~~Astral Images incurred $1.4 million in~~June 30, 2017, research and development expenses ~~during each~~for 1^st Detect were $4.8 million and $4.2 million, respectively.

Astral Images

We have developed a suite of ~~the fiscal years 2017 and 2016. Our philosophy is to offer compelling solutions with differentiation~~products through ~~innovation. Our~~our research and development activities ~~are directed towards building innovative solutions consisting~~at Astral, but development of ~~customized off-the-shelf hardware~~new products has been curtailed due to funding constraints and ~~internally-developed, reliable AI software and services.~~given that the 4K HDR conversion market has not developed as quickly as anticipated. We are now focused on ~~developing technology innovations that we believe will deliver significant cost benefits while enhancing image quality on par or better than the competition.~~supporting our current and potential future partnerships. We believe in protecting our intellectual property as Astral has ~~one~~five U.S. ~~patent~~patents and ~~five~~one U.S. patent applications in process. For the years

ended June 30, 2018 and June 30, 2017, research and development expenses for Astral were $1.2 million and $1.4 million, respectively.

Certain Regulatory Matters

We are subject to United States federal, state, and local laws and regulations designed to protect the environment and to regulate the discharge of materials into the environment. We are also beholden to certain regulations designed to protect our domestic technology from unintended foreign exploitation and regulate certain business practices. We believe that our policies, practices, and procedures are properly designed to prevent unreasonable risk of environmental damage and consequential financial liability. Our operations are also subject to various regulations under federal laws regarding the international transfer of technology, as well as to various federal and state laws related to business operations. In addition, we are subject to federal contracting procedures, audit, and oversight. Compliance with environmental laws and regulations and technology export requirements has not had and, we believe, will not have in the future, material effects on our capital expenditures, earnings, or competitive position.

Federal regulations that impact our operations include the following:

Foreign Corrupt Practices Act. The Foreign Corrupt Practices Act establishes rules for U.S. companies doing business internationally. Compliance with these rules is achieved through established and enforced corporate policies, documented internal procedures, and financial controls.

Iran Nonproliferation Act of 2000. This act authorizes the President of the United States to take punitive action against individuals or organizations known to be providing material aid to weapons of mass destruction programs in Iran.

Federal Acquisition Regulations. Goods and services provided by us to U.S. Government agencies are subject to Federal Acquisition Regulations (“FAR”). These regulations provide rules and procedures for invoicing, documenting, and conducting business under contract with such entities. The FAR also subjects us to audit by federal auditors to confirm such compliance.

Truth in Negotiations Act. The Truth in Negotiations Act was enacted for the purpose of providing full and fair disclosure by contractors in the conduct of negotiations with the U.S. Government. The most significant provision included in the Truth in Negotiations Act is the requirement that contractors submit certified cost and pricing data for negotiated procurements above a defined threshold.

Regulatory Compliance and Risk Management

We maintain compliance with regulatory requirements and manage our risks through a program of compliance, awareness, and insurance, which includes maintaining certain insurances and a continued emphasis on safety to mitigate any risks.

Employees Update

As of June 30, ~~2017,~~2018, we employed ~~42 regular full-time~~33 employees, none of which were covered by any collective bargaining agreements.

Item 1A. Risk ~~Factors.~~Factors

An investment in our securities involves a high degree of risk. This annual report will contain a discussion of the risks applicable to an investment in our securities. Prior to making a decision about investing in our securities, you should carefully consider the specific factors discussed under the heading “Risk Factors” in this annual report. The risks and uncertainties we have described are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our operations. The occurrence of any of these known or unknown risks might cause you to lose all or part of your investment in the offered securities.

We have incurred significant losses since inception and anticipate that we will incur continued losses for the foreseeable future.

As of June 30, 2018, we had an accumulated deficit of approximately $184.2 million and reported a net loss of $13.3 million for the fiscal year 2018. We are unable to predict the extent of any future losses or when we will become profitable, if at all. If we are unable to achieve and then maintain profitability, the market value of our common stock will likely experience significant decline.

Our business units are in development stage. They have earned limited revenues and it is uncertain whether they will earn any revenues in the future or whether any of them will ultimately be profitable.

Our business units are in an early stage with a limited operating history. Its future operations are subject to all of the risks inherent in the establishment of a new business including, but not limited to, risks related to capital requirements, failure to establish business relationships, and competitive disadvantages against larger and more established companies. These business units will require substantial amounts of funding to continue to commercialize its products. If such funding comes in the form of equity financing, such equity financing may involve substantial dilution to existing shareholders. Even with funding, our products may fail to be effective or attractive to the market or lack the necessary financial or other resources or relationships to be successful.

These business units can be expected to experience continued operating losses until they can generate sufficient revenues to cover their operating costs. Furthermore, there can be no assurance that the business units will be able to develop, manufacture, or market additional products in the future, that future revenues will be significant, that any sales will be profitable, or that the business units will have sufficient funds available to complete their commercialization efforts.

Any products and technologies developed and manufactured by our business units may require regulatory approval prior to being made, marketed, sold, and used. There can be no assurance that regulatory approval of any products will be obtained.

The commercial success of any of our business units will depend, in part, on obtaining patent and other intellectual property protection for the technologies contained in any products it develops. In addition, our business units may need to license intellectual property to commercialize future products or avoid infringement of the intellectual property rights of others. There can be no assurance that licenses will be available on acceptable terms and conditions, if at all. Our business units may suffer if any licenses terminate, if the licensors fail to abide by the terms of the license or fail to prevent infringement by third parties, if the licensed patents or other rights are found to be invalid, or if our respective business unit is unable to enter into necessary licenses on acceptable terms. If such business unit, or any third-party, from whom it licenses intellectual property, fails to obtain adequate patent or other intellectual property protection for intellectual property covering its products, or if any protection is reduced or eliminated, others could use the intellectual property covering the products, resulting in harm to the competitive business position of this business unit. In addition, patent and other intellectual property protection may not provide our business units with a competitive advantage against competitors that devise ways of making competitive products without infringing any patents that this business unit owns or has rights to. Such competition could adversely affect the prices for any products or the market share of any of our business units and could have a material adverse effect on its results of operations and financial condition.

Our cash and cash equivalents may not be sufficient to fund our operating expenses, capital equipment requirements, and other expected liquidity requirements.

Our future capital requirements will depend on a number of factors, including our success in developing and expanding markets for our products, payments under possible future strategic arrangements, continued progress of our research and development of potential products, the need to acquire licenses to new technology, costs associated with increasing our manufacturing and development facilities, costs associated with strategic acquisitions including integration costs and assumed liabilities, litigation expense, the status of competitive products, and potential cost associated with both protecting and defending our intellectual property. Additionally, actions taken as a result of the ongoing internal evaluation of our business could result in expenditures that are not currently contemplated. Factors that could affect our capital requirements, in addition to those listed above include continued collections of accounts receivable consistent with our historical experience and our ability to manage product development efforts.

We cannot be certain that additional financing will be available on reasonable terms when needed, or at all, which could seriously harm our business.

We have incurred net losses and negative cash flow from operations in recent prior periods, and we may not achieve or maintain profitability in the future. As a result, we may need additional financing. Our ability to obtain additional financing, if and when required, will depend on investor demand, our operating performance, the condition of the capital markets, and other factors. Therefore, we may need to raise additional funds and we cannot assure investors that additional financing will be available to us on favorable terms when required, or at all. If we raise additional funds through the issuance of equity, equity-linked, or debt securities, those securities may have rights, preferences, or privileges senior to the rights of our common stock, and our existing stockholders may experience dilution.

There is substantial doubt about our ability to continue as a going concern, indicating the possibility that we may not be able to operate in the future. The report of our independent registered public accounting firm also includes an explanatory paragraph about our ability to continue as a going concern.

As of June 30, 2018, the Company has working capital of $3.3 million. For the fiscal year 2018, the Company reported a net loss of $13.3 million and net cash used in operating activities of $10.8 million. For the fiscal year 2017, the Company reported a net loss of $11.6 million attributable to the Company and net cash used in operating activities of $8.8 million. This raises substantial doubt about the Company’s ability to continue as a going concern. Our ability to continue as a going concern is contingent upon, among other factors, the sale of the shares of our common stock or obtaining alternate financing.

Management continues to pursue many options for its capital requirements to maximize shareholder value. These include, but

are not limited to, selling the Company or a portion thereof, debt financing, equity financing, merging, or engaging in a strategic partnership. On July 3, 2018, management filed a Form S-3 shelf registration statement to raise possible funds through the capital markets. The Company is currently evaluating any combination of common stock, preferred stock, debt securities, warrants to purchase common stock, preferred stock or debt securities, or any combination of the foregoing, either individually or as units comprised of one or more of the other securities. Our consolidated financial statements as of June 30, 2018 do not include any adjustments that might result from the substantial doubt about the Company’s ability to continue as a going concern.

Our success depends significantly on the establishment and maintenance of successful relationships with our customers.

We cannot make any assurances that any customer will require our services in the future. Therefore, we continue to work on diversifying our customer base, while going to great lengths to satisfy the needs of our current customer base.

Third parties may claim we are infringing their intellectual property rights, and we could suffer significant litigation or licensing expenses or be prevented from selling products.

As we introduce any new and potentially promising product or service, or improve existing products or services with new features or components, companies possessing competing technologies, or other companies owning patents or other intellectual property rights, may be motivated to assert infringement claims in order to generate royalty revenues, delay or diminish potential sales, and challenge our right to market such products or services. Even if successful in defending against such claims, patent and other intellectual property related litigation is costly and time consuming. In addition, we may find it necessary to initiate litigation in order to protect our patent or other intellectual property rights, and even if the claims are well-founded and ultimately successful, such litigation is typically costly and time-consuming and may expose us to counterclaims, including claims for intellectual property infringement, antitrust, or other such claims. Third parties could also obtain patents or other intellectual property rights that may require us to either redesign products or, if possible, negotiate licenses from such third parties. Adverse determinations in any such litigation could result in significant liabilities to third parties or injunctions, or could require us to seek licenses from third parties, and if such licenses are not available on commercially reasonable terms, prevent us from manufacturing, importing, distributing, selling, or using certain products, any one of which could have a material adverse effect on us. In addition, some licenses may be non-exclusive, which could provide our competitors access to the same technologies. Under any of these circumstances, we may incur significant expenses.

Our ongoing success is dependent upon the continued availability of certain key employees.

We are dependent in our operations on the continued availability of the services of our employees, many of whom are individually key to our current and future success, and the availability of new employees to implement our growth plans. The market for skilled employees is highly competitive, especially for employees in technical fields. While our compensation programs are intended to attract and retain the employees required for us to be successful, ultimately, we may not be able to retain the services of all of our key employees or a sufficient number to execute on our plans. In addition, we may not be able to continue to attract new employees as required.

Our operating results may be adversely affected by increased competition.

We generally sell our products in industries that have increased competition through frequent new product and service introductions, rapid technological changes, and changing industry standards. Without the timely introduction of new products, services, and enhancements, our products and services will become technologically obsolete over time, in which case our revenue and operating results would suffer. The success of our new products and services will depend on several factors, including our ability to:

properly identify customer needs and predict future needs;

innovate and develop new technologies, services, and applications;

successfully commercialize new technologies in a timely manner;

manufacture and deliver our products in sufficient volumes and on time;

differentiate our offering from our competitors’ offerings;

price our products competitively;

anticipate our competitors’ development of new products, services, or technological innovations; and

control product quantity in our manufacturing process.

Our insurance coverage may be inadequate to cover all significant risk exposures.

We are exposed to liabilities that are unique to the products and services we provide. We maintain insurance for certain risks, and we believe our insurance coverage is consistent with general practices within our industry. However, the amount of our insurance coverage may not cover all claims or liabilities and we may be forced to bear substantial costs.

Increased cybersecurity requirements, vulnerabilities, threats, and more sophisticated and targeted computer crime could pose a risk to our systems, networks, products, services, and data.

Increased global cybersecurity vulnerabilities, threats, and more sophisticated and targeted cyber-related attacks pose a risk to the security of our and our customers’, suppliers’, and third-party service providers’ products, systems, and networks and the confidentiality, availability, and integrity of our and our customers’ data. Although we have implemented policies, procedures, and controls to protect against, detect, and mitigate these threats, we remain potentially vulnerable to additional known or unknown threats. We also have access to sensitive, confidential, or personal data or information that is subject to privacy and security laws, regulations, and customer-imposed controls. Despite our efforts to protect sensitive, confidential, or personal data or information, we may be vulnerable to material security breaches, theft, misplaced or lost data, programming errors, employee errors, and/or malfeasance that could potentially lead to the compromising of sensitive, confidential, or personal data or information, improper use of our systems or networks, unauthorized access, use, disclosure, modification, or destruction of information, defective products, production downtimes, and operational disruptions. In addition, a cyber-related attack could result in other negative consequences, including damage to our reputation or competitiveness and remediation or increased protection costs, and could subject us to fines, damages, litigation, and enforcement actions.

Our facilities located in Houston are susceptible to damage caused by hurricanes, earthquakes, or other natural disasters.

Our 1^st Detect facilities in Houston are susceptible to damage caused by hurricanes or other natural disasters. Although we insure our properties and maintain business interruption insurance, there can be no guarantee that the coverage would be sufficient or a claim will be fulfilled. A natural disaster could result in a temporary or permanent closure of our business operations, thus impacting our future financial performance.

If we are unable to anticipate technological advances and customer requirements in the commercial and governmental markets, our business and financial condition may be adversely affected.

Our business strategy employs our personnel’s decades of experience to expand the services and products we offer to our customers. We believe that our growth and future financial performance depend upon our ability to anticipate technological advances and customer requirements. There can be no assurance that we will be able to achieve the necessary technological advances for us to remain competitive. Our failure to anticipate or respond adequately to changes in technological and market requirements, or delays in additional product development or introduction, could have a material adverse effect on our business and financial performance. Additionally, the cost of capital to fund these businesses will likely require dilution of shareholders.

We plan to develop new products and services. No assurances can be given that we will be able to successfully develop these products and services.

Our business strategy outlines the use of the decades of experience we have accumulated to expand the services and products we offer to both U.S. Government agencies and commercial industries. These services and products involve new and untested technologies and business models. These technologies and business models may not be successful, which could result in the loss of any investment we make in developing them.

As a U.S. Government contractor, we are subject to extensive Federal procurement rules and regulations as well as contractual obligations that are unique to doing business with the U.S. Government. Non-compliance with any such rules, regulations, or contractual obligations could negatively affect current programs, potential awards, and our ability to do business with the U.S. Government in the future.

U.S. Government contractors must comply with extensive procurement regulations and other requirements including, but not limited to, those appearing in the FAR and its supplements, as well as specific procurement rules and contractual conditions imposed by various U.S. Government agencies. Many of these types of requirements do not appear in our contracts with commercial customers or foreign governments. In particular, U.S. Government contracts typically contain provisions and are subject to laws and regulations that give the Government agencies rights and remedies not typically found in commercial contracts, including providing the Government agency with the ability to unilaterally:

terminate our existing contracts;

reduce the value of our existing contracts;

modify some of the terms and conditions in our existing contracts;

suspend or permanently prohibit us from doing business with the government or with any specific government agency;

control and potentially prohibit the export of our products;

cancel or delay existing multiyear contracts and related orders if the necessary funds for contract performance for any subsequent year are not appropriated;

decline to exercise an option to extend an existing multiyear contract; and

claim rights to technologies and systems invented, developed, or produced by us.

U.S. Government agencies and the agencies of certain other governments with which we contract can terminate their contracts with us for convenience, and in that event, we generally may recover only our incurred or committed costs, settlement expenses, and profit on the work completed prior to termination. If an agency terminates a contract with us for default, we may be denied any recovery and may be liable for excess costs incurred by the agency in procuring undelivered items from an alternative source. Decisions by an agency to terminate one of our contracts for default could negatively affect our ability to win future awards not only from such agency, but also from other government agencies and commercial customers, many of whom evaluate past performance, or are required to review past performance information, when making their procurement decisions.

U.S. Government agencies may also initiate civil False Claims Act litigation against us based on allegations related to our performance of contracts for the U.S. Government, or to our compliance with procurement regulations and other legal requirements to which such contracts are subject, or both. Such litigation can be expensive to defend and, if found liable, can result in treble damages and significant civil penalties. The U.S. Government may also initiate administrative proceedings that, if resulting in an adverse finding against us or any of our subsidiaries as to our present responsibility to be a U.S.

Government contractor or subcontractor, could result in our company or our subsidiaries being suspended for a period of time from eligibility for awards of new government contracts or task orders or in a loss of export privileges and, if satisfying the requisite level of seriousness, in our debarment from contracting with the U.S. Government for a specified term as well as being subject to other remedies available to the U.S. Government.

Our business could be adversely affected by a negative audit by the U.S. Government.

U.S. Government agencies routinely audit and investigate government contractors. These agencies review a contractor’s performance under its contracts, cost structure, and compliance with applicable laws, regulations, and standards. The U.S. Government may also review the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation, and management information systems. Any costs found to be improperly allocated to a specific contract will not be reimbursed, while such costs already reimbursed must be refunded. If an audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines, and suspension or prohibition from doing business with the U.S. Government. In addition, we could suffer serious reputational harm that may affect our non-governmental business if allegations of impropriety were made against us.

Certain of our U.S. Government contracts are dependent upon our employees obtaining and maintaining required security clearances, as well as our ability to obtain security clearances for the facilities in which we perform sensitive government work.

Certain of our U.S. Government contracts require our employees to maintain various levels of security clearances, and we are required to maintain certain facility security clearances. If we cannot maintain or obtain the required security clearances for our facilities and our employees, or obtain these clearances in a timely manner, we may be unable to perform certain U.S. Government contracts. Further, loss of a facility clearance, or an employee's failure to obtain or maintain a security clearance, could result in a U.S. Government customer terminating an existing contract or choosing not to renew a contract. Lack of required clearances could also impede our ability to bid on or win new U.S. Government contracts. This could damage our reputation and adversely affect our business, financial condition, and results of operations.

We incur substantial upfront, non-reimbursable costs in preparing proposals to bid on contracts that we may not be awarded.

Preparing a proposal to bid on a contract is labor-intensive and results in the incurrence of substantial costs that are generally not retrievable. Additionally, although we may be awarded a contract, work performance does not commence for several months following completion of the bidding process. If funding problems by the party awarding the contract or other matters further delay our commencement of work, these delays may lower the value of the contract, or possibly render it unprofitable.

A failure of a key information technology system, process, or site could have a material adverse impact on our ability to conduct business.

We rely extensively on information technology systems to interact with our employees and our customers. These interactions include, but are not limited to, ordering and managing materials from suppliers, converting materials to finished products, shipping product to customers, processing transactions, summarizing and reporting results of operations, transmitting data used by our service personnel and by and among our wide-spread personnel and facilities, complying with regulatory, legal, and tax requirements, and other processes necessary to manage our business. If our systems are damaged or cease to function properly due to any number of causes, ranging from the failures of third-party service providers, to catastrophic events, to power outages, to security breaches, and our business continuity plans do not effectively compensate on a timely basis, we may suffer interruptions in our ability to manage operations which may adversely impact our results of operations and/or financial condition.

The market price of our common stock may be volatile and adversely affected by several factors.

The market price of our common stock could fluctuate significantly in response to various factors and events, including:

our ability to execute our business plan;

operating results below expectations;

•

our issuance of additional securities, including debt or equity or a combination thereof, necessary to fund our operating expenses;

announcements of technological innovations or new products by us or our competitors;

economic and other external factors;

period-to-period fluctuations in our financial results; and

whether an active trading market in our common stock develops and is maintained.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

We have not paid cash dividends in the past and do not expect to pay cash dividends in the foreseeable future. Any return on investment in shares of common stock may be limited to the value of our common stock.

We have never paid cash dividends on our common stock and do not anticipate paying cash dividends on our common stock in the foreseeable future. The payment of dividends on our capital stock will depend on our earnings, financial condition, and other business and economic factors affecting us at such time as the Board of Directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on any investment in shares of our common stock will only occur if the common stock price appreciates.

A sale of a substantial number of shares of the common stock may cause the price of our common stock to decline.

If our shareholders sell, or the market perceives that our shareholders intend to sell for various reasons, substantial amounts of our common stock in the public market may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

If we fail to comply with the continued minimum closing bid requirements of the NASDAQ Capital Market or other requirements for continued listing, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted.

