0001239819-23-000131 | 10-Q | XBRL Viewer

Intangible assets, net (Tables)

9 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible assets, net at September 30, 2023 and December 31, 2022 consisted of the following:


	Estimated Life	September 30, 2023		December 31, 2022
(in thousands)
Patent costs	1 - 5 years	$	9,291	$	9,086
Developed technology	5 - 10 years	16,969		15,924
In-process research and development	N/A	1,478		2,631
Customer relationships	5 - 15 years	4,177		4,117
Trade names	3 - 5 years	866		880
Backlog	1 - 3 years	421		331
		33,202		32,969

Patent costs		(4,857)		(4,128)
Developed technology		(8,673)		(6,830)
In-process research and development		(1,540)		(1,763)
Customer relationships		(948)		(574)
Trade names		(620)		(586)
Backlog		(421)		(338)
Accumulated amortization		(17,059)		(14,219)
		$	16,143	$	18,750

Schedule of Estimated Aggregate Amortization Based on Net Value of Intangible Assets

Estimated aggregate amortization, based on the net value of intangible assets at September 30, 2023, for each of the next five years and beyond is as follows (in thousands):


Year Ending December 31,
2023 (remaining 3 months)	$	995
2024	3,576
2025	3,261
2026	3,163
2027	2,385
2028 & beyond	2,763
Total	$	16,143

Accrued Liabilities

9 Months Ended

Sep. 30, 2023

Payables and Accruals [Abstract]

Accrued Liabilities

Accrued LiabilitiesAccrued liabilities consisted of the following:


	September 30, 2023		December 31, 2022
(in thousands)
Accrued compensation	$	8,344	$	8,962

Accrued professional fees	745		720
Accrued income tax	1,028		3,788
Warranty reserve	720		482
Accrued interest	110		64
Accrued liabilities - other	3,758		2,678
Total accrued and other current liabilities	$	14,705	$	16,694

Debt - Long Term Debt Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Debt Instrument [Line Items]
Total	$ 31,887	$ 23,226
Less: Current portion of long-term debt obligations	(3,000)	(2,500)
Long-term debt obligations	28,887	20,726
Term Loan
Debt Instrument [Line Items]
Net of debt issuance costs	$ 63	$ 74
Debt instrument, stated percentage (in percent)	7.90%	6.65%
Total	$ 17,187	$ 18,926
Revolving Loan
Debt Instrument [Line Items]
Debt instrument, stated percentage (in percent)	7.90%	6.65%
Total	$ 14,700	$ 4,300

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References

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+ Details

- Definition

Amount, after deduction of unamortized premium (discount) and debt issuance cost, of long-term debt. Excludes lease obligation.

+ References + Details

Inventory

9 Months Ended

Sep. 30, 2023

Inventory Disclosure [Abstract]

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 net realizable value.

Components of inventory were as follows:


	September 30, 2023		December 31, 2022
(in thousands)
Finished goods	$	11,236	$	9,930
Work-in-process	4,405		3,113
Raw materials	27,677		23,539
Total inventory	$	43,318	$	36,582

Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Common Stock	Treasury Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss
Common stock, beginning balance (in shares) at Dec. 31, 2021		32,116,270
Beginning balance treasury stock (in shares) at Dec. 31, 2021			1,744,026
Beginning balance at Dec. 31, 2021	$ 81,923	$ 34	$ (5,248)	$ 98,745	$ (11,575)	$ (33)
Increase (Decrease) in Stockholders' Equity
Exercise of stock options (in shares)		442,450
Exercise of stock options	1,161	$ 1		1,160
Share-based compensation (in shares)		246,627
Share-based compensation	2,838			2,838
ESPP issuance (in shares)		101,454
ESPP issuance	521			521
Purchase of treasury stock (in shares)		40,931	40,931
Purchase of treasury stock	(294)		$ (294)
Net income/(loss)	8,426				8,426
Foreign currency translation adjustment	(6,721)					(6,721)
Common stock, ending balance (in shares) at Sep. 30, 2022		32,865,870
Ending balance treasury stock (in shares) at Sep. 30, 2022			1,784,957
Ending balance at Sep. 30, 2022	87,854	$ 35	$ (5,542)	103,264	(3,149)	(6,754)
Common stock, beginning balance (in shares) at Jun. 30, 2022		32,752,348
Beginning balance treasury stock (in shares) at Jun. 30, 2022			1,784,957
Beginning balance at Jun. 30, 2022	88,561	$ 35	$ (5,542)	102,043	(4,345)	(3,630)
Increase (Decrease) in Stockholders' Equity
Exercise of stock options (in shares)		82,018
Exercise of stock options	3			3
Share-based compensation (in shares)		31,504
Share-based compensation	1,218			1,218
Net income/(loss)	1,196				1,196
Foreign currency translation adjustment	(3,124)					(3,124)
Common stock, ending balance (in shares) at Sep. 30, 2022		32,865,870
Ending balance treasury stock (in shares) at Sep. 30, 2022			1,784,957
Ending balance at Sep. 30, 2022	$ 87,854	$ 35	$ (5,542)	103,264	(3,149)	(6,754)
Common stock, beginning balance (in shares) at Dec. 31, 2022	33,105,080	33,105,080
Beginning balance treasury stock (in shares) at Dec. 31, 2022	1,796,862		1,796,862
Beginning balance at Dec. 31, 2022	$ 93,402	$ 35	$ (5,607)	104,893	(2,296)	(3,623)
Increase (Decrease) in Stockholders' Equity
Exercise of stock options (in shares)		529,802
Exercise of stock options	1,271			1,271
Share-based compensation (in shares)		254,883
Share-based compensation	2,925	$ 1		2,924
ESPP issuance (in shares)		88,317
ESPP issuance	546			546
Purchase of treasury stock (in shares)		34,629	40,812
Purchase of treasury stock	(436)		$ (436)
Net income/(loss)	(2,977)				(2,977)
Foreign currency translation adjustment	$ (119)					(119)
Common stock, ending balance (in shares) at Sep. 30, 2023	33,943,453	33,943,453
Ending balance treasury stock (in shares) at Sep. 30, 2023	1,837,674		1,837,674
Ending balance at Sep. 30, 2023	$ 94,612	$ 36	$ (6,043)	109,634	(5,273)	(3,742)
Common stock, beginning balance (in shares) at Jun. 30, 2023		33,908,336
Beginning balance treasury stock (in shares) at Jun. 30, 2023			1,831,491
Beginning balance at Jun. 30, 2023	94,873	$ 36	$ (5,960)	108,709	(5,734)	(2,178)
Increase (Decrease) in Stockholders' Equity
Exercise of stock options (in shares)		11,782
Exercise of stock options	37			37
Share-based compensation (in shares)		23,335
Share-based compensation	888			888
Purchase of treasury stock (in shares)			6,183
Purchase of treasury stock	(83)		$ (83)
Net income/(loss)	461				461
Foreign currency translation adjustment	$ (1,564)					(1,564)
Common stock, ending balance (in shares) at Sep. 30, 2023	33,943,453	33,943,453
Ending balance treasury stock (in shares) at Sep. 30, 2023	1,837,674		1,837,674
Ending balance at Sep. 30, 2023	$ 94,612	$ 36	$ (6,043)	$ 109,634	$ (5,273)	$ (3,742)

Revenue Recognition

9 Months Ended

Sep. 30, 2023

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Disaggregation of Revenue

We disaggregate our revenue from contracts with customers by geographic locations, customer type, contract type, timing of recognition, and major categories, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. We disaggregate revenue on the basis of where the physical goods are shipped. We also classify revenue by the customer type of entity for which it does business, which is an indicator of the diversity of our client base. We attribute revenue generated from being a subcontractor to a commercial company as government revenue when the ultimate client is a government agency or department. Disaggregation by contract mix provides insight in terms of the degree of performance risk that we have assumed. Fixed-price contracts are considered to provide the highest amount of performance risk as we are required to deliver a scope of work or level of effort for a negotiated fixed price. Cost-based contracts are considered to provide the lowest amount of performance risk since we are generally reimbursed for all contract costs incurred in performance of contract deliverables with only the amount of incentive or award fees (if applicable) dependent on the achievement of negotiated performance requirements. By classifying revenue by major product and service, we attribute revenue from a client to the major product or service that we believe to be the client's primary market.

