Luna Innovations (LUNA) 10-Q 10 Aug 17 2017 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Aug. 08, 2017
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2017
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q2
Trading Symbol	LUNA
Entity Registrant Name	LUNA INNOVATIONS INC
Entity Central Index Key	1,239,819
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		28,226,436

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 10,291,255	$ 12,802,458
Accounts receivable, net	13,150,291	14,297,725
Inventory	9,540,754	8,370,235
Prepaid expenses and other current assets	1,266,090	1,627,175
Total current assets	34,248,390	37,097,593
Property and equipment, net	6,882,576	6,780,838
Intangible assets, net	8,003,009	8,681,263
Goodwill	2,348,331	2,348,331
Other assets	68,778	88,948
Total assets	51,551,084	54,996,973
Current liabilities:
Current portion of long-term debt obligations	1,833,333	1,833,333
Current portion of capital lease obligations	52,404	52,128
Accounts payable	3,958,144	4,466,192
Accrued liabilities	8,131,316	8,667,100
Deferred revenue	946,146	949,603
Total current liabilities	14,921,343	15,968,356
Long-term deferred rent	1,337,893	1,403,957
Long-term debt obligations	1,511,520	2,420,032
Long-term capital lease obligations	89,054	114,940
Total liabilities	17,859,810	19,907,285
Commitments and contingencies
Stockholders’ equity:
Preferred stock, par value $0.001, 1,321,514 shares authorized, issued and outstanding at June 30, 2017 and December 31, 2016	1,322	1,322
Common stock, par value $0.001, 100,000,000 shares authorized, 28,226,436 and 27,988,104 shares issued, 27,688,710 and 27,541,277 shares outstanding at June 30, 2017 and December 31, 2016	28,878	28,600
Treasury stock at cost, 537,727 and 446,827 shares at June 30, 2017 and December 31, 2016	(661,253)	(517,987)
Additional paid-in capital	82,837,888	82,451,958
Accumulated deficit	(48,515,561)	(46,874,205)
Total stockholders’ equity	33,691,274	35,089,688
Total liabilities and stockholders’ equity	$ 51,551,084	$ 54,996,973

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, authorized (in shares)	1,321,514	1,321,514
Preferred stock, issued (in shares)	1,321,514	1,321,514
Preferred stock, outstanding (in shares)	1,321,514	1,321,514
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized (in shares)	100,000,000	100,000,000
Common stock, issued (in shares)	28,226,436	27,988,104
Common stock, outstanding (in shares)	27,688,710	27,541,277
Treasury Stock (in shares)	537,727	446,827

Consolidated Statements of Oper

Consolidated Statements of Operations - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Revenues:
Technology development	$ 4,625,175	$ 4,137,382	$ 8,901,624	$ 7,860,644
Products and licensing	8,951,296	10,509,522	17,793,232	20,773,273
Total revenues	13,576,471	14,646,904	26,694,856	28,633,917
Cost of revenues:
Technology development	3,439,118	3,181,447	6,661,474	6,061,282
Products and licensing	5,056,449	6,294,607	10,277,225	12,558,180
Total cost of revenues	8,495,567	9,476,054	16,938,699	18,619,462
Gross profit	5,080,904	5,170,850	9,756,157	10,014,455
Operating expense:
Selling, general and administrative	3,936,207	4,581,776	8,431,911	9,227,060
Research, development and engineering	1,263,911	1,240,655	2,708,738	2,791,146
Total operating expense	5,200,118	5,822,431	11,140,649	12,018,206
Operating loss	(119,214)	(651,581)	(1,384,492)	(2,003,751)
Other income/(expense):
Other expense	(1,225)	(39,489)	(869)	(35,545)
Interest expense	(60,386)	(78,906)	(124,760)	(165,079)
Total other expense	(61,611)	(118,395)	(125,629)	(200,624)
Loss before income taxes	(180,825)	(769,976)	(1,510,121)	(2,204,375)
Income tax expense	40,937	1,000	67,627	26,175
Net loss	(221,762)	(770,976)	(1,577,748)	(2,230,550)
Preferred stock dividend	29,536	24,580	63,632	45,790
Net loss attributable to common stockholders	$ (251,298)	$ (795,556)	$ (1,641,380)	$ (2,276,340)
Net loss per share attributable to common stockholders:
Basic and diluted (in dollars per share)	$ (0.01)	$ (0.03)	$ (0.06)	$ (0.08)
Weighted average common shares and common equivalent shares outstanding:
Basic and diluted (in shares)	27,600,147	27,557,960	27,570,919	27,517,792

Consolidated Statements of Cash

Consolidated Statements of Cash Flows - USD ($)	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Cash flows provided by/(used in) operating activities
Net loss	$ (1,577,748)	$ (2,230,550)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization	1,753,748	1,861,603
Share-based compensation	321,756	465,028
Bad debt expense	40,753	50,515
Gain on disposal of fixed assets	670	0
Change in assets and liabilities
Accounts receivable	1,106,681	(167,749)
Inventory	(1,170,519)	474,072
Other current assets	325,005	(306,371)
Accounts payable and accrued expenses	(1,109,870)	(1,076,784)
Deferred revenue	(3,457)	(81,830)
Net cash used in operating activities	(314,321)	(1,012,066)
Cash flows provided by/(used in) investing activities
Acquisition of property and equipment	(796,217)	(1,294,775)
Intangible property costs	(318,942)	(244,198)
Proceeds from sale of property and equipment	3,000	0
Net cash used in investing activities	(1,112,159)	(1,538,973)
Cash flows provided by/(used in) financing activities
Payments on capital lease obligations	(25,611)	(32,149)
Payments of debt obligations	(916,666)	(916,667)
Repurchase of common stock	(143,266)	(156,386)
Proceeds from the exercise of options	820	0
Net cash used in financing activities	(1,084,723)	(1,105,202)
Net decrease in cash and cash equivalents	(2,511,203)	(3,656,241)
Cash and cash equivalents—beginning of period	12,802,458	17,464,040
Cash and cash equivalents—end of period	10,291,255	13,807,799
Supplemental disclosure of cash flow information
Cash paid for interest	120,191	157,371
Cash paid for income taxes	40,937	198,425
Non-cash investing and financing activities
Dividend on preferred stock, 39,646 shares of common stock issuable for the six months ended June 30, 2017 and 2016	63,632	45,790
Capital expenditures funded by capital lease borrowings	$ 0	$ 157,246

Consolidated Statements of Cas6

Consolidated Statements of Cash Flows (Parenthetical) - shares	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Statement of Cash Flows [Abstract]
Dividend on preferred stock, shares of common stock issuable (in shares)	39,646	39,646

