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Astrotech Corp. (NASDAQ:ASTC) released earnings today, Nov. 14, that highlight the serious financial situation in which the company finds itself. Unless you believe that it will be able to gain significant traction with its Spacetech division over the next six quarters, I would not own shares in Astrotech.

Three Months Ended

Sept. 30,

2012

2011

(unaudited)

Revenue

$6,128

$4,840

Cost of revenue

4,907

2,926

Gross profit

1,221

1,914

Gross Profit Margin

20%

40%

Operating expenses:

Selling, general and administrative

2,099

1,929

Research and development

642

758

Total operating expenses

2,741

2,687

Loss from operations

-1,520

-773

Interest and other expense, net

-38

-74

Loss before income taxes

-1,558

-847

Income tax expense

--

-5

Net loss

-1,558

-852

Less: Net loss attributable to noncontrolling interest*

-141

-186

Net loss attributable to Astrotech Corporation

($1,417)

($666)

Net loss per share attributable to Astrotech Corporation, basic

($0.07)

($0.04)

Weighted average common shares outstanding, basic

18,951

18,120

Net loss per share attributable to Astrotech Corporation, diluted

($0.07)

($0.04)

Weighted average common shares outstanding, diluted

18,951

18,120

Over the last year, gross margins have decreased from 40% to 20%. This means that even though the company increased sales by ~25%, its profit decreased by nearly 40%. The company's net losses more than doubled from a year ago.

If that wasn't bad enough, the company's diluted share count also increased by nearly 5%. (Since Sept. 30, the company has continued to increase its shares outstanding and as of Nov. 9 had 19,486,727 shares outstanding.)

It's important to note that Astrotech has been investing in its Spacetech division in order to fuel further growth, while its primary ASO division has remained fairly stagnant. If Astrotech had closed its Spacetech division it would have saved ~$1 million this last quarter.

The question Astrotech investors need to ask themselves is if they truly believe that the Spacetech product developments will be successful and whether Astrotech will be able to successfully market them before running out of cash. Currently, the company has $5 million as of quarter end. At the current burn rate the company has five to six quarters before it runs out of cash. It will likely run into covenant issues on its term loan even sooner. As of the end of the quarter the company no longer has a revolving credit facility on which to draw.

To make matters worse, the company may face further difficulty raising additional equity too due to a delisting notification it received on Nov. 13 from Nasdaq. It indicated that the minimum bid price of its common stock had fallen below $1.00 for 30 consecutive trading days and that Astrotech is therefore not in compliance with Nasdaq Listing Rule 5550(a)(2).

In my opinion, shareholders should be prepared for the potential of further dilution and/or a bankruptcy filing in the not-so-distant future.

Disclaimer: As with all investing, micro-cap investing involves risks. Please do your own due diligence and do not solely rely on articles like this.

Source: Astrotech Releases Terrible Earnings, Faces Delisting