Astrotech Corporation — Form 10-K Summary
Reporting period: Fiscal year ended June 30, 2018, with comparison to fiscal 2017. The request metadata says “2016 Q4,” but the filing is for fiscal 2018.
Business context
Astrotech develops and commercializes technology through Astro Scientific, principally 1st Detect’s chemical-detection instruments, and Astral Images’ film-restoration software. Astrogenetix’s vaccine-development work was placed on hold for lack of funding. Management prioritized 1st Detect’s TRACER 1000 testing and certification; Astral spending and staffing were reduced.
Financial performance and condition
| Metric | FY2018 | FY2017 |
|---|---|---|
| Revenue | $86,000 | $2.328 million |
| Gross profit / margin | $50,000 / 58% | $1.035 million / 44% |
| Operating expenses | $13.387 million | $13.095 million |
| Net loss attributable to Astrotech | $13.251 million | $11.582 million |
| Loss per share | $3.26 | $2.84 |
| Net cash used in operations | $10.784 million | $8.821 million |
- Revenue fell 96%, mainly because two government subcontract agreements that drove FY2017 revenue ended. FY2018 revenue comprised $41,000 from a software license and $45,000 from space-grade handrail manufacturing.
- FY2018 operating expenses included $6.065 million of R&D and $1.693 million of impairment charges: $1.579 million for Astral assets and $114,000 related to 1st Detect facility assets. SG&A declined 25% to $5.629 million.
- At June 30, 2018, assets were $5.140 million, liabilities $1.148 million, and stockholders’ equity $3.992 million. Cash and cash equivalents were $552,000; short-term investments were $3.551 million; working capital was approximately $3.3 million.
- Investing activities provided $9.159 million, primarily reflecting investment sales and maturities. Cash declined $1.632 million during the year. The company reported no debt or credit facilities.
- Operating cash burn exceeded year-end cash. Management estimated available liquidity would fund operations through November 2018; this estimate depends on assumptions and is not a guarantee.
Changes, outlook, and risks
- The auditor issued an unqualified opinion on the financial statements but included a going-concern explanatory paragraph. Recurring losses and operating cash outflows raise substantial doubt about the company’s ability to continue as a going concern.
- Management was considering a sale, debt or equity financing, merger, or strategic partnership. A $30 million maximum shelf registration filed July 3, 2018 was declared effective August 20, 2018; the filing does not establish that any offering was completed.
- NASA declined Astrogenetix’s request for additional funding on September 11, 2018; work was halted. No specific financial guidance was provided.
- TRACER 1000 had entered DHS Transportation Security Laboratory developmental testing and was accepted into TSA air-cargo testing and ECAC evaluation. Certification, product approval, and resulting sales were uncertain.
- Two customers accounted for all FY2018 revenue, underscoring customer concentration. Key risks include financing availability, continued losses, commercialization and certification delays, competition, and possible shareholder dilution from future securities issuance.
- Astral recorded a significant impairment after a prospective software sale was postponed and market development remained slow. A subsequent Astral contract had uncertain revenue potential.
- Management reported internal controls over financial reporting effective at year-end and said a material weakness involving earnings-per-share calculation identified earlier in FY2018 had been remediated.
Important facts for investors to verify
- Current cash, investment balances, cash burn, and the outcome of management’s financing or strategic alternatives.
- Whether TRACER 1000 completes required testing and certifications, and whether those milestones lead to purchase orders and material revenue.
- Whether Astral’s subsequent contract generates meaningful revenue and whether further impairments or spending reductions occur.
- The status and terms of any securities issued under the effective shelf registration, including potential dilution.
- Progress in resolving the going-concern uncertainty and whether liquidity extends beyond management’s stated November 2018 estimate.