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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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54-1560050
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(State or Other Jurisdiction of Incorporation or Organization)
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(I.R.S. Employer Identification Number)
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Title of each class
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Trading Symbol
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Name of each exchange on which registered
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Common Stock, $0.001 par value per share
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LUNA
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The Nasdaq Stock Market LLC
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Large accelerated filer ¨
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Accelerated filer x
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Non-accelerated filer ¨
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Smaller reporting company x
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Emerging growth company ¨
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•
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Ownership. The company must be more than 50 percent owned and controlled by U.S. citizens or permanent resident aliens, or owned by an entity that is itself more than 50 percent owned and controlled by U.S. citizens or permanent resident aliens; and
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•
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Size. The company, including its affiliates, cannot have more than 500 employees.
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•
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accurately anticipate customer needs;
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•
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innovate and develop new technologies and applications;
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•
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successfully commercialize new technologies in a timely manner;
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•
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price products competitively and manufacture and deliver products in sufficient volumes and on time; and
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•
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differentiate our product offerings from those of our competitors.
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•
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lost sales and customers as a result of customers deciding not to do business with us;
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•
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complexities associated with managing the larger combined company with distant business locations;
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•
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integrating personnel while maintaining focus on providing consistent, high quality products;
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•
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loss of key employees;
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•
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potential unknown liabilities associated with the acquisition; and
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•
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performance shortfalls as a result of the division of management's attention caused by completing the acquisition and integrating operations.
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•
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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;
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•
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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;
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•
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the imposition of tariffs;
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•
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hyperinflation or economic or political instability in foreign countries;
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•
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imposition of limitations on, or increase of withholding and other taxes on remittances and other payments by foreign subsidiaries or joint ventures;
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•
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conducting business in places where business practices and customs are unfamiliar and unknown;
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•
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the imposition of restrictive trade policies;
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•
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the imposition of inconsistent laws or regulations;
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•
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the imposition or increase of investment and other restrictions or requirements by foreign governments;
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•
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uncertainties relating to foreign laws and legal proceedings;
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•
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having to comply with a variety of U.S. laws, including the Foreign Corrupt Practices Act ("FCPA"); and
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•
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having to comply with licensing requirements.
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•
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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;
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•
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we or our licensors might not have been the first to file patent applications for these inventions;
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•
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others may independently develop similar or alternative technologies or duplicate any of our technologies;
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•
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it is possible that none of our pending patent applications or the pending patent applications of our licensors will result in issued patents;
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•
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patents may issue to third parties that cover how we might practice our technology;
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•
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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
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•
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we may not develop additional proprietary technologies that are patentable.
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•
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sales of our common stock by our significant stockholders, or the perception that such sales may occur;
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•
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changes in earnings estimates, investors’ perceptions, recommendations by securities analysts or our failure to achieve analysts’ earnings estimates;
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•
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changes in our status as an entity eligible to receive SBIR contracts and grants;
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•
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quarterly variations in our or our competitors’ results of operations;
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•
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challenges integrating our recent or future acquisitions, including the inability to realize any expected synergies;
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•
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general market conditions and other factors unrelated to our operating performance or the operating performance of our competitors;
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•
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announcements by us, or by our competitors, of acquisitions, new products, significant contracts, commercial relationships or capital commitments;
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•
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pending or threatened litigation;
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•
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any major change in our board of directors or management or any competing proxy solicitations for director nominees;
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•
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changes in governmental regulations or in the status of our regulatory approvals;
