Luna(LUNA) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Presents unaudited consolidated financial statements, management's analysis, market risks, and internal controls ITEM 1. FINANCIAL STATEMENTS Presents Luna Innovations' unaudited consolidated financial statements, including balance sheets, operations, equity, cash flows, and notes Consolidated Balance Sheets Presents the company's financial position, including assets, liabilities, and stockholders' equity at specific dates Consolidated Balance Sheets (in thousands) | (in thousands) | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Total current assets | $82,613 | $75,469 | | Total assets | $129,681 | $131,002 | | Liabilities and Stockholders' Equity | | | | Total current liabilities | $33,656 | $30,085 | | Total liabilities | $50,812 | $56,560 | | Total stockholders' equity | $78,869 | $74,442 | | Total liabilities and stockholders' equity | $129,681 | $131,002 | Consolidated Statements of Operations (Unaudited) Details the company's revenues, costs, and net income or loss for the specified reporting periods Consolidated Statements of Operations (in thousands, except share and per share data) | (in thousands, except share and per share data) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $20,329 | $15,350 | $63,291 | $39,837 | | Gross profit | $12,584 | $9,632 | $37,436 | $24,126 | | Operating (loss)/income | $(10) | $1,212 | $(3,625) | $874 | | Net (loss)/income from continuing operations | $(344) | $2,308 | $(2,564) | $1,886 | | Income from discontinued operations, net of income tax | $699 | $794 | $2,371 | $1,469 | | Net income/(loss) | $355 | $3,102 | $(193) | $3,355 | | Basic Net (loss)/income per share attributable to common stockholders | $0.01 | $0.10 | $(0.01) | $0.11 | | Diluted Net (loss)/income per share attributable to common stockholders | $0.01 | $0.10 | $(0.01) | $0.10 | Consolidated Statements of Comprehensive (Loss)/Income Reports net income or loss and other comprehensive income or loss for the specified periods Consolidated Statements of Comprehensive (Loss)/Income (in thousands) | (in thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net income/(loss) | $355 | $3,102 | $(193) | $3,355 | | Other comprehensive (loss)/income | $(672) | $— | $204 | $— | | Total other comprehensive (loss)/income | $(317) | $3,102 | $11 | $3,355 | Consolidated Statements of Changes in Stockholders' Equity Outlines changes in common stock, treasury stock, additional paid-in capital, and accumulated deficit Consolidated Statements of Changes in Stockholders' Equity (in thousands, except share data) - Q3 2021 | (in thousands, except share data) | Balance at June 30, 2021 | Balance at Sep 30, 2021 | | :--- | :--- | :--- | | Common Stock Shares | 31,772,444 | 31,961,907 | | Common Stock $ | $33 | $34 | | Treasury Stock Shares | 1,739,455 | 1,739,455 | | Treasury Stock $ | $(5,209) | $(5,209) | | Additional Paid-in Capital | $95,936 | $97,238 | | Accumulated Deficit | $(13,505) | $(13,150) | | Accumulated Other Comprehensive Income/(loss) | $628 | $(44) | | Total | $77,883 | $78,869 | Consolidated Statements of Changes in Stockholders' Equity (in thousands, except share data) - YTD Q3 2021 | (in thousands, except share data) | Balance at Dec 31, 2020 | Balance at Sep 30, 2021 | | :--- | :--- | :--- | | Common Stock Shares | 31,024,537 | 31,961,907 | | Common Stock $ | $33 | $34 | | Treasury Stock Shares | 1,699,975 | 1,739,455 | | Treasury Stock $ | $(4,789) | $(5,209) | | Additional Paid-in Capital | $92,403 | $97,238 | | Accumulated Deficit | $(12,957) | $(13,150) | | Accumulated Other Comprehensive (Loss)/Income | $(248) | $(44) | | Total | $74,442 | $78,869 | Consolidated Statements of Cash Flows (Unaudited) Summarizes cash inflows and outflows from operating, investing, and financing activities Cash Flow Summary (in thousands) | (in thousands) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,230 | $97 | | Net cash (used in)/provided by investing activities | $(1,158) | $290 | | Net cash (used in)/provided by financing activities | $(960) | $1,029 | | Effect of exchange rate changes on cash and cash equivalents | $277 | $— | | Net (decrease)/increase in cash and cash equivalents | $(611) | $1,416 | | Cash and cash equivalents—beginning of period | $15,366 | $25,006 | | Cash and cash equivalents—end of period | $14,755 | $26,422 | Notes to Unaudited Consolidated Financial Statements Provides detailed explanations of accounting policies and financial statement items 1. Basis of Presentation and Significant Accounting Policies Describes the company's business, reporting segments, and key accounting principles applied - Luna Innovations is a leader in advanced optical technology, providing high-performance fiber optic test, measurement, and control products, and