On August 24, 2017, we received a written notice (the “Notice”) from the NASDAQ Stock Market LLC (“NASDAQ”) that we were not in compliance with NASDAQ Listing Rule 5550(a)(2), as the minimum bid price of our common stock had been below $1.00 per share for 30 consecutive business days. The Notice had no immediate effect on the listing of our common stock, and our common stock continues to trade on the NASDAQ Capital Market under the symbol “ASTC”. In accordance with NASDAQ Listing Rule 5810(c)(3)(A), we had a period of 180 calendar days, or until February 20, 2018, to regain compliance with the minimum bid price requirement. To regain compliance, on October 13, 2017, we filed Articles of Amendment to our Restated Articles of Incorporation, as amended (“Articles of Incorporation”) to effect a 1-for-5 reverse stock split of all of our outstanding shares of common stock and a proportional reduction in the number of our authorized shares of common stock such that the number of authorized shares was reduced from 75,000,000 shares authorized to 15,000,000 shares authorized. The closing bid price of our common stock met or exceeded $1.00 per share for 10 consecutive business days following the effective date of our reverse stock split. In the event that our stock price declines below $1.00 per share in the future and we fail to comply with NASDAQ Listing Rule 5550(a)(2), we may be eligible for an additional 180 calendar day grace period if we meet the initial listing standards, with the exception of bid price, for the NASDAQ Capital Market, and we provide written notice to NASDAQ of our intention to cure the deficiency during the second compliance period. If we do not regain compliance within the allotted compliance period(s), including any extensions that may be granted by NASDAQ, or fail to comply with other requirements for continued listing, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted. A delisting of our common stock from the NASDAQ Capital Market could materially reduce the liquidity of our common stock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors and employees and fewer business development opportunities.

We are a smaller reporting company and, as ~~defined by Rule 12b-2~~a result of the ~~Exchange Act~~reduced disclosure and governance requirements applicable to such companies, our common stock may be less attractive to investors.

We are ~~not~~a smaller reporting company, (i.e. a company with less than $250 million of public float) and we are eligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduced disclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If some investors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may be more volatile.

We are required to evaluate the effectiveness of our internal control over financial reporting on an annual basis and publicly disclose any material weaknesses in our controls. Any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and significant expense to remediate, and ultimately could have an adverse effect on our stock price.

Section 404 of the Sarbanes-Oxley Act of 2002 requires our management to assess the effectiveness of our internal control over financial reporting and to disclose if such controls were unable to provide assurance that a material error would be prevented or detected in a timely manner. We have an ongoing program to review the ~~information~~design of our internal controls framework in keeping with changes in business needs, implement necessary changes to our controls design, and test the system and process controls necessary to comply with these requirements. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our Company will have been detected.

If we or our independent registered public accounting firm identifies material weaknesses in our internal controls, the disclosure of that fact, even if quickly remedied, may cause investors to lose confidence in our financial statements and our stock price may decline. Remediation of a material weakness could require us to incur significant expenses and, if we fail to remedy any material weakness, our ability to report our financial results on a timely and accurate basis may be adversely affected, our access to the capital markets may be restricted, our stock price may decline, and we may be subject to sanctions or investigation by regulatory authorities, including the SEC or NASDAQ. We may also be required ~~under this Item.~~

to restate our financial statements from prior periods. Execution of restatements create a significant strain on our internal resources and could cause delays in our filing of quarterly or annual financial results, increase our costs, and cause management distraction. Restatements may also significantly affect our stock price in an adverse manner.

We can sell additional shares of common stock without consulting shareholders and without offering shares to existing shareholders, which would result in dilution of shareholders’ interests in the Company and could depress our stock price.

Our Articles of Incorporation authorizes 15,000,000 shares of common stock, of which 4,097,346 were outstanding as of June 30, 2018, and our Board is authorized to issue additional shares of our common stock. In addition, our Articles of Incorporation authorizes 2,500,000 shares of “blank check preferred stock,” none of which are currently outstanding and our Board is authorized to issue shares of preferred stock. Our Board has designated 300,000 shares as Series A Junior Preferred Stock, none of which are outstanding. The remaining 2,200,000 shares of “blank check preferred stock” may be issued in such series and with such rights, privileges, and limitations as the Board may, in its sole discretion, determine. Although our Board intends to utilize its reasonable business judgment to fulfill its fiduciary obligations to our then existing shareholders in connection with any future issuance of our capital stock, the future issuance of additional shares of our capital stock would cause immediate, and potentially substantial, dilution to our existing shareholders, which could also have a material effect on the market value of the shares. Furthermore, our Board may authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock, and the right to the redemption of the shares, together with a premium, prior to the redemption of the common stock. In addition, our Board could authorize the issuance of a series of preferred stock that has greater voting power than the common stock or that is convertible into our common stock, which could decrease the relative voting power of the common stock or result in dilution to our existing shareholders.

Item 1B. Unresolved Staff ~~Comments.~~

Comments

None.

~~None~~.

Item 2. ~~Properties.~~

Properties

Astrotech’s corporate headquarters is in Austin, Texas. The leased office is ~~approximately 5,000~~5,219 square feet and houses executive management, finance and accounting, ~~and~~ marketing and ~~communications.~~communications, and the staff of our Astral subsidiary. The lease began in November 2016 and expires in December 2023, with a provision to renew and extend the lease for the entire premises, for one renewal term of five years. Astrotech must, in writing, advise the landlord of its intention to renew the lease at least eight months before the expiration of its current lease in order to renew the lease.

In May 2013, 1^st Detect completed build-out of a new ~~17,000~~16,540 square foot leased research and development and production facility in Webster, Texas. This new facility is equipped with state-of-the-art laboratories, a clean room, a production shop, and offices for staff. The term of the lease is 62 months and includes options to extend for two additional ~~five year~~five-year periods. In February 2015, 1^st Detect exercised its right of first refusal on the adjoining space of ~~more than 9,000~~9,138 square feet. The original lease began in May 2013 and was to expire in June 2018; these dates were amended in October 2014 with the amended lease beginning February 1, 2015, and expiring April 30, 2020, with provisions to renew and extend the lease for the entire premises, but not less than the entire premises, for two renewal terms of five years each.

On June 1, 2018, the Company entered into its third amendment of the original lease removing 8,118 square feet from its leased space, leaving leased premises with a total square footage of 17,560.

In July 2015, Astral subleased premises consisting of approximately 4,000 square feet in Austin, Texas. The lease ~~is from July 2015 to~~terminated at the end of June 2018.

We believe that our current facilities and equipment are well maintained, in good condition, and are adequate for our present and foreseeable needs.

Item 3. Legal ~~Proceedings.~~

Proceedings

We are subject to legal proceedings and business disputes involving ordinary routine legal matters and claims incidental to our business. The ultimate legal and financial liability with respect to such matters generally cannot be estimated with certainty and requires the use of estimates in recording liabilities for potential litigation settlements or awards against us. Estimates for losses from litigation are made after consultation with outside counsel. If estimates of potential losses increase or the related facts and circumstances change in the future, we may be required to record either more or less litigation expense. As of June 30, ~~2017,~~2018, we are not involved in any pending or threatened legal proceedings that we believe could reasonably be expected to have a material adverse effect on our financial condition, results of operations, or cash flows.

Item 4. Mine Safety ~~Disclosures.~~

Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity ~~Securities.~~

Securities

Market Information

Our common stock is principally traded on the NASDAQ Capital Market under the symbol ASTC. The following table sets forth the quarterly high and low intra-day bid prices, retroactively adjusted for the Reverse Stock Split, for the periods indicated:

Fiscal 2018	High		Low
First Quarter	$	5.45	$	3.30
Second Quarter	$	5.00	$	2.38
Third Quarter	$	3.59	$	2.02
Fourth Quarter	$	6.36	$	1.71

Fiscal 2017	High		Low
First Quarter	$	10.50	$	7.05
Second Quarter	$	9.10	$	7.30
Third Quarter	$	8.05	$	6.30
Fourth Quarter	$	6.65	$	4.55

Fiscal 2017 High Low
First Quarter $ 2.10
$ 1.41
Second Quarter $ 1.82
$ 1.46
Third Quarter $ 1.61
$ 1.26
Fourth Quarter $ 1.33
$ 0.91

Fiscal 2016 High Low
First Quarter $ 3.00
$ 1.61
Second Quarter $ 2.24
$ 1.33
Third Quarter $ 3.15
$ 1.05
Fourth Quarter $ 2.25
$ 1.50

We have never paid cash dividends.

Issuer Repurchases of Equity Securities

On December 16, 2014, we announced a share repurchase program pursuant to which our Board of Directors authorized the repurchase of up to $5 million of our outstanding common stock shares. On December 3, 2015, the Board authorized an extension of the share repurchase program through December 31, 2016. The share repurchase program ended as of December 31, 2016. At the conclusion of the share repurchase program, the Company had repurchased ~~188,635~~a post-split amount of 37,727 shares of common stock at a cost of $492 thousand, which represents an average cost of ~~$2.61~~$13.04 per share. ~~In conjunction with shares purchased outside of the recent buyback program, we have repurchased approximately $3.6 million of Astrotech common stock, which is included in treasury stock.~~

The following table identifies all repurchases during the year ended June 30, ~~2017~~2018 of any of the Company’s securities registered under Section 12 of the Exchange Act, as amended, by or on behalf of the Company or any affiliated purchaser ~~(in thousands, except per share amounts)~~. None of these shares were purchased as part of the aforementioned share repurchase program:

Fiscal Month	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
August 1, 2017 through August 31, 2017 (1)		708	$	4.05		—	$	—
April 1, 2018 through April 30, 2018 (1)		1,591		2.53		—		—
Total		2,299	$	3.00		—

(1)	These shares were surrendered by employees to cover tax withholding obligations associated with equity compensation.

Fiscal Month Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
August 1, 2016 through August 31, 2016 (1) 192,397
$ 1.60
—
$ 4,508,324
December 1, 2016 through December 31, 2016 (2) 601,852
1.62
—
4,508,324
April 1, 2017 through April 30, 2017 (1) 8,250
1.19
—
—
Total 802,499
$ 1.61
—

(1) These shares were surrendered by employees and Directors to cover tax withholding obligations associated with equity compensation.
(2) The Board of Directors elected to repurchase these shares from the CEO of the Company.

We have ~~75,000,000~~15,000,000 shares of common stock authorized for issuance. As of September ~~15, 2017,~~24, 2018, we had ~~22,532,544~~4,095,373 shares of common stock outstanding, which were held by approximately ~~1,500~~5,500 holders. The last reported sale price of our common stock as reported by the NASDAQ Capital Market on September ~~15, 2017~~24, 2018 was ~~$0.88~~$3.33 per share.

Sales of Unregistered Securities

We did not make any unregistered sales of our securities in fiscal ~~2017.~~

year 2018.

Item 6. Selected Financial ~~Data.~~

Data

The information called for under this item is not applicable to smaller reporting companies.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations.~~

Operations

The following information should be read in conjunction with the Consolidated Financial Statements and the accompanying Notes included below in Item 8 of this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements.

Business Overview

Astrotech Corporation ~~(Nasdaq:~~(NASDAQ: ASTC) (“Astrotech,” the “Company,” “we,” “us,” or “our”), a ~~Washington~~Delaware corporation organized in 1984, is ~~an innovative~~a science and technology development and commercialization company that ~~invents, acquires, and commercializes technological innovations sourced from internal research, universities, laboratories, and research institutions, and then funds,~~launches, manages, and builds ~~start-up~~scalable companies ~~for profitable divestiture to market leaders~~based on innovative technology in order to maximize shareholder value.

The Company currently operates two reportable business units, Astro Scientific and Astral Images Corporation, ~~(“Astral”),~~ and their efforts are focused on the following:

Astro Scientific

•

1^st Detect Corporation (“1^st Detect”) is a ~~supplier~~manufacturer of advanced chemical detection and analysis instrumentation. Our next-generation solutions enable high performance trace detection of critical threats or compounds of interest to the security, defense, and healthcare markets using a small, fast, and inexpensive platform. The Company has engaged Chardan Capital Markets, LLC to help maximize shareholder value at 1^st ~~Detect by investigating strategic alternatives.~~

Astrogenetix, Inc. (“Astrogenetix”) iswas developing next-generation vaccines ~~and therapeutics using the unique environment of microgravity.~~but, due to recent developments, has been put on hold indefinitely.

Astral Images Corporation

Astral Images Corporation (“Astral”) ~~restores, enhances,~~is a developer of advanced film restoration and digitizes film using its powerful artificial intelligence (“AI”) algorithms to remove dust, scratches, and defects while restoring and enhancing the original color and optimizing the resolution to be viewed in ultra-high definition (“UHD” or “4K”) high dynamic range (“HDR”). We are facilitating the shift from high definition (“HD,” “2K,” or “1080p”) resolution to 4K/HDR, the format in which the latest generation of digital video content is being distributed to the home.enhancement software.

Our Business Units

Astro Scientific

Astro Scientific is a technology incubator that commercializes innovative technologies. Subsidiaries 1^st Detect and Astrogenetix currently reside in Astro Scientific:

1^st Detect - 1^st Detect ~~develops, manufactures,~~is a manufacturer of advanced chemical detection technology that detects and ~~sells chemical analyzers for use in the airport security, military,~~identifies trace amounts of explosives and breath analysis markets. Our chemical analyzers can identify chemicals with more accuracy and precision than competing analyzers given their extreme sensitivity and specificity. By leveraging a concept from Oak Ridge National Laboratory and a preliminary design initiated by an engagement with the National Aeronautics and Space Administration (“NASA”) to develop a mass spectrometer for the International Space Station, thenarcotics. The Company ~~developed a chemical analyzer that enables real-time analytics~~offers technology that we believe outperforms currently deployed competitive trace detection solutions by offering:

A higher probability of detection with a near-zero false alarm rate

A considerably expanded library of explosives, narcotics, and other compounds of interest

A target library that can be instantaneously updated or expanded in the field without requiring hardware configuration changes

Improved throughput at security or inspection checkpoints

Competitive pricing to ~~be significantly smaller, lighter, faster, and less expensive than competing analyzers. The majority of revenue in 1~~^st Detect comes from working as a subcontractor on government contracts. The Company works with prime contractors in adapting our technology to be used in enhancing the government’s detection capabilities for a variety of applications.current solutions

Our efforts have resulted in a platform technology that has ~~been or may be deployed~~many diverse market opportunities, with the initial focus remaining on the explosives and narcotics trace detection market where ion mobility spectrometers (“IMS”) are the leading incumbent technology. Of the 25,000 IMS instruments installed in the ~~following areas:~~

~~Security - Explosive device detection in airports:~~ ~~There~~field, many are ~~currently approximately 25,000 ion mobility spectrometer (“IMS”) instruments installed today, with most~~ nearing their end of life. We believe these IMS systems have many shortcomings — most notably their limited library of detectable compounds, inability to adapt

quickly to emerging threats, limited probability of detection, and significant false positive rates that reduce the user’s confidence in the machine’s efficacy and extends security or inspection checkpoint wait times.

As the current generation of IMS technology is replaced, we are positioning the Company to be the best next-generation solution for this market. ~~We have partnered with an incumbent provider~~Following a successful demo of ~~IMS instrumentation~~our technology to ~~airports to deliver an instrument to the~~U.S. Department of Homeland Security (“DHS”) and Transportation ~~and~~ Security Administration (“TSA”) ~~with far greater capabilities than IMS. Together with our partner,~~personnel in late 2017, we ~~were awarded a grant for~~recently announced that the ~~Air Cargo~~TRACER 1000 entered the Developmental Testing and ~~Next Generation Checkpoint program with~~Evaluation (“DT&E”) process at the ~~Department of Homeland~~DHS’s Transportation Security ~~Science~~Laboratory (“TSL”). Successful completion and ~~Technology Directorate (“DHS S&T”), whereby we delivered the mass spectrometer portion~~passing of the ~~instrument. We recently completed the first~~DT&E phase ~~of the program~~would lead to TSL Certification. TSL Certification is a significant endorsement that foreign governments and our technology was well received by TSA, but there is no guarantee of subsequent phases. We have therefore launched efforts internally to create a full product solution for the TSA called the Tracer 1000 MS-ETD as we work toward having the world’s firstother U.S. government agencies consider when procuring explosives trace detector (“ETD”) driven by a mass spectrometer. With mass spectrometry being the gold standard of chemical detection, a mass spectrometry-based ETD will significantly reduce the number of false positives and allow for a much more expansive library of compounds of interest as compared to IMS-based ETDs.

~~Defense - Military:~~ ~~The military~~instrumentation. Certification is also ~~looking to enhance its chemical detection capabilities~~a major step towards being listed on the TSA’s Qualified Products List (“QPL”), and ~~on September 11, 2014,~~subsequently being deployed in airports throughout the U.S. In addition, we also recently announced that ~~together with Battelle Memorial Institute~~the TRACER 1000 has been accepted into the TSA’s Air Cargo Screening Technology Qualification Test (“~~Battelle”~~ACSQT”)~~, one~~ program, representing a major step toward inclusion on TSA’s exclusive Air Cargo Screening Technology List (“ACSTL”) and having the TRACER 1000 deployed at airports and cargo facilities worldwide to screen checked luggage and other air cargo. The instrument is designed to enable air carriers, freight forwarders, shippers, and independent cargo facilities to stay ahead of evolving threats while optimizing cargo throughput. Finally, the Company also announced that the TRACER 1000 was accepted into the European Civil Aviation Conference’s (“ECAC”) evaluation process for both passenger and cargo screening in airports. ECAC is the European equivalent to the U.S. TSA. The ECAC Certification would be a significant milestone that will allow us to begin selling to airports and governments internationally.

There is no assurance that any of the ~~leading providers of instrumentation to~~further steps detailed in the military, we were awarded a grant for the Next Generation Chemical Detector (“NGCD”) program with the Department of Defense’s (“DOD”) Joint Program Executive Office for Chemical and Biological Defense (“JPEO-CBD”) for onemilestones mentioned above will be achieved or that our technology will be approved by any of the three variants in the NGCD program called the Multi-Sample Identifier/Multi-Sample Identifier Collector variant. The first stage of the three stage program was completed in the fourth quarter of fiscal year 2017. If we win the procurement, the military will procure an estimated 770 units to be used for the following purposes:


◦	~~Evaluating the presence of chemicals after suspected chemical release incidents;~~


◦	~~Continuously evaluating surface contamination following a chemical release to characterize contamination levels;~~


◦	~~Evaluating the presence of contamination at a sample site; and~~


◦	~~Confirming decontamination of potentially contaminated personnel and equipment.~~

Our portion of the contract was successfully completed; however, Battelle has indicated that they do not plan to pursue the next phase of the program. We are currently evaluating our options for remaining in the competition.

~~Healthcare - Breath analysis:~~ We have partnered with UT Health San Antonio (“UTHSA”) in the development of the BreathDetect 1000, a mass spectrometry-based instrument that is being used to analyze human breath in real-time, enabling detection of bacterial infections in the respiratory tract within minutes. We have entered pre-clinical trials working with cystic fibrosis patients at UTHSA, focusing on identifying hospital-acquired pneumonia (“HAP”), one of the biggest and most expensive problems in hospitals with over 150,000 cases reported annually. Such identification can significantly enhance the physicians’ ability to treat patients correctly. With current diagnosis methods, physicians wait up to three days for the lab to identify the organism, and another two days to receive the antibiotic resistance profile. In the meantime, they prescribe broad-spectrum antibiotics, leading to the urgent public health threat of antibiotic resistance and contributing to the re-emergence of deadly diseases such as methicillin-resistant ~~Staphylococcus aureus~~ (“MRSA”). The appropriate real-time diagnosis can lead to immediate administration of the appropriate antibiotics, reduce antibiotic resistance, decrease the length of hospital stays, and most importantly, save lives.

programs listed.

Astrogenetix - Astrogenetix ~~is applying~~was developing a fast-track, on-orbit discovery platform using the International Space Station to develop ~~vaccines and other therapeutics.~~vaccines. We were working with Texas A&M University to obtain additional funding from NASA, ~~has engaged~~which was declined subsequent to year-end. Future efforts at Astrogenetix have therefore been halted due to the ~~Center for Vaccine Development at the University~~lack of ~~Maryland (“UMD”), one of the leading vaccinology institutions in the world, to aid in the filing of an IND application of a vaccine for~~ funding.~~Salmonella~~. NASA is collaborating with UMD, meaning little investment is required of Astrogenetix at this stage. Once an IND is filed, we will be seeking partnership with a pharmaceutical company to complete the FDA approval process and to ultimately commercialize the vaccine.

~~Astral Images~~

Astral Images ~~sells film-to-digital~~Corporation

Astral Images - Astral is a developer of advanced film restoration and enhancement software. The Company offers significant cost savings to content owners who traditionally employ a laborious, inconsistent, and expensive manual frame-by-frame restoration process. At 24 frames-per-second, a full-length movie can easily have in excess of 200,000 frames, making manual conversion prohibitively expensive in some instances. At some point, we believe film studios will need to convert their film assets to 4K and/or high-dynamic range ~~conversion, image enhancement, defect removal, and color correction services.~~(“HDR”) (collectively known as ultra-high definition (“UHD”)). Astral ~~uses~~will continue to position itself to support this shift using its powerful artificial intelligence (“AI”)-driven algorithms ~~to provide automated conversion of television~~that remove dust, scratches, and ~~feature 35mm and 16mm films to~~defects from film while converting the new 4K/HDR format, the standard for the latest generation of digital film distribution to the home. Due to a significant shift in the film scanning industry, most film assets will need to go through an upgrade to the

~~new standard to remain relevant for over-the-top distribution (Netflix, Amazon, Hulu, etc.) as television manufacturers sell more 4K/HDR televisions and consumer demand for such~~ content accelerates. Astral is positioned to be a leader in the digital conversion of feature films, film-based television series, sporting events shot on film, film libraries, and film archives. Astral has introduced to the digital conversion market Black ICE™ for the conversion of black and white film, Color ICE™ for the conversion of color film, and HDR ICE™ for the conversion of color film or digital video to the new HDR format. Astral’s platform technology is also being designed to launch a targeted solution that will convert photographs, negatives, and slides to a digital format ~~while employing~~with significantly enhanced resolution.

