|
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, 2020
|
|
December 31, 2019
|
||||
|
(unaudited)
|
|
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
26,324
|
|
|
$
|
25,006
|
|
Accounts receivable, net
|
15,519
|
|
|
16,269
|
|
||
Receivable from sale of HSOR business
|
—
|
|
|
2,501
|
|
||
Contract assets
|
2,612
|
|
|
2,759
|
|
||
Inventory, net
|
11,191
|
|
|
10,294
|
|
||
Prepaid expenses and other current assets
|
1,575
|
|
|
1,287
|
|
||
Total current assets
|
57,221
|
|
|
58,116
|
|
||
Property and equipment, net
|
3,306
|
|
|
3,466
|
|
||
Intangible assets, net
|
9,853
|
|
|
10,194
|
|
||
Goodwill
|
10,542
|
|
|
10,542
|
|
||
Long-term contract assets
|
486
|
|
|
449
|
|
||
Other assets
|
2,009
|
|
|
2,341
|
|
||
Deferred tax asset
|
1,542
|
|
|
1,416
|
|
||
Total assets
|
$
|
84,959
|
|
|
$
|
86,524
|
|
Liabilities and stockholders’ equity
|
|
|
|
||||
Liabilities:
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
2,490
|
|
|
$
|
2,787
|
|
Accrued liabilities
|
9,243
|
|
|
10,369
|
|
||
Contract liabilities
|
3,569
|
|
|
3,888
|
|
||
Total current liabilities
|
15,302
|
|
|
17,044
|
|
||
Other long-term liabilities
|
1,880
|
|
|
2,011
|
|
||
Total liabilities
|
17,182
|
|
|
19,055
|
|
||
Commitments and contingencies (Note 13)
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Common stock, par value $0.001, 100,000,000 shares authorized, 32,126,368 and 31,788,896 shares issued, 30,486,577 and 30,149,105 shares outstanding at March 31, 2020 and December 31, 2019, respectively
|
32
|
|
|
32
|
|
||
Treasury stock at cost, 1,639,791 shares at March 31, 2020 and December 31, 2019
|
(4,337
|
)
|
|
(4,337
|
)
|
||
Additional paid-in capital
|
89,446
|
|
|
88,022
|
|
||
Accumulated deficit
|
(17,364
|
)
|
|
(16,248
|
)
|
||
Total stockholders’ equity
|
67,777
|
|
|
67,469
|
|
||
Total liabilities and stockholders’ equity
|
$
|
84,959
|
|
|
$
|
86,524
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
|
|
||||||
Revenues:
|
|
|
|
||||
Products and licensing
|
$
|
10,326
|
|
|
$
|
8,192
|
|
Technology development
|
6,815
|
|
|
6,641
|
|
||
Total revenues
|
17,141
|
|
|
14,833
|
|
||
Cost of revenues:
|
|
|
|
||||
Products and licensing
|
3,862
|
|
|
3,249
|
|
||
Technology development
|
4,915
|
|
|
4,816
|
|
||
Total cost of revenues
|
8,777
|
|
|
8,065
|
|
||
Gross profit
|
8,364
|
|
|
6,768
|
|
||
Operating expense:
|
|
|
|
||||
Selling, general and administrative
|
6,377
|
|
|
6,207
|
|
||
Research, development and engineering
|
1,597
|
|
|
1,458
|
|
||
Total operating expense
|
7,974
|
|
|
7,665
|
|
||
Operating income/(loss)
|
390
|
|
|
(897
|
)
|
||
Other income/(expense):
|
|
|
|
||||
Investment income
|
59
|
|
|
171
|
|
||
Other income/(expense)
|
9
|
|
|
(2
|
)
|
||
Interest expense
|
—
|
|
|
(11
|
)
|
||
Total other income
|
68
|
|
|
158
|
|
||
Income/(loss) from continuing operations before income taxes
|
458
|
|
|
(739
|
)
|
||
Income tax expense/(benefit)
|
138
|
|
|
(1,865
|
)
|
||
Net income from continuing operations
|
320
|
|
|
1,126
|
|
||
Loss from discontinued operations, net of income tax of $464
|
(1,436
|
)
|
|
—
|
|
||
Net (loss)/income
|
(1,116
|
)
|
|
1,126
|
|
||
Preferred stock dividend
