ASTROTECH Corp SEC 10-K Report

Astrotech Corporation (Nasdaq: ASTC), a Delaware-based company focused on commercializing mass spectrometry technology, has released its Form 10-K report for the fiscal year ended June 30, 2023. The report highlights significant financial growth, strategic initiatives aimed at expanding market presence, and the challenges the company faces in its industry.

Financial Highlights

• Total Revenue: $1.7 million, increased by $914 thousand, or 121.9%, compared to $750 thousand for the fiscal year ended June 30, 2023. The increase was due to more new units sold compared to the prior year.
• Gross Profit: $751 thousand, increased by $445 thousand, or 145.4%, compared to $306 thousand for the fiscal year ended June 30, 2023. Gross margin increased to 45.1% from 40.8% due to a higher proportion of recurring revenue.
• Loss from Operations: $(13.3) million, increased by $2.2 million compared to $(11.1) million for the fiscal year ended June 30, 2023. This increase was driven by higher operating expenses.
• Net Loss: $(11.7) million, increased by $2.0 million compared to $(9.6) million for the fiscal year ended June 30, 2023.
• Net Unrealized Gain (Loss): $276 thousand, compared to $(254) thousand for the fiscal year ended June 30, 2023, reflecting a $530 thousand improvement.

Business Highlights

• Company Overview: Astrotech Corporation is focused on commercializing the Astrotech Mass Spectrometer Technology™ platform through wholly-owned subsidiaries.
• Mission Statement: The company's mission is to expand access to mass spectrometry (MS) and its use in high-volume, real-time testing environments such as airports, border checkpoints, cargo hubs, infrastructure security, correctional facilities, military bases, law enforcement centers, and industrial locations.
• Product Portfolio: The company's products include the TRACER 1000™, BreathTest-1000™, AGLAB 1000™, and Pro-Control 1000™ along with related accessories and consumables.
• Business Units: Astrotech operates through several wholly-owned subsidiaries: Astrotech Technologies, Inc. (ATI), 1st Detect Corporation, AgLAB, Inc., BreathTech Corporation, and Pro-Control, Inc.
• 1st Detect Corporation: Specializes in manufacturing explosives trace detectors (ETDs) and narcotics trace detectors (NTDs) for security and detection applications. The TRACER 1000™ is the first MS-based ETD certified by the European Civil Aviation Conference (ECAC) and approved by the TSA for air cargo.
• AgLAB, Inc.: Focuses on developing mass spectrometers for the hemp and cannabis market, with the AgLAB 1000™ series aimed at optimizing yields in the distillation process.
• BreathTech Corporation: Developing the BreathTest-1000™, a breath analysis tool to screen for volatile organic compound (VOC) metabolites that could indicate compromised conditions such as bacterial or viral infections.
• Pro-Control, Inc.: Applies AMS Technology in industrial process control applications, focusing on increasing reaction intermediates, purity, and percent yields in industrial processes.
• Geographical Performance: The TRACER 1000 has been deployed in approximately 30 locations across 14 countries throughout Europe and Asia.
• New Product Launches: The TRACER 1000 Narcotics Trace Detector (NTD) was launched and is capable of rapid detection of trace levels of narcotic compounds in seconds.
• New Production Launches: Formation of Pro-Control, Inc. to utilize AMS Technology for industrial process control applications involving chemical distillation outside of the agriculture industry.
• Sales Units: The TRACER 1000 ETD and NTD are listed in the U.S. General Services Administration (GSA) IT Schedule 70, allowing sales to the U.S. federal government.
• Future Outlook: The company is focused on expanding its market presence and generating revenue growth through the development and demonstration of relevant solutions in target markets, including ongoing field trials and partnerships.
• Regulatory Approvals: The TRACER 1000 was approved by the TSA for the Air Cargo Security Technology List (ACSTL), advancing to Stage II testing for potential inclusion in the "qualified" list.
• Strategic Partnerships: AgLAB entered into a master lease agreement with SC Laboratories to jointly market the AgLAB 1000-D2™ mass spectrometer and the AgLAB Maximum Value Process™ testing method.