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•
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announcements related to patents issued to us or our competitors;
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•
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a lack of, limited or negative industry or securities analyst coverage;
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•
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discussions of our company or our stock price by the financial and scientific press and online investor communities; and
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•
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general developments in our industry.
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•
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a classified board of directors serving staggered terms;
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•
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advance notice requirements to stockholders for matters to be brought at stockholder meetings;
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•
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a supermajority stockholder vote requirement for amending certain provisions of our amended and restated certificate of incorporation and bylaws; and
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•
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the right to issue preferred stock without stockholder approval, which could be used to dilute the stock ownership of a potential hostile acquirer.
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Years ended December 31,
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||||||||||||||||||
In thousands, except share and per share data
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
Consolidated Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
||||||||||
Products and licensing
|
$
|
44,491
|
|
|
$
|
21,950
|
|
|
$
|
14,505
|
|
|
$
|
13,323
|
|
|
$
|
12,975
|
|
Technology development
|
26,025
|
|
|
20,968
|
|
|
18,576
|
|
|
16,281
|
|
|
13,599
|
|
|||||
Total revenues (1)
|
70,516
|
|
|
42,917
|
|
|
33,082
|
|
|
29,604
|
|
|
26,574
|
|
|||||
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
||||||||||
Products and licensing
|
16,684
|
|
|
8,079
|
|
|
5,724
|
|
|
5,417
|
|
|
5,651
|
|
|||||
Technology development
|
18,649
|
|
|
15,400
|
|
|
13,988
|
|
|
12,473
|
|
|
10,379
|
|
|||||
Total cost of revenues
|
35,333
|
|
|
23,479
|
|
|
19,713
|
|
|
17,890
|
|
|
16,030
|
|
|||||
Gross profit
|
35,182
|
|
|
19,438
|
|
|
13,369
|
|
|
11,714
|
|
|
10,544
|
|
|||||
Operating expense
|
31,867
|
|
|
18,560
|
|
|
15,577
|
|
|
15,840
|
|
|
17,359
|
|
|||||
Operating income/(loss)
|
3,315
|
|
|
878
|
|
|
(2,208
|
)
|
|
(4,126
|
)
|
|
(6,815
|
)
|
|||||
Other (expense)/income, net
|
(5
|
)
|
|
(17
|
)
|
|
26
|
|
|
28
|
|
|
(53
|
)
|
|||||
Interest income
|
394
|
|
|
550
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Interest expense, net
|
(16
|
)
|
|
(124
|
)
|
|
(217
|
)
|
|
(317
|
)
|
|
(218
|
)
|
|||||
Income/(loss) from continuing operations before income taxes
|
3,688
|
|
|
1,286
|
|
|
(2,399
|
)
|
|
(4,415
|
)
|
|
(7,086
|
)
|
|||||
Income tax benefit/(expense)
|
1,654
|
|
|
(48
|
)
|
|
1,149
|
|
|
136
|
|
|
602
|
|
|||||
Net income/(loss) from continuing operations
|
5,343
|
|
|
1,238
|
|
|
(1,251
|
)
|
|
(4,279
|
)
|
|
(6,484
|
)
|
|||||
Income from discontinued operations, net of income taxes
|
—
|
|
|
9,766
|
|
|
15,866
|
|
|
1,909
|
|
|
8,801
|
|
|||||
Net income/(loss)
|
5,343
|
|
|
11,004
|
|
|
14,615
|
|
|
(2,370
|
)
|
|
2,317
|
|
|||||
Less: Preferred stock dividend
|
285
|
|
|
257
|
|
|
147
|
|
|
105
|
|
|
85
|
|
|||||
Net income/(loss) attributable to common stockholders
|
$
|
5,057
|
|
|
$
|
10,747
|
|
|
$
|
14,468
|
|
|
$
|
(2,475
|
)
|
|
$
|
2,232
|
|
Net income/(loss) per share from continuing operations:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
$
|
0.19
|
|
|
$
|
0.04
|
|
|
$
|
(0.05
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.28
|
)
|
Diluted
|
$
|
0.17
|
|
|
$
|
0.04
|
|
|
$
|
(0.05
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
(0.28
|
)
|
Net income per share from discontinued operations:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
$
|
—
|
|
|
$
|
0.35
|
|
|
$
|
0.58
|
|
|
$
|
0.07
|
|
|
$
|
0.38
|
|
Diluted
|
$
|
—
|
|
|
$
|
0.30
|
|
|
$
|
0.58
|
|
|
$
|
0.07
|
|
|
$
|
0.38
|
|
Net income/(loss) per share attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
$
|
0.18
|
|
|
$
|
0.39
|
|
|
$
|
0.52
|
|
|
$
|
(0.09
|
)
|
|
$
|
0.10
|
|
Diluted
|
$
|
0.16
|
|
|
$
|
0.33
|
|
|
$
|
0.52
|
|
|
$
|
(0.09
|
)
|
|
$
|
0.10
|
|
Weighted-average shares:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
28,688,867
|
|
|
27,596,401
|
|
|
27,579,988
|
|
|
27,547,217
|
|
|
23,026,494
|
|
|||||
Diluted
|
31,840,584
|
|
|
32,452,228
|
|
|
27,579,988
|
|
|
27,547,217
|
|
|
23,026,494
|
|
|
As of December 31,
|
||||||||||||||||||
In thousands
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
25,006
|
|
|
$
|
42,460
|
|
|
$
|
36,982
|
|
|
$
|
17,464
|
|
|
$
|
14,117
|
|
Working capital (2)
|
41,072
|
|
|
56,089
|
|
|
43,975
|
|
|
23,417
|
|
|
15,413
|
|
|||||
Total assets (2)
|
86,524
|
|
|
75,599
|
|
|
66,223
|
|
|
58,132
|
|
|
27,584
|
|
|||||
Total current liabilities (2)
|
17,044
|
|
|
12,139
|
|
|
14,826
|
|
|
15,334
|
|
|
8,473
|
|
|||||
Total debt
|
—
|
|
|
619
|
|
|
2,436
|
|
|
6,125
|
|
|
625
|
|
|
Years ended December 31,
|
||||
|
2019
|
|
2018
|
||
Revenues:
|
|
|
|
||
Products and licensing
|
63.1
|
%
|
|
51.1
|
%
|
Technology development
|
36.9
|
|
|
48.9
|
|
Total revenues
|
100.0
|
|
|
100.0
|
|
Cost of revenues:
|
|
|
|
||
Products and licensing
|
23.7
|
|
|
18.8
|
|
Technology development
|
26.4
|
|
|
35.9
|
|
Total cost of revenues
|
50.1
|
|
|
54.7
|
|
Gross profit
|
49.9
|
|
|
45.3
|
|
Operating expense
|
45.2
|
|
|
43.2
|
|
Operating income
|
4.7
|
|
|
2.1
|
|
Total other income
|
0.5
|
|
|
1.0
|
|
Income from continuing operations before income taxes
|
5.2
|
|
|
3.1
|
|
Income from continuing operations, net of income taxes
|
7.6
|
|
|
2.9
|
|
Income from discontinued operations, net of income taxes
|
—
|
|
|
22.8
|
|
Net income
|
7.6
|
%
|
|
25.7
|
%
|
|
Years ended December 31,
|
|
|
|
|
|||||||||
|
2019
|
|
2018
|
|
$ Difference
|
|
% Difference
|
|||||||
Products and licensing revenues
|
$
|
44,491,041
|
|
|
$
|
21,949,689
|
|
|
$
|
22,541,352
|
|
|
102.7
|
%
|
Technology development revenues
|
26,024,674
|
|
|
20,967,556
|
|
|
5,057,118
|
|
|
24.1
|
%
|
|||
Total revenues
|
$
|
70,515,715
|
|
|
$
|
42,917,245
|
|
|
$
|
27,598,470
|
|
|
64.3
|
%
|
|
Years ended December 31,
|
|
|
|
|
|||||||||
|
2019
|
|
2018
|
|
$ Difference
|
|
% Difference
|
|||||||
Products and licensing costs
|
$
|
16,684,172
|
|
|
$
|
8,078,870
|
|
|
$
|
8,605,302
|
|
|
106.5
|
%
|
Technology development costs
|
18,649,161
|
|
|
15,400,475
|
|
|
3,248,686
|
|
|
21.1
|
%
|
|||
Total costs of revenues
|
$
|
35,333,333
|
|
|
$
|
23,479,345
|
|
|
$
|
11,853,988
|
|
|
50.5
|
%
|
|
Years ended December 31,
|
|
|
|
|
|||||||||
|
2019
|
|
2018
|
|
$ Difference
|
|
% Difference
|
|||||||
Selling, general and administrative expense
|
$
|
24,371,349
|
|
|
$
|
14,794,205
|
|
|
$
|
9,577,144
|
|
|
64.7
|
%
|
Research, development and engineering expense
|
7,496,012
|
|
|
3,766,160
|
|
|
3,729,852
|
|
|
99.0
|
%
|
|||
Total operating expense
|
$
|
31,867,361
|
|
|
$
|
18,560,365
|
|
|
$
|
13,306,996
|
|
|
71.7
|
%
|
|
Years ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
Net cash provided by/(used in) operating activities
|
$
|
4,798,201
|
|
|
$
|
(3,308,826
|
)
|
Net cash (used in)/provided by investing activities
|
(19,814,991
|
)
|
|
10,037,123
|
|
||
Net cash used in financing activities
|
(2,437,560
|
)
|
|
(1,249,564
|
)
|
||
Net (decrease)/increase in cash and cash equivalents
|
$
|
(17,454,350
|
)
|
|
$
|
5,478,733
|
|
|
Total
|
|
Less than 1
year
|
|
1 - 3 years
|
|
3 - 5 years
|
|
More than 5
years
|
||||||||||
Operating facility leases (1)
|
$
|
3,742,613
|
|
|
$
|
1,467,701
|
|
|
$
|
1,185,504
|
|
|
$
|
1,089,408
|
|
|
$
|
—
|
|
Finance leases (2)
|
81,855
|
|
|
56,019
|
|
|
20,794
|
|
|
5,042
|
|
|
—
|
|
|||||
Purchase order obligation (3)
|
1,271,440
|
|
|
1,271,440
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Other liabilities (4)
|
220,000
|
|
|
220,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
$
|
5,315,908
|
|
|
$
|
3,015,160
|
|
|
$
|
1,206,298
|
|
|
$
|
1,094,450
|
|
|
$
|
—
|
|
(1)
|
We lease our facilities in Blacksburg, Charlottesville and Roanoke, Virginia, Ann Arbor, Michigan, Chino, California and Atlanta, Georgia under operating leases that as of December 31, 2019, are scheduled to expire between October
|
(2)
|
In January 2016, February 2018, and June 2018 we executed leases in the amounts of $207,000, $15,000, and $75,000, respectively, for office equipment. These equipment leases expire in 2021, 2021 and 2023, respectively.
|
(3)
|
Purchase order obligations included outstanding orders for inventory purchases. In 2019, our Luna Technologies subsidiary executed non-cancelable purchase orders for a total amount of $1.9 million for multiple shipments of tunable lasers to be delivered over an 18-month period beginning in July 2019.
