My Chung - President and Chief Executive Officer Dale Messick - Chief Financial Officer.

Neil Cataldi - Blueprint J.D. Padgett - Almak Capital Edward Perry - Pride Investor Gregg Hillman - First Wilshire Securities Management.

Good day ladies and gentlemen and welcome to the Luna Innovations Incorporated Second Quarters 2015 Earnings Conference Call. At this time all participants are in listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time.

[Operator Instructions] I would now like to turn the conference over to Dale Messick, Chief Financial Officer. You may begin..

Thank you, Nicole. Good afternoon everyone and thank you for joining us today as we review our operating results for the second quarter of 2015. Recording of this conference call will subsequently be posted on our website.

Before we proceed with your presentation today, let me remind each of you that statements made in this conference call, as well as in our public filings, releases and websites which are not historical facts may be forward-looking statements that involve risk and uncertainties and are subject to changes at any time, including but not limited to statements about our expectations regarding future operating results or an ongoing prospects of the company following our combination with Advanced Photonix.

We caution investors that any forward-looking statements made by us are management’s beliefs based on currently available information and should not be taken as a guarantee of future results or performance.

Actual results may differ materially as a result of a variety of factors discussed in our latest forms filed with the Securities and Exchange Commission.

We disclaim any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward-looking statements to reflect future events or developments expect as required by law.

There is more complete information regarding forward-looking statements, risks and uncertainties in the company’s filings with the SEC available on the SECs website and our website. And at this time I’d like to turn the call over to My Chung, President and CEO of Luna Innovations..

Thank you, Dale, and thank you all for joining us today. This is an exciting time for Luna and I’m happy to be here today to share with you the progress that we have made following the merger with Advanced Photonix.

As the transaction was completed mid-quarter in May, the financial results we released today reflect the results for the full quarter for the historical Luna entity, but only about a half of the quarter of that result for the historical API entity.

However, these partial results confirms our belief that this transaction will accelerate our path to profitability as we were already able to achieve the positive adjusted EBITDA in our first combined quarter.

The savings in having only one publicly listed company rather than two and the leveraging of shared expenses and resources will accelerate our path to profitability while creating a bigger and stronger company. We are seeing traction in each of our key strategic growth initiatives and we are optimistic about our ability to continue to grow.

Our product and license revenues were $6.3 million for the second quarter which included $3.6 million of revenue from API for this partial period. We had $2.7 million of revenue from the historical Luna product operations which represents the 35% growth over the second quarter of last year.

This growth came largely from sales of our ODiSI system for distributed high resolution measurements of strain and temperature. We are making good headway in penetrating the strain measurement market especially as it relates to the testing of composite elements in structures.

We are pleased to be able to tell you today that during the second quarter we had our first multi-unit shipment of ODiSI systems to a large multinational aerospace manufacturer.

We view this multiunit order as conformation of the value that our solution offers in providing far greater insight into the performance of composite structures that one is able to get using conventional electrical strain gauges and thermocouples.

The key strategic growth initiative for API relates to the increasing demand for their Picometrix high speed optical receivers for next generation 100 gigabit systems and the deployment of fiber-to-the-home and premise. We are actively working with system and component manufacturers to capitalize on this opportunity.

In anticipation of this increase demand, we are also in the process of expanding our manufacturing capabilities in Ann Arbor. Our pro forma revenues were $12.4 million for the second quarter of 2015 compared to combined revenues of $12.9 million for the June quarter of 2014.

Those of you who have followed API for some time will recall that the company had very strong performance in the June and September quarters of 2014 with revenues in the neighborhood of $7.5 million in each of those quarters and then dropping significantly down to $5.8 million in the December quarter driven principally in the high speed optical receiver part of the business as a couple of very large customers pushed out their capital spending.

In the first half of 2015, we have in fact seen the HSOR business peaking back up, not yet to the level of mid-2014 but growing steadily from the December low.

The remaining areas of our business the Optosolutions group focused on custom optoelectronic components of the sub systems, the technology development group focused on contract research largely funded by U.S.

government and the Terahertz Group focused on sensing solutions utilizing Terahertz frequencies all performed solidly and were in line with our expectation for the quarter.