The details are listed in the table below for the three and nine months ended September 30, 2023 and 2022:


		Three Months Ended September 30,				Nine Months Ended September 30,

		2023		2022		2023		2022
(in thousands)		(unaudited)				(unaudited)
Total Revenue by Geographic Location
	United States	$	10,238	$	12,597	36,280		$	33,361
	Asia	11,388		7,248		20,769		16,265
	Europe	6,266		8,300		19,566		20,765
	Canada, Central and South America	1,859		661		5,681		6,846
	All Others	952		347		2,616		558
	Total	$	30,703	$	29,153	$	84,912	$	77,795

Total Revenue by Major Customer Type
	Sales to the U.S. government	$	1,982	$	2,604	$	5,207	$	6,394
	U.S. direct commercial sales and other	8,257		9,993		31,074		26,967
	Foreign commercial sales & other	20,464		16,556		48,631		44,434
	Total	$	30,703	$	29,153	$	84,912	$	77,795

Total Revenue by Contract Type
	Fixed-price contracts	$	30,234	$	28,202	$	82,757	$	75,556
	Cost-type contracts	469		951		2,155		2,239
	Total	$	30,703	$	29,153	$	84,912	$	77,795

Total Revenue by Timing of Recognition
	Goods transferred at a point in time	$	27,921	$	25,114	75,761		$	66,608
	Goods/services transferred over time	2,782		4,039		9,151		11,187
	Total	$	30,703	$	29,153	$	84,912	$	77,795

Total Revenue by Major Products/Services
	Technology development	$	1,253	$	2,062	4,381		$	5,198
	Test, measurement and sensing systems	29,217		26,809		79,783		70,927
	Other	233		282		748		1,670
	Total	$	30,703	$	29,153	$	84,912	$	77,795

Contract Balances

Our contract assets consist of unbilled amounts for research contracts as well as custom product contracts. Contract liabilities include excess billings, and customer deposits. During the three and nine months ended September 30, 2023, we recognized $0.3 million and $2.9 million of revenue, respectively, that was included in contract liabilities as of December 31, 2022.

The following table shows the components of our contract balances as of September 30, 2023 and December 31, 2022:


	September 30, 2023		December 31, 2022
(in thousands)
Contract assets	$	7,324	$	7,691
Contract liabilities	4,619		4,089
Net contract assets	$	2,705	$	3,602

Performance Obligations

Unfulfilled performance obligations represent amounts expected to be earned on executed contracts. Indefinite delivery and quantity contracts and unexercised options are not reported in total unfulfilled performance obligations. Unfulfilled performance obligations include funded obligations, which is the amount for which money has been directly authorized by the U.S. government and for which a purchase order has been received by a commercial customer, and unfunded obligations represent firm orders for which funding has not yet been appropriated. The approximate value of our unfulfilled performance obligations was $49.0 million at September 30, 2023. We expect to satisfy 41% of the performance obligations in 2023, 55% in 2024 and the remainder by 2028.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
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Reference 10: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org//606/tableOfContent

+ Details

Intangible assets, net - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 929	$ 987	$ 2,839	$ 2,794

Intangible assets, net

9 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible assets, net

Intangible assets, net at September 30, 2023 and December 31, 2022 consisted of the following:


	Estimated Life	September 30, 2023		December 31, 2022
(in thousands)
Patent costs	1 - 5 years	$	9,291	$	9,086
Developed technology	5 - 10 years	16,969		15,924
In-process research and development	N/A	1,478		2,631
Customer relationships	5 - 15 years	4,177		4,117
Trade names	3 - 5 years	866		880
Backlog	1 - 3 years	421		331
		33,202		32,969

Patent costs		(4,857)		(4,128)
Developed technology		(8,673)		(6,830)
In-process research and development		(1,540)		(1,763)
Customer relationships		(948)		(574)
Trade names		(620)		(586)
Backlog		(421)		(338)
Accumulated amortization		(17,059)		(14,219)
		$	16,143	$	18,750

Amortization expense for the three and nine months ended September 30, 2023 was $0.9 million and $2.8 million, respectively. Estimated aggregate amortization, based on the net value of intangible assets at September 30, 2023, for each of the next five years and beyond is as follows (in thousands):


Year Ending December 31,
2023 (remaining 3 months)	$	995
2024	3,576
2025	3,261
2026	3,163
2027	2,385
2028 & beyond	2,763
Total	$	16,143

Consolidated Statements of Comprehensive (Loss)/Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Statement of Comprehensive Income [Abstract]
Net income/(loss)	$ 461	$ 1,196	$ (2,977)	$ 8,426
Other comprehensive loss	(1,564)	(3,124)	(119)	(6,721)
Total other comprehensive (loss)/income	$ (1,103)	$ (1,928)	$ (3,096)	$ 1,705

- Definition

Amount, after deduction of tax, noncontrolling interests, dividends on preferred stock and participating securities; of income (loss) available to common shareholders.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 3
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147483443/250-10-50-3

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
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-Name Accounting Standards Codification
-Section 50
-Paragraph 11
-Subparagraph (a)
-Publisher FASB
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
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-Section 50
-Paragraph 11
-Subparagraph (b)
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 250
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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-Section S99
-Paragraph 5
-Subparagraph (SAB Topic 6.B)
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
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Reference 13: http://www.xbrl.org/2003/role/disclosureRef
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Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Topic 260
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-Section 45
-Paragraph 60B
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482689/260-10-45-60B

+ Details

Inventory (Tables)

9 Months Ended

Sep. 30, 2023

Inventory Disclosure [Abstract]

Schedule of Inventory

Components of inventory were as follows:


	September 30, 2023		December 31, 2022
(in thousands)
Finished goods	$	11,236	$	9,930
Work-in-process	4,405		3,113
Raw materials	27,677		23,539
Total inventory	$	43,318	$	36,582