|
(4)
|
Other liabilities include remaining amounts payable for minimum royalty payments for certain licensed technologies payable over the remaining patent terms of the underlying technology.
|
Reports of Independent Registered Public Accounting Firm
|
|
Consolidated Balance Sheets at December 31, 2019 and 2018
|
|
Consolidated Statements of Operations for the years ended December 31, 2019 and 2018
|
|
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2019 and 2018
|
|
Consolidated Statements of Cash Flows for the years ended December 31, 2019 and 2018
|
|
|
December 31, 2019
|
|
December 31, 2018
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
25,005,917
|
|
|
$
|
42,460,267
|
|
Accounts receivable, net
|
16,268,645
|
|
|
13,037,068
|
|
||
Receivable from sale of HSOR business
|
2,501,386
|
|
|
2,500,000
|
|
||
Contract assets
|
2,758,946
|
|
|
2,422,495
|
|
||
Inventory, net
|
10,294,431
|
|
|
6,873,742
|
|
||
Prepaid expenses and other current assets
|
1,286,968
|
|
|
935,185
|
|
||
Total current assets
|
58,116,293
|
|
|
68,228,757
|
|
||
Property and equipment, net
|
3,465,612
|
|
|
3,627,886
|
|
||
Intangible assets, net
|
10,194,477
|
|
|
3,302,270
|
|
||
Goodwill
|
10,541,676
|
|
|
101,008
|
|
||
Long term contract assets
|
449,260
|
|
|
336,820
|
|
||
Other assets
|
2,341,179
|
|
|
1,995
|
|
||
Deferred tax asset
|
1,415,563
|
|
|
—
|
|
||
Total assets
|
$
|
86,524,060
|
|
|
$
|
75,598,736
|
|
Liabilities and stockholders’ equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Current portion of long-term debt obligations
|
$
|
—
|
|
|
$
|
619,315
|
|
Current portion of capital lease obligations
|
—
|
|
|
40,586
|
|
||
Accounts payable
|
2,786,825
|
|
|
2,395,984
|
|
||
Accrued liabilities
|
10,369,545
|
|
|
6,597,458
|
|
||
Contract liabilities
|
3,887,685
|
|
|
2,486,111
|
|
||
Total current liabilities
|
17,044,055
|
|
|
12,139,454
|
|
||
Long-term portion of deferred rent
|
—
|
|
|
1,035,974
|
|
||
Other long-term liabilities
|
2,011,487
|
|
|
—
|
|
||
Long-term capital lease obligations
|
—
|
|
|
68,978
|
|
||
Total liabilities
|
19,055,542
|
|
|
13,244,406
|
|
||
Commitments and contingencies (Note 14)
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock, par value $0.001, 1,321,514 shares authorized, 0 and 1,321,514 shares issued and outstanding at December 31, 2019 and 2018, respectively
|
—
|
|
|
1,322
|
|
||
Common stock, par value $0.001, 100,000,000 shares authorized, 31,788,896 and 29,209,506 shares issued, 30,149,105 and 27,956,401 shares outstanding at December 31, 2019 and 2018, respectively
|
31,849
|
|
|
30,120
|
|
||
Treasury stock at cost, 1,639,791 and 1,253,105 shares at December 31, 2019 and 2018, respectively
|
(4,337,107
|
)
|
|
(2,116,640
|
)
|
||
Additional paid-in capital
|
88,021,903
|
|
|
85,744,750
|
|
||
Accumulated deficit
|
(16,248,127
|
)
|
|
(21,305,222
|
)
|
||
Total stockholders’ equity
|
67,468,518
|
|
|
62,354,330
|
|
||
Total liabilities and stockholders’ equity
|
$
|
86,524,060
|
|
|
$
|
75,598,736
|
|
|
Years ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
Revenues:
|
|
|
|
||||
Products and licensing
|
$
|
44,491,041
|
|
|
$
|
21,949,689
|
|
Technology development
|
26,024,674
|
|
|
20,967,556
|
|
||
Total revenues
|
70,515,715
|
|
|
42,917,245
|
|
||
Cost of revenues:
|
|
|
|
||||
Products and licensing
|
16,684,172
|
|
|
8,078,870
|
|
||
Technology development
|
18,649,161
|
|
|
15,400,475
|
|
||
Total cost of revenues
|
35,333,333
|
|
|
23,479,345
|
|
||
Gross profit
|
35,182,382
|
|
|
19,437,900
|
|
||
Operating expense:
|
|
|
|
||||
Selling, general and administrative
|
24,371,349
|
|
|
14,794,205
|
|
||
Research, development and engineering
|
7,496,012
|
|
|
3,766,160
|
|
||
Total operating expense
|
31,867,361
|
|
|
18,560,365
|
|
||
Operating income
|
3,315,021
|
|
|
877,535
|
|
||
Other income/(expense):
|
|
|
|
||||
Other expense, net
|
(4,504
|
)
|
|
(17,143
|
)
|
||
Investment income
|
393,556
|
|
|
549,580
|
|
||
Interest expense, net
|
(15,878
|
)
|
|
(124,344
|
)
|
||
Total other income
|
373,174
|
|
|
408,093
|
|
||
Income from continuing operations before income taxes
|
3,688,195
|
|
|
1,285,628
|
|
||
Income tax benefit/(expense)
|
1,654,350
|
|
|
(47,818
|
)
|
||
Net income from continuing operations
|
5,342,545
|
|
|
1,237,810
|
|
||
Operating income from discontinued operations, net of income tax expenses ($183,921)
|
—
|
|
|
1,170,634
|
|
||
Gain on sale, net of income tax expenses ($1,572,244)
|
—
|
|
|
8,595,797
|
|
||
Income from discontinued operations, net of income taxes
|
—
|
|
|
9,766,431
|
|
||
Net income
|
5,342,545
|
|
|
11,004,241
|
|
||
Less: Preferred stock dividend
|
285,450
|
|
|
257,302
|
|
||
Net income attributable to common stockholders
|
$
|
5,057,095
|
|
|
$
|
10,746,939
|
|
|
|
|
|
||||
Net income per share from continuing operations:
|
|
|
|
||||
Basic
|
$
|
0.19
|
|
|
$
|
0.04
|
|
Diluted
|
$
|
0.17
|
|
|
$
|
0.04
|
|
Net income per share from discontinued operations:
|
|
|
|
||||
Basic
|
$
|
—
|
|
|
$
|
0.35
|
|
Diluted
|
$
|
—
|
|
|
$
|
0.30
|
|
Net income per share attributable to common stockholders:
|
|
|
|
||||
Basic
|
$
|
0.18
|
|
|
$
|
0.39
|
|
Diluted
|
$
|
0.16
|
|
|
$
|
0.33
|
|
Weighted average shares:
|
|
|
|
||||
Basic
|
28,688,867
|
|
|
27,596,401
|
|
||
Diluted
|
31,840,584
|
|
|
32,452,228
|
|
|
Preferred Stock
|
|
Common Stock
|
|
Treasury Stock
|
Additional
Paid in
Capital
|
|
Accumulated
Deficit
|
|
