Luna Innovations Inc. (LUNA, Financial) filed Quarterly Report for the period ended 2009-03-31.
LUNA INNOVATIONS INCORPORATED develops and manufactures new-generation products for the healthcare telecommunications energy and defense markets. Luna develops technologies in four primary areas: Sensors & Systems; Health Sciences; Materials & Secure Computing. Luna's product offerings generally fit into two categories: Instrumentation Test & Measurement & Healthcare. The products are used to measure monitor protect and improve critical processes in the markets we serve. Through its disciplined commercialization business model Luna has become a recognized leader in transitioning science to solutions. Luna is headquartered in Roanoke Virginia. Luna Innovations Inc. has a market cap of $8 million; its shares were traded at around $0.721 with and P/S ratio of 0.2.
Total revenues decreased 4.8% to $8.5 million for the three months ended March 31, 2009 from $8.9 million for the three months ended March 31, 2008. Revenues within our Technology Development Division increased approximately 4.3% from the corresponding period in 2008 while revenues in our Product and License segment decreased by approximately 30%. Technology development revenues increased to $6.9 million for the three months ended March 31, 2009 from $6.6 million for the corresponding 2008 period. The growth within our Technology Development segment reflects continued strong success in obtaining research contracts, an increase in the size of certain awards, and the addition of direct contract personnel. We generated approximately $1.6 million in product and license revenues in the first quarter of 2009 as compared with $2.3 million in the first quarter of 2008, reflecting a decrease of approximately 20% in product sales, which we attribute in part to the overall decline in the U.S. economy that previously also impacted our business beginning in the fourth quarter of 2008, and a decrease of 45% in product development revenues, due principally to the discontinuation of certain contracts during 2008.
Cost of revenues increased 4.3% to $5.8 million for the three months ended March 31, 2009 from $5.5 million for the corresponding 2008 period. The main components of this overall increase were increased direct labor to complete our awarded contracts and an increase to our estimated total costs attributable to an increase in the estimated overhead costs to be applied to our technology development contracts. Technology development cost of sales increased approximately 17% accounting for approximately $0.7 million in increased cost of revenues. Product and license cost of sales decreased $0.5 million, or 35%, which is consistent with the lower product development revenue.
Operating expense increased to $42.8 million for the three months ended March 31, 2009 from $5.3 million for the corresponding quarter in 2008. This change is primarily due to the estimated loss recognized in conjunction with our litigation with Hansen of $36.3 million and associated impairment of goodwill and other intangible assets totaling $1.3 million in our product and license business segment. Excluding those charges operating expenses were $5.2 million for the quarter ending March 31, 2009, a decrease of $0.1 million from the corresponding period in 2008.
Net interest expense on March 31, 2009 was $159,000 compared to a net interest income of $25,000 during the same quarter in 2008, due to the addition of our credit facility with Silicon Valley Bank in May of 2008. For the quarter ended March 31, 2009 we recognized approximately $66,000 of interest expense related to the new credit facility, which bears interest at a floating rate of Prime plus 1.5% with a minimum interest rate of 5.5%. In addition, our convertible notes payable to Carilion Clinic in the aggregate amount of $5 million accrue simple interest at a rate of 6%. The remaining difference is primarily due to a decrease in return on cash deposits, which were $8,000 and $110,000 for the quarters ended March 31, 2009 and 2008, respectively.
We used approximately $2.0 million and $0.6 million of net cash from operations during the three months ended March 31, 2009 and 2008, respectively. The primary factors in the increased cash used in operations between the two periods were the $1.4 million increase in net loss (excluding the effects of the estimated litigation losses) relative to first quarter of 2008 and a $2.2 million decrease in the cash flow impact of changes in accounts receivable compared to the first quarter of 2008 offset by a $1.2 million improvement in the cash flow impact of changes in accounts payable and accrued liabilities in the first quarter of 2009 compared to 2008.
