OT- LUNA Blog-Luna’s Latest America’s Cup Partnership Builds on its Strong History with Racing Yachts

https://lunainc.com/36thamericascup/

Luna’s HYPERION and ODiSI will be a part of the development of the DEFIANT, the New York Yacht Club’s boat competing in the 36th America’s Cup as American Magic.

The monohull designs under development for the AC75 class employ hydrofoils, which provide lift similar to airfoils, producing much greater speed and efficiency. However, foil design must overcome drag, which is dependent on foil shape and configuration. Custom engineering and construction with new materials requires advanced strain sensing capabilities in both the design and in situ phases.

Luna’s Atlanta location (formerly Micron Optics) has worked on racing yachts since 2003, as a partner for teams throughout Europe, Asia and North America. Fiber optic sensing devices are part of the system that evaluates critical structural components, informs sailing tactics and ensures safety for racing yachts, which are expected to reach speeds around 50 knots. The HYPERION provides a streamlined solution for real-time, onboard analysis of performance during sail and racing, while Luna’s ODiSI delivers the high-definition data for in-depth analysis and design optimization.

For complete details on this project, check out this story, featured in Engineering360.

LUNA First Quarter Conference call - my thoughts and comments

Luna Innovations Incorporated (NASDAQ:LUNA) Q1 2018 Earnings Conference Call May 9, 2018 5:00 PM ET

https://seekingalpha.com/article/4172029-luna-innovations-luna-ceo-scott-graeff-q1-2018-results-earnings-call-transcript?part=single

My Note: I listened to and participated in last week's LUNA INNOVATIONS Q1 conference call. My impression is that this company is finally "hitting on all cylinders" and in a variety of cutting edge technologies with real legs to make a run in the market place. 

CEO Scott Graeff noted that, Luna's first quarter revenues increased 21% or $2.1 million year-over-year contributing more than $1 million to Luna's bottom line. Revenues from Luna's products and license segment grew 29%, and sales from Luna's Lightwave division grew 74%. Scott advised that the Lightwave division includes Luna's instruments for testing optical components and networks which target the growing demand for bandwidth fueling the development of silicon photonics and the building of more and more data centers. This division also includes the sales of  Luna's Odyssey instruments used for measuring structural health and integrity. 

Scott also had the following comments about the Terahertz division, in Ann Arbor, Michigan:

Scott Graeff

On the Terahertz side, I discussed last quarter, our new leadership in that group and the traction taking place across the Terahertz organization whether in sales, engineering or manufacturing. The group continues to gain momentum and recognized a 29% increase in revenues in Q1 compared to a year ago. We are increasing our marketing presence for the Terahertz platform with much greater tradeshow presence.

We plan to participate in 10 shows this year with four shows already completed in 2018. For comparison, we only completed four shows in all of 2017. Additionally, we are gaining efficiency in our operations, for instance since January 1, w have reduced our time to build a system by 27% taking 67% of the engineering hours out of the build and lowered overall cost of goods sold by nearly 10%. These important measurements are critical to the growth that we expect and a true testament to the outstanding work being done in our facility.

Here are my questions and comments:

Randy Knudson

Good afternoon. On the last conference call you talked about ODiSi becoming or you're hopeful that it might be recognized as the industry standard for composites or in composite testing and maybe I misunderstood that. So has there been any -- how do you achieve that. I guess is the first question, where are you and where are we in terms of being recognized as the industry standard for testing composite products.

Scott Graeff

Yes. I'm going to let Brian answer that. I know I will say that it is top of our priority list. We believe it is important and we are going down that path and doing everything we can. I will say you're dealing with some bureaucratic organizations and there is a process involved in going through that. I'll let Brian who is very involved in this talk a little bit more.

Brian Soller

Yes, sure. Hi, Randy. I think there are standard bodies that deliver essentially confirmed documentation with regards to what would be considered a standard and test for materials -- all different types of materials. And we've identified two standards bodies that we believe the most relevant to our Odyssey products and using fiber optics to measure composite materials. And we have over the last year engaged with those committees -- at the committee level with those bodies. And we are now members of at the committee level teams that are working on new standards and the partnership between the standards body and other corporate entities in Luna to develop standards over the course of time that would include our technology.