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Cash flows used in by operating activities
Net (loss)/income	$ (2,977)	$ 8,426
Adjustments to reconcile net (loss)/income to net cash used in operating activities
Depreciation and amortization	4,092	3,993
Share-based compensation	3,219	3,204
Loss on disposal of property and equipment	281	0
Gain on sale of discontinued operations, net of tax	0	(10,921)
Deferred taxes	(998)	(3,374)
Change in assets and liabilities
Accounts receivable	(6,095)	(6,166)
Contract assets	1,145	(2,739)
Inventory	(6,520)	(6,662)
Other current assets	202	2,093
Other non-current assets	(121)	599
Accounts payable and accrued and other current liabilities	(479)	5,824
Contract liabilities	111	2,425
Other non-current liabilities	0	13
Net cash used in operating activities	(8,140)	(3,285)
Cash flows used in investing activities
Acquisition of property and equipment	(1,750)	(2,313)
Acquisition of intangible property	(95)	0
Proceeds from sale of discontinued operations	0	12,973
Acquisition of Luna Innovations Germany GmbH	0	(22,085)
Other	0	29
Net cash used in investing activities	(1,845)	(11,396)
Cash flows provided by financing activities
Payments on finance lease obligations	(37)	(36)
Proceeds from borrowings under debt obligations	10,400	22,150
Payments of debt obligations	(1,750)	(16,275)
Repurchase of common stock	(436)	(294)
Proceeds from ESPP	546	521
Proceeds from the exercise of stock options	1,272	1,160
Net cash provided by financing activities	9,995	7,226
Effect of exchange rate changes on cash and cash equivalents	(6)	(1,784)
Net increase/(decrease) in cash and cash equivalents	4	(9,239)
Cash and cash equivalents—beginning of period	6,024	17,128
Cash and cash equivalents—end of period	6,028	7,889
Supplemental disclosure of cash flow information
Cash paid for interest	1,590	209
Cash paid for income tax	$ 3,206	$ 220

Accrued Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Payables and Accruals [Abstract]
Accrued compensation	$ 8,344	$ 8,962
Accrued professional fees	745	720
Accrued income tax	1,028	3,788
Warranty reserve	720	482
Accrued interest	110	64
Accrued liabilities - other	3,758	2,678
Total accrued and other current liabilities	$ 14,705	$ 16,694

Capital Stock and Share-Based Compensation (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	$ 24,400	$ 200,000	$ 118,300	$ 600,000
Stock-based compensation expense not yet recognized	100,000		$ 100,000
Weighted average remaining service period			1 year 1 month 6 days
Restricted stock units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	900,000	$ 600,000	$ 2,800,000	$ 1,800,000
Stock-based compensation expense not yet recognized	$ 5,800,000		$ 5,800,000
Weighted average remaining service period			1 year 2 months 12 days
RSUs granted (in shares)	85,740	190,000	388,869	823,842
RSUs granted (in dollars per share)	$ 8.87		$ 8.37
Restricted stock units (RSUs) \| Non-Employee Director Deferred Compensation Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
RSUs granted (in shares)	7,348	14,299	65,284.76	112,560
RSUs granted (in dollars per share)	$ 9.05		$ 8.65
ESPP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	$ 100,000	$ 100,000	$ 300,000	$ 200,000

Capital Stock and Share-Based Compensation	9 Months Ended
Capital Stock and Share-Based Compensation	Sep. 30, 2023
Equity [Abstract]
Capital Stock and Share-Based Compensation	Capital Stock and Share-Based Compensation Stock Options For the three and nine months ended September 30, 2023, we recognized $24.4 thousand and $118.3 thousand, respectively, in share-based compensation expense related to stock options, which is included in our selling, general and administrative expense in the accompanying consolidated statement of operations. Share-based compensation expense related to stock options for the three and nine months ended September 30, 2022 totaled $0.2 million and $0.6 million, respectively. We expect to recognize $0.1 million in share-based compensation expense over the weighted-average remaining service period of 1.1 years for stock options outstanding as of September 30, 2023. Restricted Stock Units During the three and nine months ended September 30, 2023, we granted 85,740 and 388,869 time-based restricted stock units ("RSUs"), respectively. During the three and nine months ended September 30, 2022, we granted 190,000 and 823,842 time-based RSUs, respectively. The general terms of the RSUs are similar to awards previously granted by us. The weighted average fair value of the time-based RSUs granted during the three and nine months ended September 30, 2023 was $8.87 and $8.37 per share, respectively. The fair value of each RSU was determined based on the market price of our stock on the date of grant. In addition, pursuant to our Deferred Compensation Plan, non-employee directors can elect to defer the receipt of some or all of the equity compensation that they receive for board and committee service. During the three and nine months ended September 30, 2023, we granted 7,348 and 65,284.76 RSUs, respectively, pursuant to the Deferred Compensation Plan. During the three and nine months ended September 30, 2022, we granted 14,299 and 112,560 RSUs, respectively, pursuant to the Deferred Compensation Plan. The general terms of these RSUs are similar to awards previously granted by us. The weighted average fair value of these RSUs granted during the three and nine months ended September 30, 2023, was $9.05 and $8.65 per share, respectively. The fair value of each RSU was determined based on the market price of our stock on the date of grant. For the three and nine months ended September 30, 2023, we recognized $0.9 million and $2.8 million, respectively, in share-based compensation expense related to RSUs, which is included in our selling, general and administrative expense in the accompanying consolidated statement of operations. Share-based compensation related to RSUs for the three and nine months ended September 30, 2022 totaled $0.6 million and $1.8 million, respectively. We expect to recognize $5.8 million in share-based compensation expense over the weighted-average remaining service period of 1.2 years for RSUs outstanding as of September 30, 2023. Employee Stock Purchase Plan ("ESPP") For each of the three and nine months ended September 30, 2023, we recognized $0.1 million and $0.3 million, respectively, in share-based compensation expense related to the ESPP, which is included in our selling, general and administrative expense in the accompanying consolidated statement of operations. Share-based compensation related to the ESPP for the three and nine months ended September 30, 2022 totaled $0.1 million and $0.2 million, respectively.

- Definition

The entire disclosure for equity.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-13

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
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-URI https://asc.fasb.org//1943274/2147481112/505-10-50-13

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org//1943274/2147481112/505-10-50-14

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
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Reference 11: http://www.xbrl.org/2003/role/disclosureRef
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Reference 13: http://www.xbrl.org/2003/role/disclosureRef
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Reference 14: http://www.xbrl.org/2003/role/disclosureRef
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Reference 15: http://www.xbrl.org/2003/role/disclosureRef
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Reference 17: http://www.xbrl.org/2003/role/disclosureRef
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Reference 18: http://www.xbrl.org/2003/role/disclosureRef
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Reference 19: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

Commitments and Contingencies (Details) - Tunable lasers - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Mar. 31, 2023	Dec. 31, 2022	Jun. 30, 2022
Loss Contingencies [Line Items]
Non-cancelable purchase order commitment	$ 2,700	$ 600	$ 4,600	$ 3,100
Non-cancelable purchase order commitment remained	$ 7,900
Minimum
Loss Contingencies [Line Items]
Non-cancelable purchase order delivery period (in months)	11 months
Maximum
Loss Contingencies [Line Items]
Non-cancelable purchase order delivery period (in months)	21 months

Basis of Presentation and Significant Accounting Policies - Narrative (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2023 shares	Sep. 30, 2022 shares	Sep. 30, 2023 segment
Debt Instrument [Line Items]
Number of reportable segments \| segment			1
Common stock equivalents included in diluted per share data (in shares) \| shares	1,300,847	1,304,160
SOFR \| PNC Bank Facility \| Minimum \| Term Loan
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate (in percent)			1.75%
SOFR \| PNC Bank Facility \| Maximum \| Term Loan
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate (in percent)			2.75%

