Thursday, May 14, 2009
Verdict guts 1st quarter for Luna
The technology company recorded a net loss of $40.9 million after losing a lawsuit.
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A $36.3 million jury verdict against Luna Innovations Inc. accounted for a huge net loss in the first quarter and erased the equity owned by shareholders.
The Roanoke-based technology company recorded a net loss of $40.9 million, or $3.66 per share, in the first quarter ended March 31.
That's a significant change from the net loss of $1.8 million, or 17 cents a share, reported by Luna for the first quarter a year ago, but one that almost entirely reflects the jury award.
At the end of 2008, shareholders equity, a measurement of the company's net worth, was $14.3 million. After the verdict it swung to a deficit of $25.8 million at the end of the first quarter. Still, the company maintained $29.8 million in total assets for the quarter, according to the balance sheet.
The total financial impact of the ongoing litigation was $38.2 million, including $900,000 in legal fees.
"The damage amount, if it stands, is obviously significant to Luna," said Luna CEO Kent Murphy during a conference call with investors Wednesday morning. "We are working aggressively on post-trial motions and the potential to appeal the verdict so we can reach a resolution that allows us to continue to do the great work we are doing."
After a four-week trial in Santa Clara, Calif., a jury found Luna violated a 2006 agreement with Hansen Medical Inc. and shared Hansen's trade secrets with another company, Intuitive Surgical Inc. The verdict has not been certified by the judge and could be reduced or increased.
"In our industry, confidential technical information is our lifeblood," Murphy said. "We strive to preserve the integrity of that information whether it is ours or someone else's. ... I do not believe there is anything in our work related to Hansen that we learned and then applied to other work that we were doing for Intuitive or any other partner."
Murphy also sought to shed light on business operations not related to the legal troubles. He pointed to a backlog of contracts worth $26.4 million and a 4 percent growth in revenues in the first quarter for the technology development division.
Total revenues were down slightly to $8.5 million for the first quarter, compared with $8.9 million for the same period a year earlier.
Murphy also highlighted Luna's efforts to reduce overhead expenses and noted that if legal fees and the other expenses associated with the litigation were removed the company's operating expenses would be at a level below what it was in 2007.
Still, the uncertainty of the final outcome of the trial dominated the day's conference call and the company's first quarter financial results.
The financial situation has also led Luna to fall out of compliance with its debt agreement with Silicon Valley Bank, said Luna's chief financial officer, Dale Messick.
"While the bank has not done so, the bank does have the option to call some of the debt," Messick said.
Luna recorded $4.6 million in current long-term debt liabilities related to the situation on its balance sheet. Shares of Luna closed Wednesday at 78 cents, down 4 cents from Tuesday.