You have to be careful with this, as Scott mentioned that they are fairly bureaucratic organizations, so it can take some time. But over the last year we have gotten engaged with what we believe to be the right folks in the right standard bodies and over the next 18 months or so I think we'll see some real progress.

Randy Knudson

Let me ask a follow up question if I could. In terms of competition without naming competition, is there significant competition in this market, are you the only -- are we the only people that's really doing this kind of testing?

Scott Graeff

That’s a good question. The competition that we have in this market is really other types of measurement technology.

Randy Knudson

Okay.

Brian Soller

So whether these electrical strain gauges or thermocouples or stand offs temperature detection using a flare type instrument. So there's competition -- a lot of competition from other technologies. We bring some very specific benefits to these types of measurements and there's not a lot of direct head-to-head competition with the way we make these measurements using fiber optics.

There certainly are other fiber optics techniques on the market. They'll have different benefits they bring. Ours is pretty unique though in terms of the combination of resolution and accuracy that we can achieve. So I hope that answers the question.

Randy Knudson

No. It did. And one of the technologies that I've seen and in fact I think in Ann Arbor, aren’t they using Terahertz to evaluate airplanes -- various parts of airplane hulls or in various modalities, isn't Terahertz being used?

Brian Soller

Yes. Our Terahertz technologies used to measure layered thickness and quality of coatings for different types of aerospace and many other applications actually. It's not an apples-to-apples to exactly what we're measuring with fiber optics but you can think of them as complimentary.

Scott Graeff

Randy, if you were ever out in the Ann Arbor area, it's a very disruptive technology. I'd welcome you to come in and meet the folks out there and see it firsthand.

Randy Knudson

I appreciate that. And what's the thoughts in terms of when -- how long are they going to stay in the current facility or are the plans to move out?

Scott Graeff

Yes. Our lease -- like I talked before our lease is through the end of this year. It is not ideal space. We're within -- we're kind of where we were mixed in with the Macom facility as well. So we're evaluating that right now looking at where we go from here. But that is a kind of a mid-year decision point as far as where we're going.

Randy Knudson

Yes. Great. In terms of Terahertz, are there any new value added resellers, I was really been impressed with some of the press releases where we can see, I think five significant value added resellers selling in different aspects of using Terahertz in various products whether it's plastic paper, whatever but are there other --are there new value added resellers on the horizon. Are there new markets in that area?

Scott Graeff

Well, we are active in that and the guys out there and the folks out there have done a nice job, Margaret and Irl and John and Steve in signing up some additional VARs and some additional distributors and some reps. So I don't have them the names of them at my fingertips right now. But that is an active approach and you're dead on with when you get into a specific market many times it requires a specific VAR or a specific rep that knows that business it’s not just saying. Let me just broad stroke Terahertz technology out here. It's where we're going after and who has those contacts. So we are active in that and I can follow up with you with the names. I just don't know right now.

Randy Knudson

Well, I appreciate that and overall just really impressed with what you gentlemen have done and so thank you for answering my questions.

Scott Graeff

Thanks Randy.

----

One of the most insightful comments came from an unidentified institutional investor who strongly encouraged management to consider a stock buy back as Luna has approximately 38 million dollars it is holding from the sale of it's HSOR division. I concur whole -heartedly. 

Unidentified Analyst

But, and correct me if I'm wrong on any of that, but what I have learned over the years is that the one business that you know best is, your business and with the amount of cash on the balance sheet returning some cash to shareholders by buying back more stock who would seem to be a very good use for some of the cash because if we want a money market fund we can put money in the money market fund. So, I don't want you to just buy something because you want to put the cash to work. Why not concentrate on buying back some of the shares at these prices because you certainly know your business best.