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References

+ Details

Consolidated Statements of Operations (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Income Statement [Abstract]
Discontinued operations tax effect	$ 0	$ (78)	$ (346)	$ 3,205
Tax effect	$ 3,117	$ 3,117	$ 3,117	$ 3,117

Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 6,028	$ 6,024
Accounts receivable, net	39,304	33,249
Contract assets	7,324	7,691
Inventory	43,318	36,582
Prepaid expenses and other current assets	4,207	4,328
Total current assets	100,181	87,874
Property and equipment, net	4,892	4,893
Intangible assets, net	16,143	18,750
Goodwill	26,896	26,927
Operating lease right-of-use assets	7,999	4,661
Other non-current assets	3,338	3,255
Deferred tax asset	5,645	4,647
Total assets	165,094	151,007
Current liabilities:
Current portion of long-term debt obligations	3,000	2,500
Accounts payable	10,617	8,109
Accrued and other current liabilities	14,705	16,694
Contract liabilities	4,619	4,089
Current portion of operating lease liabilities	2,069	2,239
Total current liabilities	35,010	33,631
Long-term debt obligations, net of current portion	28,887	20,726
Long-term portion of operating lease liabilities	6,178	2,804
Other long-term liabilities	407	444
Total liabilities	70,482	57,605
Commitments and contingencies (Note 11)
Stockholders’ equity:
Common stock, par value $0.001, 100,000,000 shares authorized, 35,781,127 and 34,901,954 shares issued, 33,943,453 and 33,105,080 shares outstanding at September 30, 2023 and December 31, 2022, respectively	36	35
Treasury stock at cost, 1,837,674 and 1,796,862 shares at September 30, 2023 and December 31, 2022, respectively	(6,043)	(5,607)
Additional paid-in capital	109,634	104,893
Accumulated deficit	(5,273)	(2,296)
Accumulated other comprehensive loss	(3,742)	(3,623)
Total stockholders’ equity	94,612	93,402
Total liabilities and stockholders’ equity	$ 165,094	$ 151,007

Goodwill (Details) $ in Thousands	9 Months Ended
Goodwill (Details) $ in Thousands	Sep. 30, 2023 USD ($)
Goodwill [Roll Forward]
Beginning balance	$ 26,927
Foreign currency translation	(31)
Ending balance	$ 26,896

- Definition

Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.

+ References + Details

Basis of Presentation and Significant Accounting Policies

9 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies

Nature of Operations

Luna Innovations Incorporated (“we,” “our” 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 high performance fiber optic test, measurement and control products for the telecommunications and photonics industries, and distributed fiber optic sensing solutions that measure, or "sense" the structures for industries ranging from aerospace, automotive, oil and gas, security and infrastructure. Our communications test and control products help customers test their fiber optic networks and assemblies with speed and precision in both lab and production environments. Our test and measurement products accelerate the development of high speed fiber optic components like photonic integrated circuits, coherent receivers and short-run fiber networks. Our distributed fiber optic sensing products help designers and manufacturers more efficiently develop new and innovative products by measuring stress, strain, and temperature at a high resolution for new designs or manufacturing processes. Our distributed fiber optic sensing products ensure the safety and structural integrity or operational health of critical assets in the field, by monitoring stress, strain, temperature and vibration in large civil and industrial infrastructure such as bridges, roads, pipelines and borders. We manufacture and sell "terahertz" (THz) products for layer thickness measurements for materials like plastics, rubber, and paint. Our THz products are used in the aerospace and automotive/EV sector. We also provide applied research services, primarily under federally funded development programs, that leverage our sensing and instrumentation technologies to meet the specific needs and applications of our customers.

Unaudited Interim Financial Information

The accompanying unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States 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 interim 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 adjustments considered necessary to present fairly our financial position at September 30, 2023, results of operations, comprehensive (loss)/income and changes in stockholders' equity for the three and nine months ended September 30, 2023 and 2022, and cash flows for the nine months ended September 30, 2023 and 2022. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. The consolidated balance sheet as of December 31, 2022 was derived from our audited consolidated financial statements.

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, 2022, included in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”) on March 16, 2023.

Goodwill and Intangible Assets

Goodwill and intangible assets with indefinite lives are not amortized but are tested for impairment on an annual basis, as of October 1 of each year, or whenever events or changes in circumstances indicate that the carrying amount of these assets may be impaired. Purchased intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful lives. We analyze the reasonableness of the remaining useful life whenever events or circumstances indicate that the carrying amount may not be recoverable to determine whether the carrying value has been impaired.

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 significant value drivers are observable.

•Level 3—Valuations derived from valuation techniques in which significant value drivers are unobservable.

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued and other liabilities approximate fair value because of the short-term nature of these instruments. The carrying amount of lease liabilities approximate fair value because these financial instruments bear interest at rates that approximate current market rates for similar agreements with similar maturities and credit. We consider the terms of the PNC Bank, National Association debt facility, including its floating per annum interest rate of the daily simple secured overnight financing rate ("SOFR"), plus an SOFR adjustment, plus a margin ranging from 1.75% to 2.75%, to be at market based upon similar instruments that would be available to us. The Company has certain assets and liabilities that have been recorded at fair value on a non-recurring basis following an acquisition.

Reportable Segments

We have one reportable segment that develops, manufactures and markets distributed fiber optic sensing products and fiber optic communications test and control products.

Net Income/(Loss) Per Share

Basic per share data is computed by dividing our net income/(loss) by the weighted average number of shares outstanding during the period. Diluted per share data is computed by dividing net income/(loss) 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.

For the three months ended September 30, 2023 and 2022, the effects of 1,300,847 and 1,304,160 common stock equivalents are included for the diluted per share data, respectively. Stock options, restricted stock units and deferred stock units credited to our directors under our non-employee deferred compensation plan are included in our common stock equivalents. For the nine months ended September 30, 2023 and 2022, all potentially dilutive securities for stock options and restricted stock units were excluded as their impact would be anti-dilutive.

The following shares could potentially dilute basic EPS in the future and have been excluded from the computation of diluted weighted average shares outstanding because the effect would be anti-dilutive:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Stock options	78,000	80,000	165,000	580,000
Restricted stock units	83,000	386,000	1,135,000	947,000

Foreign Currency

For our non-U.S. dollar functional currency subsidiaries, assets and liabilities are translated into U.S. dollars using fiscal period end exchange rates. Sales and expenses are translated at average monthly exchange rates. Foreign currency translation gains and losses are included as a component of accumulated other comprehensive loss within equity. Gains and losses resulting from foreign currency transactions are included in earnings.

Recently Issued Pronouncements

In June 2016, the FASB issued ASU 2016-13 Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments, which requires companies to measure financial assets at an amortized cost basis to be presented at the net amount expected to be collected. The new accounting rules eliminate the probable initial recognition threshold and, instead, reflect an entity's current estimate of all expected credit losses. ASU 2016-13 is applicable to our trade receivables and convertible note. This pronouncement was amended under ASU 2019-10 to allow an extension on the adoption date for entities that qualify as a small reporting company. We adopted ASU 2016-13, effective January 1, 2023. The adoption of ASU 2016-13 did not have a significant impact on our consolidated financial statements.