|
—
|
|
|
83
|
|
||
Net (loss)/income attributable to common stockholders
|
$
|
(1,116
|
)
|
|
$
|
1,043
|
|
Net income per share from continuing operations:
|
|
|
|
||||
Basic
|
$
|
0.01
|
|
|
$
|
0.04
|
|
Diluted
|
$
|
0.01
|
|
|
$
|
0.03
|
|
Net loss per share from discontinued operations:
|
|
|
|
||||
Basic
|
$
|
(0.05
|
)
|
|
$
|
—
|
|
Diluted
|
$
|
(0.04
|
)
|
|
$
|
—
|
|
Net (loss)/income per share attributable to common stockholders:
|
|
|
|
||||
Basic
|
$
|
(0.04
|
)
|
|
$
|
0.04
|
|
Diluted
|
$
|
(0.03
|
)
|
|
$
|
0.03
|
|
Weighted average shares:
|
|
|
|
||||
Basic
|
30,380,345
|
|
|
28,039,080
|
|
||
Diluted
|
32,549,487
|
|
|
33,479,935
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
|
|
||||||
Cash flows (used in)/provided by operating activities
|
|
|
|
||||
Net (loss)/income
|
$
|
(1,116
|
)
|
|
$
|
1,126
|
|
Adjustments to reconcile net (loss)/income to net cash (used in)/provided by operating activities
|
|
|
|
||||
Depreciation and amortization
|
679
|
|
|
617
|
|
||
Share-based compensation
|
226
|
|
|
343
|
|
||
Bad debt expense
|
14
|
|
|
—
|
|
||
Loss from discontinued operations, net of tax
|
1,436
|
|
|
—
|
|
||
Deferred taxes
|
(127
|
)
|
|
—
|
|
||
Tax benefit from release of valuation allowance
|
—
|
|
|
(1,889
|
)
|
||
Change in assets and liabilities
|
|
|
|
||||
Accounts receivable
|
737
|
|
|
1,053
|
|
||
Contract assets
|
111
|
|
|
(429
|
)
|
||
Inventory
|
(897
|
)
|
|
(528
|
)
|
||
Other current assets
|
(287
|
)
|
|
(41
|
)
|
||
Accounts payable and accrued expenses
|
(760
|
)
|
|
1,196
|
|
||
Contract liabilities
|
(318
|
)
|
|
149
|
|
||
Net cash (used in)/provided by operating activities
|
(302
|
)
|
|
1,597
|
|
||
Cash flows provided by/(used in) investing activities
|
|
|
|
||||
Acquisition of property and equipment
|
(74
|
)
|
|
(215
|
)
|
||
Intangible property costs
|
(91
|
)
|
|
(61
|
)
|
||
Proceeds from sale of discontinued operations
|
600
|
|
|
—
|
|
||
Acquisition of General Photonics Corporation
|
—
|
|
|
(19,004
|
)
|
||
Net cash provided by/(used in) investing activities
|
435
|
|
|
(19,280
|
)
|
||
Cash flows provided by/(used in) financing activities
|
|
|
|
||||
Payments on finance lease obligations
|
(13
|
)
|
|
(7
|
)
|
||
Payments of debt obligations
|
—
|
|
|
(375
|
)
|
||
Proceeds from the exercise of options and warrants
|
1,198
|
|
|
185
|
|
||
Net cash provided by/(used in) financing activities
|
1,185
|
|
|
(197
|
)
|
||
Net increase/(decrease) in cash and cash equivalents
|
1,318
|
|
|
(17,880
|
)
|
||
Cash and cash equivalents—beginning of period
|
25,006
|
|
|
42,460
|
|
||
Cash and cash equivalents—end of period
|
$
|
26,324
|
|
|
$
|
24,580
|
|
Supplemental disclosure of cash flow information
|
|
|
|
||||
Cash paid for interest
|
$
|
1
|
|
|
$
|
12
|
|
Cash paid for income taxes
|
$
|
—
|
|
|
$
|
—
|
|
Non-cash investing and financing activities
|
|
|
|
||||
Contingent liability for business combination
|
$
|
—
|
|
|
$
|
900
|
|
Dividend on preferred stock, 19,823 shares of common stock issuable for the three months ended March 31, 2019
|
$
|
—
|
|
|
$
|
83
|
|
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 significant value drivers are observable.