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LUNA INNOVATIONS INCORPORATED develops and manufactures new-generation products for the healthcare telecommunications energy and defense markets. Luna develops technologies in four primary areas: Sensors & Systems; Health Sciences; Materials & Secure Computing. Luna's product offerings generally fit into two categories: Instrumentation Test & Measurement & Healthcare. The products are used to measure monitor protect and improve critical processes in the markets we serve. Through its disciplined commercialization business model Luna has become a recognized leader in transitioning science to solutions. Luna is headquartered in Roanoke Virginia. Luna Innovations Inc. has a market cap of $8 million; its shares were traded at around $0.721 with and P/S ratio of 0.2.
Highlight of Business Operations:
had net losses of $40.9 million and $1.9 million for the same periods, respectively. Our loss for the three months ended March 31, 2009 includes a contingent liability of approximately $36.3 million recognized in the first quarter in connection with estimated losses from our ongoing litigation with Hansen Medical, Inc., or Hansen, and approximately $1.3 million in impairment charges against goodwill and other intangible assets related to the potential outcome of this litigation.Total revenues decreased 4.8% to $8.5 million for the three months ended March 31, 2009 from $8.9 million for the three months ended March 31, 2008. Revenues within our Technology Development Division increased approximately 4.3% from the corresponding period in 2008 while revenues in our Product and License segment decreased by approximately 30%. Technology development revenues increased to $6.9 million for the three months ended March 31, 2009 from $6.6 million for the corresponding 2008 period. The growth within our Technology Development segment reflects continued strong success in obtaining research contracts, an increase in the size of certain awards, and the addition of direct contract personnel. We generated approximately $1.6 million in product and license revenues in the first quarter of 2009 as compared with $2.3 million in the first quarter of 2008, reflecting a decrease of approximately 20% in product sales, which we attribute in part to the overall decline in the U.S. economy that previously also impacted our business beginning in the fourth quarter of 2008, and a decrease of 45% in product development revenues, due principally to the discontinuation of certain contracts during 2008.
Cost of revenues increased 4.3% to $5.8 million for the three months ended March 31, 2009 from $5.5 million for the corresponding 2008 period. The main components of this overall increase were increased direct labor to complete our awarded contracts and an increase to our estimated total costs attributable to an increase in the estimated overhead costs to be applied to our technology development contracts. Technology development cost of sales increased approximately 17% accounting for approximately $0.7 million in increased cost of revenues. Product and license cost of sales decreased $0.5 million, or 35%, which is consistent with the lower product development revenue.
Operating expense increased to $42.8 million for the three months ended March 31, 2009 from $5.3 million for the corresponding quarter in 2008. This change is primarily due to the estimated loss recognized in conjunction with our litigation with Hansen of $36.3 million and associated impairment of goodwill and other intangible assets totaling $1.3 million in our product and license business segment. Excluding those charges operating expenses were $5.2 million for the quarter ending March 31, 2009, a decrease of $0.1 million from the corresponding period in 2008.
Net interest expense on March 31, 2009 was $159,000 compared to a net interest income of $25,000 during the same quarter in 2008, due to the addition of our credit facility with Silicon Valley Bank in May of 2008. For the quarter ended March 31, 2009 we recognized approximately $66,000 of interest expense related to the new credit facility, which bears interest at a floating rate of Prime plus 1.5% with a minimum interest rate of 5.5%. In addition, our convertible notes payable to Carilion Clinic in the aggregate amount of $5 million accrue simple interest at a rate of 6%. The remaining difference is primarily due to a decrease in return on cash deposits, which were $8,000 and $110,000 for the quarters ended March 31, 2009 and 2008, respectively.
We used approximately $2.0 million and $0.6 million of net cash from operations during the three months ended March 31, 2009 and 2008, respectively. The primary factors in the increased cash used in operations between the two periods were the $1.4 million increase in net loss (excluding the effects of the estimated litigation losses) relative to first quarter of 2008 and a $2.2 million decrease in the cash flow impact of changes in accounts receivable compared to the first quarter of 2008 offset by a $1.2 million improvement in the cash flow impact of changes in accounts payable and accrued liabilities in the first quarter of 2009 compared to 2008.
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