Goodwill

9 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

The change in the carrying value of goodwill during the nine months ended September 30, 2023 was as follows:


(in thousands)
Balance as of December 31, 2022	$	26,927
Foreign currency translation	(31)
Balance as of September 30, 2023	$	26,896

Discontinued Operations (Details) - USD ($) $ in Thousands	3 Months Ended				9 Months Ended
Discontinued Operations (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Jun. 30, 2023	Dec. 31, 2022	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Loss from discontinued operations	$ 0			$ (28)	$ 1,038	$ (622)
Discontinued Operations, Held-for-sale or Disposed of by Sale \| Luna Labs
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Revenue			$ 1,300
Receivables		$ 100	$ 1,300
Loss from discontinued operations		$ 1,000

Revenue Recognition - Contract Balances (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2023	Dec. 31, 2022
Revenue from Contract with Customer [Abstract]
Revenue recognized	$ 300	$ 2,900
Contract assets	7,324	7,324	$ 7,691
Contract liabilities	4,619	4,619	4,089
Net contract assets	$ 2,705	$ 2,705	$ 3,602

Income Taxes	9 Months Ended
Income Taxes	Sep. 30, 2023
Income Tax Disclosure [Abstract]
Income Taxes	Income TaxesOur provision for income taxes is based upon the estimated annual effective tax rate for the year applied to the current period income plus the tax effect of any significant or unusual items, discrete events or changes in tax law. Fluctuations in the distribution of pre-tax income among our operating subsidiaries can lead to fluctuations of the effective tax rate in the consolidated financial statements. We and our subsidiaries file U.S. federal income tax returns and income tax returns in various state, local, and foreign jurisdictions. For the nine months ended September 30, 2023, our effective income tax rate was 27.2% compared to 14.5% for the nine months ended September 30, 2022. Historically, our tax rate can vary significantly from the federal statutory rate of 21% due to losses generated in jurisdictions where the benefit is not expected to be recognized partially offset by favorable impacts from stock award vesting and exercises, foreign-derived intangible income deduction and research and development tax credits.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Publisher FASB
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org//1943274/2147482603/740-30-50-2

+ Details

Intangible assets, net - Summary of Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	$ 33,202	$ 32,969
Accumulated amortization	(17,059)	(14,219)
Total	16,143	18,750
Patent costs
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	9,291	9,086
Accumulated amortization	$ (4,857)	(4,128)
Patent costs \| Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated Life	1 year
Patent costs \| Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated Life	5 years
Developed technology
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	$ 16,969	15,924
Accumulated amortization	$ (8,673)	(6,830)
Developed technology \| Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated Life	5 years
Developed technology \| Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated Life	10 years
In-process research and development
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	$ 1,478	2,631
Accumulated amortization	(1,540)	(1,763)
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	4,177	4,117
Accumulated amortization	$ (948)	(574)
Customer relationships \| Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated Life	5 years
Customer relationships \| Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated Life	15 years
Trade names
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	$ 866	880
Accumulated amortization	$ (620)	(586)
Trade names \| Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated Life	3 years
Trade names \| Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated Life	5 years
Backlog
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	$ 421	331
Accumulated amortization	$ (421)	$ (338)
Backlog \| Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated Life	1 year
Backlog \| Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated Life	3 years

Revenue Recognition (Tables)

9 Months Ended

Sep. 30, 2023

Revenue from Contract with Customer [Abstract]

Schedule of Disaggregation of Revenue

The details are listed in the table below for the three and nine months ended September 30, 2023 and 2022:


		Three Months Ended September 30,				Nine Months Ended September 30,

		2023		2022		2023		2022
(in thousands)		(unaudited)				(unaudited)
Total Revenue by Geographic Location
	United States	$	10,238	$	12,597	36,280		$	33,361
	Asia	11,388		7,248		20,769		16,265
	Europe	6,266		8,300		19,566		20,765
	Canada, Central and South America	1,859		661		5,681		6,846
	All Others	952		347		2,616		558
	Total	$	30,703	$	29,153	$	84,912	$	77,795

Total Revenue by Major Customer Type
	Sales to the U.S. government	$	1,982	$	2,604	$	5,207	$	6,394
	U.S. direct commercial sales and other	8,257		9,993		31,074		26,967
	Foreign commercial sales & other	20,464		16,556		48,631		44,434
	Total	$	30,703	$	29,153	$	84,912	$	77,795

Total Revenue by Contract Type
	Fixed-price contracts	$	30,234	$	28,202	$	82,757	$	75,556
	Cost-type contracts	469		951		2,155		2,239
	Total	$	30,703	$	29,153	$	84,912	$	77,795

Total Revenue by Timing of Recognition
	Goods transferred at a point in time	$	27,921	$	25,114	75,761		$	66,608
	Goods/services transferred over time	2,782		4,039		9,151		11,187
	Total	$	30,703	$	29,153	$	84,912	$	77,795

Total Revenue by Major Products/Services
	Technology development	$	1,253	$	2,062	4,381		$	5,198
	Test, measurement and sensing systems	29,217		26,809		79,783		70,927
	Other	233		282		748		1,670
	Total	$	30,703	$	29,153	$	84,912	$	77,795

Schedule of components of contract balances

The following table shows the components of our contract balances as of September 30, 2023 and December 31, 2022:


	September 30, 2023		December 31, 2022
(in thousands)
Contract assets	$	7,324	$	7,691
Contract liabilities	4,619		4,089
Net contract assets	$	2,705	$	3,602

Intangible assets, net - Estimated Aggregate Amortization (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Goodwill and Intangible Assets Disclosure [Abstract]
2023 (remaining 3 months)	$ 995
2024	3,576
2025	3,261
2026	3,163
2027	2,385
2028 & beyond	2,763
Total	$ 16,143	$ 18,750

Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
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)	35,781,127	34,901,954
Common stock outstanding (in shares)	33,943,453	33,105,080
Treasury stock (in shares)	1,837,674	1,796,862

Accrued Liabilities (Tables)

9 Months Ended

Sep. 30, 2023

Payables and Accruals [Abstract]

Schedule of Accrued Liabilities

Accrued liabilities consisted of the following:


	September 30, 2023		December 31, 2022
(in thousands)
Accrued compensation	$	8,344	$	8,962

Accrued professional fees	745		720
Accrued income tax	1,028		3,788
Warranty reserve	720		482
Accrued interest	110		64
Accrued liabilities - other	3,758		2,678
Total accrued and other current liabilities	$	14,705	$	16,694

Inventory (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Inventory Disclosure [Abstract]
Finished goods	$ 11,236	$ 9,930
Work-in-process	4,405	3,113
Raw materials	27,677	23,539
Total inventory	$ 43,318	$ 36,582

Basis of Presentation and Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share


	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Stock options	78,000	80,000	165,000	580,000
Restricted stock units	83,000	386,000	1,135,000	947,000

Revenue Recognition - Performance Obligation Amount (Details) $ in Millions	Sep. 30, 2023 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation	$ 49.0
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-10-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation, percentage (in percent)	41.00%
Remaining performance obligation, period	3 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation, percentage (in percent)	55.00%
Remaining performance obligation, period	1 year

Debt (Tables)