distributed fiber optic sensing solutions for various industries[28] - The company also provides applied research services, primarily funded by the U.S. government, in advanced materials, sensing, and healthcare applications[29] - The Luna Labs segment was classified as held for sale during Q3 2021, resulting in Lightwave becoming the sole reportable segment going forward[36][37] 2. Discontinued Operations Details the financial impact and classification of the Luna Labs segment as held for sale - Luna Labs segment met held-for-sale and discontinued operations accounting criteria at the end of Q3 2021, with the sale expected to be completed within one year[43] Discontinued Operations Financial Summary (in thousands) | (in thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $6,376 | $5,700 | $17,650 | $16,929 | | Net income from discontinued operations, net of tax | $699 | $794 | $2,371 | $2,905 | Discontinued Operations Assets and Liabilities (in thousands) | (in thousands) | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets held for sale | $13,855 | $13,000 | | Liabilities associated with assets held for sale | $9,091 | $8,933 | 3. Business Acquisitions Summarizes recent acquisitions, including OptaSense and New Ridge Technologies, and their financial impact - On December 3, 2020, Luna Innovations acquired OptaSense for $38.9 million, gaining distributed acoustic sensing (DAS) intellectual property and products, complementing its Lightwave segment[46] - On October 29, 2020, Luna acquired New Ridge Technologies for $0.6 million, integrating its fiber optic test and measurement equipment into the Lightwave segment[48] OptaSense Purchase Consideration Allocation (in thousands) | (in thousands) | OptaSense Purchase Consideration | | :--- | :--- | | Accounts receivable | $4,534 | | Inventory | $12,793 | | Identifiable intangible assets | $11,263 | | Goodwill | $8,520 | | Total purchase consideration | $33,688 | 4. Intangible assets, net Presents the company's intangible assets, including patents, developed technology, and customer base Intangible Assets, Net (in thousands) | (in thousands) | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Patent costs | $3,508 | $3,595 | | Developed technology | $17,409 | $17,344 | | In-process research & development | $1,580 | $1,580 | | Customer base | $1,302 | $1,302 | | Trade names | $3,121 | $3,122 | | Backlog | $696 | $696 | | Total | $27,616 | $27,639 | | Accumulated amortization | $(9,797) | $(7,645) | | Intangible assets, net | $17,819 | $19,994 | - Amortization expense for intangible assets was $0.8 million for the three months ended September 30, 2021, and $2.4 million for the nine months ended September 30, 2021[60] 5. Goodwill Details the company's goodwill balance and changes due to acquisitions and foreign currency translation Goodwill (in thousands) | (in thousands) | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Goodwill | $19,000 | $18,100 | - Goodwill decreased by $0.2 million during the three months ended September 30, 2021, due to foreign currency translation, and by $0.9 million during the nine months ended September 30, 2021, primarily due to measurement period adjustments[61] 6. Inventory Provides a breakdown of inventory components, including finished goods, work-in-process, and raw materials Inventory Breakdown (in thousands) | (in thousands) | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Finished goods | $10,955 | $11,547 | | Work-in-process | $3,023 | $1,425 | | Raw materials | $11,372 | $10,090 | | Total inventory | $25,350 | $23,062 | 7. Accrued Liabilities Lists various accrued liabilities, such as compensation, professional fees, and income tax Accrued Liabilities (in thousands) | (in thousands) | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Accrued compensation | $7,785 | $7,669 | | Contingent consideration | $225 | $225 | | Accrued professional fees | $647 | $825 | | Accrued income tax | $1,286 | $281 | | Total accrued and other current liabilities | $10,826 | $10,773 | 8. Debt Details the company's debt obligations, including term loans and revolving credit facilities, and covenants Debt Obligations (in thousands) | (in thousands) | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Term Loan (net) | $9,326 | $12,434 | | Revolving Loan | $7,550 | $7,550 | | Total | $16,876 | $19,984 | | Less: Current portion of long-term debt obligations | $(4,167) | $(4,167) | | Long-term debt obligations | $12,709 | $15,817 | - The company entered into a Loan Agreement with PNC Bank on December 1, 2020, providing a $12.5 million term loan and a $15.0 million revolving credit facility, used in part for the OptaSense acquisition[66][141] - The Term Loan and Revolving Line mature on December 1, 2023, bearing interest at LIBOR plus a margin (1.75% to 