Astrotech (ASTC) - 2023 Q2 - Quarterly Report

Revenue and Profitability - Total revenue decreased by $298 thousand in Q2 FY2023 compared to Q2 FY2022, primarily due to a shift in sales focus from the ETD market to the AgLAB 1000-D2 commercialization[123] - Gross profit for Q2 FY2023 was $108 thousand, with a gross margin of 41%, an increase of 20% from the same quarter in the previous year[124] - Total revenue decreased by $447 thousand in fiscal year 2023, with all revenue derived from TRACER 1000 unit sales and rentals, as well as consumables and maintenance services[128] - Gross profit for the six months ended December 31, 2022, was $114 thousand, with a gross margin of 38%, up from 18% in the prior year[128] - Other income increased by $316 thousand in Q2 FY2023 due to higher earnings from capital-preservation investments as interest rates rose[125] - Other income increased by $527 thousand, driven by higher income from short-term investments and reduced interest expenses[131] - The company anticipates that the AgLAB market will provide more profitable opportunities compared to the ETD market[128] Operating Expenses - Operating expenses increased by $542 thousand, or 22.8%, in Q2 FY2023, driven by a 109.2% increase in research and development expenses[125] - Operating expenses increased by $1.2 million, or 28.1%, during the six months ended December 31, 2022, primarily due to a 93% increase in research and development expenses[129][130] - Selling, general and administrative expenses decreased by $170 thousand, or 9.8%, in Q2 FY2023 compared to the same period last year[125] Cash Flow and Investments - Cash and cash equivalents decreased by $10.6 million to $15.9 million as of December 31, 2022, compared to June 30, 2022[135] - Net cash used in operating activities increased by $771 thousand for the six months ended December 31, 2022, due to higher prepayments and operating expenses[136] - Cash used in investing activities rose by $5.5 million, primarily due to purchases of short-term time deposit investments[137] - The company authorized a share repurchase program of up to $1.0 million, effective from November 17, 2022, through November 17, 2023[139] Product Development and Market Focus - AgLAB is developing the AgLAB 1000-D2 series to optimize THC and CBD oil yields during distillation, with initial production runs beginning in Q1 FY2023[114] - BreathTech is developing the BreathTest-1000 to screen for VOC metabolites, with preliminary results indicating it can differentiate between background breath and disease VOCs[116] - The TRACER 1000 has been deployed in approximately 21 locations across 14 countries as of December 31, 2022[111] Supply Chain and External Factors - The company is focused on securing alternative supplies and managing production to mitigate the impact of supply chain shortages[118] - The long-term impact of the COVID-19 pandemic on the company's business may not be fully reflected until future periods[118] Taxation - The effective tax rate for the six months ended December 31, 2022, was 0%, with a full valuation allowance on deferred tax assets due to expected future losses[141]