9 Months Ended

Sep. 30, 2023

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments

Long-term debt consisted of the following:


	September 30, 2023		December 31, 2022
(in thousands)
Term Loan (net of debt issuance costs of $63 and $74, 7.90% and 6.65% at September 30, 2023 and December 31, 2022, respectively)	$	17,187	$	18,926
Revolving Loan (7.90% and 6.65% at September 30, 2023 and December 31, 2022)	14,700		4,300
	31,887		23,226
Less: Current portion of long-term debt obligations	(3,000)		(2,500)
Long-term debt obligations	$	28,887	$	20,726

Schedule of Maturities of Long-term Debt

Maturities on debt are as follows (in thousands):


Year Ending December 31,	Amount

2023 (remaining 3 months)	$	750
2024	3,000
2025	3,500
2026	4,000
2027	20,700
Total maturities	31,950
Less: deferred issuance costs	(63)
Total	$	31,887

- Definition

Tabular disclosure of long-debt instruments or arrangements, including identification, terms, features, collateral requirements and other information necessary to a fair presentation. These are debt arrangements that originally required repayment more than twelve months after issuance or greater than the normal operating cycle of the entity, if longer.

+ References

Reference 1: http://www.xbrl.org/2003/role/exampleRef
-Topic 470
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-Name Accounting Standards Codification
-Section 55
-Paragraph 69B
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-URI https://asc.fasb.org//1943274/2147481568/470-20-55-69B

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Reference 3: http://www.xbrl.org/2009/role/commonPracticeRef
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+ Details

Debt

9 Months Ended

Sep. 30, 2023

Debt Disclosure [Abstract]

Debt

Debt Long-term debt consisted of the following:


	September 30, 2023		December 31, 2022
(in thousands)
Term Loan (net of debt issuance costs of $63 and $74, 7.90% and 6.65% at September 30, 2023 and December 31, 2022, respectively)	$	17,187	$	18,926
Revolving Loan (7.90% and 6.65% at September 30, 2023 and December 31, 2022)	14,700		4,300
	31,887		23,226
Less: Current portion of long-term debt obligations	(3,000)		(2,500)
Long-term debt obligations	$	28,887	$	20,726

PNC Bank Facility

On January 31, 2023, the Company entered into a Loan Modification Agreement (the "Third Amendment") in respect of the Loan Agreement and previous amendments discussed hereafter to slightly modify its net leverage ratio and interest rate applicable margin. On June 21, 2022 (the “Effective Date”), the Company entered into a Loan Modification Agreement (the “Second Amendment”) in respect of its Loan Agreement, dated as of December 1, 2020 (the “Original Loan Agreement” and as amended by that certain First Amendment to Loan Agreement, dated as of March 10, 2022, the Second Amendment, and the Third Amendment the “Loan Agreement”) with PNC Bank, National Association, as lender (the “Lender”) and certain of the Company’s domestic subsidiaries as guarantors, to, among other things, extend the maturity date of the Term Loan and Revolving Line (each as defined below) to June 21, 2027 and increase the total commitments to the Company.

The Loan Agreement provides a $15.0 million revolving credit facility (the “Revolving Line”) and a $20 million term loan facility (the “Term Loan”). On the Effective Date, we borrowed the full amount of the Term Loan from the Lender according to a term note (the “Term Note”), a portion of the proceeds of which were used to refinance the remaining principal amount of the $12.5 million in term loans issued under the Original Loan Agreement, and the remainder of which were used to pay down approximately $13.7 million of the $15.0 million in revolving loans outstanding under the Revolving Line (the “Revolving Loan”) according to a revolving line of credit note (the “Revolving Line of Credit Note”). We may repay and reborrow advances under the Revolving Line from time to time according to the Revolving Line of Credit Note. The unused Revolving Line totaled $0.3 million at September 30, 2023.

The Term Loan matures on June 21, 2027. The Term Loan amortizes at a rate equal to 10% for the first year, 15% for years two and three, 20% in year four and 15% in year five, in each case payable on a quarterly basis. The remaining balance is due on maturity. Accrued interest is due and payable on the first day of each month and the outstanding principal balance and any accrued but unpaid interest will be due and payable on June 21, 2027. The Term Loan bears interest at a floating per annum rate equal to the sum of (a) the daily simple secured overnight finance rate ("Daily Simple SOFR"), plus (b) an SOFR adjustment of ten basis points (0.10%), plus (c) an applicable margin. The applicable margin ranges from 1.75% to 2.75% per annum, depending on our Net Leverage Ratio (as defined in the Loan Agreement). We may prepay the Term Loan without penalty or premium.

The Revolving Line expires on June 21, 2027. Borrowings under the Revolving Line bear interest at a floating per annum rate equal to the sum of (a) the Daily Simple SOFR, plus (b) an SOFR adjustment of ten basis points (0.10%), plus (c) an applicable margin. The applicable margin ranges from 1.75% to 2.75% per annum, depending on our Net Leverage Ratio. Accrued interest is due and payable on the first day of each month and the outstanding principal balance and any accrued but unpaid interest is due and payable on June 21, 2027. The unused portion of the Revolving Line accrues a fee equal to 0.20% per annum multiplied by the quarterly average unused amount.

The Loan Agreement includes a number of affirmative and restrictive covenants applicable to us and our subsidiaries, including, among others, financial covenants regarding minimum net leverage and fixed charge coverage, affirmative covenants regarding delivery of financial statements, payment of taxes, and maintenance of government compliance, and restrictive covenants regarding dispositions of property, acquisitions, incurrence of additional indebtedness or liens, investments and transactions with affiliates. We are also restricted from paying dividends or making other distributions or payments on our capital stock, subject to limited exceptions. We were in compliance with these covenants as of September 30, 2023.

Upon the occurrence of certain events, including failure to satisfy our payment obligations under the Loan Agreement, failure to adhere to the financial covenants, the breach of certain of our other covenants under the Loan Agreement, cross defaults to other indebtedness or material agreements, judgment defaults and defaults related to failure to maintain governmental approvals, the Lender will have the right, among other remedies, to declare all principal and interest immediately due and payable, and to exercise secured party remedies.

Maturities on debt are as follows (in thousands):


Year Ending December 31,	Amount

2023 (remaining 3 months)	$	750
2024	3,000
2025	3,500
2026	4,000
2027	20,700
Total maturities	31,950
Less: deferred issuance costs	(63)
Total	$	31,887

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
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-Topic 235
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+ Details