Basis of Presentation and Signi

Basis of Presentation and Significant Accounting Policies	6 Months Ended
	Jun. 30, 2017
Accounting Policies [Abstract]
Basis of Presentation and Significant Accounting Policies	Basis of Presentation and Significant Accounting Policies Nature of Operations Luna Innovations Incorporated (“we,” “Luna Innovations” or the “Company”), headquartered in Roanoke, Virginia, was incorporated in the Commonwealth of Virginia in 1990 and reincorporated in the State of Delaware in April 2003. We are a leader in advanced optical technology, providing unique capabilities in high speed optoelectronics and high performance fiber optic test products for the telecommunications industry and distributed fiber optic sensing for the aerospace and automotive industries. We are organized into two reportable segments, which work closely together to turn ideas into products: our Technology Development segment and our Products and Licensing segment. Our business model is designed to accelerate the process of bringing new and innovative technologies to market. We have a history of net losses from operations beginning in 2005. We have historically managed our liquidity through cost reduction initiatives, debt financings, capital markets transactions and the sale of assets. Unaudited Interim Financial Information The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United Stated of America (“U.S. GAAP”) for interim financial statements and Article 10 of Regulation S-X of the Securities Exchange Act of 1934, as amended. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for annual financial statements. The unaudited consolidated financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management reflect all adjustments, consisting of only normal recurring accruals considered necessary to present fairly our financial position at June 30, 2017 , results of operations for the three and six months ended June 30, 2017 and 2016 , and cash flows for the six months ended June 30, 2017 and 2016 . The results of operations for the three and six months ended June 30, 2017 , are not necessarily indicative of the results that may be expected for the year ending December 31, 2017 . The consolidated interim financial statements, including our significant accounting policies, should be read in conjunction with the audited Consolidated Financial Statements and the notes thereto for the year ended December 31, 2016 , included in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”) on March 20, 2017. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between marketplace participants. Various valuation approaches can be used to determine fair value, each requiring different valuation inputs. The following hierarchy classifies the inputs used to determine fair value into three levels: • Level 1—Quoted prices for identical instruments in active markets • Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets • Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable The carrying values of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short-term nature of these instruments. The carrying value of our debt approximates fair value, as we consider the floating interest rate on our credit facilities with Silicon Valley Bank ("SVB") to be at market for similar instruments. Certain nonfinancial assets and liabilities are measured at fair value on a nonrecurring basis in accordance with U.S. GAAP. This includes items such as nonfinancial assets and liabilities initially measured at fair value in a business combination and nonfinancial long-lived asset groups measured at fair value for an impairment assessment. In general, nonfinancial assets including intangible assets and property and equipment are measured at fair value when there is an indication of impairment and are recorded at fair value only when any impairment is recognized. Net Loss Per Share Basic per share data is computed by dividing our net loss by the weighted average number of shares outstanding during the period. Diluted per share data is computed by dividing net income, if applicable, by the weighted average shares outstanding during the period increased to include, if dilutive, the number of additional common share equivalents that would have been outstanding if potential shares of common stock had been issued using the treasury stock method. Diluted per share data would also include the potential common share equivalents relating to convertible securities by application of the if-converted method. The effect of 5.0 million and 5.8 million common stock equivalents (which include outstanding warrants, preferred stock and stock options) are not included for the three months ended June 30, 2017 and 2016 , respectively, as they are anti-dilutive to earnings per share due to our net loss. The effect of 4.6 million and 5.7 million common stock equivalents are not included for the six months ended June 30, 2017 and 2016 , respectively, as they are considered anti-dilutive to earnings per share due to our net loss. Recently Issued Accounting Pronouncements Effective January 1, 2017, we adopted Accounting Standards Update ("ASU") No. 2016-09, Improvements to Employee Share-Based Payment Accountin g. These amendments apply to several aspects of accounting for share-based compensation including the recognition of excess tax benefits and deficiencies and their related presentation in the statement of cash flows as well as accounting for forfeitures. The adoption of ASU No. 2016-09 did not have a significant impact on our financial condition, results of operations or cash flows. Effective January 1, 2017, we adopted ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes , which simplifies the presentation of deferred taxes by requiring that deferred tax assets and liabilities be classified as noncurrent in any classified balance sheet rather than being separated into current and non-current amounts. The adoption of ASU No. 2015-17 did not have a significant impact on our consolidated financial statements. In January 2017, the Financial Accounting Standards Board ("FASB") issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment . This update simplifies the subsequent measurement of goodwill. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The accounting standard will be effective for reporting periods beginning after December 15, 2019. We do not expect ASU 2017-04 will have a material impact on our financial statements. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230) , which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how cash receipts and cash payments are presented in the statement of cash flows. ASU 2016-15 is effective for public entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The amendments should be applied retrospectively to all periods presented. We do not expect ASU 2016-15 will have a material impact on our financial statements. In April 2016, the FASB amended the FASB Accounting Standards Codification and created a new Topic 606, and issued ASU No. 2016-10, Revenue from contracts with customers: Identifying Performance Obligations and Licensing . This amendment prescribes that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendment supersedes the revenue recognition requirements in Topic 605, Revenue Recognition , and most industry-specific guidance throughout the Industry Topics of the Accounting Standards Codification, and is effective for annual and interim reporting periods beginning after December 15, 2017. We are currently determining the transition method and assessing the impact the amendments may have on our financial condition, results of operations or cash flows as a result of adopting this standard. In February 2016, the FASB issued ASU No. 2016-02, Leases , which requires a lessee to recognize in its statement of financial position an asset and liability for most leases with a term greater than 12 months. Lessees should recognize a liability to make lease payments and a right-of-use asset representing the lessee's right to use the underlying asset for the lease term. The amendment is effective for fiscal years ending after December 15, 2018, including interim periods within those fiscal years. We are currently evaluating the impact the adoption of this standard will have on our consolidated financial statements.

Subsequent Event- Sale of High

Subsequent Event- Sale of High Speed Optical Receivers Business	6 Months Ended
	Jun. 30, 2017
Subsequent Events [Abstract]
Subsequent Event- Sale of High Speed Optical Receivers Business	Subsequent Event- Sale of High Speed Optical Receivers Business On August 9, 2017 , we sold the assets and operations related to our high speed optical receivers ("HSOR") business, which was part of our Products and Licensing segment, to an unaffiliated third party for an initial purchase price of $33.5 million , of which $29.5 million was received at closing and $4.0 million was placed into escrow until December 15, 2018 for possible working capital adjustments to the purchase price and potential satisfaction of certain post-closing indemnification obligations (the "Transaction"). The purchase price is subject to adjustment in the future based upon a determination of final working capital, as defined in the asset purchase agreement. The HSOR business was a component of the operations of Advanced Photonix, Inc., which we acquired in May 2015. As part of the Transaction, the buyer is also expected to hire approximately 49 of our employees who were engaged in the development, manufacture, and sale of HSOR products in addition to certain corporate administrative functions. The buyer will provide certain transition services to us with respect to infrastructure and administration for which we will pay $0.3 million per month for a period of five months following the date of the Transaction. As the HSOR assets were not considered "held for sale" as of June 30, 2017, such assets are included within the assets held and used in our consolidated balance sheets as of June 30, 2017 and December 31, 2016. The following schedule sets forth the carrying amounts of major classes of assets and liabilities associated with the Transaction as of June 30, 2017 and December 31, 2016. June 30, 2017 December 31, 2016 Current assets (unaudited) Accounts receivable $ 4,263,448 $ 4,028,713 Inventory 2,262,316 1,521,398 Prepaid expenses and other current assets 122,599 251,516 Total current assets 6,648,363 5,801,627 Property and equipment, net 3,667,273 3,298,110 Intangible assets, net 4,673,792 5,314,045 Goodwill 2,348,331 2,348,331 Other assets 50,754 50,754 Total assets of the disposal group $ 17,388,513 $ 16,812,867 Current liabilities Accounts payable $ 1,149,062 $ 1,511,450 Accrued compensation 313,725 504,719 Other accrued liabilities 468,124 248,837 Total current liabilities 1,930,911 2,265,006 Deferred rent 77,719 84,555 Total liabilities of the disposal group $ 2,008,630 $ 2,349,561 The following schedule sets forth the revenues and expenses associated with the HSOR operations as well as the employees and other costs expected to be assumed by the buyer for the three and six months ended June 30, 2017 and 2016. Although these costs are expected to be assumed by the buyer, we may subsequently replace certain of these resources in support of our remaining operations. Three Months Ended Six Months Ended 2017 2016 2017 2016 (unaudited) (unaudited) Revenues $ 2,283,440 $ 4,745,999 $ 5,314,927 $ 9,744,708 Cost of revenues 1,568,746 3,202,491 3,801,363 6,505,287 Gross profit 714,694 1,543,508 1,513,564 3,239,421 Operating expense Research, development and engineering 445,020 362,999 961,077 813,396 Selling, general and administrative 656,323 1,035,066 1,487,378 2,017,071 Total operating expense 1,101,343 1,398,065 2,448,455 2,830,467 Operating (loss)/income (386,649 ) 145,443 (934,891 ) 408,954 Other (income)/expense — (3,548 ) 35,036 (Loss)/income before income taxes (386,649 ) 148,991 (934,891 ) 373,918 Income tax benefit/(expense) — 56,557 — 141,939 (Loss)/income attributable to disposal group $ (386,649 ) $ 92,434 $ (934,891 ) $ 231,979

Inventory

Inventory	6 Months Ended
	Jun. 30, 2017
Inventory Disclosure [Abstract]
Inventory	Inventory Inventory consists of finished goods, work-in-process and raw materials valued at the lower of cost (determined on the first-in, first-out basis) or market. We write down inventory for estimated obsolescence or unmarketable inventory in an amount equal to the difference between the cost of the inventory and the estimated market value based upon assumptions about future demand and market conditions. Components of inventory were as follows: June 30, December 31, (unaudited) Finished goods $ 2,630,986 $ 1,993,543 Work-in-process 1,445,377 1,098,173 Raw materials 5,464,391 5,278,519 Total inventory $ 9,540,754 $ 8,370,235

