Astrotech Corporation — Form 10-Q Summary
Reporting period: Three months ended September 30, 2019 (the first quarter of fiscal 2020), compared with the three months ended September 30, 2018. The filing metadata’s “2018 Q1” label does not match the period covered by the filing.
Business context
Astrotech develops and commercializes technology, with current efforts focused on mass spectrometry. Its 1st Detect subsidiary is commercializing the TRACER 1000 explosives trace detector; AG-TECH is developing mass spectrometers for agricultural applications. Astrotech Technology owns and licenses related intellectual property. Astral Images activity and spending have been minimized, and it no longer qualifies as a reportable segment.
Financial performance and position
| Metric | Quarter ended September 30, 2019 | Prior-year quarter |
|---|---|---|
| Revenue | $1 thousand | $33 thousand |
| Gross profit / margin | $1 thousand / 100% | $22 thousand / 67% |
| Operating expenses | $2.057 million | $2.247 million |
| Operating loss | $2.056 million | $2.225 million |
| Net loss | $2.068 million | $2.238 million |
| Net loss per share | $0.37 | $0.55 |
| Cash used in operating activities | $1.830 million | $2.247 million |
The 100% gross margin reflects only $1 thousand of revenue and should not be read as evidence of meaningful scale. Revenue in 2019 came from sales of materials related to earlier mass-spectrometry technology; the prior-year revenue was associated with a discontinued Astral Images agreement. SG&A rose 5% to $1.202 million, while R&D fell 22% to $855 thousand. Management attributed lower R&D spending to the shift from TRACER 1000 development toward production and sales preparation.
At September 30, 2019, cash and cash equivalents were $1.579 million, working capital was approximately $0.4 million, and total assets were $5.115 million. Current liabilities were $2.516 million. Stockholders’ equity was $1.295 million, below Nasdaq’s stated $2.5 million continued-listing threshold. The balance sheet included $1.541 million of operating lease liabilities, of which $237 thousand was current.
Cash decreased by $9 thousand during the quarter: $1.830 million used in operations was largely offset by $1.821 million of financing inflows. Financing included a $1.5 million related-party note and $321 thousand of net stock-issuance proceeds. The prior-year quarter’s investing inflow of $3.595 million primarily reflected sales and maturities of investments.
Material changes, outlook and risks
- Going concern: Management states that recurring losses and operating cash outflows raise substantial doubt about the Company’s ability to continue as a going concern. It is evaluating potential funding sources, including asset or company sales, licensing, debt or equity financing, a merger, or a strategic partnership. Additional funding may not be available on acceptable terms; without it, the Company may need to delay, reduce, or terminate R&D or curtail operations.
- Related-party borrowing: On September 5, 2019, Astrotech issued its CEO and Chairman a secured $1.5 million note bearing 11% annual interest, due September 5, 2020. The Company and subsidiaries granted security interests in collateral, and subsidiaries guaranteed the obligation.
- Equity and listing: The Company had received $1.4 million net from its ATM offering through September 30, 2019, selling 360,668 shares at a weighted-average $3.80 per share. It reported that its equity was below Nasdaq’s stated minimum and anticipated a possible Nasdaq notice requiring corrective steps; no outcome is assured.
- Product commercialization: TRACER 1000 received ECAC certification for passenger and cargo screening in February 2019 and was officially launched in June 2019. TSA testing programs were still progressing; the filing cautions that TSA approval for either cargo or passenger screening is not assured. Management reported customer interest, demonstrations, and field trials, but provided no quantified sales forecast or formal financial guidance.
- Accounting and unusual items: Adoption of lease accounting Topic 842 on July 1, 2019 added approximately $1.6 million of right-of-use assets and lease obligations and increased opening retained earnings by $230 thousand. Comparative prior periods were not adjusted. The Company recorded no income tax benefit; a valuation allowance covers all net deferred tax assets.
- Other disclosures: The filing reports no material pending legal proceedings and no off-balance-sheet arrangements. Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Available liquidity, cash burn, and the Company’s ability to raise sufficient capital to address the stated going-concern uncertainty.
- Terms, collateral, interest accrual, and repayment capacity for the $1.5 million secured related-party note due September 2020.
- Nasdaq’s response to the reported $1.295 million stockholders’ equity and any steps or deadlines to maintain listing.
- Whether TSA testing results in passenger or cargo screening approval, and whether ECAC certification leads to commercial orders and sustained revenue.
- The timing and amount of future financing, ATM issuance, and potential dilution to existing shareholders.