|
•
|
Level 3—Valuations derived from valuation techniques in which significant value drivers are unobservable.
|
|
Three Months Ended March 31, 2020
|
||
(in thousands)
|
|
||
Settlement of HSOR receivable
|
$
|
1,900
|
|
Loss on sale
|
1,900
|
|
|
|
|
||
Allocated income tax benefit
|
(464
|
)
|
|
Loss from discontinued operations, net of related income tax
|
$
|
1,436
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
(in thousands)
|
|
|
|
|
||||
Patent costs
|
|
$
|
5,383
|
|
|
$
|
5,291
|
|
Developed technology
|
|
9,800
|
|
|
9,800
|
|
||
In-process research & development
|
|
1,580
|
|
|
1,580
|
|
||
Customer base
|
|
700
|
|
|
700
|
|
||
Trade names and trademarks
|
|
550
|
|
|
550
|
|
||
|
|
18,013
|
|
|
17,921
|
|
||
Accumulated amortization
|
|
(8,159
|
)
|
|
(7,727
|
)
|
||
|
|
$
|
9,853
|
|
|
$
|
10,194
|
|
Year Ending December 31,
|
|
|
||
2020 - remaining 9 months
|
|
$
|
1,265
|
|
2021
|
|
1,669
|
|
|
2022
|
|
1,519
|
|
|
2023
|
|
1,446
|
|
|
2024
|
|
1,256
|
|
|
2025 & beyond
|
|
2,698
|
|
|
Total
|
|
$
|
9,853
|
|
4.
|
Goodwill
|
5.
|
Inventory, net
|
|
March 31,
2020 |
|
December 31,
2019 |
||||
(in thousands)
|
|
|
|
||||
Finished goods
|
$
|
2,074
|
|
|
$
|
1,695
|
|
Work-in-process
|
1,431
|
|
|
1,008
|
|
||
Raw materials
|
7,686
|
|
|
7,591
|
|
||
Total inventory, net
|
$
|
11,191
|
|
|
$
|
10,294
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
(in thousands)
|
|
|
|
||||
Accrued compensation
|
$
|
5,755
|
|
|
$
|
6,416
|
|
Accrued professional fees
|
145
|
|
|
113
|
|
||
Accrued income tax
|
607
|
|
|
716
|
|
||
Current operating lease liability
|
1,055
|
|
|
1,283
|
|
||
Current finance lease liability
|
41
|
|
|
50
|
|
||
Royalties
|
76
|
|
|
365
|
|
||
Accrued liabilities - other
|
564
|
|
|
426
|
|
||
Contingent liability - General Photonics
|
1,000
|
|
|
1,000
|
|
||
Total accrued liabilities
|
$
|
9,243
|
|
|
$
|
10,369
|
|
7.
|
Debt
|
|
Three Months Ended March 31,
|
||
(in thousands)
|
2019
|
||
Interest expense on Term Loans
|
$
|
7
|
|
Amortization of debt issuance costs
|
3
|
|
|
Other interest expense
|
1
|
|
|
Total interest expense, net
|
$
|
11
|
|
8.
