Astrotech Corporation — Form 10-Q Summary
Period clarification: Although the request identifies 2018 Q2, this filing reports the quarter and six months ended December 31, 2019 (Astrotech fiscal 2020 Q2). The financial statements are unaudited; amounts below are in millions unless stated otherwise.
Business context and reporting period
Astrotech develops and commercializes technology, with its primary focus on platform mass spectrometry. Its businesses include 1st Detect, which markets the TRACER 1000 explosives trace detector, and AgLAB, which is developing mass spectrometers for agriculture. TRACER 1000 received European ECAC certification in February 2019, launched commercially in June 2019, and had its first announced commercial sale in November 2019. The company reported one segment, 1st Detect.
Financial performance and position
| Metric | Quarter ended Dec. 31, 2019 | Prior-year quarter | Six months ended Dec. 31, 2019 | Prior-year six months |
|---|---|---|---|---|
| Revenue | $0.205 | $0.007 | $0.206 | $0.040 |
| Gross profit / margin | $0.009 / 4% | $0.007 / 100% | $0.010 / 5% | $0.029 / 73% |
| Operating expenses | $2.049 | $2.183 | $4.106 | $4.430 |
| Net loss | $2.083 | $2.160 | $4.151 | $4.398 |
| Net loss per share | $0.35 | $0.46 | $0.72 | $1.01 |
| Operating cash used | Not separately presented for the quarter | $3.356 | $4.230 |
Revenue growth reflected TRACER 1000 product-launch sales; prior-year revenue was associated with Astral’s discontinued ColorTime agreement. Current-period gross margin was low because inventory used in production carried research-and-development volume pricing. Management said material costs could decline with additional orders and scale, but provided no quantified forecast.
At December 31, 2019, cash and cash equivalents were $0.393 million, restricted cash was $0.611 million, and working capital was negative $0.7 million. Total assets were $3.677 million, total liabilities $3.430 million, and stockholders’ equity $0.247 million. Current liabilities included a $1.5 million related-party note; operating lease liabilities totaled $1.053 million. Operating cash use was partly offset by $1.5 million in note proceeds and $1.272 million net proceeds from stock issuance. Cash and restricted cash together declined $0.584 million over the six months.
Material changes, outlook, and risks
- Operating expenses fell 6% year over year in the quarter and 7% for the six-month period, mainly from lower SG&A; six-month R&D expense also declined.
- The filing states that substantial doubt exists about the company’s ability to continue as a going concern, citing losses, operating cash outflows, and limited liquidity. Management was evaluating a sale, technology licensing, debt or equity financing, a merger, or a strategic partnership. Funding may not be available on acceptable terms; absent funding, the company may delay or curtail research, strategic opportunities, or operations.
- The September 2019 $1.5 million secured note from the CEO and chairman bears 11% interest and matures September 5, 2020. On February 13, 2020, the company disclosed an additional $1.0 million secured note from the same related party, also at 11% and due September 5, 2020.
- Stockholders’ equity was below Nasdaq’s $2.5 million continued-listing threshold; the company anticipated a Nasdaq notice and possible required remediation, with no assurance of the outcome.
- Revenue was substantially dependent on one customer. TRACER 1000 still faced TSA passenger and cargo screening processes; the company cautioned that approval was not assured. Product demand, market acceptance, funding, competition, and technology execution are identified risks.
- Restricted cash related to TRACER 1000 purchase-order letters of credit. One letter of credit was released January 7, 2020, reducing restricted cash to $0.122 million. The company adopted lease accounting Topic 842 on July 1, 2019, recognizing approximately $1.6 million in lease assets and obligations and a $0.230 million opening retained-earnings adjustment; a subsequent lease amendment reduced the related balances by $0.414 million.
- No material pending legal proceedings were reported. Management concluded disclosure controls were effective; no material change in internal control was reported.
Important facts for investors to verify
- Whether the company secured durable financing and addressed its going-concern and Nasdaq equity-listing issues.
- Repayment terms, collateral, and any further changes to the related-party notes, including the February 2020 borrowing.
- TRACER 1000 sales volume, customer concentration, gross-margin improvement, and progress toward TSA approvals.
- Actual cash burn, availability of restricted funds, and liquidity after the reporting date.
- Whether the stated potential funding or strategic alternatives resulted in completed transactions.