Finally Scott noted that the  Technology Development segment, which represents funded research under U.S. government contracts, grew 9% year-over-year. Scott touted the diverse team and their ability to win Phase 1 feasibility projects and to extend them into larger development programs at a higher conversion rate with a breadth and depth of the IP portfolio that has been created.  There are solid synergies from having this division as it relates to LUNA's ability to innovate quickly and efficiently. Overall, it was a very positive report which portends good things for the future across the board. This of course is my opinion, and it's not investment advice. Perform your own due diligence. 

OT-LUNA BLOG-Verifying the Integrity of Composite Adhesive Joints using the ODiSI

http://lunainc.com/verifying-integrity-composite-adhesive-joints-odisi/

Chicken rivets may not sound like a very technical term.  However, it refers to the mechanical fasteners used extensively in the aerospace industry to guarantee the reliability of adhesive bonds of carbon fiber-reinforced plastic (CFRP) materials.   Because adhesive bonds are not very well understood, current certification requirements need proof that should a critical design load be reached, each adhesively bonded joint will not separate and cause structural failure. The easiest and cheapest way to do this is to assemble the parts with these additional mechanical fasteners, or chicken rivets.

Do the additional fasteners compromise the part?

Unfortunately, these additional fasteners actually negate many of the major benefits of adhesively bonded joints, including higher joint stiffness and superior fatigue performance. Instead of uniformly transferring the load across the bonded interface, fasteners and holes create stress concentrations. Additional fasteners add weight and their holes encourage environmental degradation through water ingress, humidity and corrosion.

A Boeing 787 Dreamliner in the paint hangar of the company’s facility in Everett, Wash., in 2009. (Elaine Thompson, AP).

What can we do to better-understand the joint?

One way to accelerate the move away from chicken rivets is to develop a greater understanding of damage growth in bonded structures. Researchers have been using Luna’s distributed strain sensing system in order to assess the tough-to-detect flaws and damage that might affect the integrity of adhesive joints. How uniform is the load distribution? How does failure initiate and evolve? What model parameters should be used to analyze these joints?

Luna’s ODiSI platform allows for strain measurements to be captured at every millimeter along a continuous optical fiber sensor, allowing you to see the strain profile across the entire joint with a single scan. Any defects can be easily detected as steep strain gradients during both static and fatigue loading, and tracked accurately across the joint. In addition to that, the small fiber sensor size lends itself to being embedded directly into the bond line. This means that you now have a micro-local measurement at that joint. Finally, when a finite element model of the part is created, the ODiSI’s measurement points can be used to provide real-life calibration data across the entire structure. This is in contrast to being limited to the single points that you acquire using surface-mounted electrical foil gages.

What have other researchers learned?

The body of research is expansive and growing. Researchers from the University of Mississippi showed that the addition of fiber sensors inside the joint does not at all impact bond strength (https://arc.aiaa.org/doi/abs/10.2514/6.2016-0239). Researchers in Norway used the distributed sensor to track the growth of an intentional defect, with quasi-static tensile loading, and tracked the strain gradients throughout the de-bonding process (https://www.sciencedirect.com/science/article/pii/S1359836815000086). In a multinational collaborative effort, Ribeiro and colleagues used the ODiSI system to evaluate the stability and rate of disbond growth (https://www.tandfonline.com/doi/abs/10.1080/00218464.2018.1433039). In these papers, accompanying finite element models were also created and used as cross-reference validation for the distributed strain measurements.

Reference 1: Figure 6. Strain distribution for regions 4 and 5 of the optical fiber after fatigue test and correlation with an image of C-scan inspection.

Conclusion

The use of adhesive joints is gaining traction not just in the aerospace industry, but also in the automotive and energy industries, for lightweighting and strength optimization. As such, it would be massively beneficial to be able to evaluate the integrity of these joints in a more robust and direct way.

To learn more about how to better understand the behavior of adhesively bonded parts, check out our ODiSI distributed sensing platform.

