Astrotech Corporation — Form 10-Q Summary
Period clarification: The supplied filing is for the quarter ended March 31, 2021, not 2019 Q3. It reports the three- and nine-month periods ended March 31, 2021, compared with the same periods in 2020. Financial amounts below are in thousands of dollars unless noted; statements are unaudited.
Business context and reporting period
Astrotech develops and commercializes mass spectrometry technology through subsidiaries focused on security detection (1st Detect), agriculture (AgLAB), and breath analysis (BreathTech). The quarter’s reported revenue came from 1st Detect’s TRACER 1000 systems. The company reported two business segments: 1st Detect and AgLAB.
Financial results and liquidity
| Metric | Three months ended March 31, 2021 | Three months ended March 31, 2020 | Nine months ended March 31, 2021 | Nine months ended March 31, 2020 |
|---|---|---|---|---|
| Revenue | $54 | $118 | $324 | $324 |
| Gross profit / margin | $8 / 15% | $7 / 6% | $37 / 11% | $17 / 5% |
| Operating expenses | $2,348 | $2,007 | $5,988 | $6,113 |
| Operating loss | $(2,340) | $(2,000) | $(5,951) | $(6,096) |
| Net loss | $(2,403) | $(2,068) | $(6,136) | $(6,219) |
| Basic and diluted loss per share | $(0.13) | $(0.34) | $(0.42) | $(1.05) |
For the nine-month period, operating cash use was $4,864, investing cash use was $24, and financing provided $33,555, primarily from stock sales. Cash, cash equivalents, and restricted cash totaled $32,016 at March 31, 2021, including $31,474 of unrestricted cash and $542 of restricted cash. Working capital was approximately $28.3 million, compared with approximately $0.3 million at June 30, 2020. Total assets were $33,780 and total liabilities $5,452.
Balance-sheet term notes totaled approximately $3,042, comprising a $2,500 related-party note and $542 in PPP borrowing before subsequent forgiveness. Lease liabilities were $72. The related-party notes bear 11% interest and mature September 5, 2021. The company reported no cash interest paid during the nine-month period.
Material changes versus prior comparable periods
- Quarterly revenue fell $64, or about 54%, due to pandemic-related microchip delivery delays; the company said the supply issue had been resolved. Nine-month revenue was unchanged year over year.
- Gross margin improved in both comparisons: 15% versus 6% for the quarter and 11% versus 5% for nine months. Management attributed improvement to production economics and expects further improvement with higher volumes and cost refinement.
- Quarterly operating expenses rose $341, mainly from higher payroll-related SG&A, partly offset by lower R&D and office costs. Nine-month operating expenses declined $125 overall, with R&D down $572 as the company shifted emphasis toward commercialization.
- Nine-month results included a $544 charge related to disposal of the former corporate lease and associated assets and liabilities. Management estimated approximately $870 of net cash savings over the remainder of that lease.
- Common shares outstanding increased substantially through equity offerings. The company raised approximately $33.5 million net during the nine months and reported stockholders’ equity of $28,328 at March 31, 2021, versus $625 at June 30, 2020.
Outlook, commentary, risks, and unusual items
- Management said the equity financings resolved the liquidity issue and that substantial doubt about the company’s ability to continue as a going concern no longer existed. It may pursue further financing or strategic options.
- TRACER 1000 had passed TSA cargo non-detection testing; cargo detection testing was ongoing and remained a step toward potential U.S. air-cargo approval. TSA passenger-checkpoint testing was on indefinite hold. The filing provides no quantified revenue or earnings guidance.
- BreathTech signed a study agreement with Cleveland Clinic on March 31, 2021 to evaluate breath samples in relation to COVID-19 PCR results. This remains development work, not a reported commercial product or revenue stream.
- COVID-19 risks include delays to certification, supply-chain disruption, reduced near-term checkpoint demand, and potential effects on customers, operations, liquidity, and results. Revenue was highly concentrated: two customers materially comprised substantially all revenue in the current periods.
- On April 19, 2021, the company received full forgiveness of its approximately $542 PPP loan and the associated cash restriction was released.
- After quarter-end, the company sold 21,639,851 shares at $1.50 and Wainwright exercised an option for another 3,245,977 shares, for approximately $37.3 million gross proceeds before fees and expenses. Underwriter warrants covered 1,493,150 shares at $1.875. The filing reports 49,487,492 shares outstanding as of May 12, 2021.
- A stockholder class and derivative action filed April 15, 2021 challenges the vote approving a certificate amendment. The company disputes the allegations and filed a Delaware validation proceeding to address uncertainty and seek ratification.
- The company terminated its former Austin office lease and allowed its Webster facility lease to expire, while entering a new 36-month Austin office and laboratory lease beginning around June 1, 2021.
Investor verification priorities
- Confirm TSA cargo detection testing progress, approval timing, and the status of passenger-screening testing.
- Assess conversion of TRACER purchase orders and service commitments into recognized revenue, including customer concentration and any delivery constraints.
- Reconcile post-quarter offering proceeds net of fees, share count and potential dilution from warrants and equity awards.
- Verify the related-party note repayment or refinancing and the release of restricted cash following PPP forgiveness.
- Track the certificate-amendment litigation and validation proceeding, and confirm any material legal or governance developments.