Accrued Liabilities

Accrued Liabilities	6 Months Ended
	Jun. 30, 2017
Payables and Accruals [Abstract]
Accrued Liabilities	Accrued Liabilities Accrued liabilities at June 30, 2017 and December 31, 2016 consisted of the following: June 30, 2017 December 31, 2016 (unaudited) Accrued compensation $ 4,779,817 $ 5,442,723 Claims reserve 1,727,123 1,577,123 Accrued sub-contracts 464,961 483,477 Accrued professional fees 57,153 67,719 Deferred rent 154,396 155,138 Royalties 160,801 345,895 Warranty reserve 419,196 185,125 Accrued liabilities - other 367,869 409,900 Total accrued liabilities $ 8,131,316 $ 8,667,100

Debt

Debt	6 Months Ended
	Jun. 30, 2017
Debt Disclosure [Abstract]
Debt	Debt Silicon Valley Bank Facility We currently have a Loan and Security Agreement with SVB (the "Credit Facility") under which, as amended on May 8, 2015, we have a term loan with an original borrowing amount of $6.0 million (the “Original Term Loan”). The Original Term Loan is repayable in 48 monthly installments of $125,000 , plus accrued interest payable monthly in arrears, and unless earlier terminated, is scheduled to mature in May 2020. The Original Term Loan carries a floating annual interest rate equal to SVB’s prime rate then in effect plus 2% . We may prepay amounts due under the Original Term Loan at any time, subject to an early termination fee of up to 2% of the amount of prepayment. In September 2015, we entered into the Waiver and Seventh Loan Modification Agreement, which provided an additional $1 million of available financing for purchases of equipment through December 31, 2015, which we fully borrowed in December 2015 (the "Second Term Loan" and, together with the Original Term Loan, the "Term Loans"). The Second Term Loan also bears interest at a floating prime rate plus 2% and is to be repaid in 35 monthly installments of $27,778 plus accrued interest. The Credit Facility requires us to maintain a minimum cash balance of $5.0 million and to maintain at each month end a ratio of cash plus 60% of accounts receivable greater than or equal to 1.5 times the outstanding principal of the Term Loans. The Credit Facility also requires us to observe a number of additional operational covenants, including protection and registration of intellectual property rights, and certain customary negative covenants. As of June 30, 2017 , we were in compliance with all covenants under the Credit Facility. Amounts due under the Credit Facility are secured by substantially all of our assets, including intellectual property, personal property and bank accounts. In addition, the Credit Facility contains customary events of default, including nonpayment of principal, interest or other amounts, violation of covenants, material adverse change, an event of default under any subordinated debt documents, incorrectness of representations and warranties in any material respect, bankruptcy, judgments in excess of a threshold amount, and violations of other agreements in excess of a threshold amount. If any event of default occurs SVB may declare due immediately all borrowings under the Credit Facility and foreclose on the collateral. Furthermore, an event of default under the Credit Facility would result in an increase in the interest rate on any amounts outstanding. As of June 30, 2017 , there were no events of default on the Credit Facility. The aggregate balance under the Term Loans at June 30, 2017 and December 31, 2016 , was $3.4 million and $4.3 million , respectively. The effective rate of our Term Loan at June 30, 2017 was 6.25% . The following table presents a summary of debt outstanding as of June 30, 2017 and December 31, 2016 : June 30, 2017 December 31, 2016 (unaudited) Silicon Valley Bank Term Loan $ 3,375,000 $ 4,291,666 Less: unamortized debt issuance costs 30,147 38,301 Less: current portion 1,833,333 1,833,333 Total long-term debt $ 1,511,520 $ 2,420,032 The schedule of remaining principal payments under our Term Loans as of June 30, 2017 was as follows: 2017 $ 916,667 2018 1,833,333 2019 625,000 $ 3,375,000

Capital Stock and Share-Based C

Capital Stock and Share-Based Compensation	6 Months Ended
	Jun. 30, 2017
Equity [Abstract]
Capital Stock and Share-Based Compensation	Capital Stock and Share-Based Compensation We recognize share-based compensation expense based upon the fair value of the underlying equity award on the date of the grant. For restricted stock awards and restricted stock units, we recognize expense based upon the price of our underlying stock at the date of the grant. We have elected to use the Black-Scholes-Merton option pricing model to value any option or warrant awards granted. We recognize share-based compensation for such awards on a straight-line basis over the requisite service period of the awards. The risk-free interest rate is based on U.S. Treasury interest rates, the terms of which are consistent with the expected life of the stock options. The expected life and estimated post-employment termination behavior is based upon historical experience of homogeneous groups within our company. We also assume an expected dividend yield of zero for all periods, as we have never paid a dividend on our common stock and do not have any plans to do so in the future. A summary of the stock option activity for the six months ended June 30, 2017 is presented below: Options Outstanding Options Exercisable Number of Shares Price per Share Weighted Average Exercise Price Aggregate Intrinsic Value (1) Number of Shares Weighted Average Exercise Price Aggregate Intrinsic Value (1) Balance, January 1, 2017 2,857,114 $0.61 - $6.83 $ 1.89 $ 107,063 2,367,630 $ 1.93 $ 101,071 Granted 80,000 $1.51 - $1.54 $ 1.53 Exercised (1,000 ) $0.82 $ 0.82 Canceled (117,623 ) $1.40 - $3.69 $ 2.26 Balance, June 30, 2017 2,818,491 $0.61 - $6.83 $ 1.86 $ 356,221 2,584,839 $ 1.90 $ 334,031 (1) The intrinsic value of an option represents the amount by which the market value of the stock exceeds the exercise price of the option of in-the-money options only. The aggregate intrinsic value is based on the closing price of our common stock on the NASDAQ Capital Market, as applicable, on the respective dates. At June 30, 2017 , the outstanding stock options to purchase an aggregate of 2.8 million shares had a weighted-average remaining contractual term of 4.8 years , and the exercisable stock options to purchase an aggregate of 2.6 million shares had a weighted-average remaining contractual term of 4.5 years. For the six months ended June 30, 2017 and 2016 we recognized $0.3 million and $0.5 million in share-based compensation expense, respectively, which is included in our selling, general and administrative expense in the accompanying consolidated financial statements. We expect to recognize $0.2 million in share-based compensation expense over the weighted-average remaining service period of 1.7 years for stock options outstanding as of June 30, 2017 . The following table summarizes the value of our unvested restricted stock awards: Number of Unvested Shares Weighted Average Grant Date Fair Value Aggregate Value of Unvested Shares Balance, January 1, 2017 743,042 $ 1.20 $ 888,764 Granted 289,000 $ 1.54 445,060 Vested (355,542 ) $ 1.21 (431,854 ) Repurchased $ — — Forfeitures (51,667 ) $ 1.14 (58,917 ) Balance, June 30, 2017 624,833 $ 1.35 $ 843,053 Restricted Stock Units We issue restricted stock units ("RSUs"), to our non-employee directors for service on our board of directors. Under our non-employee director compensation policy, continuing non-employee directors receive an annual RSU grant at the time of our annual meeting of stockholders, which grant vests on the earlier of the one year anniversary of the grant or the following annual meeting of stockholders. Under our non-employee director deferred compensation plan, as amended (the "NEDCP") non-employee directors may also elect to receive their annual cash retainers for board and committee service in RSUs which are issued quarterly and vest immediately upon their issuance, subject to deferred settlement in accordance with the NEDCP. The following is a summary of our RSU activity for the six months ended June 30, 2017 : Number of RSUs Intrinsic Value Issued Unvested Weighted Average Grant Date Fair Value per Share Outstanding Unvested Balance, January 1, 2017 528,510 86,956 $1.29 $ 776,910 $ 127,825 Granted 165,143 129,865 $1.56 Vested — (86,956 ) $1.15 Forfeitures — — $0.00 Converted — — $0.00 Balances, June 30, 2017 693,653 129,865 $1.36 $ 1,047,416 $ 196,096 The following details our equity transactions during the six months ended June 30, 2017 : Preferred Stock Common Stock Treasury Stock Additional Paid-in Capital Shares $ Shares $ Shares $ $ Balance, January 1, 2017 1,321,514 1,322 27,541,277 28,600 446,827 (517,987 ) 82,451,958 Exercise of stock options — — 1,000 1 — — 819 Share-based compensation — — 289,000 289 — — 321,467 Non-cash compensation — — — — — — — Stock dividends to Carilion Clinic (1) — — — 40 — — 63,592 Forfeitures of restricted stock grants — — (51,667 ) (52 ) — — 52 Repurchase of common stock — — (90,900 ) — 90,900 (143,266 ) — Balances, June 30, 2017 1,321,514 1,322 27,688,710 28,878 537,727 (661,253 ) 82,837,888 (1) The stock dividends payable in connection with Carilion Clinic’s Series A Preferred Stock will be issued subsequent to June 30, 2017 . For the period from January 12, 2010, the original issue date of the Series A Preferred Stock, through June 30, 2017 , the Series A Preferred Stock issued to Carilion has accrued $1,077,074 in dividends. The accrued and unpaid dividends as of June 30, 2017 will be paid by the issuance of 592,047 shares of our common stock upon Carilion’s written request. Stock Repurchase Program In May 2016, our board of directors authorized us to repurchase up to $2.0 million of our common stock through May 31, 2017. Our stock repurchase program does not obligate us to acquire any specific number of shares. Under the program, shares may be repurchased in privately negotiated or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. We did not repurchase any shares during the six months ended June 30, 2017 . As of May 31, 2017, we had repurchased a total of 205,500 shares for an aggregate purchase price of $0.2 million , after which the stock repurchase program expired. We currently maintain these repurchased shares as treasury stock.

