Closing Price 10/29: $1.50
AstroTech Corportation is a science and technology development and commercialization company that launches, manages, and builds companies. Within their portfolio are four companies:
- Astrotech Technology, Inc. (“ATI”) has mass spectrometry technology (used to measure mass-to-change ratio of ions), and licenses the intellectual property associated with the technology.
- 1st Detect Corporation (“1st Detect”), a licensee of ATI, is a manufacturer of explosives and narcotics trace detectors developed for use at airports, secured facilities, and borders worldwide.
- Agriculture Technology Corporation (“AG-TECH”), a licensee of ATI, is a manufacturer of trace detectors for use in agriculture.
- Astral Images Corporation (“Astral”) is a developer of advanced film restoration and enhancement software.
1st Detect has developed the TRACER 1000™, the world’s first certified mass spectrometer (MS)-based explosives trace detector (ETD), with the goal of implementing at airports and other secured facilities across the globe. The TRACER 1000™ is able to detect explosives and narcotics, and its uses are highly applicable to the security market. This market has tremendous growth given the current political landscape. The company’s growth thesis on this division is predicated on their belief that government and airport customers are unsatisfied with the currently deployed ETD technology. This ends up wasting a lot of people’s times, as current systems frequently flag false positives, where the system will identify personal care products and other common household chemicals as explosives, causing unnecessary passenger delays and frustration, wasted security resources that mount to high costs, and lack of confidence in ETDs. The TRACER 1000™ will help ensure trust between the security personnel and the ETD. Further, this poses a security threat to the United States of America, and with terrorist threats becoming more numerous, sophisticated, and lethal, security professionals have been looking for better ways to address evolving threats. The TRACER 1000 is the first MS-based ETD to have ever passed either U.S. or European regulatory testing, leading to considerable interest from prospective customers, which has earned the company several successful demos and field trials. While there is currently no assurance that the TRACER 1000 will pass the TSA tests, it has received positive feedback during tests, and has passed European Regulatory testing.
The company is currently generating very little revenue. For FY19, ended June 30th, 2019, the company only generated $127,000. The cost of these revenues clocked in at $90,000, making for a gross margin of 29%. Gross margin % was down 29% from 2018, when the company had revenue of $86,000. However, the company’s net loss was down to $7.5M from $13.2M in 2019. This is from cost cutting in SG&A, R&D, among other expenses.
While the company’s cash position decreased from $4,276,000 in FY18 to $2,722,000 in FY2019, the company remains strong. They have raised money from the CEO, amongst other private offerings, and have limited debt obligations. Their debt/equity ratio is only 0.36. At 6/30/2019, the company’s cash and cash equivalents position was $1.6 million and net working capital was approximately $1.9 million. At 6/30/18, the company held cash and cash equivalents of $0.6 million and net working capital was approximately $3.3 million. Cash and cash equivalents increased by approximately $1.0 million during the year ended June 30, 2019. This is critical to continue funding operations while the company is producing a net loss.
In terms of ownership, 12% is held by institutions. For a company of AstroTech’s size, with a market cap of approximately $15M, this is quite rare. The CEO, Thomas B. Pickens III, owns approximately $5M worth of shares. The remaining shares are held by the general public. It is a vote of confidence from institutions and insiders, when their collective allocation of shares is near 50%.
Going forward, look for AstroTech to continue to grow their top line through their main business segment, which requires worldwide distribution of the TRACER 1000™. By staying ahead of emerging threats, lowering operating costs, and improving screening throughput, demand for the TRACER can be expected to ramp up internationally as it is ECAC approved, and pending TSA approval here in the United States.