The Terahertz team in fact was successful in winning a multiunit deal which unfortunately we cannot share any details at this time, but does provide us with continued confidence in this new technology.

From an operation standpoint as you might imagine, we have spent a good deal of time visiting the various locations meeting with employees and improving our understanding of the operations.

We have been very impressed by the quality of the team, their knowledge of their markets, customers, products and operations and the excitement of our employees and that potential this merger represents in creating a stronger and more successful company. With that, I would turn the call back over to Dale..

Thank you, My. As you know, our merger with API was completed on May 8th and so our reported results include the operations of API from that closing of the merger through June 30.

With API results being included for just a portion of the corner and not at all in comparative year ago period, results are little more difficult to compare and analyze and so I’ll focus on the revenue growth in the legacy Luna business to be comparative.

Before I go into the Luna numbers, let me level set with the $10 million of revenue we recognized in the second quarter $4 million of that was realized from the operations of API including $3.6 million of product revenue and $0.4 million of technology development revenue.

Revenues therefore from the legacy Luna business were $6 million consisting of $2.7 million of product and licensing revenue and $3.3 million of technology development revenue. Luna’s historical business grew partially 15% over Q2 of last year from $5.2 million to $6 million.

That growth came primarily from the product and license segment with the historical technology development business segment growing approximately $100,000.

Luna’s product and licensing revenues was $2.7 million in the second quarter of 2015 compared to $2 million for the second quarter of last year or growth of 35% and as My mentioned in his comments the increased sales of ODiSI products drove the growth in the Luna products revenue versus Q2 of last year.

Gross profit from the legacy Luna business was $2.7 million or 44% of revenues for the second quarter 2015 compared to $2 million or 38% of revenues for the second quarter of 2014. As the products and license segment continues to grow to represent a greater proportion of our total revenues we continue to see margin improvement.

With the inclusion of API, our overall gross profit was $4.2 million or 42% of revenues. Operating expenses increased to $6.3 million in the second quarter of 2015 compared to $3 million in the second quarter of 2014.

Operating expenses in Q2 of 2015 included approximately $1.7 million of non-recurring cost associated with the merger transaction including legal accounting fees, investment banker cost and cost of preparing and distributing the registration statement.

The operations of API also added approximately $1.1 million to our operating expenses for the period.

In addition, the allocation of purchase price from the merger resulted in a step-up in basis of certain assets and the recognition of new and tangible assets the depreciation and amortization of which added an incremental $0.3 million of operating expenses for the period.

Because of the impact of the transaction cost to our results for the quarter, our operating loss grew to $2.2 million compared to $1 million in Q2 of last year.

Again, excluding those transaction cost our operating loss improved significantly to approximately $400,000, if it would have been more than $0.5 million improvement over the prior year quarter.

With the non-recurring charges for the merger in Q2 and the increased amortization for purchased accounting our operating improvement and the benefit of the merger can be better understood from an adjusted EBITDA perspective.

After excluding the non-recurring charges associated with the merger of $1.7 million, our adjusted EBITDA for the second quarter of 2015 was a positive $581,000 compared to a negative adjusted EBITDA of $542,000 in second quarter of 2014.

Year-to-date, we’ve recognized revenues of $15.4 million compared to $9.7 million of revenue for the first half of 2014. Again the merger with API during the second quarter contributed $4 million to our year-to-date revenue.

The historical Luna business grew 17% to $11.4 million for the first half of 2015 compared to $9.7 million for the first half of 2014. Revenue for the historical Luna TDT business improved to $6.2 million year-to-date compared to $5.9 million for the first half of 2014.

Revenues from the historical Luna product and licensing segment grew 36% to $5.2 million for the first six months of 2015 compared to $3.8 million for the first six months of 2014.

Increased sales of Luna’s ODiSI products and optical back scallary flictometer products primarily drive the 36% increase in products and licensing revenues associated with historical business.

Year-to-date gross profit for the legacy Luna business improved to $4.9 million or 43% revenue compared to $3.5 million or 36% revenues for the first half of last year. Again a greater concentration of products and licensing revenues as part of our overall revenue mix price improved margins. With the inclusion of API our overall gross margin was 42%.