The Company is at a point whereby its ~~AI algorithms~~resources must be carefully allocated to ~~restore~~optimize the ~~image~~primary objective – setting 1^st Detect on a path to ~~its original condition in automation.~~

meaningful sales by getting through testing and certification. Although we believe Astral has developed valuable technology fortified by patents and trade secrets, the potential market has not evolved as quickly as anticipated. Due to funding constraints, the Company’s main focus remains on the 1^st Detect opportunity. Consequently, headcount at Astral has been reduced, the Astral office was consolidated with the corporate office, expenditures have been reduced, and new development is exclusively focused on strategic initiatives that would facilitate the realization of Astral’s value.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates and assumptions are reviewed periodically. Actual results may differ from these estimates under different assumptions or conditions.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that directly affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. Management continuously evaluates its critical accounting policies and estimates, including those used in evaluating the recoverability of long-lived assets, recognition of revenue, valuation of inventory, and the recognition and measurement of loss contingencies, if any.

Revenue Recognition

Astrotech recognizes revenue employing ~~several~~two generally accepted revenue recognition methodologies. The methodology used is based on contract type and the manner in which products and services are provided.

~~Revenue~~

Production Unit Sales and Software Licensing Agreements

When revenue for sale of manufactured product is ~~recognized~~commenced or when we license our software for use, we will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when a firm sales contract or invoice is in place, delivery has occurred or services have been provided, and collectability is reasonably assured.

In fiscal year 2018, we had two revenue sources and, in both arrangements, there were no undelivered elements at June 30, 2018.

Construction-Type and Production-Type Contracts

~~A portion~~

In the prior year, most of the Company’s revenue iswas derived from contracts to manufacture mass spectrometers to a buyer’s specification. These contracts are accounted for under the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 605-35 “Revenue Recognition: Construction-Type and Production-Type ~~Contracts”.~~Contracts.” These contracts are fixed-price and are recorded on the ~~percentage of completion~~percentage-of-completion basis using the ratio of costs incurred to estimated total costs at completion as the measurement basis for progress toward completion and revenue recognition. Any losses identified on contracts are recognized immediately. Contract accounting requires significant judgment relative to assessing risks, estimating contract costs, and making related assumptions for schedule and technical issues. With respect to contract change orders, claims, or similar items, judgment must be used in estimating related amounts and assessing the potential for realization. These amounts are only included in contract value when they can be reliably estimated and realization is probable.

The Company enters into fixed-priced subcontracts on government ~~projects that are one to two years long.~~projects. Revenue from certain long-term, integrated project management contracts to provide new prototypes and completion services is reported on the percentage-of-completion method of accounting. At the outset of each contract, we prepare a detailed analysis of our estimated cost to complete the project, and our progress is based on the percentage of projected cost incurred. Risks related to service delivery, usage, productivity, and other factors are considered in the estimation process. The recording of profits and losses on long-term contracts requires an estimate of the total profit or loss over the life of each contract. This estimate requires consideration of total contract value, change orders, and claims, less costs incurred and estimated costs to complete. Anticipated losses on contracts are recorded in full in the period in which they become evident. Profits are recorded based upon the total estimated contract profit ~~multiplied by~~times the current percentage complete for the contract. The Company did not recognize any revenue from contracts to manufacture mass spectrometers to a buyer’s specification in fiscal year 2018. As of June 30, ~~2017,~~2018, there were not any unrecognized contract revenues or costs.

Research and Development

Research and development costs are expensed as incurred. ~~Income from the sale of prototype units in 1~~^st Detect for the years ended June 30, 2017 and 2016 was $12 thousand and $93 thousand, respectively, and was booked as an offset to research and development and will continue to be booked accordingly until the Company transitions to full production. Research and development expenses for the fiscal years ended June 30, 2018 and 2017 were $6.1 million and ~~2016 were~~ $5.6 million, respectively, after adjusting for $19 thousand and ~~$6.5 million, respectively.~~

$787 thousand in research and development expenses that were reclassified to cost of sales due to certain activities being associated with revenue recognition.

Net Loss per Common Share

Basic net loss per common share is calculated by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share ~~would~~is the same as basic net loss per common share as the potential dilutive shares are considered to be ~~considered~~ anti-dilutive (see Note 13 to the consolidated financial statements).

Cash and Cash Equivalents

The Company considers short-term investments with original maturities of three months or less to be cash equivalents. Cash equivalents are comprised primarily of operating cash accounts, money market investments, and certificates of ~~deposits.~~

deposit.

Accounts Receivable

The carrying value of the Company’s accounts receivable, net of the allowance for doubtful accounts, represents their estimated net realizable value. Astrotech estimates the allowance for doubtful accounts based on type of customer, age of outstanding receivable, historical collection trends, and existing economic conditions. If events or changes in circumstances indicate that a specific receivable balance may be unrealizable, further consideration is given to the collectability of those balances, and the allowance is adjusted accordingly. Receivable balances deemed uncollectible are written off against the allowance. The Company anticipates collecting all unreserved receivables within one year. As of June 30, ~~2017~~2018 and ~~2016,~~2017, there was no allowance for doubtful accounts deemed necessary.

Inventory

The Company computes inventory cost on a first-in, first-out basis, and inventory is valued at the lower of cost ~~or market.~~and net realizable value. The valuation of inventory also requires the Company to estimate obsolete and excess inventory as well as inventory that is not of saleable quality.

Property and Equipment

Property and equipment are stated at cost. All furniture, fixtures, and equipment are depreciated using the straight-line method over the estimated useful lives of the respective assets, which is generally five years. Purchased software is typically depreciated over three ~~years; however, Astral’s proprietary software, Astral HDR ICE™, is being depreciated over seven years as this is management’s best estimate of useful life of this platform.~~years. Leasehold improvements are amortized over the shorter of the useful life of the improvement or the term of the lease. Repairs and maintenance are expensed when incurred.

Impairment of Long-Lived Assets

The Company ~~reviews~~continuously evaluates its long-lived assets ~~and certain identifiable intangibles~~ for impairment ~~whenever events or changes in circumstances indicate that~~to assess whether the carrying amount of an asset may not be recoverable. ~~Examples~~Our evaluation is based on an assessment of potential indicators of impairment, such ~~events~~as an adverse change in the business climate that could ~~include competitors developing~~affect the value of an asset, current or forecasted operating or cash flow losses that demonstrate continuing losses associated with the use of an asset, and ~~marketing similar technology or changes in technical standards being released.~~ a current expectation that, more likely than not, an asset will be disposed of before the end of its previously estimated useful life. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Recoverability of long-lived assets is dependent on a number of conditions, including uncertainty about future events and demand for our services. ~~No impairments were identified~~

During the fourth quarter of fiscal year 2018, the Company determined that there was an impairment indicator associated with the Color ICE™ software platform and scanner of Astral (“Astral assets”). During the quarter, management’s push to sell a newer version of Astral’s Color ICE™ software to a major scanning company was postponed, possibly indefinitely. In addition, even though the Company secured its first contract subsequent to year-end that utilizes Astral’s latest software, the expectations under the contract remain unclear and the contract could yield limited, or possibly no, additional revenue. In light of the Company’s limited resources, expenses in Astral have been reduced and efforts have been scaled back until the market begins to develop. Due to the delay in the ~~years ended~~development of the market which has to date not yielded significant revenues, management believes that, for the foreseeable future, it is probable that Astral net cash flows will continue to fall short of the value of the Astral assets. Management therefore recorded an impairment charge of $1.6 million in fiscal year 2018. As of June 30, ~~2017 or 2016.~~2018, the fair value of these assets was immaterial.

On June 1, 2018, the Company entered into its third amendment of the original lease for the 1^st Detect facility removing 8,118 square feet from its leased space. Management therefore wrote-off the leasehold improvements and other assets associated with this reduction of square footage. The total amount associated with this impairment is $114 thousand. See Note 15 to the consolidated financial statements for more information relating to the amended lease agreement.

Fair Value of Financial Instruments

Astrotech’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, ~~investments,~~ and accrued liabilities. The Company’s management believes the carrying amounts of these assets and liabilities approximates their

fair value. For more information about the Company’s accounting policies surrounding fair value ~~instruments,~~investments, see Note 9 to the consolidated financial statements.

Available-for-Sale Investments

Investments that are designated as available-for-sale are reported at fair value, with unrealized gains and losses recorded in accumulated other comprehensive loss. The Company determines the cost of investments sold based on a first-in, first-out cost basis at the individual security level. The Company’s investments are subject to a periodic impairment review and are evaluated based on the specific facts and circumstances present at the time of assessment, which include the consideration of general market conditions, the duration and extent to which the fair value is below cost, and the Company’s ability and intent to hold the investment for a sufficient period of time to allow for recovery of value in the foreseeable future. The Company also considers specific adverse conditions related to the financial health of, and the business outlook for, the investee, which may include industry and sector performance, changes in technology, operational and financing cash flow factors, and changes in the investee’s credit rating. The Company records other than temporary impairments on marketable equity securities and marketable equity method investments in gains (losses) on equity investments, net of previously recorded gains (losses). For more information on investments, see Note 34 to the consolidated financial statements.

~~Held-to-Maturity Investments~~

Investments that are designated as held-to-maturity investments are reported at historical amortized costs. These are investments the Company intends to hold until maturity. The Company’s investments are subject to a periodic impairment review. The Company will write down any investment that the Company does not expect to recover the entire amortized cost basis of the instrument. The Company separates other than temporary impairments into amounts representing credit losses, which are recognized in interest and other net income (expense) items, and amounts related to all other factors, which are recognized in other comprehensive loss. For more information on investments, see Note 3 to the consolidated financial statements.

Operating Leases

The Company leases space under operating leases. Lease agreements often include tenant improvement allowances, rent holidays, and rent escalation clauses, as defined in the respective lease agreements. Most of the Company’s lease agreements include renewal periods at the Company’s option. The Company recognizes rent holiday periods, tenant improvement allowances, and scheduled rent increases on a straight-line basis over the lease term beginning with the date the Company takes possession of the leased property. The Company records tenant improvement allowances and rent holidays as deferred rent liabilities on the consolidated balance sheets and amortizes the deferred rent over the terms of the lease to rent expense on the consolidated statements of operations.

Share-Based Compensation

The Company accounts for share-based awards to employees based on the fair value of the award on the grant date. The fair value of stock options is estimated using the expected dividend yields of the Company’s stock, the expected volatility of the stock, the expected length of time the options remain outstanding, and the risk-free interest rates. Changes in one or more of these factors may significantly affect the estimated fair value of the stock options. The Company recognizes forfeitures as they occur. The fair value of awards that are likely to meet goals, if any, are recorded as an expense over the vesting ~~period (see~~period. For more information on share-based compensation, see Note 11 to the consolidated financial ~~statements for more information).~~

statements.

Noncontrolling Interest

Noncontrolling interest accounting is applied for any entities where the Company maintains more than 50% and less than 100% ownership. The Company clearly identifies the noncontrolling interest in the balance sheets and income statements. The Company also discloses three measures of net loss: net loss, net loss attributable to noncontrolling interest, and net loss attributable to Astrotech Corporation. The Company’s operating cash flows in its consolidated statements of cash flows reflect net loss, while basic and diluted loss per share calculations reflect net loss attributable to Astrotech Corporation.

The Company eliminated all noncontrolling interest ~~balance~~as of ~~$0 and $(40) thousand at~~ June 30, ~~2017 and June 30, 2016, respectively, represents an interest by a minority shareholder in one of the Company’s subsidiaries more fully discussed in~~2017. See Note 5 to the consolidated financial ~~statements.~~

statements for more information.

Income Taxes

The Company accounts for income taxes under the liability method, whereby deferred tax asset or liability account balances are determined based on the difference between the financial statement and the tax bases of assets and liabilities using current tax laws and rates in effect for the year in which the differences are expected to affect taxable income. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. A valuation allowance is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Treasury Stock

The Company records treasury stock at the cost to acquire it and includes treasury stock as a component of stockholders’ equity.

Results of Operations for the Years Ended June 30, ~~2017~~2018 and ~~2016~~

2017

Selected financial data for the fiscal years ended June 30, ~~2017~~2018 and ~~2016~~2017 of our ~~continuing~~ operations are as follows:

	Years Ended June 30,
(In thousands)	2018			2017			Variance
Revenue	$	86		$	2,328		$	(2,242	)
Cost of revenue		36			1,293			(1,257	)
Gross profit		50			1,035			(985	)
Gross margin percentage		58	%		44	%		14	%
Operating expenses
Selling, general and administrative		5,629			7,508			(1,879	)
Research and development		6,065			5,587			478
Loss on impairment of long-lived assets		1,693			-			1,693
Total operating expenses		13,387			13,095			292
Interest and other income, net		86			306			(220	)
Income tax expense		—			(2	)		2
Net loss		(13,251	)		(11,756	)		(1,495	)
Less: net loss attributable to noncontrolling interest		—			(174	)		174
Net loss attributable to Astrotech Corporation	$	(13,251	)	$	(11,582	)	$	(1,669	)

Year Ended June 30,
(In thousands) 2017 2016 Variance
Revenue $ 2,328
$ 2,671
$ (343 )
Cost of revenue 1,293
2,332
1,039
Gross profit 1,035
339
696
Gross margin percentage 44 % 13 % 32 %
Operating expenses

Selling, general and administrative 7,508
7,708
200
Research and development 5,587
6,469
882
Total operating expenses 13,095
14,177
1,082
Interest and other income, net 306
379
(73 )
Income tax (expense) benefit (2 ) 25
(27 )
Net loss (11,756 ) (13,434 ) 1,678
Less: net loss attributable to noncontrolling interest (174 ) (339 ) (165 )
Net loss attributable to Astrotech Corporation $ (11,582 ) $ (13,095 ) $ 1,513

Revenue – Total revenue decreased by ~~$0.3~~$2.2 million, or ~~13%~~96%, for the year ended June 30, ~~2017,~~2018, compared to the year ended June 30, ~~2016. All of~~2017. Of the fiscal year ~~2017~~2018 revenue, $41 thousand was ~~associated~~from a software license agreement with ~~research-based, fixed-price, government-related subcontract agreements, compared to the fiscal year 2016 revenue of $2.5 million for the same subcontract agreements. The decrease~~a large post-production film company and $45 thousand was ~~primarily due to revenues of $0.2 million received in fiscal year 2016~~ associated with space-grade handrail manufacturing sales, an opportunity born from our legacy space business for which the Company has unique expertise. ~~These handrail manufacturing sales occur every one~~The fiscal year 2017 revenue of $2.3 million was associated with research-based, fixed-price, government-related subcontract agreements. The decrease was primarily due to ~~three years; no such sales were made in~~the two government-related subcontract agreements coming to an end during fiscal year 2017.

Cost of Revenue and Gross Profit – Cost of revenue is comprised of labor, materials, depreciation, and overhead. Gross profit is comprised of revenue less cost of revenue. Cost of revenue ~~is comprised of labor, materials, and overhead related to products manufactured for the subcontract agreements. Cost of revenue~~ decreased ~~$1.0~~$1.3 million, or ~~45%~~97%, for the year ended June 30, ~~2017,~~2018, compared to the year ended June 30, ~~2016.~~2017. Gross profit ~~increased $0.7~~decreased $1.0 million, or ~~205%~~95%, during the year ended June 30, ~~2017,~~2018, compared to the year ended June 30, ~~2016,~~2017, due to ~~favorable changes to actual profit margins as a result of fewer production issues than anticipated. Gross margin percentage~~the decrease in revenue described above.

Operating Expenses – Our operating expenses increased ~~32% for~~$0.3 million, or 2%, during the year ended June 30, ~~2017,~~2018, compared to the year ended June 30, ~~2016, due to favorable variances mentioned above.~~

~~Operating Expenses~~ ~~– Our operating expenses decreased $1.1 million, or 8%, during the year ended June 30, 2017, compared to the year ended June 30, 2016.~~2017. Significant changes to operating expenses include the following:

Selling, General and Administrative Expenses – Our selling, general and administrative expenses decreased ~~$0.2~~$1.9 million, or 3%25%, for the year ended June 30, ~~2017,~~2018, compared to the year ended June 30, ~~2016,~~2017, driven by decreases in compensation and related expenses caused by a reduction in workforce of ~~$0.5~~$0.9 million, reduced ~~consulting~~equity compensation expense of $0.7 million, reduced marketing expenses of ~~$0.2~~$0.1 million, reduced directors fees of $0.1 million, and a $0.1 million decrease in ~~travel and meals related to the same reduction in workforce, partially offset by increased equity compensation of $0.6 million.~~legal costs.


•	Research and Development Expenses – Research and development expenses ~~decreased $0.9~~prior to a reclassification of $19 thousand and $787 thousand to cost of sales in fiscal years 2018 and 2017, respectively, were $6.1 million ~~or 14%, primarily driven by reductions in employment~~ and $6.4

million. The reason for this decrease was reduced compensation and related expenses ~~of $0.7 million and~~caused by a ~~decrease~~reduction in ~~materials expense of $0.4 million,~~workforce, partially offset by an increase in ~~depreciation~~material expenditures as we produce TRACER 1000 units for airport security.

•

Loss on Impairment of ~~$0.3~~Long-Lived Assets – During the fourth quarter of fiscal year 2018, the Company determined that there was an impairment indicator associated with the Color ICE™ software platform and scanner of the Astral assets. During the quarter, management’s push to sell a newer version of Astral’s Color ICE™ software to a major scanning company was postponed, possibly indefinitely. In addition, even though the Company secured its first contract subsequent to year-end that utilizes Astral’s latest software, the expectations under the contract remain unclear and the contract could yield limited, or possibly no, additional revenue. In light of the Company’s limited resources, expenses in Astral have been reduced and efforts have been scaled back until the market begins to develop. Due to the delay in the development of the market which has to date not yielded significant revenues, management believes that, for the foreseeable future, it is probable that Astral net cash flows will continue to fall short of the value of the Astral assets. Management therefore recorded an impairment charge of $1.6 million ~~due to placing Astral’s ICE~~^TM ~~software~~in fiscal year 2018. As of June 30, 2018, the fair value of these assets was immaterial. In addition, on June 1, 2018, the Company entered into ~~service.~~its third amendment of the original lease for the 1^st Detect facility removing 8,118 square feet from its leased space. Management therefore wrote-off the leasehold improvements and other assets associated with this reduction of square footage. The total amount associated with this impairment is $114 thousand.

Income Taxes – Our income tax ~~benefit~~expense decreased ~~$27~~$2.0 thousand, or ~~108%~~100%, due to ~~the recognition of overpayment of federal~~a reduction in state income tax ~~for the 2014 tax year. This overpayment was accounted for in fiscal year 2016 and a refund was received in fiscal year 2017.~~owed.

FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY

Balance Sheet

Total assets for the year ended June 30, ~~2017~~2018 were ~~$18.8~~$5.1 million compared to total assets of ~~$30.5~~$18.8 million atas of the end of fiscal year ~~2016.~~2017. The following table sets forth the significant components of the balance sheet as of June 30, ~~2017,~~2018, compared with ~~2016:~~2017:

	Years Ended June 30,
(In thousands)	2018		2017		Variance
Assets:
Current assets	$	4,276	$	13,665	$	(9,389	)
Property and equipment, net		733		3,180		(2,447	)
Long-term investments		50		1,990		(1,940	)
Other assets, net		81		—		81
Total	$	5,140	$	18,835	$	(13,695	)
Liabilities and stockholders’ equity:
Current liabilities	$	960	$	1,809	$	(849	)
Other long-term liabilities		188		256		(68	)
Stockholders’ equity		3,992		16,770		(12,778	)
Total	$	5,140	$	18,835	$	(13,695	)

Year Ended June 30,
(In thousands) 2017 2016 Variance
Assets:

Current assets $ 13,665
$ 22,923
$ (9,258 )
Property and equipment, net 3,180
3,392
(212 )
Long-term investments 1,990
4,208
(2,218 )
Total $ 18,835
$ 30,523
$ (11,688 )
Liabilities and stockholders’ equity:

Current liabilities $ 1,809
$ 1,800
$ 9
Other long-term liabilities 256
96
160
Stockholders’ equity 16,770
28,627
(11,857 )
Total $ 18,835
$ 30,523
$ (11,688 )

Current assets – Current assets decreased ~~$9.3~~$9.4 million as of June 30, ~~2017,~~2018, compared to June 30, ~~2016,~~2017, as a result of funding our normal operating activities and furthering our research and development initiatives at 1^st Detect and Astral.