2.25%) and are subject to financial covenants[67][68][71] 9. Leases Describes the company's operating and finance lease arrangements, including ROU assets and lease liabilities - The company recognizes ROU assets and lease liabilities for operating and finance leases with terms over twelve months, primarily for facilities (operating leases) and equipment (finance leases)[74][75][76] Lease Liabilities (in thousands) | (in thousands) | Operating Leases | Finance Leases | | :--- | :--- | :--- | | Total future minimum lease payments | $6,621 | $219 | | Less: interest | $528 | $11 | | Total lease liabilities | $6,093 | $208 | | Current lease liability | $2,020 | $48 | | Long-term lease liability | $4,073 | $160 | Weighted-Average Lease Data | Weighted-average data | Operating Leases | Finance Leases | | :--- | :--- | :--- | | Remaining lease term (years) | 5.8 | 4.2 | | Discount rate | 6% | 3% | 10. Capital Stock and Share-Based Compensation Covers common stock, share-based compensation expenses, and restricted stock unit grants - For the nine months ended September 30, 2021, the company granted options to purchase 80,735 shares of common stock with a weighted average fair value of $5.24 per share[80] - Share-based compensation expense related to stock options was $0.3 million (Q3 2021) and $0.8 million (YTD Q3 2021)[81] - The company granted 134,250 time-based restricted stock units (RSUs) during the nine months ended September 30, 2021, with a weighted average fair value of $11.35 per share[82][83] 11. Revenue Recognition Explains revenue recognition policies and provides a breakdown of revenue by geographic location and customer type Revenue by Geographic Location and Customer Type (in thousands) | (in thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue by Geographic Location: United States | $11,555 | $8,729 | $33,670 | $21,622 | | Total Revenue by Geographic Location: Asia | $3,390 | $4,532 | $10,658 | $11,857 | | Total Revenue by Geographic Location: Europe | $3,628 | $1,694 | $12,114 | $5,261 | | Total Revenue by Major Customer Type: Sales to the U.S. government | $2,713 | $2,599 | $7,629 | $6,119 | | Total Revenue by Major Customer Type: U.S. direct commercial sales and other | $8,444 | $6,130 | $25,642 | $15,503 | | Total Revenue by Major Products/Services: Test, measurement and sensing systems | $18,253 | $12,987 | $56,255 | $34,023 | Contract Assets and Liabilities (in thousands) | (in thousands) | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Contract assets | $2,883 | $4,139 | | Contract liabilities | $4,967 | $6,698 | | Net contract assets | $(2,084) | $(2,559) | - Unfulfilled performance obligations for the Lightwave segment were approximately $38.6 million at September 30, 2021, with 36% expected to be satisfied in 2021, 56% in 2022, and the remainder by 2025[93] 12. Income Taxes Discusses the effective income tax rate and factors contributing to its difference from the federal statutory rate - The effective income tax rate for the nine months ended September 30, 2021, was 35.90%, compared to (97.28%) for the same period in 2020[95] - The 2021 rate differed from the federal statutory rate of 21% due to permanent differences from equity compensation adjustments, state income taxes, R&D tax credits, and losses with no corresponding valuation allowances[95] 13. Commitments and Contingencies Outlines legal proceedings and non-cancelable purchase order commitments - The company is involved in legal proceedings in the ordinary course of business, but management believes ultimate liability will not materially affect financial position or results[96] - As of September 30, 2021, approximately $1.7 million in non-cancelable purchase order commitments for tunable lasers remained, expected to be delivered by September 30, 2022[98] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Provides management's analysis of financial condition, operational results, liquidity, and capital resources Overview of Our Business Describes Luna Innovations' core business in advanced optical technology and its market focus - Luna Innovations is a leader in advanced optical technology, offering fiber optic test, measurement, and control products for telecommunications and photonics, and distributed fiber optic sensing solutions for various industries[104] - The company's Lightwave segment focuses on fiber optic sensing and communications test/control products, while the Luna Labs segment (now discontinued operations) performed applied research[105][106][109] - The acquisition of OptaSense in December 2020 expanded the Lightwave segment's capabilities into distributed acoustic sensing (DAS) for high-growth markets[108] Acquisitions Summarizes recent acquisitions, particularly OptaSense, and their strategic impact on the business - On December 