Operating expenses $11.2 million for the first half of 2015 compared to $6.5 million for the first half of 2014. OpEx for the first six months of 2015 included 3.5 million of transaction related expenses.

As noted in the quarter results, operating expenses year-to-date also include $1.1 million from the operations of API during the stuff period and $0.3 million of incremental depreciation and amortization during this down period.

As a result to the non-recurring transaction cost, our operating loss grew to $4.7 million for the first half of 2015 versus an operating loss of $2.9 million for the first half of 2014.

The sale of our medical shape-sensing business to Intuitive Surgical in January of 2014 provided a total benefit of $10.5 million in discontinued operations and income taxes to the bottom line for first half of 2014. There were no discontinued operations in our results for the first six months of 2015.

And accordingly, with that $10.5 million benefit, we reported a net income of $7.6 million or $0.51 per share for the first half of 2014 compared to a net loss including transaction related expenses of $4.8 million or $0.26 per share for the first six months of 2015.

Again, looking at adjusted EBITDA to normalize after non-recurring charges and benefits, for the first half of 2015 we achieved positive adjusted EBITDA of $203,000 compared to an adjusted EBITDA loss of nearly $2 million for the first half of 2014.

Turning to the balance sheet, accounting for the merger with API increased our total assets to $47.7 million at June 30th compared to $27.6 million of December 31st.

In addition to the intangible assets that we’ve acquired in the merger, we’ve recorded – I’m sorry, in addition to the tangible assets we acquired the merger – we recorded approximately $12 million in tangible assets as part of our primarily purchase price allocation.

We’ve also entered into a new $6 million debt facility to replace the historical API once they were outstanding and 5.9 million [indiscernible] outstanding as of June 30th. [Indiscernible] four years with monthly payments of $125,000 plus accrued interest.

For those who have followed Luna for some time you may recall we previously had – similar $6 million term loan that was just ending at the time of the merger and also have been caring similar amortization $125,000 per month.

So from a cash flow perspective payments under this new loan will be very similar to the cash flow that we have been experiencing over previous 4 years. We ended the second quarter 2015 with cash of $7.5 million compared to $14.1 million at the December 31, 2014 and $13.3 million at the end of Q1.

This higher level cash usage from second quarter of 2015 included cash payments of approximately $3.9 million of cash associated with the merger and some subsequent severance payments.

In addition, our tables balance at API had grown during the period leading up to the merger and we had to use some cash right afterward to get back to the more current status on our payables.

If you look at the cash flow statement you’ll see that from a working capital perspective we also made some investment inventory that we ramp up for plan growth as My mentioned in his comments as well. With that I’d like to turn the call back over to My..

Thank you, Dale. And as I mentioned at the beginning of the call, I think that the primary takeaway to understand our performance for the core and the benefits we can realize from the merger is that to look at the positive adjusted EBITDA in this first period. We’re excited about our prospects. We’re pleased with the team that has now joined Luna.

And at this point, I’d be happy to take any questions that you may have..

[Operator Instructions] Our first question comes from the line of Neil Cataldi of Blueprint. Your line is now open..

Hi, guys. Nice quarter. I got a few questions.

So correct me, if I’m wrong, but API would have done 6.1 million in this past quarter if you’d captured all three months right?.

Right. That’s correct..

Okay. Can you tell us what API did in the first quarter? I don’t think they ever put those numbers out..

I think – if you look at the first half of 2015 we would have had pro-forma revenues of 12.4, – so the API revenues were about the same in the first quarter..

Okay. So roughly 6 million as well. That means that that business has stabilized which is a good sign. The S4 related to the merger which is filed in March discloses some projections for the both of the businesses moving forward.

I’m just curious what’s your view today on how investors should look at those projections given where you are? I think if we annualized the revenue we’re little bit behind the $60 million schedule but EBITDA seems to be quite a bit ahead.

Any comments on that?.

