liability
|
$
|
1,374,060
|
|
Long-term operating lease liability
|
2,914,504
|
|
|
Total operating lease liabilities
|
$
|
4,288,564
|
|
|
Three months ended
|
||
|
March 31, 2019
|
||
Finance lease cost:
|
|
||
Amortization of right-of-use assets
|
$
|
12,808
|
|
Interest on lease liabilities
|
2,176
|
|
|
Total finance lease cost
|
$
|
14,984
|
|
|
|
||
Other information:
|
|
||
Cash paid for amounts included in the measurement of lease liabilities:
|
|
||
Operating cash flows from operating leases
|
$
|
403,899
|
|
Finance cash flows from finance leases
|
$
|
6,763
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities
|
—
|
|
|
Right-of-use assets obtained in exchange for new finance lease liabilities
|
$
|
14,541
|
|
Weighted-average remaining lease term - operating leases
|
4.0
|
|
|
Weighted-average remaining lease term - finance leases
|
2.7
|
|
|
Weighted-average discount rate - operating leases
|
7
|
%
|
|
Weighted-average discount rate - finance leases
|
7
|
%
|
10.
|
Capital Stock and Share-Based Compensation
|
|
Options Outstanding
|
|
Options Exercisable
|
||||||||||||||||||||
|
Number of
Shares
|
|
Price per Share
Range |
|
Weighted
Average
Exercise
Price
|
|
Aggregate
Intrinsic
Value (1)
|
|
Number of
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Aggregate
Intrinsic
Value (1)
|
||||||||||
Balance, January 1, 2018
|
3,108,868
|
|
|
$0.61 - $6.55
|
|
$
|
2.26
|
|
|
$
|
3,669,794
|
|
|
1,986,740
|
|
|
$
|
1.81
|
|
|
$
|
3,314,494
|
|
Granted
|
565,070
|
|
|
$3.21 - $3.37
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Exercised
|
(260,344
|
)
|
|
$1.18 - $1.80
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Canceled
|
(1,469
|
)
|
|
1.47
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance, March 31, 2019
|
3,412,125
|
|
|
$0.61 - $6.23
|
|
$
|
2.48
|
|
|
$
|
5,844,998
|
|
|
1,810,984
|
|
|
$
|
1.91
|
|
|
$
|
4,170,283
|
|
(1)
|
The intrinsic value of an option represents the amount by which the market value of the stock exceeds the exercise price of the option of in-the-money options only. The aggregate intrinsic value is based on the closing price of our common stock on the Nasdaq Capital Market, as applicable, on the respective dates.
|
|
Number of Unvested Shares
|
|
Weighted Average Grant Date Fair Value
|
|
Aggregate Grant Date Fair Value of Unvested Shares
|
|||||
Balance, January 1, 2019
|
458,620
|
|
|
$
|
2.56
|
|
|
$
|
1,172,456
|
|
Granted
|
230,000
|
|
|
$
|
2.97
|
|
|
683,430
|
|
|
Vested
|
—
|
|
|
—
|
|
|
—
|
|
||
Forfeitures
|
—
|
|
|
—
|
|
|
—
|
|
||
Balance, March 31, 2019
|
688,620
|
|
|
$
|
2.70
|
|
|
$
|
1,855,886
|
|
|
Number of Stock Units
|
|
Weighted Average Grant Date Fair Value per Share
|
|
Intrinsic Value Outstanding
|
||||
Balance, January 1, 2019
|
507,290
|
|
|
$1.53
|
|
$
|
1,699,422
|
|
|
Granted
|
9,104
|
|
|
3.35
|
|
|
|
||
Forfeitures
|
—
|
|
|
—
|
|
|
|
||
Converted
|
—
|
|
|
—
|
|
|
|
||
Balance, March 31, 2019
|
516,394
|
|
|
$1.56
|
|
$
|
2,153,363
|
|
|
Preferred Stock
|
|
Common Stock
|
|
Treasury Stock
|
|
Additional
Paid-in
Capital
|
|
Accumulated Deficit
|
|
Total
|
|||||||||||||||
|
Shares
|
|
$
|
|
Shares
|
|
$
|
|
Shares
|
|
$
|
|
$
|
|
|
|
|
|||||||||
Balance at January 1, 2019, as previously reported
|
1,321,514
|
|
|
1,322
|
|
|
27,956,401
|
|
|
30,120
|
|
|
1,253,105
|
|
|
(2,116,640
|
)
|
|
85,744,750
|
|
|
(21,305,222
|
)
|
|
62,354,330
|
|
Exercise of stock options
|
—
|
|
|
—
|
|
|
189,312
|
|
|
189
|
|
|
—
|
|
|
—
|
|
|
184,769
|
|
|
—
|
|
|
184,958
|
|
Share-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
342,765
|
|
|
—
|
|
|
342,765
|
|
Non-cash compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Stock dividends to Carilion Clinic
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|
—
|
|
|
—
|
|
|
83,038
|
|
|
(83,058
|
)
|
|
—
|
|
Net Income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,125,879
|
|
|
1,125,879
|
|
Purchase of treasury stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Balance, March 31, 2019
|
1,321,514
|
|
|
1,322
|
|
|
28,145,713
|
|
|
30,329
|
|
|
1,253,105
|
|
|
(2,116,640
|
)
|
|
86,355,322
|
|
|
(20,262,401
|
)
|
|
64,007,932
|
|
(1)
|
The stock dividends payable in connection with Carilion Clinic’s Series A Preferred Stock will be issued subsequent to
March 31, 2019
. For the period from January 12, 2010, the original issue date of the Series A Preferred Stock, through
March 31, 2019
, the Series A Preferred Stock issued to Carilion has accrued
$1,500,692
in dividends. The accrued and unpaid dividends as of
March 31, 2019
will be paid by the issuance of
730,808
shares of our common stock upon Carilion’s written request.
