Luna Innovations says more financial statements unreliable

The Roanoke-based fiber-optic technology company Luna Innovations Inc. on Friday added more than a year’s worth of previous financial statements to the list of those that it says are no longer reliable.

Luna said in a news release that a committee formed by its board of directors has determined that the company’s financial statements from 2022 and the first quarter of 2023 “cannot be relied upon and need to be restated due to identified accounting errors relating to revenue recognition.”

Revenue recognition is an accounting principle that deals with determining precisely when revenue has been earned by a company. Generally speaking, it requires that revenue is recognized during the time period that products and services are delivered, not necessarily when payment is received.

“As the independent review remains ongoing and the full extent of this impact is still being determined, the Company cannot at this time estimate when it will file its restated financial statements,” Luna said in its news release. “The Company is working diligently on this matter and will provide updated information as appropriate.”

As a publicly traded company, Luna files quarterly reports on its business performance as well as other legally required disclosures and statements with the U.S. Securities and Exchange Commission.

Friday’s announcement came a little more than a month after Luna said that it was reviewing certain transactions in the second and third quarters of 2023 after identifying accounting errors, that those quarterly financial statements could not be relied upon, and that it would delay issuing its fourth quarter and annual reports for 2023.

Luna Innovations, with more than 375 employees, develops fiber-optic sensors and measuring tools for the automotive, communications and energy industries, among other markets. 

When it first disclosed the accounting errors in March, Luna said it had convened a special committee consisting of some of the company’s board plus external legal and financial advisers.

Less than two weeks after that announcement, Luna said its president and CEO, Scott Graeff, was retiring. Richard Roedel, who has been chairman of Luna’s board since 2010, is serving as interim president and executive chairman.

[Disclosure: Scott Graeff’s wife, Quinn Graeff, is a member of the Cardinal Productions Inc. board of directors. The Graeffs are also contributors to Cardinal News. Neither board members nor donors have any influence or say in news decisions; see our policy.]

Earlier this month, NASDAQ said Luna risks being delisted from the stock exchange because of its reporting delay.

Meanwhile, a lawsuit filed in federal court in California alleges that Luna and several of its executives violated securities laws.

Shares of Luna Innovations (NASDAQ: LUNA) closed at $2.77 on Friday, down about 1% for the day and down nearly 60% since the beginning of this year.

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