Nasdaq to delist Roanoke tech company

Nasdaq to delist Roanoke tech company

Roanoke-based technology company Luna Innovations Inc. has lost its place on the Nasdaq Stock Market after months of delays in filing proper financial statements.

Luna officials notified Nasdaq in late December that they do not expect to file any of their multiple delinquent financial reports by a March 27 deadline — the latest available extension under the stock market’s listing rules — according to a Securities and Exchange Commission report posted Monday morning.

In response, Nasdaq will suspend and delist the company on Tuesday, according to the SEC.

Luna develops and markets fiber-optic sensing and monitoring devices for transportation, energy and other markets. It can remain in business, but its stock will not be publicly traded, according to the SEC.

In a news release posted late Monday morning, the company said that it will focus on “strategic alternatives” while continuing to work with its customers, partners and suppliers. The company expects it will be eligible to trade on over-the-counter markets, specifically the OTC Expert Market, according to the Luna release.

The Expert Market is for unsolicited customer orders only, according to the SEC. Quotations in those securities are restricted from public viewing and are only available to certain eligible investors, the SEC post read.

That market has at least three disadvantages, according to Nasdaq:

  • Less accessibility and lower liquidity decreases trading volume.
  • The OTC Expert Market has fewer regulations than major exchanges do.
  • Transaction costs are higher, and there is a wider spread between an asset’s asking price and its bidding price.

According to a post at otcmarkets.com, only broker-dealers and “professional or sophisticated investors” are allowed to view quotations in Expert Market securities. This market is open to stock issuers who do not make their information publicly available.

Since February, Luna has failed to file quarterly and annual reports, and has said that multiple statements it filed before then must be restated, due to inaccuracies. The central issue was revenue recognition — whether the company reported earnings at the correct time. Federal law states that companies must report revenue after a service has been delivered, and not before.

“While we are disappointed in the restatement process schedule delays, we are encouraged by the operational discipline and improvements by the entire Luna team since May,” Kevin Ilcisin, the company’s president and chief executive officer, said in the news release.

Ilcisin took the reins on Aug. 1. He had been a top consultant after Luna’s former top leader, Scott Graeff, abruptly retired the month before. Graeff’s departure followed the company’s disclosure that earnings reporting discrepancies had caused it to indefinitely delay annual and quarterly reports.

The company’s stock traded at $7.92 a share as recently as February 2024. The price began a steady decline about mid-March, after the company’s announcements about the financial statements — the first in a series of events that led to a complete turnover in its executive suite.

The company, Graeff and two former chief financial officers are identified in multiple lawsuits related to how Luna has handled the financial statements.

A special committee of board members and outside legal and financial advisors formed in February 2024 to investigate the company’s accounting issues. The committee has not released any findings about the statements, but it did report a finding that Graeff had engaged in conduct that constituted “cause” under his contract. Luna subsequently canceled his severance payments and took back stock from him. 

Graeff told Cardinal News in May that he had strived at Luna to ensure that his decisions and conduct as a leader were consistent with his values.

A former Virginia Tech professor, Kent Murphy, founded Luna in 1990. Murphy spun it off from the university and ran it for the next 20 years. As recently as 2023, Luna was buying up similar properties and expanding its footprint globally. The company’s client history includes Northrup Grumman and the Sistine Chapel.

In 2009, Luna filed for bankruptcy protection in a Virginia court, after a jury ordered it to pay a medical company $36 million in damages. The jury decided that Luna breached its contract with Hansen Medical Inc. and misappropriated trade secrets that belonged to the California-based company, according to multiple published reports.

Luna and Hansen reached a settlement by year’s end, and Luna emerged from Chapter 11 reorganization by January 2010. Luna stock hit a low of 26 cents in July 2009, according to Reuters.

Luna opened Monday on the Nasdaq selling at $2.13 a share. It closed at 88 cents a share at close of trading on Monday.

Luna, in its Monday news release, said it plans “a broader business update” this month. It will include “preliminary revenue and booking numbers for fiscal year 2024.”

An email and a voice message left for a Luna spokeswoman were not returned. 

Meanwhile, the company continued to seek a sale or merger, under conditions of an agreement with investor White Hat Capital.


link