|
11.
|
Revenue Recognition
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
Contract assets
|
$
|
3,188,352
|
|
|
$
|
2,759,315
|
|
Contract liabilities
|
(2,792,119
|
)
|
|
(2,486,111
|
)
|
||
Net contract assets (liabilities)
|
$
|
396,233
|
|
|
$
|
273,204
|
|
12.
|
Income Taxes
|
13.
|
Operating Segments
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(unaudited)
|
||||||
Revenues:
|
|
|
|
||||
Technology development
|
$
|
6,640,743
|
|
|
$
|
4,636,776
|
|
Products and licensing
|
8,192,375
|
|
|
4,131,754
|
|
||
Total revenues
|
$
|
14,833,118
|
|
|
$
|
8,768,530
|
|
Technology development operating income/(loss)
|
$
|
64,237
|
|
|
$
|
99,234
|
|
Products and licensing operating income/(loss)
|
(961,815
|
)
|
|
(14,983
|
)
|
||
Total operating income/(loss)
|
$
|
(897,578
|
)
|
|
$
|
84,251
|
|
Depreciation, technology development
|
$
|
98,395
|
|
|
$
|
93,600
|
|
Depreciation, products and licensing
|
$
|
158,990
|
|
|
$
|
64,317
|
|
Amortization, technology development
|
$
|
27,932
|
|
|
$
|
37,206
|
|
Amortization, products and licensing
|
$
|
331,992
|
|
|
$
|
112,729
|
|
|
March 31,
2019 |
|
December 31,
2018 |
||||
|
(unaudited)
|
|
|
||||
Total segment assets:
|
|
|
|
||||
Technology development
|
$
|
32,331,533
|
|
|
$
|
34,823,525
|
|
Products and licensing
|
51,232,275
|
|
|
40,775,211
|
|
||
Total assets
|
$
|
83,563,808
|
|
|
$
|
75,598,736
|
|
Property plant and equipment, and intangible assets, technology development
|
$
|
2,162,062
|
|
|
$
|
2,103,711
|
|
Property plant and equipment, and intangible assets, products and licensing
|
$
|
23,338,116
|
|
|
$
|
4,927,453
|
|
14.