Yeah, I would say that it was a slower start for them then they had originally anticipated. I’ve got to believe that this transaction impacted some of their business. But our projection going forward is pretty much tracking the tables that are in the S4. Little bit delayed little bit but clearly the opportunity are the same..

And should we expect positive EBITDA going forward on a quarterly basis?.

That’s kind of how we are mapping it out..

Okay. Along the same lines of – or the same subject to those projections I see that the Luna products and licensing segment is sort of slated for 50% type growth next year I mean you guys just had a great quarter.

Can you tell us a little bit more about the catalyst for this growth? Have there been recent customer wins or anything? I mean we don’t see a lot of press releases.

So what should we use to sort of get our hands around where the growth is coming from today?.

The announcement I made today in terms of big win from a major aerospace company I think is the positive indication that we’ve got and that we’re on the right track. Right, the two biggest markets for us for composites testing is automotive is by far the largest and then aerospace is the one that’s there today..

Okay. Have there been – I mean this is a great news that there has been a multi-unit shipment. Is there a way to quantify the number of wins or any way for you to quantify what the pipeline looks like for us? I know I think it was on a call last November.

You had noted that companies across both of these industries were in various stages of testing and proving out the technology.

How have those tests progressed?.

I think that the progress that we’re making is indicated by growth both in the quarter as well in the half – supports our belief that we’re in the right space. Our limiting factor by far is the speed with which we’re going add direct sales people.

Early on last year we came to the conclusion that current channel selling strain gauges or thermocouples were not actively sell our products, so we bit the bullet and said no, we’re going to build our own direct sales force.

We staffed up here in North America with two very, very strong sales people; we’re in the midst of adding another person in Europe and we’re looking for major expansion in [age] [ph] as well. So we’re gated in a nutshell by the speed with which we can add direct people..

Okay. Shifting gears to the API side. Same type of question. These projections show quite a bit of growth there next year. I think the numbers are 60%. In the past, API had announced and disclosed some design wins.

Just curious if there had been any design wins you guys can talk about this year and also in the press release today you talked about the market in North America and Asia, what should the geographic mix look like going forward and maybe if you could specifically touch on China that would be great..

Yeah, so we continued to do well in that high-speed optical receiver market we did take a step back in Q4 last year and slow ramp up in the January quarter, but things have picked up. I think the leading indicator is the comment that I made about expanding our manufacturing capacity, try and get ahead of the curve.

The two major drivers for this business will be the rollout of 100 gigabit for data centers as well as for the metro as well as fiber-to-the-home especially within China..

Okay. One more question on China, I know, Alcatel-Lucent is a big customer of the company, and ZTE is a big Chinese company that had received a design win last year that API had announced and that other sales side analyst in the past had talked about both of these companies appeared to have a very strong position in China right now.

Alcatel-Lucent actually announced a $1 billion plus order recently.

So what is the nature of the relationships as it pertains to your opportunity with optics and should their success in infrastructure rollouts correlate or flow through to your revenue in any way?.

I would expect that to be the case..

Yes, okay..

Customers are very good partners for us. Alcatel-Lucent took a step back a little bit when they sold that manufacturing site that they have in Italy to Flextronics. I think they’re back in the process of ramping back up and I think ZTE took a step back a little bit with the political situation in China.

But I think that’s settling out and they should be back in a growth mode..

Okay. Two more real quick and then I’ll get back in the queue.

Synergies with the acquisition the filing those $3 million as a number we can circle, how much have you realized thus far, I think public company costs and salaries accounts for 2 million of that, so has most of that 2 million been captured already?.

I believe so, as you see from the positive adjusted EBITDA that we’ve achieved at the revenue level we’re well ahead of where we originally have projected..

Okay. So maybe a little bit more to go but the low hanging fruit has been captured..

Exactly..

Okay.

Last question any update on the progress with Intuitive Surgical and the royalty payments?.

No, they continue to work feverishly on trying to achieve that milestone and we continue to send someone there over to run tests on a regular basis. So nothing in particular to announce today, other than we do see the energy level being put into it..

Alright, great. Thanks guys..

Thanks Neil..

Thanks Neil..

Thank you. Our next question comes from the link of J.D. Padgett of Almak Capital. Your line is now open..

