Astrotech Corporation — Form 10-Q Summary
Period clarification: The supplied filing is for the quarter ended March 31, 2018, and the nine months then ended—not 2016 Q3 as stated in the request metadata. It was signed May 15, 2018.
Business context
Astrotech is a technology development and commercialization company with two reportable business units: Astro Scientific, including 1st Detect and Astrogenetix, and Astral Images. The unaudited results cover the fiscal third quarter and first nine months of fiscal 2018. The filing says interim results are not necessarily indicative of the full fiscal year.
Financial performance and position
| Metric | Three months ended March 31, 2018 | Three months ended March 31, 2017 | Nine months ended March 31, 2018 | Nine months ended March 31, 2017 |
|---|---|---|---|---|
| Revenue | $0 | $0.411 million | $0.041 million | $1.937 million |
| Gross profit (margin) | $0 (0%) | $0.250 million (61%) | $0.017 million (41%) | $0.726 million (37%) |
| Operating expenses | $2.858 million | $3.194 million | $9.118 million | $9.924 million |
| Net loss attributable to Astrotech | $2.855 million | $2.800 million | $8.998 million | $8.818 million |
| Loss per share, basic and diluted | $0.70 | $0.69 | $2.22 | $2.15 |
For the nine months, operating cash used was $8.641 million, investing cash provided was $7.093 million, and financing cash used was $0.003 million. Cash declined by $1.551 million to $0.633 million. At March 31, cash plus short-term investments was approximately $6.3 million; working capital was $5.6 million. Total assets were $9.311 million, total liabilities $1.146 million, and stockholders’ equity $8.165 million. The balance sheet does not present a separate debt balance.
Changes versus prior comparable periods
- Quarterly revenue fell to zero. The prior-year quarter’s revenue was mainly from government-related research subcontracts that ended in fiscal Q4 2017.
- Nine-month revenue fell by about $1.9 million. The current-period $41,000 came from a software license agreement with a post-production film company; prior-year revenue came from government subcontracts.
- Nine-month operating expenses decreased $0.806 million, as lower SG&A (down $1.420 million) more than offset higher R&D (up $0.614 million). Management attributed the R&D increase to redeploying personnel to product refinement and government testing.
- Operating cash use increased $2.184 million year over year, primarily because payroll-related and other accrued liabilities declined. Cash and investments were substantially lower than at June 30, 2017.
Outlook, risks and notable items
- Going concern and liquidity: Management and the filing state that recurring losses and operating cash outflows raise substantial doubt about the Company’s ability to continue as a going concern. Management said available liquidity was expected to fund operating and other requirements through September 2018. It was pursuing possible sale of the Company or part of it, debt or equity financing, a merger, or a strategic partnership; no outcome was assured.
- Commercialization milestones: 1st Detect’s TRACER 1000 had entered DHS Transportation Security Laboratory developmental testing and evaluation and was accepted into the TSA air-cargo screening qualification program. Certification and TSA listings remained future milestones, not achieved results. Astrogenetix was seeking funding to pursue an FDA Investigational New Drug application. Astral’s reported nine-month revenue came from one customer, highlighting customer concentration.
- Product and revenue risks: The business units are early-stage, have limited revenue, and may need substantial additional funding. Government procurement, regulatory approval, product acceptance, competition, and development milestones are material risks. The filing warns that additional financing may be unavailable or dilutive.
- Unusual items: Inventory related to earlier detector iterations was written off in fiscal Q2 2018; materials purchases are being expensed pending future product sales. The Company completed a 1-for-5 reverse stock split in October 2017. The Tax Cuts and Jobs Act changed the federal corporate tax rate; the Company had not completed accounting for all related tax effects, and it maintained a full valuation allowance against net deferred tax assets.
- Controls and legal matters: Management reported disclosure controls and internal control over financial reporting effective at March 31, 2018, and said a prior-quarter material weakness involving EPS calculation and review had been remediated. The filing reports no material pending legal proceeding.
Important facts for investors to verify
- Whether Astrotech secured financing, a sale, merger, or strategic partner before the stated liquidity runway ended in September 2018.
- Subsequent cash burn, investment liquidity, working capital, and any new debt or equity issuance.
- Progress and outcomes of TRACER 1000 testing, certification, TSA qualification, and any resulting commercial orders or revenue.
- Whether Astral and other units converted development activity into recurring revenue, and whether customer concentration changed.
- Any later disclosures on going-concern status, inventory accounting, tax effects, or the remediation of the prior control weakness.