|
Contingencies and Guarantees
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
2019
|
2020
|
2021
|
2022
|
2023 and beyond
|
Total
|
||||||||||||
Products and Licensing
|
$
|
7,442,894
|
|
$
|
3,171,964
|
|
$
|
1,571,597
|
|
$
|
1,538,276
|
|
$
|
1,323,423
|
|
$
|
15,048,154
|
|
Technology Development
|
2019
|
2020
|
2021
|
2022
|
2023 and beyond
|
Total
|
||||||||||||
Funded
|
$
|
14,622,934
|
|
$
|
4,556,997
|
|
$
|
1,506,077
|
|
$
|
287,857
|
|
$
|
—
|
|
$
|
20,973,865
|
|
Unfunded
|
$
|
1,112,864
|
|
$
|
3,830,142
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
4,943,006
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|||||||||
|
2019
|
|
2018
|
|
$ Difference
|
|
% Difference
|
|||||||
Revenues:
|
|
|
|
|
|
|
|
|||||||
Technology development
|
$
|
6,640,743
|
|
|
$
|
4,636,776
|
|
|
$
|
2,003,967
|
|
|
43
|
%
|
Products and licensing
|
8,192,375
|
|
|
4,131,754
|
|
|
4,060,621
|
|
|
98
|
%
|
|||
Total revenues
|
$
|
14,833,118
|
|
|
$
|
8,768,530
|
|
|
$
|
6,064,588
|
|
|
69
|
%
|
|
Three Months Ended March 31,
|
|
|
|
|
|||||||||
|
2019
|
|
2018
|
|
$ Difference
|
|
% Difference
|
|||||||
Cost of revenues:
|
|
|
|
|
|
|
|
|||||||
Technology development
|
$
|
4,816,146
|
|
|
$
|
3,353,501
|
|
|
$
|
1,462,645
|
|
|
44
|
%
|
Products and licensing
|
3,249,338
|
|
|
1,575,403
|
|
|
1,673,935
|
|
|
106
|
%
|
|||
Total cost of revenues
|
8,065,484
|
|
|
4,928,904
|
|
|
3,136,580
|
|
|
64
|
%
|
|||
Gross profit
|
$
|
6,767,634
|
|
|
$
|
3,839,626
|
|
|
$
|
2,928,008
|
|
|
76
|
%
|
|
Three Months Ended March 31,
|
|
|
|
|
|||||||||
|
2019
|
|
2018
|
|
$ Difference
|
|
% Difference
|
|||||||
Operating expense:
|
|
|
|
|
|
|
|
|||||||
Selling, general and administrative
|
$
|
6,207,318
|
|
|
$
|
3,333,490
|
|
|
$
|
2,873,828
|
|
|
86
|
%
|
Research, development and engineering
|
1,457,893
|
|
|
879,592
|
|
|
578,301
|
|
|
66
|
%
|
|||
Total operating expense
|
$
|
7,665,211
|
|
|
$
|
4,213,082
|
|
|
$
|
3,452,129
|
|
|
82
|
%
|
|
Three Months Ended March 31,
|
|
|
||||||||
|
2019
|
|
2018
|
|
$ Difference
|
||||||
Net cash provided by/(used in) operating activities
|
$
|
1,596,683
|
|
|
$
|
(2,540,334
|
)
|
|
$
|
4,137,017
|
|
Net cash used in investing activities
|
(19,280,140
|
)
|
|
(242,828
|
)
|
|
(19,037,312
|
)
|
|||
Net cash used in financing activities
|
(196,804
|
)
|
|
(755,697
|
)
|
|
558,893
|
|
|||
Net decrease in cash and cash equivalents
|
$
|
(17,880,261
|
)
|
|
$
|
(3,538,859
|
)
|
|
$
|
(14,341,402
|
)
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
•
|
accurately anticipate customer needs;
|
•
|
innovate and develop new technologies and applications;
|
•
|
successfully commercialize new technologies in a timely manner;
|
•
|
price products competitively and manufacture and deliver products in sufficient volumes and on time; and
|
•
|
differentiate our product offerings from those of our competitors.
|
•
|
lost sales and customers as a result of customers deciding not to do business with us;
|
•
|
complexities associated with managing the larger combined company with distant business locations;
|
•
|
integrating personnel while maintaining focus on providing consistent, high quality products;
|
•
|
loss of key employees;
|
•
|
potential unknown liabilities associated with the acquisition;
|
•
|
performance shortfalls as a result of the division of management's attention caused by completing the acquisition and integrating operations.
|
•
|
having to comply with U.S. export control regulations and policies that restrict our ability to communicate with non-U.S. employees and supply foreign affiliates and customers;
|
•
|
changes in or interpretations of foreign regulations that may adversely affect our ability to sell our products, perform services or repatriate profits to the United States;
|
•
|
the imposition of tariffs;
|
•
|
hyperinflation or economic or political instability in foreign countries;
|
•
|
imposition of limitations on, or increase of withholding and other taxes on remittances and other payments by foreign subsidiaries or joint ventures;
|
•
|
conducting business in places where business practices and customs are unfamiliar and unknown;
|
•
|
the imposition of restrictive trade policies;
|
•
|
the imposition of inconsistent laws or regulations;
|
•
|
the imposition or increase of investment and other restrictions or requirements by foreign governments;
|
•
|
uncertainties relating to foreign laws and legal proceedings;
|
•
|
having to comply with a variety of U.S. laws, including the Foreign Corrupt Practices Act ("FCPA"); and
|
•
|
having to comply with licensing requirements.
|
•
|
we or our licensors might not have been the first to make the inventions covered by each of our pending patent applications and issued patents;
|
•
|
we or our licensors might not have been the first to file patent applications for these inventions;
|
•
|
others may independently develop similar or alternative technologies or duplicate any of our technologies;
|
•
|
it is possible that none of our pending patent applications or the pending patent applications of our licensors will result in issued patents;
|
•
|
patents may issue to third parties that cover how we might practice our technology;
|
•
|
our issued patents and issued patents of our licensors may not provide a basis for commercially viable technologies, may not provide us with any competitive advantages, or may be challenged and invalidated by third parties; and
|
•
|
we may not develop additional proprietary technologies that are patentable.