References

1              Fabricio N. Ribeiro, Marcias Martinez & Calvin Rans (2018) Evaluation of mode II fatigue disbonding using Central Cut Plies specimen and distributed strain sensing technology, The Journal of Adhesion, DOI: 10.1080/00218464.2018.1433039

My questions on the LUNA INNOVATIONS 1st Quarter conference call

My note:The Picometrix division of Luna contines to make improvements in it's THz division. I also thought the discussion of the ODiSi, platform is very interesting, and shows huge promise. (You can read the entire CC on the link below).

https://seekingalpha.com/article/4072498-luna-innovations-luna-ceo-chung-q1-2017-results-earnings-call-transcript?part=single

Operator

Our next question is from Randy Knudson. Your line is now open.

Unidentified Analyst

Good afternoon.

My Chung

Hi, Randy.

Unidentified Analyst

I wanted to first ask you about your $2 million stock repurchase, which was announced about a year ago and see if that's all been concluded or is there still money left to buy stock?

My Chung

So, we have not consumed the entire amount. In fact, there was not any repurchase activity that was done in Q1 just because we set this up in a 10b5-1 plan. So, there were specific parameters that were established for it. And with the increase in the stock price that we had end of last year and in Q1, we went outside of those repurchase parameters.

So, we’ve not spent the entire amount. It was established as a one-year plan. So, it’s something that was approved at our board meeting in May of last year and it will be another topic of discussion at the May board meeting this year as to whether or not we want to extend that or under what parameters we would.

Unidentified Analyst

Okay, thank you. I was glad to hear you at least mention your terahertz division. I know in the last couple of phone conferences, I don't think the word terahertz was even mentioned, which kind of surprises all of us old-time API investors.

And so, I just want to see what the trend is there. What are your thoughts on terahertz in Ann Arbor. Is it coming along? Or are we going to – is it going to be one of your drivers in the future?

My Chung

It’s actually coming along rather well. The focus that we put them on was really improving the quality of the system and the dependability of the measurement. We had one value-added reseller that was one of the first ones we signed up. And their feedback to me when I came on board was they couldn’t depend upon the quality and reliability of the system.

And as a result, we had a lot of units sent back for repair and we decided, hey, let’s slow down a little bit, let’s fix the problems that we need to fix, so that customers can rely on the systems that we’re selling and the measurements. And that’s come a significantly long way. We’ve signed up new value-added resellers. We’re in discussions with quite a number. So, in fact, I think Q4 was a very strong quarter for us for terahertz. And I guess we should have mentioned it at the last earnings.

But it’s still active. The team is still intact. It’s the same team that's been there. It’s not growing quite as high-speed optical receivers, and so we downplayed a little bit, but by no means that we shut it down.

Unidentified Analyst

Right. And once again, what do you see in the future for the terahertz division? Is it something that's going to – I am assuming, by your mention of Q4, it's reached profitability?

My Chung

Yes, it did. It’s a very good quarter. Our focus is on manufacturing applications and we have a number of aircraft – military aircraft manufacturers talking to us about utilizing that technology as a means with which to find faults. They’ve funded a chunk of research for us in anticipation of that. So, I think that will be a big application for us. And likewise, our sales guy is actively involved with a number of customers from a process manufacturing to, in a number of cases, to replace beta gauges that are currently being used.

Unidentified Analyst

Got you. Primarily in the wood, plastic, those areas?

My Chung

Exactly. Yes, yeah.

Unidentified Analyst

And then the airline inspection that you talked about, is that something related to what you're already doing for the F-35 in terms of the paint application or is this something to do with inspection of the structure itself, relating to what we saw at Wright State University, in press release? 

My Chung

No, it’s the F-35.

Dale Messick

And there’s also some – we’re actually going to do a big demonstration on a submarine as well.

Unidentified Analyst

Okay, great. And I guess my kind of related question to that is with, it's really difficult to find any information about Lunar. I do applaud you on your blog that you have occasionally, and I read it and try to share that actively on the net, but it seems like there's a lot of things that you would have an opportunity to share with us that might encourage some shareholder buying…

My Chung

We recognize that and we are looking to make significant changes here in this year.