Total
|
|||||||||||||||||||||
|
Shares
|
|
$
|
|
Shares
|
|
$
|
|
Shares
|
|
$
|
$
|
|
$
|
|
$
|
|||||||||||||||
Adjusted balance as of January 1, 2018
|
1,321,514
|
|
|
$
|
1,322
|
|
|
27,283,918
|
|
|
$
|
29,186
|
|
|
1,070,904
|
|
|
$
|
(1,649,746
|
)
|
$
|
83,563,208
|
|
|
$
|
(32,052,161
|
)
|
|
$
|
49,891,809
|
|
Exercise of stock options and warrants
|
—
|
|
|
—
|
|
|
442,425
|
|
|
441
|
|
|
—
|
|
|
—
|
|
1,096,592
|
|
|
—
|
|
|
1,097,033
|
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
282,394
|
|
|
282
|
|
|
—
|
|
|
—
|
|
627,857
|
|
|
—
|
|
|
628,139
|
|
||||||
Non-cash compensation
|
—
|
|
|
—
|
|
|
129,865
|
|
|
131
|
|
|
—
|
|
|
—
|
|
199,871
|
|
|
—
|
|
|
200,002
|
|
||||||
Stock dividends (1)
|
—
|
|
|
—
|
|
|
—
|
|
|
80
|
|
|
—
|
|
|
—
|
|
257,222
|
|
|
(257,302
|
)
|
|
—
|
|
||||||
Purchase of treasury stock
|
—
|
|
|
—
|
|
|
(182,201
|
)
|
|
—
|
|
|
182,201
|
|
|
(466,894
|
)
|
—
|
|
|
—
|
|
|
(466,894
|
)
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
11,004,241
|
|
|
11,004,241
|
|
||||||
Balance—December 31, 2018
|
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 and warrants
|
—
|
|
|
—
|
|
|
487,802
|
|
|
488
|
|
|
—
|
|
|
—
|
|
447,466
|
|
|
—
|
|
|
447,954
|
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
16,286
|
|
|
16
|
|
|
—
|
|
|
—
|
|
1,544,140
|
|
|
—
|
|
|
1,544,156
|
|
||||||
Stock dividends (1)
|
—
|
|
|
—
|
|
|
770,454
|
|
|
60
|
|
|
—
|
|
|
—
|
|
285,390
|
|
|
(285,450
|
)
|
|
—
|
|
||||||
Preferred stock to common stock conversion
|
(1,321,514
|
)
|
|
(1,322
|
)
|
|
1,321,514
|
|
|
1,322
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Forfeitures of restricted stock grants
|
—
|
|
|
—
|
|
|
(16,666
|
)
|
|
(157
|
)
|
|
—
|
|
|
—
|
|
157
|
|
|
—
|
|
|
—
|
|
||||||
Purchase of treasury stock
|
—
|
|
|
—
|
|
|
(386,686
|
)
|
|
—
|
|
|
386,686
|
|
|
(2,220,467
|
)
|
—
|
|
|
—
|
|
|
(2,220,467
|
)
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
5,342,545
|
|
|
5,342,545
|
|
||||||
Balance—December 31, 2019
|
—
|
|
|
$
|
—
|
|
|
30,149,105
|
|
|
$
|
31,849
|
|
|
1,639,791
|
|
|
$
|
(4,337,107
|
)
|
$
|
88,021,903
|
|
|
$
|
(16,248,127
|
)
|
|
$
|
67,468,518
|
|
(1)
|
The stock dividends payable in connection with the Series A Convertible Preferred Stock were issued at the request of Carilion. See Note 11 - Stockholders' Equity for more information.
|
|
Years ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
Cash flows provided by/(used in) operating activities:
|
|
|
|
||||
Net income
|
$
|
5,342,545
|
|
|
$
|
11,004,241
|
|
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
|
|
|
|
||||
Depreciation and amortization
|
2,503,291
|
|
|
1,218,559
|
|
||
Stock-based compensation
|
1,544,156
|
|
|
627,856
|
|
||
Loss on disposal of fixed assets
|
—
|
|
|
(1,000
|
)
|
||
Gain on sale of discontinued operations, net of income taxes
|
—
|
|
|
(8,595,798
|
)
|
||
Tax benefit from release of valuation allowance
|
(3,349,032
|
)
|
|
—
|
|
||
Bad debt
|
538,298
|
|
|
6,000
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(2,248,925
|
)
|
|
(6,240,377
|
)
|
||
Contract assets
|
(448,891
|
)
|
|
(761,714
|
)
|
||
Inventory
|
(722,690
|
)
|
|
(967,797
|
)
|
||
Other assets
|
(242,112
|
)
|
|
1,849,629
|
|
||
Other long-term assets
|
44,976
|
|
|
—
|
|
||
Accounts payable and accrued expenses
|
591,585
|
|
|
(461,927
|
)
|
||
Contract liabilities
|
1,245,000
|
|
|
(986,498
|
)
|
||
Net cash provided by/(used in) operating activities
|
4,798,201
|
|
|
(3,308,826
|
)
|
||
Cash flows (used in)/provided by investing activities:
|
|
|
|
||||
Acquisition of property and equipment
|
(540,635
|
)
|
|
(386,890
|
)
|
||
Proceeds from sale of property and equipment
|
—
|
|
|
1,000
|
|
||
Intangible property costs
|
(270,106
|
)
|
|
(374,766
|
)
|
||
Acquisition of Micron Optics, net
|
—
|
|
|
(5,001,750
|
)
|
||
Acquisition of General Photonics Corporation, net
|
(19,004,250
|
)
|
|
—
|
|
||
Proceeds from sale of discontinued operations, net
|
—
|
|
|
15,799,529
|
|
||
Net cash (used in)/provided by investing activities
|
(19,814,991
|
)
|
|
10,037,123
|
|
||
Cash flows used in financing activities:
|
|
|
|
||||
Payments on debt obligations
|
(625,000
|
)
|
|
(1,833,333
|
)
|
||
Payments on finance lease obligations
|
(40,047
|
)
|
|
(46,653
|
)
|
||
Purchase of treasury stock
|
(2,220,467
|
)
|
|
(466,894
|
)
|
||
Proceeds from the exercise of options and warrants
|
447,954
|
|
|
1,097,316
|
|
||
Net cash used in financing activities
|
(2,437,560
|
)
|
|
(1,249,564
|
)
|
||
Net change in cash and cash equivalents
|
(17,454,350
|
)
|
|
5,478,733
|
|
||
Cash and cash equivalents—beginning of period
|
42,460,267
|
|
|
36,981,534
|
|
||
Cash and cash equivalents—end of period
|
$
|
25,005,917
|
|
|
$
|
42,460,267
|
|
Supplemental disclosure of cash flow information
|
|
|
|
||||
Cash paid for interest
|
$
|
18,359
|
|
|
$
|
117,616
|
|
Cash paid for income taxes
|
$
|
1,160,276
|
|
|
$
|
1,828,203
|
|
Non-cash investing and financing activity:
|
|
|
|
|
|
||
Contingent liability for business combination
|
$
|
900,000
|
|
|
$
|
—
|
|
Common stock issued pursuant to restricted stock vesting
|
$
|
—
|
|
|
$
|
200,202
|
|
Dividend on preferred stock
|
$
|
285,450
|
|
|
$
|
257,302
|
|
•
|
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 significant value drivers are observable.
|
•
|
Level 3—Valuations derived from valuation techniques in which significant value drivers are unobservable.