Operating Segments

Operating Segments	6 Months Ended
	Jun. 30, 2017
Segment Reporting [Abstract]
Operating Segments	Operating Segments Our operations are divided into two operating segments—“Technology Development” and “Products and Licensing”. The Technology Development segment provides applied research to customers in our areas of focus. Our engineers and scientists collaborate with our network of government, academic and industry experts to identify technologies and ideas with promising market potential. We then compete to win fee-for-service contracts from government agencies and industrial customers who seek innovative solutions to practical problems that require new technology. The Technology Development segment derives its revenues primarily from services. The Products and Licensing segment derives its revenues from product sales, funded product development and technology licenses. Through June 30, 2017 , our Chief Executive Officer and his direct reports collectively represented our chief operating decision makers, and they evaluated segment performance based primarily on revenues and operating income or loss. The accounting policies of our segments are the same as those described in the summary of significant accounting policies (see Note 1 to our Financial Statements, “Organization and Summary of Significant Accounting Policies,” presented in our Annual Report on Form 10-K as filed with the SEC on March 20, 2017). The table below presents revenues and operating loss for reportable segments: Three Months Ended Six Months Ended 2017 2016 2017 2016 (unaudited) (unaudited) Revenues: Technology development $ 4,625,175 $ 4,137,382 $ 8,901,624 $ 7,860,644 Products and licensing 8,951,296 10,509,522 17,793,232 20,773,273 Total revenues $ 13,576,471 $ 14,646,904 $ 26,694,856 $ 28,633,917 Technology development operating income/(loss) $ 60,659 $ 313,208 $ (304,901 ) $ (177,108 ) Products and licensing operating loss (179,873 ) (964,789 ) (1,079,591 ) (1,826,643 ) Total operating loss $ (119,214 ) $ (651,581 ) $ (1,384,492 ) $ (2,003,751 ) Depreciation, technology development $ 88,698 $ 91,127 $ 176,918 $ 186,784 Depreciation, products and licensing $ 240,504 $ 263,514 $ 571,480 $ 517,011 Amortization, technology development $ 26,169 $ 44,501 $ 66,605 $ 117,838 Amortization, products and licensing $ 437,612 $ 522,660 $ 930,590 $ 1,039,969 The table below presents assets for reportable segments: June 30, December 31, (unaudited) Total segment assets: Technology development $ 16,608,820 $ 16,923,090 Products and licensing 34,942,264 38,073,883 Total assets $ 51,551,084 $ 54,996,973 Property plant and equipment, and intangible assets, technology development $ 2,462,428 $ 2,602,803 Property plant and equipment, and intangible assets, products and licensing $ 14,771,488 $ 15,207,630 There are no material inter-segment revenues for any period presented. The U.S. government accounted for 38% and 28% of total consolidated revenues for the three months ended June 30, 2017 and 2016 , respectively, and for 36% and 28% of total consolidated revenues for the six months ended June 30, 2017 and 2016 , respectively. International revenues (customers outside the United States) accounted for 28% and 29% of total consolidated revenues for the three months ended June 30, 2017 and 2016 , respectively, and 27% and 32% of the total consolidated revenues for the six months ended June 30, 2017 and 2016 , respectively. Revenues from customers in China represented 7% and 19% of total revenues for the three months ended June 30, 2017 and 2016 , respectively, and 10% and 19% for the six months ended June 30, 2017 and 2016 , respectively. No other single country, outside of the United States, represented more than 10% of total revenues in the three and six months ended June 30, 2017 and 2016. In addition, we had one commercial customer whose revenues accounted for 0% and 14% of our total consolidated revenues for the three months ended June 30, 2017 and 2016 , respectively, and 5% and 15% for the six months ended June 30, 2017 and 2016 , respectively.

Contingencies and Guarantees

Contingencies and Guarantees	6 Months Ended
	Jun. 30, 2017
Commitments and Contingencies Disclosure [Abstract]
Contingencies and Guarantees	Contingencies and Guarantees We are from time to time involved in certain legal proceedings in the ordinary course of conducting our business. While the ultimate liability pursuant to these actions cannot currently be determined, we believe it is not reasonably possible that these legal proceedings will have a material adverse effect on our financial position or results of operations. In September 2014, we received a preliminary audit report from the Defense Contract Audit Agency (the "DCAA"), with respect to our 2007 incurred cost submission and questioning $0.8 million of claimed costs that the DCAA believes are expressly unallowable under the Federal Acquisition Regulations and, therefore, subject to potential penalty. In June 2015, we received from the Defense Contract Management Agency ("DCMA") a final determination and demand for payment of penalties, interest, and over billing in the aggregate amount of $1.1 million . In July 2015, we filed an appeal with the Armed Services Board of Contract Appeals ("ABSCA"). In January 2017, a hearing was held before the ASBCA. No ruling has yet been issued with respect to our appeal. In April 2017, we made a settlement offer of $150,000 to the DCMA, and we have accrued that amount in our financial statements as of June 30, 2017 . The DCMA notified us in May 2017 that it has declined our settlement offer. The appeals process remains ongoing. In the third quarter of 2016 we executed two non-cancelable purchase orders totaling $1.4 million for multiple shipments of tunable lasers to be delivered over an 18 -month period. At June 30, 2017 , approximately $0.5 million of this commitment remained. In addition, as of June 30, 2017 , we had $0.7 million in outstanding purchase orders for multiple shipments of certain amplifiers utilized in our integrated coherent receiver products. We have entered into indemnification agreements with our officers and directors, to the extent permitted by law, pursuant to which we have agreed to reimburse the officers and directors for legal expenses in the event of litigation and regulatory matters. The terms of these indemnification agreements provide for no limitation to the maximum potential future payments. We have a directors and officers insurance policy that may, in certain instances, mitigate the potential liability and payments.