Property and equipment, net – Property and equipment decreased ~~$0.2~~$2.4 million as of June 30, ~~2017,~~2018, compared to June 30, ~~2016,~~2017, due to the impairment of Astral’s Color ICE™ software platform and scanner as market opportunities have not materialized as quickly as planned, continuing depreciation, ~~partially offset by an increase in leasehold improvements at~~and the ~~Company’s new office~~write-off of assets associated with 1^st Detect’s releasing a portion of their leased space.

Long-term investments – Long-term investments decreased ~~$2.2~~$1.9 million due to reclassification from long-term to short-term investments as certain investments ~~matured.~~became current.

Current liabilities – Current liabilities ~~remained relatively unchanged~~decreased $0.8 million as of June 30, ~~2017,~~2018, compared to June 30, ~~2016,~~2017, primarily due to ~~an increase in payables and other liabilities, partially offset by~~ a reduction in payroll related ~~accruals.~~accruals, a decrease in payables, and the reduction of certain liabilities associated with 1

^st Detect’s releasing a portion of their leased space.

Other long-term liabilities – Other long-term liabilities ~~increased $0.2 million~~decreased $68 thousand for the year ended June 30, ~~2017,~~2018, compared to June 30, ~~2016, primarily~~2017, due to ~~a new~~amortization of tenant ~~allowance~~improvement allowances associated with the ~~build-out of new office space.~~corporate and 1^st Detect offices.

Liquidity and Capital Resources

The following is a summary of the change in our cash and cash equivalents (in thousands):

	Years Ended June 30,
	2018			2017			Variance
Change in cash and cash equivalents:
Net cash used in operating activities	$	(10,784	)	$	(8,821	)	$	(1,963	)
Net cash provided by investing activities		9,159			7,881			1,278
Net cash used in financing activities		(7	)		(1,275	)		1,268
Net change in cash and cash equivalents	$	(1,632	)	$	(2,215	)	$	583

Twelve Months Ended
June 30,
2017 2016 Variance
Cash flows from continuing operations:

Net cash used in operating activities $ (8,821 ) $ (13,324 ) $ 4,503
Net cash provided by investing activities 7,881
9,433
(1,552 )
Net cash used in financing activities (1,275 ) (140 ) (1,135 )
Net cash used in continuing operations (2,215 ) (4,031 ) 1,816

Cash flows from discontinued operations:

Net cash provided by investing activities —
6,100
(6,100 )
Net cash provided by discontinued operations —
6,100
(6,100 )

Net change in cash and cash equivalents $ (2,215 ) $ 2,069
$ (4,284 )

Cash and Cash Equivalents

At June 30, 2018, we held cash and cash equivalents of $0.6 million and our net working capital was approximately $3.3 million. At June 30, 2017, we held cash and cash equivalents of $2.2 million and our net working capital was approximately $11.9 million. ~~At June 30, 2016, we held cash and cash equivalents of $4.4 million and our net working capital was approximately $21.1 million.~~ Cash and cash equivalents decreased by approximately ~~$2.2~~$1.6 million during the year ended June 30, ~~2017.~~

2018.

Operating Activities

Net cash used in operating activities ~~from continuing operations~~ was $10.8 million for the year ended June 30, 2018, compared to cash used in operating activities of $8.8 million for the year ended June 30, ~~2017, compared to cash used in operating activities of $13.3 million for the year ended June 30, 2016.~~2017. The ~~decrease~~increase in cash used in operating activities was ~~caused by a decrease in net loss~~ due to ~~our cost saving initiatives, billings~~receipts of cash in ~~excess~~fiscal year 2017 related to contracts from prior years, but limited receipts of ~~costs incurred, the use of our inventory, and by the increase~~cash in ~~our new tenant allowance.~~

fiscal year 2018.

Investing Activities

Net cash provided by investing activities ~~from continuing operations~~ for the year ended June 30, ~~2017~~2018 was ~~$7.9~~$9.2 million, compared to cash provided by investing activities from ~~continuing~~ operations of ~~$9.4~~$7.9 million for the year ended June 30, ~~2016. In fiscal year 2017, fewer~~2017. The increase in cash provided by investing activities was due to an increase in sales of investments ~~were sold~~ to fund operations ~~fewer investments matured,~~ and a decrease in purchases of property ~~plant,~~ and ~~equipment decreased.~~

equipment. This increase was partially offset by fewer investments maturing.

Financing Activities

Cash used in financing activities ~~from continuing operations increased $1.1~~decreased $1.3 million for the year ended June 30, ~~2017,~~2018, compared to the year ended June 30, ~~2016. The increase was~~2017 due to ~~payments totaling $1.3 million for~~fewer shares repurchased.

~~Discontinued Operations~~

There was no cash provided by investing activities from discontinued operations for the year ended June 30, 2017, compared to cash provided by investing activities of $6.1 million for the year ended June 30, 2016, which was due to the receipt of an indemnity cash holdback during the previous fiscal year related to the sale of our former Astrotech Space Operations (“ASO”) business unit.

Debt

As of June 30, ~~2017~~2018 and ~~2016,~~2017, the Company had no credit facilities.

Liquidity

As of June 30, ~~2017,~~2018, we had cash and cash equivalents and short-term investments of ~~$13.1~~$4.1 million and our ~~net~~ working capital was approximately ~~$11.9~~$3.3 million. The Company reported a net loss of $13.3 million for the fiscal year 2018 and a net loss of $11.6 million for the fiscal year 2017, along with net cash used in operating activities of $10.8 million for the fiscal year 2018 and net cash used in operating activities of $8.8 million for the fiscal year 2017. These factors raise substantial doubt about the Company’s ability to continue as a going concern, but the Company remains resolute in identifying the optimal solution to the liquidity issue. The Company is currently evaluating several potential sources for additional liquidity. These include, but are not limited to, selling the Company or a portion thereof, debt financing, equity financing, merging, or engaging in a strategic partnership. On July 3, 2018, management filed Form S-3 to raise possible funds through the capital

markets. The Company is currently evaluating potential offering of any combination of common stock, preferred stock, debt securities, warrants to purchase common stock, preferred stock or debt securities, or any combination of the foregoing, either individually or as units comprised of one or more of the other securities. However, additional funding may not be available when needed or on terms acceptable to us. If we are unable to generate funding within a reasonable timeframe, we may have to delay, reduce, or terminate our research and development programs, limit strategic opportunities, or curtail our business activities. Astrotech’s consolidated financial statements as of June 30, 2018 do not include any adjustments that might result from the outcome of this uncertainty.

Our future capital requirements will depend on a number of factors, including our success in developing and expanding markets for our products, payments under possible future strategic arrangements, continued progress of our research and development, ~~and successful testing of our products,~~ the need to acquire licenses to new technology, costs associated with ~~operating~~increasing our manufacturing and development ~~facilities,~~capabilities, costs associated with strategic acquisitions including integration costs and assumed liabilities, ~~litigation expense,~~ and the status of competitive products and potential ~~cost~~costs associated with both protecting and defending our intellectual property. ~~In addition, actions taken as a result of the ongoing internal evaluation of our business could result in expenditures not currently contemplated in our estimates for fiscal year 2018.~~ Factors that could affect our capital requirements, in addition to those listed above, include continued collections of accounts receivable consistent with our historical experience and our ability to manage product development efforts.

We believe ~~that our existing cash and cash equivalents are~~we have sufficient liquidity to continue to fund our operating expenses, capital ~~equipment~~ requirements, and other expected liquidity requirements ~~for the coming year. We expect to utilize existing cash and proceeds from operations to support strategies for Astrotech.~~

through November 2018.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of June 30, ~~2017.~~

2018.

Item 7A.Quantitative and Qualitative Disclosures about Market ~~Risk.~~

Risk

Not applicable to smaller reporting companies.

Item 8. Financial ~~Statements~~Statements and Supplementary ~~Data.~~Data

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

Astrotech Corporation

Austin, TX

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Astrotech Corporation (the ~~Company)~~“Company”) and subsidiaries as of June 30, ~~2017~~2018 and ~~2016 and~~2017, the related consolidated statements of operations, ~~and comprehensive loss,~~ changes in stockholders’ equity, and cash flows for the years then ~~ended.~~ ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at June 30, 2018 and 2017, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Going Concern Uncertainty

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has suffered recurring losses from operations and has net cash flows deficiencies that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on ~~these~~the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the ~~Public Company Accounting Oversight Board (United States).~~PCAOB. Those standards require that we plan and perform ~~audits~~the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material ~~misstatement.~~misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. ~~Our~~As part of our audits ~~included consideration~~we are required to obtain an understanding of internal control over financial reporting ~~as a basis for designing audit procedures that are appropriate in the circumstances,~~ but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. ~~An audit also includes~~

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence ~~supporting~~regarding the amounts and disclosures in the consolidated financial ~~statements, assessing~~statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, ~~and~~as well as evaluating the overall presentation of the consolidated financial ~~statement presentation.~~statements. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Astrotech Corporation at June 30, 2017 and 2016 and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ BDO USA, LLP

We have served as the Company's auditor since 2015.

Austin, Texas

September ~~18, 2017~~

25, 2018

ASTROTECH CORPORATION

Consolidated Balance Sheets

(In thousands, except share data)

	June 30,
	2018			2017
Assets
Current assets
Cash and cash equivalents	$	552		$	2,184
Short-term investments		3,551			10,900
Accounts receivable		12			146
Inventory, net		7			166
Prepaid expenses and other current assets		154			269
Total current assets		4,276			13,665
Property and equipment, net		733			3,180
Long-term investments		50			1,990
Other assets, net		81			—
Total assets	$	5,140		$	18,835
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	112		$	259
Payroll related accruals		412			907
Accrued and other liabilities		434			641
Income tax payable		2			2
Total current liabilities		960			1,809
Other liabilities		188			256
Total liabilities		1,148			2,065
Commitments and contingencies (Note 15)
Stockholders’ equity
Preferred stock, $0.001 par value, convertible, 2,500,000 shares authorized, no shares issued and outstanding at June 30, 2018 and June 30, 2017		—			—
Common stock, $0.001 par value, 15,000,000 shares authorized; 4,496,873 and 4,508,509 shares issued at June 30, 2018 and June 30, 2017, respectively; 4,097,346 and 4,111,281 shares outstanding at June 30, 2018 and June 30, 2017, respectively		190,570			190,382
Treasury stock, 399,527 and 397,228 shares at cost at June 30, 2018 and June 30, 2017, respectively		(4,128	)		(4,121	)
Additional paid-in capital		1,745			1,483
Accumulated deficit		(184,164	)		(170,913	)
Accumulated other comprehensive loss		(31	)		(61	)
Total stockholders’ equity		3,992			16,770
Total liabilities and stockholders’ equity	$	5,140		$	18,835

June 30,
2017 2016
Assets

Current assets

Cash and cash equivalents $ 2,184
$ 4,399
Short-term investments 10,900
17,102
Accounts receivable 146
156
Costs and estimated revenues in excess of billings —
451
Inventory:
Raw materials 109
327
Work-in-process 57
75
Finished goods —
94
Prepaid expenses and other current assets 269
319
Total current assets 13,665
22,923
Property and equipment, net 3,180
3,392
Long-term investments 1,990
4,208
Total assets $ 18,835
$ 30,523

Liabilities and stockholders’ equity

Current liabilities

Accounts payable $ 259
$ 237
Payroll related accruals 907
1,000
Accrued and other liabilities 641
563
Income tax payable 2
—
Total current liabilities 1,809
1,800
Other liabilities 256
96
Total liabilities 2,065
1,896

Commitments and contingencies (Note 15)

Stockholders’ equity

Preferred stock, no par value, convertible, 2,500,000 shares authorized, no shares issued and outstanding, at June 30, 2017 and June 30, 2016 —
—
Common stock, no par value, 75,000,000 shares authorized; 22,542,544 and 21,811,153 shares issued at June 30, 2017 and June 30, 2016, respectively; 20,556,403 and 20,627,511 shares outstanding at June 30, 2017 and June 30, 2016, respectively 190,382
189,294
Treasury stock, 1,986,141 and 1,183,642 shares at cost at June 30, 2017 and June 30, 2016, respectively (4,121 ) (2,828 )
Additional paid-in capital 1,483
1,419
Accumulated deficit (170,913 ) (159,117 )
Accumulated other comprehensive loss (61 ) (101 )
Equity attributable to stockholders of Astrotech Corporation 16,770
28,667
Noncontrolling interest —
(40 )
Total stockholders’ equity 16,770
28,627
Total liabilities and stockholders’ equity $ 18,835
$ 30,523

See accompanying notes to consolidated financial statements.

ASTROTECH CORPORATION

Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except per share data)

	June 30,
	2018			2017
Revenue	$	86		$	2,328
Cost of revenue		36			1,293
Gross profit		50			1,035
Operating expenses:
Selling, general and administrative		5,629			7,508
Research and development		6,065			5,587
Loss on impairment of long-lived assets		1,693			—
Total operating expenses		13,387			13,095
Loss from operations		(13,337	)		(12,060	)
Interest and other income, net		86			306
Loss from operations before income taxes		(13,251	)		(11,754	)
Income tax expense		—			(2	)
Net loss		(13,251	)		(11,756	)
Less: Net loss attributable to noncontrolling interest		—			(174	)
Net loss attributable to Astrotech Corporation	$	(13,251	)	$	(11,582	)
Weighted average common shares outstanding:
Basic and diluted		4,061			4,084
Basic and diluted net loss per common share:
Net loss attributable to Astrotech Corporation	$	(3.26	)	$	(2.84	)
Other comprehensive loss, net of tax:
Net loss attributable to Astrotech Corporation	$	(13,251	)	$	(11,582	)
Available-for-sale securities
Net unrealized losses, net of zero tax expense		(94	)		(20	)
Reclassification adjustment for realized losses included in net loss, net of zero tax expense		124			60
Total comprehensive loss attributable to Astrotech Corporation	$	(13,221	)	$	(11,542	)

June 30,
2017 2016
Revenue $ 2,328
$ 2,671
Cost of revenue 1,293
2,332
Gross profit 1,035
339
Operating expenses:

Selling, general and administrative 7,508
7,708
Research and development 5,587
6,469
Total operating expenses 13,095
14,177
Loss from operations (12,060 ) (13,838 )
Interest and other income, net 306
379
Loss from operations before income taxes (11,754 ) (13,459 )
Income tax (expense) benefit (2 ) 25
Net loss (11,756 ) (13,434 )
Less: Net loss attributable to noncontrolling interest (174 ) (339 )
Net loss attributable to Astrotech Corporation $ (11,582 ) $ (13,095 )

Weighted average common shares outstanding:
Basic and diluted 20,418
20,388

Basic and diluted net loss per common share:

Net loss attributable to Astrotech Corporation $ (0.57 ) $ (0.64 )

Other comprehensive loss, net of tax:
Net loss attributable to Astrotech Corporation $ (11,582 ) $ (13,095 )
Available-for-sale securities
Net unrealized losses, net of zero tax expense (20 ) (92 )
Reclassification adjustment for realized losses included in net loss, net of zero tax expense 60
14
Total comprehensive loss attributable to Astrotech Corporation $ (11,542 ) $ (13,173 )

See accompanying notes to consolidated financial statements.

ASTROTECH CORPORATION

Consolidated Statement of Changes in Stockholders’ Equity

(In thousands)

	Common Stock
	Number of Shares Outstanding			Amount			Treasury Stock Amount			Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Non- Controlling Interest			Total Stockholders’ Equity
Balance at June 30, 2016		4,125		$	189,294		$	(2,828	)	$	1,419		$	(159,117	)	$	(101	)	$	(40	)	$	28,627
Net change in available-for-sale debt and marketable equity securities		—			—			—			—			—			40			—			40
Stock-based compensation		—			—			—			98			—			—			—			98
Forfeiture of stock-based compensation		(12	)		(4	)		—			(3	)		—			—			—			(7	)
Exercise of stock options		9			49			—			(31	)		—			—			—			18
Share repurchases		(160	)		—			(1,293	)		—			—			—			—			(1,293	)
Restricted stock issuance		149			1,043			—			—			—			—			—			1,043
Acquisition of non-controlling interest		—			—			—			—			(214	)		—			214			—
Net loss		—			—			—			—			(11,582	)		—			(174	)		(11,756	)
Balance at June 30, 2017		4,111			190,382			(4,121	)		1,483			(170,913	)		(61	)		—			16,770
Net change in available-for-sale debt and marketable equity securities		—			—			—			—			—			30			—			30
Stock-based compensation		—			—			—			262			—			—			—			262
Cancellation of restricted stock		(12	)		—			—			—			—			—			—			—
Share repurchases		(2	)		—			(7	)		—			—			—			—			(7	)
Restricted stock issuance		—			188			—			—			—			—			—			188
Net loss		—			—			—			—			(13,251	)		—			—			(13,251	)
Balance at June 30, 2018		4,097		$	190,570		$	(4,128	)	$	1,745		$	(184,164	)	$	(31	)	$	—		$	3,992

Common Stock

Number of
Shares Outstanding
Amount
Treasury
Stock
Amount

Additional
Paid-In
Capital

Accumulated
Deficit

Accumulated
Other Comprehensive Loss

Non-
Controlling
Interest

Total
Stockholders’
Equity
Balance at June 30, 2015 20,744
$ 189,007
$ (2,672 ) $ 1,139
$ (146,022 ) $ (23 ) $ 299
$ 41,728
Net change in available-for-sale debt and marketable equity securities —
—
—
—
—
(78 ) —
(78 )
Stock-based compensation —
—
—
331
—
—
—
331
Forfeiture of stock based comp (104 ) (92 ) —
(67 ) —
—
—
(159 )
Exercise of stock options 16
—
—
16
—
—
—
16
Share repurchases (63 ) —
(156 ) —
—
—
—
(156 )
Restricted stock issuance 35
379
—
—
—
—
—
379
Net loss —
—
—
—
(13,095 ) —
(339 ) (13,434 )
Balance at June 30, 2016 20,628
189,294
(2,828 ) 1,419
(159,117 ) (101 ) (40 ) 28,627
Net change in available-for-sale debt and marketable equity securities —
—
—
—
—
40
—
40
Stock-based compensation —
—
—
98
—
—
—
98
Forfeiture of stock based comp (58 ) (4 ) —
(3 ) —
—
—
(7 )
Exercise of stock options 45
49
—
(31 ) —
—
—
18
Share repurchases (802 ) —
(1,293 ) —
—
—
—
(1,293 )
Restricted stock issuance 743
1,043
—
—
—
—
—
1,043
Acquisition of non-controlling interest —
—
—
—
(214 ) —
214
—
Net loss —
—
—
—
(11,582 ) —
(174 ) (11,756 )
Balance at June 30, 2017 20,556
$ 190,382
$ (4,121 ) $ 1,483
$ (170,913 ) $ (61 ) $ —
$ 16,770

See the accompanying notes to consolidated financial statements.

ASTROTECH CORPORATION

Consolidated Statements of Cash Flows

(In thousands)

	Years Ended June 30,
	2018			2017
Cash flows from operating activities:
Net loss	$	(13,251	)	$	(11,756	)
Adjustments to reconcile net loss from operations to net cash used in operating activities:
Stock-based compensation		450			1,134
Amortization		16			20
Depreciation		749			711
Net loss on sale of available-for-sale investment		124			60
Net loss on impairment on long-lived assets		1,693			—
Changes in assets and liabilities:
Accounts receivable		134			10
Cost, estimated earnings and billings, net of uncompleted contracts		—			451
Accounts payable		(147	)		22
Other assets and liabilities		(552	)		525
Income tax payable		—			2
Net cash used in operating activities		(10,784	)		(8,821	)
Cash flows from investing activities:
Sale of available-for-sale investments		7,229			3,744
Maturities of securities		1,949			4,636
Purchases of property and equipment		(19	)		(499	)
Net cash provided by investing activities		9,159			7,881
Cash flows from financing activities:
Payments for share repurchase		(7	)		(1,293	)
Proceeds from exercise of stock options		—			18
Net cash used in financing activities		(7	)		(1,275	)
Net change in cash and cash equivalents		(1,632	)		(2,215	)
Cash and cash equivalents at beginning of period		2,184			4,399
Cash and cash equivalents at end of period	$	552		$	2,184
Supplemental disclosures of cash flow information:
Cash paid for interest	$	—		$	—
Income taxes paid	$	—		$	—

Year Ended June 30,
2017 2016
Cash flows from operating activities:

Net loss $ (11,756 ) $ (13,434 )
Adjustments to reconcile net loss from operations to net cash used in operating activities:

Stock-based compensation 1,134
551
Amortization 20
33
Depreciation 711
525
Net loss on sale of available-for-sale investment 60
14
Changes in assets and liabilities:
Accounts receivable 10
42
Cost, estimated earnings and billings, net of uncompleted contracts 451
(451 )
Accounts payable 22
(161 )
Other assets and liabilities 525
(253 )
Income tax payable 2
(190 )
Net cash used in operating activities (8,821 ) (13,324 )

Cash flows from investing activities:

Sale of available-for-sale investments 3,744
4,315
Maturities of held-to-maturity securities 4,636
5,927
Purchases of property and equipment (499 ) (809 )
Net cash provided by investing activities-continuing operations 7,881
9,433
Net cash provided by investing activities-discontinued operations —
6,100
Net cash provided by investing activities 7,881
15,533

Cash flows from financing activities:

Payments for share repurchase (1,293 ) (156 )
Proceeds from exercise of stock options 18
16
Net cash used in financing activities (1,275 ) (140 )

Net change in cash and cash equivalents (2,215 ) 2,069
Cash and cash equivalents at beginning of period 4,399
2,330
Cash and cash equivalents at end of period $ 2,184
$ 4,399

Supplemental disclosures of cash flow information:
Cash paid for interest $ —
$ —
Income taxes paid $ —
$ 198

See accompanying notes to consolidated financial statements.