3, 2020, Luna acquired OptaSense Holdings Limited for $38.9 million, enhancing its distributed acoustic sensing (DAS) intellectual property and market presence[111] Discontinued Operations Details the financial impact and classification of the Luna Labs segment as held for sale - The Luna Labs segment was classified as held-for-sale and discontinued operations at the end of Q3 2021, with the sale anticipated within one year[112] Description of Revenues, Costs and Expenses Explains the components of revenues, costs, and operating expenses, noting COVID-19 impacts - The COVID-19 pandemic has caused supply chain disruptions, delayed revenue, and impacted customer/supplier interactions[114] - Revenues are generated from product sales, commercial product development, licensing, and technology development activities, with Luna Labs' R&D services now reported as discontinued operations[115][116] - Operating expenses include selling, general and administrative, research, development and engineering, depreciation, amortization, and M&A costs, with Luna Labs' operating expenses also in discontinued operations[119] Critical Accounting Policies and Estimates Highlights key accounting policies and estimates requiring significant management judgment - Financial statements require management estimates and judgments, particularly concerning accounts receivable, inventory, goodwill, and long-lived assets, with potential future impacts from the COVID-19 pandemic[122][123] Results of Operations Analyzes the company's financial performance for the specified periods, comparing current to prior year Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020 Compares financial results for the three months ended September 30, 2021 and 2020, highlighting key changes Three Months Ended September 30, 2021 vs 2020 (in thousands) | (in thousands) | 2021 | 2020 | $ Difference | % Difference | | :--- | :--- | :--- | :--- | :--- | | Revenues | $20,329 | $15,350 | $4,979 | 32% | | Cost of revenues | $7,745 | $5,718 | $2,027 | 35% | | Gross margin | 62% | 63% | -1% | - | | Selling, general and administrative | $9,674 | $6,229 | $3,445 | 55% | | Research, development and engineering | $2,920 | $1,615 | $1,305 | 81% | | Operating (loss)/income | $(10) | $1,212 | $(1,222) | -101% | | Net income from discontinued operations, net | $699 | $794 | $(95) | -12% | - The increase in revenues and cost of revenues was primarily driven by the OptaSense acquisition[125][126] - Operating expenses rose significantly due to OptaSense operations, integration costs, intangible asset amortization, and variable costs supporting sales growth[127][128] Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020 Compares financial results for the nine months ended September 30, 2021 and 2020, highlighting key changes Nine Months Ended September 30, 2021 vs 2020 (in thousands) | (in thousands) | 2021 | 2020 | $ Difference | % Difference | | :--- | :--- | :--- | :--- | :--- | | Revenues | $63,291 | $39,837 | $23,454 | 59% | | Cost of revenues | $25,855 | $15,711 | $10,144 | 65% | | Gross margin | 59% | 59% | 0% | 0% | | Selling, general and administrative | $33,414 | $17,959 | $15,455 | 86% | | Research, development and engineering | $7,647 | $4,717 | $2,930 | 62% | | Operating (loss)/income | $(3,625) | $874 | $(4,499) | -515% | | Net income from discontinued operations, net | $2,371 | $1,469 | $902 | 61% | - Revenue growth was primarily due to the OptaSense acquisition and increased sales of communications testing products[132] - Operating expenses increased significantly due to OptaSense operations, integration costs, amortization of intangible assets, and variable costs supporting sales growth[134][135] Liquidity and Capital Resources Assesses the company's cash position, available credit, and ability to meet short-term and long-term obligations - As of September 30, 2021, cash and cash equivalents totaled $14.8 million[139] - The company believes current cash and available revolving line of credit will provide adequate liquidity for the next twelve months, with potential for third-party financing for increased capital spending[146] - The Loan Agreement with PNC Bank includes financial and restrictive covenants, with obligations secured by a first priority perfected security interest in substantially all assets[144] Discussion of Cash Flows Analyzes cash flows from operating, investing, and financing activities for the specified periods Cash Flow Summary (in thousands) | (in thousands) | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | $ Difference | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,230 | $97 | $1,133 | | Net cash (used in)/provided by investing activities | $(1,158) | $290 | $(1,448) | | Net cash (used in)/provided by financing activities | $(960) | $1,029 | $(1,989) | | Net (decrease)/increase in cash and cash equivalents | $(611) | $1,416 | $(2,027) | - Operating activities provided $1.2 million in cash for the first nine months of 2021, driven by non-cash charges for depreciation, amortization, and share-based compensation, partially offset by working capital outflows[147] - Investing activities used $1.2 million in cash in 2021, primarily for fixed asset additions and capitalized intellectual property costs, a shift from cash provided in 2020[149] Off-Balance Sheet Arrangements Confirms the absence of off-balance sheet arrangements as of the reporting date - As of September 30, 2021, the company had no off-balance sheet arrangements[151] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Outlines exposure to market risks, specifically interest rate and foreign currency exchange rate fluctuations Interest Rate Risk Evaluates the company's exposure to interest rate fluctuations on its variable-rate debt - The company is exposed to interest rate risk on its Term Loan and Revolving Loan, which have variable interest rates based on LIBOR plus a margin[153] - As of September 30, 2021, outstanding borrowings were $9.3 million (Term Loan) and $7.6 million (Revolving Loan) at a weighted-average variable interest rate of 2.1%[153] - A 0.25% increase in interest rates would result in an unfavorable annual impact of $0.04 million on pre-tax earnings and cash flows[153] Foreign Currency Exchange Rate Risk Assesses the impact of foreign currency exchange rate fluctuations on the company's financial results - Following the OptaSense acquisition, the company is exposed to foreign currency exchange rate fluctuations from foreign operations and cross-currency purchases[154] - As of September 30, 2021, the exposure to foreign currency rate fluctuations was not material to the company's financial condition or results of operations[154] ITEM 4. CONTROLS AND PROCEDURES Details evaluation of disclosure controls and procedures and changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures Reports on the effectiveness of the company's disclosure controls and procedures - Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of September 30, 2021[158] - Based on the evaluation, disclosure controls and procedures were concluded to be effective as of September 30, 2021[158] Changes in Internal Control over Financial Reporting Identifies any material changes in internal control over financial reporting during the period - No material changes in internal control over financial reporting occurred during the three months ended September 30, 2021[159] PART II. OTHER INFORMATION Covers legal proceedings, equity sales, defaults, mine safety, and other required disclosures ITEM 1. LEGAL PROCEEDINGS Addresses the company's involvement in legal proceedings and management's assessment of their financial impact - The company is occasionally involved in litigation or claims in the ordinary course of business[162] - Management believes that the ultimate liability from these actions will not materially affect the company's financial position, results of operations, or liquidity[162] ITEM 1A. RISK FACTORS Details various risks and uncertainties that could adversely affect the company's business and financial condition RISKS RELATING TO OUR BUSINESS Details risks inherent to the company's business model, including reliance on licenses, suppliers, and government contracts - The company's fiber-optic products business relies on a revocable license from Intuitive Surgical, Inc.; revocation would materially harm operations[166] - Dependence on third-party vendors for specialized components and contract manufacturers for some products creates vulnerability to supply shortages, price fluctuations, and production disruptions, including from COVID-19[167][168] - Reliance on U.S. government contracts, particularly SBIR programs (25% of total revenues for YTD Sep 2021), exposes the company to federal regulations, audits, and potential loss of eligibility, which could adversely affect revenues and growth[170][174][178] RISKS RELATING TO OUR OPERATIONS AND BUSINESS STRATEGY Outlines risks related to operational execution, strategic initiatives, acquisitions, and the COVID-19 pandemic - The company intends to sell its Luna Labs business, but there is no guarantee of satisfactory terms or timeframe for the divestiture[210] - Failure to properly evaluate and execute strategic initiatives, including integrating acquired businesses like OptaSense, could adversely affect future results and stock price due to integration difficulties, unknown liabilities, or loss of key personnel[211][212] - The ongoing COVID-19 pandemic has caused supply chain disruptions, delayed revenue, and impacted customer/supplier interactions, with potential for further