Unidentified Analyst

Great.

My Chung

All right? It’s been a challenge for our team to assimilate all the different technologies that we ended up with from the merger. They’ve been understaffed. In fact, I’m looking at the people in charge of that right now and they keep on telling, My, we need more, we need more.

So, it is on my list this year. All right? That we do need to improve dramatically information flow out, both from an investors’ perspective as well as from a technology.

Unidentified Analyst

And then, in terms of your Odyssey platform, which sounds like it’s really one of your primary focuses going forward in the future. That too is – other than your blog, it’s almost impossible to find any information out there. I was pleased to hear – and let me just see if I understood you correctly. You're really – you really have no direct competition in that particular area of composite or stress testing. Is it – did I understand that correctly?

My Chung

That is absolutely correct. Our competition is the traditional individualist strain gauges and people have to put on – quite a significant number of them trying to cover the entire structure. The most of the other fiber optic sensing technology that's out there is more – how do I say it? It’s more single sensor based. In other words, they add a sensor on to the fiber to test at that point whereas we use the bare fiber and we have the ability to look at reflections along that entire length of the fiber. We don’t need a grading put on the fiber in other words. So, it’s a very unique technology that we have. It’s a technology that we use on the medical space. So, the reason why Intuitive Surgical was very interested in us because we had that ability that we could track the bends of that fiber throughout the entire length.

Unidentified Analyst

Well, that’s great. And it’d be wonderful to have something – more information about that. And I know you mentioned that's one of your goals. So, I would sure appreciate seeing that because I think there would be a lot of people interested in knowing more about that and lots of potential investors that would be excited about that.

My Chung

No, I agree. And that indeed is something that we’ve tasked ourselves with doing. It was the best kept secret.

Unidentified Analyst

Yeah, got you. And lastly, I just want to applaud you also for mentioning Rob Risser because he was truly a great person from my many conversations with him and he’ll be sorely missed. And thank you.

My Chung

He’s an incredible individual with an incredible background and sad to see how quickly he passed on last month. So, it was a shocker to all of us.

Unidentified Analyst

Well, thank you again.

OT LUNA Blog-Introducing the ODiSI-B 5.0

http://lunainc.com/introducing-odisi-b-5-0/

Today we introduced major enhancements to our ODiSI platform that provide valuable new capabilities to better measure strain and temperature. To keep pace with tomorrow, you need advanced technology in order to test advanced technology.

Are you ready?

Advanced materials are creating new challenges in the lab as well as on the production floor. While testing metals is easy, the anisotropic characteristics of composite materials pose new measurement challenges. Additionally, traditional test methods are inadequate for the new fastening processes utilized in composite structures. Furthermore, Finite Element Modeling programs don’t have the accuracy to predict the strain of complex structures made with advanced materials.

So, to be ready for the challenges of tomorrow’s technology, you need the ODiSI-B 5.0 today!

 New features of the ODiSI-B 5.0:

• Two Sensing Options – High-Definition and High-Speed CFG*
  • High-Definition offers ultrahigh resolution and a lower priced sensor
  • High-Speed CFG offers greater dynamic sensing capability
• Robust Sensing with Ruggedized Cable and Connectors
  • Industrial grade stand-off cable and connectors are suitable for harsh environments and rough handling
• Data Visualization with CAD Integration*
  • Analyze ODiSI data files quickly and visually using the new 3D data visualization with CAD integration
• Strain Sensors with NIST-Traceable Calibration
  • Strain sensors are calibrated to NIST-traceable standards and come with a certificate of conformance

*High-Speed CFG module and 3D data visualization package sold as options

To learn more about the ODiSI-B 5.0 click here.

Users of the current ODiSI-B should contact Luna to discuss upgrade options to the enhanced system. Call 540.961.5190 or request a quote by clicking here solutions@lunainc.com 

Click here to view the ODiSI-B 5.0 one-pager.  The data sheet can be downloaded here.  