Basis of Presentation and Sig15

Basis of Presentation and Significant Accounting Policies (Policies)	6 Months Ended
	Jun. 30, 2017
Accounting Policies [Abstract]
Nature of Operations	Nature of Operations Luna Innovations Incorporated (“we,” “Luna Innovations” or the “Company”), headquartered in Roanoke, Virginia, was incorporated in the Commonwealth of Virginia in 1990 and reincorporated in the State of Delaware in April 2003. We are a leader in advanced optical technology, providing unique capabilities in high speed optoelectronics and high performance fiber optic test products for the telecommunications industry and distributed fiber optic sensing for the aerospace and automotive industries. We are organized into two reportable segments, which work closely together to turn ideas into products: our Technology Development segment and our Products and Licensing segment. Our business model is designed to accelerate the process of bringing new and innovative technologies to market. We have a history of net losses from operations beginning in 2005. We have historically managed our liquidity through cost reduction initiatives, debt financings, capital markets transactions and the sale of assets.
Unaudited Interim Financial Information	Unaudited Interim Financial Information The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United Stated of America (“U.S. GAAP”) for interim financial statements and Article 10 of Regulation S-X of the Securities Exchange Act of 1934, as amended. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for annual financial statements. The unaudited consolidated financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management reflect all adjustments, consisting of only normal recurring accruals considered necessary to present fairly our financial position at June 30, 2017 , results of operations for the three and six months ended June 30, 2017 and 2016 , and cash flows for the six months ended June 30, 2017 and 2016 . The results of operations for the three and six months ended June 30, 2017 , are not necessarily indicative of the results that may be expected for the year ending December 31, 2017 . The consolidated interim financial statements, including our significant accounting policies, should be read in conjunction with the audited Consolidated Financial Statements and the notes thereto for the year ended December 31, 2016 , included in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”) on March 20, 2017.
Fair Value Measurements	Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between marketplace participants. Various valuation approaches can be used to determine fair value, each requiring different valuation inputs. The following hierarchy classifies the inputs used to determine fair value into three levels: • Level 1—Quoted prices for identical instruments in active markets • Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets • Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable The carrying values of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short-term nature of these instruments. The carrying value of our debt approximates fair value, as we consider the floating interest rate on our credit facilities with Silicon Valley Bank ("SVB") to be at market for similar instruments. Certain nonfinancial assets and liabilities are measured at fair value on a nonrecurring basis in accordance with U.S. GAAP. This includes items such as nonfinancial assets and liabilities initially measured at fair value in a business combination and nonfinancial long-lived asset groups measured at fair value for an impairment assessment. In general, nonfinancial assets including intangible assets and property and equipment are measured at fair value when there is an indication of impairment and are recorded at fair value only when any impairment is recognized.
Net Loss Per Share	Net Loss Per Share Basic per share data is computed by dividing our net loss by the weighted average number of shares outstanding during the period. Diluted per share data is computed by dividing net income, if applicable, by the weighted average shares outstanding during the period increased to include, if dilutive, the number of additional common share equivalents that would have been outstanding if potential shares of common stock had been issued using the treasury stock method. Diluted per share data would also include the potential common share equivalents relating to convertible securities by application of the if-converted method.
Recently Issued Accounting Pronouncements	Recently Issued Accounting Pronouncements Effective January 1, 2017, we adopted Accounting Standards Update ("ASU") No. 2016-09, Improvements to Employee Share-Based Payment Accountin g. These amendments apply to several aspects of accounting for share-based compensation including the recognition of excess tax benefits and deficiencies and their related presentation in the statement of cash flows as well as accounting for forfeitures. The adoption of ASU No. 2016-09 did not have a significant impact on our financial condition, results of operations or cash flows. Effective January 1, 2017, we adopted ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes , which simplifies the presentation of deferred taxes by requiring that deferred tax assets and liabilities be classified as noncurrent in any classified balance sheet rather than being separated into current and non-current amounts. The adoption of ASU No. 2015-17 did not have a significant impact on our consolidated financial statements. In January 2017, the Financial Accounting Standards Board ("FASB") issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment . This update simplifies the subsequent measurement of goodwill. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The accounting standard will be effective for reporting periods beginning after December 15, 2019. We do not expect ASU 2017-04 will have a material impact on our financial statements. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230) , which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how cash receipts and cash payments are presented in the statement of cash flows. ASU 2016-15 is effective for public entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The amendments should be applied retrospectively to all periods presented. We do not expect ASU 2016-15 will have a material impact on our financial statements. In April 2016, the FASB amended the FASB Accounting Standards Codification and created a new Topic 606, and issued ASU No. 2016-10, Revenue from contracts with customers: Identifying Performance Obligations and Licensing . This amendment prescribes that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendment supersedes the revenue recognition requirements in Topic 605, Revenue Recognition , and most industry-specific guidance throughout the Industry Topics of the Accounting Standards Codification, and is effective for annual and interim reporting periods beginning after December 15, 2017. We are currently determining the transition method and assessing the impact the amendments may have on our financial condition, results of operations or cash flows as a result of adopting this standard. In February 2016, the FASB issued ASU No. 2016-02, Leases , which requires a lessee to recognize in its statement of financial position an asset and liability for most leases with a term greater than 12 months. Lessees should recognize a liability to make lease payments and a right-of-use asset representing the lessee's right to use the underlying asset for the lease term. The amendment is effective for fiscal years ending after December 15, 2018, including interim periods within those fiscal years. We are currently evaluating the impact the adoption of this standard will have on our consolidated financial statements.

Subsequent Event- Sale of Hi16

Subsequent Event- Sale of High Speed Optical Receivers Business (Tables)	6 Months Ended
	Jun. 30, 2017
Subsequent Events [Abstract]
Schedule of disposal group information	The following schedule sets forth the revenues and expenses associated with the HSOR operations as well as the employees and other costs expected to be assumed by the buyer for the three and six months ended June 30, 2017 and 2016. Although these costs are expected to be assumed by the buyer, we may subsequently replace certain of these resources in support of our remaining operations. Three Months Ended Six Months Ended 2017 2016 2017 2016 (unaudited) (unaudited) Revenues $ 2,283,440 $ 4,745,999 $ 5,314,927 $ 9,744,708 Cost of revenues 1,568,746 3,202,491 3,801,363 6,505,287 Gross profit 714,694 1,543,508 1,513,564 3,239,421 Operating expense Research, development and engineering 445,020 362,999 961,077 813,396 Selling, general and administrative 656,323 1,035,066 1,487,378 2,017,071 Total operating expense 1,101,343 1,398,065 2,448,455 2,830,467 Operating (loss)/income (386,649 ) 145,443 (934,891 ) 408,954 Other (income)/expense — (3,548 ) 35,036 (Loss)/income before income taxes (386,649 ) 148,991 (934,891 ) 373,918 Income tax benefit/(expense) — 56,557 — 141,939 (Loss)/income attributable to disposal group $ (386,649 ) $ 92,434 $ (934,891 ) $ 231,979 The following schedule sets forth the carrying amounts of major classes of assets and liabilities associated with the Transaction as of June 30, 2017 and December 31, 2016. June 30, 2017 December 31, 2016 Current assets (unaudited) Accounts receivable $ 4,263,448 $ 4,028,713 Inventory 2,262,316 1,521,398 Prepaid expenses and other current assets 122,599 251,516 Total current assets 6,648,363 5,801,627 Property and equipment, net 3,667,273 3,298,110 Intangible assets, net 4,673,792 5,314,045 Goodwill 2,348,331 2,348,331 Other assets 50,754 50,754 Total assets of the disposal group $ 17,388,513 $ 16,812,867 Current liabilities Accounts payable $ 1,149,062 $ 1,511,450 Accrued compensation 313,725 504,719 Other accrued liabilities 468,124 248,837 Total current liabilities 1,930,911 2,265,006 Deferred rent 77,719 84,555 Total liabilities of the disposal group $ 2,008,630 $ 2,349,561

Inventory (Tables)

Inventory (Tables)	6 Months Ended
	Jun. 30, 2017
Inventory Disclosure [Abstract]
Components of Inventory	Components of inventory were as follows: June 30, December 31, (unaudited) Finished goods $ 2,630,986 $ 1,993,543 Work-in-process 1,445,377 1,098,173 Raw materials 5,464,391 5,278,519 Total inventory $ 9,540,754 $ 8,370,235

Accrued Liabilities (Tables)

Accrued Liabilities (Tables)	6 Months Ended
	Jun. 30, 2017
Payables and Accruals [Abstract]
Schedule of Accrued Liabilities	Accrued liabilities at June 30, 2017 and December 31, 2016 consisted of the following: June 30, 2017 December 31, 2016 (unaudited) Accrued compensation $ 4,779,817 $ 5,442,723 Claims reserve 1,727,123 1,577,123 Accrued sub-contracts 464,961 483,477 Accrued professional fees 57,153 67,719 Deferred rent 154,396 155,138 Royalties 160,801 345,895 Warranty reserve 419,196 185,125 Accrued liabilities - other 367,869 409,900 Total accrued liabilities $ 8,131,316 $ 8,667,100

