Astrotech Corporation — Form 10-Q summary
Reporting period: The filing covers the quarter and six months ended December 31, 2017 (Astrotech fiscal 2018 second quarter), not 2016 Q2 as indicated in the request metadata. Amounts below are in millions unless otherwise noted.
Business context and results
Astrotech develops and commercializes technologies through Astro Scientific, which includes 1st Detect and Astrogenetix, and Astral Images, which develops film-restoration software. The filing describes early-stage product and market-development efforts across security detection, healthcare breath analysis, vaccine development, and film restoration.
| Metric | Quarter ended Dec. 31, 2017 | Quarter ended Dec. 31, 2016 | Six months ended Dec. 31, 2017 | Six months ended Dec. 31, 2016 |
|---|---|---|---|---|
| Revenue | $0.041 | $0.520 | $0.041 | $1.526 |
| Gross profit / margin | $0.017 / 41% | $0.201 / 39% | $0.017 / 41% | $0.476 / 31% |
| Operating expenses | $3.184 | $2.890 | $6.260 | $6.730 |
| Operating loss | $(3.167) | $(2.689) | $(6.243) | $(6.254) |
| Net loss attributable to Astrotech | $(3.137) | $(2.603) | $(6.143) | $(6.018) |
| Basic and diluted loss per share | $(0.77) | $(0.63) | $(1.51) | $(1.46) |
Cash, liquidity, and balance sheet
- At December 31, 2017, cash and cash equivalents were $0.633 million; short-term investments were $7.278 million and long-term investments were $1.255 million. Management reported total cash and investments of approximately $9.2 million and working capital of approximately $6.9 million.
- For the six months, operating cash use was $5.849 million, investing cash provided was $4.301 million, and financing cash use was $0.003 million. Cash declined $1.551 million from June 30, 2017.
- Total liabilities were $1.482 million, including $1.254 million current liabilities. The filing does not report outstanding borrowings or debt; cash interest paid was zero.
- Total assets were $12.347 million, compared with $18.835 million at June 30, 2017. Stockholders’ equity declined to $10.865 million from $16.770 million.
Material changes and notable items
- Revenue fell sharply because prior-year government-related subcontract work had ended in fiscal 2017. Current-period revenue was solely from one software license agreement with a large post-production film company, for restoring one film.
- Quarterly R&D expense increased $0.328 million year over year as the company refined products undergoing government testing. Six-month SG&A declined $1.2 million, largely due to lower equity compensation and payroll costs; R&D increased $0.7 million.
- The company wrote off the majority of inventory associated with the MMS-1000 as it shifted focus to the TRACER 1000. Net inventory fell to $0.010 million from $0.166 million.
- Astrotech completed a five-for-one reverse stock split in October 2017 and changed its state of incorporation from Washington to Delaware in December 2017.
- The Tax Cuts and Jobs Act reduced the federal corporate rate to 21%; Astrotech estimated a 27.52% blended statutory rate for fiscal 2018. The company maintained a full valuation allowance against deferred tax assets, and its reported effective tax rate was approximately zero.
Outlook, risks, and contingencies
- Going concern: Management said recurring losses and cash use raise substantial doubt about the company’s ability to continue as a going concern. It stated that available liquidity was expected to fund operations and other expected requirements through September 2018. Possible responses include a sale, financing, merger, or strategic partnership; an engagement to explore strategic alternatives was ongoing.
- Commercialization: 1st Detect had demonstrated its technology to DHS and TSA and was seeking TSA Qualified Products List acceptance; approval had not been reported. BreathDetect was in pre-clinical trials. Astrogenetix was seeking funding for an FDA Investigational New Drug application.
- Concentration: One customer accounted for 100% of revenue in the 2017 quarter and six-month period. The company therefore remained exposed to customer concentration and limited revenue visibility.
- Controls: Management concluded disclosure controls were ineffective because a material weakness in mathematical accuracy led to an inadvertent EPS calculation error for the September 2017 quarter. Remediation actions were planned.
- The filing identifies risks including ability to raise capital, continue as a going concern, commercialize products, secure government funding and contracts, meet development milestones, and compete. It reported no material pending legal proceedings and no off-balance-sheet arrangements.
- No quantified revenue or earnings guidance was provided.
Important facts for investors to verify
- Cash burn, investment maturities, and whether funding or strategic alternatives are secured before the stated September 2018 liquidity horizon.
- Whether TSA QPL acceptance, government testing, and customer adoption progress, and whether these efforts generate material revenue.
- Follow-on sales and customer diversification after the single-film license; the filing does not establish recurring revenue from that agreement.
- Progress and effectiveness of the EPS calculation and disclosure-control remediation.
- Potential future effects of the inventory write-off and the company’s transition from MMS-1000 to TRACER 1000.