Strategic Initiatives

• During fiscal year 2024, the company made significant strides in expanding its market presence and product offerings. Key initiatives included the deployment of the TRACER 1000 in approximately 30 locations across 14 countries, the acceptance of a significant purchase order for seven TRACER 1000 Explosive Trace Detectors, and the introduction of the AgLAB Maximum Value Process at MJBizcon.
• Additionally, the company formed a new wholly-owned subsidiary, Pro-Control, to utilize AMS Technology for industrial process control applications. The company also began accepting orders for the TRACER 1000 Narcotics Trace Detector and announced the inclusion of the TRACER 1000 NTD and ETD in the U.S. General Services Administration IT Schedule 70.
• Furthermore, AgLAB entered into a master lease agreement with SC Laboratories for joint marketing of the AgLAB 1000-D2 mass spectrometer. The TRACER 1000 was also approved by the U.S. Transportation Security Administration for the Air Cargo Security Technology List, advancing to Stage II testing.
• The company successfully completed several public offerings of common stock in fiscal year 2021, raising net proceeds of approximately $67.6 million. These funds are intended to satisfy both short-term and long-term capital needs, including scaling operations, increasing manufacturing capacity, and expanding research and development capabilities.
• The company reported a decrease in cash and cash equivalents by approximately $3.8 million during the year ended June 30, 2024, primarily due to funding ongoing operating expenses. Additionally, the company repaid related party debt, including the full repayment and cancellation of a $1.5 million secured promissory note issued to the CEO. The company did not engage in any equity repurchases or pay dividends during the fiscal year.
• The company anticipates increased expenses in connection with ongoing research and development efforts and business expansion. It plans to finance additional cash needs through a combination of equity offerings, debt financing, and strategic partnerships. The company is also focused on managing production and securing alternative supplies to mitigate the impact of supply chain shortages.
• The long-term impact of the COVID-19 pandemic on the business remains uncertain, but the company is optimistic about passing on pricing inflation to customers and continuing to grow its market presence. The company expects its cash and cash equivalents and investments to fund operating expenses and capital expenditure requirements for at least twelve months following the issuance of the consolidated financial statements.

Challenges and Risks

• Financial Performance and Profitability: The company has incurred significant losses since inception and anticipates continued losses for the foreseeable future. As of June 30, 2024, the accumulated deficit was approximately $237 million with a net loss of $11.7 million for fiscal year 2024. The inability to achieve and maintain profitability could lead to a significant decline in the market value of the company's common stock.
• Development Stage Business Units: The company's business units are in the development stage with limited operating history and revenues. They face risks related to capital requirements, failure to establish business relationships, and competitive disadvantages against larger companies. These units require substantial funding, and there is no guarantee of future profitability or market success.
• Regulatory Approvals: The company's products, such as the TRACER 1000 and BreathTest-1000, require regulatory approvals (e.g., TSA and FDA). Obtaining these approvals is complex, lengthy, and uncertain, which could materially affect operations and financial condition if not granted timely or at all.
• Capital Requirements: The company may need to raise additional capital to fund operations and commercialize products. There is no assurance of obtaining future financing on commercially reasonable terms, which could limit the ability to pursue business objectives and respond to opportunities or challenges.
• Intellectual Property Risks: The success of the company's business units depends on obtaining and protecting patents and other intellectual property. Failure to secure adequate protection or defend against infringement claims could harm competitive positions and financial conditions.
• International Operations: The company faces risks related to international sales, including import/export laws, exchange rate fluctuations, political instability, and stringent foreign regulations. These factors could negatively impact international business and overall financial performance.
• Inflation: Inflation could adversely affect the company's business by increasing costs, particularly if price increases cannot be achieved to offset these costs. This may exacerbate other risks, including supply chain disruptions and employee retention challenges.
• Customer Concentration: The company generates substantial revenue from a limited number of customers. The loss of any major customer could materially harm business operations and financial results.
• Competition: Increased competition in the industries where the company operates could adversely affect operating results. The company must innovate and commercialize new products timely to remain competitive.
• Natural Disasters: Facilities in Austin are susceptible to damage from hurricanes or other natural disasters, which could result in temporary or permanent closure of business operations, impacting financial performance.
• Supply Chain Dependence: The company relies on third-party suppliers, including single-source suppliers, for critical components. Supply interruptions or price fluctuations could harm business operations and financial results.
• Warranty Costs: The company provides warranties on its products, which could result in substantial future repair or replacement costs, impacting financial condition and results of operations.
• Legal and Regulatory Compliance: The company's products and operations are subject to extensive governmental regulation. Failure to comply with applicable requirements could result in enforcement actions, higher costs, or lower sales.
• Cannabis Industry Risks: The company's AgLAB business is highly dependent on the U.S. hemp and cannabis market, which is subject to evolving regulations and public perception. Changes in laws or enforcement actions could negatively impact business operations.
• Cybersecurity: Increased cybersecurity threats pose risks to the company's systems, networks, and data. Breaches could result in operational disruptions, reputational damage, and significant costs.
• Corporate Governance Compliance: Compliance with regulations such as the Sarbanes-Oxley Act and Dodd-Frank Act imposes significant costs and administrative burdens. Failure to maintain effective controls could harm operating results and financial condition.
• Insurance Coverage: The company's insurance coverage may be inadequate to cover all significant risk exposures, potentially leading to substantial costs.

SEC Filing: ASTROTECH Corp [ ASTC ] - 10-K - Sep. 20, 2024