|
Equipment
|
3 – 7 years
|
Furniture and fixtures
|
7 years
|
Software
|
3 years
|
Leasehold improvements
|
Lesser of lease term or life of improvements
|
|
Balance at
|
|
Adjustment for
|
|
Adjusted balance at
|
||||||
|
December 31, 2018
|
|
ASC 842
|
|
January 1, 2019
|
||||||
Assets:
|
|
|
|
|
|
||||||
Property and equipment, net
|
$
|
3,627,886
|
|
|
$
|
(90,494
|
)
|
|
$
|
3,537,392
|
|
Other assets, net
|
1,995
|
|
|
3,536,133
|
|
|
3,538,128
|
|
|||
|
|
|
|
|
|
||||||
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
|
|
|
|
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
|
|
29,760
|
|
|
10,511,916
|
|
||
Accounts payable and accrued expenses
|
|
(379,737
|
)
|
|
(4,076,489
|
)
|
||
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
|
|
|
|
Years Ended December 31,
|
||||||
|
|
2019
|
|
2018
|
||||
|
|
(unaudited)
|
|
(unaudited)
|
||||
Revenue
|
|
$
|
72,576,902
|
|
|
$
|
60,249,896
|
|
|
|
|
|
|
||||
Income from continuing operations
|
|
$
|
6,912,802
|
|
|
$
|
1,559,008
|
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Building
|
$
|
69,556
|
|
|
$
|
69,556
|
|
Equipment
|
9,564,426
|
|
|
9,341,007
|
|
||
Furniture and fixtures
|
684,812
|
|
|
640,890
|
|
||
Software
|
1,178,210
|
|
|
1,122,231
|
|
||
Leasehold improvements
|
5,287,935
|
|
|
4,950,510
|
|
||
|
16,784,939
|
|
|
16,124,194
|
|
||
Less—accumulated depreciation
|
(13,319,327
|
)
|
|
(12,496,308
|
)
|
||
Property and equipment, net
|
$
|
3,465,612
|
|
|
$
|
3,627,886
|
|
|
|
|
December 31,
|
||||||
|
Estimated Life
|
|
2019
|
|
2018
|
||||
Patent costs
|
1 - 18 years
|
|
$
|
5,291,245
|
|
|
$
|
4,991,460
|
|
Developed technology
|
5 years
|
|
9,800,000
|
|
|
2,600,000
|
|
||
In-process research and development
|
N/A
|
|
1,580,000
|
|
|
200,000
|
|
||
Customer base
|
7 years
|
|
700,000
|
|
|
100,000
|
|
||
Trade names
|
3 years
|
|
550,000
|
|
|
150,000
|
|
||
|
|
|
17,921,245
|
|
|
8,041,460
|
|
||
Accumulated amortization
|
|
|
(7,726,768
|
)
|
|
(4,739,190
|
)
|
||
Intangible assets, net
|
|
|
$
|
10,194,477
|
|
|
$
|
3,302,270
|
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Finished goods
|
$
|
1,695,461
|
|
|
$
|
1,339,832
|
|
Work-in-process
|
1,007,719
|
|
|
643,420
|
|
||
Raw materials
|
7,591,251
|
|
|
4,890,490
|
|
||
Inventory, net
|
$
|
10,294,431
|
|
|
$
|
6,873,742
|
|
7.
|
Goodwill
|
Balance as of December 31, 2018
|
$
|
101,008
|
|
Goodwill resulting from business combination - GP
|
10,511,916
|
|
|
Measurement Period Adjustment - MOI
|
(71,248
|
)
|
|
Balance as of December 31, 2019
|
$
|
10,541,676
|
|
|
|
December 31,
|
||||||
|
|
2019
|
|
2018
|
||||
|
Accrued compensation
|
$
|
6,416,163
|
|
|
$
|
4,467,587
|
|
|
Contingent consideration - GP
|
1,000,000
|
|
|
—
|
|
||
|
Accrued professional fees
|
113,303
|
|
|
198,062
|
|
||
|
Accrued income tax
|
715,916
|
|
|
236,636
|
|
||
|
Deferred rent
|
—
|
|
|
146,542
|
|
||
|
Current operating lease liability
|
1,283,310
|
|
|
—
|
|
||
|
Current finance lease liability
|
50,307
|
|
|
—
|
|
||
|
Accrued royalties
|
364,951
|
|
|
302,428
|
|
||
|
Accrued liabilities-other
|
425,595
|
|
|
404,752
|
|
||
|
Working capital payable - MOI
|
—
|
|
|
542,983
|
|
||
|
Customer deposits
|
—
|
|
|
298,468
|
|
||
Total accrued liabilities
|
$
|
10,369,545
|
|
|
$
|
6,597,458
|
|
|
Years ended December 31,
|
|||||||
|
|
2019
|
|
2018
|
||||
Interest expense on Term Loans
|
|
$
|
8,073
|
|
|
$
|
101,087
|
|
Amortization of debt issuance costs
|
|
5,685
|
|
|
16,308
|
|
||
Other interest expense
|
|
2,120
|
|
|
6,949
|
|
||
Total interest expense, net
|
|
$
|
15,878
|
|
|
$
|
124,344
|
|
|
|
Year Ended
|
||
|
|
December 31, 2019
|
||
Operating lease costs
|
|
$
|
1,622,476
|
|
Variable rent costs
|
|
(146,542
|
)
|
|
Total rent expense
|
|
$
|
1,475,934
|
|
Year Ending December 31,
|
|
||
2020
|
$
|
1,467,701
|
|
2021
|
640,800
|
|
|
2022
|
544,704
|
|
|
2023
|
544,704
|
|
|
2024 and beyond
|
544,704
|
|
|
Total future minimum lease payments
|
3,742,613
|
|
|
Less: Interest
|
470,908
|
|
|
Total operating lease liabilities
|
$
|
3,271,705
|
|
|
|
||
Current operating lease liability
|
$
|
1,283,310
|
|
Long-term operating lease liability
|
1,988,395
|
|
|
Total operating lease liabilities
|
$
|
3,271,705
|
|
Year Ending December 31,
|
|
||
2020
|
$
|
56,020
|
|
2021
|
10,710
|
|
|
2022
|
10,083
|
|
|
2023
|
5,042
|
|
|
2024 and beyond
|
—
|
|
|
Total future minimum lease payments
|
81,855
|
|
|
Less: Interest
|
8,456
|
|
|
Total finance lease liabilities
|
$
|
73,399
|
|
|
|
||
Current finance lease liability
|
$
|
50,307
|
|
Long-term finance lease liability
|
23,092
|
|
|
Total finance lease liabilities
|
$
|
73,399
|
|
|
Year Ended
|
||
|
December 31, 2019
|
||
Finance lease cost:
|
|
||
Amortization of right-of-use assets
|
$
|
46,498
|
|
Interest on lease liabilities
|
4,926
|
|
|
Total finance lease cost
|
$
|
51,424
|
|
|
|
||
Other information:
|
|
||
Cash paid for amounts included in the measurement of lease liabilities:
|
|
||
Operating cash flows from operating leases
|
$
|
1,622,476
|
|
Finance cash flows from finance leases
|
$
|
40,047
|
|
Right-of-use assets obtained in exchange for new finance lease liabilities
|
$
|
14,541
|
|
Weighted-average remaining lease term (years) - operating leases
|
3.7
|
|
|
Weighted-average remaining lease term (years) - finance leases
|
2.1
|
|
|
Weighted-average discount rate - operating leases
|
7
|
%
|
|
Weighted-average discount rate - finance leases
|
7
|
%
|
|
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 at January 1, 2018
|
2,714,561
|
|
|
$0.61 - 6.55
|
|
$
|
1.88
|
|
|
$
|
2,098,195
|
|
|
2,590,030
|
|
|
$
|
1.89
|
|
|
$
|
2,013,034
|
|
Forfeited
|
(675,607
|
)
|
|
$1.15 - 6.55
|
|
1.90
|
|
|
|
|
|
|
|
|
|
||||||||
Exercised
|
(96,425
|
)
|
|
$0.65 - 2.46
|
|
2.07
|
|
|
|
|
|
|
|
|
|
||||||||
Granted
|
1,166,339
|
|
|
$2.67 - 3.53
|
|
3.09
|
|
|
|
|
|
|
|
|
|
||||||||
Balance at December 31, 2018
|
3,108,868
|
|
|
$0.61 - 6.55
|
|
$
|
2.26
|
|
|
$
|
3,669,794
|
|
|
1,986,740
|
|
|
$
|
1.81
|
|
|
$
|
3,314,494
|
|
Forfeited
|
(14,707
|
)
|
|
$1.47 - 3.37
|
|
2.51
|
|
|
|
|
|
|
|
|
|
||||||||
Exercised
|
(558,834
|
)
|
|
$0.61 - 1.81
|
|
1.21
|
|
|
|
|
|
|
|
|
|
||||||||
Granted
|
625,070
|
|
|
$3.21 - 7.37
|
|
3.63
|
|
|
|
|
|
|
|
|
|
||||||||
Balance at December 31, 2019
|
3,160,397
|
|
|
$1.18 - 7.37
|
|
$
|
2.72
|
|
|
$
|
14,459,884
|
|
|
1,835,799
|
|
|
$
|
2.28
|
|
|
$
|
9,197,775
|
|
(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.