|
Leases
|
Lease component
|
Classification
|
March 31, 2020
|
December 31, 2019
|
||||
(in thousands)
|
|
|
|
||||
Assets
|
|
|
|
||||
ROU assets - operating lease
|
Other assets
|
$
|
1,917
|
|
$
|
2,236
|
|
ROU assets - finance lease
|
Other assets
|
57
|
|
70
|
|
||
Total ROU assets
|
|
$
|
1,974
|
|
$
|
2,306
|
|
|
|
|
|
||||
Liabilities
|
|
|
|
||||
Current operating lease liability
|
Accrued liabilities
|
$
|
1,055
|
|
$
|
1,283
|
|
Current finance lease liability
|
Accrued liabilities
|
41
|
|
50
|
|
||
Long-term operating lease liability
|
Other liabilities
|
1,860
|
|
1,988
|
|
||
Long-term finance lease liability
|
Other liabilities
|
20
|
|
23
|
|
||
Total lease liabilities
|
|
$
|
2,976
|
|
$
|
3,344
|
|
|
Three Months Ended March 31,
|
||||||
(in thousands)
|
2020
|
|
2019
|
||||
Operating lease costs
|
$
|
412
|
|
|
$
|
404
|
|
Variable rent costs
|
(39
|
)
|
|
(36
|
)
|
||
Total rent expense
|
$
|
373
|
|
|
$
|
368
|
|
Year Ending December 31,
|
|
||
2020 - remaining 9 months
|
$
|
1,468
|
|
2021
|
641
|
|
|
2022
|
545
|
|
|
2023
|
545
|
|
|
2024
|
544
|
|
|
Total future minimum lease payments
|
3,743
|
|
|
Less: Interest
|
828
|
|
|
Total operating lease liabilities
|
$
|
2,915
|
|
|
|
||
Current operating lease liability
|
$
|
1,055
|
|
Long-term operating lease liability
|
1,860
|
|
|
Total operating lease liabilities
|
$
|
2,915
|
|
Year Ending December 31,
|
|
||
2020 - remaining 9 months
|
$
|
56
|
|
2021
|
11
|
|
|
2022
|
10
|
|
|
2023
|
5
|
|
|
Total future minimum lease payments
|
82
|
|
|
Less: Interest
|
21
|
|
|
Total finance lease liabilities
|
$
|
61
|
|
|
|
||
Current finance lease liability
|
$
|
41
|
|
Long-term finance lease liability
|
20
|
|
|
Total finance lease liabilities
|
$
|
61
|
|
|
Three Months Ended March 31,
|
||||||
(in thousands, except weighted-average data)
|
2020
|
|
2019
|
||||
Finance lease cost:
|
|
|
|
||||
Amortization of right-of-use assets
|
$
|
14
|
|
|
$
|
13
|
|
Interest on lease liabilities
|
1
|
|
|
2
|
|
||
Total finance lease cost
|
$
|
15
|
|
|
$
|
15
|
|
|
|
|
|
||||
Other information:
|
|
|
|
||||
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
||||
Operating cash flows from operating leases
|
$
|
378
|
|
|
$
|
404
|
|
Finance cash flows from finance leases
|
$
|
13
|
|
|
$
|
7
|
|
Right-of-use assets obtained in exchange for new finance lease liabilities
|
$
|
—
|
|
|
$
|
15
|
|
Weighted-average remaining lease term (years) - operating leases
|
3.7
|
|
|
4.0
|
|
||
Weighted-average remaining lease term (years) - finance leases
|
1.9
|
|
|
2.7
|
|
||
Weighted-average discount rate - operating leases
|
7
|
%
|
|
7
|
%
|
||
Weighted-average discount rate - finance leases
|
7
|
%
|
|
7
|
%
|
9.
