Thursday, May 21, 2009
Luna at risk of being removed from Nasdaq
The tech company does not have $10 million in stockholders equity, the minimum requirement.
The latest from The Ticker blog
Luna Innovations Inc. is out of compliance with rules put in place by Nasdaq and is in jeopardy of being delisted from the stock exchange if the Roanoke company doesn't regain some of its previous value.
If the company's stock is no longer eligible to be traded on the Nasdaq exchange it could make it difficult to raise needed capital as the relatively young public company has struggled to become profitable.
Specifically, Luna is out of compliance with the Nasdaq marketplace rule requiring a minimum of $10 million in stockholders equity.
While at the end of 2008 Luna's stockholders equity, a measurement of the company's net worth, was $14.3 million, it plummeted to a deficit of $25.8 million at the end of the first quarter.
The Nasdaq listing qualifications staff confirmed the compliance deficiency in a letter dated Tuesday, according to a Luna news release.
Luna raised $21 million with its initial public offering in June 2006, selling 3.5 million shares of stock at $6 apiece. From the beginning Luna has been touted as a rising star and an important part of Roanoke's economic strategy. Carilion Clinic owns about one-fifth of the company.
The recent troubles stem from a California lawsuit filed by Hansen Medical Inc. that resulted in a $36.3 million verdict against Luna in April, when the jury found Luna misappropriated Hansen's trade secrets. A final judgment has not been entered, but Luna was forced to account for the jury award on its first-quarter balance sheet for the three months ended March 31.
Not only did Luna record a net loss of $40.9 million for the quarter, but it also saw its ability to become profitable take a nosedive.
A high-tech company that develops and manufactures products for the health care, telecommunications, energy and defense markets, Luna had predicted it would become profitable by the end of 2009. Given the results of the lawsuit, Luna CEO Kent Murphy backed away from that profitability goal last week.
"Now with these next steps we must take in the legal process, those goals may not be attainable in the second half of this year and we anticipate pushing these milestones to 2010," Murphy said during a conference call with investors May 13.
Luna has until June 3 to provide Nasdaq with a specific plan to regain and maintain compliance with the listing standards. For the time being Luna's stock will continue to trade on the Nasdaq Global Market exchange.
If Nasdaq accepts Luna's plan for regaining shareholders equity, Luna may be given until Sept. 1 to meet the standard.
In the news release Luna said it would appeal any proposed delisting from Nasdaq.
If Luna is delisted and cannot get listed on another major stock exchange, its shares would be traded in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board, Luna said in its quarterly filing with the Securities and Exchange Commission.
In addition to facing the possibility of being delisted from Nasdaq, Luna warned in its quarterly SEC filing that it could seek bankruptcy protection.
Meanwhile, Luna continues to fight the jury verdict in court and has hired additional attorneys to help represent it during the post-trial phase of the litigation.
"We do believe there exists several valid legal bases for challenging the amount of the damages awarded," Murphy said during last week's conference call.
Shares of Luna closed at 69 cents Wednesday, unchanged from Tuesday's close.