|
•
|
sales of our common stock by our significant stockholders, or the perception that such sales may occur;
|
•
|
changes in earnings estimates, investors’ perceptions, recommendations by securities analysts or our failure to achieve analysts’ earnings estimates;
|
•
|
changes in our status as an entity eligible to receive SBIR contracts and grants;
|
•
|
quarterly variations in our or our competitors’ results of operations;
|
•
|
general market conditions and other factors unrelated to our operating performance or the operating performance of our competitors;
|
•
|
announcements by us, or by our competitors, of acquisitions, new products, significant contracts, commercial relationships or capital commitments;
|
•
|
pending or threatened litigation;
|
•
|
any major change in our board of directors or management or any competing proxy solicitations for director nominees;
|
•
|
changes in governmental regulations or in the status of our regulatory approvals;
|
•
|
announcements related to patents issued to us or our competitors;
|
•
|
a lack of, limited or negative industry or securities analyst coverage;
|
•
|
discussions of our company or our stock price by the financial and scientific press and online investor communities; and
|
•
|
general developments in our industry.
|
•
|
a classified board of directors serving staggered terms;
|
•
|
advance notice requirements to stockholders for matters to be brought at stockholder meetings;
|
•
|
a supermajority stockholder vote requirement for amending certain provisions of our amended and restated certificate of incorporation and bylaws; and
|
•
|
the right to issue preferred stock without stockholder approval, which could be used to dilute the stock ownership of a potential hostile acquirer.
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
OTHER INFORMATION
|
ITEM 6.
|
EXHIBITS
|
Exhibit
Number
|
|
Description
|
2.1(1)+
|
|
|
|
|
|
4.1(2)+
|
|
|
|
|
|
10.1
|
|
|
|
|
|
31.1
|
|
|
|
|
|
31.2
|
|
|
|
|
|
32.1*
|
|
|
|
|
|
32.2*
|
|
|
|
|
|
101
|
|
The following materials from the Registrant’s Quarterly Report on Form 10-Q for the three months ended March 31, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at March 31, 2019 and December 31, 2018, (ii) Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018, (iii) Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018 and (iv) Notes to Unaudited Consolidated Financial Statements.
|
(1)
|
Incorporated by reference to the exhibit to the Registrant's Current Report on Form 8-K, Commission File No. 000-52008, filed on March 4, 2019. The number given in parentheses indicates the corresponding exhibit number in such Form 8-K.
|
(2)
|
Incorporated by reference to the exhibit to the Registrant's Current Report on Form 8-K, Commission File No. 000-52008, filed on January 16, 2019. The number given in parentheses indicates the corresponding exhibit number in such Form 8-K.
|
+
|
Pursuant to Item 601 (b)(2) of Regulation S-K promulgated by the SEC, certain exhibits and schedules to this agreement have been omitted. The Registrant hereby agrees to furnish supplementally to the SEC, upon its request, any or all of such omitted exhibits or schedules.
|
†
|
Indicates management contract or compensatory plan.
|
*
|
These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350 and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
|
|
|
|
Luna Innovations Incorporated
|
|
Date:
|
May 13, 2019
|
|
By:
|
/s/ Dale Messick
|
|
|
|
|
Dale Messick
|
|
|
|
|
Chief Financial Officer
(principal financial and accounting officer and duly authorized officer)
|
|
|||
|
|
|
|
Cash Compensation
1
|
|
||
Annual Director (non-chair) Retainer
|
$
|
37,500
|
|
Annual Chair Retainer
|
$
|
62,500
|
|
Board Meetings
|
$
|
0
|
|
Committee Chair Retainer
|
|
||
Audit
|
$
|
11,000
|
|
Compensation
|
$
|
11,000
|
|
Nominating
|
$
|
6,000
|
|
Committee Service Retainer
|
|
||
Audit
|
$
|
4,000
|
|
Compensation
|
$
|
4,000
|
|
Nominating
|
$
|
4,000
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Luna Innovations Incorporated;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Scott A. Graeff
|
|
Scott A. Graeff
|
|
President and Chief Executive Officer
(principal executive officer)
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Luna Innovations Incorporated;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Dale E. Messick
|
|
Dale E. Messick
|
|
Chief Financial Officer
(principal financial officer)
|
|
/s/ Scott A. Graeff
|
|
Scott A. Graeff
|
|
President and Chief Executive Officer
(principal executive officer)
|
|
/s/ Dale E. Messick
|
|
Dale E. Messick
|
|
Chief Financial Officer
(principal financial officer)
|
|