adverse effects on business, operations, and financial markets[224][226] RISKS RELATING TO OUR REGULATORY ENVIRONMENT Covers risks associated with compliance with various U.S. and foreign laws, regulations, and data privacy requirements - Operations are subject to numerous U.S. and foreign laws (e.g., export controls, anti-corruption, environmental, health and safety), with non-compliance potentially leading to fines, penalties, or suspension of export privileges[228][229][232] - Manufacturing facilities must meet federal, state, and foreign standards (e.g., FDA Good Manufacturing Practice, ISO); failure to comply could lead to operational cessation and revenue impact[231] - The company is subject to evolving privacy and data security laws (e.g., CCPA, CPRA, GDPR), with non-compliance or data breaches potentially resulting in significant fines, penalties, and reputational damage[235][236][239][243] RISKS RELATING TO OUR INTELLECTUAL PROPERTY Discusses risks concerning the protection, enforcement, and potential infringement of the company's intellectual property - Proprietary rights, including patents and trade secrets, may not adequately protect technologies, facing challenges from invalidation, circumvention, independent development, or difficulties in enforcement[244][247][248] - Third parties may claim infringement of their intellectual property, leading to substantial litigation or licensing expenses, and potentially blocking the ability to sell products[251][252] - A substantial portion of technology is subject to retained rights of licensors (academic institutions, corporations, government agencies), which could lead to third-party licenses or limit the company's rights[254][255][256] RISKS RELATING TO OUR COMMON STOCK Addresses risks related to stock price volatility, anti-takeover provisions, and internal control deficiencies - The common stock price has been volatile and is expected to fluctuate significantly due to various factors, including sales by significant stockholders, changes in earnings estimates, and general market conditions[259][260] - Anti-takeover provisions in the company's charter, bylaws, and Delaware law could discourage or prevent a change in control, potentially affecting the stock price and limiting stockholder influence[264][265] - Failure to maintain proper and effective internal controls over financial reporting could adversely affect investor confidence and the stock value, potentially leading to regulatory sanctions[275][277] GENERAL RISK FACTORS Covers broad risks such as cybersecurity breaches, stock sales, and potential litigation - The company faces risks of security breaches or compromises of IT networks and systems, including cyber-attacks, which could lead to data loss, reputational damage, and operational disruptions[271][272] - Substantial sales of common stock by stockholders, or the perception thereof, could lead to a decline in the stock price[273] - The company may become involved in securities class action litigation, which is expensive and diverts management's attention, potentially harming the business[274] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Reports on unregistered sales of equity securities and the use of proceeds, if any - There were no unregistered sales of equity securities, use of proceeds from registered equity securities, or purchases of equity securities by the registrant during the three months ended September 30, 2021[284] ITEM 3. DEFAULTS UPON SENIOR SECURITIES Indicates whether there were any defaults upon senior securities - There were no defaults upon senior securities[280] ITEM 4. MINE SAFETY DISCLOSURES States the applicability of mine safety disclosures - Mine safety disclosures are not applicable to the company[281] ITEM 5. OTHER INFORMATION Indicates if there is any other information to disclose - There is no other information to disclose[282] ITEM 6. EXHIBITS Lists the exhibits filed as part of the Form 10-Q, including certifications and interactive data files Exhibits List | Exhibit Number | Description | | :--- | :--- | | 31.1 | Certification of the Principal Executive Officer | | 31.2 | Certification of the Principal Financial Officer | | 32.1* | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350 | | 32.2* | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 | | 101 | Inline XBRL Financial Statements and Notes | | 104 | Cover Page Interactive Data File | SIGNATURES Contains official signatures for the Quarterly Report on Form 10-Q, confirming submission by authorized personnel SIGNATURES Contains official signatures for the Quarterly Report on Form 10-Q, confirming submission by authorized personnel - The report was signed by Eugene J. Nestro, Chief Financial Officer (Principal Financial and Accounting Officer), on November 15, 2021[288]