|
|
|
Years ended December 31,
|
||
|
|
2019
|
|
2018
|
Risk-free interest rate range
|
|
2.5%
|
|
3.04%
|
Expected life of option-years
|
|
7
|
|
7
|
Expected stock price volatility
|
|
65%
|
|
67%
|
Expected dividend yield
|
|
—%
|
|
—%
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
||||||||||
|
Range of
Exercise Prices
|
|
Options
Outstanding
|
|
Weighted
Average
Remaining
Life in
Years
|
|
Weighted
Average
Exercise
Price
|
|
Options
Exercisable
|
|
Weighted
Average
Remaining
Life in
Years
|
|
Weighted
Average
Exercise
Price of
Options
Exercisable
|
||
Year ended December 31, 2018
|
$0.61 - 6.55
|
|
3,108,868
|
|
|
5.72
|
|
$2.26
|
|
1,986,740
|
|
|
3.46
|
|
$1.81
|
Year ended December 31, 2019
|
$1.18 - 7.37
|
|
3,160,397
|
|
|
6.24
|
|
$2.72
|
|
1,835,799
|
|
|
4.30
|
|
$2.28
|
|
Total Intrinsic Value of
Options Exercised
|
|
Total Fair Value of
Options Vested
|
||||
Year ended December 31, 2018
|
$
|
112,213
|
|
|
$
|
2,980,110
|
|
Year ended December 31, 2019
|
$
|
1,641,687
|
|
|
$
|
3,267,672
|
|
|
Number of Unvested Shares
|
|
Weighted Average Grant Date Fair Value
|
|
Aggregate Grant Date Fair Value of Unvested Shares
|
|||
Balance at January 1, 2017
|
489,698
|
|
|
$1.51
|
|
$
|
738,345
|
|
Granted
|
296,287
|
|
|
$3.07
|
|
$
|
909,600
|
|
Vested
|
(312,365
|
)
|
|
$1.45
|
|
$
|
(454,339
|
)
|
Forfeitures
|
(15,000
|
)
|
|
$1.41
|
|
$
|
(21,150
|
)
|
Balance at December 31, 2018
|
458,620
|
|
|
$2.56
|
|
$
|
1,172,456
|
|
Granted
|
291,600
|
|
|
$3.75
|
|
$
|
1,094,430
|
|
Vested
|
(210,619
|
)
|
|
$2.33
|
|
$
|
(490,769
|
)
|
Forfeitures
|
(37,499
|
)
|
|
$2.96
|
|
$
|
(111,115
|
)
|
Balance at December 31, 2019
|
502,102
|
|
|
$3.32
|
|
$
|
1,665,002
|
|
|
Number of Stock Units
|
|
Weighted Average Grant Date Fair Value per Share
|
|
Intrinsic Value Outstanding
|
|||
January 1, 2018
|
466,702
|
|
|
$1.40
|
|
$
|
1,134,086
|
|
Granted
|
40,588
|
|
|
$2.99
|
|
|
||
December 31, 2018
|
507,290
|
|
|
$1.40
|
|
$
|
1,699,422
|
|
Granted
|
121,713
|
|
|
$4.41
|
|
|
||
December 31, 2019
|
629,003
|
|
|
$2.09
|
|
$
|
4,585,432
|
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Contract assets
|
$
|
3,208,206
|
|
|
$
|
2,759,315
|
|
Contract liabilities
|
(3,887,685
|
)
|
|
(2,486,111
|
)
|
||
Net contract assets
|
$
|
(679,479
|
)
|
|
$
|
273,204
|
|
|
Years ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
Current:
|
|
|
|
||||
Federal
|
$
|
1,466,770
|
|
|
$
|
(44,727
|
)
|
State
|
227,912
|
|
|
92,545
|
|
||
Deferred federal
|
(2,849,371
|
)
|
|
—
|
|
||
Deferred state
|
(499,661
|
)
|
|
—
|
|
||
Income tax (benefit)/expense
|
$
|
(1,654,350
|
)
|
|
$
|
47,818
|
|
|
December 31, 2019
|
|
December 31, 2018
|
||||||
|
|
Long-Term
|
|
|
Long-Term
|
||||
Bad debt and inventory reserve
|
|
$
|
376,331
|
|
|
|
$
|
332,721
|
|
Inventory adjustment
|
|
—
|
|
|
|
(21,785
|
)
|
||
UNICAP
|
|
4,828
|
|
|
|
2,804
|
|
||
Deferred revenue
|
|
130,058
|
|
|
|
115,676
|
|
||
ASC842 Lease Accounting (DTA)
|
|
796,864
|
|
|
|
288,017
|
|
||
ASC842 Lease Accounting (DTL)
|
|
(544,539
|
)
|
|
|
—
|
|
||
Depreciation and amortization
|
|
(2,134,569
|
)
|
|
|
(838,540
|
)
|
||
Net operating loss carryforwards- Luna
|
|
349,421
|
|
|
|
349,421
|
|
||
Net operating loss carryforwards- API
|
|
1,169,671
|
|
|
|
1,265,538
|
|
||
Net operating loss carryforwards - state
|
|
150,050
|
|
|
|
179,149
|
|
||
Net operating loss carryforwards- Canada
|
|
10,503
|
|
|
|
10,503
|
|
||
Accrued liabilities
|
|
594,450
|
|
|
|
394,118
|
|
||
Deferred compensation
|
|
294,190
|
|
|
|
216,944
|
|
||
Stock-based compensation
|
|
373,658
|
|
|
|
803,757
|
|
||
Restricted stock
|
|
102,741
|
|
|
|
60,681
|
|
||
State bonus
|
|
33,791
|
|
|
|
44,861
|
|
||
Performance based compensation
|
|
9,499
|
|
|
|
—
|
|
||
Transaction costs
|
|
58,540
|
|
|
|
63,668
|
|
||
Total
|
|
1,775,487
|
|
|
|
3,267,533
|
|
||
Valuation allowance
|
|
(359,924
|
)
|
|
|
(3,267,533
|
)
|
||
Net deferred tax asset
|
|
$
|
1,415,563
|
|
|
|
$
|
—
|
|
|
|
Years ended December 31,
|
||||
|
|
2019
|
|
2018
|
||
Income tax expense at federal statutory rate
|
|
21.00
|
%
|
|
21.00
|
%
|
State taxes, net of federal tax effects
|
|
(8.67
|
)%
|
|
—
|
%
|
Change in valuation allowance
|
|
(67.39
|
)%
|
|
(27.65
|
)%
|
Incentive stock options
|
|
(1.75
|
)%
|
|
(1.05
|
)%
|
Provision to return adjustments
|
|
7.26
|
%
|
|
21.24
|
%
|
Meals and entertainment
|
|
0.50
|
%
|
|
0.97
|
%
|
AMT credit
|
|
—
|
%
|
|
(9.83
|
)%
|
Other permanent differences
|
|
4.20
|
%
|
|
(0.88
|
)%
|
Income tax (benefit)/expense
|
|
(44.85
|
)%
|
|
3.80
|
%
|
|
Years ended December 31,
|
|||||||
|
|
2019
|
|
2018
|
||||
Products and Licensing revenue
|
|
$
|
44,491,041
|
|
|
$
|
21,949,689
|
|
Technology Development revenue
|
|
26,024,674
|
|
|
20,967,556
|
|
||
Total revenue
|
|
$
|
70,515,715
|
|
|
$
|
42,917,245
|
|
Products and Licensing operating income
|
|
$
|
1,807,616
|
|
|
$
|
499,323
|