Debt (Tables)

Debt (Tables)	6 Months Ended
	Jun. 30, 2017
Debt Disclosure [Abstract]
Summary of Debt Outstanding	The following table presents a summary of debt outstanding as of June 30, 2017 and December 31, 2016 : June 30, 2017 December 31, 2016 (unaudited) Silicon Valley Bank Term Loan $ 3,375,000 $ 4,291,666 Less: unamortized debt issuance costs 30,147 38,301 Less: current portion 1,833,333 1,833,333 Total long-term debt $ 1,511,520 $ 2,420,032
Schedule of Remaining Principal Payments Under the Term Loan	The schedule of remaining principal payments under our Term Loans as of June 30, 2017 was as follows: 2017 $ 916,667 2018 1,833,333 2019 625,000 $ 3,375,000

Capital Stock and Share-Based20

Capital Stock and Share-Based Compensation (Tables)	6 Months Ended
	Jun. 30, 2017
Equity [Abstract]
Summary of Stock Option Activity	A summary of the stock option activity for the six months ended June 30, 2017 is presented below: Options Outstanding Options Exercisable Number of Shares Price per Share Weighted Average Exercise Price Aggregate Intrinsic Value (1) Number of Shares Weighted Average Exercise Price Aggregate Intrinsic Value (1) Balance, January 1, 2017 2,857,114 $0.61 - $6.83 $ 1.89 $ 107,063 2,367,630 $ 1.93 $ 101,071 Granted 80,000 $1.51 - $1.54 $ 1.53 Exercised (1,000 ) $0.82 $ 0.82 Canceled (117,623 ) $1.40 - $3.69 $ 2.26 Balance, June 30, 2017 2,818,491 $0.61 - $6.83 $ 1.86 $ 356,221 2,584,839 $ 1.90 $ 334,031 (1) The intrinsic value of an option represents the amount by which the market value of the stock exceeds the exercise price of the option of in-the-money options only. The aggregate intrinsic value is based on the closing price of our common stock on the NASDAQ Capital Market, as applicable, on the respective dates.
Summary of Restricted Stock Awards and Units	The following is a summary of our RSU activity for the six months ended June 30, 2017 : Number of RSUs Intrinsic Value Issued Unvested Weighted Average Grant Date Fair Value per Share Outstanding Unvested Balance, January 1, 2017 528,510 86,956 $1.29 $ 776,910 $ 127,825 Granted 165,143 129,865 $1.56 Vested — (86,956 ) $1.15 Forfeitures — — $0.00 Converted — — $0.00 Balances, June 30, 2017 693,653 129,865 $1.36 $ 1,047,416 $ 196,096 The following table summarizes the value of our unvested restricted stock awards: Number of Unvested Shares Weighted Average Grant Date Fair Value Aggregate Value of Unvested Shares Balance, January 1, 2017 743,042 $ 1.20 $ 888,764 Granted 289,000 $ 1.54 445,060 Vested (355,542 ) $ 1.21 (431,854 ) Repurchased $ — — Forfeitures (51,667 ) $ 1.14 (58,917 ) Balance, June 30, 2017 624,833 $ 1.35 $ 843,053
Details of Equity Transactions	The following details our equity transactions during the six months ended June 30, 2017 : Preferred Stock Common Stock Treasury Stock Additional Paid-in Capital Shares $ Shares $ Shares $ $ Balance, January 1, 2017 1,321,514 1,322 27,541,277 28,600 446,827 (517,987 ) 82,451,958 Exercise of stock options — — 1,000 1 — — 819 Share-based compensation — — 289,000 289 — — 321,467 Non-cash compensation — — — — — — — Stock dividends to Carilion Clinic (1) — — — 40 — — 63,592 Forfeitures of restricted stock grants — — (51,667 ) (52 ) — — 52 Repurchase of common stock — — (90,900 ) — 90,900 (143,266 ) — Balances, June 30, 2017 1,321,514 1,322 27,688,710 28,878 537,727 (661,253 ) 82,837,888 (1) The stock dividends payable in connection with Carilion Clinic’s Series A Preferred Stock will be issued subsequent to June 30, 2017 . For the period from January 12, 2010, the original issue date of the Series A Preferred Stock, through June 30, 2017 , the Series A Preferred Stock issued to Carilion has accrued $1,077,074 in dividends. The accrued and unpaid dividends as of June 30, 2017 will be paid by the issuance of 592,047 shares of our common stock upon Carilion’s written request.

Operating Segments (Tables)

Operating Segments (Tables)	6 Months Ended
	Jun. 30, 2017
Segment Reporting [Abstract]
Schedule of Revenues, Operating Loss and Assets for Reportable Segments	The table below presents revenues and operating loss for reportable segments: Three Months Ended Six Months Ended 2017 2016 2017 2016 (unaudited) (unaudited) Revenues: Technology development $ 4,625,175 $ 4,137,382 $ 8,901,624 $ 7,860,644 Products and licensing 8,951,296 10,509,522 17,793,232 20,773,273 Total revenues $ 13,576,471 $ 14,646,904 $ 26,694,856 $ 28,633,917 Technology development operating income/(loss) $ 60,659 $ 313,208 $ (304,901 ) $ (177,108 ) Products and licensing operating loss (179,873 ) (964,789 ) (1,079,591 ) (1,826,643 ) Total operating loss $ (119,214 ) $ (651,581 ) $ (1,384,492 ) $ (2,003,751 ) Depreciation, technology development $ 88,698 $ 91,127 $ 176,918 $ 186,784 Depreciation, products and licensing $ 240,504 $ 263,514 $ 571,480 $ 517,011 Amortization, technology development $ 26,169 $ 44,501 $ 66,605 $ 117,838 Amortization, products and licensing $ 437,612 $ 522,660 $ 930,590 $ 1,039,969 The table below presents assets for reportable segments: June 30, December 31, (unaudited) Total segment assets: Technology development $ 16,608,820 $ 16,923,090 Products and licensing 34,942,264 38,073,883 Total assets $ 51,551,084 $ 54,996,973 Property plant and equipment, and intangible assets, technology development $ 2,462,428 $ 2,602,803 Property plant and equipment, and intangible assets, products and licensing $ 14,771,488 $ 15,207,630

Basis of Presentation and Sig22

Basis of Presentation and Significant Accounting Policies (Details) shares in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2017shares	Jun. 30, 2016shares	Jun. 30, 2017segmentshares	Jun. 30, 2016shares
Accounting Policies [Abstract]
Number of reportable segments | segment			2
Antidilutive securities excluded from computation of net loss per share (in shares) | shares	5	5.8	4.6	5.7

Subsequent Event- Sale of Hi23

Subsequent Event- Sale of High Speed Optical Receivers Business (Details) - High Speed Optical Receivers Business - Disposed of by Sale	Aug. 09, 2017USD ($)employee	Jun. 30, 2017USD ($)	Jun. 30, 2016USD ($)	Jun. 30, 2017USD ($)	Jun. 30, 2016USD ($)	Dec. 31, 2016USD ($)
Current assets
Accounts receivable		$ 4,263,448		$ 4,263,448		$ 4,028,713
Inventory		2,262,316		2,262,316		1,521,398
Prepaid expenses and other current assets		122,599		122,599		251,516
Total current assets		6,648,363		6,648,363		5,801,627
Property and equipment, net		3,667,273		3,667,273		3,298,110
Intangible assets, net		4,673,792		4,673,792		5,314,045
Goodwill		2,348,331		2,348,331		2,348,331
Other assets		50,754		50,754		50,754
Total assets of the disposal group		17,388,513		17,388,513		16,812,867
Current liabilities
Accounts payable		1,149,062		1,149,062		1,511,450
Accrued compensation		313,725		313,725		504,719
Other accrued liabilities		468,124		468,124		248,837
Total current liabilities		1,930,911		1,930,911		2,265,006
Deferred rent		77,719		77,719		84,555
Total liabilities of the disposal group		2,008,630		2,008,630		$ 2,349,561
Revenues		2,283,440	$ 4,745,999	5,314,927	$ 9,744,708
Cost of revenues		1,568,746	3,202,491	3,801,363	6,505,287
Gross profit		714,694	1,543,508	1,513,564	3,239,421
Operating expense
Research, development and engineering		445,020	362,999	961,077	813,396
Selling, general and administrative		656,323	1,035,066	1,487,378	2,017,071
Total operating expense		1,101,343	1,398,065	2,448,455	2,830,467
Operating (loss)/income		(386,649)	145,443	(934,891)	408,954
Other (income)/expense		0			35,036
Other (income)/expense			(3,548)
(Loss)/income before income taxes		(386,649)	148,991	(934,891)	373,918
Income tax benefit/(expense)		0	56,557	0	141,939
(Loss)/income attributable to disposal group		$ (386,649)	$ 92,434	$ (934,891)	$ 231,979
Subsequent Event
Subsequent Event [Line Items]
Sale price of disposal	$ 33,500,000
Proceeds from sale of business	29,500,000
Placed in escrow	$ 4,000,000
Number of employees expected to be hired by buyer | employee	49
Transition costs, monthly payment	$ 300,000
Transition period	5 months