ASTROTECH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended June 30, ~~2017~~2018 and ~~2016~~

2017

(1) Description of the Company and Operating Environment

Astrotech Corporation ~~(Nasdaq:~~(NASDAQ: ASTC) (“Astrotech,” “the Company,” “we,” “us” or “our”), a ~~Washington~~Delaware corporation organized in 1984, is ~~an innovative~~a science and technology development and commercialization company that ~~invents, acquires, and commercializes technological innovations sourced from internal research, universities, laboratories, and research institutions, and then funds,~~launches, manages, and builds ~~start-up~~scalable companies ~~for profitable divestiture to market leaders~~based on innovative technology in order to maximize shareholder value.

~~Our~~

Business

Overview

Segment Information – ~~With the sale of the ASO business unit (see Note 4) and the founding of Astral, the~~The Company operates two reportable business units, Astro Scientific and ~~Astral.~~Astral Images Corporation. Since the Company operates in two segments, all financial segment information required by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 280, Segment Reporting (“FASB ASC 280”) can be found in Note 16, Segment Information.

Astro Scientific

Astro Scientific is a technology incubator that commercializes innovative technologies. Subsidiaries 1^st Detect and Astrogenetix currently reside in Astro Scientific:

1^st Detect

- 1^st Detect ~~develops, manufactures,~~is a manufacturer of advanced chemical detection technology that detects and ~~sells chemical analyzers for use in the airport security, military,~~identifies trace amounts of explosives and breath analysis markets. Our chemical analyzers can identify chemicals with more accuracy and precision than competing analyzers given their extreme sensitivity and specificity. By leveraging a concept from Oak Ridge National Laboratory and a preliminary design initiated by an engagement with the National Aeronautics and Space Administration (“NASA”) to develop a mass spectrometer for the International Space Station,narcotics. In April 2018, the Company ~~developed a chemical analyzer~~announced that ~~enables real-time analytics that we believe to be significantly smaller, lighter, faster,~~the TRACER 1000 entered the Developmental Testing and ~~less expensive than competing analyzers. The majority~~Evaluation (“DT&E”) process at the Department of ~~revenue in 1~~^st Detect comes from working as a subcontractor on government contracts. The Company works with prime contractors in adapting our technology to be used in enhancing the government’s detection capabilities for a variety of applications.

~~Our product portfolio currently consists~~Homeland Security’s (“DHS”) Transportation Security Laboratory (“TSL”). Successful completion and passing of the ~~following products:~~

~~MMS-1000™ - the MMS-1000™~~DT&E phase would lead to TSL Certification. TSL Certification is a ~~small, low-power desktop analyzer designed for the laboratory market.~~

~~OEM-1000 - the OEM-1000 is an original equipment manufacturer (“OEM”) component~~significant endorsement that ~~drives the MMS-1000™. It is designed to be integrated into customers’ packaging~~foreign governments and enclosures and to be integrated with application-specific sampling or separation technology. Variants of the OEM-1000 have been selected by our partners for integration with their ancillary instrumentation.

MMS-2000™ - the MMS-2000™ is a process gas monitor that provides real-time measurement of specific chemicals in a process stream. It is built for continuous, autonomous monitoring and recording of any excursions or environmental anomalies that can continuously report the abundance of a set of chemicals in order to optimize yield or identify out-of-spec conditions.

~~Tracer 1000 MS-ETD™ - the Tracer 1000 MS-ETD™ is an~~other U.S. government agencies consider when procuring explosives trace detector (“ETD”) ~~with~~instrumentation. Certification is also a ~~linear ion trap mass spectrometer~~major step towards being listed on the Transportation Security Administration’s (“TSA”) Qualified Products List (“QPL”), and subsequently being deployed in airports throughout the U.S. In addition, the Company also recently announced that the TRACER 1000 has been accepted into the TSA’s Air Cargo Screening Technology Qualification Test (“ACSQT”) program, representing a ~~swab-based thermal desorption sample inlet system. It is designed to replace~~major step toward inclusion on TSA’s exclusive Air Cargo Screening Technology List (“ACSTL”) and having the ~~current generation of ion mobility spectrometry-based ETD systems installed~~TRACER 1000 deployed at airports and cargo facilities worldwide to screen checked luggage and other ~~high security~~air cargo. The instrument was designed to enable air carriers, freight forwarders, shippers, and independent cargo facilities ~~globally.~~

~~BreathDetect 1000™ -~~to stay ahead of evolving threats while optimizing cargo throughput. Finally, the ~~BreathDetect 1000™~~Company also announced that the TRACER 1000 was accepted into European Civil Aviation Conference’s (“ECAC”) evaluation process for both passenger and cargo screening in airports. ECAC is the European equivalent to the U.S. TSA. The ECAC Certification would be a ~~mass spectrometry-based instrument~~significant milestone that will allow us to begin selling to airports and governments internationally.

There is ~~being used to analyze human breath in real-time, enabling detection~~no assurance that any of ~~bacterial infections~~the further steps detailed in the ~~respiratory tract within minutes.~~

milestones mentioned above will be achieved or that our technology will be approved by any of the programs listed.

Astrogenetix

- Astrogenetix ~~is applying~~was developing a fast-track, on-orbit discovery platform using the International Space Station to develop ~~vaccines and other therapeutics.~~vaccines. We were working with Texas A&M University to obtain additional funding from NASA, ~~has engaged~~which was declined subsequent to year-end. Future efforts at Astrogenetix have therefore been halted due to the ~~Center for Vaccine Development at the University~~lack of ~~Maryland (“UMD”), one of the leading vaccinology institutions in the world, to research the application of a vaccine for~~ funding.~~Salmonella. NASA is collaborating with UMD, meaning little investment is required of Astrogenetix at this stage.~~

~~Astral Images~~

Astral Images ~~sells film-to-digital conversion, high-dynamic range conversion, image~~Corporation

Astral Images - Astral is a developer of advanced film restoration and enhancement ~~defect removal, and color correction services. Astral uses its powerful~~software. Astral’s artificial intelligence (“AI”)-driven algorithms ~~to provide automated conversion of television~~remove dust, scratches, and ~~feature 35mm and 16mm films to~~defects from film while converting the new 4K/HDR format, the standard for the latest generation of digital film distribution to the home. Due to a significant shift in the film scanning industry, most film assets will need to go through an upgrade to the new standard to remain relevant for over-the-top distribution (Netflix, Amazon, Hulu, etc.) as television manufacturers sell more 4K/HDR televisions and consumer demand for such content accelerates. Astral is positioned to be a leader in the digital conversion of feature films, film-based television series, sporting events shot on film, film libraries, and film archives. Astral has introduced to the digital conversion market Black ICE™ for the conversion of black and white film, Color ICE™ for the conversion of color film, and HDR ICE™ for the conversion of color film or digital video to the new HDR format. Astral’s platform technology is also being designed to launch a targeted solution that will convert photographs, negatives, and slides to a digital format ~~while employing its AI algorithms~~with significantly enhanced resolution. In addition, the intelligent software automatically restores the film’s original color, optimizing the content to ~~restore the image to its original condition~~be viewed in ~~automation.~~

4K.

(2) Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of Astrotech Corporation and its majority-owned subsidiaries that are required to be consolidated. All intercompany transactions have been eliminated in consolidation.

On Monday, October 16, 2017, the Company effectuated a reverse stock split of its shares of Common Stock whereby every five (5) pre-split shares of Common Stock were exchanged for one (1) post-split share of the Company's Common Stock (“Reverse Stock Split”). No fractional shares were issued in connection with the Reverse Stock Split. Stockholders who would otherwise have held a fractional share of the Common Stock received a cash payment in lieu thereof. Numbers presented in these financial statements have been adjusted to reflect the Reverse Stock Split.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that directly affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. Management continuously evaluates its critical accounting policies and estimates, including those used in evaluating the recoverability of long-lived assets, recognition of revenue, valuation of inventory, and the recognition and measurement of loss contingencies, if any. Actual results may vary.

Revenue Recognition

~~Revenue~~

Production Unit Sales and Software Licensing Agreements

When revenue for sale of manufactured product is ~~recognized~~commenced or when the Company licenses its software for use, the Company will recognize revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when a firm sales contract or invoice is in place, delivery has occurred or services have been provided, and collectability is reasonably assured.

In fiscal year 2018, the Company had two revenue sources and, in both arrangements, there were no undelivered elements at June 30, 2018.

Construction-Type and Production-Type Contracts

~~A portion~~

In the prior year, most of the Company’s revenue iswas derived from contracts to manufacture mass spectrometers to a buyer’s specification. These contracts are accounted for under the provisions of FASB ASC Topic 605-35 “Revenue Recognition: Construction-Type and Production-Type ~~Contracts”.~~Contracts.” These contracts are fixed-price and are recorded on the ~~percentage of completion~~percentage-of-completion basis using the ratio of costs incurred to estimated total costs at completion as the measurement basis for progress toward completion and revenue recognition. Any losses identified on contracts are recognized immediately. Contract accounting requires significant judgment relative to assessing risks, estimating contract costs, and making related assumptions for schedule and technical issues. With respect to contract change orders, claims, or similar items, judgment must be used in estimating related amounts and assessing the potential for realization. These amounts are only included in contract value when they can be reliably estimated and realization is probable.

percentage-of-completion method of accounting. At the outset of each contract, ~~we prepare~~the Company prepares a detailed analysis of our estimated cost to complete the project, and our progress is based on the percentage of projected cost incurred. Risks related to service delivery, usage, productivity, and other factors are considered in the estimation process. The recording of profits and losses on long-term contracts requires an estimate of the total profit or loss over the life of each contract. This estimate requires consideration of total contract value, change orders, and claims, less costs incurred and estimated costs to complete. Anticipated losses on contracts are recorded in full in the period in which they become evident. Profits are recorded based upon the total estimated contract profit ~~multiplied by~~times the current percentage complete for the contract.

The Company did not

recognize any revenue from contracts to manufacture mass spectrometers to a buyer’s specification in fiscal year 2018. As of June 30, 2018, there were not any unrecognized contract revenues or costs.

Research and Development

Research and development costs are expensed as incurred. ~~Income from~~Research and development costs are used to improve system functionality, streamline and simplify the ~~sale of prototype units in 1~~^st ~~Detect for the years ended June 30, 2017~~user experience, and ~~2016 was $12 thousand and $93 thousand, respectively, and was booked as an offset to~~extend our capabilities into customer-defined, application-specific opportunities. Other research and development activities include building innovative solutions consisting of customized off-the-shelf hardware and ~~will continue to be booked accordingly until~~internally-developed, reliable AI software and services. Furthermore, the Company ~~transitions to full production. Research~~aggressively seeks patent protection from the U.S. Patent & Trademark Office and ~~development expenses for the fiscal years ended June 30, 2017 and 2016 were $5.6 million and $6.5 million, respectively.~~

foreign patent offices.

Net Loss per Common Share

Basic net loss per common share is calculated by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share ~~would~~is the same as basic net loss per common share as the potential dilutive shares are considered to be ~~considered anti-dilutive (see~~anti-dilutive. For more information, see Note ~~13).~~

13.

Cash and Cash Equivalents

Accounts Receivable

Inventory

Property and Equipment

Property and equipment are stated at ~~cost.~~cost, less accumulated depreciation. All furniture, fixtures, and equipment are depreciated using the straight-line method over the estimated useful lives of the respective assets, which is generally five years. Purchased software is typically depreciated over three ~~years; however, Astral’s proprietary software, Astral HDR ICE™, is being depreciated over seven years as this is management’s best estimate of useful life of this platform.~~years. Leasehold improvements are amortized over the shorter of the useful life of the improvement or the term of the lease. Repairs and maintenance are expensed when incurred.

Impairment of Long-Lived Assets

The Company ~~reviews~~continuously evaluates its long-lived assets ~~and certain identifiable intangibles~~ for impairment ~~whenever events or changes in circumstances indicate that~~to assess whether the carrying amount of an asset may not be recoverable. Our evaluation is based on an assessment of potential indicators of impairment, such as an adverse change in the business climate that could affect the value of an asset, current or forecasted operating or cash flow losses that demonstrate continuing losses associated with the use of an asset, and a current expectation that, more likely than not, an asset will be disposed of before the end of its previously estimated useful life. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower

of the carrying amount or fair value less costs to sell. Recoverability of long-lived assets is dependent on a number of conditions, including

uncertainty about future events and demand for our services. ~~No impairments were identified~~

During the fourth quarter of fiscal year 2018, the Company determined that there was an impairment indicator associated with the Color ICE™ software platform and scanner of Astral (“Astral assets”). During the quarter, management’s push to sell a newer version of Astral’s Color ICE™ software to a major scanning company was postponed, possibly indefinitely. In addition, even though the Company secured its first contract subsequent to year-end that utilizes Astral’s latest software, the expectations under the contract remain unclear and the contract could yield limited, or possibly no, additional revenue. In light of the Company’s limited resources, expenses in Astral have been reduced and efforts have been scaled back until the market begins to develop. Due to the delay in the ~~years ended~~development of the market which has to date not yielded significant revenues, management believes that, for the foreseeable future, it is probable that Astral net cash flows will continue to fall short of the value of the Astral assets. Management therefore recorded an impairment charge of $1.6 million in fiscal year 2018. As of June 30, ~~2017~~2018, the fair value of these assets was immaterial.

other assets associated with this reduction of square footage. The total amount associated with this impairment is $114 thousand. See Note 15 for more information relating to the amended lease agreement.

Fair Value of Financial Instruments

Astrotech’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, ~~investments,~~ and accrued liabilities. ~~The Company’s management~~Management believes the carrying amounts of these assets and liabilities approximates their fair value due to their liquidity. For more information about the Company’s accounting policies surrounding fair value ~~instruments,~~investments, see Note 9.

Available-for-Sale Investments

Investments that are designated as available-for-sale are reported at fair value, with unrealized gains and losses recorded in accumulated other comprehensive loss. The Company determines the cost of investments sold based on a first-in, first-out cost basis at the individual security level. The Company’s investments are subject to a periodic impairment review and are evaluated based on the specific facts and circumstances present at the time of assessment, which include ~~the~~ consideration of general market conditions, the duration and extent to which the fair value is below cost, and the Company’s ability and intent to hold the investment for a sufficient period of time to allow for recovery of value in the foreseeable future. The Company also considers specific adverse conditions related to the financial health of, and the business outlook for, the investee, which may include industry and sector performance, changes in technology, operational and financing cash flow factors, and changes in the investee’s credit rating. The Company records other than temporary impairments on marketable equity securities and marketable equity method investments in gains (losses) on equity investments, net of previously recorded gains (losses). For more information on investments, see Note 3.

~~Held-to-Maturity Investments~~

Operating Leases

The Company leases space under operating leases. Lease agreements often include tenant improvement allowances, rent holidays, and rent escalation clauses, as defined in the respective lease agreements. ~~Most of the~~The Company’s lease agreements include renewal periods at the Company’s option. The Company recognizes rent holiday periods, tenant improvement allowances, and scheduled rent increases on a straight-line basis over the lease term beginning with the date the Company takes possession of the leased property. The Company records tenant improvement allowances and rent holidays as deferred rent liabilities on the consolidated balance sheets and amortizes the deferred rent over the terms of the lease to rent expense on the consolidated statements of operations.

Share-Based Compensation

they occur. The fair value of awards that are likely to meet goals, if any, are recorded as an expense over the vesting ~~period (see~~period. For more information, see Note ~~11 for more information).~~

11.

Noncontrolling Interest

Noncontrolling interest accounting is applied for any entities where the Company maintains ~~more than 50% and~~control but less than 100% ownership. The Company clearly identifies the noncontrolling interest in the balance sheets and income statements. The Company also discloses three measures of net loss: net loss, net loss attributable to noncontrolling interest, and net loss attributable to

Astrotech Corporation. The Company’s operating cash flows in its consolidated statements of cash flows reflect net loss, while basic and diluted loss per share calculations reflect net loss attributable to Astrotech Corporation.

~~The noncontrolling interest balance of $(40) thousand at June 30, 2016 represents an interest by a minority shareholder in one of the Company’s subsidiaries more fully discussed in Note 5.~~

Income Taxes

Treasury Stock

The Company records treasury stock at the cost to acquire it and includes treasury stock as a component of stockholders’ equity.

Accounting Pronouncements

In May 2014, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (Topic 606) (“ASU 2014-09”), which supersedes the revenue recognition requirements in ~~ASC~~Accounting Standards Codification (“ASC”) 605, Revenue Recognition (as updated by ASU 2015-14 in August 2015, ASU 2016-08 in March 2016, and ASU 2016-20 in December 2016). The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides a five-step process to achieve that core principle. ASU 2014-09 requires disclosures enabling users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. ASU 2014-09 was to be effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. ASU 2015-14 delayed the required adoption date for public entities to periods beginning after December 15, 2017, although early adoption to the original effective date under ASU 2014-09 is permitted. Once implemented, the Company can use one of two retrospective application methods for prior periods. ~~Earlier application~~

Astrotech has completed its evaluation of the provisions of this standard and concluded that the adoption will not result in a material adjustment to beginning accumulated deficit as the Company does not have any uncompleted revenue contracts. Revenue is ~~not permitted.~~

measured as the amount of consideration the Company expects to receive in exchange for providing the service.

The Company ~~has been assessing~~will adopt this new standard effective July 1, 2018 using the ~~impact~~modified retrospective method of adoption as permitted by the ~~new revenue recognition~~standard. Under this method, the cumulative effect of initially applying the standard ~~on its relationships with its clients. We have hired~~is recognized as an ~~outside consultant~~adjustment to ~~help with~~ the opening balance of stockholders’ equity, and revenues reported in the periods prior to the date of adoption are not changed. Astrotech will not, however, make such an adjustment to stockholders’ equity as a result of our evaluation. The adoption of ~~this standard. The Company is nearly complete with its comprehensive diagnostic~~Topic 606 will have no material impact on our financial position, results of ~~the measurement and recognition provisions of the new standard and is in the process of finalizing its conclusions and policies. The Company plans to adopt this standard in fiscal year 2019.~~

The Company has not yet determined the impacts of all the disclosure requirements and specifically is assessing the manner in which it will disaggregate its revenue to illustrate how the nature, amount, timing, and uncertainty of revenue andoperations, stockholders’ equity, or cash flows are affected by economic factors. Additionally, while the Company is in the process of assessing its accounting and forecasting processes to ensure its ability to record, report, forecast, and analyze results under the new standard, it is not expecting significant changes to its business processes or systems.

flows.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). ASU 2016-01 modifies how entities measure equity investments and present changes in the fair value of financial liabilities. Under the new guidance, entities will have to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value

and recognize any changes in fair value in net income unless the investments qualify for the new practicality exception. A practicality exception will apply to those equity investments that do not have a readily determinable fair value and do not qualify for the practical expedient to estimate fair value under ASC 820, “Fair Value Measurements,” and as such these investments may be measured at cost. ASU 2016-01 will be effective for the Company’s fiscal year beginning July 1, 2018, and subsequent interim periods. The adoption of ASU 2016-01 is not expected to have an impact on the Company’s financial statements. The Company will adopt this ASU in fiscal year 2019.

In February 2016, the FASB issued ASU ~~2016-02, “Leases~~2016-02: Leases (Topic 842)~~” (“~~ and ASU ~~2016-02”). The new standard establishes~~2018-10: Codification Improvements to Topic 842, Leases. These ASUs require that a lessee recognize in its statement of financial position a liability to make lease payments (the lease liability) and a right-of-use ~~(“ROU”) model that requires~~asset representing its right to use the underlying asset for the lease term. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For leases with a term of 12 months or less, a lessee is permitted to ~~record~~make an ~~ROU~~accounting policy election by class of underlying asset not to recognize lease assets and a lease ~~liability on the balance sheet for all~~liabilities. For income statement purposes, leases ~~with terms longer than 12 months. Leases will~~are still required to be classified as either operating or finance. Operating leases will result in straight-line expense while finance ~~or operating, with classification affecting the pattern of~~

leases will result in a front-loaded expense recognition in the income statement. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. pattern. The Company is assessing the impact the adoption of ~~ASU 2016-02~~these standards will have on its financial ~~statements.~~

statements and plans to adopt this ASU in fiscal year 2020.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 amends guidance on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. For assets held at amortized cost basis, ASU 2016-13 eliminates the probable initial recognition threshold in current generally accepted accounting standards, and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available-for-sale debt securities, credit losses should be measured in a manner similar to current generally accepted accounting standards; however, ASU 2016-13 will require that credit losses be presented as an allowance rather than as a write-down. ASU 2016-13 affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. This amendment affects loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of this standard will have on its financial statements.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. The Company ~~is currently in~~adopted the ~~process~~provisions of ~~evaluating~~ASU 2016-15 effective July 1, 2018, and it appears that the adoption of this standard will not impact the Company’s consolidated statement of ~~adoption on its consolidated financial statements.~~

cash flows going forward.