|
Technology Development operating income
|
|
1,507,405
|
|
|
378,212
|
|
||
Total operating income
|
|
$
|
3,315,021
|
|
|
$
|
877,535
|
|
Depreciation, Technology Development
|
|
$
|
397,296
|
|
|
$
|
379,952
|
|
Depreciation, Products and Licensing
|
|
$
|
552,285
|
|
|
$
|
273,185
|
|
Amortization, Technology Development
|
|
$
|
91,185
|
|
|
$
|
130,765
|
|
Amortization, Products and Licensing
|
|
$
|
1,462,525
|
|
|
$
|
418,349
|
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Total segment assets:
|
|
|
|
||||
Products and Licensing
|
$
|
48,723,810
|
|
|
$
|
40,775,211
|
|
Technology Development
|
37,800,250
|
|
|
34,823,525
|
|
||
Total
|
$
|
86,524,060
|
|
|
$
|
75,598,736
|
|
Property plant and equipment and intangible assets, Technology Development
|
$
|
2,079,486
|
|
|
$
|
2,103,711
|
|
Property plant and equipment and intangible assets, Products and Licensing
|
$
|
22,122,279
|
|
|
$
|
4,927,453
|
|
|
Three Months Ended
|
||||||||||||||||||||||||||||||
(Dollars in thousands,
except per share amounts)
|
March 31,
2019 |
|
June 30,
2019 |
|
September 30,
2019 |
|
December 31,
2019 |
|
March 31,
2018 |
|
June 30,
2018 |
|
September 30,
2018 |
|
December 31,
2018 |
||||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Products and licensing
|
$
|
8,192
|
|
|
$
|
11,373
|
|
|
$
|
11,894
|
|
|
$
|
13,032
|
|
|
$
|
4,131
|
|
|
$
|
4,457
|
|
|
$
|
5,371
|
|
|
$
|
7,990
|
|
Technology development
|
6,641
|
|
|
6,441
|
|
|
6,495
|
|
|
6,448
|
|
|
4,637
|
|
|
5,466
|
|
|
5,316
|
|
|
5,548
|
|
||||||||
Total revenues
|
14,833
|
|
|
17,814
|
|
|
18,389
|
|
|
19,480
|
|
|
8,768
|
|
|
9,923
|
|
|
10,687
|
|
|
13,538
|
|
||||||||
Gross margin
|
6,768
|
|
|
8,752
|
|
|
9,275
|
|
|
10,388
|
|
|
3,840
|
|
|
4,231
|
|
|
4,689
|
|
|
6,572
|
|
||||||||
Operating (loss)/income
|
(898
|
)
|
|
1,014
|
|
|
1,481
|
|
|
1,718
|
|
|
(373
|
)
|
|
205
|
|
|
581
|
|
|
423
|
|
||||||||
Net income/(loss) from continuing operations
|
1,126
|
|
|
840
|
|
|
1,231
|
|
|
2,146
|
|
|
(272
|
)
|
|
299
|
|
|
1,293
|
|
|
(122
|
)
|
||||||||
Income from discontinued operations net of income taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
421
|
|
|
768
|
|
|
7,556
|
|
|
1,062
|
|
||||||||
Net income
|
1,126
|
|
|
840
|
|
|
1,231
|
|
|
2,146
|
|
|
149
|
|
|
1,067
|
|
|
8,849
|
|
|
940
|
|
||||||||
Net income attributable to common stockholders
|
$
|
1,043
|
|
|
$
|
751
|
|
|
$
|
1,117
|
|
|
$
|
2,146
|
|
|
$
|
84
|
|
|
$
|
1,004
|
|
|
$
|
8,785
|
|
|
$
|
873
|
|
Net income/(loss) per share from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Basic
|
$
|
0.04
|
|
|
$
|
0.03
|
|
|
$
|
0.04
|
|
|
$
|
0.07
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.01
|
|
|
$
|
0.05
|
|
|
$
|
—
|
|
Diluted
|
$
|
0.03
|
|
|
$
|
0.02
|
|
|
$
|
0.04
|
|
|
$
|
0.07
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.01
|
|
|
$
|
0.04
|
|
|
$
|
—
|
|
Net income per share from discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Basic
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.02
|
|
|
$
|
0.03
|
|
|
$
|
0.27
|
|
|
$
|
0.04
|
|
Diluted
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.02
|
|
|
$
|
0.02
|
|
|
$
|
0.23
|
|
|
$
|
0.04
|
|
Net income attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Basic
|
$
|
0.04
|
|
|
$
|
0.03
|
|
|
$
|
0.04
|
|
|
$
|
0.07
|
|
|
$
|
—
|
|
|
$
|
0.04
|
|
|
$
|
0.31
|
|
|
$
|
0.03
|
|
Diluted
|
$
|
0.03
|
|
|
$
|
0.02
|
|
|
$
|
0.03
|
|
|
$
|
0.07
|
|
|
$
|
—
|
|
|
$
|
0.03
|
|
|
$
|
0.27
|
|
|
$
|
0.03
|
|
Weighted average shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Basic
|
28,039,080
|
|
|
28,246,840
|
|
|
28,291,297
|
|
|
30,159,322
|
|
|
27,204,989
|
|
|
27,531,361
|
|
|
27,901,631
|
|
|
28,067,348
|
|
||||||||
Diluted
|
33,479,935
|
|
|
33,650,790
|
|
|
32,115,847
|
|
|
32,211,847
|
|
|
27,204,989
|
|
|
31,506,745
|
|
|
33,055,881
|
|
|
28,067,348
|
|
|
Year Ended December 31,
|
||
|
2018
|
||
Sale price
|
$
|
17,500,000
|
|
Adjusted purchase price
|
17,500,000
|
|
|
|
|
||
Assets held for sale
|
(8,193,184
|
)
|
|
Liabilities held for sale
|
989,453
|
|
|
Transaction costs
|
(858,227
|
)
|
|
Return of working capital
|
730,000
|
|
|
Income tax expense
|
(1,572,245
|
)
|
|
Gain on sale of discontinued operations
|
$
|
8,595,797
|
|
|
Year Ended December 31,
|
||
|
2018
|
||
Net revenues
|
$
|
8,363,606
|
|
Cost of revenues
|
5,294,268
|
|
|
Operating expenses
|
1,728,113
|
|
|
Other (income)/expenses
|
(13,330
|
)
|
|
Income before income taxes
|
1,354,555
|
|
|
Allocated tax expense
|
183,921
|
|
|
Operating income from discontinued operations
|
1,170,634
|
|
|
Gain on sale, net of related income taxes
|
8,595,797
|
|
|
Net income from discontinued operations
|
$
|
9,766,431
|
|
(a)
|
The following documents are filed as part of this Annual Report on Form 10-K:
|
(1)
|
Financial Statements. See Index to Consolidated Financial Statements at Item 8 of this Report on Form 10-K.