Inventory (Details)

Inventory (Details) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Inventory Disclosure [Abstract]
Finished goods	$ 2,630,986	$ 1,993,543
Work-in-process	1,445,377	1,098,173
Raw materials	5,464,391	5,278,519
Total inventory	$ 9,540,754	$ 8,370,235

Accrued Liabilities (Details)

Accrued Liabilities (Details) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Payables and Accruals [Abstract]
Accrued compensation	$ 4,779,817	$ 5,442,723
Claims reserve	1,727,123	1,577,123
Accrued sub-contracts	464,961	483,477
Accrued professional fees	57,153	67,719
Deferred rent	154,396	155,138
Royalties	160,801	345,895
Warranty reserve	419,196	185,125
Accrued liabilities - other	367,869	409,900
Total accrued liabilities	$ 8,131,316	$ 8,667,100

Debt - Additional Information (

Debt - Additional Information (Details)	May 08, 2015USD ($)installment	Sep. 30, 2015USD ($)installment	Jun. 30, 2017USD ($)	Dec. 31, 2016USD ($)
Debt Instrument [Line Items]
Aggregate term loan balance			$ 3,375,000	$ 4,291,666
Term Loan | Silicon Valley Bank
Debt Instrument [Line Items]
Debt, face amount	$ 6,000,000
Debt, number of monthly payment | installment	48
Early termination fee	2.00%
Effective interest rate			6.25%
Term Loan | Silicon Valley Bank | Prime Rate
Debt Instrument [Line Items]
Debt, additional interest above prime rate	2.00%
Term Loan | Silicon Valley Bank | Sixth Loan Modification Agreement
Debt Instrument [Line Items]
Debt, monthly principal payments	$ 125,000
Term Loan | Silicon Valley Bank | Seventh Loan Modification Agreement
Debt Instrument [Line Items]
Debt, face amount		$ 1,000,000
Debt, number of monthly payment | installment		35
Debt, monthly principal payments		$ 27,778
Debt, additional interest above prime rate		2.00%
Minimum cash balance		$ 5,000,000
Liquidity covenant component, accounts receivable percentage		60.00%
Liquidity covenant component, outstanding principal loan balance multiplier		1.5

Debt - Summary of Debt Outstand

Debt - Summary of Debt Outstanding (Details) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Debt Disclosure [Abstract]
Silicon Valley Bank Term Loan	$ 3,375,000	$ 4,291,666
Less: unamortized debt issuance costs	30,147	38,301
Less: current portion	1,833,333	1,833,333
Long-term debt obligations	$ 1,511,520	$ 2,420,032

Debt - Remaining Principal Paym

Debt - Remaining Principal Payments Under the Term Loan (Details) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Debt Disclosure [Abstract]
2,017	$ 916,667
2,018	1,833,333
2,019	625,000
Silicon Valley Bank Term Loan	$ 3,375,000	$ 4,291,666

Capital Stock and Share-Based29

Capital Stock and Share-Based Compensation - Additional Information (Details) - USD ($)	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Equity [Abstract]
Expected dividend yield	0.00%
Stock options granted (in shares)	80,000
Aggregate outstanding stock options (in shares)	2,818,491		2,857,114
Outstanding stock options, weighted average remaining contractual term	4 years 9 months 6 days
Exercisable stock options (in shares)	2,584,839		2,367,630
Exercisable stock options, weighted average remaining contractual term	4 years 6 months 6 days
Share-based compensation	$ 321,756	$ 465,028
Stock-based compensation expense not yet recognized	$ 200,000
Weighted average remaining service period	1 year 8 months

Capital Stock and Share-Based30

Capital Stock and Share-Based Compensation - Summary of Activity of Equity Incentive Plans (Details) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Options Outstanding, Number of Shares
Beginning Balance (shares)	2,857,114
Granted (in shares)	80,000
Exercised (in shares)	(1,000)
Canceled (in shares)	(117,623)
Ending Balance (shares)	2,818,491	2,857,114
Price per Share Range
Outstanding, lower limit (in dollars per share)	$ 0.61	$ 0.61
Outstanding, upper limit (in dollars per share)	6.83	6.83
Granted, lower limit (in dollars per share)	1.51
Granted, upper limit (in dollars per share)	1.54
Exercised (in dollars per share)	0.82
Canceled, lower limit (in dollars per share)	1.40
Canceled, upper limit (in dollars per share)	3.69
Options Outstanding, Weighted Average Exercise Price
Beginning Balance (in dollars per share)	1.89
Granted (in dollars per share)	1.53
Exercised (in dollars per share)	0.82
Canceled (in dollars per share)	2.26
Ending Balance (in dollars per share)	$ 1.86	$ 1.89
Additional Disclosures
Options Outstanding, Aggregate Intrinsic Value	$ 356,221	$ 107,063
Options Exercisable, Number of Shares (in shares)	2,584,839	2,367,630
Options Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 1.90	$ 1.93
Options Exercisable, Aggregate Intrinsic Value	$ 334,031	$ 101,071

Capital Stock and Share-Based31

Capital Stock and Share-Based Compensation - Summary of Restricted Stock Awards (Details)	6 Months Ended
	Jun. 30, 2017USD ($)$ / sharesshares
Number of Unvested Shares
Beginning balance (in shares) | shares	743,042
Granted (in shares) | shares	289,000
Vested (in shares) | shares	(355,542)
Repurchased (in shares) | shares
Forfeitures (in shares) | shares	(51,667)
Ending balance (in shares) | shares	624,833
Weighted Average Grant Date Fair Value
Beginning balance (in usd per share) | $ / shares	$ 1.20
Granted (in usd per share) | $ / shares	1.54
Vested (in usd per share) | $ / shares	1.21
Repurchased (in usd per share) | $ / shares	0
Forfeitures (in usd per share) | $ / shares	1.14
Ending balance (in usd per share) | $ / shares	$ 1.35
Aggregate Value of Unvested Shares
Aggregate value of shares, Beginning balance | $	$ 888,764
Aggregate value of shares, Granted | $	445,060
Aggregate value of shares, Vested | $	(431,854)
Aggregate value of shares, Repurchased | $	0
Aggregate value of shares, Forfeitures | $	(58,917)
Aggregate value of shares, Ending balance | $	$ 843,053

Capital Stock and Share-Based32

Capital Stock and Share-Based Compensation - Summary of Restricted Stock Units (Details) - USD ($)	6 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Number of Unvested Shares
Beginning balance (in shares)	743,042
Granted (in shares)	289,000
Vested (in shares)	(355,542)
Forfeitures (in shares)	(51,667)
Ending balance (in shares)	624,833
Weighted Average Grant Date Fair Value
Beginning balance (in usd per share)	$ 1.20
Granted (in usd per share)	1.54
Vested (in usd per share)	1.21
Forfeitures (in usd per share)	1.14
Ending balance (in usd per share)	$ 1.35
Intrinsic value, outstanding	$ 843,053	$ 888,764
Restricted Stock Units (RSUs) | Employee Director Compensation Plan
Number of RSUs
Beginning balance (in shares)	528,510
Granted (in shares)	165,143
Vested (in shares)	0
Forfeitures (in shares)	0
Converted (in shares)	0
Ending balance (in shares)	693,653
Number of Unvested Shares
Beginning balance (in shares)	86,956
Granted (in shares)	129,865
Vested (in shares)	(86,956)
Forfeitures (in shares)	0
Converted (in shares)	0
Ending balance (in shares)	129,865
Weighted Average Grant Date Fair Value
Beginning balance (in usd per share)	$ 1.29
Granted (in usd per share)	1.56
Vested (in usd per share)	1.15
Forfeitures (in usd per share)	0
Converted (in usd per share)	0
Ending balance (in usd per share)	$ 1.36
Intrinsic value, outstanding	$ 1,047,416	776,910
Intrinsic value, unvested	$ 196,096	$ 127,825