OT-Luna Innovations Introduces Major New Enhancements to its ODiSI Sensing Platform

ODiSI-B 5.0 offers enhanced performance and ruggedness for high resolution measurements of strain and temperature, providing improved characterization  of composite components and structures

https://lunainc.com/luna-innovations-introduces-major-enhancements-odisi-sensing-platform/

(ROANOKE, VA, July 19, 2016) – Luna Innovations Incorporated (NASDAQ: LUNA) today launched a significant upgrade to its ODiSI (Optical Distributed Sensor Interrogator) strain and temperature sensing platform. Luna’s ODiSI technology uses a lightweight, flexible, inexpensive, easy-to-install, distributed fiber sensor to provide critical stress, strain and temperature information to designers and manufacturers working with advanced materials. Luna’s ODiSI platform provides a number of advantages over traditional strain gages and thermocouples: distributed multi-point sensing; ultrahigh-definition measurements; reduced cost of sensor installation; and the ability to embed the sensor within composite structures. ODiSI provides these benefits with a per-sensor cost that is significantly lower than traditional foil strain gages.

The ODiSI-B 5.0 enhancements are the result of continued engineering development in response to customer feedback and include: more robust sensing and ruggedized cables and connectors; high-definition and high-speed sensing options; data visualization and CAD integration; and strain sensors with NIST-traceable calibration.

“One of our key growth strategies is to become the leading provider of sensing systems for testing composites and other advanced materials,” said My Chung, president and chief executive officer of Luna. “We introduced the ODiSI platform to address this market and now, through ongoing engineering development, we’re launching enhancements that offer greater performance and new capabilities. Luna is committed to evolving our solution and responding to the measurement needs of customers in our target markets, particularly those where composites are becoming commonplace like aerospace and automotive.”

The ODiSI-B 5.0’s development comes at a time that the aerospace and automotive markets continue to move toward the use of advanced materials. Unlike steel or aluminum, composite construction is non-uniform and requires new measurement technologies to ensure safety and reliability.

Users of the current ODiSI-B should contact Luna to discuss upgrade options to the enhanced system.

About Luna:

Luna Innovations Incorporated (www.lunainc.com) develops, manufactures and markets high definition fiber optic sensing products and fiber optic test and measurement instrumentation, and packages optoelectronic semiconductors into high-speed optical receivers (HSOR products), custom optoelectronic subsystems (Optoelectronics products) and Terahertz (THz) instrumentation that provide unique capabilities for the aerospace, automotive, energy, defense, and telecommunications industries. Luna is organized into two business segments, which work closely together to turn ideas into products: a Technology Development segment and a Products and Licensing segment. Luna’s business model is designed to accelerate the process of bringing new and innovative technologies to market.

Forward-Looking Statements:

The statements in this release that are not historical facts constitute “forward-looking statements” made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. These statements include the company’s expectations regarding the greater performance and new capabilities of the enhanced ODiSI platform, as well as Luna’s strategy to become the leading supplier of sensor testing for testing composites and other advanced materials. Management cautions the reader that these forward-looking statements are only predictions and are subject to a number of both known and unknown risks and uncertainties, and actual results may differ materially from those expressed or implied by these forward-looking statements as a result of a number of factors. These factors include, without limitation, failure of demand for the company’s products and services to meet expectations, technological challenges and those risks and uncertainties set forth in the company’s periodic reports and other filings with the Securities and Exchange Commission (“SEC”). Such filings are available on the SEC’s website at www.sec.gov and on the company’s website at www.lunainc.com. The statements made in this release are based on information available to the company as of the date of this release and Luna undertakes no obligation to update any of the forward-looking statements after the date of this release.

Investor Contact:Dale Messick, CFO
Luna Innovations Incorporated
Phone: 1.540.769.8400
Email: IR@lunainc.com

Luna Innovations ends the year with $17.5 million dollars in cash on balance sheet- but what is going on with it's Terahertz divisions?