Neil was very thorough there so that was helpful, but a couple of follow-on questions to that for those that are less similar story.

With the Intuitive dynamic what specifically are the milestones we need to achieve there to be able to capture that additional income stream?.

The milestone that they are striving to achieve is the ability to acridly sell where the tip of the fiber is without the need for camera or an x-ray. So keep in mind that the application is a robotic surgical system and we’re manipulated that flexible cath or into the body. And they want to know exactly where that tip is before they start cutting.

So we suspect that we’re – we had always been working with Intuitive on was to indeed pinpoint that tip of that fiber in location to a very high degree of efficacy in order to give the physician the confidence to start the surgical procedure..

You guys have confidence from a technological standpoint, that’s achievable?.

No, absolutely. And the team that we send over along with a transaction intuitive was some of our brightest engineers. They took our CTL first that was a first criteria that they had to do transaction and once market greed and he picked that top notch team to go along with him..

And what if kind of [indiscernible] that dictates when that milestone payment is due or not if there is some third party that needs to sign off on – in terms of validating that technology or how does that work?.

Well there is a test procedure that was well documented early on to prove that the technology met the specs. They have multiple system set up. The tests were repeat ability and that is a system that we use to confirm whether they have achieved it or not. They have to do it multiple times on multiple systems..

Okay. So you are still optimistic or that’s achievable on some point of we could get that milestone revenue and hopefully participate in royalties beyond that..

Yes, the team over there is incentivized as well. I mean this is such a high important project for Intuitive. I’ve got to believe that they are getting constant calls from the folks in California..

Right. Okay.

And then on cash usage, looking forward our most of the kind of transaction related expenses behind us or there any sort of one time dynamics that are going to drain additional cash looking forward?.

Certainly, the big expenses of the transaction are behind us. So we should get to a much more normalized cash dynamic here is in Q3 and beyond. Even My mentioned that we are doing some capacity expansion, so there is some CapEx that has to go along with that. There is also some financing opportunities for that CapEx as well we’re looking into.

I don’t think you’re going to just in case anything like a cash usage that we saw in Q2..

Okay. And the staffing requirements that you’ve talked about in terms of fielding in direct sales force. Is that kind of embodied in some of the projections that we’re previously shared in the perspectives or in terms of just impacting expenses line..

Yes, so the model that we use for revenue projections as well as the additional sales people is that – for every sales person that we bring on board we give him as a sorry point of $1 million sales quarter.

So if you take the sensing number our project out what the sensing number would be by a 1 million roughly that would be the number sales people that we would like to hire over the next three years..

Okay. Was that sensing number split out specifically from the product and licensing segment..

I don’t think we actually broke it out..

It’s not, but if you look at the growth in the product and licensing segment that is predominantly sensing driven..

Right..

Okay.

And sensing being the RAC product?.

Correct..

And you’ve talked about the year-over-year delta and the revenue there is that really the first kind of initial increment of revenue from ODiSI..

No, we actually introduced a very first product prematurely in 2011 came out with a new enhanced product the first quarter of 2012 and the last year when we bought back one of the original designers for our telecomm products we revamped the ODiSI platform to the point where as we mentioned what the major aerospace company has now endorsed it..

So there was even through 2014 some material revenue from ODiSI?.

It wasn’t. I would say it was just getting started..

Okay..

Alright, the big ramp up was in the second half of 2014 and is continued..

Okay.

And for the telecomm the TNM segment of that business is your outlook there that just kind of more flattish through the next couple of years?.

No, actually. With the pickup in telecomm marker was actually you’ve seen some nice increases on the telecomm product side..

From a forecasting perspective, we would look at the sensing platform going at a much quicker rate, but we do have something in the TNM side as well..

Okay. And I guess just final question from me. Now you kind of had three months with API, and you kind of alluded the – earlier questioning with.

Are you comfortable with our – you just said you pushed out a little bit, but do they seem overall optimistic with some of the growth expectations they have for their individual product lines or you think that they just can truly ramp that dramatically..