In May 2017, the FASB issued ASU 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”). ASU 2017-09 clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as a modification. The new guidance is expected to reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as a modification. Changes to the terms or conditions of a share-based payment award that do not impact the fair value of the award, vesting conditions, and the classification as an equity or liability instrument will not need to be assessed under modification accounting. ASU 2017-09 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The amendments in this update should be applied prospectively to an award modified on or after the adoption date. ~~Accordingly,~~The Company adopted the provisions of ASU 2017-09 effective July 1, 2018. The adoption of ASU 2017-09 ~~will~~did not impact the Company’s accounting for its stock-based compensation.

(3) Going Concern

Financial Condition

The Company’s consolidated financial statements for the year ended June 30, 2018 have ~~an effect~~been prepared on a going concern basis, which contemplates the ~~Company's historical~~realization of assets and the satisfaction of liabilities in the normal course of business. As of June 30, 2018, the Company has working capital of $3.3 million. The Company reported a net loss of $13.3 million for the fiscal year 2018 and a net loss attributable to the Company of $11.6 million for the fiscal year 2017, along with net cash used in operating activities of $10.8 million for the fiscal year 2018 and net cash used in operating activities of $8.8 million for the fiscal year 2017. This raises substantial doubt about the Company’s ability to continue as a going concern within one year after the audited financial ~~statements.~~statements are issued.

Management’s Plans to Continue as a Going Concern

The Company remains resolute in identifying the optimal solution to its liquidity issue. The Company is currently evaluating several potential sources for additional liquidity. These include, but are not limited to, selling the ~~effect~~Company or a portion thereof, debt financing, equity financing, merging, or engaging in a strategic partnership. On July 3, 2018, management filed Form S-3 to raise possible funds through the capital markets. The Company is currently evaluating potential offering of any combination of common stock, preferred stock, debt securities, warrants to purchase common stock, preferred stock or debt securities, or any combination of the foregoing, either individually or as units comprised of one or more of the other securities. However, additional funding may not be available when needed or on terms acceptable to us. If we are unable to generate funding within a reasonable timeframe, we may have to delay, reduce or terminate our research and development programs, limit strategic opportunities or curtail our business activities. Astrotech’s consolidated financial statements as of June 30, 2018 do not include any adjustments that might result from the outcome of this ~~standard on future consolidated financial statements.~~

uncertainty.

~~(3)~~(4) Investments

The following tables summarize gains and losses related to the Company’s investments:

	June 30, 2018
Available-for-Sale	Adjusted		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gain		Loss			Value
Mutual Funds - Corporate & Government Debt	$	1,751	$	—	$	(23	)	$	1,728
Fixed Income Bonds		1,333		—		(5	)		1,328
Time Deposits		548		—		(3	)		545
Total	$	3,632	$	—	$	(31	)	$	3,601

	June 30, 2017
Available-for-Sale	Adjusted		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gain		Loss			Value
Mutual Funds - Corporate & Government Debt	$	9,104	$	—	$	(61	)	$	9,043
Fixed Income Bonds		3,048		—		—			3,048
Time Deposits		799		—		—			799
Total	$	12,951	$	—	$	(61	)	$	12,890

June 30, 2016
Available-for-Sale Adjusted Unrealized Unrealized Fair
(In thousands) Cost Gain Loss Value
Mutual Funds - Corporate & Government Debt $ 12,908
$ —
$ (101 ) $ 12,807
Total $ 12,908
$ —
$ (101 ) $ 12,807

June 30, 2016
Held-to-Maturity Carrying Unrealized Unrealized Fair
(In thousands) Value Gain Loss Value
Fixed Income Bonds $ 3,513
$ 11
$ (6 ) $ 3,518
Time Deposits 4,990
7
—
4,997
Total $ 8,503
$ 18
$ (6 ) $ 8,515

The Company has certain financial instruments on its consolidated balance sheet related to interest bearing time deposits and fixed income bonds. These ~~held-to-maturity~~ time deposits are included in “Short-term investments” if the maturities at the end of the reporting period were 360 days or less or “Long-term investments” if the maturities at the end of the reporting period were over 360 days. Fixed income ~~bonds,~~investments maturing over the next one to ~~four~~three years ~~are comprised~~comprise a set of ~~investments in~~highly diversified bonds issued by various corporations ~~with ratings of BB- or better.~~

Carrying Value
Short-Term Investments Long-Term Investments
(In thousands) June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
Mutual Funds - Corporate & Government Debt $ 9,043
$ 12,807
$ —
$ —
Time Deposits
Maturities from 1-90 days —
2,243
—
—
Maturities from 91-360 days 250
1,699
—
—
Maturities over 360 days —
—
549
1,048
Fixed Income Bonds
Maturities less than 1 year 1,607
353
—
—
Maturities from 1-3 years —
—
1,441
3,160
Total $ 10,900
$ 17,102
$ 1,990
$ 4,208

and entities that in aggregate represent an above average investment-grade fixed income portfolio.

	Carrying Value
	Short-Term Investments				Long-Term Investments
(In thousands)	June 30, 2018		June 30, 2017		June 30, 2018		June 30, 2017
Mutual Funds - Corporate & Government Debt	$	1,728	$	9,043	$	—	$	—
Time Deposits
Maturities from 1-90 days		—		—		—		—
Maturities from 91-360 days		495		250		—		—
Maturities over 360 days		—		—		50		549
Fixed Income Bonds
Maturities less than 1 year		1,328		1,607		—		—
Maturities from 1-3 years		—		—		—		1,441
Total	$	3,551	$	10,900	$	50	$	1,990

~~(4) Discontinued Operations & Gain on the Sale of the ASO Business Unit~~

In August 2014, the Company completed the previously announced sale of substantially all of its assets used in the Company’s former Astrotech Space Operations business unit to Lockheed Martin Corporation for an agreed upon sales price of $61.0 million, less a working capital adjustment. The net sales price was $59.3 million, which included a working capital adjustment of $1.7 million and an indemnity holdback of $6.1 million. As of June 30, 2017, the Company had received the full net sales price of $59.3 million. The indemnity holdback was being held in an escrow account under the terms of an escrow agreement until February 2016, the 18-month anniversary of the consummation of the transaction. 100% of the indemnity holdback was released on February 25, 2016 and no further claims may be made.

(5) Noncontrolling Interest

Astral was created in conjunction with a noncontrolling interest, resulting in Astrotech owning 72% of Astral at the point of creation ~~92% as of June 30, 2016~~ and 100% as of June 30, ~~2017.~~2017 and 2018. The following table details the contributions from the Company and the ~~minority~~noncontrolling interest owner and the Company’s ownership percentage of Astral:

(In thousands)	Astrotech		Noncontrolling Owner (1)			Astrotech Ownership
Initial investment	$	1,422	$	422			72	%
Additional contributions made in fiscal year 2015		1,000		—			83	%
Additional contributions made in fiscal year 2016		3,000		—			92	%
Additional contributions made in fiscal year 2017		3,500		(422	)		100	%
Additional contributions made in fiscal year 2018		—		—			100	%
Total Contributions	$	8,922	$	—

(1)	Astrotech acquired full ownership of Astral Images in fiscal year 2017.

(In thousands)	2018		2017
Beginning balance	$	—	$	(40	)
Net loss attributable to noncontrolling interest		—		(174	)
Acquisition of minority interest (1)		—		214
Ending balance	$	—	$	—

(1)	The noncontrolling interest holder relinquished his interest in Astral on June 30, 2017.

(In thousands) Astrotech Minority Owner (1) Astrotech Ownership
Initial investment $ 1,422
$ 422
72 %
Additional contributions made in fiscal year 2015 1,000
—
83 %
Additional contributions made in fiscal year 2016 3,000
—
92 %
Additional contributions made in fiscal year 2017 3,500
(422 ) 100 %
Total Contributions $ 8,922
$ —

(1) Astrotech acquired full ownership of Astral Images in fiscal year 2017.

The Company applies noncontrolling interest accounting, which requires us to clearly identify the noncontrolling interest in the condensed consolidated balance sheets and consolidated income statements. The Company discloses three measures of net loss: net loss, net loss attributable to noncontrolling interest, and net loss attributable to Astrotech Corporation. The Company’s operating cash flows in its consolidated statements of cash flows reflect net loss, while our basic and diluted loss per share calculations reflect net loss attributable to Astrotech Corporation.

~~The noncontrolling interest balance of $(40) thousand represents a noncontrolling interest in Astral at June 30, 2016.~~

(In thousands) 2017 2016
Beginning balance $ (40 ) $ 299
Net loss attributable to noncontrolling interest (174 ) (339 )
Acquisition of minority interest (1) 214
—
Ending balance $ —
$ (40 )
(1) The noncontrolling interest holder relinquished his interest in Astral on June 30, 2017.

(6) Property and Equipment

As of June 30, ~~2017~~2018 and ~~2016,~~2017, property and equipment consisted of the following:

	June 30,
(In thousands)	2018			2017
Furniture, Fixtures, Equipment & Leasehold Improvements	$	2,554		$	3,309
Software		326			2,053
Capital Improvements in Progress		—			—
Gross Property and Equipment		2,880			5,362
Accumulated Depreciation		(2,147	)		(2,182	)
Property and Equipment, net	$	733		$	3,180

During the fourth quarter of fiscal year 2018, the Company determined that there was an impairment indicator associated with the Color ICE™ software platform and scanner of the Astral assets. During the quarter, management’s push to sell a

June 30,
(In thousands) 2017 2016
Furniture, Fixtures, Equipment & Leasehold Improvements $ 3,309
$ 2,856
Software 2,053
2,074
Capital Improvements in Progress —
9
Gross Property and Equipment 5,362
4,939
Accumulated Depreciation (2,182 ) (1,547 )
Property and Equipment, net $ 3,180
$ 3,392

newer version of Astral’s Color ICE™ software to a major scanning company was postponed, possibly indefinitely. In addition, even though the Company secured its first contract subsequent to year-end that utilizes Astral’s latest software, the expectations under the contract remain unclear and the contract could yield limited, or possibly no, additional revenue. In light of the Company’s limited resources, expenses in Astral have been reduced and efforts have been scaled back until the market begins to develop. Due to the delay in the development of the market which has to date not yielded significant revenues, management believes that, for the foreseeable future, it is probable that Astral net cash flows will continue to fall short of the value of the Astral assets.Management therefore recorded an impairment charge of $1.6 million in fiscal year 2018. As of June 30, 2018, the fair value of these assets was immaterial.

Depreciation and amortization expense of property and equipment was $0.7 million for each of the years ended June 30, ~~2017~~2018 and ~~2016 was $0.7 million and $0.6 million, respectively.~~

2017.

(7) Accrued and Other Liabilities

The following table represents the balances of accrued and other liabilities on the consolidated balance sheet as of June 30, ~~2017~~2018 and ~~2016:~~2017:

(In thousands)	June 30, 2018		June 30, 2017
Accrued payroll, bonuses, and other payroll related liabilities	$	412	$	907
Accrued expenses		393		536
Other current liabilities		41		105
Total	$	846	$	1,548

(In thousands) June 30, 2017 June 30, 2016
Accrued payroll, bonuses, and other payroll related liabilities $ 907
$ 1,000
Accrued expenses 536
327
Deferred revenue —
54
Other current liabilities 105
182
Total $ 1,548
$ 1,563

(8) Debt

The Company had no outstanding debt as of June 30, ~~2017~~2018 and ~~2016.~~

2017.

(9) Fair Value of Financial Instruments

The accounting standard for fair value measurements defines fair value, establishes a market-based framework or hierarchy for measuring fair value, and expands disclosures about fair value measurements. The standard is applicable whenever assets and liabilities are measured and included in the financial statements at fair value.

The fair value hierarchy established in the standard prioritizes the inputs used in valuation techniques into three levels as follows:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following tables present the carrying amounts, estimated fair values, and valuation input levels of certain financial instruments as of June 30, ~~2017~~2018 and June 30, ~~2016:~~2017:

	June 30, 2018
	Carrying		Fair Value Measured Using						Fair
(In thousands)	Amount		Level 1		Level 2		Level 3		Value
Available-for-Sale Securities
Mutual Funds - Corporate & Government Debt	$	1,728	$	1,728	$	—	$	—	$	1,728
Bonds: 0-1 year		1,328		—		1,328		—		1,328
Time deposits: 91-360 days		495		—		495		—		495
Time deposits: over 360 days		50		—		50		—		50
Total	$	3,601	$	1,728	$	1,873	$	—	$	3,601

	June 30, 2017
	Carrying		Fair Value Measured Using						Fair
(In thousands)	Amount		Level 1		Level 2		Level 3		Value
Available-for-Sale Securities
Mutual Funds - Corporate & Government Debt	$	9,043	$	9,043	$	—	$	—	$	9,043
Bonds: 0-1 year		1,607		—		1,607		—		1,607
Bonds: 1-3 years		1,441		—		1,441		—		1,441
Time deposits: 91-360 days		250		—		250		—		250
Time deposits: over 360 days		549		—		549		—		549
Total	$	12,890	$	9,043	$	3,847	$	—	$	12,890

June 30, 2017
Carrying Fair Value Measured Using Fair
(In thousands) Amount Level 1 Level 2 Level 3 Value
Available-for-Sale Securities
Mutual Funds - Corporate & Government Debt $ 9,043
$ 9,043
$ —
$ —
$ 9,043
Bonds: 0-1 year 1,607
—
1,607
—
1,607
Bonds: 1-3 years 1,441
—
1,441
—
1,441
Time deposits: 1-90 days —
—
—
—
—
Time deposits: 91-360 days 250
—
250
—
250
Time deposits: over 360 days 549
—
549
—
549
Total $ 12,890
$ 9,043
$ 3,847
$ —
$ 12,890

June 30, 2016
Carrying Fair Value Measured Using Fair
(In thousands) Amount Level 1 Level 2 Level 3 Value
Available-for-Sale Securities
Mutual Funds - Corporate & Government Debt $ 12,807
$ 12,807
$ —
$ —
$ 12,807
Held-to-Maturity Securities
Bonds: 0-1 year 353
—
352
—
352
Bonds: 1-3 years 3,160
—
3,166
—
3,166
Time deposits: 1-90 days 2,243
—
2,244
—
2,244
Time deposits: 91-360 days 1,699
—
1,703
—
1,703
Time deposits: over 360 days 1,048
—
1,050
—
1,050
Total $ 21,310
$ 12,807
$ 8,515
$ —
$ 21,322

(10) Business Risk and Credit Risk Concentration Involving Cash

For the fiscal year ended June 30, ~~2017,~~2018, the Company had two customers that together comprised all of the Company’s revenue. All of the Company’s revenue for the fiscal year ended June 30, ~~2016~~2017 came from ~~three~~two different customers. The following tables summarize the concentrations of sales and trade accounts receivable percentages for the Company’s customers:

	Year Ended June 30, 2018			Year Ended June 30, 2017
	Percentage of Total Sales			Percentage of Total Sales
NGCD Partner		—			40	%
DHS S&T Partner		—			60	%
Large Post-Production Film Company		48	%		—
Aerospace Manufacturing Company		52	%		—

	June 30, 2018		June 30, 2017
	Percentage of Trade A/R		Percentage of Trade A/R
DHS S&T Partner		—		100	%

Year Ended
June 30, 2017 Year Ended
June 30, 2016
Percentage of Total Sales Percentage of Total Sales
NGCD Partner 40 % 61 %
DHS S&T Partner 60 % 30 %
A Japanese aerospace company — % 9 %

June 30, 2017 June 30, 2016
Percentage of Trade A/R Percentage of Trade A/R
DHS S&T Partner 100 % 100 %

The Company maintains funds in bank accounts that may exceed the limit insured by the Federal Deposit Insurance Corporation

~~(the~~ (the “FDIC”). In October 2008, the FDIC increased its insurance to $250,000 per depositor. The risk of loss attributable to these uninsured balances is mitigated by depositing funds in what the Company believes to be high credit quality financial institutions. The Company has not experienced any losses in such accounts.

(11) Common Stock Incentive, Stock Purchase Plans, and Other Compensation Plans

2008 Stock Incentive Plan (“2008 Plan”)

The 2008 Plan was created to promote growth of the Company by aligning the long-term financial success of the Company with the employees, directors, and consultants. At the time of approval, ~~5,500,000~~1,100,000 shares of Astrotech’s common stock were reserved for issuance under this plan. The 2008 Plan, administered by the Compensation Committee of the Board of Directors, provides for granting of incentive awards in the form of stock options, stock appreciation rights (“SARs”), and

restricted stock to employees, directors, and consultants of the Company. As of June 30, ~~2017,~~2018, there were 0 shares available for grant under the 2008 Plan.

2011 Stock Incentive Plan (“2011 Plan”)

The 2011 Plan was designed to increase shareholder value by compensating employees over the long term. The plan is to be used to promote long-term financial success and execution of the Company’s business strategy. At the time of approval, ~~1,750,000~~350,000 shares of Astrotech’s common stock were reserved for issuance under this plan. On June 26, 2014, an additional ~~2,000,000~~400,000 shares of Astrotech’s common stock were approved for issuance under this plan. On December 7, 2017, an additional 225,000 shares of Astrotech’s common stock were approved for issuance under this plan. The 2011 Plan, administered by the Compensation Committee of the Board of Directors, provides for granting of incentive awards in the form of stock, stock options, SARs, and restricted stock to employees, directors, and consultants of the Company. As of June 30, ~~2017,~~2018, there were ~~20,002~~243,677 shares available for grant under the 2011 Plan.

Stock Option Activity Summary

The Company’s stock option activity for the years ended June 30, ~~2017~~2018 and ~~2016~~2017 was as follows:

	Shares (In thousands)			Weighted Average Exercise Price
Outstanding at June 30, 2016		191		$	5.90
Granted		185			6.15
Exercised		(9	)		1.95
Canceled or expired		(2	)		15.05
Outstanding at June 30, 2017		365		$	6.25
Granted		—			—
Exercised		—			—
Canceled or expired		(4	)		5.30
Outstanding at June 30, 2018		361		$	5.48

Shares
(In thousands)

Weighted Average
Exercise Price
Outstanding at June 30, 2015 1,128
$ 1.53
Granted 170
1.50
Exercised (16 ) 1.09
Canceled or expired (324 ) 2.56
Outstanding at June 30, 2016 958
$ 1.18
Granted 924
1.23
Exercised (45 ) 0.39
Canceled or expired (11 ) 3.01
Outstanding at June 30, 2017 1,826
$ 1.25

The aggregate intrinsic value of options exercisable at June 30, ~~2017~~2018 was ~~$0.1 million~~$29 thousand as the fair value of the Company’s common stock is more than the exercise prices of these options. The aggregate intrinsic value of all options outstanding at June 30, ~~2017~~2018 was ~~$0.1 million.~~$29 thousand.

Range of exercise prices	Number Outstanding		Options Outstanding Weighted- Average Remaining Contractual Life (years)		Weighted- Average Exercise Price		Number Exercisable		Options Exercisable Weighted- Average Exercise Price
$1.60 – 3.55		93,950		3.13	$	3.06		93,950	$	3.06
$5.30 – 8.35		266,578		7.66		6.30		128,616		6.22
$16.00 – 16.00		600		6.78		16.00		600		16.00
$1.60 – 16.00		361,128		6.48	$	5.48		223,166	$	4.92

Range of exercise prices
Number
Outstanding

Options
Outstanding
Weighted-
Average
Remaining
Contractual
Life (years)

Weighted-
Average
Exercise
Price

Number
Exercisable

Options
Exercisable
Weighted-
Average
Exercise
Price
$0.32 – 0.71 387,750
3.36 $ 0.62
387,750
$ 0.62
$1.06 – 1.67 1,353,514
8.68 1.26
430,000
1.32
$3.20 – 3.20 85,000
7.78 3.20
61,336
3.20
$0.32 – 3.20 1,826,264
7.51 $ 1.21
879,086
$ 1.14

Compensation costs recognized related to vested stock option awards during the years ended June 30, 2018 and 2017 ~~and 2016 was $0.1~~were $0.3 million and ~~$0.3~~$0.1 million, respectively. At June 30, ~~2017,~~2018, there was ~~$0.6~~$0.4 million of total unrecognized compensation cost related to non-vested stock option awards, which is expected to be recognized over a weighted average period of ~~2.7~~1.9 years.