Yesterday I participated in the Luna Innovations Q4 2015 Conference Call. My Chung, President and CEO of Luna, had the following to say about the anticipated future growth of the company:

Our priorities for 2016 center around two themes. First is continuing to improve our bottom line. With the size of the company today, the synergies we can realize and the opportunities presented by our growth initiatives, we believe we will get there. It will take us a few quarters, especially given the level of amortization expense that was added as a result of purchase accounting that as you can see from our improving adjusted EBITDA, we are on the right path, and we are focused on that goal. Our planning activities for 2016 have been squarely centered around that objective.

Our second priority is to deliver on our two strategic growth initiatives. This means driving hard on growth in the area of high-speed optical receivers and in the adoption of our ODiSI platform for distributed strain and temperature testing. We continue to make good progress in ODiSI sales into the composite market as it provides a compelling value proposition with a significantly better resolution and lower cost.

In 2015, we were successful in penetrating key players in the aerospace and automotive industries. Our high-speed optical receiver initiative centers around capitalizing on the growing 2.5G fiber to the premise market, especially in Asia and the emerging 100G data center communication opportunity.

I re-read My's comments again this morning. Not a mention of the word terahertz!

 http://seekingalpha.com/article/3960086-luna-innovations-luna-ceo-chung-q4-2015-results-earnings-call-transcript?page=2

The only substantive discussion of terahertz in fact was as a result of questions I asked on the conference call:

Randy Knudson

I thought it was a good quarter, so thank you gentlemen. I am excited for the future. I wanted to see if you could provide me with a little more color in regard to Terahertz which is my main interest as Rob is aware and I guess I come at this from a couple of directions. Is Terahertz, we don't hear anything at all about Terahertz. I assume that it's primarily being moved by your VARs, your value added resellers?

Rob Risser

Yeah. Hi, Randy, this is Rob. So that VAR channel is continuing to mature. Terahertz is still crossing the chasm, but there is more traction today than it was the same time last year. There's more product revenue coming out of it, but it's still - and there is less contract revenue that is going in. So Terahertz is still not contributing to profits or positive EBITDA yet, but it is gaining traction in the market and marching ahead, those VARs they take some time to really get up to speed and to get the product adapted out of the pilot play ups and into the production facilities, so that is moving ahead and progressing well. It's just - it's a slow and steady pace. So it's not really a big contributor to the top line yet and it's not a contributor at all to the bottom line right now.

Randy Knudson

And I assume that there are some kind of confidentiality agreements in place with the VARs because I have reason to believe and I won't mention names, but there must be some confidentiality because I see some products that appear or that maybe I understand have API technology now Luna Technology, Picometrix technology embedded into them especially in the plastic extrusion.

My Chung

That's right. Yeah, you are right. We do have confidentiality and they protect that, their processes and their adoptions of things so tightly that you are probably doing some [indiscernible] that gives you information that we wouldn't be able to provide publicly.

Randy Knudson

Well, and it's just a shame because the investing public doesn't have any real way of determining what the footprint is of Picometrix, Luna and Terahertz and I think it's one of the more exciting things going forward that you have. So I wanted to also ask about the anomaly detection device that I know in the last conference call I asked about and I think My mentioned that there might be some opportunities overseas where people were actively looking at that in the security market and I'm wondering if you can comment any further on that?

My Chung

Not really. The new distributor that we put in place in China was getting a lot of interest in homeland security in that technology. We have now brought them in in terms of what we can offer but as of date no real progress in that other than they are obviously investing there a little bit differently than the US market is today.

Randy Knudson

Understand. And then last thing is also related to Terahertz and it’s Luna side of Terahertz. I know that you mentioned on the last conference call that you are – once your engineers there in Virginia found out about or got involved in Terahertz that you are actually doing some other design wins maybe for the government on some Terahertz issues, I'm just wondering we don't see anything about maybe it's once again proprietary confidentiality, but it is a shame there is no mention on your webpage when you click on Terahertz, you just go back to the Picometrix page. And I am wondering in the future if could give us something about what you are doing there because I know in your skunk works or whatever you call your advanced technology working in nano materials and those kinds of things, so I find that real interesting and I think the public would be - investing public would find that interesting as well.