Basis of Presentation and Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 2023
Accounting Policies [Abstract]
Nature of Operations	Nature of Operations Luna Innovations Incorporated (“we,” “our” 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 high performance fiber optic test, measurement and control products for the telecommunications and photonics industries, and distributed fiber optic sensing solutions that measure, or "sense" the structures for industries ranging from aerospace, automotive, oil and gas, security and infrastructure. Our communications test and control products help customers test their fiber optic networks and assemblies with speed and precision in both lab and production environments. Our test and measurement products accelerate the development of high speed fiber optic components like photonic integrated circuits, coherent receivers and short-run fiber networks. Our distributed fiber optic sensing products help designers and manufacturers more efficiently develop new and innovative products by measuring stress, strain, and temperature at a high resolution for new designs or manufacturing processes. Our distributed fiber optic sensing products ensure the safety and structural integrity or operational health of critical assets in the field, by monitoring stress, strain, temperature and vibration in large civil and industrial infrastructure such as bridges, roads, pipelines and borders. We manufacture and sell "terahertz" (THz) products for layer thickness measurements for materials like plastics, rubber, and paint. Our THz products are used in the aerospace and automotive/EV sector. We also provide applied research services, primarily under federally funded development programs, that leverage our sensing and instrumentation technologies to meet the specific needs and applications of our customers.
Unaudited Interim Financial Information	Unaudited Interim Financial Information The accompanying unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States 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 interim 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 adjustments considered necessary to present fairly our financial position at September 30, 2023, results of operations, comprehensive (loss)/income and changes in stockholders' equity for the three and nine months ended September 30, 2023 and 2022, and cash flows for the nine months ended September 30, 2023 and 2022. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. The consolidated balance sheet as of December 31, 2022 was derived from our audited consolidated financial statements. 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, 2022, included in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”) on March 16, 2023.
Goodwill and Intangible Assets	Goodwill and Intangible AssetsGoodwill and intangible assets with indefinite lives are not amortized but are tested for impairment on an annual basis, as of October 1 of each year, or whenever events or changes in circumstances indicate that the carrying amount of these assets may be impaired. Purchased intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful lives. We analyze the reasonableness of the remaining useful life whenever events or circumstances indicate that the carrying amount may not be recoverable to determine whether the carrying value has been impaired.
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 significant value drivers are observable. •Level 3—Valuations derived from valuation techniques in which significant value drivers are unobservable. The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued and other liabilities approximate fair value because of the short-term nature of these instruments. The carrying amount of lease liabilities approximate fair value because these financial instruments bear interest at rates that approximate current market rates for similar agreements with similar maturities and credit. We consider the terms of the PNC Bank, National Association debt facility, including its floating per annum interest rate of the daily simple secured overnight financing rate ("SOFR"), plus an SOFR adjustment, plus a margin ranging from 1.75% to 2.75%, to be at market based upon similar instruments that would be available to us. The Company has certain assets and liabilities that have been recorded at fair value on a non-recurring basis following an acquisition.
Reportable Segments	Reportable Segments We have one reportable segment that develops, manufactures and markets distributed fiber optic sensing products and fiber optic communications test and control products.
Net Income/(Loss) Per Share	Net Income/(Loss) Per Share Basic per share data is computed by dividing our net income/(loss) by the weighted average number of shares outstanding during the period. Diluted per share data is computed by dividing net income/(loss) 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. For the three months ended September 30, 2023 and 2022, the effects of 1,300,847 and 1,304,160 common stock equivalents are included for the diluted per share data, respectively. Stock options, restricted stock units and deferred stock units credited to our directors under our non-employee deferred compensation plan are included in our common stock equivalents. For the nine months ended September 30, 2023 and 2022, all potentially dilutive securities for stock options and restricted stock units were excluded as their impact would be anti-dilutive.
Foreign Currency	Foreign CurrencyFor our non-U.S. dollar functional currency subsidiaries, assets and liabilities are translated into U.S. dollars using fiscal period end exchange rates. Sales and expenses are translated at average monthly exchange rates. Foreign currency translation gains and losses are included as a component of accumulated other comprehensive loss within equity. Gains and losses resulting from foreign currency transactions are included in earnings.
Recently Issued Pronouncements	Recently Issued Pronouncements In June 2016, the FASB issued ASU 2016-13 Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments, which requires companies to measure financial assets at an amortized cost basis to be presented at the net amount expected to be collected. The new accounting rules eliminate the probable initial recognition threshold and, instead, reflect an entity's current estimate of all expected credit losses. ASU 2016-13 is applicable to our trade receivables and convertible note. This pronouncement was amended under ASU 2019-10 to allow an extension on the adoption date for entities that qualify as a small reporting company. We adopted ASU 2016-13, effective January 1, 2023. The adoption of ASU 2016-13 did not have a significant impact on our consolidated financial statements.

- Definition

Disclosure of accounting policy for segment reporting.

+ References + Details

Income Taxes (Details)	9 Months Ended
Income Taxes (Details)	Sep. 30, 2023	Sep. 30, 2022
Income Tax Disclosure [Abstract]
Effective income tax rate (in percent)	27.20%	14.50%

Discontinued Operations	9 Months Ended
Discontinued Operations	Sep. 30, 2023
Discontinued Operations and Disposal Groups [Abstract]
Discontinued Operations	Discontinued Operations During the fourth quarter of 2022, we recorded revenue and an unbilled receivable of $1.3 million related to our annual Incurred Cost Submission for the year ended 2021 for projects from our Luna Labs business sold on March 7, 2022. As of June 30, 2023, we no longer believed we would be able to collect the majority of the Luna Labs portion of the unbilled receivables and revised our estimated collection from $1.3 million to $0.1 million, resulting in a loss recorded in discontinuing operations of $1.0 million, net of tax, during the three months ended June 30, 2023.

Debt - Additional Information (Details) - PNC Bank Facility - USD ($)		9 Months Ended
	Jan. 31, 2023	Sep. 30, 2023
Term Loan \| SOFR \| Minimum
Debt Instrument [Line Items]
Variable basis rate (in percent)		1.75%
Term Loan \| SOFR \| Maximum
Debt Instrument [Line Items]
Variable basis rate (in percent)		2.75%
Loan Modification Agreement \| Revolving Loan
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity	$ 15,000,000
Line of credit facility, remaining borrowing capacity		$ 300,000
Repayments of lines of credit	$ 13,700,000
Commitment fee percentage (in percent)	0.20%
Loan Modification Agreement \| Revolving Loan \| SOFR
Debt Instrument [Line Items]
Variable basis rate (in percent)	0.10%
Loan Modification Agreement \| Revolving Loan \| SOFR \| Minimum
Debt Instrument [Line Items]
Variable basis rate (in percent)	1.75%
Loan Modification Agreement \| Revolving Loan \| SOFR \| Maximum
Debt Instrument [Line Items]
Variable basis rate (in percent)	2.75%
Loan Modification Agreement \| Term Loan
Debt Instrument [Line Items]
Debt, face amount	$ 20,000,000
Line of credit facility, remaining borrowing capacity	$ 12,500,000
Loan Modification Agreement \| Term Loan \| SOFR
Debt Instrument [Line Items]
Variable basis rate (in percent)	0.10%
Loan Modification Agreement \| Term Loan \| SOFR \| Minimum
Debt Instrument [Line Items]
Variable basis rate (in percent)	1.75%
Loan Modification Agreement \| Term Loan \| SOFR \| Maximum
Debt Instrument [Line Items]
Variable basis rate (in percent)	2.75%
Loan Modification Agreement \| Term Loan \| Period 1
Debt Instrument [Line Items]
Debt instrument, amortization period, percentage (in percent)	10.00%
Loan Modification Agreement \| Term Loan \| Period 2
Debt Instrument [Line Items]
Debt instrument, amortization period, percentage (in percent)	15.00%
Loan Modification Agreement \| Term Loan \| Period 3
Debt Instrument [Line Items]
Debt instrument, amortization period, percentage (in percent)	15.00%
Loan Modification Agreement \| Term Loan \| Period 4
Debt Instrument [Line Items]
Debt instrument, amortization period, percentage (in percent)	20.00%
Loan Modification Agreement \| Term Loan \| Period 5
Debt Instrument [Line Items]
Debt instrument, amortization period, percentage (in percent)	15.00%