Restricted Stock

The Company’s restricted stock activity for the years ended June 30, ~~2017~~2018 and ~~2016,~~2017, was as follows:

	Shares (In thousands)			Weighted Average Grant-Date Fair Value
Outstanding at June 30, 2016		31		$	15.70
Granted		52			8.65
Exercised		(15	)		15.85
Canceled or expired		(12	)		11.90
Outstanding at June 30, 2017		56		$	9.95
Granted		—			—
Exercised		(16	)		13.37
Canceled or expired		(12	)		8.35
Outstanding at June 30, 2018		28		$	10.16

Shares
(In thousands)

Weighted
Average
Grant-Date
Fair Value
Outstanding at June 30, 2015 336
$ 3.16
Granted 35
2.02
Vested (112 ) 2.79
Canceled or expired (104 ) 3.20
Outstanding at June 30, 2016 155
$ 3.14
Granted 258
1.73
Vested (75 ) 3.17
Canceled or expired (58 ) 2.38
Outstanding at June 30, 2017 280
$ 1.99

Compensation costs recognized related to vested restricted stock awards during the years ended June 30, 2018 and 2017 ~~and 2016 was $1.0~~were $0.2 million and ~~$1.1~~$1.0 million, respectively. At June 30, ~~2017,~~2018, there was ~~$0.2~~$0.1 million of unrecognized compensation ~~costs~~cost related to restricted stock, which is expected to be recognized over a weighted average period of ~~1.4~~1.2 years.

Fair Value of Stock-Based Compensation

Stock-based compensation costs are generally based on the fair value calculated from the Black-Scholes model on the date of grant of stock options. The fair values of stock options are amortized as compensation expense on a straight-line basis over the vesting period of the grants. The Company recognizes forfeitures as they occur. The assumptions used for the years ended June 30, ~~2017~~2018 and ~~2016~~2017 and the resulting estimates of weighted-average fair value per share of options granted or modified are summarized in the following table:

	Year Ended June 30, 2018			Year Ended June 30, 2017
Expected Dividend Yield	—			—
Expected Volatility		113	%		124	%
Risk-Free Interest Rates		2.86	%		2.42	%
Expected Option Life (in years)		3.50			6.61
Weighted-average grant-date fair value of options awarded	$	2.83		$	6.15

Year ended
June 30, 2017 Year ended
June 30, 2016
Expected Dividend Yield — % — %
Expected Volatility 124 % 109 %
Risk-Free Interest Rates 2.42 % 0.65 %
Expected Option Life (in years) 6.61
8.71
Weighted-average grant-date fair value of options awarded $ 1.23
$ 1.18

The expected dividend yield is based on the Company’s current dividend yield and the best estimate of projected dividend yield for future periods within the expected life of the option, which is currently 0%.

The Company estimated volatility using the historical share price performance over the expected life. Management believes the historical estimated volatility is materially indicative of expectations about future volatility.

The estimate of the risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant.

For the years ended June 30, ~~2017~~2018 and June 30, ~~2016,~~2017, the Company used the simplified method of calculating the expected life of the options.

Securities Repurchase Program

On December ~~13,~~16, 2014, the Board of Directors amended the share repurchase program to allow for the repurchase of up to $5.0 million more treasury shares until December 31, 2015. On December 3, 2015, the Board authorized an extension of the share repurchase program through December 31, 2016. The share repurchase program ended as of December 31, 2016. At the conclusion of the share repurchase program, the Company had repurchased ~~188,635~~37,727 shares of common stock at a cost of $492 thousand, which represents an average cost of ~~$2.61~~$13.04 per share.

Shares Repurchased from Related Parties

In August 2016, the Company repurchased ~~192,000~~38,400 shares issued to the Chief Financial Officer and the Chief Operating Officer related to their tax withholding obligations at a cost of $308 thousand which represents an average price of ~~$1.60~~$8.02 per share. In December 2016, the Company repurchased ~~601,852~~120,370 shares from the Chief Executive Officer at a cost of $975 thousand, which represents an average cost of ~~$1.62~~ $8.10 per share.

(12) Income Taxes

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Valuation allowances are established, when necessary, to reduce deferred tax assets to amounts that are more likely than not to be realized. As of June 30, ~~2017~~2018 and ~~2016,~~2017, the Company had established a full valuation allowance against all of its net deferred tax assets.

For the fiscal year ended June 30, ~~2017,~~2018, the Company incurred losses from operations in the amount of ~~$11.8~~$13.3 million. The total effective tax rate is approximately 0% for the fiscal year. There is no current state tax ~~expense of approximately $2 thousand.~~

expense.

FASB ASC 740, Income Taxes addresses the accounting for uncertainty in income taxes recognized in an entity’s financial statements and prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return. The Company had no unrecognized tax benefit for the years ended June 30, ~~2017~~2018 and 2017.

The Tax Cuts and Jobs Act was enacted on December 22, 2017. The Act reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and creates new taxes on certain foreign sourced earnings. In the second quarter, the Company revised its estimated annual effective rate to reflect a change in its federal statutory rate from 35% to 21%. The rate change is effective on January 1, 2018; therefore, the Company’s blended statutory tax rate for the fiscal year ended June 30, ~~2016.~~

2018 is 28%. The Company’s tax asset was evaluated at 21%. At June 30, 2018, the Company has not completed its accounting for all of the tax effects of enactment of the Act; however, a reasonable estimate has been made. Note that the Company currently has net operating loss carryovers. A valuation allowance has been recorded to fully reserve for net operating loss carryovers, other carryovers, and book/tax differences on the balance sheet.

For the years ended June 30, ~~2017~~2018 and ~~2016,~~2017, the Company’s effective tax rate differed from the federal statutory rate of 28% and 35%, respectively, primarily due to the valuation allowance placed against its net deferred tax assets.

Loss carryovers are generally subject to modification by tax authorities until three years after they have been utilized.

The components of income tax ~~(expense) benefit~~expense from operations are as follows (in thousands):

	Year Ended June 30,
	2018		2017
Current
Federal	$	—	$	—
State and local		—		(2	)
Total income tax expense	$	—	$	(2	)

Year Ended June 30,
2017 2016
Current

Federal $ —
$ 29
State and local (2 ) (4 )
Total tax (expense) benefit $ (2 ) $ 25

A reconciliation of the reported income tax ~~(expense) benefit~~expense to the amount that would result by applying the U.S. Federal statutory rate to the loss before income taxes to the actual amount of income tax ~~(expense) benefit~~expense recognized follows (in thousands):

	Year Ended June 30,
	2018			2017
Expected benefit	$	3,647		$	3,996
State tax expense		—			(2	)
Change in temporary tax adjustments		(3,608	)		(3,905	)
Other permanent items		(39	)		(91	)
Total income tax expense	$	—		$	(2	)

Year Ended June 30,
2017 2016
Expected benefit $ 3,996
$ 4,576
State tax expense (2 ) (4 )
Change in temporary tax adjustments not recognized (3,905 ) (4,414 )
Other permanent items (91 ) (133 )
Total income tax (expense) benefit $ (2 ) $ 25

The impact of the change in tax rate due to the tax reform had an effect of $858 thousand and it was offset by the change in the valuation allowance.

The Company’s deferred tax assets as of June 30, ~~2017~~2018 and ~~2016~~2017 consist of the following (in thousands):

	Year Ended June 30,
	2018			2017
Deferred tax assets:
Net operating loss carryforwards	$	15,976		$	20,439
Alternative minimum tax credit carryforwards		857			857
Accrued expenses and other timing		983			1,344
Total gross deferred tax assets	$	17,816		$	22,640
Less — valuation allowance		(17,518	)		(22,195	)
Net deferred tax assets	$	298		$	445
Deferred tax liabilities:
Property and equipment, principally due to differences in depreciation	$	(298	)	$	(445	)
Total gross deferred tax liabilities		(298	)		(445	)
Net deferred tax assets (liabilities)	$	—		$	—

Year Ended June 30,
2017 2016
Deferred tax assets:

Net operating loss carryforwards $ 20,439
$ 15,704
Alternative minimum tax credit carryforwards 857
857
Accrued expenses and other timing 1,344
1,473
Total gross deferred tax assets $ 22,640
$ 18,034
Less — valuation allowance (22,195 ) (17,939 )
Net deferred tax assets $ 445
$ 95
Deferred tax liabilities:

Property and equipment, principally due to differences in depreciation $ (445 ) $ (95 )
Total gross deferred tax liabilities $ (445 ) $ (95 )
Net deferred tax assets (liabilities) $ —
$ —

The Company files consolidated returns for ~~Federal,~~federal, Florida, and Texas income and franchise taxes. In assessing the need for a valuation allowance, management considers whether it is more likely than not that some portion or all of the net deferred tax assets will be utilized to offset future tax liabilities. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. As of June 30, ~~2017,~~2018, the Company provided a full valuation allowance of approximately ~~$22.2~~$17.5 million against its net deferred tax assets.

The valuation allowance ~~increased~~decreased by approximately ~~$4.2~~$4.7 million for the year ended June 30, ~~2017.~~2018. Since the Company reflects a full valuation allowance against its deferred tax assets, there has been no income tax impact from these changes.

At June 30, ~~2017,~~2018, the Company had net operating loss carryforwards of approximately ~~$56.9~~$69.0 million ($~~19.3~~14.5 million, tax effected) for federal income tax purposes that are available to offset future regular taxable income. These net operating loss carryforwards expire between the years 2021 and ~~2036.~~2037. Utilization of some of these net operating losses is limited due to the changes in stock

ownership of the Company associated with the October 2007 Exchange Offer; as such, the benefit from these losses may not be realized.

~~The~~

At June 30, 2018, the Company also has accumulated state net operating loss carryforwards of approximately ~~$26.2~~$35.7 million ($~~1.1~~1.5 million, tax effected) that are available to offset future state taxable income. These net operating loss carryforwards expire between the years 2031 and ~~2036.~~2037. These losses may also be subject to utilization limitations; as such, the benefit from these losses may not be realized.

The Company has a temporary credit for business loss carryovers that may be utilized to offset its Texas margin tax. ~~The~~At June 30, 2018, the credit amount is $0.5 million ($0.3 million, tax effected). These credits may be used to offset ~~$13~~$39 thousand of state tax liability each year and will expire in 2027.

~~The~~

At June 30, 2018, the Company has $0.9 million of alternative minimum tax credit carryforwards available to offset future regular tax liabilities.

Uncertain Tax Positions

The ~~Company’s change in~~Company had no uncertain tax ~~benefit reserves during 2017~~positions at June 30, 2018 and ~~2016 were as follows (in thousands):~~

2017 2016
Balance at July 1 $ —
$ 76
Additions for tax positions of current period —
—
Additions for tax positions of prior years —
—
Decreases for tax positions of prior years —
(76 )
Balance at June 30 $ —
$ —

During 2016, the Company removed the uncertain tax benefit reserve of approximately $76 thousand. Due to the statute of limitations in California, the Company can no longer recognize the tax benefit related to state taxes. 2017.

The Company recognizes interest and penalties related to income tax ~~matters~~matter in income tax expense. For the years ended June 30, ~~2017~~2018 and ~~2016,~~2017, the Company did not recognize any interest expense for uncertain tax positions. ~~Furthermore, the Company no longer has a filing requirement in California as of June 30, 2017.~~

(13) Net Loss per Share

Basic loss per share is computed on the basis of the weighted average number of shares of common stock outstanding during the period. Diluted net ~~income~~loss per share is computed on the basis of the weighted average number of shares of common stock

plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method and the if-converted method. Dilutive potential common shares include outstanding stock options and shared-based awards.

Reconciliation and the components of basic and diluted net loss per share are as follows (in thousands, except per share data):

	Year Ended
	2018			2017
Numerator:
Amounts attributable to Astrotech Corporation, basic and diluted:
Net loss attributable to Astrotech Corporation	$	(13,251	)	$	(11,582	)
Denominator:
Denominator for basic and diluted net loss per share attributable to Astrotech Corporation — weighted average common stock outstanding		4,061			4,084
Basic and diluted net loss per common share:
Net loss attributable to Astrotech Corporation	$	(3.26	)	$	(2.84	)

Year Ended
June 30,
2017 2016
Numerator:
Amounts attributable to Astrotech Corporation, basic and diluted:
Net loss attributable to Astrotech Corporation $ (11,582 ) $ (13,095 )
Denominator:
Denominator for basic and diluted net loss per share attributable to Astrotech Corporation — weighted average common stock outstanding 20,418
20,388
Basic and diluted net loss per common share:
Net loss attributable to Astrotech Corporation $ (0.57 ) $ (0.64 )

* These amounts have been adjusted for the Reverse Stock Split.

All unvested restricted stock awards for the year ended June 30, ~~2017~~2018 are not included in diluted net loss per share, as the impact to net loss per share is anti-dilutive. Options to purchase ~~1,826,264~~361,128 shares of common stock at exercise prices ranging from ~~$0.32~~$1.60 to ~~$3.20~~$16.00 per share outstanding for the year ended June 30, 2018 were not included in diluted net loss per share, as the impact to net loss per share is anti-dilutive. Options to purchase 365,253 shares of common stock at exercise prices ranging from $1.60 to $16.00 per share outstanding for the year ended June 30, 2017 were not included in diluted net loss per share, as the impact to net loss per share is anti-dilutive. ~~Options to purchase 957,750 shares of common stock at exercise prices ranging from $0.32 to~~

~~$3.20 per share outstanding for the year ended June 30, 2016 were not included in diluted net loss per share, as the impact to net loss per share is anti-dilutive.~~

(14) Employee Benefit Plans

Astrotech has a defined contribution retirement plan, which covers substantially all employees and officers. For each of the years ended June 30, ~~2017~~2018 and ~~2016,~~2017, the Company has contributed the required match of $0.2 million to the plan. The Company has the right, but not an obligation, to make additional contributions to the plan in future years at the discretion of the Company’s Board of Directors. The Company has not made any additional contributions for the years ended June 30, ~~2017~~2018 and ~~2016.~~

2017.

(15) Commitments and Contingencies

The Company is obligated under non-cancelable operating leases for equipment and office space. Future minimum payments under the operating leases are as follows (in thousands):

For the Year Ended June 30,
2019	$	368
2020		344
2021		198
2022		204
2023		210
Thereafter		143
Total	$	1,467

Year Ended June 30,
2018 $ 530
2019 290
2020 280
2021 198
2022 204
Thereafter 353
Total $ 1,855

Rent expense was approximately $0.4 million for each of the years ended June 30, ~~2017~~2018 and ~~2016.~~

2017.

Astrotech Corporation ~~presently~~ leases office space consisting of ~~approximately 5,000~~5,219 square feet in Austin, ~~Texas.~~Texas and houses executive management, finance and accounting, marketing and communications, and the staff of our Astral subsidiary. The lease began in November 2016 and expires in December 2023 with a provision to renew and extend the lease for the entire premises for one renewal term of five years. Astrotech must, in writing, advise the landlord of its intention to renew the lease at least eight months before the expiration of its current lease in order to renew the lease.

Astral presently subleases premises consisting of approximately 4,000 square feet in Austin, Texas. The lease began in July 2015 and expires in June 2018 with no provision to renew nor extend the lease.

In May 2013, 1^stDetect ~~presently leases two adjoining premises consisting~~completed build-out of ~~approximately 17,000~~a new 16,540 square foot leased research and ~~9,000 square feet~~development and production facility in ~~the city of~~ Webster, Texas. This new facility is equipped with state-of-the-art laboratories, a clean room, a production shop, and offices for staff. The term of the lease is 62 months and includes options to extend for two additional five-year periods. In February 2015, 1^st Detect exercised its right of first refusal on the adjoining space of 9,138 square feet. The original lease began in May 2013 and was to expire in June 2018; these dates were amended in October 2014 with the amended lease beginning February 1, 2015, and expiring April 30, 2020, with provisions to renew and extend the lease for the entire premises, but not less than the entire premises, for two renewal terms of five years each. On June 1, 2018, the Company entered into its third amendment of the original lease removing 8,118 square feet from its leased space, leaving leased premises with a total square footage of 17,560.^st ~~Detect must~~

In July 2015, Astral subleased premises consisting of approximately 4,000 square feet in ~~writing advise~~Austin, Texas. The lease terminated at the ~~landlord~~end of ~~its intention to renew the lease at least six months before the expiration of its current lease in order to renew the lease.~~

June 2018.

Employment Contracts

The Company has entered into an employment contract with a key executive. Generally, certain amounts may become payable in the event the Company terminates the executive’s employment.

Legal Proceedings

The Company is not party to, nor are its properties the subject of, any material pending legal proceedings.

(16) Segment Information

The Company currently has two reportable business units: Astro Scientific and ~~Astral.~~

Astral Images Corporation.

Astro Scientific

Astro Scientific is a technology incubator that commercializes innovative technologies. Subsidiaries 1^st Detect and Astrogenetix currently reside in Astro Scientific:

Astrogenetix – Astrogenetix was developing next-generation vaccines but, due to develop a mass spectrometer for the International Space Station, the Company developed a chemical analyzer that enables real-time analytics that we believe to be significantly smaller, lighter, faster, and less expensive than competing analyzers. The majority of revenue in 1^st ~~Detect comes from working as a subcontractor~~recent developments, has been put on ~~government contracts. The Company works with prime contractors in adapting our technology to be used in enhancing the government’s detection capabilities for a variety of applications.~~hold indefinitely.

~~Astrogenetix -~~ Astrogenetix is applying a fast-track, on-orbit discovery platform using the International Space Station to develop vaccines and other therapeutics. NASA has engaged the Center for Vaccine Development at UMD, one of the leading vaccinology institutions in the world, to research the application of a vaccine for ~~Salmonella. NASA is collaborating with UMD, meaning little investment is required of Astrogenetix at this stage.~~

~~Astral Images~~

Astral Images ~~sells film-to-digital conversion, high-dynamic range conversion, image enhancement, defect removal, and color correction services.~~ Corporation

Astral uses its powerful artificial intelligence (“AI”) algorithms to provide automated conversion of television and feature 35mm and 16mm films to the new 4K/HDR format, the standard for the latest generation of digital film distribution to the home. Due to a significant shift in the film scanning industry, most film assets will need to go through an upgrade to the new standard to remain relevant for over-the-top distribution (Netflix, Amazon, Hulu, etc.) as television manufacturers sell more 4K/HDR televisions and consumer demand for such content accelerates. Images - Astral is ~~positioned to be~~ a ~~leader in the digital conversion~~developer of ~~feature films, film-based television series, sporting events shot on~~advanced film ~~film libraries,~~restoration and film archives. Astral has introduced to the digital conversion market Black ICE™ for the conversion of black and white film, Color ICE™ for the conversion of color film, and HDR ICE™ for the conversion of color film or digital video to the new HDR format. Astral’s platform technology is also being designed to launch a targeted solution that will convert photographs, negatives, and slides to a digital format while employing its AI algorithms to restore the image to its original condition in automation.

enhancement software.

All intercompany transactions between business units have been eliminated in consolidation.

Key financial metrics of the Company’s segments for the years ended June 30, ~~2017~~2018 and ~~2016~~2017 are as follows:

	Year Ended June 30, 2018
(In thousands)	Revenue		Depreciation		Loss on Impairment of Long-Lived Assets			Loss Before Income Taxes
Astro Scientific	$	46	$	392	$	(114	)	$	(9,582	)
Astral		40		357		(1,579	)		(3,669	)
Total	$	86	$	749	$	(1,693	)	$	(13,251	)

	Year Ended June 30, 2017
(In thousands)	Revenue		Depreciation		Loss on Impairment of Long-Lived Assets			Loss Before Income Taxes
Astro Scientific	$	2,320	$	390	$	—		$	(9,058	)
Astral		8		321		—			(2,696	)
Total	$	2,328	$	711	$	—		$	(11,754	)

	June 30, 2018
(In thousands)	Fixed Assets, Net		Total Capital Expenditures		Total Assets
Astro Scientific	$	699	$	8	$	5,075
Astral		34		11		65
Total	$	733	$	19	$	5,140

	June 30, 2017
(In thousands)	Fixed Assets, Net		Total Capital Expenditures		Total Assets
Astro Scientific	$	1,224	$	468	$	16,833
Astral		1,956		31		2,002
Total	$	3,180	$	499	$	18,835

Year Ended
June 30, 2017 Year Ended
June 30, 2016
Revenue, Depreciation, and Income
(In thousands) Revenue Depreciation Loss before income taxes Revenue Depreciation Loss before income taxes
Astro Scientific $ 2,320
390
$ (9,058 ) $ 2,670
398
$ (10,849 )
Astral 8
321
(2,696 ) 1
127
(2,610 )
Total $ 2,328
$ 711
$ (11,754 ) $ 2,671
$ 525
$ (13,459 )

June 30, 2017 June 30, 2016
Assets
(In thousands) Fixed
Assets, net Total Capital Expenditures Total Assets Fixed
Assets, net Total Capital Expenditures Total Assets
Astro Scientific $ 1,224
468
$ 16,833
$ 1,146
322
$ 28,125
Astral 1,956
31
2,002
2,246
487
2,398
Total $ 3,180
$ 499
$ 18,835
$ 3,392
$ 809
$ 30,523

(17) Subsequent Events

On ~~August 24, 2017,~~July 3, 2018, the Company ~~received~~filed a ~~letter from The NASDAQ Stock Market notifying the Company of its failure to maintain compliance~~Form S-3 shelf registration statement with the $1.00 per share of common stock minimum closing bid price requirement over the preceding 30 consecutive trading days as required by Marketplace Rule 5550(a)(2). The letter stated that the Company has until February 20, 2018 to demonstrate compliance by maintaining a minimum closing bid price of $1.00 per share of common stockSEC for a ~~minimum~~maximum offering amount of ~~10 consecutive trading days. If~~$30 million. The shelf registration was subsequently deemed effective by the ~~Company cannot demonstrate compliance, further steps may be taken, up to and including the delisting of~~SEC on August 20, 2018.