My Chung

Actually, we're also in the process of trying to merge the two websites together. It turns out that the code that API website was written in is different than ours, so it will take us still little of bit of time. We're also trying to upgrade the information as of currently on the site so that our investors as well as customers have a complete view on Luna. But as I said, it's taken us a little bit longer because of the way each of the sites were created.

With regards to the technology development side, indeed the two entities, the Group in Ann Arbor or our group in Virginia here has worked fairly closely together especially in the last couple of months trying to leverage off of the capabilities of each and going after some of these government contracts. Clearly our team when we announced it internally was really excited about Terahertz, they see it. They haven't gone after it, and they say, hey, there are activities out there.

Randy Knudson

Good. And going forward you see that just progressing? We should see continued improvement in the Terahertz division I guess on both sides.

My Chung

I would hope so. When we've done internally at the traditional Luna is we put a process in place as far as how we scour what proposal is being requested, what contributions we can make, what our likelihood is winning the follow-on contracts, right, outside of the initial study. Those processes we're trying to transfer over to Rob's group in Ann Arbor. I think there's been a lot of cooperation and receptivity to that.

Rob Risser

Yeah, good collaboration.

Randy Knudson

I think last thing I just wanted to applaud you for having Rob on the telephone. I know for a lot of us old, API investors it's nice to hear Rob on the conference.

My Chung

We had a drag and screaming and yelling.

Rob Risser

It's good to hear you, Randy. It's good to talk to you.

Randy Knudson

Good. Thank you all.

Rob Risser

Thank you.

I guess my take-away from the conference call is that Terahertz development at LUNA is still on-going and active, but it's HSOR, fiber to the home sales primarily in China, and the continuing development of the LUNA ODiSi,  used in the inspection of composite materials in airplanes and automobiles, has become the primary focus of the company. 

It's pretty clear to me that Irl Duling Head of the Picometrix, terahertz division is continuing to make significant progress in the commercialization of THz. The problem is that most of these contract "wins" are subject to strict confidentiality agreements, making it difficult to evaluate the scope of the current market penetration. However, the company did disclose some customer names in 2014 at the Liolos Conference, and then was asked to remove these references. However, I had posted those customer names here:

http://terahertztechnology.blogspot.com/2014/09/advanced-photonix-discloses-some-names.html

Of course, we know the identity of some of the other VARS, (value added resellers, who are employing Picometrix, THz technology in their product lines such as:

Thermo Fisher Scientific: 

http://terahertztechnology.blogspot.com/2012/03/advanced-photonix-signs-agreement-with.html

Automation and Control Technology (ACT):

http://terahertztechnology.blogspot.com/2012/04/advanced-photonix-inc-signs-value-added.html

Seltek, LTD:

http://terahertztechnology.blogspot.com/2014/09/advanced-photonix-inc-signs-var_30.html

Most of these relationships were disclosed by API, back in 2014-2015, but there is reason to believe there are many more. (Of course, this discussion omits the significant contract which continues and is on-going with the USAF on the paint inspection of the new F-35, which has been mentioned extensively on this blog).

Although the company has never disclosed any relationship, I have reason to suspect that Picometrix supplies THz technology to INOEX for use it's terahertz product line for the inspection of corrugated pipes, and foam core pipes among other products:

http://www.inoex.de/en/world/products/productcategory/terahertz-1/ProductCategory/show/

I think it's also important to note that LUNA's Applied Research and Technology Division also now has a focus on next generation THz development adding their extensive background and knowledge in metamaterials and nano-technology to the strong THz foundation created in Ann Arbor by Steve Williamson, Irl Duling and others. 

I think that while THz is not in the news at LUNA, it continues to show signs that a break-through on multiple areas remains likely, and that the explosive growth of the HSOR, fiber to the home market which is driving LUNA's growth will help fund and better insure such a future. 

THESE ARE ALL MY OPINIONS. PLEASE PERFORM YOUR OWN DUE DILIGENCE.