Business context and reporting period
This is Astrotech Corporation’s Form 10-Q for the quarter ended September 30, 2017 (fiscal Q1 2018), not fiscal Q1 2016 as the request metadata indicates. The filing compares the quarter with the three months ended September 30, 2016. Astrotech operates Astro Scientific, including 1st Detect and Astrogenetix, and Astral Images, focused on film digitization and enhancement.
Financial highlights
Unless stated otherwise, amounts are in millions of dollars.
| Metric | Quarter ended Sep. 30, 2017 | Quarter ended Sep. 30, 2016 |
|---|---|---|
| Revenue | $0 | $1.006 |
| Gross profit / margin | $0 / 0% | $0.275 / 27% |
| Operating expenses | $3.076 | $3.840 |
| Operating loss | $(3.076) | $(3.565) |
| Net loss attributable to Astrotech | $(3.006) | $(3.415) |
| Net loss per share | $(0.15) | $(0.17) |
| Cash used in operating activities | $3.468 | $3.116 |
At September 30, 2017, cash and cash equivalents were $0.095 million; short- and long-term investments totaled $11.490 million, for cash and investments of about $11.6 million. Working capital was about $9.6 million, down from $11.9 million at June 30, 2017. Total assets were $15.125 million and total liabilities $1.240 million. The balance sheet reports no borrowings or other debt.
Changes versus prior comparable period
- Revenue fell to zero from $1.006 million because government-related subcontract agreements that generated most prior-year revenue ended in fiscal Q4 2017.
- Operating expenses declined $0.764 million: lower selling, general and administrative costs, including reduced equity compensation and payroll, partly offset by higher research and development spending.
- Net loss narrowed by $0.461 million, while operating cash use increased by $0.352 million, partly due to payments on year-end payroll accruals.
- Cash and cash equivalents fell by $2.089 million during the quarter; sales and maturities of investments provided $1.389 million in investing cash inflows.
Outlook, risks and unusual items
Management stated it believed liquidity was sufficient to fund operations and expected requirements through September 2018. However, the filing says fiscal 2017’s $11.6 million net loss and $8.8 million operating cash use raised substantial doubt about the company’s ability to continue as a going concern. Management engaged Chardan Capital Markets to pursue strategic alternatives, including a sale, financing, merger, or strategic partnership. The company cautioned that it may not execute a solution; its statements do not include adjustments that could result if its going-concern plans fail.
Key business uncertainties include obtaining follow-on government contracts and funding, product demand and market acceptance, development milestones, competition, and the ability to raise capital. The first phase of a TSA-related program was completed, but later phases were not assured; Battelle did not plan to pursue the next phase of a separate defense program. Astrogenetix was seeking funding for an FDA Investigational New Drug application. The company reported no material pending legal proceedings and no off-balance-sheet arrangements. It effected a five-for-one reverse stock split on October 16, 2017, after quarter-end; reported share figures were adjusted for the split.
Important facts for investors to verify
- Whether Astrotech can secure financing, a transaction, or other strategic alternative before its stated liquidity runway expires.
- Whether 1st Detect can replace expired subcontract revenue with follow-on government or commercial sales.
- Actual cash burn and the liquidity available from investments, including any restrictions or market-value changes.
- Progress and funding needs for Astral, Astrogenetix, and 1st Detect product development and commercialization.
- The effect of the reverse split and any subsequent share-count changes or financing on existing shareholders.