|
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)
|
||||||||||
(in thousands, except share, per share and weighted-average data)
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance, January 1, 2020
|
3,160,397
|
|
|
$1.18 - $7.37
|
|
$
|
2.72
|
|
|
$
|
14,460
|
|
|
1,835,799
|
|
|
$
|
2.28
|
|
|
$
|
9,198
|
|
Granted
|
20,000
|
|
|
$7.59
|
|
$
|
7.59
|
|
|
|
|
|
|
|
|
|
|||||||
Exercised
|
(316,504
|
)
|
|
$1.27 - $4.43
|
|
$
|
3.79
|
|
|
|
|
|
|
|
|
|
|||||||
Canceled
|
(12,660
|
)
|
|
3.37
|
|
$
|
3.37
|
|
|
|
|
|
|
|
|
|
|||||||
Balance, March 31, 2020
|
2,851,233
|
|
|
$1.18 - $7.59
|
|
$
|
2.63
|
|
|
$
|
10,142
|
|
|
1,632,952
|
|
|
$
|
2.06
|
|
|
$
|
6,691
|
|
(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.
|
(in thousands, except share and per share data)
|
Number of Unvested Shares
|
|
Weighted Average Grant Date Fair Value
|
|
Aggregate Grant Date Fair Value of Unvested Shares
|
|||||
Balance, January 1, 2020
|
502,102
|
|
|
$
|
3.32
|
|
|
$
|
1,665
|
|
Granted
|
138,650
|
|
|
6.43
|
|
|
892
|
|
||
Vested
|
(55,668
|
)
|
|
3.27
|
|
|
(182
|
)
|
||
Balance, March 31, 2020
|
585,084
|
|
|
$
|
4.06
|
|
|
$
|
2,375
|
|
(in thousands, except share and weighted-average data)
|
Number of Stock Units
|
|
Weighted Average Grant Date Fair Value per Share
|
|
Intrinsic Value Outstanding
|
|||||
Balance, January 1, 2020
|
629,003
|
|
|
$
|
2.09
|
|
|
$
|
4,585
|
|
Granted
|
7,114
|
|
|
7.38
|
|
|
44
|
|
||
Balance, March 31, 2020
|
636,117
|
|
|
$
|
2.15
|
|
|
$
|
3,912
|
|
|
Preferred Stock
|
|
Common Stock
|
|
Treasury Stock
|
|
Additional
Paid-in
Capital
|
|
Accumulated Deficit
|
|
Total
|
|||||||||||||||||||||
|
Shares
|
|
$
|
|
Shares
|
|
$
|
|
Shares
|
|
$
|
|
$
|
|
$
|
|
$
|
|||||||||||||||
(in thousands, except share data)
|
||||||||||||||||||||||||||||||||
Balance, January 1, 2020, as previously reported
|
—
|
|
|
$
|
—
|
|
|
30,149,105
|
|
|
$
|
32
|
|
|
1,639,791
|
|
|
$
|
(4,337
|
)
|
|
$
|
88,022
|
|
|
$
|
(16,248
|
)
|
|
$
|
67,469
|
|
Exercise of stock options
|
—
|
|
|
—
|
|
|
316,504
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,198
|
|
|
—
|
|
|
1,198
|
|
||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
55,668
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
501
|
|
|
—
|
|
|
502
|
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,116
|
)
|
|
(1,116
|
)
|
||||||
Forfeitures of restricted stock
|
—
|
|
|
—
|
|
|
(34,700
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(275
|
)
|
|
—
|
|
|
(276
|
)
|
||||||
Balance, March 31, 2020
|
—
|
|
|
$
|
—
|
|
|
30,486,577
|
|
|
$
|
32
|
|
|
1,639,791
|
|
|
$
|
(4,337
|
)
|
|
$
|
89,446
|
|
|
$
|
(17,364
|
)
|
|
$
|
67,777
|
|
|
Preferred Stock
|
|
Common Stock
|
|
Treasury Stock
|
|
Additional
Paid-in
Capital
|
|
Accumulated Deficit
|
|
Total
|
|||||||||||||||||||||
|
Shares
|
|
$
|
|
Shares
|
|
$
|
|
Shares
|
|
$
|
|
$
|
|
$
|
|
$
|
|||||||||||||||
(in thousands, except share data)
|
||||||||||||||||||||||||||||||||
Balance, January 1, 2019, as previously reported
|
1,321,514
|
|
|
$
|
1
|
|
|
27,956,401
|
|
|
$
|
30
|
|
|
1,253,105
|
|
|
$
|
(2,117
|
)
|
|
$
|
85,745
|
|
|
$
|
(21,305
|
)
|
|
$
|
62,354
|
|
Exercise of stock options
|
—
|
|
|
—
|
|
|
189,312
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
185
|
|
|
—
|
|
|
185
|
|
||||||
Share-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
343
|
|
|
—
|
|
|
343
|
|
||||||
Stock dividends to Carilion Clinic
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
83
|
|
|
(83
|
)
|
|
—
|
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,126
|
|
|
1,126
|
|
||||||
Balance, March 31, 2019
|
1,321,514
|
|
|
$
|
1
|
|
|
28,145,713
|
|
|
$
|
30
|
|
|
1,253,105
|
|
|
$
|
(2,117
|
)
|
|
$
|
86,356
|
|
|
$
|
(20,262
|
)
|
|
$
|
64,008
|
|
10.