|
(2)
|
Schedules.
|
Column A
|
Column B
|
|
Column C
|
|
Column D
|
|
Column E
|
||||||||
|
Balance
at beginning
of Period
|
|
Additions
|
|
Deductions
|
|
Balance at
end
of period
|
||||||||
Year Ended December 31, 2018
|
|
|
|
|
|
|
|
||||||||
Reserves deducted from assets to which they apply:
|
|
|
|
|
|
|
|
||||||||
Deferred tax valuation allowance
|
$
|
5,020,744
|
|
|
$
|
—
|
|
|
$
|
(1,753,211
|
)
|
|
$
|
3,267,533
|
|
Allowances for doubtful accounts
|
286,717
|
|
|
3,500
|
|
|
(6,134
|
)
|
|
284,083
|
|
||||
|
$
|
5,307,461
|
|
|
$
|
3,500
|
|
|
$
|
(1,759,345
|
)
|
|
$
|
3,551,616
|
|
Year Ended December 31, 2019
|
|
|
|
|
|
|
|
||||||||
Reserves deducted from assets to which they apply:
|
|
|
|
|
|
|
|
||||||||
Deferred tax valuation allowance
|
$
|
3,267,533
|
|
|
$
|
—
|
|
|
$
|
(2,907,609
|
)
|
|
$
|
359,924
|
|
Allowances for doubtful accounts
|
284,083
|
|
|
646,196
|
|
|
—
|
|
|
930,279
|
|
||||
|
$
|
3,551,616
|
|
|
$
|
646,196
|
|
|
$
|
(2,907,609
|
)
|
|
$
|
1,290,203
|
|
(3)
|
Exhibits. The exhibits filed as part of this report are listed under “Exhibits” at subsection (b) of this Item 15.
|
(b)
|
Exhibits
|
Exhibit No.
|
Exhibit Document
|
2.1#
|
|
2.2#
|
|
2.3#
|
|
2.4#
|
|
3.1
|
|
3.2
|
|
3.3
|
|
3.4
|
|
3.4
|
|
4.1
|
|
4.2
|
|
4.3
|
|
4.4
|
|
4.5
|
|
4.6
|
|
4.7
|
|
4.8*
|
|
10.1
|
|
10.2**
|
10.3**
|
|
10.4**
|
|
10.5
|
|
10.6**
|
|
10.7
|
|
10.8
|
|
10.9
|
|
10.10
|
|
10.11**
|
|
10.12**
|
|
10.13
|
|
10.14
|
|
10.15
|
|
10.16
|
|
10.17
|
|
10.18
|
|
10.19**
|
10.20
|
|
10.21
|
|
10.22
|
|
10.23
|
|
10.24
|
|
10.25
|
|
10.26
|
|
10.27*
|
|
10.28*
|
|
10.29*
|
|
10.30*
|
|
21.1
|
|
23.1
|
|
24.1
|
Power of Attorney (see signature page)
|
31.1*
|
|
31.2*
|
|
32.1***
|
|
32.2***
|
|
101
|
The following materials from the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2019, are formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at December 31, 2019 and 2018, (ii) Consolidated Statements of Operations for the years ended December 31, 2019 and 2018, (iii) Consolidated Statements of Changes in Stockholder’s Equity for the years ended December 31, 2019 and 2018 (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2019 and 2018, and (v) Notes to Audited Consolidated Financial Statements.
|
#
|
Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and exhibits to this agreement are omitted, but will be furnished to the Securities and Exchange Commission upon request.
|
**
|
Confidential treatment has been granted with respect to portions of this exhibit, indicated by asterisks, which has been filed separately with the Securities and Exchange Commission.
|
***
|
These certifications are being furnished solely to accompany this annual 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.
|
ITEM 16.
|
FORM 10-K SUMMARY
|
|
LUNA INNOVATIONS INCORPORATED
|
||
|
|
|
|
|
By:
|
|
/s/ Eugene J. Nestro
|
|
|
|
Eugene J. Nestro
Chief Financial Officer
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Scott A. Graeff
|
|
President, Chief Executive Officer and Director (Principal Executive Officer)
|
|
March 13, 2020
|
Scott A. Graeff
|
|
|
||
/s/ Eugene J. Nestro
|
|
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
|
|
March 13, 2020
|
Eugene J. Nestro
|
|
|
||
/s/ Michael W. Wise
|
|
Director
|
|
March 13, 2020
|
Michael W. Wise
|
|
|
||
/s/ Donald Pastor
|
|
Director
|
|
March 13, 2020
|
Donald Pastor
|
|
|
||
/s/ John B. Williamson III
|
|
Director
|
|
March 13, 2020
|
John B. Williamson III
|
|
|
||
/s/ N. Leigh Anderson
|
|
Director
|
|
March 13, 2020
|
N. Leigh Anderson
|
|
|
||
/s/ Warren B. Phelps, III
|
|
Director
|
|
March 13, 2020
|
Warren B. Phelps, III
|
|
|
||
/s/ Gary Spiegel
|
|
Director
|
|
March 13, 2020
|
Gary Spiegel
|
|
|
||
/s/ Mary Beth Vitale
|
|
Director
|
|
March 13, 2020
|
Mary Beth Vitale
|
|
|
||
/s/ Richard W. Roedel
|
|
Chairman of the Board of Directors
|
|
March 13, 2020
|
Richard W. Roedel
|
|
|
1.
|
I have reviewed this annual report on Form 10-K 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 annual report on Form 10-K 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.
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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;
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b.
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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;
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c.
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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
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d.
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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
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5.
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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):
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a.
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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
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b.
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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.
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/S/ Eugene J. Nestro
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Eugene J. Nestro
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Chief Financial Officer
(principal financial officer)
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/S/ Scott A. Graeff
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Scott A. Graeff
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President and Chief Executive Officer
(principal executive officer)
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/S/ Eugene J. Nestro
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Eugene J. Nestro
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Chief Financial Officer
(principal financial officer)
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