At this stage, we’re very confident of their growth opportunities. It appears as if they have some unique capabilities and meaning service packs and the relationships that they have with certain customers seem very solid then which we point we signed off on them expanding their manufacturing capacity ahead of getting the purchase orders..

Okay. So stay tune for that down..

Right. Hopefully not..

I think you get any additional sell side or I don’t think there is any sell side coverage for the stock right now from Bareilly or anticipate that in the future..

Well, Bareilly was covering API.

Right..

I’m not sure if Brian is on the line, but I believe he is continuing to cover us. Dave, rather, I’m sorry..

Thank you, guys very much..

Thank you. And our next question comes from the line of Edward Perry of Pride Investor. Your line is now open..

Well, good afternoon, [indiscernible] executed the merge very well as it appears..

Could you speak up a little bit louder, I’m in trouble here hearing you..

I’m sorry..

I’m having a little bit of trouble here hearing you..

Okay. It looks like a good Q and that you’ve executed well on the merger..

Yes, no, we are very pleased and I think part of it was that we had a group of people that were really excited about doing something game changing..

Good..

Very well received by both sides of the companies and it went right from doing the merger to execution..

And I’m glad to see that you retained on press store. I think you one of the few people that understands the scope of what API products are.

Are there any residuals from those superiors’ lawsuits that came post-merger?.

Yes, those lawsuits are still out there and we’ve not affected a settlement yet, but we still don’t believe that there is significant exposure on us..

Okay. Good. Another question. You mentioned that you’re expanding HSOR manufacturing in Ann Arbor.

Does that exclude like a second shift?.

That does.

Good..

As well as it is enhancing the equipment..

Okay. And I’ve noticed going over the bios carefully on the Luna’s executive team as well as their directorships. Luna has very significant depth of experience and new development marketing and acceptance in commercial markets.

Is Luna going to provide any kind of assistance – helping API achieve it faster, acceptance of the Terahertz Group products?.

Terahertz is actually is doing very well today. As I mentioned in the script they’ve actually won a multi-unit deal. So very stable still trying to build their business overall, but far ahead this year then they have been previously..

Good, we missed the last conference call, so we don’t have that information. Okay. When you mentioned you're moving towards direct sales approach, does that include API side because they were using [indiscernible] resellers to do their sales..

We’ll be only for our sensing product..

I see. Okay. And about our, the old [indiscernible] what API used to call API Canada is that still in the Optoelectronic..

That is. I believe there is staff of three or four people still up in Canada.

Okay. Alright, good. That’s all I have for now. Thank you so much..

Thank you for joining us today..

Thank you. Our next question comes from the line of Gregg Hillman of First Wilshire Securities Management. Your line is now open..

Hey, good afternoon..

Hey, Gregg..

Fiber to the home, -- what you’ve been reading recently in terms of what’s going on in that and like independent indicators could I look through the see if that markets trying to gain traction before even appears sales acceleration here for API..

I missed, what market are you asking about?.

Fiber to the home, like in China for example..

Fiber to the home..

What indications do you getting right now and where could I look for into get independent confirmation.

Market is going to start takeoff to significant sales growth?.

I would say they are again ready to get back to deployment. I think the setback that they had was the political situation was ahead of all the carriers in China but I believe that’s all been settled now and then indications that we’re getting is that over the next quarter or so you’ll see the ramp up start up again..

Okay. And My just wondering maybe if you could explain to me the Cus divisions for API versus Luna. I think [indiscernible], but I mean API had some other than HSOR and Terahertz they had some other indications and I think made optical test equipment just as you had some optical test equipment.

Could you compare and contrast those two businesses reach of the companies and kind of exactly explain me what they are..

Yes, I think the only test equipment is N80 is that they have is Terahertz product line. The opponents that they make out in the camera real California are Optoelectronic solutions [indiscernible] small sub-assemblies then it is test products..

Okay. And then you made optical [indiscernible] types and then all of your businesses are pretty much test type equipment at Luna..

That is correct..

And then what was happening in the quarter with their – quarter just recorded for their optical components at APR and do you anticipate growth through that? I mean do you know what the amount lies at dollar about the quarter just recorded?.

