On May 15, 2009, Luna Innovations Incorporated (NASDAQ:LUNA) notified Nasdaq that it was not in compliance with the standards for continued listing on the Nasdaq Global Market in connection with the filing of its Quarterly Report on Form 10-Q for the period ended March 31, 2009. Luna Innovations confirmed to Nasdaq that it no longer satisfied the requirements of Nasdaq Marketplace Rule 5450(b)(1)(A), which specifies that an issuer must maintain stockholders’ equity of at least $10 million. Luna Innovations does not meet the alternative “Market Value” or “Total Assets/Total Revenue” standards for continued listing at this time. The Nasdaq Listing Qualifications Staff confirmed this compliance deficiency in a letter dated May 19, 2009.

The Nasdaq Listing Qualifications Staff has permitted Luna Innovations until June 3, 2009 to provide Nasdaq with a specific plan to regain and maintain compliance with the continued quantitative listing standards and requirements of the Nasdaq Global Market. During this time, Luna Innovations common stock will continue to trade on the Nasdaq Global Market, subject to the company’s continued compliance with other Nasdaq listing requirements. If the plan of compliance is approved following review, Luna Innovations may be granted an additional extension to regain compliance for an undetermined period that may extend no longer than September 1, 2009, which is 105 days following the date of the original deficiency notice. If Luna Innovations is unable to regain compliance within the permitted time period or a staff extension is not granted, it may then receive a delisting determination notice. In the event that Nasdaq determines to delist the company’s common stock from the Nasdaq Global Market, Luna Innovations intends to appeal the proposed delisting to the extent it is permitted to do so under the Nasdaq Marketplace Rules.

In addition, on May 12, 2009, Luna Innovations notified the Nasdaq Stock Market that it no longer complied with Nasdaq Marketplace Rule 5605(c)(2)(A), which requires the audit committee of a listed company to be composed of at least three independent directors. On May 12, 2009, John C. Backus, Jr.’s term as a director and member of the company’s audit committee concluded, and, as a result, only two independent directors remained as members of Luna’s audit committee.

Luna Innovations intends to fill the vacancy on its audit committee and to regain compliance with Nasdaq’s audit committee requirements as expeditiously as possible. In the meantime, Luna Innovations will rely on the cure period set forth in Nasdaq Marketplace Rule 5605(c)(4)(B), as confirmed by a letter from the Nasdaq Listing Qualifications Staff dated May 14, 2009. This cure period will run through the earlier of the company’s 2010 annual meeting of stockholders or May 12, 2010. During this time, Luna Innovations common stock will continue to trade on the Nasdaq Global Market, subject to the company’s continued compliance with other Nasdaq listing requirements.