On September 11, 2018, Astrogenetix received notification from NASA that its ~~common stock from The NASDAQ Capital Market.~~

The Company has not yet determined what action, if any, it will take in response to this letter, although the Company intends to monitor the closing bid price of its common stock between now and February 19, 2018, and to consider available options if its common stock does not trade at a level likely to result in the Company regaining compliance with The NASDAQ Capital Market minimum closing bid price requirement.

application for additional funding was declined.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial ~~Disclosure.~~

Disclosure

None.

Item 9A. Controls and ~~Procedures.~~

Procedures

Under the supervision and with the participation of our management, including our ~~principal executive officer~~Chief Executive Officer and ~~principal financial officer,~~Chief Financial Officer, we have evaluated the effectiveness of our internal controls through the oversight of the operations of the Company, and, based on that evaluation, our ~~principal executive officer~~Chief Executive Officer and ~~principal financial officer~~Chief Financial Officer have concluded that these controls and procedures are effective. There have been no changes in our internal controls over financial reporting that occurred during the ~~last~~most recent fiscal ~~year~~quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the ~~Securities and Exchange Commission’s (“SEC”)~~SEC’s rules and information required to be disclosed by us in the reports that we file under Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decision regarding required disclosure.

Management’s Report on Internal Controls over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal controls over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our ~~principal~~chief executive and financial officers, we conducted an evaluation of the effectiveness of our internal controls over financial reporting as of June 30, ~~2017,~~2018, based on the frame-work in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013). Based on our evaluation under the framework in Internal Control-Integrated Framework, our management concluded that our internal controls over financial reporting were effective as of June 30, ~~2017.~~

2018.

In the ~~prior~~first quarter of fiscal year 2018, we noted a material weakness in the design and operation of our internal control over financial reporting. The following material weakness was present at ~~June~~September 30, ~~2016:~~

2017:

~~We did not identify and implement appropriate accounting policies to ensure~~

Our internal controls over the ~~recognition~~mathematical accuracy of revenue was in accordance with generally accepted accounting principles. Specifically, we incorrectly accounted for certain sales contracts entered into during fiscal 2016 as multiple-element arrangements within the scope of ASC Topic 605-25, ~~Multiple-Element Arrangements, when such contracts should have been accounted for as contracts within the scope of ASC 605-35,~~ ~~Construction-Type and Production-Type Contracts. This error resulted~~disclosed amounts failed, resulting in an ~~understatement of our reported revenues through March 31, 2016, which was corrected~~inadvertent error in the ~~fourth quarter~~calculation of ~~fiscal 2016 but deemed immaterial to~~“Net Loss per Common Share” in the ~~previously issued financial statements.~~Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended September 30, 2017 and 2016.

Remediation

~~To remediate~~

We have remediated the ~~prior year~~ material weakness described above ~~we have implemented~~by implementing the ~~following:~~

following procedures:

~~Implemented~~

Designed a remediation action for the review and analysis of ~~the revenue transactions involving contracts~~earnings per share and improved the related policy and procedures;

Expanded ~~revenue recognition education for employees directly responsible for executing control activities related~~review of financial disclosures; and

Further documented our tie-out to our ~~sales contracts; and~~internal calculations.

~~Documented our revenue recognition policies and procedures to provide detailed explanations specific to the Company’s sales contracts.~~

This annual report does not include an attestation report of our registered public accounting firm regarding internal controls over financial reporting. Management’s report was not subject to attestation by our registered accounting firm pursuant to §989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which exempts the Company from the requirement that it include an attestation report of the Company’s registered public accounting firm regarding internal controls over our management’s assessment of internal controls over financial reporting.

Item 9B. Other ~~Information.~~

Information

None.

PART III

As set forth below, the information required by Part III (Items 10, 11, 12, 13, and 14) is incorporated herein by reference to the Company’s definitive proxy statement to be used in connection with its ~~2017~~2018 Annual Meeting of Stockholders and which will be filed with the SEC not later than 120 days after the end of the Company’s fiscal year ended June 30, ~~2017~~2018 (the ~~“2017~~“2018 Proxy Statement”), in accordance with General Instructions G(3) of Form 10-K.

Item 10. Directors, Executive Officers, and Corporate Governance

The information required by Item 10 will be contained in, and is hereby incorporated by reference to, the ~~2017~~2018 Proxy Statement.

Item 11.Executive Compensation

The information required by Item 11 will be contained in, and is hereby incorporated by reference to, the ~~2017~~2018 Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by Item 12 will be contained in, and is hereby incorporated by reference to, the ~~2017~~2018 Proxy Statement.

Item 13. Certain Relationships and Related Transactions and Director Independence

The information required by Item 13 will be contained in, and is hereby incorporated by reference to, the ~~2017~~2018 Proxy Statement.

Item 14.Principal Accounting Fees and Services

The information required by Item 14 will be contained in, and is hereby incorporated by reference to, the ~~2017~~2018 Proxy Statement.

PART IV

Item 15.Exhibits, Financial Statement Schedules

The following documents are filed as part of the report:

Financial Statements.

The following consolidated financial statements of Astrotech Corporation and its wholly-owned and majority-owned subsidiaries and related notes, are set forth herein as indicated below.

	Page

	~~Page~~
Report of BDO USA, LLP, Independent Registered Public Accounting Firm	23 28
Consolidated Balance Sheets	24 29
Consolidated Statements of Operations and Comprehensive Loss	25 30
Consolidated Statement of Changes in Stockholders’ Equity	26 31
Consolidated Statement of Cash Flows	27 32
Notes to Consolidated Financial Statements	28 33
Exhibits	47 52



Exhibit No.		Description of Exhibit

~~(2)~~		~~Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession~~
(3)
~~2.1~~		Asset Purchase Agreement, dated May 28, 2014, by and between Astrotech Corporation, Astrotech Space Operations, Inc., Astrotech Florida Holdings, Inc., Lockheed Martin Corporation and Elroy Acquisition Company, LLC (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on May 30, 2014).

~~(3)~~		~~Articles~~ Certificate of Incorporation and Bylaws

3.1		~~Amended and Restated Bylaws~~Certificate of Incorporation, as filed with the Secretary of State of the ~~Registrant, as amended~~State of Delaware (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed with the Securities and Exchange Commission on ~~August 24, 2015)~~December 28, 2017).

3.2		Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 of the Registrant’s ~~registration statement on~~ Form ~~S-1, File No. 33- 97812, and all amendments thereto,~~8-K filed with the Securities and Exchange Commission on ~~October 5, 1995)~~December 28, 2017).

~~(4)~~ 3.3		Certificate of Designations of Series A Junior Participating Preferred Stock, as filed with the Secretary of State of the State of Delaware (incorporated by reference to Exhibit 3.3 of the Registrant’s Form 8-K filed with the Securities and Exchange Commission on December 28, 2017).

(4)		Instruments Defining the Rights of Security Holders, including Indentures

4.1		Rights Agreement, dated as of July 29, 2009, between Astrotech Corporation and American Stock Transfer & Trust Company, LLC, as Rights Agent (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-A filed with the Securities and Exchange Commission on July 31, 2009).

4.2		Amendment One to Rights Agreement, dated as of July 29, 2010, between Astrotech Corporation and American Stock Transfer & Trust Company, LLC, as Rights Agent (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-A/A filed with the Securities and Exchange Commission on July 29, 2010).


4.3
~~4.3~~		Amendment Two to Rights Agreement, dated as of August 10, 2011, between Astrotech Corporation and American Stock Transfer & Trust Company, LLC, as Rights Agent (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-A/A filed with the Securities and Exchange Commission on August 10, 2011).

4.4		Amendment Three to Rights Agreement, dated as of August 10, 2012, between Astrotech Corporation and American Stock Transfer & Trust Company, LLC, as Rights Agent (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-A/A filed with the Securities and Exchange Commission on August 10, 2012).

4.5		Amendment Four to Rights Agreement, dated as of August 6, 2013, between Astrotech Corporation and American Stock Transfer & Trust Company, LLC, as Rights Agent (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed with the Securities and Exchange Commission on August 12, 2013).

4.6		Amendment Five to Rights Agreement, dated as of June 9, 2014, between Astrotech Corporation and American Stock Transfer & Trust Company, LLC, as Rights Agent (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-A/A filed with the Securities and Exchange Commission on June 9, 2014).

4.7		Amendment Six to Rights Agreement, dated as of August 5, 2015, between Astrotech Corporation and American Stock Transfer & Trust Company, LLC, as Rights Agent (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-A/A filed with the Securities and Exchange Commission on August 11, 2015).

4.8		Amendment Seven to Rights Agreement, dated as of August 4, 2016, between Astrotech Corporation and American Stock Transfer & Trust Company, LLC, as Rights Agent (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-A/A filed with the Securities and Exchange Commission on August 8, 2016).

4.9		Amendment Eight to Rights Agreement, dated as of July 20, 2017, between Astrotech Corporation and American Stock Transfer & Trust Company, LLC, as Rights Agent (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-A/A filed with the Securities and Exchange Commission on July 25, 2017).

~~(10)~~ 4.10		~~Material Contracts~~

~~10.1~~		~~Stock Purchase~~Amendment Nine to Rights Agreement, dated ~~December 9, 2016, issued by~~as of February 22, 2018, between Astrotech Corporation ~~(Incorporated~~and American Stock Transfer & Trust Company, LLC, as Rights Agent (incorporated by reference to Exhibit ~~10.1~~4.1 to the Company’s Current Report on Form 8-A/A filed on February 27, 2018).

4.11		Amendment Ten to Rights Agreement, dated as of August 6, 2018, between Astrotech Corporation and American Stock Transfer & Trust Company, LLC, as Rights Agent (incorporated by reference to Exhibit 4.1 of the Registrant’s Form ~~8-K~~8-A/A filed with the Securities and Exchange Commission on ~~December 13, 2016)~~August 6, 2018).

~~(16)~~ (21)		~~Letter Regarding Change in Certifying Accountant~~

~~16.1~~		Letter from Ernst & Young LLP regarding change in certifying accountant, dated April 7, 2015 (incorporated by reference to Exhibit 16 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 7, 2015).

~~(21)~~		Astrotech Corporation and Subsidiaries — Subsidiaries of the Registrant

(23)		Consents of Experts and Counsel

23.1		Consent of BDO USA, LLP.

(31)		Rule 13a-14(a) Certifications



31.1
~~31.1~~		Certification of Thomas B. Pickens III, the Company’s Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

31.2		Certification of Eric Stober, the Company’s Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

(32)		Section 1350 Certifications

32.1		Certification of Thomas B. Pickens III, the Company’s Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

32.2		Certification of Eric Stober, the Company’s Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

101.INS* 101.INS		XBRL Instance Document
101.SCH* 101.SCH		XBRL Schema Document
101.CAL* 101.CAL		XBRL Calculation Linkbase Document
101.DEF* 101.DEF		XBRL Definition Linkbase Document
101.LAB* 101.LAB		XBRL Labels Linkbase Document
101.PRE* 101.PRE		XBRL Presentation Linkbase Document

* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not to be “filed” or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under these sections.

Item 16.Form 10-K Summary

None.

~~None.~~

~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	Astrotech Corporation

	By:	/s/ Thomas B. Pickens III
		Thomas B. Pickens III
		Chief Executive Officer

Date: September ~~18, 2017~~

25, 2018



	By:	/s/ Eric N. Stober
		Eric N. Stober
		Chief Financial Officer and
		Principal Accounting Officer

Date: September ~~18, 2017~~

25, 2018

Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of this registrant in the capacities and on the dates indicated.



/s/ Thomas B. Pickens III	Chairman of the Board and Chief Executive Officer	September ~~18, 2017~~25, 2018
Thomas B. Pickens III

/s/ Mark Adams	Director	September ~~18, 2017~~25, 2018
Mark Adams

/s/ Ronald W. Cantwell	Director	September ~~18, 2017~~25, 2018
Ronald W. Cantwell

~~/s/ Michael R. Humphrey~~	~~Director~~	~~September 18, 2017~~
~~Michael R. Humphrey~~

~~/s/ Sha-Chelle Manning~~	~~Director~~	~~September 18, 2017~~
~~Sha-Chelle Manning~~

/s/ Daniel T. Russler, Jr.	Director	September ~~18, 2017~~25, 2018
Daniel T. Russler, Jr.

/s/ Eric N. Stober	Chief Financial Officer and Principal Accounting Officer	September ~~18, 2017~~25, 2018
Eric N. Stober	Chief Financial Officer and Principal Accounting Officer

Delaware		91-1273737

~~Washington~~		~~91-1273737~~
(State or other jurisdiction of		(I.R.S. Employer
~~incorporation~~ corporation or organization)		Identification No.)



201 West 5th Street, Suite 1275, Austin, Texas		78701
(Address of principal executive offices)		(Zip Code)



Title of each class		Name of each exchange
Common Stock		on which registered
~~(no par value)~~ $0.001 per share		NASDAQ Capital Market



Large accelerated filer ¨ ☐		Accelerated filer ¨ ☐
Non-accelerated filer ¨ ~~(Do not check if a smaller reporting company)~~ ☐		Smaller reporting company ☑þ
Emerging growth company ¨ ☐



PART I	5 4
Item 1. Business	5 4
Item 1A. Risk Factors	12 9
Item 1B. Unresolved Staff Comments	12 16
Item 2. Properties	12 17
Item 3. Legal Proceedings	12 17
Item 4. Mine Safety Disclosures	12 17

PART II	13 18
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	13 18
Item 6. Selected Financial Data	14 19
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	14 19
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	22 27
Item 8. Financial Statements and Supplementary Data	23 28
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	44 49
Item 9A. Controls and Procedures	44 49
Item 9B. Other Information	45 50

PART III	46 51
Item 10. Directors, Executive Officers and Corporate Governance	46 51
Item 11. Executive Compensation	46 51
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	46 51
Item 13. Certain Relationships and Related Transactions, and Director Independence	46 51
Item 14. Principal Accounting Fees and Services	46 51

PART IV	47 52
Item 15. Exhibits, Financial Statement Schedules	47 52
Item 16. Form 10-K Summary	49 54

SIGNATURES	50 55



þ	~~ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~



¨	~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~



Fiscal 2016	High		Low
First Quarter	$	3.00	$	1.61
Second Quarter	$	2.24	$	1.33
Third Quarter	$	3.15	$	1.05
Fourth Quarter	$	2.25	$	1.50



Fiscal Month	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
August 1, 2016 through August 31, 2016 (1)	192,397	$	1.60	—	$	4,508,324
December 1, 2016 through December 31, 2016 (2)	601,852	1.62		—	4,508,324
April 1, 2017 through April 30, 2017 (1)	8,250	1.19		—	—
Total	802,499	$	1.61	—

(1) These shares were surrendered by employees and Directors to cover tax withholding obligations associated with equity compensation.
(2) The Board of Directors elected to repurchase these shares from the CEO of the Company.



	Twelve Months Ended June 30,
	2017			2016			Variance
Cash flows from continuing operations:
Net cash used in operating activities	$	(8,821	)	$	(13,324	)	$	4,503
Net cash provided by investing activities	7,881			9,433			(1,552		)
Net cash used in financing activities	(1,275		)	(140		)	(1,135		)
Net cash used in continuing operations	(2,215		)	(4,031		)	1,816

Cash flows from discontinued operations:
Net cash provided by investing activities	—			6,100			(6,100		)
Net cash provided by discontinued operations	—			6,100			(6,100		)

Net change in cash and cash equivalents	$	(2,215	)	$	2,069		$	(4,284	)



	Common Stock
	Number of Shares Outstanding		Amount			Treasury Stock Amount			Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Non- Controlling Interest			Total Stockholders’ Equity
Balance at June 30, 2015	20,744		$	189,007		$	(2,672	)	$	1,139		$	(146,022	)	$	(23	)	$	299		$	41,728
Net change in available-for-sale debt and marketable equity securities	—		—			—			—			—			(78		)	—			(78		)
Stock-based compensation	—		—			—			331			—			—			—			331
Forfeiture of stock based comp	(104	)	(92		)	—			(67		)	—			—			—			(159		)
Exercise of stock options	16		—			—			16			—			—			—			16
Share repurchases	(63	)	—			(156		)	—			—			—			—			(156		)
Restricted stock issuance	35		379			—			—			—			—			—			379
Net loss	—		—			—			—			(13,095		)	—			(339		)	(13,434		)
Balance at June 30, 2016	20,628		189,294			(2,828		)	1,419			(159,117		)	(101		)	(40		)	28,627
Net change in available-for-sale debt and marketable equity securities	—		—			—			—			—			40			—			40
Stock-based compensation	—		—			—			98			—			—			—			98
Forfeiture of stock based comp	(58	)	(4		)	—			(3		)	—			—			—			(7		)
Exercise of stock options	45		49			—			(31		)	—			—			—			18
Share repurchases	(802	)	—			(1,293		)	—			—			—			—			(1,293		)
Restricted stock issuance	743		1,043			—			—			—			—			—			1,043
Acquisition of non-controlling interest	—		—			—			—			(214		)	—			214			—
Net loss	—		—			—			—			(11,582		)	—			(174		)	(11,756		)
Balance at June 30, 2017	20,556		$	190,382		$	(4,121	)	$	1,483		$	(170,913	)	$	(61	)	$	—		$	16,770



	June 30, 2016
Available-for-Sale	Adjusted		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gain		Loss			Value
Mutual Funds - Corporate & Government Debt	$	12,908	$	—	$	(101	)	$	12,807
Total	$	12,908	$	—	$	(101	)	$	12,807



	June 30, 2016
Held-to-Maturity	Carrying		Unrealized		Unrealized			Fair
(In thousands)	Value		Gain		Loss			Value
Fixed Income Bonds	$	3,513	$	11	$	(6	)	$	3,518
Time Deposits	4,990		7		—			4,997
Total	$	8,503	$	18	$	(6	)	$	8,515



(In thousands)	Astrotech		Minority Owner (1)			Astrotech Ownership
Initial investment	$	1,422	$	422		72	%
Additional contributions made in fiscal year 2015	1,000		—			83	%
Additional contributions made in fiscal year 2016	3,000		—			92	%
Additional contributions made in fiscal year 2017	3,500		(422		)	100	%
Total Contributions	$	8,922	$	—
(1) Astrotech acquired full ownership of Astral Images in fiscal year 2017.



	Year Ended June 30, 2017		Year Ended June 30, 2016
	Percentage of Total Sales		Percentage of Total Sales
NGCD Partner	40	%	61	%
DHS S&T Partner	60	%	30	%
A Japanese aerospace company	—	%	9	%



	Shares (In thousands)		Weighted Average Exercise Price
Outstanding at June 30, 2015	1,128		$	1.53
Granted	170		1.50
Exercised	(16	)	1.09
Canceled or expired	(324	)	2.56
Outstanding at June 30, 2016	958		$	1.18
Granted	924		1.23
Exercised	(45	)	0.39
Canceled or expired	(11	)	3.01
Outstanding at June 30, 2017	1,826		$	1.25



	2017		2016
Balance at July 1	$	—	$	76
Additions for tax positions of current period	—		—
Additions for tax positions of prior years	—		—
Decreases for tax positions of prior years	—		(76		)
Balance at June 30	$	—	$	—



	Year Ended June 30,
	2017			2016
Numerator:
Amounts attributable to Astrotech Corporation, basic and diluted:
Net loss attributable to Astrotech Corporation	$	(11,582	)	$	(13,095	)
Denominator:
Denominator for basic and diluted net loss per share attributable to Astrotech Corporation — weighted average common stock outstanding	20,418			20,388
Basic and diluted net loss per common share:
Net loss attributable to Astrotech Corporation	$	(0.57	)	$	(0.64	)



	Year Ended June 30, 2017							Year Ended June 30, 2016
Revenue, Depreciation, and Income (In thousands)	Revenue		Depreciation		Loss before income taxes			Revenue		Depreciation		Loss before income taxes
Astro Scientific	$	2,320	390		$	(9,058	)	$	2,670	398		$	(10,849	)
Astral	8		321		(2,696		)	1		127		(2,610		)
Total	$	2,328	$	711	$	(11,754	)	$	2,671	$	525	$	(13,459	)



	June 30, 2017						June 30, 2016
Assets (In thousands)	Fixed Assets, net		Total Capital Expenditures		Total Assets		Fixed Assets, net		Total Capital Expenditures		Total Assets
Astro Scientific	$	1,224	468		$	16,833	$	1,146	322		$	28,125
Astral	1,956		31		2,002		2,246		487		2,398
Total	$	3,180	$	499	$	18,835	$	3,392	$	809	$	30,523