Gregg, its Dale. We haven’t broken out anywhere the split of revenues within API. I think that we’ve talked about the overall API business score Q1 and Q2 being up a little bit from the low that we had in December quarter.

I would characterize that as we had a little bit of growth in the HSOR side little bit of softer on the Opto Solutions side but not dramatically and the growth that we did see from Q4 into more than HSOR side..

Okay. And then for multi-client win that you mentioned for the Terahertz.

What vertical in – was that in aerospace or what was that in?.

No. It was actually in manufacturing, pipe manufacturing..

Okay..

They continue to work in aerospace, why, they have a government contract to work from that, but the big win for them were was multi-unit order for a manufacturing setup..

And they have been able to bring the price down for the Terahertz unit, I think used to be by 100,000..

Yes, they have done an excellent job of cost reducing that system..

So what’s the price down to -- is it down….

It is closer to 50 then..

Yes, more than $50,000 price range..

Okay. So that’s a pretty significant win for them..

Yes, that team is very pumped up right now..

And similarly what is the minimum ODiSI system cost or what is one test unit cost for ODiSI?.

About thousand.

About what?.

$50,000s..

So surprisingly similar, but you have to buy multiple systems [indiscernible] you need more than one system..

Yes, because if you look at the structure that you’re trying to test and with composites you’re trying to cover is much of the surface issue you possibly can and so depending on the way that you’ve laid out the aircraft for the test you’ll need multiple systems as well as multiple fibers..

Okay..

If you look little bit further out in our product roadmap clearly the market is looking for multi-channel system. So as we truly get into the final testing side you’ll see that being rolled out..

Which would be a much larger ticket..

Right..

So being hundreds of thousands of dollars for multi..

Right..

Channel test systems. Okay. Sounds good. And then Terahertz you returned to the market size for it at this point..

I think we're still trying our wrap our arms around that, as new technology that you're trying to displace existing ones. It's hard to say to tell you the truth. And I think that's what is making every Terahertz manufacturer kind of hesitate a little bit at this point..

Okay. Well, anyways congratulations as you're doing really good so far on the integration. Keep up the good work and we'll talk again soon..

Okay. Thanks a lot Greg..

Thank you. And our next question comes from the line of Bill Ackman, Private Investor. Your line is now open..

Hey Bill..

Please check your mute button Mr. Ackman..

Bill?.

Again Mr. Ackman, please check your mute button. Our next question comes from the line of J.D. Padgett of Almak Capital. Your line is now open.

Just a couple of quick follow-ups.

Fiber-to-the-home with Verizon, is there any positioning on either the aluminum side or the API side there?.

I don't believe so. We heard them mentioning also an opportunity with Verizon..

Is it just a different set of technology and what's being here China, for instance, or--?.

I've got to believe that one of the hurdles is that they are fairly well-established. It's not a Greenfield as it would be to attacking the Asia market. It’s the only thing I can think of. Bio spin around for decades. First ones to rollout fiber-to-the-home..

And is it kind of a similar dynamic for you with the core test stuff from aluminum side, when that stuff well being able to test their network and so forth?.

It does. We're more in the engineering development rather than deployment. But yes, we've seen an uptick in our ForEx for that same application or the same technology..

And then what will be the full share count once the next quarter is recorded?.

Yeah, we're there about 28.5 million shares outstanding..

Okay. And then just one background question.

You pronounced Carilion, large shareholder for Luna?.

Correct..

How did they come to be such a large shareholder?.

They were an early investor in the company when the company was private. They are a non-profit health organization here in Luna. In fact, until recently we operated one of the buildings..

They have just been our supporter of the technology and -- player along for the right for the long-term?.

Yeah. Absolutely..

Okay. Thank you guys very much..

Thank you..

Thank you. [Operator Instructions] And I'm showing no further questions at this time. I'd like to hand the call back over to My Chung for any closing remarks..

So, I want to thank everyone for joining us today. This has to be one of the very most successful conference call. But we're excited. Things are going very, very well with the terms action and we look to deliver very, very positive results in the near future. Thank you..

Ladies and gentlemen thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Have a great day everyone..