|
Revenue Recognition
|
(in thousands)
|
March 31, 2020
|
|
December 31, 2019
|
||||
Contract assets
|
$
|
3,098
|
|
|
$
|
3,208
|
|
Contract liabilities
|
3,569
|
|
|
3,888
|
|
||
Net contract liabilities
|
$
|
(471
|
)
|
|
$
|
(680
|
)
|
11.
|
Income Taxes
|
12.
|
Reportable Segments
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
(in thousands)
|
(unaudited)
|
||||||
Revenues:
|
|
|
|
||||
Products and licensing
|
$
|
10,326
|
|
|
$
|
8,192
|
|
Technology development
|
6,815
|
|
|
6,641
|
|
||
Total revenues
|
$
|
17,141
|
|
|
$
|
14,833
|
|
Products and licensing operating income/(loss)
|
$
|
19
|
|
|
$
|
(961
|
)
|
Technology development operating income
|
371
|
|
|
64
|
|
||
Total operating income/(loss)
|
$
|
390
|
|
|
$
|
(897
|
)
|
Depreciation, products and licensing
|
$
|
135
|
|
|
$
|
159
|
|
Depreciation, technology development
|
$
|
111
|
|
|
$
|
98
|
|
Amortization, products and licensing
|
$
|
404
|
|
|
$
|
332
|
|
Amortization, technology development
|
$
|
29
|
|
|
$
|
28
|
|
|
March 31,
2020 |
|
December 31,
2019 |
||||
(in thousands)
|
(unaudited)
|
|
|
||||
Total segment assets:
|
|
|
|
||||
Products and licensing
|
$
|
46,440
|
|
|
$
|
48,724
|
|
Technology development
|
38,519
|
|
|
37,800
|
|
||
Total assets
|
$
|
84,959
|
|
|
$
|
86,524
|
|
Property plant and equipment, and intangible assets, products and licensing
|
$
|
21,690
|
|
|
$
|
22,122
|
|
Property plant and equipment, and intangible assets, technology development
|
$
|
2,011
|
|
|
$
|
2,080
|
|
13.