Cover - shares	9 Months Ended
Cover - shares	Sep. 30, 2023	Nov. 10, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2023
Document Transition Report	false
Entity File Number	000-52008
Entity Registrant Name	LUNA INNOVATIONS INC
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	54-1560050
Entity Address, Address Line One	301 First Street SW
Entity Address, Address Line Two	Suite 200
Entity Address, City or Town	Roanoke
Entity Address, State or Province	VA
Entity Address, Postal Zip Code	24011
City Area Code	540
Local Phone Number	769-8400
Title of 12(b) Security	Common Stock, $0.001 par value per share
Trading Symbol	LUNA
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		33,958,641
Amendment Flag	false
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q3
Entity Central Index Key	0001239819
Current Fiscal Year End Date	--12-31

Basis of Presentation and Significant Accounting Policies - Antidilutive Securities (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive shares (in shares)	78,000	80,000	165,000	580,000
Restricted stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive shares (in shares)	83,000	386,000	1,135,000	947,000

Debt - Maturities of Long-term Debt (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Debt Disclosure [Abstract]
2023 (remaining 3 months)	$ 750
2024	3,000
2025	3,500
2026	4,000
2027	20,700
Total maturities	31,950
Less: deferred issuance costs	(63)
Total	$ 31,887	$ 23,226

- Definition

Amount, after deduction of unamortized premium (discount) and debt issuance cost, of long-term debt. Excludes lease obligation.

+ References + Details

Commitments and Contingencies	9 Months Ended
Commitments and Contingencies	Sep. 30, 2023
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and ContingenciesWe 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.We executed multiple non-cancelable purchase orders totaling $3.1 million in the second quarter of 2022, $4.6 million in the fourth quarter of 2022, $0.6 million in the first quarter of 2023, and $2.7 million in the third quarter of 2023 for multiple shipments of tunable lasers to be delivered over a 11-21 month period. At September 30, 2023, approximately $7.9 million of non-cancelable purchase order commitments remained and are expected to be delivered by March 3, 2025.

Goodwill (Tables)

9 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

The change in the carrying value of goodwill during the nine months ended September 30, 2023 was as follows:


(in thousands)
Balance as of December 31, 2022	$	26,927
Foreign currency translation	(31)
Balance as of September 30, 2023	$	26,896

- Definition

Tabular disclosure of goodwill by reportable segment and in total which includes a rollforward schedule.

+ References

Reference 1: http://www.xbrl.org/2003/role/exampleRef
-Topic 350
-SubTopic 20
-Name Accounting Standards Codification
-Section 55
-Paragraph 24
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Reference 2: http://www.xbrl.org/2009/role/commonPracticeRef
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Reference 3: http://www.xbrl.org/2009/role/commonPracticeRef
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Reference 4: http://www.xbrl.org/2009/role/commonPracticeRef
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-URI https://asc.fasb.org//1943274/2147482573/350-20-50-2

+ Details

Revenue Recognition - Schedule of Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Disaggregation of Revenue [Line Items]
Revenue	$ 30,703	$ 29,153	$ 84,912	$ 77,795
Technology development
Disaggregation of Revenue [Line Items]
Revenue	1,253	2,062	4,381	5,198
Test, measurement and sensing systems
Disaggregation of Revenue [Line Items]
Revenue	29,217	26,809	79,783	70,927
Other
Disaggregation of Revenue [Line Items]
Revenue	233	282	748	1,670
Goods transferred at a point in time
Disaggregation of Revenue [Line Items]
Revenue	27,921	25,114	75,761	66,608
Goods/services transferred over time
Disaggregation of Revenue [Line Items]
Revenue	2,782	4,039	9,151	11,187
Fixed-price contracts
Disaggregation of Revenue [Line Items]
Revenue	30,234	28,202	82,757	75,556
Cost-type contracts
Disaggregation of Revenue [Line Items]
Revenue	469	951	2,155	2,239
Sales to the U.S. government
Disaggregation of Revenue [Line Items]
Revenue	1,982	2,604	5,207	6,394
U.S. direct commercial sales and other
Disaggregation of Revenue [Line Items]
Revenue	8,257	9,993	31,074	26,967
Foreign commercial sales & other
Disaggregation of Revenue [Line Items]
Revenue	20,464	16,556	48,631	44,434
United States
Disaggregation of Revenue [Line Items]
Revenue	10,238	12,597	36,280	33,361
Asia
Disaggregation of Revenue [Line Items]
Revenue	11,388	7,248	20,769	16,265
Europe
Disaggregation of Revenue [Line Items]
Revenue	6,266	8,300	19,566	20,765
Canada, Central and South America
Disaggregation of Revenue [Line Items]
Revenue	1,859	661	5,681	6,846
All Others
Disaggregation of Revenue [Line Items]
Revenue	$ 952	$ 347	$ 2,616	$ 558

Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Income Statement [Abstract]
Revenue	$ 30,703	$ 29,153	$ 84,912	$ 77,795
Cost of revenue	13,074	12,234	35,445	30,633
Gross profit	17,629	16,919	49,467	47,162
Operating expense:
Selling, general and administrative	12,829	11,678	39,565	39,733
Research, development and engineering	2,719	2,776	8,257	7,983
Amortization of intangible assets	929	987	2,839	2,794
Total operating expense	16,477	15,441	50,661	50,510
Operating income/(loss)	1,152	1,478	(1,194)	(3,348)
Other income/(expense):
Other income	115	73	98	146
Interest expense, net	(613)	(218)	(1,566)	(442)
Total other expense, net	(498)	(145)	(1,468)	(296)
Income/(loss) from continuing operations before income taxes	654	1,333	(2,662)	(3,644)
Income tax expense/(benefit)	193	165	(723)	(527)
Net income/(loss) from continuing operations	461	1,168	(1,939)	(3,117)
Income/(loss) from discontinued operations, net of income tax expense/(benefit) of $—, $(78), $(346), and $3,205.	0	28	(1,038)	622
Gain on sale of discontinued operations, net of tax of $3,117	0	0	0	10,921
Net income/(loss) from discontinued operations	0	28	(1,038)	11,543
Net income/(loss)	$ 461	$ 1,196	$ (2,977)	$ 8,426
Net income/(loss) per share from continuing operations:
Basic (in dollars per share)	$ 0.01	$ 0.04	$ (0.06)	$ (0.10)
Diluted (in dollars per share)	0.01	0.03	(0.06)	(0.10)
Net income/(loss) per share from discontinued operations:
Basic (in dollars per share)	0	0.00	(0.03)	0.36
Diluted (in dollars per share)	0	0.00	(0.03)	0.36
Net income/(loss) per share attributable to common stockholders:
Basic (in dollars per share)	0.01	0.04	(0.09)	0.26
Diluted (in dollars per share)	$ 0.01	$ 0.04	$ (0.09)	$ 0.26
Weighted average shares:
Basic (in shares)	33,917,700	32,800,690	33,631,654	32,492,276
Diluted (in shares)	35,218,547	34,104,850	33,631,654	32,492,276