Market Overview

Luna Announces Sale of Optoelectronic Solutions

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Divestiture supports strategic focus on fiber optic based test and
measurement

Luna Innovations Incorporated (NASDAQ:LUNA), a global leader in
advanced optical technology, today announced it has closed on the
divestiture of its Optoelectronic Solutions (OPTO) business to OSI
Optoelectronics, Inc. a subsidiary of OSI Systems, Inc. for up to $18.5
million. OSI Systems, Inc. is a vertically integrated designer and
manufacturer of specialized electronic systems and components for
critical applications in the homeland security, healthcare, defense, and
aerospace industries.

"The transaction demonstrates strong execution of our strategy to focus
our business on our core, fiber optic based test and measurement
technology platform," said Scott Graeff, President and Chief Executive
Officer of Luna. "Leveraging our industry-leading, proprietary fiber
optics platform will allow us to better serve our customers and to
generate long-term growth for our investors and employees. This
divestiture is another important step in ensuring we have a robust and
flexible balance sheet and a portfolio of complementary, scalable
businesses."

"The addition of Luna's Optoelectronic Solutions business is well
aligned with our focus on expanding and enhancing our product
portfolios," said Manoocher Mansouri, OSI Optoelectronics' President.
"As a leader in this area, this acquisition is expected to be a
complementary addition with its highly regarded, customized solutions."

Transaction details and financial reporting

Originally acquired in 2015 as part of its merger with Advanced
Photonix, Inc. (API), Luna's OPTO division designs and manufactures
fully integrated photonic solutions employed across a wide range of
industries. The division reported revenue of $13.1 million for the year
ended December 31, 2017.

As part of the transaction, employees associated with the OPTO division
located in Camarillo, CA and Montreal, Quebec, are expected to transfer
to OSI. Luna plans to use transaction proceeds to invest in its core
fiber optic based test and measurement platform, consistent with the key
focus of its long term strategy.

Luna was advised by B. Riley FBR and Woods Rogers PLC.

Conference Call Information

Luna will discuss this announcement on its second-quarter 2018 earnings
call, taking place today at 8:30 am (ET). Please refer to Luna's
second-quarter fiscal 2018 earnings news, which also was released this
morning. The call can be accessed by dialing 844.578.9643 domestically
or 270.823.1522 internationally prior to the start of the call. The
participant access code is 9985726. Investors are advised to dial in at
least five minutes prior to the call to register. The conference call
will also be webcast live over the Internet. The webcast can be accessed
by logging on to the "Investor Relations" section of the Luna website, www.lunainc.com,
prior to the event. The webcast will be archived under the "Webcasts and
Presentations" section of the Luna website for at least 30 days
following the conference call.

About Luna

Luna Innovations Incorporated (www.lunainc.com)
is a leader in optical technology, providing unique capabilities in
high-performance fiber optic test products for the telecommunications
industry and distributed fiber optic sensing for the aerospace and
automotive 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 Luna's expectations
regarding the execution of its strategy, its ability to leverage its
technology to serve customers, its long-term growth, the strength of its
balance sheet, the nature of its complementary and scalable businesses
and how they work together, the design of its business model and its
technical capabilities. 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, performance, and/or achievements of Luna may differ materially
from the future results, performance, and/or achievements 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 Luna's products and services to meet expectations, technological and
strategic challenges and those risks and uncertainties set forth in
Luna'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 Luna's website at www.lunainc.com.
The statements made in this release are based on information available
to Luna 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.

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