|
Commitments and Contingencies
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
(in thousands)
|
2020
|
2021
|
2022
|
2023
|
2024 and beyond
|
Total
|
||||||||||||
Products and Licensing
|
$
|
8,119
|
|
$
|
2,382
|
|
$
|
2,454
|
|
$
|
1,321
|
|
$
|
48
|
|
$
|
14,324
|
|
(in thousands)
|
2020
|
2021
|
2022
|
2023
|
2024 and beyond
|
Total
|
||||||||||||
Technology Development
|
|
|
|
|
|
|
||||||||||||
Funded
|
$
|
14,647
|
|
$
|
7,162
|
|
$
|
1,737
|
|
$
|
—
|
|
$
|
—
|
|
$
|
23,546
|
|
Unfunded
|
$
|
2,195
|
|
$
|
2,469
|
|
$
|
794
|
|
$
|
—
|
|
$
|
—
|
|
$
|
5,458
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|||||||||
(in thousands)
|
2020
|
|
2019
|
|
$ Difference
|
|
% Difference
|
|||||||
Revenues:
|
|
|
|
|
|
|
|
|||||||
Products and licensing
|
$
|
10,326
|
|
|
$
|
8,192
|
|
|
$
|
2,134
|
|
|
26
|
%
|
Technology development
|
6,815
|
|
|
6,641
|
|
|
174
|
|
|
3
|
%
|
|||
Total revenues
|
$
|
17,141
|
|
|
$
|
14,833
|
|
|
$
|
2,308
|
|
|
16
|
%
|
|
Three Months Ended March 31,
|
|
|
|
|
|||||||||
(in thousands)
|
2020
|
|
2019
|
|
$ Difference
|
|
% Difference
|
|||||||
Cost of revenues:
|
|
|
|
|
|
|
|
|||||||
Products and licensing
|
$
|
3,862
|
|
|
$
|
3,249
|
|
|
$
|
613
|
|
|
19
|
%
|
Technology development
|
4,915
|
|
|
4,816
|
|
|
99
|
|
|
2
|
%
|
|||
Total cost of revenues
|
8,777
|
|
|
8,065
|
|
|
712
|
|
|
9
|
%
|
|||
Gross profit
|
$
|
8,364
|
|
|
$
|
6,768
|
|
|
$
|
1,596
|
|
|
24
|
%
|
|
Three Months Ended March 31,
|
|
|
|
|
|||||||||
(in thousands)
|
2020
|
|
2019
|
|
$ Difference
|
|
% Difference
|
|||||||
Operating expense:
|
|
|
|
|
|
|
|
|||||||
Selling, general and administrative
|
$
|
6,377
|
|
|
$
|
6,207
|
|
|
$
|
170
|
|
|
3
|
%
|
Research, development and engineering
|
1,597
|
|
|
1,458
|
|
|
139
|
|
|
10
|
%
|
|||
Total operating expense
|
$
|
7,974
|
|
|
$
|
7,665
|
|
|
$
|
309
|
|
|
4
|
%
|
|
Three Months Ended March 31,
|
|
|
||||||||
(in thousands)
|
2020
|
|
2019
|
|
$ Difference
|
||||||
Net cash (used in)/provided by operating activities
|
$
|
(302
|
)
|
|
$
|
1,597
|
|
|
$
|
(1,899
|
)
|
Net cash provided by/(used in) investing activities
|
435
|
|
|
(19,280
|
)
|
|
19,715
|
|
|||
Net cash provided by/(used in) financing activities
|
1,185
|
|
|
(197
|
)
|
|
1,382
|
|
|||
Net increase/(decrease) in cash and cash equivalents
|
$
|
1,318
|
|
|
$
|
(17,880
|
)
|
|
$
|
19,198
|
|
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; and
|
•
|
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;
|
•
|
challenges integrating our recent or future acquisitions, including the inability to realize any expected synergies;
|
•
|
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;
|
•
|
health epidemics, including the recent COVID-19 pandemic;
|
•
|
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
|
|
|
|
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, 2020, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at March 31, 2020 and December 31, 2019, (ii) Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019, (iii) Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019 and (iv) Notes to Unaudited Consolidated Financial Statements.
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*
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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.
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Luna Innovations Incorporated
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Date:
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May 7, 2020
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By:
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/s/ Eugene J. Nestro
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Eugene J. Nestro
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Chief Financial Officer
(Principal Financial and Accounting Officer)
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1.
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I have reviewed this quarterly report on Form 10-Q of Luna Innovations Incorporated;
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2.
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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;
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3.
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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;
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4.
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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:
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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/ 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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1.
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I have reviewed this quarterly report on Form 10-Q of Luna Innovations Incorporated;
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2.
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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;
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3.
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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;
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4.
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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:
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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 and Accounting 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 and Accounting Officer)
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