Capital Stock and Share-Based33

Capital Stock and Share-Based Compensation - Equity Transactions (Details) - USD ($)	6 Months Ended	13 Months Ended
	Jun. 30, 2017	May 31, 2017
Increase (Decrease) in Stockholders' Equity
Stockholder's equity beginning balance	$ 35,089,688
Preferred stock beginning balance (in shares)	1,321,514
Common stock beginning balance (in shares)	27,541,277
Treasury stock beginning balance (in shares)	446,827
Exercise of stock options (in shares)	1,000
Forfeitures of restricted stock grants	$ 52
Repurchase of common stock (in shares)		(205,500)
Preferred stock ending balance (in shares)	1,321,514
Common stock ending balance (in shares)	27,688,710
Treasury stock ending balance (in shares)	537,727
Stockholder's equity ending balance	$ 33,691,274
Carilion Clinic | Series A Preferred Stock
Increase (Decrease) in Stockholders' Equity
Accrued dividends	$ 1,077,074
Stock dividends for preferred shareholders (in shares)	592,047
Preferred Stock
Increase (Decrease) in Stockholders' Equity
Stockholder's equity beginning balance	$ 1,322
Preferred stock beginning balance (in shares)	1,321,514
Exercise of stock options	$ 0
Exercise of stock options (in shares)	0
Share-based compensation	$ 0
Share-based compensation (in shares)	0
Non-cash compensation	$ 0
Non-cash compensation (in shares)	0
Stock dividends to Carilion Clinic	$ 0
Stock dividends to Carilion Clinic (in shares)	0
Forfeitures of restricted stock grants	$ 0
Forfeitures of restricted stock grants (in shares)	0
Repurchase of common stock	$ 0
Repurchase of common stock (in shares)	0
Preferred stock ending balance (in shares)	1,321,514
Stockholder's equity ending balance	$ 1,322
Common Stock
Increase (Decrease) in Stockholders' Equity
Stockholder's equity beginning balance	$ 28,600
Common stock beginning balance (in shares)	27,541,277
Exercise of stock options	$ 1
Exercise of stock options (in shares)	1,000
Share-based compensation	$ 289
Share-based compensation (in shares)	289,000
Non-cash compensation	$ 0
Non-cash compensation (in shares)	0
Stock dividends to Carilion Clinic	$ 40
Stock dividends to Carilion Clinic (in shares)	0
Forfeitures of restricted stock grants	$ (52)
Forfeitures of restricted stock grants (in shares)	(51,667)
Repurchase of common stock	$ 0
Repurchase of common stock (in shares)	(90,900)
Common stock ending balance (in shares)	27,688,710
Stockholder's equity ending balance	$ 28,878
Treasury Stock
Increase (Decrease) in Stockholders' Equity
Stockholder's equity beginning balance	$ (517,987)
Treasury stock beginning balance (in shares)	446,827
Exercise of stock options	$ 0
Exercise of stock options (in shares)	0
Share-based compensation	$ 0
Share-based compensation (in shares)	0
Non-cash compensation	$ 0
Non-cash compensation (in shares)	0
Stock dividends to Carilion Clinic	$ 0
Stock dividends to Carilion Clinic (in shares)	0
Forfeitures of restricted stock grants	$ 0
Forfeitures of restricted stock grants (in shares)	0
Repurchase of common stock	$ (143,266)
Repurchase of common stock (in shares)	90,900
Treasury stock ending balance (in shares)	537,727
Stockholder's equity ending balance	$ (661,253)
Additional Paid-in Capital
Increase (Decrease) in Stockholders' Equity
Stockholder's equity beginning balance	82,451,958
Exercise of stock options	819
Share-based compensation	321,467
Non-cash compensation	0
Stock dividends to Carilion Clinic	63,592
Repurchase of common stock	0
Stockholder's equity ending balance	$ 82,837,888

Capital Stock and Share-Based34

Capital Stock and Share-Based Compensation - Stock Repurchase Program (Details) - USD ($)	6 Months Ended	13 Months Ended
	Jun. 30, 2017	May 31, 2017	May 31, 2016
Equity [Abstract]
Authorized share repurchase amount			$ 2,000,000
Stock repurchased during period (in shares)	0
Treasury shares repurchased (in shares)		205,500
Amount of stock repurchased		$ 200,000

Operating Segments - Additional

Operating Segments - Additional Information (Details) - segment	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Segment Reporting [Abstract]
Number of operating segments			2
Revenues | Government Contracts Concentration Risk | U.S. Government
Segment Reporting Information [Line Items]
Percentage of total consolidated revenues by customer	38.00%	28.00%	36.00%	28.00%
Revenues | Geographic Concentration Risk | Outside of the United States
Segment Reporting Information [Line Items]
Percentage of total consolidated revenues by customer	28.00%	29.00%	27.00%	32.00%
Revenues | Geographic Concentration Risk | China
Segment Reporting Information [Line Items]
Percentage of total consolidated revenues by customer	7.00%	19.00%	10.00%	19.00%
Revenues | Customer Concentration Risk | Major Customer One
Segment Reporting Information [Line Items]
Percentage of total consolidated revenues by customer	0.00%	14.00%	5.00%	15.00%

Operating Segments - Revenues a

Operating Segments - Revenues and Operating Loss for Reportable Segments Not Including Discontinued Operations (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Revenues:
Technology development	$ 4,625,175	$ 4,137,382	$ 8,901,624	$ 7,860,644
Products and licensing	8,951,296	10,509,522	17,793,232	20,773,273
Total revenues	13,576,471	14,646,904	26,694,856	28,633,917
Segment Reporting Information [Line Items]
Total operating income (loss)	(119,214)	(651,581)	(1,384,492)	(2,003,751)
Technology development
Segment Reporting Information [Line Items]
Total operating income (loss)	60,659	313,208	(304,901)	(177,108)
Depreciation	88,698	91,127	176,918	186,784
Amortization	26,169	44,501	66,605	117,838
Products and licensing
Segment Reporting Information [Line Items]
Total operating income (loss)	(179,873)	(964,789)	(1,079,591)	(1,826,643)
Depreciation	240,504	263,514	571,480	517,011
Amortization	$ 437,612	$ 522,660	$ 930,590	$ 1,039,969

Operating Segments - Assets for

Operating Segments - Assets for Reportable Segments (Details) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Total segment assets:
Total assets	$ 51,551,084	$ 54,996,973
Property plant and equipment, and intangible assets	6,882,576	6,780,838
Technology development
Total segment assets:
Total assets	16,608,820	16,923,090
Property plant and equipment, and intangible assets	2,462,428	2,602,803
Products and licensing
Total segment assets:
Total assets	34,942,264	38,073,883
Property plant and equipment, and intangible assets	$ 14,771,488	$ 15,207,630

Contingencies and Guarantees (D

Contingencies and Guarantees (Details)	1 Months Ended	3 Months Ended
	Apr. 30, 2017USD ($)	Sep. 30, 2016USD ($)purchase_order	Jun. 30, 2017USD ($)	Jun. 30, 2015USD ($)	Sep. 30, 2014USD ($)
Loss Contingencies [Line Items]
Number of non-cancelable purchase orders executed | purchase_order		2
Non-cancelable purchase order delivery period		18 months
Tunable Lasers
Loss Contingencies [Line Items]
Non-cancelable purchase order commitment		$ 1,400,000
Non-cancelable purchase order commitment remaining			$ 500,000
Amplifiers
Loss Contingencies [Line Items]
Non-cancelable purchase order commitment remaining			$ 700,000
Preliminary Audit Report | Defense Contract Audit Agency
Loss Contingencies [Line Items]
Claimed cost, subject to potential penalty				$ 1,100,000	$ 800,000
Litigation settlement, offered, amount	$ 150,000